UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2018
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number
001-09071
BBX Capital Corporation
(Exact name of registrant as specified in its charter)
Florida
(State or other jurisdiction of
incorporation or organization)
401 East Las Olas Boulevard,
Suite 800
Fort Lauderdale, Florida
(Address of principal executive
office)
59‑2022148
(I.R.S Employer Identification
No.)
33301
(Zip Code)
(954) 940-4900
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 par Value
Class B Common Stock, $.01 par Value
Preferred Share Purchase Rights
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.
YES [ ] NO [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. YES [ ] NO [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES
[X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer [ ]
reporting company [ ]
Emerging growth company [ ]
Accelerated filer [X]
Non-accelerated filer [ ]
Smaller
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).
YES [ ] NO [X]
On June 30, 2018, the aggregate market value of the registrant’s voting common equity held by non-affiliates was
$562.2 million computed by reference to the closing price of the registrant’s Class A Common Stock and Class B
Common Stock on such date. The registrant does not have any non-voting common equity.
The number of shares outstanding of each of the registrant’s classes of common stock as of March 1, 2019 is as
follows:
Class A Common Stock of $.01 par value, 78,379,530 shares outstanding.
Class B Common Stock of $.01 par value , 19,384,830 shares outstanding.
Documents Incorporated by Reference
Portions of the registrant’s Definitive Proxy Statement on Schedule 14A relating to the registrant’s 2019 Annual
Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.
BBX Capital Corporation
Annual Report on Form 10-K for the Year Ended December 31, 2018
TABLE OF CONTENTS
PART I
Page
Item 1.
Business
Item 1A
Risk Factors
Item 1B
Unresolved Staff Comments
Item 2
Item 3
Item 4
Item 5
Properties
Legal Proceedings
Mine Safety Disclosure
PART II
Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
Item 6
Selected Financial Data
Item 7
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
1
30
50
50
51
54
54
57
60
89
Item 8
Financial Statements and Supplementary Data
F-1 to F-66
Item 9
Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
Item 9A
Controls and Procedures
Item 9B
Other Information
PART III
Item 10
Directors, Executive Officers and Corporate Governance
Item 11
Executive Compensation
Item 12
Item 13
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director
Independence
Item 14
Principal Accounting Fees and Services
PART IV
Item 15
Exhibits, Financial Statement Schedules
SIGNATURES
PART I
Item 1. BUSINESS
Overview
History
BBX Capital Corporation (referred to in this report together with its subsidiaries as the “Company,” “we,”
“us,” or “our,” and without its subsidiaries as “BBX Capital”) is a Florida-based diversified holding
company whose principal investments are Bluegreen Vacations Corporation (“Bluegreen Vacations” or
“Bluegreen”), BBX Capital Real Estate LLC (“BBX Capital Real Estate” or “BBXRE”), Renin Holdings,
LLC (“Renin”), a n d IT’SUGAR, LLC (“IT’SUGAR”). In addition to its principal investments, the
Company has other investments in various operating businesses, including restaurant locations throughout
Florida and companies in the confectionery industry.
The Company’s Class A Common Stock trades on the New York Stock Exchange (“NYSE”) under the
ticker symbol “BBX,” and its Class B Common Stock trades on the OTCQX Best Market under the ticker
symbol “BBXTB.”
In December 2016, BBX Capital completed the acquisition of all the outstanding shares of the former
BBX Capital Corporation (“BCC”) not previously owned by it, and following the transaction, BBX
Capital changed its name from BFC Financial Corporation to BBX Capital Corporation. Prior to the
acquisition, BBX Capital had an 82% equity interest in BCC and a direct 54% equity interest in
Woodbridge Holdings Corporation (“Woodbridge”), the parent company of Bluegreen, and BCC held the
remaining 46% interest in Woodbridge. As a result of the acquisition, BCC, Woodbridge, and Bluegreen
became wholly-owned subsidiaries of the Company.
During the fourth quarter of 2017, Bluegreen completed an initial public offering (“IPO”) of its common
stock in which Bluegreen sold to the public 3,736,723 shares of its common stock and Woodbridge, as a
selling shareholder, sold to the public 3,736,722 shares of Bluegreen’s common stock. In addition, during
the fourth quarter of 2018, Bluegreen repurchased and retired 288,532 shares of its common stock for $4.0
million. As a result of Bluegreen’s IPO and subsequent share repurchases, BBX Capital currently owns
approximately 90.3% of Bluegreen’s common stock through Woodbridge. In March 2019, BBX Capital
announced its intention to take Bluegreen private through a short-form merger under Florida law pursuant
to which BBX Capital will acquire all of the outstanding shares of Bluegreen’s common stock not
currently owned by BBX Capital. If the proposed merger is completed, Bluegreen will become a wholly-
owned subsidiary of BBX Capital, and each share of Bluegreen’s common stock outstanding at the
effective time of the merger, other than shares beneficially owned by BBX Capital and shareholders who
duly exercise and perfect appraisal rights in accordance with Florida law, will be converted into the right
to receive $16.00 per share in cash. The total merger consideration is estimated to be approximately
$115.0 million. The merger is expected to be completed 30 days after the Schedule 13E-3 filed with the
SEC relating to the merger is first mailed to Bluegreen's shareholders, or as soon as practicable thereafter.
However, the merger may be terminated at any time before it becomes effective, and there is no assurance
that the merger will be consummated on the contemplated terms, or at all.
Prior to July 2012, BCC’s principal investment was BankAtlantic and its subsidiaries (“BankAtlantic”), a
federal savings bank headquartered in Fort Lauderdale, Florida. In July 2012, BCC sold all of the issued
and outstanding shares of BankAtlantic’s capital stock to BB&T Corporation (“BB&T”) (the stock sale
and related transactions described herein are collectively referred to as the “BankAtlantic Sale”). Prior to
the closing of the BankAtlantic Sale, BankAtlantic transferred certain non-performing loans receivable,
real estate properties, and previously charged off loans to BCC.
Principal Investments
BBX Capital’s principal investments are as follows:
·
Bluegreen Vacations: Founded in 1966 and headquartered in Boca Raton, Florida, Bluegreen is
a leading vacation ownership company that markets and sells vacation ownership interests
(“VOIs”) and manages resorts in top leisure and urban destinations. Bluegreen’s resort network
includes 45 Club Resorts (resorts in which owners in the Bluegreen Vacation Club (the
“Vacation Club”) have the right to use most of the units in connection with their VOI
ownership) and 24 Club Associate Resorts (resorts in which owners in Bluegreen’s
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Vacation Club have the right to use a limited number of units in connection with their VOI
ownership). Bluegreen’s Club Resorts and Club Associate Resorts are primarily located in
popular, high-volume, “drive-to” vacation locations, including Orlando, Las Vegas, Myrtle
the
Beach and Charleston, among others. Through Bluegreen’s points-based system,
approximately 216,000 owners in its Vacation Club have the flexibility to stay at units available
at any of its resorts and have access to over 11,000 other hotels and resorts through partnerships
and exchange networks. Bluegreen has a robust sales and marketing platform supported by
exclusive marketing relationships with nationally-recognized consumer brands, such as Bass Pro
and Choice Hotels. These marketing relationships drive sales within its core demographic.
Bluegreen also provides third-party developers with sales and marketing services and resorts and
resort developers with other fee-based services, including resort management, mortgage
servicing, title services, and construction management. In addition, Bluegreen offers financing to
qualified VOI purchasers. Bluegreen had total assets of approximately $1.3 billion as of
December 31, 2018.
·
·
·
BBX Capital Real Estate: BBXRE is engaged in the acquisition, development, construction,
ownership, financing, and management of real estate and investments in real estate joint
ventures. BBXRE had total assets of approximately $165.1 million as of December 31, 2018,
including investments, directly and indirectly through joint ventures, in multifamily apartment
and
townhome communities, single-family master-planned communities, and commercial
properties located primarily in Florida. In addition, BBXRE owns a 50% equity interest in The
Altman Companies, LLC (the “Altman Companies”), a developer and manager of multifamily
apartment communities.
Renin: Renin is engaged in the design, manufacture, and distribution of sliding doors, door
systems and hardware, and home décor products and operates through its headquarters in Canada
and two manufacturing and distribution facilities in Canada and the United States. In addition to
its own manufacturing, Renin also sources various products and materials from China. Renin
had total assets of approximately $32.4 million as of December 31, 2018.
IT’SUGAR: In June 2017, the Company acquired IT’SUGAR, a specialty candy retailer which
operates approximately 100 retail locations in over 25 states and Washington, D.C.
IT’SUGAR’s products include bulk candy, giant candy packaging, and novelty items that are
purchased from third-party vendors and sold at its retail locations, which include a mix of high-
traffic resort and entertainment, lifestyle, mall/outlet, and urban locations across the United
States. IT’SUGAR had total assets of approximately $70.7 million as of December 31, 2018.
Other Investments
In addition to its principal investments, the Company has investments in other operating businesses that
are in various stages of development and currently generate operating losses. These investments include
various companies in the confectionery industry, including Hoffman’s Chocolates, a manufacturer and
retailer of gourmet chocolates with retail locations in South Florida, and other manufacturers/wholesalers
of confectionery products. In addition, the Company has entered into area development and franchise
agreements pursuant to which the Company has the opportunity to develop up to approximately 60 MOD
Super Fast Pizza (“MOD Pizza”) franchised restaurant locations throughout Florida over the next several
years. The Company currently operates nine MOD Pizza restaurant locations and is evaluating their
performance to determine the rate at which it will open new restaurant locations in the future.
Our Strategies and Objectives
The Company’s goal is to build long-term shareholder value. Since many of the Company’s assets do not
generate income on a regular or predictable basis, the Company’s objective continues to be long-term
growth as measured by increases in book value and intrinsic value over time.
In addition, our goal is to streamline our business verticals so that our business model can be more easily
analyzed and followed by the marketplace.
The Company regularly reviews the performance of its investments and, based upon economic, market,
and other relevant factors, considers transactions involving the sale or disposition of all or a portion of its
assets, investments, or subsidiaries. These include, among other alternatives, a sale or spin-off of its
assets, investments, or subsidiaries or transactions involving public or private issuances of debt or equity
securities which decrease or dilute the Company’s ownership interest in such investments.
2
Additional Information
The Company’s corporate website is www.bbxcapital.com. The Company’s annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are
available free of charge through its website as soon as reasonably practicable after such material is
electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). The
Company’s website and the information contained on or connected to it are not incorporated into this
Annual Report on Form 10-K.
Cautionary Note Regarding Forward-Looking Statements
This document contains forward-looking statements based largely on current expectations of the Company
that involve a number of risks and uncertainties. All opinions, forecasts, projections, future plans or other
statements, other than statements of historical fact, are forward-looking statements and can be identified
by the use of words or phrases such as “plans,” “believes,” “will,” “expects,” “anticipates,” “intends,”
“estimates,” “our view,” “we see,” “would” and words and phrases of similar import. The forward-looking
statements in this document are also forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and involve substantial risks and uncertainties. We can give
no assurance that such expectations will prove to be correct. Actual results, performance, or achievements
could differ materially from those contemplated, expressed, or implied by the forward-looking statements
contained herein. Forward-looking statements are based largely on our expectations and are subject to a
number of risks and uncertainties that are subject to change based on factors which are, in many instances,
beyond our control. When considering forward-looking statements, the reader should keep in mind the
risks, uncertainties and other cautionary statements made in this report. The reader should not place undue
reliance on any forward-looking statement, which speaks only as of the date made. This document also
contains information regarding the past performance of the Company and its respective investments and
operations. The reader should note that prior or current performance is not a guarantee or indication of
future performance. Comparisons of results for current and any prior periods are not intended to express
any future trends or indications of future performance, and all such information should only be viewed as
historical data. Future results could differ materially as a result of a variety of risks and uncertainties.
Some factors which may affect the accuracy of the forward-looking statements apply generally to the
industries in which the Company operates, including the resort development and vacation ownership
industries in which Bluegreen operates, the real estate development and construction industry in which
BBX Capital Real Estate operates, the home improvement industry in which Renin operates, and the
confectionery industry in which IT’SUGAR and the Company’s other confectionery businesses operate.
These risks and uncertainties include, but are not limited to:
·
·
·
·
·
·
·
BBX Capital has limited sources of cash and is dependent upon dividends from Bluegreen to
fund its operations; Bluegreen may not be in a position to pay dividends or its board of directors
may determine not to pay dividends; and dividend payments may be subject to restrictions,
including restrictions contained in debt instruments;
Risks associated with the Company’s indebtedness, including that the Company will be required
to utilize cash flow to service its indebtedness, that indebtedness may make the Company more
vulnerable to economic downturns, that indebtedness subjects the Company to covenants and
restrictions on its operations and activities and on BBX Capital’s ability to pay dividends, and,
with respect to the $80.0 million loan that BBX Capital received from a subsidiary of Bluegreen
during April 2015, that BBX Capital may be required to prepay the loan to the extent necessary
for Bluegreen or its subsidiaries to remain in compliance with covenants under their outstanding
indebtedness;
Risks associated with BBX Capital’s current business strategy, including the risk that BBX
Capital will not be successful in simplifying its business structure or in pursuing the sale or
disposal of businesses or investments, that it will not be in a position to provide strategic support
to or make additional investments in its subsidiaries or joint ventures, or that it may not achieve
or maintain in the future the benefits anticipated to be realized from such support or additional
investments;
BBX Capital’s shareholders’ interests will be diluted to the extent additional shares of its
common stock are issued;
The risk that BBX Capital may not pay dividends on its Class A Common Stock or Class B
Common Stock in the amount anticipated, when anticipated, or at all;
Risks associated with BBX Capital’s recently announced plan to take Bluegreen private pursuant
to a statutory short-form merger under Florida law;
The impact of economic conditions on the Company, the price and liquidity of BBX Capital’s
Class A Common Stock and Class B Common Stock, and BBX Capital’s ability to obtain
additional capital, including the risk
3
that if BBX Capital needs or otherwise believes it is advisable to issue debt or equity securities or
to incur indebtedness in order to fund the Company’s operations or investments, it may not be
possible to issue any such securities or obtain such indebtedness on favorable terms, or at all;
The impact on liquidity of BBX Capital’s Class A Common Stock of not maintaining
compliance with the listing requirements of the NYSE, which includes, among other things, a
minimum average closing price, share volume, and market capitalization;
The risk that creditors of BBX Capital’s subsidiaries or other third-parties may seek to recover
distributions or dividends made by such subsidiaries to BBX Capital or other amounts owed by
such subsidiaries to such creditors or third-parties;
The performance of entities in which BBX Capital has made investments may not be profitable
or achieve anticipated results;
Risks related to potential business expansion that the Company may pursue, including that the
Company may not pursue such expansion when or to the extent anticipated or at all, and any
such expansion may involve significant costs and the incurrence of significant indebtedness and
may not be successful;
Risks and uncertainties affecting the Company and its results, operations, markets, products,
services and business strategies, and the risks and uncertainties associated with its ability to
successfully implement its currently anticipated plans, and its ability to generate earnings under
the current business strategy;
Risks associated with acquisitions, asset or subsidiary dispositions, or debt or equity financings
which the Company may consider or pursue from time to time;
·
·
·
·
·
·
· Adverse conditions in the stock market, the public debt market, and other capital markets and
·
the impact of such conditions on the activities of the Company;
Risks of cybersecurity threats, including the potential misappropriation of assets or confidential
information, corruption of data or operational disruptions;
·
·
· Updating of, and developments with respect to, technology, including the cost involved in
updating our technology and the impact that any failure to keep pace with developments in
technology could have on our operations or competitive position and our information
technology expenditures may not result in the expected benefits;
The Company’s ability to compete effectively in the highly competitive industries in which it
operates;
The Company’s ability to maintain the integrity of internal or customer data, the failure of
which could result in damage to our reputation and/or subject us to costs, fines or lawsuits;
Risks associated with, and the impact of, regulatory examinations or audits of the Company’s
operations, and the costs associated with regulatory compliance;
Risks associated with legal and other regulatory proceedings, including claims of noncompliance
with applicable regulations or for development related defects, and the impact they may have on
the Company’s financial condition and operating results;
·
·
· Audits of the Company’s federal or state tax returns, including that they may result in the
·
·
·
·
imposition of additional taxes;
Environmental liabilities, including claims with respect to mold or hazardous or toxic
substances, and their impact on the Company’s financial condition and operating results;
The impact on the Company’s consolidated financial statements and internal control over
financial reporting of the adoption of new accounting standards, including the new standard for
accounting for leases which the Company adopted on January 1, 2019;
Risks that the impact of hurricanes and other natural disasters may adversely impact the
Company’s financial condition and operating results; and
The preparation of financial statements in accordance with U.S. generally accepted accounting
principles (“GAAP”) involves making estimates, judgments and assumptions, and any changes
in estimates, judgments and assumptions used could have a material adverse impact on the
financial condition and operating results of the Company or its subsidiaries.
With respect to Bluegreen, the risks and uncertainties include, but are not limited to:
· Adverse trends or disruptions in the vacation ownership, vacation rental, and travel industries;
· Adverse changes to, or interruptions in, business relationships, including changes in or the
expiration or termination of Bluegreen’s management contracts, exchange networks, or strategic
marketing alliances;
Risks of the real estate market and the risks associated with real estate development, including a
decline in real estate values and a deterioration of other conditions relating to the real estate
market and real estate development;
Bluegreen’s ability to maintain inventory of VOIs for sale;
·
· Decreased demand from prospective purchasers of VOIs;
·
4
· Adverse events or trends in vacation destinations and regions where the resorts in Bluegreen’s
·
·
·
·
·
·
·
·
·
·
·
network are located, including weather-related events;
The availability of financing and Bluegreen’s ability to sell, securitize, or borrow against its VOI
notes receivable;
The ratings of third-party rating agencies, including the impact of any downgrade on
Bluegreen’s ability to obtain, renew or extend credit facilities, or otherwise raise funds;
Bluegreen’s indebtedness and the terms of its indebtedness may limit, among other things, its
activities and ability to pay dividends, and Bluegreen may not comply with the terms of its
indebtedness;
The loss of the services of Bluegreen’s key management and personnel could adversely affect its
business;
Bluegreen’s ability
to comply with applicable regulations to the vacation ownership
industry currently as adopted or as may be adopted in the future and the costs of compliance
efforts or a failure to comply;
Bluegreen’s ability to successfully implement its growth strategy or maintain or expand its
capital-light business relationships or activities;
Bluegreen’s customers’ compliance with their payment obligations under financing provided by
Bluegreen, and the impact of defaults on Bluegreen’s operating results and liquidity position;
Changes in Bluegreen’s business model and marketing efforts, plans or strategies, may cause
marketing expenses to increase or adversely impact its revenue, operating results and financial
condition and such expenses as well as investments in new and expanded sales offices may not
achieve the desired results;
The impact of the resale market for VOIs on Bluegreen’s business, operating results and
financial condition;
Risks associated with Bluegreen’s relationships with third-party developers, including that third-
party developers who provide VOIs to be sold pursuant to fee-based services or just-in-time
arrangements may not provide VOIs when planned and that third-party developers may not
fulfill their obligations to Bluegreen or to the homeowners associations that maintain the resorts
they developed; and
Calculation of payments and reimbursements due under Bluegreen’s marketing agreement with
Bass Pro and the parties’ ability to resolve the issue with respect thereto.
With respect to BBX Capital Real Estate, the risks and uncertainties include, but are not limited to:
·
·
·
·
The impact of economic, competitive, and other factors affecting BBX Capital Real Estate and
its assets, including the impact of a decline in real estate values on BBX Capital Real Estate’s
business and the value of BBX Capital Real Estate’s assets;
Risks that the recent investment in the Altman Companies may not realize the anticipated
benefits and will increase the Company’s exposure to risks associated with the multifamily real
estate development and construction industry;
The risk of additional impairments of real estate assets;
The risks associated with investments in real estate developments and joint ventures include:
o
o
o
o
o
o
o
o
exposure to downturns in the real estate and housing markets;
exposure to risks associated with real estate development activities, including severe
weather conditions increasing costs, delaying construction, causing uninsured losses or
reducing demand for homes;
risks associated with obtaining necessary zoning and entitlements;
risks that joint venture partners may not fulfill their obligations and concentration risks
associated with entering into numerous joint ventures with the same joint venture
partner;
risks relating to reliance on third-party developers or joint venture partners to complete
real estate projects;
risk associated with increasing interest rates, as the majority of the development costs
and sales of residential communities is financed;
risks associated with not finding tenants for multifamily apartments or buyers for
single-family homes and townhomes;
risk associated with finding equity partners, securing financing, and selling newly built
multifamily apartments;
risk that the projects will not be developed as anticipated or be profitable; and
risk associated with customers or vendors not performing on their contractual
o
o
obligations.
With respect to IT’SUGAR and Renin, the risks and uncertainties include, but are not limited to:
·
·
·
Risks that the Company’s investments will not achieve the returns anticipated;
Risks that their business plans, including IT’SUGAR’s plans for opening new stores in high
profile locations, will not be successful;
Risks that market demand for their products could decline;
5
·
·
·
·
·
·
·
·
·
Risks associated with increased commodity costs or a limited availability of commodities;
Risks associated with product recalls or product liability claims;
The risk of losses associated with excess and obsolete inventory and the risks of additional
required reserves for lower of cost or market value losses in inventory;
For Renin, the risk of trade receivable losses and the risks of charge-offs and required increases
in the allowance for bad debts;
Risks associated with the performance of vendors, commodity price volatility and the impact of
tariffs on goods imported from Canada and Asia, particularly with respect to Renin;
For Renin, risks associated with exposure to foreign currency exchange risk of the U.S. dollar
compared to the Canadian dollar;
The amount and terms of indebtedness associated with the operations and capital expenditures
may impact their financial condition and results of operations and limit their activities;
Requirements for operating and capital expenditures may require BBX Capital to make capital
contributions or advances; and
The risk that a decline in IT’SUGAR’s profitability or cash flows may result in impairment
losses associated with IT’SUGAR’s intangible and long-lived assets.
With respect to the Company’s other investments in operating businesses, in addition to the above risks
relevant to these businesses, the risks and uncertainties include, but are not limited to:
·
·
·
·
Risks that the reorganization of the confectionery businesses and operations may not achieve
anticipated operating efficiencies and reduction in operating losses and that the implementation
of strategic alternatives, including the sale or disposal of certain operations, will result in
additional losses;
Continued operating losses and the failure of these businesses to meet financial metrics may
necessitate BBX Capital making further capital contributions or advances to the businesses or a
decision not to support underperforming businesses;
The risk of impairment losses associated with declines in the value of the Company’s
investments in these operating businesses or the Company’s inability to recover its investments;
and
Risks associated with the Company’s ongoing compliance with its franchise agreements or area
development agreements, including the impact of noncompliance with the development
schedule to open MOD Pizza restaurant locations.
These and other risks and uncertainties disclosed in this Annual Report on Form 10-K are not necessarily
all of the important factors that could cause the Company’s actual results to differ materially from those
expressed in any of the forward-looking statements. Other unknown or unpredictable factors could cause
the Company’s actual results to differ materially from those expressed in any of the forward-looking
statements.
Given these uncertainties, you are cautioned not to place undue reliance on forward-looking statements,
and you should read this Annual Report on Form 10-K with the understanding that actual future results,
levels of activity, performance, and events and circumstances may be materially different from what the
Company expects. The Company qualifies all forward-looking statements by these cautionary statements.
Forward-looking statements speak only as of the date of this Annual Report on Form 10-K.
In addition to the risks and factors identified above, reference is also made to the other risks and factors
detailed in this report and the other reports filed by the Company with the SEC. The Company cautions
that the foregoing factors are not exclusive.
6
Principal Investments
The Company’s principal investments are Bluegreen, BBX Capital Real Estate, Renin, and IT’SUGAR.
Bluegreen
Strategies
Bluegreen’s core operating and growth strategies are focused on:
·
·
· Utilizing Bluegreen’s sales and marketing platform to increase VOI sales growth through the
maintenance and expansion of existing marketing alliances, continued development of new
marketing programs, and generation of additional VOI sales to existing Vacation Club owners;
Continuing to enhance Bluegreen’s Vacation Club experience by offering owners exceptional
value through the addition of new destinations, the expansion of exchange programs, and the
addition of new partnerships to offer increased vacation options;
Continuing to grow Bluegreen’s higher-margin, cash-generating businesses, including resort
management, title services, and loan servicing;
Increasing sales and operating efficiencies across all customer touch-points;
·
· Maintaining operational flexibility and continuing to pursue growth through a balanced mix of
capital-light sales vs. developed VOI sales, sales to new customers vs. sales to existing Vacation
Club owners, and cash sales vs. financed sales; and
Pursuing strategic transactions, including acquisitions of other VOI companies, resort assets,
sales and marketing platforms, management companies and contracts, and other assets,
properties and businesses.
·
Market and Industry Data
Market and industry data used in this Annual Report on Form 10-K have been obtained from Bluegreen’s
internal surveys, industry publications, unpublished industry data and estimates, discussions with industry
sources and other currently available information. The sources for this data include, without limitation, the
American Resort Development Association. Industry publications generally state that the information
contained therein has been obtained from sources believed to be reliable, but there can be no assurance as
to the accuracy or completeness of such information. Bluegreen has not independently verified such data.
Similarly, Bluegreen’s internal surveys, while believed to be reliable, have not been verified by any
independent sources. Accordingly, such data may not prove to be accurate. Forecasts and other forward-
looking information obtained from these sources are subject to the same qualifications and uncertainties as
the other forward-looking statements contained in this Annual Report on Form 10-K, as described above.
Trademarks, Service Marks and Trade Names
Bluegreen owns or has rights to use a number of registered and common law trademarks, trade names and
service marks in connection with its business, including, but not limited to, Bluegreen, Bluegreen Resorts,
Bluegreen Vacations, Bluegreen Traveler Plus, Bluegreen Vacation Club, Bluegreen Wilderness Club at
Big Cedar, and the Bluegreen Logo. This Annual Report on Form 10-K also refers to trademarks, trade
names and service marks of other organizations. Without limiting the generality of the preceding sentence,
World Golf Village is registered by World Golf Foundation, Inc.; Big Cedar and Bass Pro Shops are
registered by Bass Pro Trademarks, LP; Ascend, Ascend Hotel Collection, Ascend Resort Collection,
Choice Privileges, Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria, MainStay Suites,
Econo Lodge and Rodeway Inn are registered by Choice Hotels International, Inc.; and Suburban
Extended Stay Hotel is registered by Suburban Franchise Systems, Inc. All trademarks, service marks or
trade names referred to in this Annual Report on Form 10-K are the property of their respective holders.
Solely for convenience, the trademarks, trade names and service marks referred to in this Annual Report
on Form 10-K appear without the ® and ™ symbols, but such references are not intended to indicate in
any way that Bluegreen or the owner will not assert, to the fullest extent under applicable law, all rights to
such trademarks, trade names and service marks.
Business
Bluegreen is a leading vacation ownership company that markets and sells VOIs and manages resorts in
top leisure and urban destinations. Bluegreen’s resort network includes 45 Club Resorts (resorts in which
owners in the Vacation Club have the right to use most of the units in connection with their VOI
ownership) and 24 Club Associate Resorts (resorts in which owners in the Vacation Club have the right to
use a limited number of units in connection with their VOI ownership). Bluegreen’s Club Resorts and
Club Associate Resorts are primarily located in popular, high-volume, “drive-
7
to” vacation locations, including Orlando, Las Vegas, Myrtle Beach and Charleston, among others.
Through Bluegreen’s points-based system, the approximately 216,000 owners in its Vacation Club have
the flexibility to stay at units available at any of its resorts and have access to over 11,000 other hotels and
resorts through partnerships and exchange networks. Bluegreen has a robust sales and marketing platform
supported by exclusive marketing relationships with nationally-recognized consumer brands, such as Bass
Pro and Choice Hotels. These marketing relationships drive sales within its core demographic, which is
described below.
Prior to 2009, Bluegreen’s vacation ownership business consisted solely of the sale of VOIs in resorts that
it had developed or acquired (“developed VOI sales”). While Bluegreen continues to conduct such sales
and development activities, Bluegreen now also derives a significant portion of its revenue from its
capital-light business model, which utilizes Bluegreen’s expertise and infrastructure to generate both VOI
sales and recurring revenue from third parties without the significant capital investment generally
associated with the development and acquisition of resorts. Bluegreen’s capital-light business activities
include sales of VOIs owned by third-party developers pursuant to which Bluegreen is paid a commission
(“fee-based sales”) and sales of VOIs that Bluegreen purchases under just-in-time (“JIT”) arrangements
with third-party developers or from secondary market sources. In addition, Bluegreen provides resorts and
resort developers with other fee-based services, including resort management, mortgage servicing, title
services, and construction management. Bluegreen also offers financing to qualified VOI purchasers,
which generates significant interest income.
(1) Excludes “Other Income, Net.”
Bluegreen’s Vacation Club has grown from approximately 170,000 owners as of December 31, 2012 to
approximately 216,000 owners as of December 31, 2018. Bluegreen primarily serves a demographic that
it considers underpenetrated within the vacation ownership industry, as the typical Vacation Club owner
has an average annual household income of approximately $77,000 as compared to an industry average of
$86,000. According to U.S. census data, households with an annual income of $50,000 to $100,000
represent the largest percentage of the total population (approximately 29%). Bluegreen believes that its
ability to effectively scale the transaction size to suit its customer, as well as high-quality, conveniently-
located, “drive-to” resorts, are attractive to its core target demographic.
Products and Services
Vacation Ownership Interests
Since entering the vacation ownership industry in 1994, Bluegreen has generated over 669,000 VOI sales
transactions, including over 147,000 fee-based sales transactions. Bluegreen’s Vacation Club owners
receive an annual or biennial allotment of “points” in perpetuity (supported by an underlying deeded VOI
held in trust for the owner) that may be used to stay at any of Bluegreen’s 45 Club Resorts and 24 Club
Associate Resorts. Vacation Club owners can use their points to stay in resorts for varying lengths of time,
starting at a minimum of two nights. The number of points required for a stay at a resort varies depending
on a variety of factors, including resort location, size of the unit, vacation season, and the days of the
week. Under this system, Vacation Club owners can select vacations according to their schedules, space
needs and available points. Subject to certain restrictions and fees, Vacation Club owners are typically
allowed to carry over any unused points for one year and to “borrow” points from the next year. Vacation
Club owners may also
8
take advantage of various other lodging and vacation opportunities available to them as described under
“Value Proposition” below.
Each of Bluegreen’s Club Resorts and Club Associate Resorts is managed by a homeowners association
(“HOA”), which is governed by a board of directors or trustees. This board hires a management company
to which it delegates many of the rights and responsibilities of the HOA, including landscaping, security,
housekeeping, garbage collection, utilities, insurance procurement, laundry and repairs and maintenance.
Vacation Club owners pay annual maintenance fees which cover the costs of operating all the resorts in
the Vacation Club system, including fees for real estate taxes and reserves for capital improvements. If a
Vacation Club owner does not pay such charges, his or her use rights may be suspended and ultimately
terminated, subject to the applicable lender’s first mortgage lien, if any, on such owner’s VOI. Bluegreen
provides management services to 49 resorts and the Vacation Club through contractual arrangements with
HOAs. Bluegreen has a 100% renewal rate on management contracts from its Club Resorts.
“Value Proposition”
Bluegreen Vacation Club’s points-based platform offers owners significant flexibility. As reflected in the
chart below, basic Vacation Club ownership entitles owners to use their points to stay at any of
Bluegreen’s 45 Club Resorts and 24 Club Associate Resorts, as well as to access more than 4,300 resorts
available through the Resort Condominiums International, LLC (“RCI”) exchange network. For a nominal
annual fee and transaction fees, Vacation Club owners can join and utilize Bluegreen’s Traveler Plus
program, which enables them to use their points to access an additional 48 direct exchange resorts and
other vacation experiences, such as cruises. Vacation Club owners can convert their Vacation Club points
into Choice Privileges points. Choice Privileges points can be used for stays in Choice Hotels. In addition,
Traveler Plus members can directly use their Vacation Club points for stays in Choice Hotels’ Ascend
Hotel Collection properties, a network of historic and boutique hotels in the United States, Canada,
Scandinavia and Latin America. Overall, there are approximately 6,900 hotels in the Choice Hotels
network, located in more than 40 countries and territories, and Choice Hotels’ brands include the Ascend
Hotel Collection, Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, Cambria Hotels and Suites,
MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge and Rodeway Inn. Bluegreen continuously
seeks new ways to add value for its Vacation Club owners, including enhanced product offerings, new
resort locations, broader vacation experiences, and further technological innovation, all of which are
designed to increase guest satisfaction.
Approximately 66% of Vacation Club owners are enrolled in Traveler Plus. During the year ended
December 31, 2018, approximately 8% of Vacation Club owners utilized the RCI exchange network.
9
Vacation Club Resort Locations and Amenities
As shown in the map below, Bluegreen’s Vacation Club resorts are primarily located on the U.S. East
Coast and Midwest. The 48 direct-exchange resorts available to Traveler Plus members are concentrated
along the West Coast and Hawaii. Together, this provides a broad offering across the United States and
the Caribbean.
Vacation Club resorts are primarily “drive-to” resort destinations, and approximately 89% of Bluegreen’s
Vacation Club owners live within a four-hour drive of at least one of Bluegreen’s resorts. Bluegreen’s
resorts are located in popular vacation destinations, such as Florida, South Carolina, North Carolina,
Tennessee, Virginia, Texas, Louisiana and Nevada, and represent a diverse mix of resort and urban
destinations, allowing Vacation Club owners the ability to customize their vacation experience. In
addition, Bluegreen offers its Vacation Club owners access to Caribbean locations, including Aruba.
Bluegreen’s resort network offers a diverse mix of experiences and accommodations. Unlike some of
Bluegreen’s competitors that maintain static brand design standards across resorts and geographies,
Bluegreen seeks to design resorts that capture the uniqueness of a particular location. Bluegreen’s
distinctive resorts are designed to create an authentic experience and connection to their unique and varied
locations.
Bluegreen’s resorts typically feature condominium-style accommodations with amenities such as fully
equipped kitchens, entertainment centers, and in-room laundry facilities. Many resorts feature a clubhouse
(including a pool, game room, and lounge), hotel-type staff, and concierge services.
Bluegreen also owns a 51% interest in Bluegreen/Big Cedar Vacations, which develops, markets, and sells
VOIs at three premier wilderness-themed resorts adjacent to Table Rock Lake near Branson, Missouri:
The Bluegreen Wilderness Club at Big Cedar, The Cliffs at Long Creek, and Paradise Point. The
remaining 49% interest in Bluegreen/Big Cedar Vacations is held by Big Cedar, LLC, (“BC LLC”), an
affiliate of Bass Pro. As a result of Bluegreen’s controlling interest in Bluegreen/Big Cedar Vacations, the
Company’s consolidated financial statements include the results of operations and financial condition of
Bluegreen/Big Cedar Vacations.
Located next to the Big Cedar Lodge, The Bluegreen Wilderness Club is a 40-acre resort overlooking
Table Rock Lake with sprawling views of the surrounding Ozarks. Vacation Club owners enjoy a variety
of amenities, including a 9,000 square foot clubhouse, lazy river, and rock-climbing wall, in addition to
full access to the amenities and activities of Big
10
Cedar Lodge. The Cliffs at Long Creek offers fully furnished homes that can accommodate up to 13
people and other vacation villas while providing access to a clubhouse and amenities at The Bluegreen
Wilderness Club. Paradise Point offers spacious vacation villas with direct access to Table Rock Lake and
the Bass Pro Long Creek Marina.
Vacation Club Resorts
Club Resorts
Location
1 Cibola Vista Resort and Spa
2 La Cabana Beach Resort & Casino (4)
3 The Club at Big Bear Village
4 The Innsbruck Aspen
5 Via Roma Beach Resort
6 Daytona SeaBreeze
7 Resort Sixty-Six
8 The Hammocks at Marathon
9 The Fountains, Lake Eve and Oasis Lakes Orlando, Florida
10 Orlando’s Sunshine Resort I & II
Orlando, Florida
11 Casa del Mar Beach Resort
Ormond Beach, Florida
Peoria, Arizona
Oranjestad, Aruba
Big Bear Lake, California
Aspen, Colorado
Bradenton Beach, Florida
Daytona Beach Shores, Florida
Holmes Beach, Florida
Marathon, Florida
12
Grande Villas at World Golf Village &
The Resort at World Golf Village
St. Augustine, Florida
St. Pete Beach, Florida
Surfside, Florida
Savannah, Georgia
Chicago, Illinois
New Orleans, Louisiana
New Orleans, Louisiana
Dennis Port, Massachusetts
Boyne Falls, Michigan
Branson, Missouri
Hollister, Missouri
13 Bluegreen at Tradewinds
14 Solara Surfside
15 Studio Homes at Ellis Square
16 The Hotel Blake
17 Bluegreen Club La Pension
18 Marquee (8)
19 The Soundings Seaside Resort
20 Mountain Run at Boyne
21 The Falls Village
22 Paradise Point Resort (5)
23 Bluegreen Wilderness Club at Big Cedar (5) Ridgedale, Missouri
24 The Cliffs at Long Creek (5)
Ridgedale, Missouri
25 Bluegreen Club 36
Las Vegas, Nevada
26 South Mountain Resort
Lincoln, New Hampshire
27 Blue Ridge Village I,II and III
Banner Elk, North Carolina
28 Club Lodges at Trillium
Cashiers, North Carolina
29 The Suites at Hershey
Hershey, Pennsylvania
Charleston, South Carolina
30 The Lodge Alley Inn
31 King 583
32 Carolina Grande
33 Harbour Lights
34 Horizon at 77 th
35 SeaGlass Tower
36 Shore Crest Vacation Villas I & II
37 MountainLoft I & II
38 Laurel Crest
39 Eilan Hotel and Spa
40 Shenandoah Crossing
41 Bluegreen Wilderness Traveler at
42 BG Patrick Henry Square
43 Parkside Williamsburg Resort
44 Bluegreen Odyssey Dells
45 Christmas Mountain Village
Shenandoah
Charleston, South Carolina
Myrtle Beach, South Carolina
Myrtle Beach, South Carolina
Myrtle Beach, South Carolina
Myrtle Beach, South Carolina
North Myrtle Beach, South
Carolina
Gatlinburg, Tennessee
Pigeon Forge, Tennessee
San Antonio, Texas
Gordonsville, Virginia
Gordonsville, Virginia
Williamsburg, Virginia
Williamsburg, Virginia
Wisconsin Dells, Wisconsin
Wisconsin Dells, Wisconsin
Total Units
11
Total
units (1)
Managed
by
Bluegreen
(2)
Fee-Based
or JIT
sales (3)
Sales
center (7)
315
449
38
17
28
78
28
58
745
84
118
214
160
60
28
160
64
94
69
205
293
150
427
106
476
116
132
36
78
90
50
118
324
88
136
240
394
298
163
136
146
130
107
92
381
7,719
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
Club Associate Resorts
Paradise Isle Resort
Shoreline Towers Resort
Fantasy Island Resort II
1
2
3 Dolphin Beach Club
4
5 Mariner’s Boathouse and Beach Resort
Tropical Sands Resort
6
7 Windward Passage Resort
8 Gulfstream Manor
9 Outrigger Beach Club
10 Landmark Holiday Beach Resort
11 Ocean Towers Beach Club
Panama City Resort & Club
12
Surfrider Beach Club
13
Petit Crest Villas and Golf Club Villas at Big Canoe
14
Pono Kai Resort
15
16 The Breakers
17 Lake Condominiums at Big Sky
Foxrun Townhouses
18
Sandcastle Village II
19
20 Waterwood Townhouses
21 Bluegreen at Atlantic Palace
22 The Manhattan Club
Players Club
23
24 Blue Water Resort at Cable Beach (6)
Location
Gulf Shores, Alabama
Gulf Shores, Alabama
Daytona Beach Shores, Florida
Daytona Beach Shores, Florida
Fort Myers Beach, Florida
Fort Myers Beach, Florida
Fort Myers Beach, Florida
Gulfstream, Florida
Ormond Beach, Florida
Panama City Beach, Florida
Panama City Beach, Florida
Panama City Beach, Florida
Sanibel Island, Florida
Marble Hill, Georgia
Kapaa (Kauai), Hawaii
Dennis Port, Massachusetts
Big Sky, Montana
Lake Lure, North Carolina
New Bern, North Carolina
New Bern, North Carolina
Atlantic City, New Jersey
New York, New York
Hilton Head Island, South Carolina
Nassau, Bahamas
Managed
by
Bluegreen
(2)
Fee-Based
or JIT
sales (3)
✓
✓
✓
✓
✓
✓
✓
✓
(1) Represents the total number of units at the Club Resort. Owners in the Vacation Club have the right to use most of
the units at each Club Resort in connection with their VOI ownership.
(2) This resort is managed by Bluegreen Resorts Management, Inc. (“Bluegreen Resorts Management”), Bluegreen’s
wholly-owned subsidiary.
(3) This resort, or a portion thereof, was developed by third-parties, and Bluegreen has sold VOIs on their behalf or
have arrangements to acquire such VOIs as part of Bluegreen’s capital-light business strategy.
(4) This resort is managed by Casa Grande Cooperative Association I, which has contracted with Bluegreen Resorts
Management to provide management consulting services to the resort. The services provided by Bluegreen Resorts
Management to this resort pursuant to such agreement are similar in nature to, but less extensive than, the services
provided by Bluegreen or its subsidiaries to the other resorts listed in the table as “Managed by Bluegreen.”
(5) This resort is developed, marketed and sold by Bluegreen/Big Cedar Vacations.
(6) This resort is currently closed due to hurricane damage.
(7)
In addition to the sales centers listed in the table, Bluegreen also operates an additional sales center in Memphis,
Tennessee.
(8) The Marquee is expected to be open for guests in June 2019.
Marketing and Sale of Inventory
VOI sales are typically generated by attracting prospective customers to tour a resort and attend a sales
presentation. Bluegreen’s sales and marketing platform utilizes a variety of methods to generate new
owner prospects, drive tour flow and sell VOIs in its Vacation Club. Bluegreen utilizes marketing
alliances with nationally-recognized brands, which provide exclusive access to venues which target
consumers generally matching Bluegreen’s core demographic. In addition, Bluegreen sources sales
prospects through programs which generate leads at high-traffic venues and in high-density tourist
locations and events, as well as from telemarketing and referrals from existing owners and exchangers and
renters staying at Bluegreen’s properties.
Many of Bluegreen’s programs involve the sale of a discounted vacation package that typically includes a
two to three night stay in close proximity to one of Bluegreen’s resort sales offices and requires
participation in a sales presentation (a sales tour). Vacation packages are typically sold either in retail
establishments, such as Bass Pro stores and outlet malls, or via telemarketing. During the year ended
December 31, 2018, Bluegreen sold over 227,000 vacation packages, and 48% of Bluegreen’s VOI sales
were derived from vacation packages. As of December 31, 2018, Bluegreen had a pipeline of over 185,000
vacation packages sold, which typically convert to tours at a rate of 55%.
Bluegreen has an exclusive marketing agreement with Bass Pro, a nationally-recognized retailer of
fishing, marine, hunting, camping and sports gear, that provides Bluegreen with the right to market and
sell vacation packages at kiosks in each of Bass Pro’s retail locations. As of December 31, 2018,
Bluegreen sold vacation packages in 69 of Bass Pro’s stores. Bass Pro has a loyal customer base that
strongly matches Bluegreen’s core demographic. Under the agreement, Bluegreen also has the right to
market VOIs in Bass Pro catalogs and on its website and to access Bass Pro’s customer
12
database. In exchange, Bluegreen compensates Bass Pro based on VOI sales generated through the
program. No compensation is paid to Bass Pro under the agreement on sales made at Bluegreen/Big
Cedar Vacations’ resorts. During the years ended December 31, 2018, 2017 and 2016, VOI sales to
prospects and leads generated by the agreement with Bass Pro accounted for approximately 14%, 15%
and 16%, respectively, of Bluegreen’s VOI sales volume. Bluegreen’s marketing alliance with Bass Pro
originated in 2000, has been renewed twice, and currently runs through 2025. Bluegreen has continued to
meet with Bass Pro’s leadership in an effort to resolve the issues which arose between the parties in 2017
and 2018. While there is no assurance that a resolution will be reached, Bluegreen remains optimistic that
it will achieve a resolution of the outstanding issues. Bluegreen is hopeful that the resolution will address
the timing of entry into the Cabela’s stores and an extension of the parties’ agreements. If reached, the
resolution may include a restructuring of the amount and timing of compensation paid to Bass Pro. In the
meantime, Bluegreen continues to execute its vacation package marketing strategy under the current
agreement with Bass Pro. While Bluegreen does not believe that any material additional amounts are due
to Bass Pro, Bluegreen’s future results would be impacted if the issues are not resolved and by any change
in the compensation payable to Bass Pro or the calculation of payments or reimbursements utilized
pursuant to the agreements.
Bluegreen also has an exclusive strategic relationship with Choice Hotels that covers several areas of its
business, including a sales and marketing alliance that enables it to leverage Choice Hotels’ brands,
customer relationships, and marketing channels to sell vacation packages. Vacation packages are sold
through customer reservation calls transferred to Bluegreen from Choice and through outbound
telemarketing methods utilizing Choice’s customer database. In addition, 37 of Bluegreen’s resorts are
part of Choice’s Ascend Hotel Collection, which provides Bluegreen with the opportunity to market to
Choice Hotel guests staying at its resorts. Bluegreen’s strategic relationship with Choice Hotels originated
in 2013 and was extended in August 2017 for a term of 15 years, with an additional 15-year renewal term
thereafter unless either party elects not to renew the arrangement.
In addition, Bluegreen generates leads and sells vacation packages through its relationships with various
other retail operators and entertainment providers. As of December 31, 2018, Bluegreen had kiosks in 21
outlet malls, strategically selected based on proximity to major vacation destinations and strong foot traffic
of consumers matching its core target demographic. Bluegreen generates vacation package sales from
these kiosks. Bluegreen also generates leads at malls, outlets and high-density locations or events, where
contact information for sales prospects is obtained through raffles, giveaways and other attractions.
Bluegreen then seeks to sell vacation packages to such prospects, including through telemarketing efforts
by Bluegreen or third-party vendors. As of December 31, 2018, Bluegreen had lead generation operations
in over 460 locations.
Bluegreen believes that its diverse strategic marketing alliances (including those with Bass Pro, Choice
Hotels and other retail operators and entertainment providers) deliver a strategic advantage over certain
competitors that rely primarily on relationships with their affiliated hotel brands to drive lead generation
and new owner growth. Bluegreen’s goal is to identify marketing partners with brands that attract
Bluegreen’s targeted owner demographic and to build successful marketing relationships with those
partners. Bluegreen also attempts to structure its marketing alliances to compensate its partners with
success-based payments, rather than flat fees, for the use of their brand or facilities for lead generation.
Bluegreen believes that the variety in its marketing relationships has facilitated a healthy mix of new
owner sales vs. existing owner sales that compare favorably to its competitors. During the year ended
December 31, 2018, approximately 48% of Bluegreen’s VOI sales were to new owners.
In addition to attracting new customers, Bluegreen also seeks to sell additional VOI points to its existing
Vacation Club owners. These sales generally have lower marketing costs and result in higher operating
margins than sales generated through other marketing channels. During the years ended December 31,
2018, 2017 and 2016, sales to existing Vacation Club owners accounted for 52%, 49% and 46%,
respectively, of Bluegreen’s system-wide sales of VOIs, net. Bluegreen targets a balanced mix of new
customer and existing Vacation Club owner sales to drive sustainable long-term growth. The number of
owners in Bluegreen’s Vacation Club has increased at a 5% compound annual growth rate between 2012
and 2018, from approximately 170,000 owners as of December 31, 2012 to approximately 216,000 owners
as of December 31, 2018.
Bluegreen operates 26 sales offices, typically located adjacent to its resorts and staffed with sales
representatives and sales managers. As of December 31, 2018, Bluegreen had over 3,000 employees
dedicated to VOI sales and marketing. Bluegreen utilizes a uniform sales process, offers ongoing training
for its sales personnel, and maintains strict quality control policies. During the year ended December 31,
2018, 91% of Bluegreen’s sales were generated from 17 of its sales offices, which focus on both new
customer and existing Vacation Club owner sales. Bluegreen’s remaining 9 sales offices are primarily
focused on sales to existing Vacation Club owners staying at the respective resort. In addition, Bluegreen
utilizes its telesales operations to sell additional VOIs to Vacation Club owners.
13
Flexible Business Model
Bluegreen’s business model is designed to give it flexibility to capitalize on opportunities and adapt to
changing market environments. Bluegreen has the ability to adjust its targeted mix of capital-light vs.
developed VOI sales, sales to new customers vs. existing Vacation Club owners, and cash vs. financed
sales. While Bluegreen may pursue opportunities that impact its short-term results, Bluegreen’s long-term
goal is to achieve sustained growth while maximizing earnings and cash flow.
Note: Cash sales represent the portion of Bluegreen’s system-wide sales of VOIs, net that is received from
the customer in cash within 30 days of purchase.
VOI Sales Mix
Bluegreen’s VOI sales include:
·
·
Fee-based sales of VOIs owned by third-party developers pursuant to which Bluegreen is paid a
commission;
JIT sales of VOIs Bluegreen acquires from third-party developers in close proximity to when
Bluegreen intends to sell such VOIs;
Secondary market sales of VOIs Bluegreen acquires from HOAs or other owners; and
·
· Developed VOI sales, or sales of VOIs in resorts that Bluegreen develops or acquires (excluding
inventory acquired pursuant to JIT and secondary market arrangements).
14
Fee-Based Sales
Bluegreen offers sales and marketing services to third-party developers for a commission. Under these
fee-based sales arrangements, which are typically entered into on a non-committed basis, Bluegreen sells
the third-party developers’ VOIs as Vacation Club interests through its sales and marketing platform.
Bluegreen also provides third-party developers with administrative services, periodic reporting, and
analytics through its proprietary software platform. Bluegreen seeks to structure the fee for these services
to cover selling and marketing costs, plus an operating profit. Historically, Bluegreen has targeted a
commission rate of 65% to 75% of the VOI sales price. Notes receivable originated in connection with
fee-based sales are held by the third-party developer and, in certain cases, are serviced by Bluegreen for
an additional fee. In connection with fee-based sales, Bluegreen is not at risk for development financing
and has no capital requirements, thereby increasing its return on invested capital. Bluegreen also typically
holds the HOA management contract associated with these resorts.
Just-In-Time (JIT) Sales
Bluegreen enters into JIT inventory acquisition agreements with third-party developers that allow
Bluegreen to buy VOI inventory in close proximity to when Bluegreen intends to sell such VOIs. While
Bluegreen typically enters into such arrangements on a non-committed basis, Bluegreen may engage in
committed arrangements under certain circumstances. Similar to fee-based sales, JIT sales do not expose
Bluegreen to risks for development financing. However, unlike fee-based sales, Bluegreen holds the
consumer finance receivables originated in connection with JIT sales. While JIT sales accounted for only
5% of system-wide sales of VOIs, net for the year ended December 31, 2018, JIT arrangements are often
entered into in connection with fee-based sales arrangements. Bluegreen also typically holds the HOA
management contract associated with these resorts.
Secondary Market Sales
Bluegreen acquires VOI inventory from HOAs and other owners generally on a non-committed basis.
These VOIs are typically obtained by the applicable HOA through foreclosure or termination in
connection with HOA maintenance fee defaults. Accordingly, Bluegreen generally purchases VOIs from
secondary market sources at a greater discount to retail price compared to developed VOI sales and JIT
sales. During the year ended December 31, 2018, secondary market sales accounted for 19% of
Bluegreen’s system-wide sales of VOIs, net.
Developed VOI Sales
Developed VOI sales are sales of VOIs in resorts that Bluegreen has developed or acquired (excluding
inventory acquired pursuant to JIT and secondary market arrangements). During the year ended
December 31, 2018, developed VOI sales accounted for 25% of Bluegreen’s system-wide sales of VOIs,
net. Bluegreen holds the notes receivable originated in connection with developed VOI sales. Bluegreen
also typically obtains the HOA management contract associated with these resorts.
Future VOI Sales
Completed VOI inventory increases or decreases from period to period due to the acquisition of inventory
through JIT and secondary market arrangements, development of new VOI units, reacquisition of VOIs
through notes receivable defaults, and changes to sales prices and completed sales. As of December 31,
2018 and 2017, Bluegreen owned completed VOI inventory (excluding units not currently being marketed
as VOIs, such as model units) and had access to additional completed VOI inventory through fee-based
and JIT arrangements as follows (dollars are in thousands and represent the then-estimated retail sales
value):
Inventory Source
Owned completed VOI inventory
Inventory accessible through fee-based
and JIT arrangements
Total
As of December 31,
2018
2017
759,327 $
754,961
487,391
1,246,718 $
401,906
1,156,867
$
$
Based on current estimates and expectations, Bluegreen believes this inventory, combined with inventory
being developed by Bluegreen or its third-party developer clients, and inventory that Bluegreen may
reacquire in connection with mortgage and maintenance fee defaults, can support Bluegreen’s VOI sales
at its current levels for over four years. Bluegreen maintains relationships with numerous third-party
developers and expects additional fee-based and JIT
15
relationships to continue to provide high-quality VOI inventory to support its sales efforts. In addition,
Bluegreen is focused on strategically expanding its inventory through development at three of its resorts
over the next several years. Bluegreen intends to continue to strategically evaluate opportunities to
develop or acquire VOI inventory in key strategic markets where Bluegreen identifies growing demand
and has already established marketing and sales networks.
During the years ended December 31, 2018 and 2017, the estimated retail sales value and cash purchase
price of the VOIs Bluegreen acquired through secondary market arrangements were as follows (dollars in
thousands):
Estimated retail sales value
Cash purchase price
Years Ended December 31,
2018
$
$
164,390 $
11,994 $
2017
243,084
12,721
In addition to inventory acquired through secondary market arrangements and in connection with notes
receivable defaults, Bluegreen expects to acquire inventory through five JIT arrangements during 2019,
three of which provide for committed purchases for 2019, and development activities. Development
activities currently consist primarily of additional VOI units being developed at The Cliffs at Long Creek
and The Bluegreen Wilderness Club at Big Cedar in Ridgedale, Missouri, and at the Fountains in Orlando,
Florida.
Management and Other Fee-Based Services
Bluegreen earns recurring management fees for providing services to HOAs. These management services
include oversight of housekeeping services, maintenance, and certain accounting and administrative
functions. Bluegreen believes its management contracts yield highly predictable cash flows that do not
have the traditional risks associated with hotel management contracts that are linked to daily rate or
occupancy. Bluegreen’s management contracts are typically structured as “cost-plus” management fees,
which means Bluegreen generally earns fees equal to 10% to 12% of the costs to operate the applicable
resort, and have an initial term of three years with automatic one-year renewals. As of December 31, 2018,
Bluegreen provided management services to 49 resorts. Bluegreen also earns recurring management fees
for providing services to the Vacation Club. These services include managing the reservation system and
providing owner billing and collection services. Bluegreen’s management contract with the Vacation Club
provides for reimbursement of its costs plus a fee equal to $10 per VOI owner. Bluegreen may seek to
expand its management services business, including to provide hospitality management services to hotels
for third parties.
In addition to HOA and club management services, which provide a recurring stream of revenue,
Bluegreen provides other fee-based services that produce revenues without the significant capital
investment generally associated with the development and acquisition of resorts. These services include,
but are not limited to, title and escrow services for fees in connection with the closing of VOI sales,
servicing notes receivable held by third parties, typically for a fee equal to 1.5% to 2.5% of the principal
balance of the serviced portfolio, and construction management services for third-party developers,
typically for fees equal to 4% of the cost of construction of the project. Bluegreen also receives revenues
from retail and food and beverage outlets at certain resorts.
Customer Financing
Bluegreen generally offers qualified purchasers financing for up to 90% of the purchase price of VOIs.
The typical financing provides for a term of ten years, a fixed interest rate that is determined by the FICO
score of the borrower, the amount of the down payment, and existing ownership, is fully amortizing in
equal installments, and may be prepaid without penalty. Purchasers may receive an additional 1%
discount on the interest rate by participating in Bluegreen’s pre-authorized payment plan. As of
December 31, 2018, 95% of Bluegreen’s serviced VOI notes receivable participated in Bluegreen’s pre-
authorized payment plan. During the year ended December 31, 2018, the weighted-average interest rate
on Bluegreen’s VOI notes receivable was 15.1%.
VOI purchasers are generally required to make a down payment of at least 10% of the sales price. As part
of Bluegreen’s continued efforts to manage operating cash flows, Bluegreen incentivizes its sales
associates to encourage cash sales and higher down payments on financed sales, with a target of 40-45% of
the VOI sales price collected in cash. Bluegreen also promotes a point-of-sale credit card program
sponsored by a third-party financial institution. As a result of these efforts, Bluegreen has increased both
the percentage of sales that are fully paid in cash and the average down payment on financed sales.
Including down payments received on financed sales, approximately 42% of Bluegreen’s system-wide
sales of VOIs, net during the year ended December 31, 2018 were paid in cash within approximately 30
days from the contract date.
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See “Sales/Financing of Receivables” below for additional information regarding Bluegreen’s receivable
financing activities.
Loan Underwriting
Bluegreen generally does not originate financing to customers with FICO scores below 575. However,
Bluegreen may provide financing to customers with no FICO score if the customer makes a minimum
down payment of 20%. For loans made during 2018, the borrowers’ weighted-average FICO score after a
30-day, “same as cash” period from the point of sale was 726. Further information is set forth in the
following table:
FICO Score
<600
600 - 699
700+
Percentage of originated and
serviced VOI receivables (1)
2.0%
32.0%
65.0%
(1) Excludes loans for which the obligor did not have a FICO score. For 2018, approximately 1% of Bluegreen’s VOI
notes receivable related to financing provided to borrowers with no FICO score.
Collection Policies
Financed VOI sales originated by Bluegreen typically utilize a note and mortgage. Collection efforts
related to these VOI loans are managed by Bluegreen. Bluegreen’s collectors are incentivized through a
performance-based compensation program.
Bluegreen generally makes collection efforts with respect to Vacation Club owners with outstanding loans
secured by their VOI by mail, telephone, and email (as early as 10 days past due). At 30 days past due,
Bluegreen mails a collection letter to the owner, if a U.S. resident, advising that if the loan is not brought
current, the delinquency will be reported to a credit reporting agency. At 60 days past due, Bluegreen
mails a letter to the owner advising that he or she may be prohibited from making future reservations for
lodging at a resort. At 90 days past due, Bluegreen stops the accrual of, and reverses previously accrued
but unpaid, interest on the note receivable and typically mails a notice informing the owner that unless the
delinquency is cured within 30 days, Bluegreen may terminate the underlying VOI ownership. If an owner
fails to bring the account current within the given timeframe, the loan is typically defaulted, and the
owner’s VOI is terminated. In that case, Bluegreen mails a final letter, typically at approximately 120 days
past due, notifying the owner of the loan default and the termination of his or her beneficial interest in the
VOI property. Thereafter, Bluegreen may seek to resell the VOI to a new purchaser. In certain cases, at
Bluegreen’s discretion, Bluegreen may not default the loan and terminate the underlying VOI, in which
case the loan would remain delinquent.
Allowance for Credit Losses
Bluegreen estimates uncollectible VOI notes receivable based on historical amounts for similar VOI notes
receivable and does not consider the value of the underlying collateral. Bluegreen holds large pools of
homogeneous VOI notes receivable and assesses uncollectibility based on pools of receivables. In
estimating future credit losses, Bluegreen’s management does not use a single primary indicator of credit
quality, but instead evaluates its VOI notes receivable based upon a combination of factors, including a
static pool analysis that incorporates the aging of the respective receivables, default trends, and
prepayment rates by origination year, as well as the FICO scores of borrowers.
Substantially all defaulted VOI notes receivable result in the holder of such receivable acquiring the
related VOI that secured such receivable, typically soon after default and at little or no cost. The
reacquired VOI is then available for resale in the normal course of business.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for
additional information about the performance of Bluegreen’s notes receivable portfolio.
Sales/Financing of Receivables
Bluegreen’s ability to sell or borrow against its VOI notes receivable has historically been an important
factor in meeting its liquidity requirements. The vacation ownership business generally involves sales
where a buyer is only required to pay 10% of the purchase price up front while the selling and marketing
expenses related to such sales are primarily cash expenses that exceed the down payment amount. For the
year ended December 31, 2018, Bluegreen’s sales and marketing expenses totaled approximately 49% of
system-wide sales of VOIs, net. Accordingly, having facilities for the sale or hypothecation of VOI notes
receivable, along with periodic term securitization transactions, has been a critical
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factor in meeting Bluegreen’s short and long-term cash needs. See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” for additional information about Bluegreen’s
VOI notes receivable purchase facilities and term securitizations.
Receivables Servicing
Receivables servicing includes collecting payments from borrowers and remitting the funds to the owners,
lenders, or investors in such receivables, accounting for principal and interest on such receivables, making
advances when required, contacting delinquent borrowers, terminating a Vacation Club ownership in the
event that defaults are not timely remedied and performing other administrative duties.
Bluegreen receives fees for servicing its securitized notes receivable, and these fees are included as a
component of interest income. Additionally, Bluegreen earns servicing fee income from third-party
developers in connection with its servicing of their loan portfolios under certain fee-based services
arrangements, which is netted against the cost of Bluegreen’s mortgage servicing operations.
Bluegreen’s Core Operating and Growth Strategies
Grow VOI sales
Bluegreen’s goal is to utilize its sales and marketing platform to achieve VOI sales growth through the
expansion of existing alliances, continued development of new marketing programs, and additional VOI
sales to its existing Vacation Club owners. Bluegreen believes there are a number of opportunities within
its existing marketing alliances to drive future growth, including the potential expansion of its marketing
efforts with Bass Pro to include programs focused on Bass Pro’s e-commerce platform. In addition,
through Bluegreen’s agreement with Choice Hotels, Bluegreen has plans to enhance its marketing program
through further penetration of Choice Hotels’ digital and call-transfer programs. In addition to existing
programs, Bluegreen has plans to utilize its sales and marketing expertise to continue to identify unique
marketing relationships with nationally-recognized brands that resonate with its core demographic. In
addition, Bluegreen will continue to actively seek to sell additional VOI points to its existing Vacation
Club owners, which typically involve significantly lower marketing costs and have higher conversion
rates compared to sales to new customers. Bluegreen’s goal is to expand and update its sales offices to
more effectively convert tours generated by its marketing programs into sales. To this end, Bluegreen is
focused on identifying high traffic resorts where it believes increased investment in sales office
infrastructure will yield strong sales results.
Continue to enhance Bluegreen’s Vacation Club experience
Bluegreen believes its Vacation Club offers owners exceptional value. Bluegreen’s Vacation Club offers
owners access to its 45 Club Resorts and 24 Club Associate Resorts in premier vacation destinations, as
well as access to over 11,000 other hotels and resorts and other vacation experiences, such as cruises,
through partnerships and exchange networks. Bluegreen continuously seeks new ways to add value and
flexibility to its Vacation Club membership and enhance the vacation experience of its Vacation Club
owners, including the addition of new destinations, the expansion of its exchange programs, and the
addition of new partnerships to offer increased vacation options. Bluegreen also continuously seeks to
improve its technology, including websites and applications, to enhance its Vacation Club owners’
experiences. Bluegreen believes this focus, combined with its high-quality customer service, will continue
to enhance the Vacation Club experience, driving sales to new owners and additional sales to existing
Vacation Club owners.
Grow higher-margin, cash generating businesses
Bluegreen seeks to continue to grow its ancillary businesses, including resort management, title services,
and loan servicing. Bluegreen believes these businesses can grow with little additional investment in
infrastructure and potentially produce higher-margin revenues.
Increase sales and operating efficiencies across all customer touch-points
Bluegreen actively seeks to improve its operational execution across all aspects of its business. In
Bluegreen’s sales and marketing platform, Bluegreen utilizes a variety of screening methods and data-
driven analyses intended to identify and attract high-quality prospects to its sales offices in an effort to
increase Volume Per Guest (“VPG”), an important measure of sales efficiency. Bluegreen also continues
to test new and innovative methods to generate sales prospects with a focus on increasing cost efficiency.
In connection with its management services and consumer financing activities, Bluegreen will continue to
seek to leverage its size, infrastructure and expertise to increase operating efficiency and profitability. In
addition, as Bluegreen expands, Bluegreen expects to gain further operational efficiencies by streamlining
its support operations, such as call centers, customer service, administration and information technology.
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Maintain operational flexibility while growing the business
Bluegreen believes it has built a flexible business model that allows it to capitalize on opportunities and
quickly adapt to changing market environments. Bluegreen intends to continue to pursue growth through a
balanced mix of capital-light sales vs. developed VOI sales, sales to new customers vs. sales to existing
Vacation Club owners, and cash sales vs. financed sales. While Bluegreen may from time to time pursue
opportunities that impact its short-term results, Bluegreen’s long-term goal is to achieve sustained growth
while maximizing earnings and cash flow.
Pursue strategic transactions
As part of its growth strategy, Bluegreen may seek acquisitions of other VOI companies, resort assets,
sales and marketing platforms, management companies and contracts, and other assets, properties and
businesses, including where Bluegreen believes significant synergies and cost savings may be available.
Bluegreen may choose to pursue these acquisitions directly or in partnership with third-party developers
or others, including pursuant to arrangements where third-party developers purchase the resort assets and
Bluegreen sells the VOIs in the acquired resort on a commission basis. Bluegreen has a history of
successfully identifying, acquiring, and integrating complementary businesses and believes its flexible
sales and marketing platform enables it to complete these transactions in a variety of economic conditions.
Industry Overview
The vacation ownership, or timeshare, industry is one of the fastest growing segments of the global travel
and tourism sector. By purchasing a VOI, the purchaser typically acquires either (i) a fee simple interest in
a property (or collection of properties) providing annual usage rights at the owner’s home resort (where
the owner’s VOI is deeded) or (ii) an annual or biennial allotment of points that can be redeemed for stays
at properties included in the vacation ownership company’s resort network or for other vacation options
available through exchange programs. Compared to hotel rooms, vacation ownership units typically offer
more spacious floor plans and residential features, such as living rooms, fully equipped kitchens, and
dining areas. Compared to owning a vacation home in its entirety, the key advantages of vacation
ownership products typically include a lower up-front acquisition cost and annual expenses, resort-style
features and services and, often, an established infrastructure to exchange usage rights for stays across
multiple locations.
The vacation ownership industry was historically highly fragmented, with a large number of local and
regional resort developers and operators having small resort portfolios of varying quality. Bluegreen
believes that growth in the vacation ownership industry has been driven by increased interest from resort
developers and globally-recognized lodging and entertainment brands, increased interest from consumers
seeking flexible vacation options, continued product evolution, and geographic expansion. Approximately
9.6 million families (approximately 7.1% of U.S. households) own at least one VOI.
The average VOI owner is 40 years old and married, and 79% have either graduated from college or have
attended some college. VOI owners have an average household income of over $86,000, which is much
higher than the average household income for the U.S.
BBX Capital Real Estate
Overview
BBX Capital Real Estate is engaged in the acquisition, development, construction, ownership, financing,
and management of real estate and investments in real estate joint ventures, including investments in
multifamily apartment and townhome communities, single-family master-planned communities, and
commercial properties located primarily in Florida. In addition, it owns a 50% equity interest in the
Altman Companies, a developer and manager of multifamily apartment communities.
BBXRE also manages the legacy assets acquired by BCC in connection with the BankAtlantic Sale. The
legacy assets include portfolios of loans receivable, real estate properties, and loans previously charged off
by BankAtlantic.
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Strategy
BBX Capital Real Estate’s strategy is focused on:
·
·
·
Identifying and acquiring or developing real estate, including multifamily apartment and
townhome communities, single-family master-planned communities, and commercial properties;
Identifying and investing in opportunistic real estate joint ventures with third party developers;
and
Continuing to monetize the remaining legacy asset portfolio through the collection or sale of
loans receivable or the development or sale of foreclosed real estate properties.
Investment Portfolio
Although BBXRE is primarily focused on the development of multifamily apartment and townhome
communities and single-family master-planned communities, it is currently invested in a diverse portfolio
of real estate developments and operating properties. The following is a description of BBXRE’s principal
investments, which
include multifamily apartment communities, single-family master-planned
communities, retail and mixed-used properties, operating properties, and other legacy assets.
As described below, BBXRE has entered into contracts for the sale of certain projects or investments.
Such contracts may be subject to the completion of due diligence or other conditions. There is no
assurance that the transactions contemplated will be consummated as anticipated, or at all.
Multifamily Apartment Developments – The Altman Companies
The Altman Companies
In November 2018, BBX Capital Real Estate acquired a 50% equity interest in the Altman Companies, a
joint venture between BBXRE and Joel Altman (“JA”) engaged in the development, construction, and
management of multifamily apartment communities, for cash consideration of $14.6 million, including
$2.3 million in transaction costs.
The Altman Companies is a fully integrated platform covering all aspects of the development process
through its ownership of various operating companies that were previously owned and operated by JA.
These companies and their predecessors have operated since 1968 and have developed and managed more
than 25,000 multifamily homes across the United States, including communities in Florida, Michigan,
Illinois, Tennessee, Georgia, Texas, and North Carolina. The Altman Companies currently operates
through the following companies:
· Altman Development Company (“ADC”) – The Altman Companies owns 100% of ADC, which
performs site selection and other predevelopment activities (including project underwriting and
design), obtains development financing (which is typically comprised of a combination of
internal and external equity and institutional debt), provides oversight of the construction
process, and arranges for the ultimate sale of the projects upon stabilization. ADC enters into a
development agreement with each joint venture that is formed to invest in development projects
originated by the platform and earns a development fee for its services.
· Altman Management Company (“AMC”) – The Altman Companies owns 100% of AMC, which
performs leasing and property management services for the multifamily apartment communities
developed by the Altman Companies prior to the ultimate sale of such projects. In certain cases,
AMC also provides such services to apartment communities owned by third parties and certain
affiliated entities. AMC enters into a leasing and property management agreement with each
joint venture that is formed to invest in projects originated by the platform and earns a
management fee for its services.
· Altman-Glenewenkel Construction (“AGC”) – The Altman Companies owns 60% of AGC,
which performs general contractor services for the multifamily apartment communities
developed by the Altman Companies. AGC enters into a general contractor agreement with each
joint venture that is formed to invest in projects originated by the platform and earns a general
contractor fee for its services.
In addition to the fees earned by these companies, BBXRE and JA will invest in the managing member of
the joint ventures that are formed to invest in projects originated by the platform based on their relative
ownership percentages in the Altman Companies. Such equity interests are typically entitled to a
promoted equity interest in the projects to the extent that the external equity investors in such ventures
receive agreed-upon returns on their investments.
Pursuant to the operating agreement of the Altman Companies , BBXRE will acquire an additional 40%
equity interest in the Altman Companies from JA for a purchase price of $9.4 million in January 2023,
while JA can also, at his option or in other predefined circumstances, require the Company to purchase his
remaining 10% equity interest in the Altman Companies for $2.4 million. However, JA will retain his
membership interests, including his decision making rights, in
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the managing member of any development joint ventures that are originated prior to the Company’s
acquisition of additional equity interests in the Altman Companies. In addition, in certain circumstances,
BBXRE may acquire the 40% membership interests in AGC that are not owned by the Altman Companies
for a purchase price based on prescribed formulas in the operating agreement of AGC.
In connection with its investment in the Altman Companies, BBXRE acquired interests in the managing
member of seven multifamily apartment developments, including four developments in which BBXRE
had previously invested as a non-managing member, for aggregate cash consideration of $8.8 million. In
addition, BBXRE and JA each contributed $2.5 million to ABBX Guaranty, LLC, a newly formed joint
venture established to provide guarantees on the indebtedness and construction cost overruns of new real
estate joint ventures formed by the Altman Companies.
The following provides a description of BBXRE’s various investments in multifamily apartment
communities, many of which are investments in joint ventures with JA that were originated prior to
BBXRE’S investment in the Altman Companies.
Altis at Kendall Square
In March 2013, BBXRE invested $1.3 million as one of a number of investors in a joint venture with JA to
develop Altis at Kendall Square, a 321 unit multifamily apartment community comprised of twelve three-
story apartment buildings, a clubhouse, and an adjacent land parcel located in Kendall, Florida. During the
year ended December 31, 2016, the joint venture sold the apartment buildings and clubhouse, and
BBXRE recognized $3.0 million of equity earnings and received $3.7 million of distributions from the
joint venture. The joint venture is seeking to sell the land parcel in 2019.
Altis at Lakeline
In December 2014, BBXRE invested $5.0 million as one of a number of investors in a joint venture with
JA to develop Altis at Lakeline, a 354 unit multifamily apartment community comprised of nineteen two-
and three-story apartment buildings, 38 enclosed garages, and a private resort-style 5,500 square foot
clubhouse located in Cedar Park, Texas. In November 2018, BBXRE also acquired approximately 50% of
JA’s membership interest in the joint venture for $0.5 million. Construction commenced in 2015 and was
completed during 2017. The 354 apartment units were 92% leased as of December 31, 2018, and the joint
venture is seeking to sell the project in 2019.
Altis at Bonterra
In December 2015, BBXRE invested in a joint venture with JA to develop Altis at Bonterra, a 314 unit
multifamily apartment community located in Hialeah, Florida. At the inception of the venture, BBXRE
transferred land with an agreed upon value of $9.4 million and cash of $7.5 million to the joint venture in
return for its membership interest. In November 2018, BBXRE also acquired approximately 50% of JA’s
membership interest in the joint venture for $1.4 million. Construction commenced in the first quarter of
2016 and was completed during 2017. The 314 apartment units were 94% leased as of December 31,
2018, and the joint venture is seeking to sell the project in 2019.
Altis at Shingle Creek
In April 2016, BBXRE invested $332,000 as one of a number of investors in a joint venture with JA to
develop Altis at Shingle Creek, a 356 unit multifamily apartment community located in Orlando,
Florida. During the year ended December 31, 2018, the joint venture sold the project, and BBXRE
recognized $3.4 million of equity earnings and received $3.7 million of distributions from the joint
venture.
Altis at Grand Central
In September 2017, BBXRE invested $1.9 million as one of a number of investors in a joint venture with
JA to develop Altis at Grand Central, a 314 unit multifamily apartment community located in Tampa,
Florida. In November 2018, BBXRE also acquired approximately 50% of JA’s membership interest in the
joint venture for $0.6 million. Construction commenced in 2017 and is anticipated to be substantially
completed during 2019.
Altis at Promenade
In December 2017, BBXRE invested $962,000 as one of a number of investors in a joint venture with JA
to develop Altis at Promenade, a 338 unit multifamily apartment community located in Tampa, Florida .
In November 2018, BBXRE also acquired approximately 50% of JA’s membership interest in the joint
venture for $1.2 million. Construction commenced in 2018 and is anticipated to be substantially
completed during 2019.
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Altis at Ludlam
During 2018, BBXRE invested $0.7 million with JA and another investor in a joint venture to acquire
land, obtain entitlements, and fund predevelopment costs for a potential multifamily apartment
development located in Miami, Florida. The joint venture expects to receive entitlements for the project,
close on permanent development financing, and commence construction in 2019.
Altis at Preserve (Suncoast)
During 2018, BBXRE invested $1.9 million with JA in a joint venture to acquire land, obtain entitlements,
and fund predevelopment costs for a potential multifamily apartment development located in Tampa,
Florida. In 2019, the joint venture closed on its development financing and commenced construction,
which is expected to be substantially completed in 2020. In connection with the closing, BBXRE and JA
retained membership interests in the managing member of the joint venture and received distributions of a
portion of their previous capital contributions based on the final development financing structure.
Altis at Pembroke Gardens
In November 2018, BBXRE acquired approximately 50% of JA’s membership interest in a joint venture
invested in Altis at Pembroke Gardens for $1.3 million. Altis at Pembroke Gardens is a 280 unit
multifamily apartment community located in Pembroke Pines, Florida. Construction was completed
during 2017, and the 280 apartment units were 86% leased as of December 31, 2018. The joint venture is
seeking to sell the project in 2019.
Altis at Boca Raton
In November 2018, BBXRE acquired approximately 50% of JA’s membership interest in a joint venture
invested in Altis at Boca Raton for $1.9 million. Altis at Boca Raton is a 398 unit multifamily apartment
community located in Boca Raton, Florida. Construction was completed during 2017, and the 398
apartment units were 98% leased as of December 31, 2018. The joint venture is seeking to sell the project
in 2019.
Altis at Wiregrass
In November 2018, BBXRE acquired approximately 50% of JA’s membership interest in a joint venture
invested in Altis at Wiregrass for $1.9 million. Altis at Wiregrass is a 392 unit multifamily apartment
community located in Tampa, Florida. Construction of the facility was completed during 2018, and the
392 apartment units were 57% leased as of December 31, 2018.
Rights to Joint Venture Distributions
The operating agreements governing the above joint ventures generally provide that the non-managing
members are entitled to distributions based on their pro-rata share of the initial capital contributions to the
ventures until such members receive their aggregate capital contributions plus a specified return on their
capital. After such members receive their contributed capital and the specified returns, distributions
thereafter are based on an agreed-upon allocation of earnings, with the managing member receiving an
increasing percentage of the distributions. As BBXRE’s investments in the above joint ventures include
investments as both a non-managing member and a managing member, the Company’s economic interest
in the expected distributions from such ventures in many cases is not the same as its pro-rata share of the
initial contributed capital in such ventures.
Multifamily Apartment Developments – Other
The Addison on Millenia
In December 2015, BBXRE invested as one of a number of investors in a joint venture with ContraVest to
develop The Addison on Millenia, a 292 unit multifamily apartment community comprised of nine
apartment buildings located in Orlando, Florida. At the inception of the venture, BBXRE transferred land
with an agreed upon value of $5.8 million and cash of $0.3 million to the joint venture in return for its
membership interest. BBXRE was entitled to receive 48% of the joint venture distributions until it
received its aggregate capital contributions plus a specified return on its capital. After all investors receive
a specified return and the return of their contributed capital, any distributions thereafter were shared based
on earnings, with the managing member receiving an increasing percentage of distributions. During the
year ended December 31, 2018, the joint venture sold the community, and BBXRE recognized $9.3
million of equity earnings and received $15.2 million of distributions from the joint venture.
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Single Family Developments
Bonterra – CC Homes
In July 2014, BBXRE invested in a joint venture with CC Homes to develop Bonterra – CC Homes, a
residential community comprised of 394 homes located in Hialeah, Florida. At the inception of the
venture, BBXRE transferred land with an agreed upon value of $15.6 million to the joint venture in
exchange for cash of $2.2 million, membership interests with an agreed upon value of $4.9 million, and
the venture’s assumption of an $8.3 million mortgage loan on the property. BBXRE was entitled to
receive 57% of the joint venture distributions until it received its aggregate capital contributions plus a
specified return on capital, and any distributions thereafter were shared, with the managing member
receiving an increased percentage of distributions. During the year ended December 31, 2016, the joint
venture closed on the sale of 201 homes, and the Company recognized $8.5 million of equity earnings and
received $11.5 million of cash distributions from the joint venture. During the year ended December 31,
2017, the joint venture closed on the sale of 192 homes, and the Company recognized $11.0 million of
equity earnings and received $14.4 million of cash distributions from the joint venture. In January 2018,
the joint venture closed on the final home.
Village at Victoria Park
In December 2013, BBXRE invested $750,000 in a joint venture with New Urban Communities to
develop Village at Victoria Park, a residential community comprised of 30 single-family homes located in
Fort Lauderdale, Florida. BBXRE was entitled to receive 50% of the joint venture distributions. The
project commenced construction and sales during the third quarter of 2014. During the years ended
December 31, 2018 and 2017, the joint venture closed on 12 and 9 homes, respectively, and the Company
recognized $934,000 and $558,000, respectively, of equity earnings from the joint venture. As of
December 31, 2018, the joint venture had sold all of the homes in the community.
Centra Falls
In August 2015, the Company invested $750,000 as one of a number of investors in a joint venture with
Label & Co. to develop Centra Falls, a residential community comprised of 89 townhomes located in
Pembroke Pines, Florida. The Company is entitled to receive 7.143% of the joint venture distributions
until it receives its aggregate capital contributions plus a specified return on its capital. After all investors
receive a specified return and the return of their contributed capital, any distributions thereafter are shared
based on earnings, with the managing member receiving an increasing percentage of distributions. During
the years ended December 31, 2018 and 2017, the joint venture closed on 22 and 61 townhomes,
respectively, and BBXRE recognized $31,000 and $286,000, respectively, of equity earnings from the
joint venture. As of December 31, 2018, the joint venture had closed on 83 townhomes and had executed
contracts for the remaining 6 townhomes.
Centra Falls West
In November 2016, BBXRE invested $571,000 as one of a number of investors in a joint venture with
Label & Co. to develop Centra Falls West, a residential community comprised of 61 townhomes located in
Pembroke Pines, Florida. BBXRE is entitled to receive 7.143% of the joint venture distributions until it
receives its aggregate capital contributions plus a specified return on its capital. After all investors receive
a specified return and the return of their contributed capital, any distributions thereafter are shared based
on earnings, with the managing member receiving an increasing percentage of distributions. During the
year ended December 31, 2018, the joint venture closed on 60 townhomes, and BBXRE recognized
$216,000 of equity earnings from the joint venture. In January 2019, the joint venture closed on the final
townhome.
Chapel Grove
In October 2017, BBXRE invested $4.9 million as one of a number of investors in a joint venture with
Label & Co. to develop Chapel Grove, a residential community comprised of 125 townhomes located in
Pembroke Pines, Florida. BBXRE is entitled to receive 46.75% of the joint venture distributions until it
receives its aggregate capital contributions plus a specified return on its capital. After all investors receive
a specified return and the return of their contributed capital, any distributions thereafter are shared based
on earnings, with the managing member receiving an increasing percentage of distributions. The project
commenced construction during the fourth quarter of 2017, and as of December 31, 2018, the joint venture
had executed contracts to sell 97 townhomes, with closings anticipated to commence during the first
quarter of 2019.
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Beacon Lake Master Planned Development
BBXRE has obtained entitlements to develop raw land in St. Johns County, Florida into 1,476 finished
lots which will comprise the Beacon Lake Community. As part of the development, BBXRE is developing
the land and common areas and selling the finished lots to third-party homebuilders who will construct
single-family homes and townhomes that are planned to range from 1,800 square feet to 4,000 square feet
and priced from the high $200,000’s to the $500,000’s.
In 2017, BBXRE commenced land development and entered into purchase agreements with homebuilders
for the 302 finished lots comprising Phase I of the project. During the year ended December 31, 2018,
BBXRE closed on the sale of 251 finished lots in Phase I to homebuilders and recognized pre-tax profits
of $7.7 million in connection with such sales, while the remaining 51 lots are anticipated to close during
2019. During the fourth quarter of 2018, the Company commenced land development on the lots
comprising Phase II of the project, which is expected to include approximately 400 single-family homes
and 196 townhomes. The Company has entered into purchase agreements with homebuilders for finished
lots for 192 single-family homes and the 196 townhomes and anticipates that closings on the first finished
lots will commence during 2020.
BBXRE has financed a portion of the development costs for the project through the issuance of
Community Development Bonds. Under the terms of the purchase agreements with the homebuilders, in
connection with the sale of the finished lots, BBXRE is required to repay a portion of the bonds with
proceeds from such sales, while a portion of the bonds are to be assumed by the homebuilders.
Miramar – CC Homes
As of December 31, 2018, BBXRE had invested $1.6 million in a project with CC Homes and another
developer relating to the potential acquisition of real estate in Miramar, Florida for the construction of
single-family homes. Although the City of Miramar approved the site plan in June 2017, the joint venture
is currently seeking to resolve pending issues related to the entitlements for the project.
Retail and Mixed Use Developments
Gardens on Millenia Retail
In October 2015, BBXRE invested in a joint venture with Stiles Development to develop a retail center on
the Gardens of Millenia site in Orlando, Florida. At the inception of the venture, BBXRE transferred land
with an agreed upon value of $7.0 million to the joint venture in exchange for cash of $0.7 million and its
membership interest. BBXRE is entitled to receive 90% of the joint venture distributions until it receives
its aggregate capital contributions plus a specified return on its capital, and any distributions thereafter are
shared based on earnings, with the managing member receiving an increased percentage of the
distributions. During the year ended December 31, 2017, the joint venture closed on a portion of the retail
center, and BBXRE recognized $3.0 million of equity earnings and received $3.4 million of distributions
from the joint venture. The joint venture closed on the remaining retail space during the first quarter of
2018.
PGA Pod B
In December 2013, BBXRE purchased for $6.1 million a commercial property located in PGA Station in
Palm Beach Gardens, Florida, with three existing buildings consisting of 145,000 square feet of mainly
furniture retail space. Subsequent to the acquisition of the property, BBXRE invested in a joint venture
with Stiles Development to redevelop the property. At the inception of the venture, BBXRE contributed
the property (excluding certain residential development entitlements) to the joint venture in exchange for
cash of $2.9 million and a 40% interest in the venture. BBXRE transferred the retained residential
development entitlements to PGA Pods A&C, which are adjacent parcels owned by BBXRE (see below
for further discussion regarding these parcels). During the year ended December 31, 2016, governmental
approvals were obtained to change the use of a portion of the property from retail to office. During the
year ended December 31, 2018, the joint venture closed on the sale of one of the buildings, and BBXRE
recognized $1.5 million of equity earnings. The joint venture has entered into a sales contract on the
remaining two buildings; however, the closing of the sale is subject to the completion of the buyer’s due
diligence.
PGA Pods A&C
In 2014, BBXRE acquired land located in PGA Station in Palm Beach Gardens, Florida through
foreclosure on a loan receivable. During the year ended December 31, 2016, BBXRE obtained
governmental approvals to construct a 122 room limited-service suite hotel, a medical office building, and
three 60,000 square foot office buildings on the land. The Company is the master developer of PGA
Station and intends to sell the developed land to third party developers.
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During the year ended December 31, 2017, the Company closed on the sale of the land on which the hotel
and medical office buildings will be constructed to third party developers. BBXRE has entered into a sales
contract on the remaining parcels; however, the closing of the sale is subject to the completion of the
buyer’s due diligence.
Bayview
In June 2014, BBXRE invested in a joint venture with an affiliate of Procacci Development Corporation
(“PDC”). At the inception of the venture, BBXRE and PDC each contributed $1.8 million to the venture
in exchange for a 50% interest. The joint venture acquired for $8.0 million approximately three acres of
real estate located in Fort Lauderdale, Florida. There is currently an approximate 84,000 square foot office
building, along with a convenience store and gas station, on the property. The office building has low
occupancy with short term leases, while the convenience store's lease ends in March 2022. BBXRE
anticipates that the property will be redeveloped into a mixed-use project in the future.
Operating Properties
Villa San Michele
In January 2014, BBXRE acquired Villa San Michele, an 82-unit, 272 bed student housing project located
in Tallahassee, Florida, through a contractual settlement with the borrower on a loan receivable. In January
2018, BBXRE sold the property for approximately $9.5 million.
RoboVault
In April 2013, the Company acquired RoboVault, a 155,000 square foot high-tech, robotic self-storage
facility located in Fort Lauderdale, Florida, through foreclosure on a loan receivable. RoboVault offers
storage for business, forensic property, and personal prized possessions, including art, wine collections,
cars, gems, antiques, important documents and files, and other collectibles. The facility was built in 2009
to be wind resistant up to 200 mph and store items 30 feet above sea level. In January 2019, the Company
executed a sales contract to sell the RoboVault facility; however, the closing of the sale is subject to the
completion of the buyer’s due diligence.
Legacy Assets
In addition to the above projects, BBXRE holds various legacy assets acquired by BCC in connection with
the BankAtlantic Sale, including loans receivable and real estate with an aggregate carrying amount of
approximately $30.0 million as of December 31, 2018. The majority of the legacy assets do not generate
income on a regular or predictable basis. As a consequence, BBXRE does not expect to generate revenue
from the legacy assets until the assets are monetized through loan repayments or transactions involving
the sale, joint venture, or development of the underlying real estate. BBXRE generally invests the cash
flows from the monetization of legacy assets in new real estate investments, although such cash flows may
also be used to fund the operations of BBX Capital and its subsidiaries.
As a result of the substantial decline in real estate values during the recession which began in 2007 and
2008, the majority of the non-performing commercial real estate loans and foreclosed real estate assets
within the legacy asset portfolio were written down in prior periods to the then prevailing estimated fair
values of the collateral less costs to sell. The Company believes there has been improvements generally in
real estate markets since the prior period write-downs and believes that the carrying values of such assets
may be below current market values. Additionally, the recovery in the real estate market over the past
several years has favorably affected the financial condition of borrowers, and BBXRE has aggressively
pursued its borrowers and/or guarantors in order to maximize recoveries through cash settlements, loan
workout arrangements, or participation interests in the development or performance of the collateral. If
BBXRE is successful in its efforts, BBXRE may recognize gains to the extent that the amounts it collects
exceed the carrying value of its real estate loans and foreclosed real estate.
Renin
Overview
Renin is engaged in the design, manufacture, and distribution of sliding doors, door systems and
hardware, and home décor products and operates through its headquarters in Canada and two
manufacturing and distribution facilities in the United States and Canada. In addition to its own
manufacturing, Renin also sources various products and materials from China. Following BBX Capital’s
acquisition of Renin in 2013, Renin, which historically generated operating losses, has become profitable,
generating trade sales of $68.4 million and income before taxes of $2.5 million for the year ended
December 31, 2018.
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Renin’s products are sold through three channels in North America: retail, commercial,
and direct installation in the greater Toronto area. Renin’s retail channel currently
comprises approximately 60% of its gross sales and includes big box retail customers such
as Lowes, Home Depot, and Costco, while its commercial channel currently comprises
approximately 30% of its gross sales and includes original equipment manufacturers and
fabricators across North America. Renin’s direct installation channel generates the
remaining sales.
Strategy
Renin’s business and operating strategy is focused on:
· Growing sales across all channels through new customers and expanded product assortment;
·
Lowering manufacturing costs by negotiating better pricing and standardizing raw materials in
products;
Innovating its current product line; and
Reducing working capital requirements by shortening customer payment terms, improving
inventory planning, and rationalizing product assortment.
·
·
IT'SUGAR
Overview
IT’SUGAR is a specialty candy retailer which operates approximately 100 retail locations in over 25
states and Washington, D .C., and its products include bulk candy, giant candy packaging, and novelty
items that are purchased from third-party vendors and sold at its retail locations, which include a mix of
high-traffic resort and entertainment, lifestyle, mall/outlet, and urban locations across the United States.
IT’SUGAR’s retail locations generally utilize a store model that requires a relatively low initial
investment, with a goal of shorter payback periods and increased investment returns and cash flows.
IT’SUGAR also operates various “flagship” locations in select resort and entertainment locations which
generally experience higher traffic and sales volume but require a higher initial investment.
BBX Capital acquired IT’SUGAR in June 2017. During 2018, IT'SUGAR’s focus was on establishing a
platform for future growth of its retail network, including replacing three executives and focusing on
operational improvements and improved customer engagement. In addition, IT’SUGAR invested capital
in several new retail locations, including the FAO Schweetz location in New York City that opened
during 2018 which is operated by IT’SUGAR and a flagship location in Las Vegas that is expected to open
in 2019.
IT’SUGAR incurred a loss before income taxes in 2018 and is expected to incur a loss before income
taxes in 2019 due to the expected costs of opening new stores and related depreciation expense. However,
IT’SUGAR generated positive cash flows from operations in 2018 and is expected to continue to do so in
future periods.
Strategy
IT’SUGAR’s business and operating strategy is focused on:
Recruiting and retaining talented associates to operate its retail network;
·
· Developing creative and humorous product content;
·
·
Expanding its current retail network to high profile, high foot traffic locations; and
Continuous operational process improvement and improved customer engagement.
Other Investments
In addition to its principal investments, the Company has investments in other operating businesses that
are in various stages of development and currently generate operating losses.
Businesses in the Confectionery Industry
The Company has investments in various companies in the confectionery industry, including Hoffman’s
Chocolates, a manufacturer and retailer of gourmet chocolates with retail locations in South Florida, and
several other manufacturers/wholesalers of confectionery products, including fine chocolates and tropical
snacks.
During the year ended December 31, 2018, the Company exited its manufacturing facility in Utah,
outsourced the manufacturing of certain products, and reduced its corporate personnel and infrastructure,
which resulted in the recognition of various costs, including severance costs for various employees and the
recognition of lease obligations.
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In addition, these strategic initiatives and the continuing losses from certain of these businesses resulted in
the recognition of impairment losses. The Company is continuing to evaluate the operations of these
businesses, and to the extent that it decides to divest of or otherwise exit certain or all of these operations,
the Company may recognize additional impairment charges and incur additional costs in future periods.
MOD Pizza Restaurant Operations
In 2016, Food for Thought Restaurant Group, LLC (“FFTRG”), a wholly-owned subsidiary of BBX
Capital, entered into area development and franchise agreements pursuant to which the Company has the
opportunity to develop up to approximately 60 MOD Pizza franchised restaurant locations throughout
Florida over the next several years. FFTRG’s MOD Pizza restaurants operate in the fast casual dining
industry and sell custom artisan style pizzas, salads, and beverages. These restaurants charge a set price
per pizza or salad, which allows customers to choose any toppings for their pizza or salad, and the product
is made-to-order through an assembly-line process in the restaurant. FFTRG currently operates nine MOD
Pizza restaurant locations and is evaluating their performance to determine the rate at which it will open
new restaurant locations in the future.
Employees
As of December 31, 2018, the Company and its subsidiaries had approximately 7,307 employees,
including 5,816 employees at Bluegreen.
Management believes that its relations with its employees are satisfactory. The Company currently
maintains employee benefit programs that are considered by management to be generally competitive with
programs provided by other major employers in its markets.
As of December 31, 2018, approximately 28 employees of Bluegreen were covered by two collective
bargaining agreements which address the terms and conditions of their employment, including pay rates,
working hours, certain employee benefits, and procedures for settlement of labor disputes. In addition,
approximately nine employees of a Canadian division of Renin are unionized with a collective bargaining
agreement in place. Employees at Renin’s Brampton manufacturing facility in Canada voted against
unionization; however, the union filed an Unfair Labour Practice with the Ontario Labour Board which
remains pending.
Competition
The industries in which the Company’s investments conduct business are very competitive, and the
Company also faces substantial competition with respect to our investment activities from real estate
investors and developers, private equity funds, hedge funds, and other institutional investors. The
Company competes with institutions and entities that are larger and have greater resources than the
resources available to the Company.
Bluegreen competes with various high profile and well-established firms, many of which have greater
liquidity and financial resources than Bluegreen. Many of the world’s most recognized lodging,
hospitality and entertainment companies develop and sell VOIs in resort properties. Major companies that
now operate vacation ownership resorts directly or through subsidiaries include Marriott Vacations
Worldwide Corporation, the Walt Disney Company, Hilton Grand Vacations, Wyndham Destinations, and
Diamond Resorts International. Bluegreen also competes with numerous smaller owners and operators of
vacation ownership resorts and from alternative lodging options available to consumers through both
traditional methods of delivery as well as new web portals and applications, including private rentals of
homes, apartments or condominium units, which have increased in popularity in recent years. Bluegreen’s
ability to remain competitive and to attract and retain customers depends on its customers’ satisfaction
with Bluegreen’s products and services as well as on distinguishing the quality, value, and efficiency of its
products and services from those offered by its competitors. In Bluegreen’s fee-based services business,
Bluegreen typically competes with Hilton Grand Vacations and Wyndham Destinations. In addition to
competing for sales leads, prospects and fee-based service clients, Bluegreen competes with other VOI
developers for marketing, sales and resort management personnel.
Renin’s products are primarily sold to large retailers and wholesalers, and it experiences intense
competition from importers of foreign products.
Four unaffiliated companies in the confectionery industry currently account for the majority of the
industry’s revenues, reflecting significant concentration in the industry in which IT’SUGAR and certain of
the Company’s other operating businesses operate. In addition, FFTRG competes for customers with
numerous established pizza brands and new entrants into the fast casual pizza category. IT’SUGAR and
FFTRG also compete with other retail operators for identifying and leasing prime retail locations.
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Regulation
As a public company, the Company is subject to federal securities laws, including the Securities Exchange
Act of 1934. In addition, the companies in which we hold investments are subject to federal, state and
local laws and regulations generally applicable to their respective businesses.
Bluegreen
The vacation ownership and real estate industries are subject to extensive and complex governmental
regulation. Bluegreen is subject to various federal, state, local and foreign environmental, zoning,
consumer protection and other laws, rules and regulations, including those regarding the acquisition,
marketing, and sale of VOIs, as well as various aspects of Bluegreen’s financing operations. At the federal
level, the Federal Trade Commission has taken an active regulatory role through the Federal Trade
Commission Act, which prohibits unfair or deceptive acts or unfair competition in interstate commerce. In
addition, many states have what are known as “Little FTC Acts” that apply to intrastate activity.
In addition to the laws applicable to Bluegreen’s customer financing and other operations discussed below,
Bluegreen is or may be subject to the Fair Housing Act and various other federal laws, rules and
regulations. Bluegreen is also subject to various foreign laws with respect to La Cabana Beach Resort and
Casino in Oranjestad, Aruba and Blue Water Resort at Cable Beach in Nassau, Bahamas. The cost of
complying with applicable laws and regulations may be significant, and while Bluegreen strives to be in
compliance, Bluegreen may not at all times be successful. Any failure to comply with current or future
applicable laws or regulations could have a material adverse effect on Bluegreen’s results and operations.
Bluegreen’s vacation ownership product is subject to various regulatory requirements, including state and
local approvals. In most states, Bluegreen is required to file a detailed offering statement describing its
business and all material aspects of the project and sale of VOIs with a designated state authority. In
addition, when required by state law, Bluegreen provides its VOI purchasers with a public offering
disclosure statement that contains, among other items, detailed information about the VOI product and the
purchaser’s rights and obligations as a VOI owner. Laws in each state where Bluegreen sells VOIs
generally grant the purchaser of a VOI the right to cancel a purchase contract at any time within a
specified rescission period following the earlier of the date the contract was signed or the date the
purchaser received the last of the documents required to be provided by Bluegreen. Most states have other
laws that regulate Bluegreen’s activities, including real estate licensure requirements, sellers of travel
licensure requirements, anti-fraud laws, telemarketing laws, prize, gift and sweepstakes laws, and labor
laws.
Under various federal, state and local laws, ordinances and regulations, the owner of real property is
generally liable for the costs of removal or remediation of certain hazardous or toxic substances located
on or in, or emanating from, the property, as well as related costs of investigation and property damage.
These laws often impose liability without regard to whether the property owner knew of the presence of
such hazardous or toxic substances. The presence of these substances, or the failure to properly remediate
these substances, may adversely affect a property owner’s ability to sell or lease a property or to borrow
using the real property as collateral. Other federal and state laws require the removal or encapsulation of
asbestos-containing material when such material is in poor condition or in the event of construction,
demolition, remodeling or renovation. Other statutes may require the removal of underground storage
tanks. Noncompliance with any of these and other environmental, health or safety requirements may result
in the need to cease or alter operations or development at a property. In addition, certain state and local
laws may impose liability on property developers with respect to construction defects discovered on the
property or repairs made by future owners of such property. Under these laws, Bluegreen may be required
to pay for repairs to the developed property. The development, management and operation of its resorts
are also subject to the Americans with Disabilities Act.
Bluegreen’s marketing, sales, and customer financing activities are also subject to extensive regulation,
which can include, but is not limited to: the Truth-in-Lending Act and Regulation Z; the Fair Housing Act;
the Fair Debt Collection Practices Act; the Equal Credit Opportunity Act and Regulation B; the Electronic
Funds Transfer Act and Regulation E; the Home Mortgage Disclosure Act and Regulation C; the Dodd-
Frank Wall Street Reform and Consumer Protection Act of 2010 (“the Dodd-Frank Act”); Unfair or
Deceptive Acts or Practices and Regulation AA; the Patriot Act; the Right to Financial Privacy Act; the
Gramm-Leach-Bliley Act; the Fair and Accurate Credit Transactions Act; and anti-money laundering
laws. The Dodd-Frank Act contains significant changes to the regulation of financial institutions and
related entities, including the creation of new federal regulatory agencies, and the granting of additional
authorities and responsibilities to existing regulatory agencies to identify and address emerging systemic
risks posed by the activities of financial services firms. The Consumer Financial Protection Bureau (the
“CFPB”) is one such regulatory agency created pursuant to the Dodd-Frank Act. The CFPB’s mandate is
to protect consumers by carrying out federal consumer financial laws and to publish rules and forms that
facilitate understanding of the financial implications of the transactions consumers enter into. Consistent
with this mission, the CFPB amended Regulations X and Z to establish new disclosure
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requirements and forms pursuant to Regulation Z for most closed-end consumer credit transactions
secured by real property. The practical impact upon Bluegreen is the requirement to use a new Integrated
Mortgage Disclosure Statement in lieu of the separate Good Faith Estimate and Closing Statement. In
addition, Bluegreen’s term securitization transactions must comply with certain requirements of the Dodd-
Frank Act, including risk retention rules.
Bluegreen’s management of, and dealings with, HOAs, including the purchase of defaulted inventory
from HOAs in connection with secondary market arrangements, is subject to state laws and resort rules
and regulations, including those with respect to the establishment of budgets and expenditures, rule-
making and the imposition of maintenance assessments.
During the year ended December 31, 2018, approximately 6% of Bluegreen’s VOI sales were generated
by marketing to prospective purchasers obtained through internal and third-party vendors’ outbound
telemarketing efforts. Bluegreen attempts to monitor the actions and legal and regulatory compliance of
these third parties, but there are risks associated with Bluegreen’s and such third parties’ telemarketing
efforts. In recent years, state and federal regulators have increased regulations and enforcement actions
related to telemarketing operations, including requiring the adherence to state “do not call” laws. In
addition, the Federal Trade Commission and Federal Communications Commission have implemented
national “do not call” legislation. These measures have significantly increased the costs associated with
telemarketing. While Bluegreen continues to be subject to telemarketing risks and potential liability,
Bluegreen believes its exposure to adverse impacts from this heightened telemarketing legislation and
enforcement may be partially mitigated by the use of “permission based marketing,” whereby Bluegreen
obtains the permission of prospective purchasers to contact them in the future, thereby exempting such
calls from the various “do not call” laws. Bluegreen has also implemented policies and procedures that it
believes will help reduce the possibility that individuals who have requested to be placed on a “do not
call” list are not contacted. However, such policies and procedures may not be effective in ensuring strict
regulatory compliance, and from time to time, complaints have been filed against Bluegreen for
noncompliance.
To date, no material fines or penalties have been imposed on Bluegreen as a result of telemarketing
operations. However, from time to time, Bluegreen has been the subject of proceedings for violation of the
telemarketing laws and other laws applicable to the marketing and sale of VOIs.
See “Item 1A – Risk Factors” for a description of risks with respect to regulatory compliance. In addition,
see “Item 3 - Legal Proceedings” for a description of litigation that was brought against Bluegreen in
January 2019 relating to telemarketing sales activities.
Seasonality
Bluegreen has historically experienced, and expect to continue to experience, seasonal fluctuations in its
revenues and results of operations. This seasonality has resulted, and may continue to result, in
fluctuations in Bluegreen’s quarterly operating results. Although more potential customers typically visit
Bluegreen’s sales offices during the quarters ending in June and September, Bluegreen’s ultimate
recognition of the resulting sales during these periods may be later as a result of the impact of the amount
of down payment provided by customers or due to the timing of development and required use of the
percentage-of-completion method of accounting.
IT'SUGAR and certain of the Company’s other operating businesses are subject to seasonal fluctuations in
trade sales, which cause fluctuations in the Company’s quarterly results of operations. Historically,
IT’SUGAR has generated its strongest retail trade sales during the months from June through August, as
well as during the month of December, when families are on vacation.
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ITEM 1A. RISK FACTORS
We are subject to various risks and uncertainties relating to or arising out of the nature of our
businesses, operations and investments, and general business, economic, financing, legal, regulatory,
and other factors and conditions. New risk factors emerge from time to time, and it is not possible for
management to either predict all risk factors or assess all potential impacts of any factor, or
combination of factors, on BBX Capital Corporation or its subsidiaries, including with respect to their
operations, results and financial condition.
BBX Capital
BBX Capital relies on dividends from Bluegreen to fund operations.
BBX Capital has relied and continues to rely primarily on dividends from Bluegreen in order to fund its
operations and investments. Dividends from Bluegreen may not be paid to BBX Capital in the amounts
previously paid or when anticipated or at all. Bluegreen paid dividends totaling $40.4 million during
2018 and $40.0 million during 2017. The payment of dividends by Bluegreen is subject to compliance
with financial covenants under its credit facilities and certain of Bluegreen's credit facilities contain
terms which may limit the payment of cash dividends without the lender's consent or waiver.
Additionally, the payment of dividends by Bluegreen will be at the discretion of Bluegreen’s board of
directors. Decisions with respect to dividends by Bluegreen are generally based on, among other things,
Bluegreen's operating results, financial condition, cash flow, and liquidity needs. Dividend payments to
BBX Capital by any of its subsidiaries, including Bluegreen, could, in certain circumstances, be subject
to claims made by creditors of such subsidiary.
If cash flow is not sufficient to fund BBX Capital's liquidity needs or BBX Capital otherwise
determines it is advisable to do so, BBX Capital might seek to liquidate some of its investments or seek
to fund its operations with the proceeds of additional equity or debt financing. Such financing may not
be available on commercially reasonable terms, if at all, and if BBX Capital chooses to liquidate its
investments, it may be forced to do so at depressed prices.
BBX Capital’s acquisitions and investments may reduce earnings, require it to obtain additional
financing and expose it to additional risks.
BBX Capital’s business strategy has included investments in or acquisitions of operating companies,
such as its acquisition of Renin, IT’SUGAR, and other businesses in the confectionery industry. BBX
Capital may also seek to make opportunistic investments outside of its existing portfolio. Some of these
investments and acquisitions may be material. While BBX Capital seeks to make investments and
acquisitions primarily in companies that provide opportunities for growth, its investments or
acquisitions may not prove to be successful or, even if successful, may not initially generate income, or
may generate income on an irregular basis or over a long time period. Accordingly, our results of
operations may vary significantly on a quarterly basis and from year to year as a result of acquisitions
and investments. Acquisitions or investments will also expose BBX Capital, to the risks of the
businesses acquired or invested in. Acquisitions and investments entail numerous risks, including:
Risks associated with achieving profitability;
·
· Difficulties in integrating and assimilating acquired management, acquired company founders,
·
·
·
·
·
and operations;
Unforeseen expenses and losses;
Risks associated with entering new markets in which it has no or limited prior experience;
The potential loss of key employees or founders of acquired organizations;
Risks associated with transferred assets and liabilities; and
The incurrence of significant due diligence expenses relating to acquisitions, including with
respect to those that are not completed;
BBX Capital may not be able to integrate or profitably manage acquired businesses, including Renin,
IT’SUGAR, and its other operating businesses, without substantial costs, delays, or other operational or
financial difficulties, including difficulties in integrating information systems and personnel and
establishing control environment processes across acquired businesses. Further, BBX Capital may not
be able to monitor the day to day activities of its investments in joint ventures, and failure to do so could
have a material adverse effect on its business, financial condition and
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results of operations. In addition, to the extent that operating businesses are acquired outside the United
States or the State of Florida, there will be additional risks related to compliance with foreign
regulations and laws including tax laws, labor laws, currency fluctuations and geographic economic
conditions.
In addition, in connection with seeking to identify and acquire new businesses, there is significant
competition for investments and acquisitions, which could increase the costs associated with the
investment or acquisition. Substantial costs are incurred in connection with the evaluation of potential
acquisition and investment opportunities whether or not the acquisition or investment is ultimately
consummated. Further, funding of such investments or acquisitions may require additional debt or
equity financing, which will subject BBX Capital to the risks and uncertainties described in these risk
factors with respect to those activities in the immediately following risk factors. If BBX Capital
requires additional financing in the future, the financing may not be available when needed or on
favorable terms, if at all. Additionally, BBX Capital does not intend to seek shareholder approval of any
investments or acquisitions unless required by law or regulation, or by BBX Capital’s Amended and
Restated Articles of Incorporation or Bylaws.
BBX Capital from time to time also pursues transactions involving the sale of its subsidiaries or
investments or other transactions which would result in a decrease in BBX Capital’s ownership interest
in its subsidiaries. There is no assurance that any such transactions, if pursued and consummated, will
generate a profit or otherwise be advantageous to BBX Capital.
BBX Capital may issue additional securities and incur additional indebtedness at BBX Capital or its
subsidiaries.
BBX Capital may in the future seek to raise funds through the issuance of debt or equity securities.
There is generally no restriction on BBX Capital’s ability to issue debt or equity securities which are
pari passu or have a preference over its Class A Common Stock and Class B Common Stock.
Authorized but unissued shares of BBX Capital’s capital stock are available for issuance from time to
time at the discretion of BBX Capital’s board of directors, and any such issuance may be dilutive to
BBX Capital’s shareholders.
Substantial sales of BBX Capital’s Class A Common Stock or Class B Common Stock could
adversely affect the market prices of such securities.
Substantial sales of BBX Capital’s Class A Common Stock or Class B Common Stock, including sales
of shares by controlling shareholders and management, could adversely affect the market prices of such
securities. Management has in the past and may in the future enter into Rule 10b5-1 plans pursuant to
which a significant number of shares are sold into the open market.
Alan B. Levan and John E. Abdo's control position may adversely affect the market price of BBX
Capital's Class A Common Stock and Class B Common Stock.
Alan B. Levan, the Chairman and Chief Executive Officer of BBX Capital, and John E. Abdo, the Vice
Chairman of BBX Capital, collectively beneficially own shares of BBX Capital’s Class A Common
Stock and Class B Common Stock representing approximately 77% of the general voting power of BBX
Capital. In addition, each of Mr. Alan Levan and Mr. Abdo has been granted restricted securities of
BBX Capital which are scheduled to vest over time. Further, Mr. Alan Levan and Mr. Abdo are parties
to an agreement pursuant to which Mr. Alan Levan has agreed to vote his shares of BBX Capital’s Class
B Common Stock in favor of the election of Mr. Abdo to BBX Capital’s board of directors for so long
as he is willing and able to serve as a director of BBX Capital, and Mr. Abdo has granted to Mr. Alan
Levan the right to vote his shares of Class B Common Stock so long as such Class B shares are
beneficially owned by Mr. Abdo or his heirs, successors or assigns. Upon Mr. Alan Levan’s death or
disability, Jarett Levan, President of the Company, will succeed to Mr. Alan Levan’s rights and
obligations under the agreement with Mr. Abdo. Because BBX Capital’s Class A Common Stock and
Class B Common Stock vote as a single class on most matters, Mr. Alan Levan and Mr. Abdo
effectively have the voting power to elect the members of BBX Capital’s board of directors and to
control the outcome of any other vote of BBX Capital’s shareholders, except in those limited
circumstances where Florida law mandates that the holders of BBX Capital’s Class A Common Stock
vote as a separate class. Mr. Alan Levan’s and Mr. Abdo’s control position may have an adverse effect
on the market price of BBX Capital’s Class A Common Stock and Class B Common Stock. In addition,
their interests may conflict with the interests of BBX Capital’s other shareholders.
31
Provisions in BBX Capital's Amended and Restated Articles of Incorporation and Bylaws, as well
as BBX Capital's shareholder rights plan, may make it difficult for a third party to acquire BBX
Capital and could impact the price of BBX Capital's Class A Common Stock and Class B Common
Stock.
BBX Capital's Amended and Restated Articles of Incorporation and Bylaws contain provisions that
could delay, defer or prevent a change of control of BBX Capital or its management. These provisions
could make it more difficult for shareholders to elect directors and take other corporate actions. As a
result, these provisions could limit the price that investors are willing to pay in the future for shares of
BBX Capital's Class A Common Stock or Class B Common Stock. These provisions include:
·
·
The provisions in BBX Capital's Amended and Restated Articles of Incorporation
regarding the special voting rights of BBX Capital 's Class B Common Stock;
Subject to the special class voting rights of holders of BBX Capital’s Class B Common
Stock under certain circumstances, the authority of BBX Capital's board of directors to
issue additional shares of common or preferred stock and to fix the relative rights and
preferences of the preferred stock without additional shareholder approval; and
· Advance notice procedures to be complied with by shareholders in order to make
shareholder proposals or nominate directors.
In addition, BBX Capital’s rights agreement, which was adopted and is designed to preserve certain tax
benefits available to BBX Capital, may have an anti-takeover effect because the rights agreement
provides a deterrent to investors from acquiring a 5% or greater ownership interest in BBX Capital’s
Class A Common Stock and Class B Common Stock.
Holders of BBX Capital’s Class A Common Stock and Class B Common Stock may not receive
dividends in the amounts anticipated, when anticipated, or at all.
BBX Capital’s board of directors have declared regular quarterly cash dividend since June 2016 and has
indicated its intention to declare regular quarterly dividends on BBX Capital’s Class A Common Stock
and Class B Common Stock. However, future dividends are subject to approval and declaration by
BBX Capital’s board of directors and, accordingly, BBX Capital may not make dividend payments in
the future, whether in the amount anticipated, on a regular basis, or at all. The payment of dividends, if
any, by BBX Capital will depend on many factors considered by its board of directors, including,
without limitation, our financial condition and results of operations, liquidity requirements, market
opportunities, and contractual constraints. Further, over time, the Company’s cash needs may change
significantly from its current needs, which could affect whether BBX Capital pays dividends and the
amount of any dividends it may pay in the future. The terms of BBX Capital’s indebtedness may also
restrict it from paying cash dividends on its stock under certain circumstances. In addition, BBX Capital
pays regular quarterly cash dividends of $125,000 with respect to its outstanding 5% Cumulative
Preferred Stock. BBX Capital may not pay or set apart for payment any dividend or other distribution
(other than a dividend or distribution payable solely in common stock) on its Class A Common Stock or
Class B Common Stock until such time as all accrued and unpaid dividends on BBX Capital’s 5%
Cumulative Preferred Stock have been or contemporaneously are declared or paid and a sum is set apart
sufficient for payment of such accrued and unpaid dividends.
There are risks associated with BBX Capital’s recently announced plan to take Bluegreen private
pursuant to a statutory short-form merger under Florida law.
On March 4, 2019, BBX Capital announced its intention to take Bluegreen private through a short-form
merger under Florida law pursuant to which BBX Capital will acquire all of the outstanding shares of
Bluegreen’s common stock not currently owned by BBX Capital. If the proposed merger is completed,
Bluegreen will become a wholly-owned subsidiary of BBX Capital, and each share of Bluegreen’s
common stock outstanding at the effective time of the merger, other than shares beneficially owned by
BBX Capital and shareholders who duly exercise and perfect appraisal rights in accordance with Florida
law, will be converted into the right to receive $16.00 per share in cash. BBX Capital expects to fund
the total merger consideration estimated to be approximately $115.0 million with its existing liquidity
which reduces its liquidity for other purposes. The merger is expected to be completed 30 days after the
Schedule 13E-3 filed with the SEC relating to the merger is first mailed to Bluegreen's shareholders, or
as soon as practicable thereafter. However, the merger may be terminated at any time before it becomes
effective, and there is no assurance that the merger will be consummated on the contemplated terms, or
at all. If the merger is consummated, BBX Capital’s ownership interest in Bluegreen will increase from
approximately 90.3% to 100%, and accordingly, BBX Capital’s exposure to the risks of ownership of
Bluegreen, including the business, industry, and the other risks described in this Risk Factors section
under “Bluegreen” below, will increase. In addition, Bluegreen’s shareholders
32
will have appraisal rights under Florida law if the merger is consummated. Shareholders of Bluegreen
who exercise and perfect appraisal rights will be entitled to receive a cash payment equal to the fair
value of their shares as determined in accordance with Florida law, which may be more than, less than,
or equal to the $16.00 per share merger consideration, and accordingly, the total amount payable to
Bluegreen’s shareholders in connection with the merger may be more than expected. Further, the fair
value of Bluegreen’s shares under Florida’s appraisal rights statutes may be determined by a court in
litigation, which is inherently uncertain and may require the incurrence of significant expenses and
significant devotion of management time, regardless of the outcome of the appraisal rights litigation. In
addition, BBX Capital may not realize the benefits expected from taking Bluegreen private to the extent
anticipated, or at all.
Bluegreen
Bluegreen is subject to the business, financial and operating risks inherent to the vacation ownership
industry, any of which could adversely impact its business, prospects and results.
Bluegreen is subject to a number of business, financial and operating risks inherent to the vacation
ownership industry, including, without limitation:
·
Significant competition from other vacation ownership businesses and hospitality providers;
· Market and/or consumer perception of vacation ownership companies and the industry in
·
·
·
·
·
general;
Increases in operating and other costs (as a result of inflation or otherwise), including
marketing costs, employee compensation and benefits, interest expense and insurance, which
may not be offset by price or fee increases in our business;
Bluegreen’s ability to maintain, enhance or expand its marketing arrangements and
relationships;
Changes in taxes and governmental regulations, including those that influence or set wages,
prices, interest rates or construction and maintenance procedures and costs;
Costs and efforts associated with complying with applicable laws and regulations, and the
costs and consequences of non-compliance;
Risks related to the development or acquisition of resorts and inventory, including delays in,
or cancellations of, planned or future resort development or inventory acquisition activities;
Shortages of labor or labor disruptions;
·
· Availability and cost of capital necessary for Bluegreen and third-party developers with whom
Bluegreen does business to fund investments, capital expenditures and service debt
obligations;
Bluegreen’s ability to securitize the receivables that it originates in connection with VOI
sales;
Financial condition of third-party developers with whom Bluegreen does business;
Relationships with third-party developers, Bluegreen’s Vacation Club members and HOAs;
Changes in the supply and demand for Bluegreen’s products and services;
Lack of security over inappropriate access to customer or Bluegreen’s records;
Private resales of VOIs and the sale of VOIs in the secondary market; and
·
·
·
·
·
· Unlawful or deceptive third-party VOI resale, cease and desist, or vacation package sales
·
schemes, and reputational risk associated therewith.
Any of these factors could increase costs, limit or reduce the prices Bluegreen is able to charge for its
products and services or adversely affect Bluegreen’s ability to develop or acquire new resorts or source
VOI supply from third parties, or otherwise adversely impact Bluegreen’s business, prospects or results.
Bluegreen’s business and operations, including its ability to market VOIs, may be adversely affected
by general economic conditions and, conditions affecting the vacation ownership industry and the
availability of financing.
Bluegreen’s business is subject to risks related to general economic and industry conditions and trends.
Bluegreen’s results, operations and financial condition may be adversely affected by unfavorable
general economic and industry conditions, such as high unemployment rates and job insecurity, declines
in discretionary spending, declines in real estate values and the occurrence of adverse weather or
geopolitical conflicts, including if these or other factors adversely impact the availability of financing
for Bluegreen or its customers or the ability of Bluegreen’s customers’ to otherwise pay amounts owed
under notes receivable. Further, adverse changes affecting the vacation ownership industry, such as an
oversupply of vacation ownership units, a reduction in demand for such units, changes in travel and
other consumer preferences, demographic and vacation patterns, changes in governmental regulation of
the industry, imposition of increased taxes by governmental authorities, the declaration of bankruptcy
and/or credit defaults by other vacation ownership companies and negative publicity for the industry,
could also have a material
33
adverse effect on Bluegreen’s business. This includes risks relating to conditions that negatively shape
public perception of Bluegreen resorts or of travel or the vacation ownership or hospitality industry
generally, including travel-related accidents, disease outbreaks, whether in regions generally, at third
party properties or at Bluegreen resorts (including reputational damage, remediation costs and other
potential liability and adverse impact of any such outbreak at Bluegreen resorts). Bluegreen’s operations
and results may be negatively impacted if Bluegreen is unable to update its business strategy over time
and from time to time in response to changing economic and industry conditions.
Bluegreen may not be able to develop or acquire VOI inventory or enter into and maintain fee-based
service agreements or other arrangements to source VOI inventory, which may cause its business
and results to be adversely impacted.
In addition to developed VOI sales, Bluegreen sources VOIs as part of its capital-light business strategy
through fee-based service agreements with third-party developers and through JIT and secondary
market arrangements. If Bluegreen is unable to develop or acquire resorts at the levels or in the time
frames anticipated, or is unsuccessful in entering into agreements with third-party developers or others
to source VOI inventory in connection with its capital-light business strategy, Bluegreen may
experience a decline in VOI supply or an increase in VOI cost, which could have a negative impact on
Bluegreen’s sales and results of operations. In addition, a decline in VOI supply and sales could result in
a decrease in financing revenues that are generated by VOI sales and fee and rental revenues that are
generated by Bluegreen’s management services.
Bluegreen’s business and properties are subject to extensive federal, state and local laws, regulations
and policies. Changes in these laws, regulations and policies, as well as the cost of maintaining
compliance with new or existing laws, regulations and policies and the imposition of additional taxes
on operations, could adversely affect Bluegreen’s business. In addition, results of audits of its tax
returns or those of its subsidiaries may have a material adverse impact on Bluegreen’s financial
condition.
The federal government and the state and local jurisdictions in which Bluegreen operates have enacted
extensive regulations that affect the manner in which Bluegreen markets and sells VOIs and conduct its
other business operations. In addition, federal, state and local regulators may enact new laws and
regulations that may adversely affect Bluegreen’s results or require Bluegreen to substantially modify
its business practices. Many states have adopted specific laws and regulations regarding the sale of
VOIs. Many states, including Florida and South Carolina, where certain of Bluegreen resorts are
located, extensively regulate VOI and timeshare related activities, including the creation and
management of resorts, the marketing and sale of properties, the escrow of purchaser funds prior to the
completion of construction and closing, the content and use of advertising materials and promotional
offers, the delivery of an offering memorandum and the creation and operation of exchange programs
and multi-site timeshare plan reservation systems. Moreover, with regard to sales conducted in South
Carolina, the closing of real estate and mortgage loan transactions must be conducted under the
supervision of an attorney licensed in South Carolina and otherwise in accordance with South Carolina’s
Timesharing Transaction Procedures Act. Most states also have other laws that are applicable to
Bluegreen’s activities, such as timeshare project registration laws, real estate licensure laws, mortgage
licensure laws, sellers of travel licensure laws, anti-fraud laws, consumer protection laws, telemarketing
laws, prize, gift and sweepstakes laws, and consumer credit laws. Bluegreen’s management of, and
dealings with, HOAs, including Bluegreen’s purchase of defaulted inventory from HOAs in connection
with its secondary market sales, are also subject to state laws and resort rules and regulations, including
those with respect to the establishment of budgets and expenditures, rule-making, and the imposition of
maintenance assessments.
Bluegreen is authorized to market and sell VOIs in all locations at which Bluegreen marketing and sales
activities are conducted. If Bluegreen’s agents or employees violate applicable regulations or licensing
requirements, their acts or omissions could cause the states where the violations occurred to revoke or
refuse to renew Bluegreen’s licenses, render Bluegreen’s sales contracts void or voidable, or impose
fines on Bluegreen based on past activities.
In addition, the federal government and the state and local jurisdictions in which Bluegreen conducts
business have generally enacted extensive regulations relating to direct marketing and telemarketing,
including the federal government’s national “do not call” list, the making of marketing and related calls
to cell phone users, a significant development in light of cell phone usage becoming the primary method
of communication, the Telemarketing Sales Rule, the Telephone Consumer Protection Act and the
CAN-SPAM Act of 2003. These regulations, as well as international data protection laws, have
impacted Bluegreen’s marketing of VOIs. While Bluegreen has taken steps designed to ensure
compliance with applicable regulations, these steps have increased and are expected to continue to
increase marketing costs and may not prevent failures in compliance. Additionally, adoption of new
state or federal laws regulating marketing and solicitation, and changes to existing laws, could adversely
affect current or planned
34
marketing activities and cause Bluegreen to change its marketing strategy. If this occurs, Bluegreen may
not be able to develop adequate alternative marketing strategies, which could affect the amount and
timing of its VOI sales. Bluegreen cannot predict the impact that these legislative initiatives or any other
legislative measures that may be proposed or enacted in the future may have on its marketing strategies
and results. Further, from time to time, complaints are filed against Bluegreen by individuals claiming
that they received calls in violation of applicable regulations. See “Item 3. Legal Proceedings.” for
description of litigation that was brought against Bluegreen in January 2019 relating to telemarketing
sales activities.
Most states have taxed VOIs as real estate, imposing property taxes that are billed to the respective
HOAs that maintain the related resorts, and have not sought to impose sales tax upon the sale of the
VOI or accommodations tax upon the use of the VOI. From time to time, however, various states have
attempted to promulgate new laws or apply existing laws impacting the taxation of VOIs to require that
sales or accommodations taxes be collected. Should new state or local laws be implemented or
interpreted to impose sales or accommodations taxes on VOIs, Bluegreen’s business could be materially
adversely affected.
From time to time, in the ordinary course of its business, consumers file complaints against Bluegreen.
Bluegreen may be required to incur significant costs to resolve these complaints or enter into consents
with regulators regarding its activities, including the refund of all or a portion of the purchase price paid
by the customer for the VOI. If Bluegreen is found to have not complied with applicable federal, state
and local laws and regulations, such violations may have adverse implications on Bluegreen, including
rendering Bluegreen’s VOI sales contracts void or voidable, negative publicity, potential litigation , and
regulatory fines or other sanctions. The expense, negative publicity and potential sanctions associated
with any failure to comply with applicable laws or regulations could have a material adverse effect on
Bluegreen’s business, results of operations or financial position.
Under the Americans with Disabilities Act of 1990 and the Accessibility Guidelines promulgated
thereunder (collectively, the “ADA”), all public accommodations, including Bluegreen’s properties,
must meet various federal requirements related to access and use by disabled persons. Compliance with
the ADA’s requirements could require removal of access barriers or other renovations, and non-
compliance could result in the imposition of fines or penalties, or awards of damages, against
Bluegreen. Bluegreen’s properties are also subject to various federal, state and local regulatory
requirements, such as state and local fire and life safety requirements. Further, various laws govern
Bluegreen’s resort management activities, including laws and regulations regarding community
association management, public lodging, food and beverage services, liquor licensing, labor,
employment, health care, health and safety, accessibility, discrimination, immigration, and the
environment (including climate change).
Bluegreen’s lending activities are also subject to a number of laws and regulations, including laws and
regulations related to consumer loans, retail installment contracts, mortgage lending, fair debt collection
and credit reporting practices, consumer collection practices, contacting debtors by telephone, mortgage
disclosure, lender licenses and money laundering. The Consumer Finance Protection Bureau, created
under the Dodd-Frank Act, has emphasized new regulatory focus on areas of Bluegreen’s business such
as consumer mortgage servicing and debt collection, credit reporting and consumer financial
disclosures, all of which affect the manner in which Bluegreen may provide financing to the purchasers
of VOIs and conduct its lending and loan servicing operations.
The vacation ownership and hospitality industries are highly competitive, and Bluegreen may not be
able to compete successfully.
Bluegreen competes with various high profile and well-established operators, many of which have
greater liquidity and financial resources than Bluegreen. Many of the world’s most recognized lodging,
hospitality and entertainment companies develop and sell timeshare units or VOIs in resort properties.
Bluegreen also competes with numerous smaller owners and operators of vacation ownership resorts
and also faces competition from alternative lodging options available to consumers through both
traditional methods of delivery as well as new web portals and applications, including private rentals of
homes or apartments or condominium units, which have increased in popularity in recent years.
Bluegreen's ability to remain competitive and to attract and retain customers depends on its customers'
satisfaction with its products and services as well as on distinguishing the quality, value, and efficiency
of its products and services from those offered by its competitors. Customer dissatisfaction with
experiences at its resorts or otherwise as a Vacation Club owner, including due to an inability to use
points for desired stays, could result in negative publicity and/or a decrease in sales, or otherwise
adversely impact Bluegreen's ability to successfully compete in the vacation ownership and hospitality
industries. Bluegreen may not be able to timely and sufficiently identify and remediate the cause of
customer dissatisfaction. Any of these events could materially and adversely impact Bluegreen's
operating results and financial condition.
35
Bluegreen’s business and profitability may be impacted if financing is not available on favorable
terms, or at all.
In connection with VOI sales, Bluegreen generally offers financing to the purchaser of up to 90% of the
purchase price of the VOI. However, Bluegreen incurs selling, marketing and administrative cash
expenses prior to and concurrent with the sale. These costs, along with the cost of the underlying VOI,
generally exceed the down payment Bluegreen receives at the time of the sale. Accordingly,
Bluegreen’s ability to borrow against or sell its notes receivable has historically been a critical factor in
Bluegreen’s continued liquidity, and Bluegreen therefore has depended on funds from its credit facilities
and securitization transactions to finance its operations. If Bluegreen’s pledged receivables facilities
terminate or expire and Bluegreen is unable to extend them or replace them with comparable facilities,
or if Bluegreen is unable to continue to participate in securitization-type transactions and “warehouse”
facilities on acceptable terms, Bluegreen’s liquidity, cash flow and profitability would be materially and
adversely affected. Credit market disruptions have in the past adversely impacted the willingness of
banks and other finance companies to provide “warehouse” lines of credit for VOI notes receivable and
resulted from time to time in the term securitization market being unavailable. Future credit market
disruptions may have similar effects or otherwise make obtaining additional and replacement external
sources of liquidity more difficult and more costly.
In addition, financing for real estate acquisition and development and the capital markets for corporate
debt is cyclical. While Bluegreen has increased its focus on expanding its fee-based service business
and encouraging higher down payments in connection with sales, there is no assurance that these
initiatives will enhance Bluegreen’s financial position or otherwise be successful in the long term.
Bluegreen anticipates that it will continue to seek and use external sources of liquidity, including
borrowings under its existing credit facilities, under credit facilities that Bluegreen may obtain in the
future, under securitizations in which Bluegreen may participate in the future or pursuant to other
borrowing arrangements, to:
·
·
·
·
Support Bluegreen’s operations and, subject to declaration by its board of directors and
contractual limitations, including limitations contained in its credit facilities, pay dividends;
Finance the acquisition and development of VOI inventory or property and equipment;
Finance a substantial percentage of Bluegreen’s sales; and
Satisfy Bluegreen’s debt and other obligations.
Bluegreen’s ability to service or refinance its indebtedness or to obtain additional financing (including
its ability to consummate future term securitizations) depends on the credit markets and on Bluegreen’s
future performance, which is subject to a number of factors, including the success of Bluegreen’s
business, results of operations, leverage, financial condition and business prospects, prevailing interest
rates, general economic conditions, the performance of Bluegreen’s receivables portfolio, and
perceptions about the vacation ownership and real estate industries.
As of December 31, 2018, Bluegreen had $29.1 million of indebtedness scheduled to become due during
2019. Historically, much of Bluegreen’s debt has been renewed or refinanced in the ordinary course of
business. However, there is no assurance that Bluegreen will be able to renew, extend or refinance all
or any portion of its outstanding debt or otherwise obtain sufficient external sources of liquidity, in each
case, on attractive terms, or at all. If Bluegreen is unable to do so, Bluegreen’s liquidity and financial
condition may be materially, adversely impacted.
In addition, Bluegreen has and intends to continue to enter into arrangements with third-party
developers pursuant to which it will sell their VOI inventory for a fee. These arrangements enable
Bluegreen to generate fees from the marketing and sales services provided, and in certain cases from
provisions of management services, without requiring it to fund development and acquisition costs. If
these third-party developers are not able to obtain or maintain financing necessary for their
development activities or other operations, Bluegreen may not be able to enter into these fee-based
arrangements or have access to their VOI inventory when anticipated, which would adversely impact
results.
Bluegreen would suffer substantial losses and its liquidity position could be adversely impacted if an
increasing number of customers to whom Bluegreen provides financing default on their obligations.
Adverse conditions in the mortgage industry, including credit availability, borrowers’ financial profiles,
prepayment rates and other factors, including those outside of Bluegreen’s control, may increase the
default rates Bluegreen experiences or otherwise negatively impact the performance of its notes
receivable. In addition, in recent years, third parties have been discouraging certain borrowers from
staying current on their note payments. Although in many cases Bluegreen may have recourse against a
buyer for the unpaid purchase price, certain states have laws that limit Bluegreen’s ability to recover
personal judgments against customers who have defaulted on their loans or Bluegreen may determine
that the cost of doing so may not be justified. Historically, Bluegreen has generally not pursued such
36
in
then
interest
remarketed
the Bluegreen Vacation Club and
recourse against its customers. In the case of Bluegreen’s notes receivable secured by VOIs, if
Bluegreen is unable to collect the defaulted amount due, Bluegreen traditionally has terminated the
customer’s
recovered
VOI. Irrespective of Bluegreen’s remedy in the event of a default, Bluegreen cannot recover the
marketing, selling and administrative costs associated with the original sale, and such costs generally
exceed the cash received by Bluegreen from the buyer at the time of the sale. In addition, Bluegreen
will need to incur such costs again in order to resell the VOI. Bluegreen updates its estimate of such
future losses each quarter, and consequently, the charge against sales in a particular period may be
impacted, favorably or unfavorably, by a change in expected losses related to notes originated in prior
periods. In addition, defaults may cause buyers of, or lenders whose loans are secured by, Bluegreen’s
VOI notes receivable to reduce the amount of availability or advance rates under receivables purchase
and credit facilities, or result in an increase in the interest costs associated with such facilities. In such
an event, the cost of financing may increase, and Bluegreen may not be able to secure replacement or
alternative financing on terms acceptable to Bluegreen, if at all, which would adversely affect
Bluegreen’s earnings, financial position and liquidity.
the
Bluegreen’s VOI notes receivable financing facilities could be adversely affected if a particular VOI
note receivable pool fails to meet certain performance ratios, which could occur if the default rate or
other credit metrics of the underlying VOI notes receivable deteriorate. In addition, if Bluegreen offers
financing to purchasers of VOIs with terms longer than those generally offered in the industry,
Bluegreen may not be able to securitize those VOI financing receivables. Bluegreen’s ability to sell
securities backed by Bluegreen’s VOI notes receivable depends on the continued ability and willingness
of capital market participants to invest in such securities. Asset-backed securities issued in Bluegreen’s
term securitization transactions could be downgraded by credit agencies in the future. If a downgrade
occurs, Bluegreen’s ability to complete other securitization transactions on acceptable terms or at all
could be jeopardized, and Bluegreen could be forced to rely on other potentially more expensive and
less attractive funding sources, to the extent available. Similarly, if other operators of vacation
ownership products were to experience significant financial difficulties, or if the vacation ownership
industry as a whole were to contract, Bluegreen could experience difficulty in securing funding on
acceptable terms. The occurrence of any of the foregoing could adversely impact Bluegreen’s business
and results, including, without limitation, by reducing the amount of financing Bluegreen is able to
provide to VOI purchasers, which in turn may result in a reduction in VOI sales.
In addition, under the terms of Bluegreen’s pledge and receivable sale facilities, Bluegreen may be
required, under certain circumstances, to replace receivables or to pay down the loan to within
permitted loan-to-value ratios. Additionally, the terms of Bluegreen’s securitization transactions
require Bluegreen to repurchase or replace loans if Bluegreen breaches any of the representations and
warranties Bluegreen made at the time Bluegreen sold the receivables. These agreements also often
include terms providing for substantially all of Bluegreen’s cash flow from its retained interest in the
receivable portfolios sold to be paid to the parties who purchased the receivables from Bluegreen in the
event of defaults or delinquencies by customers in excess of stated thresholds, or if other performance
thresholds are not met.
Bluegreen's existing indebtedness, or indebtedness that it may incur in the future, could adversely
impact its financial condition and results of operations, and the terms of Bluegreen's indebtedness
may limit its activities.
Bluegreen's level of debt and debt service requirements have several important effects on Bluegreen's
operations. Significant debt service cash requirements reduce the funds available for operations and
future business opportunities and increase Bluegreen's vulnerability to adverse economic and industry
conditions, as well as conditions in the credit markets generally. In addition, Bluegreen's leverage
position increases its vulnerability to economic and competitive pressures and may limit funds available
for acquisitions, working capital, capital expenditures, dividends, and other general corporate purposes.
Further, the financial covenants and other restrictions contained in indentures, credit agreements and
other agreements relating to Bluegreen's indebtedness require Bluegreen to meet certain financial tests
and may limit its ability to, among other things, pay dividends, borrow additional funds, dispose of
assets or make investments. If Bluegreen fails to comply with the terms of its debt instruments, such
debt may become due and payable immediately, which would have a material adverse impact on
Bluegreen's cash position and financial condition. Significant resources may be required to monitor
Bluegreen's compliance with its debt instruments (from a quantitative and qualitative perspective), and
such monitoring efforts may not be effective in all cases. Bluegreen may also incur substantial
additional indebtedness in the future. If new debt or other liabilities are added to its current debt levels,
the related risks that Bluegreen faces could intensify.
To the extent inflationary trends, tightened credit markets or other factors affect interest rates,
Bluegreen’s debt service costs may increase. If interest rates increased one percentage point, the effect
on interest expense related to Bluegreen’s variable-rate debt would be an annual increase of $2.9
million, based on balances as of December 31, 2018.
37
The ratings of third-party rating agencies could adversely impact Bluegreen’s ability to obtain, renew
or extend credit facilities, or otherwise raise funds.
Rating agencies from time to time review prior corporate and specific transaction ratings in light of
tightened ratings criteria. In February 2019, Standard & Poor’s Rating Services affirmed Bluegreen’s
‘B+’ credit rating. Bluegreen’s corporate credit rating is also based, in part, on rating agencies’
speculation about Bluegreen’s potential future debt and dividend levels. If rating agencies were to
downgrade Bluegreen’s corporate credit ratings, Bluegreen’s ability to raise funds on favorable terms,
or at all, and Bluegreen’s liquidity, financial condition and results of operations could be adversely
impacted. See “Bluegreen would suffer substantial losses and Bluegreen’s liquidity position could be
adversely impacted if an increasing number of customers to whom Bluegreen provides financing default
on their obligations” above. In addition, if rating agencies downgraded their original ratings on certain
bond classes in Bluegreen’s securitizations, holders of such bonds may be required to sell bonds in the
marketplace, and such sales could occur at a discount, which could impact the perceived value of the
bonds and Bluegreen’s ability to sell future bonds on favorable terms or at all. While Bluegreen is not
aware of any reasonably likely downgrades to its corporate credit rating or the ratings of bond classes in
its securitizations, such ratings changes can occur without advance notice.
There are risks associated with Bluegreen’s maintenance and addition of strategic partnerships and
arrangements.
Bluegreen generates a significant portion of its new sales prospects and leads through its arrangements
with various third parties, including Bass Pro and Choice Hotels, and is dependent upon existing and
future relationships in order to acquire new customers. VOI sales to prospects and leads generated by
Bluegreen’s marketing arrangement with Bass Pro accounted for approximately 14% and 15% of
Bluegreen’s VOI sales volume during the years ended December 31, 2018 and 2017, respectively. If
Bluegreen’s agreement with Bass Pro, or any other significant marketing arrangement, does not
generate a sufficient number of prospects and leads or is terminated or limited and not replaced by
another source of sales prospects and leads, Bluegreen may not be able to successfully market and sell
its products and services at current sales levels, at anticipated levels or at levels required in order to
offset the costs associated with its marketing efforts. Bluegreen has continued to meet with Bass Pro’s
leadership in an effort to resolve the issues which arose between the parties in 2017 and 2018. While
Bluegreen does not believe that any material additional amounts are due to Bass Pro, Bluegreen’s future
results would be impacted if the issues are not resolved and by any change in the compensation payable
to Bass Pro or the calculation of payments or reimbursements utilized pursuant to the agreements.
Bluegreen’s future success depends on its ability to market its products and services successfully and
efficiently, and Bluegreen’s marketing expenses have increased and may continue to increase in the
future.
As previously described, Bluegreen competes for customers with hotel and resort properties, other
vacation ownership resorts and alternative lodging options, including private rentals of homes,
apartments or condominium units. The identification of sales prospects and leads and the marketing of
Bluegreen’s products and services to them are essential to Bluegreen’s success. Bluegreen incurs
expenses associated with marketing programs in advance of the closing of sales. If Bluegreen’s lead
identification and marketing efforts do not yield enough leads or Bluegreen is unable to successfully
convert sales leads to sales, Bluegreen may be unable to recover the expense of its marketing programs
and systems and its business, operating results and financial condition would be adversely affected. In
addition, while sales to existing owners have increased recently, Bluegreen also continues to focus its
marketing efforts on selling to new customers, which typically involves a relatively higher marketing
cost compared to sales to existing owners. These efforts may result in increases in Bluegreen’s sales and
marketing expenses. If Bluegreen is not successful in offsetting the cost increase with greater sales
revenue, Bluegreen’s operating results and financial condition would be adversely impacted. In
addition, Bluegreen's marketing efforts are subject to the risk of changing consumer behavior. Changes
in consumer behavior may adversely impact the effectiveness of marketing efforts and strategies which
Bluegreen has in place, and Bluegreen may not be able to timely and effectively respond to such
changes. In addition, Bluegreen may not be able to continue to increase or maintain its level of sales to
existing owners.
38
Bluegreen may not be successful in maintaining or expanding its capital-light business relationships,
or its capital-light activities, including fee-based sales and marketing arrangements, and JIT and
secondary market sales activities, and such activities may not be profitable, which would have an
adverse impact on Bluegreen’s results of operations and financial condition.
Bluegreen offers fee-based marketing, sales, resort management and other services to third-party
developers. Bluegreen has over the last several years continued to expand its capital-light business
strategy, which Bluegreen believes enables it to leverage its expertise in sales and marketing, resort
management, mortgage servicing, construction management and title services. Bluegreen currently
intends to continue its focus on its capital-light business activities as such activities generally produce
positive cash flow and typically require less capital investment than Bluegreen’s traditional vacation
ownership business. Bluegreen has attempted to structure these activities to cover its costs and generate
a profit. Sales of third party developers’ VOIs must generate sufficient cash to comply with the terms of
their financing obligations as well as to pay the fees or commissions due to Bluegreen. The third party
developers may not be able to obtain or maintain financing necessary to meet the developer’s
requirements, which could impact Bluegreen's ability to sell the developers’ inventory. While
Bluegreen could attempt to utilize other arrangements, including JIT arrangements, where Bluegreen
would utilize its receivable credit facilities in order to provide fee-based marketing and sales services,
this would reduce the credit otherwise available to Bluegreen and impact profitability. Bluegreen
commenced its capital-light activities largely during the “Great Recession” in response to poor
economic conditions, and Bluegreen’s fee-based and other capital-light business activities in the future
may be adversely impacted by changes in economic conditions. When Bluegreen performs fee-based
sales and marketing services, Bluegreen sells VOIs in a resort developed by a third party as an interest in
the Bluegreen Vacation Club. This subjects Bluegreen to a number of risks typically associated with
selling products developed by others under its own brand name, including litigation risks. Further, these
arrangements may expose Bluegreen to additional risk as it will not control development activities or
timing of development completion. If third parties with whom Bluegreen enters into agreements are not
able to fulfill their obligations to Bluegreen, the inventory expected to be acquired or marketed and sold
on their behalf may not be available when expected or at all, or may not otherwise meet agreed-upon
specifications. Further, if these third parties do not perform as expected and Bluegreen does not have
access to the expected inventory or ability to obtain access to inventory from alternative sources on a
timely basis, its ability to maintain or increase sales levels would be adversely impacted.
Bluegreen also sells VOI inventory through secondary market arrangements which require low levels of
capital deployment. In connection with secondary market sales, Bluegreen acquires VOI inventory
from its resorts’ HOAs on a non-committed basis in close proximity to the timing of when Bluegreen
intends to sell such VOIs. VOIs purchased from HOAs are typically obtained by the HOAs through
foreclosure in connection with maintenance fee defaults and are generally acquired by Bluegreen at a
discount. While Bluegreen intends to increase its secondary market sales efforts in the future, Bluegreen
may not be successful in doing so, and these efforts may not result in Bluegreen achieving anticipated
results. Further, Bluegreen’s secondary market sale activities may subject Bluegreen to negative
publicity, which could adversely impact its reputation and business.
Bluegreen is subject to certain risks associated with its management of resort properties.
Through management of resorts and ownership of VOIs, Bluegreen is subject to certain risks related to
the physical condition and operation of the managed resort properties in its network, including:
·
The presence of construction or repair defects or other structural or building damage at any of
these resorts, including resorts Bluegreen may develop in the future;
· Any noncompliance with or liabilities under applicable environmental, health or safety
regulations or requirements or building permit requirements relating to these resorts;
· Any damage or interruption of access to physical assets resulting from natural disasters, such
as hurricanes, earthquakes, fires, floods and windstorms, which may increase in frequency or
severity due to climate change or other factors; and
Claims by employees, members and their guests for injuries sustained on these resort
properties.
·
Some of these risks may be more significant in connection with the properties for which Bluegreen
recently acquired management agreements, particularly those management agreements which were
acquired from operators in financial distress. If an uninsured loss or a loss in excess of insured limits
occurs as a result of any of the foregoing, Bluegreen may be subject to significant costs.
39
Additionally, a number of U.S. federal, state and local laws, including the Fair Housing Amendments
Act of 1988 and the ADA, impose requirements related to access to and use by disabled persons of a
variety of public accommodations and facilities. A determination that managed resorts are subject to,
and that they are not in compliance with, these accessibility laws could result in a judicial order
requiring compliance, imposition of fines or an award of damages to private litigants. If one of
Bluegreen’s managed resorts was required to make significant improvements as a result of non-
compliance with these accessibility laws, assessments might be needed to fund such improvements,
which additional costs may cause its VOI owners to default on their consumer loans from Bluegreen or
cease making required maintenance fee or assessment payments. Also, to the extent that Bluegreen
holds interests in a particular resort, it would be responsible for the pro rata share of the costs of such
improvements. In addition, any new legislation may impose further burdens or restrictions on property
owners with respect to access by disabled persons.
The resort properties that Bluegreen manages are subject to federal, state and local laws and regulations
relating to the protection of the environment, natural resources and worker health and safety, including
laws and regulations governing and creating liability relating to the management, storage and disposal
of hazardous substances and other regulated materials and the cleanup of contaminated sites. The
resorts are also subject to various environmental laws and regulations that govern certain aspects of their
ongoing operations. These laws and regulations control such things as the nature and volume of
wastewater discharges, quality of water supply and waste management practices. To the extent that
Bluegreen holds interests in a particular resort, it would be responsible for the pro rata share of losses
sustained by such resort as a result of a violation of any such laws and regulations.
In addition, Bluegreen may from time to time have disagreements with VOI owners and HOAs resulting
from its provision of management services. Failure to resolve such disagreements may result in
litigation and additional costs. Further, disagreements with HOAs could also result in the loss of
management contracts, which would negatively affect Bluegreen’s revenues and results and may also
have an adverse impact on its ability to generate sales from existing VOI owners.
Bluegreen’s management contracts are typically structured as “cost-plus,” with an initial term of three
years and automatic one-year renewals. If a management contract is terminated or not renewed on
favorable terms or is renegotiated in a manner adverse to Bluegreen, its revenues and cash flows would
be adversely affected.
Bluegreen results of operations and financial condition may be materially and adversely impacted if
Bluegreen does not continue to participate in exchange networks and other strategic alliances with
third parties or if Bluegreen customers are not satisfied with the networks in which Bluegreen
participate or our strategic alliances.
Bluegreen believes that its participation in exchange networks and other strategic alliances and its
Traveler Plus program make ownership of its VOIs more attractive by providing owners with the
ability to take advantage of vacation experiences in addition to stays at Bluegreen resorts. Bluegreen’s
participation in the RCI exchange network allows Vacation Club owners to use their points to stay at
over 4,300 participating resorts, based upon availability and the payment of a variable exchange fee.
During the year ended December 31, 2018, approximately 8% of Vacation Club owners utilized the
RCI exchange network for a stay of two or more nights. Bluegreen also has an exclusive strategic
arrangement with Choice Hotels pursuant to which, subject to payments and conditions, certain of
Bluegreen resorts have been branded as part of Choice Hotels’ Ascend Hotel Collection. Vacation Club
owners can convert their Vacation Club points into Choice Privileges points. Choice Privileges points
can be used for stays at Choice Hotels. For a nominal annual fee and transactional fees, Vacation Club
owners may also participate in Bluegreen’s Traveler Plus program, which enables them to use points to
access an additional 48 direct exchange resorts and for other vacation experiences such as cruises. In
addition, Traveler Plus members can directly use their Vacation Club points for stays at Choice Hotels’
Ascend Hotel Collection properties, a network of historic and boutique hotels in the United States,
Canada, Scandinavia and Latin America. Bluegreen may not be able to or desire to continue to
participate in the RCI or direct exchange networks in the future or maintain or extend its other
marketing and strategic networks, alliances and relationships. In addition, these networks, alliances and
relationships, and Bluegreen’s Traveler Plus program, may not continue to operate effectively, and
Bluegreen customers may not be satisfied with them. In addition, Bluegreen may not be successful in
identifying or entering into new strategic relationships in the future. If any of these events should occur,
Bluegreen’s results of operations and financial condition may be materially and adversely impacted.
Maintenance fees at Bluegreen’s resorts and/or Vacation Club dues may be required to be increased,
which could cause its product to become less attractive and could harm business.
The maintenance fees, special assessments and Vacation Club dues that are levied by HOAs and the
Vacation Club on VOI owners may increase as the costs to maintain and refurbish properties, and to
keep properties in compliance
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with Bluegreen’s standards and applicable regulations, increase. Increases in such fees, assessments or
dues could negatively affect customer satisfaction with Bluegreen’s Vacation Club or otherwise
adversely impact VOI sales to both new customers and existing VOI owners or could contribute to
additional defaults.
Bluegreen’s strategic transactions may not be successful and may divert its management’s attention
and consume significant resources.
Bluegreen intends to continue its strategy of selectively pursuing complementary strategic transactions.
Bluegreen may also purchase management contracts, including from resort operators facing financial
distress, and purchase VOI inventory at resorts that it does not manage, with the goal of acquiring
sufficient VOI ownership at such a resort to become the manager of that resort. The successful
execution of this strategy will depend on Bluegreen’s ability to identify and enter into the agreements
necessary to take advantage of these potential opportunities, and to obtain any necessary financing.
Bluegreen may not be able to do so successfully. In addition, Bluegreen’s management may be required
to devote substantial time and resources to pursue these opportunities, which may impact their ability to
manage its operations effectively.
Acquisitions involve numerous additional risks, including: (i) difficulty in integrating the operations
and personnel of the acquired business or assets; (ii) potential disruption of ongoing business and the
distraction of management from day-to-day operations; (iii) difficulty entering markets in which
Bluegreen has limited or no prior experience and in which competitors have a stronger market position;
(iv) difficulty maintaining the quality of services that Bluegreen has historically provided across new
acquisitions; (v) potential legal and financial responsibility for liabilities of the acquired business or
assets; (vi) potential overpayment for the acquired business or assets; (vii) increased expenses
associated with completing an acquisition and amortizing any acquired intangible assets; (viii) risks
associated with any debt incurred in connection with the financing of the transaction; and (ix)
challenges in implementing uniform standards, controls, procedures and policies throughout an acquired
business.
Bluegreen is dependent on the managers of its affiliated resorts to ensure that those properties meet
its customers’ expectations.
In addition to stays at Bluegreen resorts, Vacation Club owners have access to other resorts and hotels
as a result of participation in exchange programs and other strategic alliances. Accordingly, Vacation
Club owners have access to resorts that Bluegreen does not manage, own or operate. If those resorts are
not maintained in a manner consistent with Bluegreen’s standards of quality, or Bluegreen’s Vacation
Club owners are otherwise dissatisfied with those resorts, Bluegreen may be subject to customer
complaints and its reputation and brand could be damaged. In addition, Bluegreen’s agreements with
these resorts or their owners may expire, be terminated or not be renewed, or may be renegotiated in a
manner adverse to Bluegreen, and Bluegreen may be unable to enter into new agreements that provide
Vacation Club owners with equivalent access to additional resorts, any or all of which could materially
adversely impact Bluegreen’s business, operating results and financial condition.
The resale market for VOIs could adversely affect Bluegreen’s business.
Based on Bluegreen’s experience at its resorts and at resorts owned by third parties, Bluegreen believes
that resales of VOIs in the secondary market generally are made at net sales prices below the original
customer purchase prices. The relatively lower sales prices are partly attributable to the high marketing
and sales costs associated with the initial sales of such VOIs. Accordingly, the initial purchase price of
a VOI may be less attractive to prospective buyers, and Bluegreen competes with buyers who seek to
resell their VOIs. While VOI resale clearing houses or brokers currently do not have a material impact
on Bluegreen’s business, the availability of resale VOIs at lower prices, particularly if an organized and
liquid secondary market develops, could adversely affect Bluegreen’s level of sales and sales prices,
which in turn would adversely affect Bluegreen’s business, financial condition and results of operations.
Bluegreen is subject to the risks of the real estate market and the risks associated with real estate
development, including a decline in real estate values and a deterioration of other conditions relating
to the real estate market and real estate development.
Real estate markets are cyclical in nature and highly sensitive to changes in national and regional
economic conditions, including:
·
·
·
Levels of unemployment;
Levels of discretionary disposable income;
Levels of consumer confidence;
41
The availability of financing;
·
· Overbuilding or decreases in demand;
·
·
Interest rates; and
Federal, state and local taxation methods.
A deterioration in general economic conditions or in the real estate market would have a material
adverse effect on Bluegreen’s business.
Bluegreen expects to seek to acquire more real estate inventory in the future, and the availability of land
for development of resort properties at favorable prices will be critical to Bluegreen’s profitability and
the ability to cover its significant selling, general and administrative expenses, cost of capital and other
expenses. If Bluegreen is unable to acquire such land or resort properties at a favorable cost,
Bluegreen’s results of operations may be materially, adversely impacted. The profitability of
Bluegreen’s real estate development activities is also impacted by the cost of construction, including the
costs of materials and labor and other services. Should the cost of construction materials and services
rise, the ultimate cost of Bluegreen’s future resorts inventory when developed could increase and have a
material, adverse impact on Bluegreen’s results of operations. Bluegreen is also exposed to other risks
associated with development activities, including, without limitation:
· Adverse conditions in the capital markets may limit Bluegreen’s ability to raise capital for
·
completion of projects or for development of future properties;
Construction delays, zoning and other local, state or federal governmental approvals, cost
overruns, lender financial defaults, or natural disasters, such as earthquakes, hurricanes,
floods, fires, volcanic eruptions and oil spills, increasing overall construction costs, affecting
timing of project completion or resulting in project cancellations;
· Any liability or alleged liability or resulting delays associated with latent defects in design or
construction of projects Bluegreen has developed or that Bluegreen constructs in the future
adversely affecting Bluegreen’s business, financial condition and reputation;
Failure by third-party contractors to perform for any reason, exposing Bluegreen to
operational, reputational and financial harm; and
The existence of any title defects in properties Bluegreen acquires.
·
·
In addition, the third-party developers from whom Bluegreen sources VOI inventory as part of its
capital-light business strategy are exposed to such development-related risks and, therefore, the
occurrence of such risks may adversely impact its ability to acquire VOI inventory from them when
expected or at all.
Bluegreen’s intellectual property rights, and the intellectual property rights of its business partners,
are valuable, and the failure to protect those rights could adversely affect its business.
Bluegreen’s intellectual property rights, including existing and future trademarks, trade secrets and
copyrights, are and will continue to be valuable and important assets of its business. Bluegreen believes
that its proprietary technology, as well as its other technologies and business practices, are competitive
advantages and that any duplication by competitors would harm Bluegreen’s business. Measures taken
to protect Bluegreen’s intellectual property may not be sufficient or effective. Additionally, intellectual
property laws and contractual restrictions may not prevent misappropriation of Bluegreen’s intellectual
property. Finally, even if Bluegreen is able to successfully protect its intellectual property, others may
develop technologies that are similar or superior to Bluegreen’s technology. Bluegreen also generates a
significant portion of new sales prospects and leads through arrangements with third parties, including
Bass Pro. The failure by these third parties to protect their intellectual property rights could also harm
Bluegreen’s business.
BBX Capital Real Estate
Some of BBXRE’s operations are through unconsolidated joint ventures with others, and we may be
adversely impacted by a joint venture partner’s failure to fulfill its obligations.
By entering into joint ventures, BBXRE may be successful in reducing the amount BBXRE invests in
the ownership and development of real estate properties. However, joint venture partners may become
financially unable or unwilling to fulfill their obligations under the joint venture agreements. Most joint
ventures borrow money to help finance their activities, and although recourse on the loans is generally
limited to the managing members, joint ventures and their properties, BBXRE has in some cases and
may in the future provide ongoing financial support or guarantees. If joint
42
venture partners do not meet their obligations to the joint venture, BBXRE may be required to make
significant expenditures, which may have an adverse effect on our operating results or financial
condition. BBXRE has in the past and may in the future hold investments in a number of different joint
ventures with the same or related developers, which could increase the adverse effects of any failures
by such developer to fulfil its obligations. BBXRE has a substantial investment in the Altman
Companies and related investments in Altis multifamily apartment joint ventures developed and
managed by Altman Companies and Joel Altman (“JA”) . Additionally, BBXRE has contributed $2.5
million to a newly formed joint venture with JA that guarantees the indebtedness and construction cost
overruns of new real estate joint ventures established by Altman Companies, which increases BBXRE’s
risk of loss in connection with its real estate joint venture investments managed by JA and the Altman
Companies.
Investments by BBXRE in real estate developments directly or through joint ventures expose it to
market and economic risks inherent in the real estate construction and development industry.
The real estate construction and development industry is highly competitive and subject to numerous
risks which in many cases are beyond management’s control. The success of BBXRE’s investments in
real estate developments is dependent on many factors, including:
· Demand for or oversupply of new homes, finished lots, rental apartments and commercial real
estate;
Real estate market values;
Changes in capitalization rates impacting real estate values;
Inventory of foreclosed homes negatively impacting selling prices;
· Demand for commercial real estate tenants;
·
·
·
· Availability and reasonable pricing of skilled labor;
· Availability and reasonable pricing of construction materials, such as lumber, framing,
·
concrete and other building materials;
Changes in laws and regulations for new construction and land entitlements, including
environmental and zoning laws and regulations;
· Natural disasters and severe weather conditions increasing costs, delaying construction,
causing uninsured losses or reducing demand for new homes;
· Availability and cost of mortgage financing for potential purchasers;
· Mortgage loan interest rates;
· Availability, delays and costs associated with obtaining permits, approvals or licenses
necessary to develop property;
Construction defects and product liability claims; and
·
· General economic conditions.
Any of these factors could give rise to delays in the start or completion of a project, increase the cost of
developing a project, or could result in reduced prices and values for BBX Capital’s developments,
including developments underlying its joint venture investments.
A significant portion of BBXRE’s loans and real estate assets are located in Florida, and economic
conditions in the Florida real estate market could adversely affect our earnings and financial
condition.
The legacy assets retained by us in the BankAtlantic Sale, the real estate developments managed by
BBXRE, and the real estate being developed by joint ventures in which BBXRE has invested are
primarily concentrated in Florida, and adverse changes to the Florida economy or the real estate market
may negatively impact our earnings and financial condition. As a result, BBXRE is exposed to
geographic risks of high unemployment rates, declines in the housing industry and declines in the real
estate market in Florida. Adverse changes in laws and regulations in Florida would have a negative
impact on our revenues, financial condition and business. Declines in the Florida housing markets may
negatively impact the credit performance of BBXRE’s loans and result in asset impairments. Further,
the State of Florida is subject to the risks of natural disasters, such as tropical storms and hurricanes,
which may disrupt operations, adversely impact the ability of borrowers to timely repay their loans,
adversely impact the value of any collateral securing loans and BBXRE’s portfolio of real estate, or
otherwise have an adverse effect on our results of operations. The severity and impact of tropical
storms, hurricanes and other weather related events are unpredictable.
43
BXRE’s inability to finance its real estate developments through Community Development District
Bonds o r obtain performance bonds or letters of credit could adversely affect our results of
operations and liquidity.
BBXRE is often required to provide performance bonds and letters of credit under construction
contracts or development agreements. BBXRE also obtained financing for the construction of
infrastructure improvements for the first two phases of its Beacon Lake development in St. Johns
County, Florida from the issuance of Community Development Bonds. BBXRE’s ability to obtain
performance bonds, letters of credit, or additional issuances of Community Development Bonds is
dependent on BBXRE’s credit rating, financial condition, and historical performance. If BBXRE is
unable to obtain these bonds or letters of credit or cause the issuance of Community Development
Bonds when required or desirable, our results of operations and liquidity could be adversely affected.
In connection with the sale of BankAtlantic to BB&T during July 2012, we acquired nonperforming
loans and foreclosed real estate, and our results of operations and financial condition may be
adversely affected if these assets are monetized below their current book values.
As a result of the BankAtlantic Sale, we maintain and manage a portfolio of foreclosed real estate and
non-performing loans managed by BBXRE. As a consequence, our financial condition and results of
operations will be dependent on BBXRE’s ability to successfully manage and monetize these legacy
assets. Further, the loan portfolio and real estate may not be easily salable in the event BBXRE decides
to liquidate an asset through a sale transaction. If the legacy assets are not monetized at or near the
current book values ascribed to them, or if these assets are liquidated for amounts less than book value,
our financial condition and results of operations would be adversely affected. Because a majority of
these legacy assets do not generate income on a regular basis, we do not expect to generate significant
revenue or income with respect to these assets until such time as an asset is monetized through
repayments or BBXRE consummate transactions involving the sale, joint venture or development of the
underlying real estate or investments.
Renin
Renin’s retail sales are concentrated with big-box home center customers, and there is significant
competition in the industry.
A significant amount of Renin’s sales are to big-box home centers. These home centers in many
instances have significant negotiating leverage with their vendors, including Renin, and are able to
affect the prices of the products sold and the terms and conditions of conducting business with
them. These home centers may also reduce the number of vendors they purchase from or make
significant changes in their volume of purchases. Although homebuilders, dealers and other retailers
represent other channels of distribution for Renin’s products, the loss of a home center customer or
reduced sales volume at any of these home centers would have a material adverse effect on Renin’s
business. Further, Renin has substantial competition from overseas manufacturers of products similar to
those sold by Renin.
A significant portion of Renin’s business relies on home improvement and new home construction
activity, both of which are cyclical and outside of management’s control.
A significant portion of Renin’s business is dependent on the levels of home improvement activity,
including spending on repair and remodeling projects, and new home construction activity.
Macroeconomic conditions, including consumer confidence levels, fluctuations in home prices,
unemployment and underemployment levels, interest rates, regulatory initiatives, and the availability of
home equity loans and mortgage financing affect both discretionary spending on home improvement
projects as well as new home construction activity. Adverse changes in these factors or uncertainty
regarding these macroeconomic conditions could result in a decline in spending on home improvement
projects and a decline in demand for new home construction, both of which could adversely affect
Renin’s results of operations.
Renin’s operating results would be negatively impacted if it experiences increased commodity costs
or a limited availability of commodities.
Renin purchases various commodities to manufacture products, including steel, aluminum, glass and
mirrors. Fluctuations in the availability and prices of these commodities could increase the cost to
manufacture products. Further, increases in energy costs could increase production and transportation
costs, each of which could negatively affect its operating results. Renin’s existing arrangements with
customers, competitive considerations and the relative negotiating power and resistance of home center
customers and big-box retailers to price increases make it difficult to increase selling prices to absorb
increased production costs. If Renin is not able to increase the prices of its products
44
or achieve other cost savings or productivity improvements to offset any increased commodity and
production costs, our operating results could be negatively impacted. Many of the raw materials
purchased by Renin are sourced from China, Mexico, and other countries. Changes in United States
trade practices, or tariffs levied on these imports, could significantly impact Renin’s results of
operations and financial condition.
IT'SUGAR and Other Confectionery Businesses
Market demand for candy products could decline.
IT’SUGAR and the Company’s other confectionery businesses operate in highly competitive markets
and compete with larger companies that have greater resources. IT’SUGAR’s success is impacted by
many factors, including the following:
Effective retail execution;
Effective and cost-efficient advertising campaigns and marketing programs;
·
·
· Adequate supply of commodities at a reasonable cost;
· Oversight of product safety;
· Ability to sell products at competitive prices;
·
·
Response to changes in consumer preferences and tastes;
Changes in consumer health concerns, including obesity and the consumption of certain
ingredients and;
Concerns related to effects of sugar or other ingredients which may be used to make its
products.
·
A decline in market demand for candy products could negatively affect operating results.
IT’SUGAR’s opening of new stores in high profile locations may reduce earnings, require additional
financing and increase capital expenditures.
IT’SUGAR’s business strategy is to open new stores in high profile locations. While IT’SUGAR seeks
new store locations to provide opportunities for growth and earnings, IT’SUGAR may not be successful
in identifying these opportunities or may open new stores which are not profitable. The expansion of
stores could expose IT’SUGAR to additional debt financing, may not generate anticipated results, or
may result in losses or future impairments, which can have an adverse effect on its results of operations
and liquidity.
IT’SUGAR’s continued success is dependent on its ability to differentiate itself from other retailer s
in the confectionery industry.
IT’SUGAR in the past has differentiated itself from other retailers through merchandise packaging,
licenses, store environment, and celebrity endorsements. IT’SUGAR’s results of operations and
financial condition would be adversely affected if it is unable to obtain celebrity endorsements or
licenses at a reasonable cost or to maintain its distinct appeal or if actions by its competitors reduce the
effectiveness of its business model.
BBX Capital may experience product recalls or product liability claims associated with businesses in
the confectionery industry.
Selling products for human consumption involves inherent legal and other risks, including product
contamination, spoilage, product tampering, allergens, or other adulteration. BBX Capital could decide
or be required to destroy inventory, recall products or lose sales in connection with contamination,
tampering, adulteration or other deficiencies. These events could result in significant losses and may
damage BBX Capital’s reputation, and discourage consumers from buying products, or cause
production and delivery disruptions which would adversely affect our financial condition and results of
operations. BBX Capital may also incur losses if products cause injury, illness or death. A significant
product liability claim may adversely affect both reputation and profitability, even if the claim is
unsuccessful.
45
BBX Capital may not realize the expected results from its strategic initiatives in connection with
companies acquired in the confectionery industry.
During 2018 and 2017, BBX Capital exited its candy manufacturing facilities in Utah and South Florida
and consolidated its wholesale manufacturing operations in Orlando in order to improve operating
efficiencies and generate cost savings. These strategic initiatives may not be successful, and BBX
Capital may decide to otherwise exit these operations, which could result in additional losses and
adversely affect our results of operations.
Other Investments
FFTRG’s operations require ongoing compliance with its area development and franchise
agreements with MOD Pizza.
FFTRG’s area development agreement with MOD Pizza provides an exclusive right to open MOD Pizza
franchised pizza restaurant locations in the State of Florida subject to the requirement that FFTRG open
restaurant locations based on a predetermined development schedule. Failure to comply with the
schedule gives MOD Pizza the right to terminate the agreement. In connection with such a termination,
FFTRG will lose its right to open additional MOD Pizza restaurant locations, and MOD Pizza may grant
franchise rights to another franchisee in the state of Florida. If FFTRG loses its exclusive development
rights, it will be unable to scale its infrastructure and operations, and its existing locations may face
increased competition from additional MOD Pizza locations.
The franchise agreements with MOD Pizza also require FFTRG to comply with various operating
programs designed and established by MOD Pizza. These programs include the adoption of price
discounts and promotions, the implementation of menu changes, and the funding of various ongoing
operating expenses and capital expenditures, including the requirement to periodically remodel
restaurant locations. These requirements and the related risks of noncompliance and the costs of
compliance could have an adverse effect on the operating results of the Company’s MOD Pizza
franchise operations.
Other Risk Factors
BBX Capital or its subsidiaries may incur additional indebtedness.
BBX Capital and its subsidiaries have in the past and may in the future incur significant amounts of
debt, including at Bluegreen. Any indebtedness, including indebtedness incurred in the future could
have several important effects on BBX Capital or its subsidiaries, including, without limitation, that
BBX Capital or its subsidiaries may be required to use available cash for the payment of principal and
interest due on its debt and that the outstanding indebtedness and leverage at BBX Capital or its
subsidiaries will impact liquidity, and any negative changes in general economic and industry
conditions will increase such impact.
The Company’s technology requires updating, the cost involved in updating the technology may be
significant, and the failure to keep pace with developments in technology could impair the
Company's operations or competitive position.
The industries in which the Company does business, including the vacation ownership and hospitality
industries, require the utilization of technology and systems, including technology utilized for sales and
marketing, mortgage servicing, property management, brand assurance and compliance, and reservation
systems. This technology requires continuous updating and refinements, including technology required
to remain competitive and to comply with the legal requirements such as privacy regulations and
requirements established by third parties. The Company is taking steps to update its information
technology platform, which has required, and is likely to continue to require, significant capital
expenditures. Older systems which have not yet been updated may increase the risk of operational
inefficiencies, financial loss and non-compliance with applicable legal and regulatory requirements, and
the Company may not be successful in updating such systems in the time frame or at the cost
anticipated. Further, as a result of the rapidly changing technological environment, systems which the
Company has put in place or expects to put in place in the near term may become outdated, requiring
new technology, and the Company may not be able to replace those systems as quickly as its
competition or within budgeted costs and time frames. Further, the Company may not achieve the
benefits that may have been anticipated from any new technology or system.
In addition, conversions to new information technology systems require effective change management
processes and may result in cost overruns, delays or business interruptions. If the Company’s
information technology systems are
46
disrupted, become obsolete, or do not adequately support our strategic, operational, or compliance
needs, the Company’s business, financial position, results of operations, or cash flows may be adversely
affected.
Information technology failures and data security breaches could harm our business.
BBX Capital and its subsidiaries rely on information technology (IT) systems, including Internet sites,
data hosting facilities and other hardware and platforms, some of which are hosted by third parties.
These IT systems, like those of most companies, may be vulnerable to a variety of interruptions and
risks, including, but not limited to, natural disasters, telecommunications failures, hackers, and other
security issues. Moreover, the Company’s computer systems, like those of most companies, may
become subject to computer viruses or other malicious codes, and to cyber or phishing-attacks.
Although administrative and technical controls have been implemented which attempt to minimize the
risk of cyber incidents, computer intrusion efforts are becoming increasingly sophisticated, and any
enhanced controls installed might be breached. If the IT systems cease to function properly, the
Company could suffer interruptions in its operations. If the cyber-security is breached, unauthorized
persons may gain access to our proprietary or confidential information, including information about
borrowers, employees or investments. This could require the Company to incur significant costs to
comply with legally required protocols and to repair or restore the security of its systems.
The tax impact resulting from the Tax Cuts and Jobs Act are based on interpretations and
assumptions the Company has made. Any changes in interpretations and assumptions or the
issuance of additional regulatory guidance may have a material adverse impact on our tax rate in
fiscal years 2018 and beyond.
On December 22, 2017, U.S. federal tax legislation, commonly referred to as the Tax Cuts and Jobs Act
(the “Tax Reform Act”), was signed into law, significantly changing the U.S. Internal Revenue Code.
The Tax Reform Act is complex, and the Company has made judgments and interpretations about the
application of these changes in the tax laws. The interpretation and finalization of recently proposed
regulations and other interpretive guidance that may be issued by the Internal Revenue Service could
differ from our interpretations of the Tax Reform Act which could result in the potential for the
payment of additional taxes, penalties or interest that may adversely affect our results of operations for
the fiscal years 2019 and beyond.
Unexpected events, such as natural disasters, severe weather and terrorist activities, may disrupt the
Company’s operations and increase our costs.
The occurrence of one or more unexpected events, including tsunamis, hurricanes, earthquakes, floods
and other forms of severe weather or terrorist activities in countries or regions in which our assets,
suppliers or our operating businesses are located could adversely affect our operations and financial
performance.
The Company’s insurance policies may not cover all potential losses.
The Company maintains insurance coverage for liability, property and other risks with respect to its
operations and activities. While the Company has comprehensive property and liability insurance
policies with coverage features and insured limits that it believes are customary, market forces beyond
the Company’s control may limit the scope of the insurance coverage it can obtain or ability to obtain
coverage at reasonable rates. The cost of insurance may increase and coverage levels may decrease,
which may affect the Company’s ability to maintain customary insurance coverage and deductibles at
acceptable costs. There is a limit as well as various sub-limits on the amount of insurance proceeds the
Company will receive in excess of applicable deductibles. Further, certain types of losses, generally of a
catastrophic nature, such as earthquakes, hurricanes and floods, terrorist acts, and certain environmental
matters, may be outside the general coverage limits of the Company’s policies, subject to large
deductibles, deemed uninsurable or too cost-prohibitive to justify insuring against. In addition, in the
event of a substantial loss, the insurance coverage the Company carries may not be sufficient to pay the
full market value or replacement cost of the affected property or in some cases may not provide a
recovery for any part of a loss.
If an insurable event occurs that affects more than one of the Company’s properties, the claims from
each affected property may be considered together to determine whether the individual occurrence
limit, annual aggregate limit or sub-limits, depending on the type of claim, have been reached. If the
limits or sub-limits are exceeded, each affected property may only receive a proportional share of the
amount of insurance proceeds provided for under the policy. As a result, the Company could lose some
or all of the capital it has invested in a property, as well as the anticipated future revenue opportunities
from the property. Further, the Company could remain obligated under guarantees or other financial
obligations related to a property. In addition, with respect to Bluegreen, its VOI owners could be
required to contribute toward deductibles to help cover losses.
47
Adverse outcomes in legal or other regulatory proceedings, including claims of non-compliance with
applicable regulations or development-related defects could adversely affect the Company’s financial
condition and operating results.
In the ordinary course of business, the Company is subject to litigation and other legal and regulatory
proceedings, which result in significant expenses and devotion of time and the Company may agree to
indemnify third parties or its strategic partners from damages or losses associated with such risks. In
addition, litigation is inherently uncertain, and adverse outcomes in the litigation and other proceedings
to which the Company is or may be subject could adversely affect its financial condition and operating
results.
Bluegreen engages third-party contractors to construct its resorts, and BBXRE engages third-party
contractors in its developments. However, Bluegreen’s and BBXRE’s respective customers may assert
claims against Bluegreen and BBXRE for construction defects or other perceived development defects,
including, without limitation, structural integrity, the presence of mold as a result of leaks or other
defects, water intrusion, asbestos, electrical issues, plumbing issues, road construction, water and sewer
defects and defects in the engineering of amenities. In addition, certain state and local laws may impose
liability on property developers with respect to development defects discovered in the future. Bluegreen
and BBXRE could have to accrue a significant portion of the cost to repair such defects in the quarter
when such defects arise or when the repair costs are reasonably estimable.
Costs associated with litigation, including claims for development-related defects, and the outcomes
thereof could adversely affect the Company’s liquidity, financial condition and operating results.
BBX Capital and its subsidiaries are subject to environmental laws related to their real estate and
timeshare activities including claims with respect to mold or hazardous or toxic substances, which
could have a material adverse impact on our financial condition and operating results.
As current or previous owners or operators of real property, BBX Capital and its subsidiaries, including
Bluegreen, may be liable under federal, state and local environmental laws, ordinances and regulations
for the costs of removal or remediation of hazardous or toxic substances on, under or in the property.
These laws often impose liability whether or not we knew of, or were responsible for, the presence of
such hazardous or toxic substances. The presence of such substances, or the failure to properly
remediate such substances, may adversely affect our ability to sell or lease real estate or to borrow
money using such real estate or receivables generated from the sale of such property as
collateral. Noncompliance with environmental, health or safety requirements may require us to cease or
alter operations at one or more of our properties. Further, we may be subject to common law claims by
third parties based on damages and costs resulting from violations of environmental regulations or from
contamination associated with one or more of our properties. The cost of investigating, remediating or
removing such hazardous or toxic substances may be substantial.
Failure to maintain the integrity of the Company’s internal or customer data could result in faulty
business decisions or operational inefficiencies, damage the Company's reputation and/or subject the
Company to costs, fines, or lawsuits.
The Company collects and retains large volumes of internal and customer data, including social security
numbers, credit card numbers and other personally identifiable information of its customers in various
internal information systems and information systems of its service providers. The Company also
maintains personally identifiable information about its employees. The integrity and protection of that
customer, employee and company data is critical to the Company and faulty decisions could be made if
that data is inaccurate or incomplete. The Company’s customers and employees also have a high
expectation
that the Company and its service providers will adequately protect their personal
information. The regulatory environment as well as the requirements imposed on the Company by the
payment card industry surrounding information, security and privacy is also increasingly demanding, in
both the United States and other jurisdictions in which the Company operates. The Company’s systems
may be unable to satisfy changing regulatory and payment card industry requirements and employee and
customer expectations, or may require significant additional investments or time in order to do so.
The Company’s information systems and records, including those it maintains with its service
providers, may be subject to security breaches, cyberattacks, system failures, viruses, operator error or
inadvertent releases of data. A significant theft, loss, or fraudulent use of customer, employee or
company data maintained by the Company or by a service provider could adversely impact the
Company’s reputation and could result in remedial and other expenses, fines or litigation. A breach in
the security of the Company’s information systems or those of its service providers
48
could lead to an interruption in the operation of the Company’s systems, resulting in operational
inefficiencies and a loss of profits.
The Company’s business may be adversely impacted by negative publicity, including information
spread through social media.
The proliferation and global reach of social media continues to expand rapidly and could cause the
Company to suffer reputational harm. The continuing evolution of social media presents new challenges
and requires the Company to keep pace with new developments, technology and trends. Negative posts
or comments about the Company, the properties it manages or its brands on any social networking or
user-generated review website, including travel and vacation property websites, could affect consumer
opinions of the Company and its products, and the Company cannot guarantee that it will timely or
adequately redress such instances.
The loss of the services of key management and personnel could adversely affect the Company’s
business.
The Company’s ability to successfully implement its business strategy will depend on the ability to
attract and retain experienced and knowledgeable management and other professional staff. If the
Company is unable to retain and motivate its existing employees and efforts to retain and attract key
management and other personnel are unsuccessful, the Company’s results of operations and financial
condition may be materially and adversely impacted.
Changes to and replacement of the LIBOR benchmark interest rate could adversely affect our results
of operations and liquidity.
In July 2017, the Financial Conduct Authority (the regulatory authority over LIBOR) stated they will
plan for a phase out of regulatory oversight of LIBOR interest rate indices after 2021 to allow for an
orderly transition to an alternate reference rate. The Alternative Reference Rates Committee (ARRC)
has proposed that the Secured Overnight Financing Rate (SOFR) is the rate that represents best practice
as the alternative to LIBOR for promissory notes or other contracts that are currently indexed to
LIBOR. The ARRC has proposed a market transition plan to SOFR from LIBOR and organizations are
currently working on transition plans as it relates to derivatives and cash markets exposed to LIBOR.
The Company currently has $177.1 million of LIBOR indexed junior subordinated debentures and
$59.0 million of LIBOR indexed receivable-backed notes payable and lines of credit that mature after
2021. The Company is evaluating the potential impact that the eventual replacement of the LIBOR
benchmark interest rate could have on the Company’s results of operations and liquidity.
There are inherent uncertainties involved in estimates, judgments and assumptions used in the
preparation of financial statements in accordance with accounting principles generally accepted in
the United States of America (“GAAP”). Any changes in estimates, judgments and assumptions used
could have a material adverse effect on our financial condition and operating results.
The consolidated financial statements included in the periodic reports we file with the SEC, including
this Annual Report on Form 10-K, are prepared in accordance with GAAP. The preparation of financial
statements in accordance with GAAP involves making estimates, judgments and assumptions that affect
reported amounts of assets (including long-lived assets, goodwill and other intangible assets), liabilities
and related reserves, revenues, expenses and income. This includes estimates, judgments and
assumptions for assessing the amortization/accretion of purchase accounting fair value differences and
the impairment of long-lived assets, goodwill and other intangible assets pursuant to applicable
accounting guidance. We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are often not readily apparent from
other sources. However, estimates, judgments and assumptions can be highly uncertain and are subject
to change in the future, and our estimates, judgments and assumptions may prove to be incorrect and our
actual results may differ from these estimates under different assumptions or conditions. If any
estimates, judgments or assumptions change in the future, or our actual results differ from our estimates
or assumptions, we may be required to record additional expenses or impairment charges, which would
be recorded as a charge against our earnings and could have a material adverse impact on our financial
condition and operating results.
49
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The principal executive office of the Company is located at 401 East Las Olas Boulevard, Suite 800, Fort
Lauderdale, Florida, 33301, and is occupied under a lease with an expiration date of February 28, 2021.
The Company has the right to renew the terms of the lease for two additional terms of five years
commencing as of the expiration date.
Bluegreen’s principal executive office is located at 4960 Conference Way North, Suite 100, Boca Raton,
Florida 33431, and consists of approximately 120,838 square feet of leased space with an expiration date
of December 31, 2023. At December 31, 2018, Bluegreen also maintained sales offices at or near 26 of its
resorts as well as regional administrative offices in Orlando, Florida and Indianapolis, Indiana. For
information regarding Bluegreen’s resort properties that are part of the Bluegreen Vacation Club, please
see Item 1 Business —Products – Vacation Club Resorts.
IT’SUGAR’s principal executive office is located at 3155 Southwest 10 th Street, Deerfield Beach, Florida
and is occupied under a lease with an expiration date of October 31, 2019. IT’SUGAR leases
approximately 100 retail locations in over 25 states and Washington D.C., with lease expirations from
2019 to 2030. The retail leases typically have a 10 year original term.
Renin’s principal executive office is located at 110 Walker Drive, Brampton, Ontario and is occupied
under a lease with an expiration date of December 31, 2024. Renin leases its manufacturing facilities in
the United States and Canada which have lease expiration dates of December 31, 2019 and December 31,
2024, respectively.
The Company’s other operating businesses in the confectionery industry lease the following
manufacturing facilities in Utah and Florida and retail locations in Florida:
·
·
·
·
66,000 square foot manufacturing, storage and distribution facility located at 680 South 500
East, American Fork, Utah, with a lease expiration date of May 31, 2023;
80,000 square feet of office, manufacturing, warehousing and food storage areas located at 1815
Cypress Lake Drive, Orlando, Florida with a lease expiration date of September 30, 2019 with
five additional option terms of one year each commencing as of the expiration date;
Three retail locations in Palm Beach County, Florida with lease expiration dates ranging from
December 31, 2019 to November 30, 2026; and
Four retail locations in Broward County, Florida with lease expiration dates ranging from June
30, 2020 to June 30, 2022.
One of these businesses also owns a chocolate manufacturing facility located at 5190 Lake Worth Road,
Greenacres, Florida. The facility is comprised of a 4,000 square foot office and store front area and an
11,526 square foot manufacturing area.
BBX Capital has one lease associated with a restaurant in Palm Beach County acquired through
foreclosure with an expiration of 2030.
FFTRG leases the following retail locations to operate MOD Super-Fast Pizza restaurants in Florida:
Three retail restaurant locations in Broward County expiring in 2027 through 2028;
·
· One retail restaurant location in Dade County expiring in 2027;
· One retail restaurant location in Duval County expiring in 2027;
· One retail restaurant location in Orange County expiring in 2029;
· One retail restaurant location in Hillsborough County expiring in 2028; and
· One retail restaurant location in Alachua County expiring in 2028;
· One retail restaurant location in St. Lucie County expiring in 2029.
50
These retail leases typically have a 10 year term with the right to renew the term of the lease for two
additional terms of five years commencing as of the expiration date.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, BBX Capital and its subsidiaries are parties to lawsuits as plaintiff or
defendant involving its operations and activities. Although BBX Capital and its subsidiaries believe that
they have meritorious defenses in all current legal actions, the outcome of litigation and regulatory matters
and timing of ultimate resolution are inherently difficult to predict and uncertain. Set forth below are
descriptions of material pending legal proceedings.
In the ordinary course of business, Bluegreen becomes subject to claims or proceedings from time to time
relating to the purchase, sale, marketing, or financing of VOIs or its other business activities. Bluegreen is
also subject to certain matters relating to the Bluegreen Communities’ business, substantially all assets of
which were sold on May 4, 2012. Additionally, from time to time in the ordinary course of business,
Bluegreen becomes involved in disputes with existing and former employees, vendors, taxing jurisdictions
and various other parties, and Bluegreen receives individual consumer complaints, as well as complaints
received through regulatory and consumer agencies, including Offices of State Attorneys General.
Bluegreen takes these matters seriously and attempts to resolve any such issues as they arise.
BBX Capital Litigation
There were no material pending legal proceedings against BBX Capital or its subsidiaries excluding
Bluegreen as of December 31, 2018.
Bluegreen Litigation
Bluegreen “Cease and Desist” Letters
Commencing in 2015, it came to Bluegreen’s attention that Bluegreen’s collection efforts with respect to
its VOI notes receivable were being impacted by a then emerging, industry-wide trend involving the
receipt of “cease and desist” letters from exit firms and their attorneys purporting to represent certain VOI
owners. Following receipt of these letters, Bluegreen is unable to contact the owners unless allowed by
law. Bluegreen believes
these exit firms have encouraged such owners to become delinquent and
ultimately default on their obligations and that such actions and Bluegreen’s inability to contact the
owners are a primary contributor to the increase in our annual default rates. Bluegreen’s average annual
default rates on its VOI notes receivable have increased from 6.9% in 2015 to 8.4% in 2018. Bluegreen
also estimates that approximately 14.4% of the total delinquencies on its VOI notes receivable as of
December 31, 2018 related to VOI notes receivable subject to this issue. Bluegreen has in a number of
cases pursued, and Bluegreen may in the future pursue, legal action against the VOI owners, and in certain
circumstances against the exit firms. See the “Totten” cash files in December 2018 described below.
Whitney Paxton and Jeff Reeser, on behalf of themselves and all others similarly situated, v. Bluegreen
Vacations Unlimited, Inc., Phillip Hicks and Todd Smith, Case No. 3:16-CV-523-HSM-HBG, United
States District Court, Eastern District of Tennessee at Knoxville
On August 24, 2016, Whitney Paxton and Jeff Reeser filed a lawsuit against Bluegreen Vacations
Unlimited, Inc. (“BVU”), a wholly-owned subsidiary of Bluegreen, and certain of its employees
(collectively, the “Defendants”), seeking to establish a class action of former and current employees of
BVU and alleging violations of plaintiffs’ rights under the Fair Labor Standards Act of 1938 (the “FLSA”)
and breach of contract. The lawsuit also sought damages in the amount of the unpaid compensation owed
to the plaintiffs. The court granted preliminary approval of class action in September 2017 to conditionally
certify collective action and facilitate notice to potential class members be granted with respect to certain
employees and denied as to others. In February 2019, the parties agreed to settle the matter for an
immaterial amount. It is expected that the court will approve the settlement and the dismissal of the
lawsuit after the settlement documents are fully prepared and executed.
51
Stephen Potje, Tamela Potje, Sharon Davis, Beafus Davis, Matthew Baldwin, Tammy Baldwin, Arnor Lee,
Angela Lee, Gretchen Brown, Paul Brown, Jeremy Estrada, Emily Estrada, Michael Oliver, Carrie
Oliver, Russell Walters, Elaine Walters, and Mike Ericson v. Bluegreen Corporation, Case No.:
2018CA004782, 15th Judicial Circuit Court, Palm Beach County, Florida
On September 22, 2017, Stephen Potje, Tamela Potje, Sharon Davis, Beafus Davis, Matthew Baldwin,
Tammy Baldwin, Arnor Lee, Angela Lee, Gretchen Brown, Paul Brown, Jeremy Estrada, Emily Estrada,
Michael Oliver, Carrie Oliver, Russell Walters, Elaine Walters, and Mike Ericson, individually and on
behalf of all other similarly situated, filed a purported class action lawsuit against Bluegreen which asserts
claims for alleged violations of the Florida Deceptive and Unfair Trade Practices Act and the Florida False
Advertising Law. In the complaint, the plaintiffs alleged the making of false representations in connection
with the sales of VOIs, including representations regarding the ability to use points for stays or other
experiences with other vacation providers, the ability to cancel VOI purchases and receive a refund of the
purchase price and the ability to roll over unused points, and that annual maintenance fees would not
increase. The purported class action lawsuit was dismissed without prejudice after mediation. However,
on or about April 24, 2018, plaintiffs re-filed their individual claims in Palm Beach County Circuit Court.
Bluegreen intends to file a motion for summary judgment seeking dismissal of the suit.
Gordon Siu, individually and on behalf of all others similarly situated, v. Bluegreen Vacations Unlimited,
Inc., Choice Hotels International, Inc., et al., Case No. 3:18-CV-00022, U.S. District Court for the
Southern District of California
On January 4, 2018, Gordon Siu, individually and on behalf of all others similarly situated, filed a lawsuit
against BVU and Choice Hotels International, Inc. which asserted claims for alleged violations of
California law that relates to the recording of telephone conversations with consumers. Plaintiff alleged
that after staying at a Choice Hotels resort, defendants placed a telemarketing call to plaintiff to sell the
Choice Hotels customer loyalty program and a vacation package at a Choice hotel via the Bluegreen
Getaways vacation package program. Plaintiff alleged that he was not timely informed that the phone
conversation was being recorded and sought certification of a class comprised of other persons recorded
on calls without their consent within one year before the filing of the original complaint. After BVU
moved to dismiss the complaint, plaintiff amended his complaint to dismiss one of the two causes of
action in the original complaint on the basis that that particular statute only concerns land line phones.
Plaintiff and Choice agreed to a confidential settlement and Choice was dismissed from this lawsuit. On
November 22, 2018, the parties agreed to settle the matter for a nominal amount. In January 2019, the
settlement was approved, and the case is now closed.
Melissa S. Landon, Edward P. Landon, Shane Auxier and Mu Hpare, on behalf of themselves and all
others similarly situated v. Bluegreen Vacations Unlimited, Inc. and Bluegreen Vacations Corporation,
Case No. 18-cv-994, United States District Court, Eastern District of Wisconsin
On June 28, 2018, Melissa S. Landon, Edward P. Landon, Shane Auxier and Mu Hpare, individually and
on behalf of all others similarly situated, filed a purported class action lawsuit against the Company and
BVU asserting claims for alleged violations of the Wisconsin Timeshare Act, Wisconsin law prohibiting
illegal referral selling, and Wisconsin law prohibiting illegal attorney’s fee provisions. Plaintiffs
allegations include that Bluegreen failed to disclose the identity of the seller of real property at the
beginning of Bluegreen’s initial contact with the purchaser; that Bluegreen misrepresented who the seller
of the real property was; that Bluegreen misrepresented the buyer’s right to cancel; that Bluegreen
included an illegal attorney’s fee provision in the sales document(s); that Bluegreen offered an illegal
“today only” incentive to purchase; and that Bluegreen utilizes an illegal referral selling program to induce
the sale of VOIs. Plaintiffs seek certification of a class consisting of all persons who, in Wisconsin,
purchased from Bluegreen one or more VOIs within six years prior to the filing of this lawsuit. Plaintiffs
seek statutory damages, attorneys’ fees and injunctive relief. Bluegreen believes the lawsuit is without
merit and intends to vigorously defend the action. Bluegreen has filed a motion to dismiss the complaint
which is pending.
Bluegreen Vacations Unlimited, Inc. and Bluegreen Vacations Corporation v. Totten Franqui Davis &
Burk, LLC et al., Case No. 6:18-02188-RBD-DCI, United States District Court for the Middle District of
Florida, Orlando Division
On December 21, 2018, Bluegreen and BVU have filed a lawsuit against timeshare exit firm Totten
Franqui and certain other affiliated timeshare exit companies (“TPEs”). In the compliant, Bluegreen
argues that through various forms of deceptive advertising, as well as inappropriate direct contact with
VOI owners, the TPEs made false statements about Bluegreen and provided misleading information to the
VOI owners. Bluegreen also believes that the TPEs induce Bluegreen’s VOI owners to breach their
contracts and stop making payments to Bluegreen, which typically results in a default on the VOI note and
termination of the VOI. Thereafter, the TPE’s despite often times doing no more than encouraging non-
payment, claim that they “helped” the consumer “exit” their timeshare contract. Bluegreen believes that
all of this results in the consumer paying fees to the TPEs in exchange for illusory services. Bluegreen has
asserted
52
claims under the Lanham Act, as well as tortious interference with contractual relations, civil conspiracy to
commit tortious interference and other claims.
Shehan Wijesinha, individually and on behalf of all others similarly situated, v. Bluegreen Vacations
Unlimited, Inc., Case No. 19CV20073, United States District Court for the Southern District of Florida
On January 7, 2019, Shehan Wijesinha filed a purported class action lawsuit alleging violations of the
Telephone Consumer Protection Act. It is alleged that BVU called plaintiff’s cell phone for telemarketing
purposes using an automated dialing system, and that plaintiff did not give BVU his express written
consent to do so. Plaintiffs seek certification of a class comprised of other persons in the United States
who received similar calls from or on behalf of BVU without the person’s consent. Plaintiff seeks
monetary damages, attorneys’ fees and injunctive relief. Bluegreen believes the lawsuit is without merit
and intends to vigorously defend the action.
Debbie Adair et al. v. Bluegreen Vacations Unlimited, Inc. et al., Case No. 19-1-003, Chancery Court for
the Fourth Judicial District for Sevier County, Tennessee
On January 7, 2019, Debbie Adair and thirty-four other timeshare purchasers filed a lawsuit against BVU
and Bass Pro alleging violations of the Tennessee Consumer Protection Act, the Tennessee Time-share
Act, the California Time-Share Act, fraudulent misrepresentation for failure to make certain required
disclosures, fraudulent inducement for inducing purchasers to remain under contract past rescission,
unauthorized practice of law, civil conspiracy, unjust enrichment, and breach of contract. Plaintiffs seek
rescission of their contracts, money damages, including statutory treble damages, or in the alternative,
punitive damages in an amount not less than $0.5 million. Bluegreen believes the lawsuit is without merit
and intends to vigorously defend the action. Bluegreen has agreed to indemnify Bass Pro with respect to
the claims brought against Bluegreen in this proceeding.
53
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
The Company’s Class A Common Stock and Class B Common Stock have substantially identical terms,
except as follows:
· Under Florida law and our Articles of Incorporation and Bylaws, holders of our Class A
Common Stock and Class B Common Stock vote together as a single class on most matters
presented for a shareholder vote. On such matters, holders of our Class A Common Stock are
entitled to one vote for each share held, with all holders of Class A Common Stock possessing in
the aggregate 22% of the total voting power. Holders of Class B Common Stock have the
remaining 78% of the total voting power. If the number of shares of Class B Common Stock
outstanding decreases to 1,800,000 shares, the Class A Common Stock’s aggregate voting
power will increase to 40%, and the Class B Common Stock will have the remaining 60%. If the
number of shares of Class B Common Stock outstanding decreases to 1,400,000 shares, the
Class A Common Stock’s aggregate voting power will increase to 53%, and the Class B
Common Stock will have the remaining 47%. If the number of shares of Class B Common
Stock outstanding decreases to 500,000 shares, the fixed voting percentages will be eliminated,
and holders of our Class A Common Stock and holders of our Class B Common Stock will each
be entitled to one vote per share.
Each share of Class B Common Stock is convertible at the option of the holder thereof into one
share of Class A Common Stock.
·
In addition to any other approval required by Florida law, the voting structure described in the first bullet
point above may not be amended without the approval of holders of a majority of the outstanding shares
of our Class B Common Stock, voting as a separate class. Holders of our Class B Common Stock also
have certain other special voting rights with respect to matters affecting our capital structure and the Class
B Common Stock.
Market Information
On July 13, 2017, the Company’s Class A Common Stock began trading on the New York Stock
Exchange (“NYSE”) under the ticker symbol “BBX.” On February 3, 2017, the Company’s Class B
Common Stock began trading on the OTCQX Best Market under the ticker symbol “BBXTB.”
From February 3, 2017 through July 12, 2017, the Company’s Class A Common Stock was quoted on the
OTCQX Best Market under the ticker symbol “BBXT.” Prior to February 3, 2017, our Class A and Class
B Common Stock were quoted on the OTCQB market tier of the OTC Markets (“OTCQB”) under the
ticker symbol names “BFCF” and “BFCFB,” respectively.
O n March 1, 2019, there were approximately 353 record holders of our Class A Common Stock and
approximately 130 record holders of our Class B Common Stock.
Issuer Purchases of Equity Securities
On June 13, 2017, our board of directors approved a share repurchase program which authorizes the
repurchase of up to 5,000,000 shares of the Company’s Class A Common Stock and Class B Common
Stock at an aggregate cost of up to $35 million. The June 2017 repurchase program authorizes
management, at its discretion, to repurchase shares from time to time subject to market conditions and
other factors.
54
As of December 31, 2018, 1,521,593 shares of the Company’s Class A Common Stock have been
repurchased for approximately $10.0 million under the June 2017 share repurchase program, of which
321,593 shares were repurchased in November 2017 for an aggregate purchase price $2.4 million and
1,200,000 shares were repurchased in November and December 2018 for an aggregate purchase price $7.6
million.
From September 30, 2018 through October 5, 2018, a total of 789,729 shares of the Company’s Class A
Common Stock and 505,148 shares of the Company’s Class B Common Stock previously owned by
certain executive officers were surrendered to the Company by the executive officers as payment in
satisfaction of tax withholding obligations relating to the vesting of certain previously reported restricted
stock awards and units granted to the executive officers. Further information regarding these repurchases
during the quarter ended December 31, 2018, is set forth in the table below:
Period
(a) Total
Number of
Shares
Purchased
(b) Average Price
Paid per Share
(c) Total
Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
(d) Maximum Number
(or Approximate Dollar
Value) of Shares that
May Yet Be Purchased
Under the Plans or
Programs
October 1 - October
31, 2018 (1)
November 1 -
November 30, 2018 (2)
December 1 –
December 31, 2018 (2)
1,294,877
$7.30
-
837,288
$6.41
837,288
362,712
$5.97
362,712
Total
2,494,877
$6.81
1,200,000
4,678,407
shares (or
approximately
$32,567,000)
3,841,119
shares (or
approximately
$27,197,000)
3,478,407
shares (or
approximately
$25,030,000)
3,478,407
shares (or
approximately
$25,030,000)
(1) These shares were surrendered to the Company by certain executive officers in satisfaction of tax withholding
obligations and were not repurchased under a share repurchase program.
(2) The shares repurchased in November 2018 and December 2018 were made under the June 2017 share repurchase
program.
In April 2018, BBX Capital completed a cash tender offer pursuant to which it purchased and retired
6,486,486 shares of its Class A Common Stock at a purchase price of $9.25 per share for an aggregate
purchase price of approximately $60.1 million, inclusive of acquisition costs.
55
Equity Compensation Plan Information
The following table lists awards previously granted and outstanding, and securities authorized for
issuance, under the Company’s equity compensation plans at December 31, 2018:
Number of Securities
to be Issued
Upon Exercise
of Outstanding
Options,
Warrants
or Rights
Weighted-
Average
Exercise
Price of
Outstanding
Options,
Warrants
or Rights
Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans
(Excluding
Outstanding
Options,
Warrants,
or Rights)(1)
-
-
-
-
-
-
2,241,751
-
2,241,751
Plan category
Equity compensation plans
approved by security
holders
Equity compensation plans
not approved by security
holders
Total
(1)
In January 2019, the Company’s Compensation Committee of the board of directors granted 1,923,975 restricted
shares of the Company’s Class B Common Stock to the Company’s executive officers under the BBX Capital
Corporation 2014 Incentive Plan reducing the number of securities remaining available for future issuance under
equity compensation plans to 317,776.
BBX Capital assumed BCC’s equity compensation plans upon consummation of the acquisition of all the
outstanding shares of BCC not owned by the Company pursuant to a merger agreement on December 15,
2016. Pursuant to the merger agreement for this transaction, awards outstanding under the BCC Equity
Compensation Plan at December 15, 2016 continue to be outstanding and governed by the BBX Capital
2005 Restricted Stock and Option Plan, and the BBX Capital 2014 Stock Incentive Plan, except that such
awards were converted into awards that are eligible to be settled in shares of the Company’s Class A
Common Stock resulting in the issuance of 5,090,354 restricted shares of the Company’s Class A
Common Stock and non-qualifying stock options to acquire 35,716 shares of the Company’s Class A
Common Stock at December 15, 2016. No further awards have been nor will be granted under the BCC
equity compensation plans.
Shareholder Return Performance Graph
Set forth below is a graph comparing the cumulative total returns (assuming reinvestment of dividends) for
the Company’s Class A Common Stock, the Standard and Poor’s 500 Stock Index and Standard and
Poor’s Small-Cap Stock Index and assumes $100 was invested on December 31, 2013.
$
BBX Capital Corporation
Standard and Poor's Small-Cap
Stock Index
Standard and Poor's 500 Stock
Index
12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018
198.27
100.00
275.78
117.30
109.00
168.86
100.00
104.52
100.90
126.01
140.77
127.04
100.00
111.39
110.58
121.13
144.65
135.63
56
The Company is not able to identify a group of peer companies or industry or line of business index which
it believes is comparable to the Company and its current activities. Accordingly, the Company selected
the Standard and Poor’s Small-Cap Stock Index based on the Company’s market capitalization.
The performance graph should not be deemed “filed” for purposes of Section 18 of the Exchange Act, or
incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act,
except as expressly set forth by specific reference in such filing.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical consolidated financial data as of and for the periods
indicated below. The selected historical consolidated statements of operations for fiscal years 2018, 2017
and 2016 and the selected consolidated statements of financial conditions as of December 31, 2018 and
2017 are derived from our audited consolidated financial statements included in Item 8 of this report. The
selected historical consolidated statements of operations for fiscal years 2015 and 2014 and the selected
consolidated statements of financial condition as of December 31, 2016, 2015 and 2014 set forth below
are derived from our previously filed audited consolidated financial statements not included in this report
and have been updated to conform to the current presentation. In addition, the selected historical
consolidated statements of operations for fiscal years 2017 and 2016 and the selected consolidated
statements of financial conditions as of December 31, 2017 and 2016 have been updated to reflect the
impact of the adoption of ASU 2014-09 and ASU 2017-05, while the selected historical consolidated
statements of operations for fiscal years 2015 and 2014 and the selected consolidated statements of
financial conditions as of December 31, 2015 and 2014 have not been updated to reflect the adoption of
these standards. As a result, the financial data presented for such periods is not comparable with respect to
the application of these standards. See Note 2 – Summary of Significant Accounting Policies under Item 8
included in this report for additional information concerning the adoption of these accounting standards.
57
.
For the Years Ended December 31,
2016
*As
Adjusted
(Dollars in thousands, except for per share data)
2017
*As
Adjusted
2015
2018
2014
Statements of Operations Data:
Total revenues
Total cost and expenses
Equity in earnings (loss) from
unconsolidated real estate joint ventures
Foreign exchange gain (loss)
Income before income taxes
(Provision) benefit for income taxes (1)
Net income
Less: Net income attributable to
noncontrolling interests
Net income attributable to shareholders
$ 947,593
874,423
869,570
789,317
822,153
755,564
744,257
676,971
676,966
611,300
14,194
68
87,432
(31,639)
55,793
12,541
(193)
92,601
9,702
102,303
12,178
219
78,986
(36,390)
42,596
(1,565)
(1,038)
64,683
76,596
141,279
(573)
(715)
64,378
(37,073)
27,305
20,691
35,102
18,378
83,925
13,166
29,430
18,805
122,474
13,455
13,850
Common Share Data (2)
Basic earnings per share of common stock: $
Diluted earnings per share of common
stock:
$
0.37
0.36
0.85
0.81
0.34
1.41
0.34
1.40
0.16
0.16
Basic weighted average number of
common shares outstanding
Diluted weighted average number of
common shares outstanding
95,298
98,745
86,902
87,022
84,502
97,860
103,916
87,492
87,208
84,761
Cash dividends declared per common
share (3):
Book value per share (4):
Fully Diluted book value per share (5):
$
$
0.040
0.030
0.015
-
-
5.90
5.70
5.88
5.63
4.76
4.32
4.46
4.21
3.03
2.84
* See Note 2 – Summary of Significant Accounting Policies under Item 8 included in this report for a summary of adjustments.
58
As of December 31,
2016
2017
2018
*As Adjusted *As Adjusted
2015
2014
(Dollars in thousands)
Statements of Financial Condition
Data:
Notes receivable
VOI Inventory
Total assets
Borrowings (6)
Shareholders' equity
Noncontrolling interests
Total equity
$ 439,167
334,149
1,705,020
796,243
549,620
87,988
637,608
426,858
281,291
1,605,681
700,646
585,468
82,054
667,522
425,800
238,534
424,267
415,598
194,713
220,211
1,437,290 1,340,960 1,402,453
661,583
675,391
252,906
376,826
193,800
106,080
446,706
482,906
701,146
466,158
41,609
507,767
* See Note 2 – Summary of Significant Accounting Policies under Item 8 included in this report for a summary of adjustments.
(1) The benefit for income taxes for the year ended December 31, 2017 was the result of the reduction in the
Company’s net deferred income tax liability associated with the enactment of the Tax Cuts and Jobs Act which
permanently lowered the corporate income tax rate from 35% to 21%. The benefit for income taxes for the year
ended December 31, 2015 was the result of a $127.8 million reversal of a portion of the Company’s deferred tax
asset valuation allowance on May 1, 2015 when the Company became eligible to file a consolidated group federal
income tax return with BCC, Woodbridge, and Bluegreen as a result of the Company’s purchase of additional
shares of BCC’s Class A Common Stock on April 30, 2015 and related increase in its ownership in BCC to 81%.
(2) While the Company has two classes of common stock outstanding, the two-class method is not presented because
the Company’s capital structure does not provide for different dividend rates or other preferences, other than voting
rights, between the two classes.
(3) During the year ended December 31, 2018 and 2017, the Company declared quarterly cash dividends of $0.01 and
$0.0075 per share, respectively, on its Class A and Class B Common Stock. During the year ended December 31,
2016, the Company declared quarterly cash dividends of $0.005 per share on its Class A and Class B Common
Stock beginning in June 2016.
(4) The numerator of book value per share for all periods is shareholders’ equity. The denominator of book value per
share for all periods was computed by adding the number of Class A and Class B common shares outstanding at
year-end.
(5) The numerator of fully diluted book value per share for all periods is shareholders’ equity. The denominator of
fully diluted book value per share for all periods was computed by adding the number of Class A and Class B
shares outstanding at year-end and the number of unvested restricted stock awards and exercisable stock options
outstanding (without assuming any buybacks of such potentially dilutive shares under the treasury method).
(6) Borrowings consist of notes payable and other borrowings, receivable-backed notes payable and junior
subordinated debentures.
59
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
BBX Capital Corporation (referred to together with its subsidiaries as the “Company,” “we,” “us,” or
“our,” and without its subsidiaries as “BBX Capital”) is a Florida-based diversified holding company
whose principal
investments are Bluegreen Vacations Corporation (“Bluegreen Vacations” or
“Bluegreen”), BBX Capital Real Estate LLC (“BBX Capital Real Estate” or “BBXRE”), Renin Holdings,
LLC (“Renin”), and IT’SUGAR, LLC (“IT’SUGAR”). In addition to its principal investments, the
Company has other investments in various operating businesses, including restaurant locations throughout
Florida and companies in the confectionery industry.
As of December 31, 2018, the Company had total consolidated assets of approximately $1.7 billion and
shareholders’ equity of approximately $549.6 million. Net income attributable to shareholders for the
years ended December 31, 2018, 2017 and 2016 was approximately $35.1 million, $83.9 million and
$29.4 million, respectively.
The Company’s consolidated financial statements for fiscal years 2017 and 2016 were adjusted for the
adoption of the new accounting standards governing revenue recognition and the sale of nonfinancial
assets under the full retrospective method, and accordingly, the Company’s results of operations for such
periods as discussed below have been restated to conform to the new standards. See Note 2 – Summary of
Significant Accounting Policies under Item 8 included in this report for additional information concerning
the adoption of these accounting standards.
Summary of Consolidated Results of Operations
Consolidated Results
The following summarizes key financial highlights for the year ended December 31, 2018 compared to
the same 2017 period:
Total consolidated revenues were $947.6 million, a 9.0% increase compared to 2017.
Income before income taxes was $87.4 million, a 5.6% decrease compared to 2017.
·
·
· Net income attributable to common shareholders was $35.1 million, a 58.2% decrease compared
to 2017.
· Diluted earnings per share was $0.36 per diluted share, a $0.45 per share decrease compared to
2017.
The Company’s consolidated results for 2018 as compared to the same 2017 period were significantly
impacted by the following events:
·
·
In June 2017, the Company acquired IT’SUGAR, a specialty candy retailer with approximately
100 retail locations in over 25 states and Washington, D .C., for a purchase price of $58.4
million, net of cash acquired. During 2018, IT’SUGAR contributed revenues of $79.8 million
and a loss before income taxes of $2.4 million.
In December 2017, the enactment of the Tax Cuts and Jobs Act (the “Tax Reform Act”) , which
reduced the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018, resulted
in a $45.3 million reduction in the Company’s deferred tax liability in 2017.
· During 2018, BBX Capital Real Estate closed on the sale of 251 developed lots to homebuilders
as part of Phase I of its development of the Beacon Lake Community, which resulted in pre-tax
profits of $7.7 million in 2018. In addition, BBX Capital Real Estate monetized various
investments within its portfolio, including the Addison on Millenia, Altis at Shingle Creek, and
a student housing facility.
· During the fourth quarter of 2017, Bluegreen completed an initial public offering (“IPO”) of its
common stock, which resulted in a decrease in the Company’s ownership in Bluegreen’s
common stock from 100% to 90%. As a result, $8.6 million and $5.6 million of Bluegreen’s net
income was allocated to the noncontrolling interests during 2018 and 2017, respectively.
Segment Results
BBX Capital currently reports the results of its business activities through the following reportable
segments: Bluegreen, BBX Capital Real Estate, Renin and IT’SUGAR.
60
Information regarding income before income taxes by reportable segment for the years ended December
31, 2018, 2017, and 2016 is set forth in the table below (in thousands):
Bluegreen
BBX Capital Real Estate
Renin
IT'SUGAR
Other
Reconciling items and eliminations
Income before income taxes
(Provision) benefit for income taxes
Net income
Less: Net income attributable to noncontrolling interests
Net income attributable to shareholders
$
$
For the Years Ended December 31,
2016
2017
2018
129,624
136,998
128,893
30,993
16,084
30,214
857
2,180
2,461
-
2,598
(2,384)
(15,476)
(22,052)
(16,780)
(67,012)
(43,207)
(54,972)
78,986
92,601
87,432
(36,390)
9,702
(31,639)
42,596
102,303
55,793
13,166
18,378
20,691
29,430
83,925
35,102
61
Bluegreen Reportable Segment
Executive Overview
Bluegreen is a leading vacation ownership company that markets and sells VOIs and manages resorts in
popular leisure and urban destinations. Bluegreen’s resort network includes 45 Club Resorts (resorts in
which owners in its Vacation Club have the right to use most of the units in connection with their VOI
ownership) and 24 Club Associate Resorts (resorts in which owners in its Vacation Club have the right to
use a limited number of units in connection with their VOI ownership). Bluegreen’s Club Resorts and
Club Associate Resorts are primarily located in popular, high-volume, “drive-to” vacation locations,
including Orlando, Las Vegas, Myrtle Beach and Charleston, among others. Through its points-based
system, the approximately 216,000 owners in its Vacation Club have the flexibility to stay at units
available at any of its resorts and have access to over 11,000 other hotels and resorts through partnerships
and exchange networks. Bluegreen has a robust sales and marketing platform supported by exclusive
marketing relationships with nationally-recognized consumer brands, such as Bass Pro and Choice Hotels.
These marketing relationships drive sales within its core demographic.
VOI Sales and Financing
Bluegreen’s primary business is the marketing and selling of deeded VOIs, developed either by Bluegreen
or third parties. Customers who purchase these VOIs receive an annual allotment of points, which can be
redeemed for stays at one of its resorts or at 11,000 other hotels and resorts available through partnerships
and exchange networks. Historically, VOI companies have funded the majority of the capital investment
in connection with resort development with internal resources and acquisition and development funding.
In 2009, Bluegreen began selling VOIs on behalf of third-party developers and has successfully
diversified from a business focused on capital-intensive resort development to a flexible model with a
balanced mix of developed and capital-light inventory. Bluegreen relationships with third-party
developers enable it to generate fees from the sales and marketing of their VOIs without incurring the
significant upfront capital investment generally associated with resort acquisition or development. While
sales of acquired or developed inventory typically result in greater Adjusted EBITDA contribution, fee-
based sales generally require no initial investment or development financing risk. Both acquired or
developed VOI sales and fee-based VOI sales drive recurring, incremental and long-term fee streams by
adding owners to its Vacation Club and new resort management contracts. In conjunction with its VOI
sales, Bluegreen also generates interest income by providing financing to qualified purchasers.
Collateralized by the underlying VOIs, Bluegreen’s loans are generally structured as 10-year, fully-
amortizing loans with a fixed interest rate ranging from approximately 13% to approximately 17% per
annum. As of December 31, 2018, the weighted-average interest rate on Bluegreen’s VOI notes receivable
was 15.1%. In addition, Bluegreen earns fees for various other services including title and escrow services
for fees in connection with the closing of VOI sales, and generates fees for mortgage servicing.
Resort Operations and Club Management
Bluegreen enters into management agreements with the Home Owner Associations (“HOAs”) that
maintain most of the resorts and earn fees for providing management services to those HOAs and
Bluegreen’s approximately 216,000 Vacation Club owners. These resort management services include
oversight of housekeeping services, maintenance, and certain accounting and administration functions.
Bluegreen’s management contracts yield highly predictable, recurring cash flows and do not have the
traditional risks associated with hotel management contracts that are linked to daily rate or occupancy.
Bluegreen’s management contracts are typically structured as “cost-plus,” with an initial term of three
years and automatic one-year renewals. In connection with the management services provided to the
Vacation Club, Bluegreen manages the reservation system and provides owner, billing and collection
services. In addition to resort and club management services, Bluegreen earns fees for various other
services that produce recurring, predictable and long term-revenue including construction management
services to third-party developers.
Principal Components Affecting Bluegreen’s Results of Operations
Principal Components of Revenues
Fee-Based Sales. Represent sales of third-party VOIs where Bluegreen is paid a commission.
JIT Sales. Represent sales of VOIs acquired from third parties in close proximity to when Bluegreen
intends to sell such VOIs.
62
Secondary Market Sales. Represent sales of VOIs acquired from HOAs or other owners, typically in
connection with maintenance fee defaults. This inventory is generally purchased at a greater discount to
retail price compared to developed VOI sales and VOIs purchased by Bluegreen for sale as part of
Bluegreen’s JIT sales activities.
Developed VOI Sales. Represent sales of VOIs in resorts that Bluegreen has developed or acquired (not
including inventory acquired through JIT and secondary market arrangements).
Financing Revenue. Represents interest income from the financing of VOI sales, which includes interest
income and loan servicing fees. Bluegreen also earns fees from providing mortgage servicing to certain
third-party developers relating to VOIs sold by them.
Other Fee-Based Services. Represents resort operation and club management recurring fees from
managing the Vacation Club and transaction fees for certain resort amenities and certain member
exchanges. Bluegreen also earns recurring management fees under its management agreements with HOAs
for day-to-day management services, including oversight of housekeeping services, maintenance, and
certain accounting and administrative functions.
Bluegreen also includes in other fee-based services revenue earned from various other services that
produce recurring, predictable and long-term revenue, such as title services.
Principal Components of Expenses
Cost of VOIs Sold. Represents the cost at which Bluegreen’s owned VOIs sold during the period were
relieved from inventory. In addition to inventory from Bluegreen’s VOI business, Bluegreen’s owned
VOIs also include those that were acquired by Bluegreen under JIT and secondary market arrangements.
Compared to the cost of Bluegreen’s developed VOI inventory, VOIs acquired in connection with JIT
arrangements typically have a relatively higher associated cost of sales as a percentage of sales while those
acquired in connection with secondary market arrangements typically have a lower cost of sales as a
percentage of sales as secondary market inventory is generally obtained from HOAs at a significant
discount to retail price. Cost of VOIs sold as a percentage of sales of VOIs varies between periods based
on the relative costs of the specific VOIs sold in each period and the size of the point packages of the
VOIs sold (primarily due to offered volume discounts, and taking into account consideration of
cumulative sales to existing owners). Additionally, the effect of changes in estimates under the relative
sales value method, including estimates of projected sales, future defaults, upgrades and incremental
revenue from the resale of repossessed VOI inventory, are reflected on a retrospective basis in the period
the change occurs. Cost of sales will typically be favorably impacted in periods where a significant
amount of secondary market VOI inventory is acquired and the resulting change in estimate is recognized.
While Bluegreen believes that there is additional inventory that can be obtained through the secondary
market at favorable prices in the future, there can be no assurance that such inventory will be available as
expected.
Net Carrying Cost of VOI Inventory. Represents the maintenance fees and developer subsidies for unsold
VOI inventory paid or accrued to the HOAs that maintain the resorts. Bluegreen attempts to offset this
expense, to the extent possible, by generating revenue from renting VOIs and through utilizing them in
sampler programs. Bluegreen nets such revenue from this expense item.
Selling and Marketing Expense. Represents costs incurred to sell and market VOIs, including costs
relating to marketing and incentive programs, tours, and related wages and sales commissions. Revenues
from vacation package sales are netted against selling and marketing expenses.
Financing Expense. Represents financing interest expense related to Bluegreen’s receivable-backed debt
and amortization of the related debt issuance costs and other expenses incurred in providing financing and
servicing loans, including administrative costs associated with mortgage servicing activities for loans
owned by Bluegreen and the loans of certain third-party developers. Mortgage servicing activities include,
among other things, payment processing, reporting and collection services.
Cost of Other Fee-Based Services. Represents costs incurred to manage resorts and the Vacation Club,
including payroll and related costs and other administrative costs to the extent not reimbursed by the
Vacation Club or HOAs. Bluegreen also includes in costs of other fee-based services expense from
various other services that produce recurring, predictable and long-term revenue, such as cost associated
with title services.
General and Administrative Expense. Primarily represents compensation expense for personnel
supporting Bluegreen’s business and operations, professional fees (including consulting, audit and legal
fees), and administrative and related expenses.
63
Key Business and Financial Metrics and Terms Used by Management
Sales of VOIs. Represent sales of Bluegreen’s owned VOIs, including developed VOIs, and those
acquired through JIT and secondary market arrangements, reduced by equity trade allowances and an
estimate of uncollectible VOI notes receivable. In addition to the factors impacting system-wide sales of
VOIs (described below), sales of VOIs are impacted by the proportion of system-wide sales of VOIs, net
sold on behalf of third-parties on a commission basis, which are not included in sales of VOIs.
System-wide Sales of VOIs. Represents all sales of VOIs, whether owned by Bluegreen or a third party
immediately prior to the sale. Sales of VOIs owned by third parties are transacted as sales of VOIs in
Bluegreen’s Vacation Club through the same selling and marketing process used to sell Bluegreen’s VOI
inventory. Bluegreen considers system-wide sales of VOIs, net to be an important operating measure
because it reflects all sales of VOIs by Bluegreen’s sales and marketing operations without regard to
whether Bluegreen or a third party owned such VOI inventory at the time of sale. System-wide sales of
VOIs is not a recognized term under GAAP and should not be considered as an alternative to sales of
VOIs or any other measure of financial performance derived in accordance with GAAP or to any other
method of analyzing our results as reported under GAAP.
Guest Tours. Represents the number of sales presentations given at Bluegreen’s sales centers during the
period.
Sale to Tour Conversion Ratio. Represents the rate at which guest tours are converted to sales of VOIs
and is calculated by dividing guest tours by number of VOI sales transactions.
Average Sales Volume Per Guest (“VPG”). Represents the sales attributable to tours at Bluegreen’s sales
locations and is calculated by dividing VOI sales by guest tours. Bluegreen considers VPG to be an
important operating measure because it measures the effectiveness of Bluegreen’s sales process,
combining the average transaction price with the sale-to-tour conversion ratio.
EBITDA. Bluegreen defines EBITDA as earnings, or net income, before taking into account interest
income (excluding interest earned on VOI notes receivable), interest expense (excluding interest expense
incurred on debt secured by Bluegreen’s VOI notes receivable), income and franchise taxes, and
depreciation and amortization. For the purposes of the EBITDA calculation, no adjustments were made
for interest income earned on Bluegreen’s VOI notes receivable or the interest expense incurred on debt
that is secured by such notes receivable because they are both considered to be part of the operations of
Bluegreen’s business.
Adjusted EBITDA. Bluegreen defines Adjusted EBITDA as EBITDA adjusted for amounts attributable to
the non-controlling interest in Bluegreen/Big Cedar Vacations (in which Bluegreen owns a 51% interest)
and items that Bluegreen believes are not representative of ongoing operating results.
Bluegreen considers EBITDA and Adjusted EBITDA to be an indicator of its operating performance, and
it is used by Bluegreen to measure its ability to service debt, fund capital expenditures and expand its
business. EBITDA is also used by companies, lenders, investors and others because it excludes certain
items that can vary widely across different industries or among companies within the same industry. For
example, interest expense can be dependent on a company’s capital structure, debt levels and credit
ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies.
The tax positions of companies can also vary because of their differing abilities to take advantage of tax
benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax
rates and provision for income taxes can vary considerably among companies. EBITDA also excludes
depreciation and amortization because companies utilize productive assets of different ages and use
different methods of both acquiring and depreciating productive assets. These differences can result in
considerable variability in the relative costs of productive assets and the depreciation and amortization
expense among companies.
Bluegreen considers Adjusted EBITDA to be a useful supplemental measure of Bluegreen’s operating
performance that facilitates the comparability of historical financial periods.
EBITDA and Adjusted EBITDA are not recognized terms under GAAP and should not be considered as
an alternative to net income (loss) or any other measure of financial performance or liquidity, including
cash flow, derived in accordance with GAAP, or to any other method or analyzing Bluegreen’s results as
reported under GAAP. The limitations of using EBITDA or Adjusted EBITDA as an analytical tool
include, without limitation, that EBITDA or Adjusted EBITDA does not reflect (i) changes in, or cash
requirements for, working capital needs; (ii) interest expense, or the cash requirements necessary to
service interest or principal payments on indebtedness (other than as noted above); (iii) tax expense or the
cash requirements to pay taxes; (iv) historical cash expenditures or future requirements for capital
expenditures or contractual commitments; or (v) the effect on earnings or changes resulting from matters
that Bluegreen considers not to be indicative of its future operations or performance. Further, although
depreciation and amortization
64
are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the
future, and EBITDA or Adjusted EBITDA does not reflect any cash requirements for such replacements.
In addition, Bluegreen’s definition of Adjusted EBITDA may not be comparable to definitions of Adjusted
EBITDA or other similarly titled measures used by other companies.
Results of Operations
For the years ended December 31, 2018, 2017, and 2016
Information regarding the results of operations for Bluegreen for the years ended December 31, 2018,
2017 and 2016 are set forth below (dollars in thousands):
2018
For the Years Ended December 31,
2017
2016
% of
System-
wide sales
of VOIs,
net(5)
46%
37%
51%
9%
-43%
100%
-51%
49%
-17%
41%
-9%
91%
Amount
$ 299,104
182,108
330,854
45,982
(238,780)
619,268
(330,854)
288,414
(46,397)
242,017
(17,679)
224,338
% of
System-
wide sales
of VOIs,
net(5)
48%
30%
54%
7%
-39%
100%
-53%
47%
-16%
39%
-7%
93%
Amount
$ 403,683
164,991
294,822
39,626
(288,792)
614,330
(294,822)
319,508
(45,635)
273,873
(28,829)
245,044
% of
System-
wide sales
of VOIs,
net(5)
66%
27%
48%
6%
-47%
100%
-48%
52%
-14%
45%
-11%
89%
Amount
$ 287,292
232,562
318,540
56,450
(270,774)
624,070
(318,540)
305,530
(51,305)
254,225
(23,813)
230,412
216,422
68%
229,389
69%
201,829
68%
51,205
180,558
(124,144)
(11,358)
(307,614)
(107,789)
127,692
1,201
8%
29%
-20%
-2%
-49%
-17%
20%
56,899
164,458
(112,979)
(4,220)
(319,664)
(101,535)
136,686
312
9%
27%
-18%
-1%
-52%
-16%
22%
58,657
153,005
(103,859)
(6,847)
(315,611)
(104,319)
127,899
1,724
10%
25%
-17%
-1%
-51%
-17%
21%
(28,541)
$ 100,352
2,345
$ 139,343
(41,620)
88,003
$
28,541
128,893
12,392
199
(2,345)
136,998
9,632
178
41,620
129,623
9,536
186
15,195
12,168
12,505
(6,044)
150,635
3,650
-
3
-
(6,874)
152,102
5,836
4,781
46
-
(8,167)
143,683
-
-
(1,423)
10,000
(12,468)
$ 141,820
(12,485)
$ 150,280
(10,006)
$ 142,254
Developed Sales (1)
Secondary Market sales
Fee-Based sales
JIT sales
Less: Equity trade allowances (6)
System-wide sales of VOIs
Less: Fee-Based sales
Gross sales of VOIs
Provision for credit losses (2)
Sales of VOIs
Cost of VOIs sold (3)
Gross profit (3)
Fee-based sales commission
revenue (4)
Financing revenue, net of
financing expense
Other fee-based services revenue
Cost of other fee-based services
Net carrying cost of VOI
inventory
Selling and marketing expenses
General and administrative
expenses
Operating profit
Other income
Benefit (provision) for income
taxes
Net income
Adjustments for EBITDA:
Benefit (provision) for income
taxes
Income before taxes
Depreciation
Franchise taxes
Interest expense (other than
interest
incurred on debt that is secured
by
VOI notes receivable)
Interest income (other than
interest
earned on VOI notes receivable)
EBITDA
Adjustments for Adjusted
EBITDA:
Corporate realignment costs
One-time payment to Bass Pro
Loss(gain) on assets held for sale
One-time special bonus
EBITDA attributable to
noncontrolling interest in
Bluegreen/Big Cedar Vacations
Adjusted EBITDA
65
(1) Developed VOI sales represent sales of VOIs acquired or developed by Bluegreen under its developed VOI
business. Developed VOI sales do not include Secondary Market sales, Fee-Based sales or JIT sales.
(2) Percentages for provision for credit losses are calculated as a percentage of gross sales of VOIs, which excludes
Fee-Based sales (and not of system-wide sales of VOIs, net).
(3) Percentages for costs of VOIs sold and gross profit are calculated as a percentage of sales of VOIs (and not based
on system-wide sales of VOIs).
(4) Percentages for Fee-Based sales commission revenue are calculated as a percentage of Fee-Based sales (and not
based on system-wide sales of VOIs, net).
(5) Represents the applicable line item, calculated as a percentage of system-wide sales of VOIs, net, unless otherwise
indicated in the above footnotes.
(6) Equity trade allowances are amounts granted to customers upon trading in their existing VOIs in connection with
the purchase of additional VOIs.
Bluegreen - For the year ended December 31, 2018 compared to the year ended December 31, 2017
Sales of VOIs. Sales of VOIs were $254.2 million and $242.0 million during the years ended December
31, 2018 and 2017, respectively. Sales of VOI s are impacted by the factors described below in system-
wide sales of VOIs. Gross sales of VOIs were reduced by $51.3 million and $46.4 million during the
years ended December 31, 2018 and 2017, respectively, for the provision for credit losses. The provision
for credit losses varies based on the amount of financed, non-fee based sales during the period and
changes in estimates of future notes receivable performance for existing loans. Bluegreen’s provision for
credit losses as a percentage of gross sales of VOIs was 17% and 16% during the years ended December
31, 2018 and 2017, respectively. The percentage of VOI sales which were realized in cash within 30 days
from sale decreased to 42% during the year ended December 31, 2018 from 43% during the year ended
December 31, 2017. The increase in the provision for credit losses is primarily due to the lower cash sales
and the impact of additional reserves on prior years’ originations offset by the impact of an increase in the
weighted-average FICO scores of borrowers with respect to 2018 originations compared to prior years. In
recent years Bluegreen has experienced an increase in expected default rates. Bluegreen believes that a
significant portion of the default increase in recent years is due in part to the receipt of letters from
attorneys who purport to represent certain VOI owners and who have encouraged such owners to become
delinquent and ultimately default on their obligations. See “Item 3. Legal Proceedings” for additional
information regarding such letters and actions taken by Bluegreen in connection therewith. While
Bluegreen believes its notes receivable are adequately reserved at this time, actual defaults may differ
from the estimates and the reserve may not be adequate. In addition to the factors described below
impacting system-wide sales of VOIs, sales of VOIs are impacted by the proportion of system-wide sales
of VOIs sold on behalf of third parties on a commission basis, which are not included in sales of VOIs.
The average annual default rates and delinquency rates (more than 30 days past due) on Bluegreen’s VOI
notes receivable were as follows:
Average annual default rates
Delinquency rates
For the Years Ended December 31,
2018
8.41%
2017
8.50%
As of December 31,
2018
2.91%
2017
3.04%
System-wide sales of VOIs. System-wide sales of VOIs were $624.1 million and $619.3 million during
the years ended December 31, 2018 and 2017, respectively. This growth reflected an increase in the
average volume per guest (“VPG”), partially offset by a decrease in the number of guest tours. During
2017, Bluegreen began screening the credit qualifications of potential marketing guests, resulting in a
higher average transaction price and higher VPG, but a lower number of tours. Bluegreen believes the
screening of marketing guests has resulted in improved efficiencies in its sales process, however there is
no assurance that efficiencies will continue to be achieved.
Included in system-wide sales are Fee-Based Sales, JIT Sales, Secondary Market Sales and developed VOI
sales. Sales by category are tracked based on which deeded VOI is conveyed in each transaction.
Bluegreen manages which VOIs are sold based on several factors, including the needs of fee-based clients,
Bluegreen’s debt service requirements and default resale requirements under term securitization and
similar transactions. These factors contribute to fluctuations in the amount of sales by category from
period to period.
66
The following table sets forth certain information for system-wide sales of VOIs for 2018 and 2017
(dollars in thousands):
Number of sales offices at period-end
Number of active sales arrangements with
third-party clients at period-end
Total number of VOI sales transactions
Average sales price per transaction
Number of total guest tours
Sale-to-tour conversion ratio – total
marketing guests
Number of new guest tours
Sale-to-tour conversion ratio – new
marketing guests
Percentage of sales to existing owners
Average sales volume per guest
For the Years Ended December 31,
% Change
2018
13%
2017
23
26
15
40,087
15,692 $
238,141
16
40,705
15,365
252,257
16.8%
146,623
16.1%
162,083
14.3%
51.6%
2,642 $
13.4%
49.4%
2,479
$
$
-6%
-2%
2%
-6%
4%
-10%
7%
4%
7%
Cost of VOIs Sold. During the years ended December 31, 2018 and 2017, cost of VOIs sold was
$23.8 million and $17.7 million, respectively, and represented 9% and 7%, respectively, of sales of VOIs.
During 2018, Bluegreen increased the average selling price of VOIs by approximately 3%. As a result of
this pricing change, Bluegreen also increased its estimate of total gross margin on the sale of its VOI
inventory under the relative sales value method. Under the relative sales value method prescribed for
timeshare developers to relieve the cost of VOI inventory, changes to the estimate of gross margin
expected to be generated on the sale of VOI inventory are recognized on a retrospective basis in earnings.
Accordingly, during 2018, Bluegreen recognized a benefit to cost of VOIs sold of $3.6 million. Further, in
2017, Bluegreen increased the selling price of its VOIs by 4%. Accordingly, during 2017, Bluegreen
recognized a benefit to cost of VOIs sold of $5.1 million. Also, in 2018 Bluegreen’s VOI sales were of
comparatively higher cost product and Bluegreen acquired less secondary market VOI inventory, which is
generally purchased at a discount, compared to 2017.
Fee-Based Sales Commission Revenue. During the years ended December 31, 2018 and 2017, Bluegreen
sold $318.5 million and $330.9 million, respectively, of third-party VOI inventory under commission
arrangements and earned sales and marketing commissions of $216.4 million and $229.4 million,
respectively, in connection with those sales. Bluegreen earned an average sales and marketing commission
of 68% and 69% during the years ended December 31, 2018 and 2017, respectively. This decrease in sales
and marketing commissions as a percentage of fee-based sales is primarily related to the mix of developer
sales at higher commission rates in 2017, as well as higher commission refunds associated with defaults
and cancellations. Additionally, Bluegreen earned a $4.5 million incentive commission in 2017 as
compared to an incentive commission of $3.3 million in 2018, in each case, related to the achievement of
certain sales thresholds pursuant to the terms and conditions of the applicable contractual arrangement.
Financing Revenue, Net of Financing Expense. During the years ended December 31, 2018 and 2017,
financing revenue, net of financing expense were $51.2 million and $56.9 million, respectively. The
decrease in finance revenue net of finance expense is a result of Bluegreen’s higher cost of borrowing and
lower weighted-average interest rates on Bluegreen’s VOI notes receivable portfolio in connection with
the introduction of “risk-based pricing” pursuant to which, buyer’s interest rates are determined based on
their FICO score at the point of sale partially offset by an increase in Bluegreen’s VOI notes receivable
portfolio.
Other Fee-Based Services Revenue. During the years ended December 31, 2018 and 2017, revenue from
Bluegreen’s resort operations, club management and title operations was $180.6 million and $164.5
million, respectively, which was partially offset by expenses directly related to these operations of $124.1
million and $113.0 million, respectively.
Other fee-based services revenue increased 10% during the year ended December 31, 2018 as compared to
the year ended December 31, 2017. Bluegreen provides management services to the Vacation Club and to
a majority of the HOAs of the resorts within the Vacation Club. In connection with its management
services, Bluegreen also manages the Vacation Club reservation system, provides services to owners and
performs billing and collections services to the Vacation Club and certain HOAs. Additionally, Bluegreen
generates revenues from its Traveler Plus program, as well as its food and beverage and other retail
operations. Bluegreen also earns commissions from providing rental services to third parties and fees from
managing the construction activities of certain of its fee based third-party developer clients. The resort
properties Bluegreen manages increased from 47 as of December 31, 2017 to 49 as of December 31, 2018
due to new resorts under management in New Orleans, Louisiana and San Antonio, Texas. Resort
operations and club management revenues increased during 2018 compared to 2017 primarily as a result
of such increase in the number of managed resorts and operations at the Éilan Hotel and Spa which we
acquired during April 2018.
67
During 2018, cost of other fee-based services increased 10% compared to 2017. This increase is primarily
due to the higher costs associated with programs provided to VOI owners and increased costs of providing
management services as a result of the increase in the number of managed resorts and the operating costs
of the Éilan Hotel and Spa.
Net Carrying Cost of VOI Inventory. The carrying cost of Bluegreen’s inventory was $27.4 million and
$16.2 million during the years ended December 31, 2018 and 2017, respectively, which was partly offset
by rental and sampler revenues of $16.0 million and $12.0 million, respectively. The increase in net
carrying costs is primarily due to Bluegreen’s acquisition of the Éilan Hotel and Spa during April 2018
and increased maintenance fees and developer subsidies associated with Bluegreen’s increase in VOI
inventory.
Selling and Marketing Expenses. Selling and marketing expenses were $307.6 million and $319.7 million
during the years ended December 31, 2018 and 2017, respectively. As a percentage of system-wide sales
of VOIs, selling and marketing expenses were 49% and 52% during the years ended December 31, 2018
and 2017, respectively. Selling and marketing expenses vary as a percentage of sales from period to period
based in part on the relative proportion of marketing methods utilized during such periods, most notably
the percentage of sales to Bluegreen’s existing owners, which have a relatively lower cost compared to
other methods. Existing owner sales increased to 52% of system-wide sales during 2018 from 49% during
2017. In addition, the corporate realignment initiative commenced during the fourth quarter of 2017
resulted in the reduction of certain selling and marketing expenses.
General and Administrative Expenses. General and administrative expenses were $107.8 million and
$101.5 million during the years ended December 31, 2018 and 2017, respectively. As a percentage of
system-wide sales of VOIs, general and administrative expenses were 17% and 16% during the years
ended December 31, 2018 and 2017, respectively. The increase in 2018 was primarily due to higher
outside legal expenses in connection with the new focus on defending litigation which Bluegreen believes
to be frivolous, higher self-insured healthcare costs, depreciation expense, executive leadership
compensation and severance expense and expenses associated with being a public company, including
investor and public relations activities. On October 9, 2017, Bass Pro raised an issue regarding the
computation of the sales commissions paid to it on the sale of VOIs. In response to the request from Bass
Pro, Bluegreen made a payment of approximately $4.8 million to Bass Pro during the fourth quarter of
2017 in connection with this matter, with no such payment in 2018. See Note 15 Commitment and
Contingencies under Item 8 of this report for additional information relating to this matter. Additionally,
the decrease reflects severance of $2.9 million payable by Bluegreen pursuant to an agreement Bluegreen
entered into with an executive during September 2017 in connection with his retirement. The $2.9 million
amount is included in corporate realignment costs in the Bluegreen’s reconciliation of EBITDA to
Adjusted EBITDA.
Bluegreen - For the year ended December 31, 2017 compared to the year ended December 31, 2016
Sales of VOIs. Sales of VOIs were $242.0 million and $273.9 million during the years ended December
31, 2017 and 2016, respectively. Gross sales of VOIs were reduced by $46.4 million and $45.6 million
during the years ended December 31, 2017, and 2016, respectively, for the provision for credit losses on
VOI notes receivable. Bluegreen’s provision for credit losses as a percentage of gross sales of VOIs were
16% and 14% during the years ended December 31, 2017 and 2016. The increase in the provision for
credit losses is primarily due to the impact of additional reserves on prior years’ originations.
The average annual default rates and delinquency rates (more than 30 days past due) on Bluegreen’s VOI
notes receivable were as follows:
Average annual default rates
Delinquency rates
For the Years Ended December 31,
2017
8.50%
2016
7.50%
As of December 31,
2017
3.04%
2016
3.30%
System-wide sales of VOIs. System-wide sales of VOIs were $619.3 million and $614.3 million during
the years ended December 31, 2017 and 2016, respectively. This growth reflected an increase in the
average sales price (per transaction), partially offset by a decrease in the number of guest tours and the
sale-to-tour conversion ratio. The average sales price per transaction increased by 12% for the year ended
December 31, 2017 compared to the year ended December 31, 2016. During 2017, Bluegreen began
screening the credit qualifications of potential marketing guests, resulting in a higher average transaction
price, higher VPG, and a lower number of tours compared to 2016.
68
The following table sets forth certain information for system-wide sales of VOIs for 2017 and 2016
(dollars in thousands):
Number of sales offices at period-end
Number of active sales arrangements with
third-party clients at period-end
Total number of VOI sales transactions
Average sales price per transaction
Number of total guest tours
Sale-to-tour conversion ratio – total
marketing guests
Number of new guest tours
Sale-to-tour conversion ratio – new
marketing guests
Percentage of sales to existing owners
Average sales volume per guest
For the Years Ended December 31,
% Change
2017
2016
23
23
-
16
40,705
15,365
252,257
18
45,340
13,727
274,987
16.1%
162,083
16.5%
190,235
13.4%
49.4%
2,479
13.5%
46.0%
2,263
$
$
-11%
-10%
12%
-8%
-2%
-15%
-1%
7%
10%
Cost of VOIs Sold. During the years ended December 31, 2017 and 2016, cost of VOIs sold was
$17.7 million and $28.8 million, respectively, and represented 7% and 11%, respectively, of sales of
VOIs. During 2017, Bluegreen increased the selling price of VOIs by approximately 4%. As a result of
this pricing change, Bluegreen also increased its estimate of total gross margin generated on the sale of its
VOI inventory. Under the relative sales value method prescribed for timeshare developers to relieve the
cost of VOI inventory, changes to the estimate of gross margin expected to be generated on the sale of
VOI inventory are recognized on a retrospective basis in earnings. Accordingly, during the second quarter
of 2017, Bluegreen recognized a benefit to cost of VOIs sold of $5.1 million. In September 2016,
Bluegreen increased the selling price of its VOIs by 5%. Accordingly, during the third quarter of 2016,
Bluegreen recognized a benefit to cost of VOIs sold of $5.6 million.
Fee-Based Sales Commission Revenue. During the years ended December 31, 2017 and 2016, Bluegreen
sold $330.9 million and $294.8 million, respectively, of third-party VOI inventory under commission
arrangements and earned sales and marketing commissions of $229.4 million and $201.8 million,
respectively, in connection with those sales. This increase was due primarily to an increase in the number
of commission based clients, as well as the factors described above related to the increase in system-wide
sales of VOIs. Bluegreen earned an average sales and marketing commission of 69% and 68% during the
years ended December 31, 2017 and 2016, respectively. Additionally, commissions in 2017 included an
incentive commission of $4.5 million related to the achievement of certain sales thresholds pursuant to the
terms and conditions of the applicable contractual arrangement, as compared to a $3.0 million incentive
commission earned in 2016.
Financing Revenue, Net of Financing Expense. During the years ended December 31, 2017 and 2016,
financing revenue, net of financing expense were $56.9 million and $58.7 million, respectively. The
increase is a result of Bluegreen’s lower cost of borrowing and an increase in its VOI notes receivable
portfolio.
Other Fee-Based Services Revenue. During the years ended December 31, 2017 and 2016, revenue from
Bluegreen’s resort operations, club management and title operations was $164.5 million and $153.0
million, respectively, which was partially offset by expenses directly related to these operations of $113.0
million and $103.9 million, respectively.
Other fee-based services revenue increased 8% during the year ended December 31, 2017 as compared to
the year ended December 31, 2016. Bluegreen provides management services to the Vacation Club and to
a majority of the HOAs of the resorts within the Vacation Club. In connection with its management
services, Bluegreen also manages the Vacation Club reservation system, provides services to owners and
performs billing and collections services to the Vacation Club and certain HOAs. The resort properties
Bluegreen manages increased from 46 as of December 31, 2016 to 47 as of December 31, 2017 due to new
resorts under management in Charleston, South Carolina and Banner Elk, North Carolina. Resort
operations and club management revenues increased during 2017 compared to 2016 primarily as a result
of such increase in the number of managed resorts and an increase in the number of owners in the
Vacation Club.
During 2017, cost of other fee-based services increased 9% compared to 2016. This increase is primarily
due to the higher costs associated with programs provided to VOI owners and increased costs of providing
management services as a result of the higher service volumes described above.
69
Net Carrying Cost of VOI Inventory. The carrying cost of Bluegreen’s VOI inventory was $16.2 million
and $16.8 million during the years ended December 31, 2017 and 2016, respectively, which was partially
offset by rental and sampler revenues of $12.0 million and $9.9 million, respectively. The decrease in net
carrying costs is a result of Bluegreen’s capital-light business activities and an increase in sampler
revenues.
Selling and Marketing Expenses. Selling and marketing expenses were $319.7 million and $315.6 million
during the years ended December 31, 2017 and 2016, respectively. The increase in selling and marketing
expenses was primarily due to increased costs from the implementation of screening the credit
qualifications of potential marketing guests, including the fulfillment costs associated with those guests,
partially offset by an increase in the average sales volume per guest. As a percentage of system-wide sales
of VOIs , selling and marketing expenses were 52% and 51% for the years ended December 31, 2017 and
2016, respectively. Selling and marketing expenses vary as a percentage of sales from period to period
based in part on the relative proportion of marketing methods utilized, most notably the percentage of
sales to Bluegreen’s existing owners, which has a relatively lower cost compared to other methods.
General and Administrative Expenses. General and administrative expenses were $101.5 million and
$104.3 million during the years ended December 31, 2017 and 2016, respectively. As a percentage of
system-wide sales of VOIs general and administrative expenses were 16% and 17% during the years ended
December 31, 2017 and 2016, respectively. The increase in general administrative expenses during 2017
primarily related to the $4.8 million payment made to Bass Pro during the fourth quarter of 2017, as
described above and accrued severance of $2.9 million pursuant to an agreement Bluegreen entered into
with an executive during September 2017 in connection with his retirement. The $2.9 million amount is
included in the corporate realignment costs in the above table. The increase in general and administrative
expenses in 2017 was partially offset by special bonuses totaling $10.0 million paid to certain of
Bluegreen’s employees in June 2016.
70
BBX Capital Real Estate Reportable Segment
Segment Description
BBX Capital Real Estate (or BBXRE) is engaged in the acquisition, development, construction,
ownership, financing, and management of real estate and investments in real estate joint ventures,
including investments in multifamily apartment and townhome communities, single-family master-
planned communities, and commercial properties located primarily in Florida. In addition, BBXRE owns
a 50% equity interest in the Altman Companies, a developer and manager of multifamily apartment
communities.
BBXRE also manages the legacy assets acquired by BCC in connection with the BankAtlantic Sale. The
legacy assets include portfolios of loans receivable, real estate properties, and loans previously charged off
by BankAtlantic.
Current Trends and Developments
The Altman Companies
I n November 2018, BBXRE acquired a fifty percent (50%) membership interest in the Altman
Companies, a joint venture between the Company and Joel Altman (“JA”) engaged in the development,
construction, and management of multifamily apartment communities, for cash consideration of $14.6
million, including $2.3 million in transaction costs.
The Altman Companies is a fully integrated platform covering all aspects of the development process,
including site selection, underwriting, design, construction, management, and sale of apartment
communities, through its ownership of 100% of the membership interests in Altman Development
Company and Altman Management Company and 60% of the membership interests in Altman-
Glenewinkel Construction. The Altman Companies generates revenues from the performance of
development, general contractor, leasing, and property management services to the joint ventures that are
formed to invest in development projects originated by the platform. In addition, BBXRE and JA invest in
the managing member of such joint ventures based on their relative ownership percentages in the Altman
Companies. Such equity interests are typically entitled to a promoted equity interest in the projects to the
extent that the external equity investors in such ventures receive agreed-upon returns on their investments.
Pursuant to the operating agreement of the Altman Companies , BBXRE will acquire an additional 40%
equity interest in the Altman Companies from JA for a purchase price of $9.4 million in January 2023,
while JA can also, at his option or in other predefined circumstances, require BBXRE to purchase his
remaining 10% equity interest in the Altman Companies for $2.4 million. However, JA will retain his
membership interests, including his decision making rights, in the managing member of any development
joint ventures that are originated prior to the Company’s acquisition of additional equity interests in the
Altman Companies. In addition, in certain circumstances, BBXRE may acquire the 40% membership
interests in Altman-Glenewinkel Construction that are not owned by the Altman Companies for a
purchase price based on prescribed formulas in the operating agreement of Altman-Glenewinkel
Construction.
In connection with its investment in the Altman Companies, BBXRE acquired interests in the managing
member of seven multifamily apartment developments, including four developments in which BBXRE
had previously invested as a non-managing member, for aggregate cash consideration of $8.8 million. In
addition, BBXRE and JA each contributed $2.5 million to ABBX Guaranty, LLC, a newly formed joint
venture established to provide guarantees on the indebtedness and construction cost overruns of new real
estate joint ventures formed by the Altman Companies.
Beacon Lake Master Planned Development
During 2018, BBXRE continued its development of the Beacon Lake Community in St. Johns County,
Florida with the sale of 251 developed lots to homebuilders as part of Phase I of the project, which is
comprised of 302 lots. In addition, BBXRE commenced land development on the lots comprising Phase
II of the project, which is expected to include approximately 400 single-family homes and 196
townhomes.
Other Joint Venture Activity
During 2018, BBXRE invested in two joint ventures to acquire land, obtain entitlements, and fund
predevelopment costs for potential multifamily apartment developments in Miami, Florida and Tampa,
Florida. These ventures are being sponsored by the Altman Companies. In 2019, the joint venture
associated with the development in Tampa, Florida closed on its permanent development financing and
commenced construction, which is expected to be substantially
71
completed in 2020.
In addition, the development projects associated with BBXRE’s existing unconsolidated joint ventures
continued to progress, including the sale of the properties developed by the Addison on Millenia and Altis
at Shingle Creek joint ventures.
Results of Operations
Information regarding the results of operations for BBX Capital Real Estate for the years ended December
31, 2018, 2017 and 2016 is set forth below (dollars in thousands):
Sales of real estate inventory
Interest income
Net gains on sales of
real estate assets
Other
Total revenues
Cost of real estate inventory sold
Recoveries from loan losses, net
Impairment losses
Selling, general and
administrative expenses
Total costs and expenses
Equity in net earnings of
unconsolidated joint ventures
Income before income taxes
For the Years Ended
December 31,
$
$
2018
21,771
2,277
4,563
2,653
31,264
14,116
(8,603)
521
9,210
15,244
14,194
30,214
$
2017
2016
-
2,225
-
3,606
1,451
5,145
8,821
-
(7,495)
1,646
11,127
5,278
12,541
16,084
3,213
5,656
12,475
-
(20,508)
2,304
11,864
(6,340)
12,178
30,993
Change
2018 vs
2017
21,771
52
Change
2017 vs
2016
-
(1,381)
3,112
(2,492)
22,443
14,116
(1,108)
(1,125)
(1,762)
(511)
(3,654)
-
13,013
(658)
(1,917)
9,966
(737)
11,618
1,653
14,130
363
(14,909)
BBX Capital Real Estate’s income before income taxes for the year ended December 31, 2018 compared
to 2017 increased by $14.1 million, or 87.9%, primarily due to the following:
· Net profits from the sale of 251 developed lots to homebuilders at the Beacon Lake Community
development during the year ended December 31, 2018;
· Net gains on the sale of real estate primarily resulting from the sale of a student housing facility
during 2018;
· A net increase in equity in earnings of unconsolidated joint ventures primarily due to the sale of
the properties developed by the Addison on Millenia and Altis at Shingle Creek joint ventures,
partially offset by the CC Homes Bonterra joint venture's completion of sales in its 394 single-
family home community development during late 2017;
· A decrease in impairment losses on commercial land parcels; and
· An increase in recoveries from loan losses primarily resulting from a $2.9 million recovery on a
commercial loan in 2018; partially offset by
· A decrease in net profits from the above mentioned student housing facility after its sale, which
consists of a decrease in rental revenues and selling, general and administrative expenses
associated with the property.
BBX Capital Real Estate’s income before income taxes for the year ended December 31, 2017 compared
to 2016 decreased by $14.9 million, or 48.1%, primarily due to the following:
· A decrease in interest income and recoveries from loan losses, which reflects the ongoing
collection of loans in the legacy asset portfolio and the overall decline in the balance of the
portfolio; and
· A decrease in gains on sales of commercial land parcels; partially offset by
· A decrease in impairment losses on commercial land parcels and residential loans; and
· A decrease in selling, general and administrative expenses primarily due to lower legal fees
incurred in connection with recoveries and foreclosures related to the loan portfolio recoveries
and real estate and joint venture transactions.
72
Renin Reportable Segment
Segment Description
Renin is engaged in the design, manufacture, and distribution of sliding doors, door systems and
hardware, and home décor products and operates through its headquarters in Canada and two
manufacturing and distribution facilities in the United States and Canada. In addition to its own
manufacturing, Renin also sources various products and materials from China. Renin’s products are sold
through three channels in North America: retail, commercial, and direct installation in the greater Toronto
area.
Current Trends and Developments
During 2018, Renin continued to experience a shift in its customer mix toward retail customers, while its
barn door product has increased as a percentage of its overall product mix. In particular, during the year
ended December 31, 2018, retail, commercial, and direct installation trade sales as a percentage of total
gross trade sales were 61%, 29%, and 10%, respectively, as compared to 51%, 36%, and 13% during the
same 2017 period. This shift reflects the addition of Costco as a retail customer, an increase in sales to e-
commerce retail customers, and a decrease in commercial and direct installation trade sales. During the
year ended December 31, 2018, Renin’s sales of barn doors and barn door hardware as a percentage of
total gross sales increased to 34% from 23% during the same 2017 period, which reflects an overall
increase in barn door sales and a decrease in sales across various other product types, including closet
doors and hardware, wall décor, and direct installation sales.
Renin has also continued to improve its operating performance through operating efficiencies achieved by
the integration of its manufacturing facilities in 2017 and other cost saving initiatives.
Results of Operations
Information regarding the results of operations for Renin for the years ended December 31, 2018, 2017
and 2016 are set forth below (dollars in thousands):
Trade sales
Cost of trade sales
Gross margin
Interest expense
Selling, general and
administrative expenses
Foreign exchange (gain) loss
Total costs and expenses
Income before income taxes
Gross margin percentage
SG&A as a percent of trade sales
$
For the Years Ended
December 31,
2017
68,935
(54,941)
13,994
509
2018
68,417
(55,483)
12,934
638
2016
65,068
(51,572)
13,496
313
9,903
(68)
10,473
$
2,461
% 18.90
% 14.47
11,112
193
11,814
2,180
20.30
16.12
12,545
(219)
12,639
857
20.74
19.28
Change
2018 vs
2017
Change
2017 vs
2016
(518)
(542)
(1,060)
129
(1,209)
(261)
(1,341)
281
(1.40)
(1.65)
3,867
(3,369)
498
196
(1,433)
412
(825)
1,323
(0.44)
(3.16)
Renin’s income before income taxes for the year ended December 31, 2018 compared to 2017 increased
by $0.3 million, or 12.9%, primarily due to the following:
· A decrease in selling, general and administrative expenses primarily attributable to a reduction in
headcount and lower consulting expenses; partially offset by
· A decrease in trade sales primarily due to the impact of lower sales to customers in its
commercial and direct installation channels and higher rebates and promotional discounts,
partially offset by an increase in sales to retail customers; and
· An overall decrease in the gross margin percentage primarily due to promotional discounts
provided to a customer to sell excess inventory.
73
Renin’s income before income taxes for the year ended December 31, 2017 compared to 2016 increased
by $1.3 million, or 154.4%, primarily due to the following:
· An increase in trade sales and gross margin reflecting higher sales volume from Renin’s retail
channel customers, including higher sales of Renin’s barn door product and sales to e-commerce
retail customers; and
· A decrease in selling, general and administration expenses associated with the transition to a new
executive team during 2016, including severance and recruitment expenses; partially offset by
· An net increase in other costs and expenses, including foreign currency exchange losses and an
increase in interest expense associated with a higher outstanding balance on Renin’s credit
facilities as a result of higher working capital requirements associated with increased sales
volume.
IT’SUGAR Reportable Segment
Segment Description
IT’SUGAR is a specialty candy retailer which operates approximately 100 retail locations in over 25
states and Washington, D .C., and its products include bulk candy, giant candy packaging, and novelty
items that are sold at its retail locations, which include a mix of high-traffic resort and entertainment,
lifestyle, mall/outlet, and urban locations across the United States .
Current Trends and Developments
Since BBX Capital’s acquisition of IT’SUGAR in June 2017, IT’SUGAR’s focus during 2018 was on
establishing a platform for future growth of its retail network, including replacing three executives and
focusing on operational improvements and improved customer engagement. In addition, IT’SUGAR
invested capital in several new retail locations, including the FAO Schweetz location in New York City
which is operated by IT’SUGAR and three other retail locations that opened during 2018, as well as a
flagship location in Las Vegas that is expected to open in 2019. IT’SUGAR is also evaluating retail
locations where sales volumes may give rise to early lease termination rights and a potential opportunity to
renegotiate occupancy costs. For certain unprofitable locations where IT’SUGAR does not have early
lease termination rights, IT’SUGAR is evaluating potential opportunities to close or sublease such
locations. Although IT’SUGAR expects that it may be necessary to incur costs to exit such locations, the
Company believes that the closure of such locations will improve IT’SUGAR’s overall profitability over
the long term.
Although the operating results of IT’SUGAR were not reflected in the Company’s consolidated financial
statements prior to the acquisition in June 2017, IT’SUGAR generated sales growth during the year ended
December 31, 2018 as compared to the same 2017 period, with an approximately 0.8% increase in overall
sales as compared to 2017. This increase primarily reflects the impact of new retail locations that were
opened in 2018 and 2017, partially offset by a decline in same store sales and the impact of closed
locations.
IT’SUGAR incurred a loss before income taxes in 2018 and is expected to incur a loss before income
taxes in 2019 due to the expected costs of opening new stores and related depreciation expense. However,
IT’SUGAR generated positive cash flows from operations in 2018 and is expected to continue to do so in
future periods.
74
Results of Operations
Information regarding the results of operations for IT’SUGAR for the year ended December 31, 2018 and
the period ended December 31, 2017 are set forth below (dollars in thousands):
For the Year
Ended
December 31,
2018
June 16, 2017
to
December 31,
2017
Trade sales
Cost of trade sales
Gross margin
Interest expense
Selling, general and
administrative expenses
Total costs and expenses
Other revenue
(Loss) income before income taxes
Gross margin percentage
SG&A as a percent of trade sales
$
$
%
%
79,618
(46,718)
32,900
40
35,404
35,444
160
(2,384)
41.32
44.47
46,765
(25,744)
21,021
-
18,489
18,489
66
2,598
44.95
39.54
Change
2018 vs
2017
32,853
(20,974)
11,879
40
16,915
16,955
94
(4,982)
(3.63)
4.93
IT’SUGAR’s loss before income taxes for the year ended December 31, 2018 reflects costs and expenses
associated with replacing three executives, which represents an investment in the business for growth in
future periods, and the opening of new locations for which the positive contributions from such locations
are not fully reflected in IT’SUGAR’s operating results due to the timing of such openings. In addition, as
compared to the 2017 period, IT’SUGAR’s operating results for 2018 reflect seasonal operating losses
that are typically incurred during the first half of the annual period which are not reflected in its operating
results for 2017 due to the timing of the acquisition in June 2017.
Other
Other in the Company’s segment information includes its investments in other operating businesses that
are in various stages of development and currently generate operating losses. These investments include
various companies in the confectionery industry, including Hoffman’s Chocolates, a manufacturer and
retailer of gourmet chocolates with retail locations in South Florida, and other manufacturers/wholesalers
of confectionery products. In addition, the Company’s wholly-owned subsidiary, Food for Thought
Restaurant Group, LLC (“FFTRG”), has entered into area development and franchise agreements pursuant
to which the Company has the opportunity to develop up to approximately 60 MOD Super Fast Pizza
(“MOD Pizza”) franchised restaurant locations throughout Florida over the next several years. FFTRG
operated seven MOD Pizza restaurant locations as of December 31, 2018 and opened two additional
locations in 2019. FFTRG is evaluating their performance to determine the rate at which it will open new
restaurant locations in the future. In addition to the above mentioned investments, the Company also holds
various other investments, including a restaurant located in South Florida that was acquired through a loan
foreclosure.
Businesses in the Confectionery Industry
The net losses before taxes from the Company’s other operations in the confectionery industry for the
years ended December 31, 2018, 2017 and 2016 were $12.6 million, $19.4 million, and $14.9 million,
respectively.
During the year ended December 31, 2018, the Company exited its manufacturing facility in Utah,
outsourced the manufacturing of certain products, and reduced its corporate personnel and infrastructure,
which resulted in the recognition of various costs, including severance costs for various employees and the
accelerated recognition of lease obligations. In addition, these strategic initiatives and the continuing
losses from certain of these businesses resulted in the recognition of impairment losses.
Although the Company expects that these efforts will reduce the ongoing operating losses associated with
these businesses, the Company is continuing to evaluate these operations, and to the extent that it decides
to divest of or otherwise exit these operations, the Company may recognize additional impairment
charges and incur additional losses in future periods. As of December 31, 2018, the net book value of the
operations under evaluation was $5.7 million.
75
MOD Pizza Restaurant Operations
The net losses before income taxes from the Company’s MOD Pizza restaurant operations for the years
ended December 31, 2018, 2017 and 2016 were $4.5 million, $2.5 million, and $0.4 million, respectively.
The higher net losses in the 2018 and 2017 periods were primarily attributable to selling, general, and
administrative expenses, including compensation expenses associated with store employees and
operations, human resource, marketing, and finance personnel that were hired in connection with
establishing initial restaurant operations, depreciation expense associated with leasehold improvements,
furniture, and fixtures at restaurant locations, and costs associated with store openings and the review of
potential restaurant sites. During the year ended December 31, 2018, the selling, general and
administrative expenses were partially offset by sales generated from the five restaurant locations opened
during 2018 and the two restaurant locations opened during the fourth quarter of 2017. On average, for
each of the seven restaurant locations opened as of December 31, 2018, the Company incurred
approximately $0.8 million in capital expenditures, net of anticipated tenant improvement allowances, and
approximately $0.2 million in store opening costs.
Reconciling Items and Eliminations
Reconciling items and eliminations in the Company’s segment information includes the following:
·
·
BBX Capital’s corporate selling, general and administrative expenses;
Interest expense primarily associated with Woodbridge’s junior subordinated debentures and
BBX Capital’s $50.0 million revolving line of credit and redeemable cumulative preferred stock;
Interest income on interest-bearing cash accounts;
The elimination of Bluegreen’s interest income on its $80 million notes receivable from BBX
Capital; and
· Other items.
·
·
Corporate Selling, General, and Administrative Expenses
BBX Capital’s corporate selling, general and administrative expenses consist primarily of expenses
associated with administering the various support functions at its corporate headquarters, including
executive compensation, legal, accounting, human resources, investor relations and executive offices.
BBX Capital’s corporate selling, general, and administrative expenses for the years ended December 31,
2018, 2017, and 2016, were $46.2 million, $53.4 million, and $56.0 million, respectively.
BBX Capital’s corporate selling, general, and administrative expenses for the year ended December 31,
2018 compared to the same 2017 period decreased by $7.2 million, which primarily reflects the impact of
the following:
·
·
$3.0 million of consulting and diligence-related costs incurred in 2017 in connection with the
Company’s acquisition of IT’SUGAR; and
$3.5 million of legal costs incurred in 2017 in connection with the SEC civil litigation against
BCC.
BBX Capital’s corporate selling, general, and administrative expenses for the year ended December 31,
2017 compared to the same 2016 period decreased by $2.6 million resulting primarily from lower
executive compensation costs, partially offset by the above mentioned consulting and diligence-related
costs associated with the acquisition of IT’SUGAR.
Interest Expense
Excluding BBX Capital’s note payable to Bluegreen, its interest expense for the years ended December
31, 2018, 2017 and 2016 was $6.4 million, $4.6 million, and $5.4 million, respectively. The increase
during the year ended December 31, 2018 as compared to the 2017 period primarily reflects $1.1 million
in interest expense associated with BBX Capital’s $50.0 million revolving line of credit that was issued
during 2018 and $0.7 million in higher interest expense on Woodbridge’s junior subordinated debentures,
which reflects the impact of rising interest rates on the variable rates associated with such debt.
BBX Capital’s interest expense on the $80.0 million note payable to Bluegreen for the years ended
December 31, 2018, 2017, and 2016 was $4.8 million, $6.4 million and $8.0 million, respectively. The
decrease for such periods reflects the reduction in the interest rate on the note on July 1, 2017 from 10%
per annum to 6% per annum. The interest expense on this note and the related interest income recognized
by Bluegreen are eliminated in the Company’s consolidated statements of operations.
76
Interest Income
During the years ended December 31, 2018, 2017 and 2016, the Company recognized $1.9 million, $0.7
million and $0.3 million, respectively, of interest income from BBX Capital’s interest-bearing cash
accounts.
Other Items
Reconciling Items and Eliminations includes $0.6 million and $8.6 million of insurance carrier
reimbursements of litigation costs for the years ended December 31, 2018 and 2017, respectively, and the
reimbursement of a $4.6 million fine previously paid in connection with the SEC civil litigation against
BCC for the year ended December 31, 2017. In addition, Reconciling Items and Eliminations includes
$6.9 million of net gains on the cancellation of Woodbridge’s junior subordinated debentures for the year
ended December 31, 2017.
Benefit (Provision) for Income Taxes
The provision for income taxes for the year ended December 31, 2018 reflected the Company’s effective
tax rate of 36.2% on income before income taxes. The effective tax rate was higher than the expected
federal income tax rate of 21% primarily due to nondeductible executive compensation, which included a
$2.8 million adjustment associated with the Company’s completion of its analysis of its accounting for the
enactment of the Tax Reform Act in December 2017, and state income taxes. See Note 14 – Income Taxes
under Item 8 of this report for additional information with respect to the accounting for the Tax Reform
Act.
The benefit for income taxes for the year ended December 31, 2017 resulted from the enactment of the
Tax Reform Act on December 22, 2017, which reduced the federal corporate tax rate from 35% to 21%
commencing on January 1, 2018 and resulted in a $45.3 million reduction in the Company’s deferred tax
liability. The Company’s effective tax rate excluding the rate change benefit was 38.4% for the year
ended December 31, 2017. The Company’s effective tax rate was higher than the expected federal income
tax rate of 35% due to state income taxes and nondeductible executive compensation.
The provision for income taxes for the year ended December 31, 2016 reflected the Company’s effective
tax rate of 46.1% on income before income taxes. The effective tax rate was higher than the expected
federal income tax rate of 35% due to state income taxes, nondeductible executive compensation, and
increases in the deferred tax asset valuation allowance based on an updated evaluation of the future
deductibility of net operating loss carryforwards.
Net Income Attributable to Noncontrolling Interests
BBX Capital includes in its consolidated financial statements the results of operations and financial
position of various partially-owned subsidiaries in which it holds a controlling financial interest, including
Bluegreen, Bluegreen/Big Cedar Vacations, and IT’SUGAR. As a result, the Company is required to
attribute net income to the noncontrolling interests in these subsidiaries.
Net income attributable to noncontrolling interests during the years ended December 31, 2018, 2017, and
2016 was $20.7 million, $18.4 million, and $13.2 million, respectively. The increase in net income
attributable to noncontrolling interests for the year ended December 31, 2018 and 2017 compared to the
same 2016 period was primarily due to Bluegreen’s IPO, which resulted in a decrease of BBX Capital’s
ownership in Bluegreen from 100% to 90%, and an increase in net income for Bluegreen/Big Cedar
Vacations, partially offset by the impact of BBX Capital’s acquisition of the outstanding noncontrolling
interests in BCC on December 15, 2016.
77
Consolidated Cash Flows
A summary of our consolidated cash flows is set forth below (in thousands):
Cash flows provided by operating activities
Cash flows (used in) provided by investing activities
Cash flows (used in) provided by financing activities
Net increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of
period
$
$
For the Years Ended December 31,
2017
65,599
(54,765)
52,096
62,930
2018
86,639
(31,063)
(43,726)
11,850
2016
81,163
49,198
(42,314)
88,047
409,247
346,317
258,270
Cash, cash equivalents and restricted cash at end of period $
421,097
409,247
346,317
Cash Flows provided by Operating Activities
The Company’s operating cash flows increased $21.0 million during the year ended December 31, 2018
compared to the same period in 2017. The increase was primarily due to higher operating distributions
from real estate joint ventures, the sale of real estate inventory at the Beacon Lake Community
development, and increased cash flows generated from Bluegreen’s operations.
The Company’s operating cash flows decreased $15.6 million during the year ended December 31, 2017
compared to the same 2016 period. The decrease was primarily due to increased spending by Bluegreen
on the acquisition and development of VOI inventory.
Cash Flows provided by/used in Investing Activities
Cash used in investing activities decreased by $23.7 million during the year ended December 31, 2018
compared to the same period in 2017. The decrease reflects the $58.4 million of cash paid for the
Company’s acquisition of IT’SUGAR in June 2017, partially offset by the acquisition of joint venture
interests associated with the Altman Companies and increased expenditures for property, equipment, and
software. The increase in expenditures for property, equipment, and software was primarily due to capital
expenditures at Bluegreen, including sales office expansions and information technology systems and
upgrades, and purchases of leasehold improvements, furniture, and fixtures associated with IT’SUGAR
and MOD Pizza retail locations.
Cash used in investing activities increased by $104.0 million during the year ended December 31, 2017
compared to the same period in 2016. The increase reflects the cash paid for the acquisition of IT’SUGAR
in June 2017, increased purchases of property and equipment, and lower repayments of loans receivable.
Cash Flows provided by/used in Financing Activities
Cash used in financing activities increased by $95.8 million during the year ended December 31, 2018
compared to the same period in 2017. The increase in cash used was primarily the result of $77.1 million
paid for the repurchase and retirement of the Company’s common stock during 2018 and $95.9 million in
net proceeds received from Bluegreen’s IPO during 2017, partially offset by $30.0 million of borrowings
on the Company’s $50.0 million revolving line of credit and Bluegreen’s 2018 Term Securitization and
other borrowings for the purchase of VOI inventory and property and equipment.
Cash provided by financing activities increased by $94.4 million during the year ended December 31,
2017 compared to the same period in 2016. The increase was primarily from the net proceeds received
from Bluegreen’s IPO and cash consideration of $16.9 million paid during the year ended December 31,
2016 for all the outstanding shares of BCC not previously owned by the Company, partially offset by an
increase in the cash paid to repurchase and retire common stock during the year ended December 31,
2017.
78
Commitments
The Company’s material commitments as of December 31, 2018 included the required payments due on
its receivable-backed debt, lines-of-credit and other notes payable, junior subordinated debentures,
commitments to complete certain projects based on its sales contracts with customers, subsidy advances to
certain HOAs and commitments under non-cancelable operating leases.
The following table summarizes the contractual minimum principal and interest payments, net of
unamortized discount, required on all of the Company’s outstanding debt and non-cancelable operating
leases by period due date, as of December 31, 2018 (in thousands):
Payments Due by Period
Unamortized
Debt
Less
than
1 year
1 — 3
Years
4 — 5
Years
After 5
Years
Issuance
Costs
Total
$
-
7,262
42,963
415,513
(6,807)
458,931
68,159
97,713
14,339
23,013
(2,337)
200,887
-
-
-
177,129
(40,704)
136,425
26,871
47,547
38,246
41,299
-
153,963
95,030
152,522
95,548
656,954
(49,848)
950,206
18,067
35,942
33,307
119,170
9,206
13,828
3,595
15,602
12,394
39,667
24,787
24,787
150,748
74,557
61,689
285,520
-
-
-
-
206,486
42,231
212,716
461,433
$ 134,697
227,079
157,237
942,474
(49,848) 1,411,639
Contractual Obligations
Receivable-backed notes
payable
Notes payable and other
borrowings
Jr. subordinated debentures
Noncancelable
leases
Total contractual
obligations
operating
Interest Obligations (1)
Receivable-backed notes
payable
Notes payable and other
borrowings
Jr. subordinated debentures
Total contractual interest
Total contractual
obligations
(1) Assumes that the scheduled minimum principal payments are made in accordance with the table above and the
interest rate on variable rate debt remains the same as the rate at December 31, 2018.
In lieu of paying maintenance fees for unsold VOI inventory, Bluegreen may enter into subsidy
agreements with certain HOAs. During the years ended December 31, 2018, 2017, and 2016, Bluegreen
made subsidy payments in connection with these arrangements of $13.9 million, $12.6 million and $13.9
million, respectively, which are included within cost of other fee-based services. As of December 31,
2018 and 2017, Bluegreen had no accrued liability for such subsidies.
In September 2017, Bluegreen entered into an agreement with an executive in connection with his
retirement. Pursuant to the terms of the agreement, Bluegreen agreed to make payments totaling
$2.9 million through March 2019. As of December 31, 2018, $0.8 million remained payable under this
agreement (all of which was accrued as of December 31, 2018). Also, in December 2018, Bluegreen
entered into an agreement with another executive in connection with his retirement. Pursuant to the terms
of the agreement, Bluegreen agreed to make payments totaling $2.0 million through December 2019, all
of which remained payable as of December 31, 2018.
During 2016, the Company entered into a severance arrangement with an executive. Under the terms of
the arrangement, the executive will receive $3.7 million over a three year period ending in August 2019.
As of December 31, 2018, $0.7 million was left to be paid under this agreement.
A wholly-owned subsidiary of BBX Capital has opened, and may continue to open, MOD Pizza restaurant
locations, which involves entering into lease agreements for such locations. BBX Capital has guaranteed
performance on certain lease agreements for these locations and may be required to guarantee
performance on additional lease agreements for new locations.
The Company believes that its existing cash, anticipated cash generated from operations, anticipated
future borrowings under existing or future credit facilities, and anticipated future sales of notes receivable
under existing, future or replacement purchase facilities will be sufficient to meet its debt service
requirements, including the contractual payment
79
of the obligations set forth above, for the foreseeable future, subject to the success of the Company’s
ongoing business strategy and the ongoing availability of credit. The Company will continue its efforts to
renew, extend or replace any credit and receivables purchase facilities that have expired or that will expire
in the near term. The Company may, in the future, also obtain additional credit facilities and may issue
corporate debt or equity securities. Any debt incurred or issued may be secured or unsecured, bear interest
at fixed or variable rates, and be subject to such terms as the lender may require. In addition, the
Company’s efforts to renew or replace credit facilities or receivables purchase facilities which have
expired or which are scheduled to expire in the near term may not be successful, and sufficient funds may
not be available from operations or under existing, proposed or future revolving credit or other borrowing
arrangements or receivables purchase facilities to meet cash needs, including debt service and other
contractual obligations. To the extent the Company is unable to sell notes receivable or borrow under such
facilities, the Company’s ability to satisfy its obligations would be materially adversely affected.
Bluegreen’s receivables purchase facilities and its credit facilities, indentures and other outstanding debt
instruments include what Bluegreen believes to be customary conditions to funding, eligibility
requirements for collateral, cross-default and other acceleration provisions and certain financial and other
affirmative and negative covenants, including, among others, limits on the incurrence of indebtedness,
payment of dividends, investments in joint ventures and other restricted payments, the incurrence of liens,
and transactions with affiliates, as well as covenants concerning net worth, fixed charge coverage
requirements, debt-to-equity ratios, portfolio performance requirements and cash balances, and events of
default or termination. In the future, Bluegreen may be required to seek waivers of such covenants, but
may not be successful in obtaining waivers, and such covenants may limit Bluegreen’s ability to pay
dividends, raise funds, sell receivables, or satisfy or refinance its obligations, or otherwise adversely affect
the Company’s financial condition and results of operations. In addition, the Company’s future operating
performance and ability to meet its financial obligations will be subject to future economic conditions and
to financial, business and other factors, many of which may be beyond the Company’s control.
Bluegreen has an exclusive marketing agreement with Bass Pro, a nationally-recognized retailer of
fishing, marine, hunting, camping and sports gear, that provides Bluegreen with the right to market and
sell vacation packages at kiosks in each of Bass Pro’s retail locations and through certain other means. As
of December 31, 2018, Bluegreen sold vacation packages in 69 of Bass Pro’s stores. Bluegreen
compensates Bass Pro based on VOI sales generated through the program. No compensation is paid to
Bass Pro under the agreement on sales made at Bluegreen/Big Cedar Vacations’ resorts. During the years
ended December 31, 2018, 2017 and 2016, VOI sales to prospects and leads generated by the agreement
with Bass Pro accounted for approximately 14% 15% and 16%, respectively, of Bluegreen’s VOI sales
volume. Bluegreen has continued to meet with Bass Pro’s leadership in an effort to resolve the issues
which arose between the parties in 2017 and 2018. While there is no assurance that a resolution will be
reached, Bluegreen remains optimistic that it will achieve a resolution of the outstanding issues.
Bluegreen is hopeful that the resolution will address the timing of entry into the Cabela’s stores and an
extension of the parties’ agreements. If reached, the resolution may include a restructuring of the amount
and timing of compensation paid to Bass Pro. In the meantime, Bluegreen continues to execute its
vacation package marketing strategy under the current agreement with Bass Pro. While Bluegreen does
not believe that any material additional amounts are due to Bass Pro, Bluegreen’s future results would be
impacted if the issues are not resolved and by any change in the compensation payable to Bass Pro or the
calculation of payments or reimbursements utilized pursuant to the agreements.
Off-balance-sheet Arrangements
BBX Capital guarantees certain obligations of its wholly-owned subsidiaries and unconsolidated real
estate joint ventures, which are not included in the contractual obligations table above, and also guarantees
certain of the obligations in the above table as described in further detail in Item 8 – Note 15 of this
Annual Report.
Liquidity and Capital Resources
BBX Capital and Subsidiaries, excluding Bluegreen
As of December 31, 2018 and 2017, the Company, excluding Bluegreen, had cash, cash equivalents and
short-term investments of approximately $146.9 million and $165.2 million, respectively. Management
believes that BBX Capital has sufficient liquidity from the sources described below to fund operations,
including its anticipated working capital, capital expenditure, and debt service requirements, for the
foreseeable future, subject to the success of the Company’s ongoing business strategy and the ongoing
availability of credit.
BBX Capital’s principal sources of liquidity are its available cash and short-term investments,
distributions received from Bluegreen, borrowings from its $50.0 million IberiaBank revolving line of
credit, distributions from unconsolidated real estate joint ventures, funds obtained from lot sales at the
Beacon Lake Community development, loan recoveries, and sales of real estate, and income from income
producing real estate.
80
BBX Capital believes that its current financial condition and credit relationships, together with anticipated
cash flows from other sources of funds, including potential dividends from Bluegreen (which, as described
below, are subject to certain limitations), and, to the extent determined to be advisable, proceeds from the
disposition of properties or investments, will allow it to meet its anticipated near-term liquidity needs.
BBX Capital may also seek additional liquidity from outside sources, including traditional bank financing,
secured or unsecured indebtedness, or the issuance of equity and/or debt securities. However, these
alternatives may not be available to us on attractive terms, or at all. The inability to raise funds through
the sources discussed above would have a material adverse effect on the Company’s business, results of
operations, and financial condition.
BBX Capital expects that it will receive dividends from time to time from Bluegreen. For the years ended
December 31, 2018, 2017, and 2016, BBX Capital received from Bluegreen dividends totaling $40.4
million, $40.0 million and $70.0 million, respectively. In addition, on February 15, 2019, BBX Capital
received from Bluegreen dividends of $11.4 million. Bluegreen has indicated that it intends to pay regular
quarterly dividends on its common stock subject to the discretion of its board of directors. The ultimate
payment of such dividends will be based upon factors that the Bluegreen board deems to be appropriate,
including Bluegreen’s operating results, financial condition, cash position, and operating and capital needs.
Dividends from Bluegreen are also dependent on restrictions contained in Bluegreen’s debt facilities.
Except as otherwise noted, the debts and obligations of Bluegreen are not direct obligations of BBX
Capital and generally are non-recourse to BBX Capital. Similarly, the assets of Bluegreen are not
available to BBX Capital, absent a dividend or distribution. Furthermore, certain of Bluegreen’s credit
facilities contain terms which could limit the payment of cash dividends without the lender’s consent or
waiver, and Bluegreen may only pay dividends subject to such restrictions as well as the declaration of
dividends by its board of directors. As a consequence, BBX Capital may not receive dividends from
Bluegreen consistent with prior periods, in the time frames or amounts anticipated, or at all.
BBX Capital may also receive funds from its subsidiaries, including Bluegreen, in connection with its tax
sharing agreement to the extent that the subsidiary utilizes BBX Capital’s tax benefits in BBX Capital’s
consolidated tax return. During the years ended December 31, 2018, 2017, and 2016, BBX Capital
received $23.1 million, $39.3 million and $26.2 million, respectively, of tax sharing payments from
Bluegreen.
Anticipated and Potential Liquidity Requirements
BBX Capital expects to use its available funds for operations and general corporate purposes (including
working capital, capital expenditures, and debt service requirements and the Company’s other
commitments described above), to make additional investments in real estate opportunities, operating
businesses, or other opportunities, to declare and pay cash dividends on the Company’s common stock, or
to repurchase shares of its common stock pursuant to its share repurchase program.
In March 2019, BBX Capital announced its intention to take Bluegreen private through a short-form
merger under Florida law pursuant to which BBX Capital will acquire all of the outstanding shares of
Bluegreen’s common stock not currently owned by BBX Capital. If the proposed merger is completed,
Bluegreen will become a wholly-owned subsidiary of BBX Capital, and each share of Bluegreen’s
common stock outstanding at the effective time of the merger, other than shares beneficially owned by
BBX Capital and shareholders who duly exercise and perfect appraisal rights in accordance with Florida
law, will be converted into the right to receive $16.00 per share in cash. The total merger consideration is
estimated to be approximately $115.0 million. The merger is expected to be completed 30 days after the
Schedule 13E-3 filed with the SEC relating to the merger is first mailed to Bluegreen's shareholders, or as
soon as practicable thereafter. However, the merger may be terminated at any time before it becomes
effective, and there is no assurance that the merger will be consummated on the contemplated terms, or at
all.
In November 2018, BBXRE acquired a fifty percent (50%) membership interest in the Altman
Companies, a joint venture between the Company and JA engaged in the development, construction, and
management of multifamily apartment communities. Although the Altman Companies generates revenues
from the performance of development, general contractor, leasing, and property management services to
the joint ventures that are formed to invest in development projects originated by the platform, the
platform is expected to generate profits for BBXRE and JA primarily through the equity distributions that
BBXRE and JA receive through their investment in the managing member of such joint ventures.
Therefore, as the timing of such distributions to BBXRE and JA is generally contingent upon the sale or
refinancing of a completed development project, it is anticipated that BBXRE and JA will be required to
contribute capital to the Altman Companies for its ongoing operating costs and predevelopment
expenditures, as well as to the managing member of newly formed joint ventures. At the current time,
while BBXRE expects that it will monetize its investment in various existing joint ventures during 2019,
including the Altis at Bonterra and Altis at Lakeline joint ventures, BBXRE anticipates that it will be
required to contribute $3.0 million to $4.0 million to the platform during 2019 related to planned
predevelopment expenditures and investments in new joint ventures. In addition, BBXRE has plans to
contribute an additional $2.0 million to $3.0 million to ABBX Guaranty, LLC, a newly formed joint
venture
81
established to provide guarantees on the indebtedness and construction cost overruns of new real estate
joint ventures formed by the Altman Companies.
During the year ended December 31, 2018, IT’SUGAR opened four retail stores and expects to open an
additional four stores during 2019 and anticipates renovating certain existing stores. In connection with
the anticipated store openings and renovation of various existing stores, IT’SUGAR expects to incur
approximately $5.0 million to $6.0 million of capital expenditures, net of
tenant allowance
reimbursements, during the year ended December 31, 2019.
The Company previously disclosed its plans to open a total of up to 60 MOD Pizza restaurant locations
throughout Florida over the next several years. Through December 31, 2018, seven locations had been
opened, and the Company opened two additional stores during 2019. The Company expects to incur an
aggregate of $1.0 million to $2.0 million of capital expenditures, net of tenant allowance reimbursements,
to open locations during 2019. The Company is currently evaluating the rate at which it is opening new
stores and may adjust the rate of growth in the future.
BBX Capital has previously indicated its intention to declare regular quarterly dividends on its Class A
and Class B Common Stock and declared cash dividends of $0.04 per share on its common stock, or $4.0
million in the aggregate, during the year ended December 31, 2018. However, future declaration and
payment of cash dividends with respect to the Company’s common stock, if any, will be determined in
light of the then-current financial condition of the Company, its operating and capital needs, and other
factors deemed relevant by the board of directors.
On June 13, 2017, BBX Capital’s board of directors approved a share repurchase program which
authorizes the repurchase of a total of up to 5,000,000 shares of the Company’ Class A Common Stock
and Class B Common Stock at an aggregate cost of no more than $35.0 million. This program replaces the
Company’s prior repurchase program and authorizes management, at its discretion, to repurchase shares
from time to time subject to market conditions and other factors. During the year ended December 31,
2018, the Company repurchased 1,200,000 shares of its Class A Common Stock at an aggregate purchase
price of $7.6 million under the program.
From September 30, 2018 through October 8, 2018, a total of 789,729 shares of the Company’s Class A
Common Stock and 505,148 shares of the Company’s Class B Common Stock previously owned by
certain executive officers were surrendered to the Company to satisfy $9.4 million of withholding tax
obligations associated with the vesting of their restricted stock awards. The Company has 3,186,546
unvested restricted stock awards outstanding as of December 31, 2018 and anticipates that, to the extent
that such awards vest, it will fund the cash payments associated with the related withholding tax
obligations in return for the surrender of a portion of such awards.
As of December 31, 2018, the Company had outstanding 10,000 shares of 5% Cumulative Preferred Stock
with a stated value of $1,000 per share, of which 5,000 shares are required to be redeemed on December
31, 2019 and the remaining 5,000 shares are required to be redeemed on December 31, 2020.
In April 2015, BBX Capital borrowed $80.0 million from a wholly-owned subsidiary of Bluegreen.
Payments of interest are required on a quarterly basis, with the entire $80.0 million principal balance and
accrued interest being due and payable in April 2020. This debt currently accrues interest at a per annum
rate of 6% with quarterly interest payments to Bluegreen of $1.2 million, and BBX Capital may be
required to repay all or a portion of the $80.0 million borrowed from Bluegreen if Bluegreen is not in
compliance with debt covenants under its debt instruments.
In addition to the note payable to Bluegreen, the Company has other indebtedness which is summarized in
Commitments above. The Company’s indebtedness, including any future debt incurred by the Company,
may make us more vulnerable to downturns in the economy and may subject the Company to covenants
or restrictions on its operations and activities.
Credit Facilities with Future Availability
As of December 31, 2018, BBX Capital and certain of its subsidiaries had the following credit facilities
with future availability, subject to eligible collateral and the terms of the facilities, as applicable.
Iberia $50.0 million Revolving Line of Credit. In March 2018, BBX Capital, BBX Sweet Holdings, LLC,
Food for Thought Restaurant Group-Florida, LLC, BCC and Woodbridge, entered into a Loan and
Security Agreement and related agreements with IberiaBank (“Iberia”), as administrative agent and
lender, and City National Bank of Florida, as lender, which provide for a $50.0 million revolving line of
credit. Amounts borrowed under the facility accrue interest at a floating rate of 30-day LIBOR plus a
margin of 3.0% to 3.75% or the Prime Rate plus a margin of 1.50% to 2.25%. The applicable margin is
based on BBX Capital’s debt to EBITDA ratio. Payments of interest only are payable monthly. The
facility matures, and all outstanding principal and interest will be payable, on March 6, 2020, with twelve-
month renewal options at BBX Capital’s request, subject to satisfaction of certain conditions. The facility
is secured by a pledge of a percentage of BBX Capital’s membership interests in Woodbridge having a
value of not less than $100.0 million.
82
Borrowings under the facility may be used for business acquisitions, real estate investments, stock
repurchases, letters of credit, and general corporate purposes.
Under the terms and conditions of the Loan and Security Agreement, BBX Capital is required to comply
with certain financial covenants, including maintaining minimum unencumbered liquidity and complying
with financial ratios related to fixed charge coverage and debt to EBITDA. The Loan and Security
Agreement also contains customary affirmative and negative covenants, including those that, among other
things, limit the ability of BBX Capital and the other borrowers to incur additional indebtedness and to
make certain loans and investments.
As of December 31, 2018, $30.0 million was outstanding on the line of credit. The outstanding balance
was repaid in January 2019 with available cash.
Toronto-Dominion Commercial Bank. In May 2017, Renin entered into a credit facility with TD Bank.
Under the terms and conditions of the credit facility, TD Bank agreed to provide term loans for up to $1.7
million and loans under a revolving credit facility for up to approximately $16.3 million subject to certain
terms and conditions. As of December 31, 2018, outstanding amounts under the term loan and revolving
credit facility were $1.1 million and $7.0 million, respectively, and were bearing interest at an effective
rate of 5.94% and 5.40%, respectively.
Bank of America Revolving Line of Credit. In August 2018, IT’SUGAR entered into a revolving credit
facility with Bank of America. Under the terms and conditions of the credit facility, Bank of America has
agreed to provide a revolving line of credit to IT’SUGAR for up to $4.0 million based on available
collateral as defined by the credit facility and subject to IT’SUGAR’s compliance with the terms and
conditions of the credit facility, including certain specific financial covenants. The revolving credit facility
is available through August 2021 and amounts outstanding bear interest at a LIBOR daily floating rate
plus 1.50% or a monthly LIBOR rate subject to the terms and conditions of the credit facility. Payments of
interest only will be payable monthly. As of December 31, 2018, there were no borrowings outstanding
under the credit facility.
Banc of America Leasing & Capital Equipment Note. In September 2018, IT’SUGAR entered into a
Master Loan and Security Agreement with Banc of America Leasing & Capital, LLC which sets forth the
terms and conditions pursuant to which IT’SUGAR may borrow funds to purchase equipment under one
or more equipment security notes. The Agreement contains customary representations and covenants,
including the submission of quarterly and annual financial statements to the lender. Each equipment note
constitutes a separate, distinct and independent financing of equipment and is secured by a security interest
in the purchased equipment and is an unconditional contractual obligation of IT’SUGAR. As of December
31, 2018, there was one equipment note outstanding with a balance of $0.6 million.
As of December 31, 2018, BBX Capital and its subsidiaries (other than Bluegreen) had availability of
approximately $31.4 million under the above revolving lines of credit, subject to eligible collateral and the
terms of the facilities, as applicable. In addition, in January 2019, the Company increased the availability
under these facilities by $30.0 million through the repayment of the outstanding balance on the Iberia line
of credit, as described above.
Bluegreen
Bluegreen believes that it has sufficient liquidity from the sources described below to fund operations,
including its anticipated working capital, capital expenditure, and debt service requirements, for the
foreseeable future, subject to the success of its ongoing business strategy and the ongoing availability of
credit.
Bluegreen’s primary sources of funds from internal operations are: (i) cash sales, (ii) down payments on
VOI sales which are financed; (iii) proceeds from the sale of, or borrowings collateralized by, notes
receivable, (iv) cash from finance operations, including mortgage servicing fees and principal and interest
payments received on the purchase money mortgage loans arising from sales of VOIs, and (v) net cash
generated from sales and marketing fee-based services and other fee-based services, including resort
management operations.
While the vacation ownership business has historically been capital intensive, and Bluegreen may from
time to time pursue transactions or activities which may require significant capital investment and
adversely impact cash flows, Bluegreen generally has sought to focus on the generation of “free cash
flow” (defined as cash flow from operating activities, less capital expenditures) by (i) incentivizing its
sales associates and creating programs with third-party credit card companies to generate a higher
percentage of sales in cash; (ii) maintaining sales volumes that focus on its more efficient marketing
channels; (iii) limiting its capital and inventory expenditures; (iv) utilizing sales and marketing, mortgage
servicing, resort management services, title and construction expertise to pursue fee-based-service
business relationships that generally require minimal up-front capital investment and have the potential to
produce incremental cash flows, and (v) more recently by selling VOIs obtained through secondary
markets or JIT arrangements. In 2018, Bluegreen invested more of its free-cash flow in additional sales
offices and sales office expansions as well as
83
information technology expenditures which Bluegreen expects to drive and support growth in future
years. In addition, during April 2018, Bluegreen acquired the Éilan Hotel & Spa in San Antonio, Texas
for $34.3 million, and borrowed $24.3 million to help fund the acquisition.
VOI sales are generally dependent upon providing financing to buyers. The ability to sell and/or borrow
against notes receivable from VOI buyers has been a critical factor in Bluegreen’s continued liquidity. A
financed VOI buyer is generally only required to pay a minimum of 10% of the purchase price in cash at
the time of sale; however, selling, marketing and administrative expenses attributable to the sale are
primarily cash expenses that generally exceed a buyer’s minimum required down payment. Accordingly,
having financing facilities available for the hypothecation, sale or transfer of VOI notes receivable has
been a critical factor in Bluegreen’s ability to meet its short and long-term cash needs. Bluegreen has
attempted to maintain a number of diverse financing facilities. Historically, Bluegreen has relied on its
ability to sell receivables in the term securitization market in order to generate liquidity and create
capacity in its receivable facilities. In addition, maintaining adequate VOI inventory to sell and pursue
growth into new markets has historically required Bluegreen to incur debt for the acquisition, construction
and development of new resorts. Development expenditures during 2019 are expected to be in a range of
$60.0 million to $70.0 million, which primarily relate to development at the Bluegreen/Big Cedar
Vacations resort, development at the Fountains resort in Orlando, Florida and refurbishments at certain
other resorts.
In connection with Bluegreen’s capital-light business strategy activities, Bluegreen has entered into
agreements with third party developers that allow Bluegreen to buy VOI inventory typically on a non-
committed basis prior to when Bluegreen intends to sell such VOI, which is referred to as “JIT inventory.”
Bluegreen’s capital-light business strategy also includes secondary market sales pursuant to which
Bluegreen enters into secondary market arrangements with certain HOAs and others on a non-committed
basis, which allows Bluegreen to acquire VOIs generally at a significant discount, as such VOIs are
typically obtained by the HOAs through foreclosure in connection with maintenance fee defaults.
Acquisition of JIT and secondary market inventory in 2019 is expected to range from $20.0 million to
$30.0 million.
In addition, Bluegreen’s capital expenditures in connection with sales and marketing facilities, as well as
its information technology capital expenditures, are expected to be in a range of $20.0 million to $25.0
million during 2019.
Available funds may also be used to acquire other businesses or assets, invest in other real estate based
opportunities, or loan to affiliates or others.
Bluegreen’s level of debt and debt service requirements have several important effects on Bluegreen’s
operations, including the following: (i) significant debt service cash requirements reduce the funds
available for operations and future business opportunities and increases Bluegreen’s vulnerability to
adverse economic and industry conditions, as well as conditions in the credit markets, generally; (ii)
Bluegreen’s leverage position increases its vulnerability to economic and competitive pressures; (iii) the
financial covenants and other restrictions contained in indentures, credit agreements and other agreements
relating to Bluegreen’s indebtedness require Bluegreen to meet certain financial tests and may restrict
Bluegreen’s ability to, among other things, pay dividends, borrow additional funds, dispose of assets or
make investments; and (iv) Bluegreen’s leverage position may limit funds available for acquisitions,
working capital, capital expenditures, dividends, and other general corporate purposes. Certain of
Bluegreen’s competitors operate on a less leveraged basis and have greater operating and financial
flexibility than Bluegreen does.
See Note 13 – Debt under Item 8 included in this report for additional information with respect to
Bluegreen’s receivable-backed notes payable facilities, including the 2018 Term Securitization.
Credit Facilities for Bluegreen Receivables with Future Availability
Bluegreen maintains various credit facilities with financial institutions which allow Bluegreen to borrow
against or sell its VOI notes receivable. As of December 31, 2018, Bluegreen had the following credit
facilities with future availability, all of which are subject to revolving availability terms during the
advance period and therefore provide for additional availability as the facility is paid down, subject to
compliance with relevant covenants, eligible collateral and applicable terms and conditions during the
advance period (dollars in thousands):
84
Borrowing
Limit
as of
December 31,
2018
Outstanding
Balance
as of
December 31,
2018
Availability
as of
December 31,
2018
$
50,000 $
17,654 $
32,346
70,000
48,414
21,586
40,000
10,606
29,394
80,000
—
80,000
50,000
290,000 $
40,074
116,748 $
9,926
173,252
$
Advance Period
Expiration;
Borrowing
Maturity
as of
December 31,
2018
March 2020;
March 2023
September 2020;
March 2025
September 2021;
September 2024
December 2019;
December 2022
June 2020;
December 2032
Borrowing
Rate;
Rate as of
December 31,
2018
Prime Rate; floor
of 4.00%; 5.25%
30 day
LIBOR+2.75%;
floor of 3.50%;
5.27%
30 day
LIBOR+2.75%
to 3.00%; 5.52%
30 day LIBOR
+2.75%; 5.25%
(1)
(2)
Liberty Bank
Facility
NBA Receivables
Facility
Pacific Western
Facility
KeyBank/DZ
Purchase Facility
Quorum Purchase
Facility
(1) Borrowings accrue interest at a rate equal to either LIBOR, a “Cost of Funds” rate or commercial paper rates plus
2.75%. As described in further detail below, the interest rate will increase to the applicable rate plus 4.75% upon the
expiration of the advance period.
(2) Of the amounts outstanding under the Quorum Purchase Facility at December 31, 2018, $4.5 million accrues interest
at a rate per annum of 4.75%, $31.1 million accrues interest at a fixed rate of 4.95%, $2.5 million accrues interest at a
fixed rate of 5.0%, and $2.0 million accrues interest at a fixed rate of 5.5%.
Other Credit Facilities and Outstanding Notes Payable
Fifth Third Syndicated Line-of-Credit and Fifth Third Syndicated Term Loan. In December 2016,
Bluegreen entered into a $100.0 million syndicated credit facility with Fifth Third Bank, as administrative
agent and lead arranger, and certain other bank participants as lenders. The facility includes a $25.0
million term loan (the “Fifth Third Syndicated Term Loan”) with quarterly amortization requirements and
a $75.0 million revolving line of credit (the “Fifth Third Syndicated Line-of-Credit”). Amounts borrowed
under the facility generally bear interest at LIBOR plus 2.75% - 3.75% depending on our leverage ratio,
are collateralized by certain of Bluegreen’s VOI inventory, sales center buildings, management fees and
short-term receivables, and will mature in December 2021. As of December 31, 2018, outstanding
borrowings under the facility totaled $77.5 million, including $22.5 million under the Fifth Third
Syndicated Term Loan and $55.0 million under the Fifth Third Syndicated Line of Credit.
Bluegreen also has outstanding obligations under various credit facilities and securitizations that have no
remaining future availability as the advance periods have expired.
See Note 13 – Debt under Item 8 included in this report for additional information with respect to
Bluegreen’s credit facilities terms and covenants.
Critical Accounting Policies
Management views critical accounting policies as accounting policies that are important to the
understanding of our financial statements and also involve estimates and judgments about inherently
uncertain matters. In preparing the financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities as of the date of the consolidated statements of financial condition and assumptions that
affect the recognition of income and expenses on the consolidated statements of operations and
comprehensive income for the periods presented. On an ongoing basis, management evaluates its
estimates, including, but not limited to, those that relate to the determination of:
·
·
·
·
The allowance for credit losses on VOI notes receivable;
The estimated future sales value of VOI inventory;
The recognition of revenue;
The recovery of the carrying value of real estate inventories;
85
·
The fair value of assets measured at, or compared to, fair value on a non-recurring
basis, such as assets held for sale, intangible assets, other long-lived assets and
goodwill;
The valuation of assets and liabilities assumed in the acquisition of a business;
The amount of deferred tax valuation allowance and accounting for uncertain tax
The estimate of contingent liabilities related to litigation and other claims and
·
·
positions; and
·
assessments.
The accounting policies that we have identified as critical accounting policies are:
·
·
·
·
·
The recognition of revenue;
Allowance for credit losses on VOI notes receivable;
The estimated future sales value of VOI inventory;
Evaluating long-lived assets and definite lived intangible assets for impairment; and
Evaluating goodwill and indefinite lived intangible assets for impairment.
Management bases its estimates on historical experience and on various other assumptions that it believes
to be reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ materially from these estimates under different assumptions and conditions. If actual results
significantly differ from management’s estimates, our results of operations and financial condition could
be materially and adversely impacted.
Revenue Recognition
Variable Consideration
Bluegreen generally offers qualified purchasers financing for up to 90% of the purchase price of VOIs.
The typical financing provides for a term of ten years and a fixed interest rate, is fully amortizing in equal
installments, and may be prepaid without penalty. For sales of VOIs for which Bluegreen provides
financing, Bluegreen reduces the transaction price for expected credit losses, which is considered to be
variable consideration. To the extent Bluegreen determines that it is probable that a significant reversal of
cumulative revenue recognized may occur, it records an estimate of variable consideration as a reduction
to the transaction price of the sales of VOIs until the uncertainty associated with the variable
consideration is resolved. Bluegreen’s estimate of variable consideration is based on the results of its
static pool analysis, which relies on historical payment data for similar VOI notes receivable and tracks
uncollectibles for each period’s sales over the entire life of the notes. Bluegreen also considers whether
historical economic conditions are comparable to then current economic conditions, as well as variations
in underwriting standards. Bluegreen reviews its estimate of variable consideration on at least a quarterly
basis. See “Allowance for Credit Losses on VOI Notes Receivable” below for a further discussion on
expected credit loss estimates.
Variable Consideration on Trade Sales and Sales of Real Estate Inventory
The Company’s trade sales are generally sold with a right of return , and the Company may provide other
sales credits or incentives, such as volume discounts or rebates. Additionally, the Company is entitled to
contingent consideration on certain single-family lot sales to builders. These programs are accounted for
as variable consideration when determining the amount of revenue to recognize upon transfer of control.
Estimates of contingent consideration, returns, and incentives are calculated using the expected value
method and updated at the end of each reporting period when additional information becomes available.
Variable consideration estimates are based on historical experience adjusted for current economic
conditions and sales trends. These estimates rely on assumptions and judgments regarding issues where
the outcome is unknown, and actual results or values may differ significantly from these estimates . A
significant change in the timing of revenue recognized could occur if actual variable consideration is
significantly different than our estimates.
Identification of Distinct Performance Obligations
Bluegreen’s resort and club management revenue and related cost reimbursements are recognized as
services are rendered. These services provided to the resort HOAs are comprised of day-to-day services to
operate the resort, including management services and certain accounting and administrative functions.
Management services provided to the Vacation Club include managing the reservation system and
providing owner, billing and collection services. Bluegreen’s management contracts are typically
structured as cost-plus with an initial term of three years and automatic one-year renewals. Bluegreen
believes these services to be a series of distinct goods and services to be accounted for as a single
performance obligation over time and recognizes revenue as the customer receives the benefits of its
services.
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Allowance for Credit Losses on VOI Notes Receivable
The allowance for credit losses is related to the notes receivable generated in connection with financing
Bluegreen’s VOI sales. Bluegreen holds large amounts of homogeneous VOI notes receivable and assesses
uncollectibility based on pools of receivables, as Bluegreen believes that there are no significant
concentrations of credit risk with any individual counterparty or groups of counterparties. In estimating
future credit losses, Bluegreen does not use a single primary indicator of credit quality but instead
evaluates its VOI notes receivable based upon a static pool analysis that incorporates the age of the
respective receivables, default trends and prepayment rates by origination year, as well as the FICO scores
of the borrowers.
The Estimated Future Sales Value of VOI Inventory
Bluegreen carries its completed inventory at the lower of (i) cost, including costs of improvements and
amenities incurred subsequent to acquisition, capitalized interest, real estate taxes and other costs incurred
during construction, or (ii) estimated fair market value, less costs to sell. Bluegreen uses the relative sales
value method for establishing the cost of its VOI sales and relieving inventory, which requires Bluegreen
to make estimates subject to significant uncertainty. Under the relative sales value method required by
timeshare accounting rules, cost of sales is calculated as a percentage of net sales using a cost-of-sales
percentage based on the ratio of total estimated development costs to total estimated VOI revenue,
including the estimated incremental revenue from the resale of VOI inventory repossessed, generally as a
result of the default of the related receivable. Also, pursuant to timeshare accounting rules, Bluegreen
does not relieve inventory for VOI cost of sales related to anticipated credit losses. Accordingly, no
adjustment is made when inventory is reacquired upon default of the related receivable.
Evaluating Long-lived Assets and Definite-lived Intangible Assets for Impairment
The Company evaluates its long-lived assets and definite-lived intangible assets, including property and
equipment, real estate held-for-investment, and Bluegreen’s undeveloped or under development resort
properties, for potential impairment whenever events or changes in circumstances indicate that the
carrying amounts of such assets may not be recoverable. With respect to property and equipment
associated with new retail locations, the Company assesses whether there are indicators of impairment
upon the earlier of the stabilization of the applicable retail location or twelve to eighteen months
following the opening of the location (depending on the maturity of the retail brand). The carrying
amounts of assets are not considered recoverable when the carrying amounts exceed the undiscounted
cash flows estimated to be generated by those assets. As the carrying amounts of these assets are
dependent upon estimates of future earnings that they are expected to generate, these assets may be
impaired if cash flows decrease significantly or do not meet expectations, in which case they would be
written down to their fair value. The estimates of useful lives and expected cash flows require us to make
significant judgments regarding future periods that are subject to a number of factors, many of which may
be beyond our control. As of December 31, 2018, the Company had capitalized in excess of $10.0 million
of property and equipment associated with new IT’SUGAR and MOD Pizza retail locations which had not
stabilized or had not been open for twelve to eighteen months. To the extent that these retail locations do
not meet expectations or actual performance within twelve to eighteen months following the opening of
such locations indicates that the carrying amounts of the property and equipment associated with such
locations may not be recoverable, we may recognize impairment charges associated with these locations in
future periods.
Evaluating Goodwill and Indefinite Lived Intangible Assets for Impairment
The process of evaluating goodwill for impairment involves the determination of the fair value of the
Company’s reporting units. Inherent in such fair value determinations are certain judgments and estimates
relating to future cash flows, including the Company’s interpretation of current economic indicators and
market valuations, and assumptions about the Company’s strategic plans with regard to its operations. Due
to the uncertainties associated with such evaluations, actual results could differ materially from such
estimates. The Company tested its goodwill for impairment on December 31, 2018 (its annual testing
date), and the goodwill associated with one of the Company’s operating businesses in the confectionery
industry that was acquired in 2014 was determined to be impaired, which resulted in the recognition of a
$4.0 million impairment loss. The Company determined that the $35.2 million of goodwill assigned to the
IT’SUGAR reporting unit at December 31, 2018 was not impaired. However, if the IT’SUGAR reporting
unit does not meet expectations or if there is a downturn in the confectionery industry, we may recognize
goodwill impairment charges in future periods. The Company’s goodwill as of December 31, 2018 was
$37.2 million.
The Company’s indefinite lived intangible assets as of December 31, 2018 consisted of $62.0 million of
management contracts, which were originated in connection with the November 16, 2009 acquisition of a
controlling interest in Bluegreen. Such management contracts are not amortized but instead are reviewed
for impairment at least annually, or if events or changes in circumstances indicate that it is more likely
than not that the related carrying amounts may be impaired. Management contracts are impaired when the
fair value of the contract is lower than the carrying value. The
87
fair value of management contracts is based on an evaluation of estimated cash flows that can be
generated from the contract which are uncertain and subject to change. Due to the uncertainties associated
with such evaluations, actual results could differ materially from such estimates and the Company could
recognize impairments on management contracts if future cash flows do not meet expectations.
88
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Market Risk
Market risk is defined as the risk of loss arising from adverse changes in market valuations resulting from
interest rate risk, foreign currency exchange rate risk, commodity price risk and equity price risk. The
Company’s primary market risk is equity price risk and interest rate risk.
The Company’s real estate assets market risk consists primarily of equity pricing risk and secondarily
interest rate risk. The Company’s real estate assets are investments in unconsolidated real estate
companies, real estate held-for-investment or held-for-sale and real estate inventory. The Company’s
financial condition and earnings are affected by changes in real estate values in the markets where the real
estate or real estate collateral is located and changes in interest rates which affects the affordability of real
estate. As a result, there is exposure to equity pricing and interest rate risk in the real estate market.
The Company’s results of operations are subject to foreign currency exchange risk of the U.S. dollar
compared to the Canadian dollar though its ownership of Renin. Renin’s assets, liabilities, revenue and
expenses that are denominated in foreign currencies will be affected by changes in the exchange rates
between the U.S. dollar and the Canadian dollar. As of December 31, 2018, the Company has not entered
into any foreign exchange forward contracts as hedges against foreign currency exchange risk.
The market price of BBX Capital’s Class A Common Stock and Class B Common Stock are important to
the valuation and financing capability of BBX Capital.
The Company, particularly with respect to Bluegreen, is affected by interest rates, which are subject to the
influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal
policies of the United States and its agencies, particularly the Federal Reserve. The nature and timing of
any changes in such policies or general economic conditions and their effect on the Company and its
subsidiaries are unpredictable.
As of December 31, 2018, Bluegreen had fixed interest rate debt of approximately $409.5 million and
floating interest rate debt of approximately $291.6 million, excluding purchase accounting adjustments for
junior subordinated debentures of $37.5 million. In addition, Bluegreen’s notes receivables as of
December 31, 2018 were comprised of approximately $549.4 million of notes bearing interest at fixed
rates and approximately $1.3 million of notes bearing interest at floating rates. The floating interest rates
are subject to floors and are generally based either upon the prevailing prime or LIBOR rates. For floating
rate financial instruments, interest rate changes generally do not affect the market value of the debt, but do
impact earnings and cash flows relating to the debt, assuming other factors are held constant. Conversely,
for fixed rate financial instruments, interest rate changes affect the market value of the debt but do not
impact earnings or cash flows relating to the debt, assuming other factors are held constant.
The Company is subject to interest rate risk on Woodbridge’s junior subordinated debentures. The interest
rates for Woodbridge’s $66.3 million of junior subordinated debentures are variable rates based upon the
prevailing 3-month LIBOR rates. For variable rate financial instruments, interest rate changes do not
generally affect the market value of the debt, but they do impact future earnings and cash flows, assuming
other factors are held constant. If interest rates were to increase one percentage point, the effect on interest
expense related to Woodbridge’s variable-rate debt would be an annual increase of approximately
$663,000, based on December 31, 2018 balances.
To the extent inflationary trends, tightened credit markets or other factors affect interest rates, Bluegreen’s
debt service costs may increase. If interest rates increased one percentage point, the effect on interest
expense related to Bluegreen’s floating-rate debt would be an annual increase of approximately $2.9
million based on December 31, 2018 balances and interest rates. Due to the interest rate floors on
Bluegreen’s floating rate debt, if interest rates decreased one percentage point, the effect on interest
expense related to its floating rate debt would be an annual decrease of approximately $2.7 million based
on December 31, 2018 balances and interest rates. In addition, a one percentage point increase or decrease
in interest rates would affect the total fair value of Bluegreen’s fixed rate debt by an immaterial amount.
This analysis does not consider the effects of changes in the level of overall economic activity that could
result due to interest rate changes. Further, in the event of a significant change in interest rates, Bluegreen
may pursue actions in order to mitigate any exposure to the change. However, due to the uncertainty of
the specific actions that may be taken and their possible effects, the foregoing sensitivity analysis assumes
no changes in Bluegreen’s financial structure.
89
Impact of Inflation
The financial statements and related financial data and notes presented herein have been prepared in
accordance with GAAP, which requires the measurement of financial position and operating results in
terms of historical dollars without considering changes in the relative purchasing power of money over
time due to inflation.
The Company is subject to significant interest rate risk on Bluegreen’s notes receivables as well as its
outstanding debt. As a result, interest rates have a more significant impact on our performance than the
effects of general price levels. Although interest rates generally move in the same direction as inflation,
the magnitude of such changes varies.
The Company believes that inflation and changing prices have had and may in the future have a material
impact on its revenues and results of operations. Bluegreen has increased the sales prices of its VOIs
periodically, including in September 2016, June 2017 and December 2018, and has from time to time
experienced increases in construction and development costs. Bluegreen may not be able to increase or
maintain the current level of its sales prices, and increased construction and development costs may have a
material adverse impact on its gross margin. In addition, to the extent that inflation in general or increased
prices for VOIs adversely impacts consumer demand, Bluegreen’s results of operations could be adversely
impacted. Furthermore, while increases in real estate construction and development costs may result in
increases in real estate sales prices, sales prices may not increase commensurate with the increase in costs
or they may decrease, and increased construction costs may have a material adverse impact on gross
margin. In addition, inflation is often accompanied by higher interest rates which could have a negative
impact on consumer demand and the costs of financing activities. Rising interest rates as well as increased
materials and labor costs may reduce margins.
90
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BBX CAPITAL CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm …………….……………………………..
…….....
Consolidated Statements of Financial Condition as of December 31, 2018 and 2017………………….
………
Consolidated Statements of Operations and Comprehensive Income for each of the years
in the three year period ended December 31, 2018 ……………………………………………….
………
Consolidated Statements of Changes in Equity for each of the years in the three year period
ended December 31, 2018 ………………………………………………………………………...
………
Consolidated Statements of Cash Flows for each of the years in the three year period
ended December 31, 2018 ……………………………………………………………………...
…………
Notes to Consolidated Financial Statements ………………………………………………………...
…………
F-2
F-3
F-4
F-5
F-7
F-9
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
BBX Capital Corporation
Opinion on the financial statements
We have audited the accompanying consolidated statements of financial condition of BBX Capital
Corporation (a Florida corporation) and subsidiaries (the “Company”) as of December 31, 2018 and 2017,
the related consolidated statements of operations and comprehensive income, changes in equity, and
cash flows for each of the three years in the period ended December 31, 2018, and the related notes and
financial statement schedules included under Item 15(a) (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2018, in conformity with accounting
principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December
31, 2018, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated
March 12, 2019 expressed an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2015.
Fort Lauderdale, Florida
March 12, 2019
F-2
BBX Capital Corporation
Consolidated Statements of Financial Condition
(In thousands, except share data)
ASSETS
Cash and cash equivalents
Restricted cash ( $28,400 in 2018 and $19,488 in 2017 in variable
interest entities ("VIEs"))
Notes receivable, net ( $341,975 in 2018 and $279,188 in 2017 in VIEs)
Trade inventory
Vacation ownership interest ("VOI") inventory
Real estate ($20,202 in 2018 and $27,828 in 2017 held for sale)
Investments in unconsolidated real estate joint ventures
Property and equipment, net
Goodwill
Intangible assets, net
Other assets
Total assets
LIABILITIES AND EQUITY
Liabilities:
Accounts payable
Deferred income
Escrow deposits
Other liabilities
Receivable-backed notes payable - recourse
Receivable-backed notes payable - non-recourse (in VIEs)
Notes payable and other borrowings
Junior subordinated debentures
Deferred income taxes
Redeemable 5% cumulative preferred stock of $.01 par value; authorized
15,000 shares;
issued and outstanding 10,000 shares in 2018 and 15,000 shares in 2017 with a
stated value of $1,000 per share
Total liabilities
Commitments and contingencies (See Note 15)
Redeemable noncontrolling interest
Equity:
Preferred stock of $.01 par value; authorized 10,000,000 shares
Class A Common Stock of $.01 par value; authorized 150,000,000 shares;
issued and outstanding 78,379,530 in 2018 and 85,689,163 in 2017
Class B Common Stock of $.01 par value; authorized 20,000,000 shares;
issued and outstanding 14,840,634 in 2018 and 13,963,200 in 2017
Additional paid-in capital
Accumulated earnings
Accumulated other comprehensive income
Total shareholders' equity
Noncontrolling interests
Total equity
Total liabilities and equity
December 31,
2017
*As
Adjusted
2018
$
366,305
362,526
54,792
439,167
20,110
334,149
54,956
64,738
139,628
37,248
69,710
124,217
1,705,020
29,537
16,522
22,255
104,441
76,674
382,257
200,887
136,425
86,363
46,721
426,858
23,902
281,291
68,536
51,234
111,929
39,482
70,449
122,753
1,605,681
31,370
16,893
21,079
103,464
84,697
336,421
144,114
135,414
47,968
9,472
1,064,833
13,974
935,394
2,579
2,765
-
784
148
161,684
385,789
1,215
549,620
87,988
637,608
1,705,020
-
857
140
228,331
354,432
1,708
585,468
82,054
667,522
1,605,681
$
$
$
* See Note 2 for a summary of adjustments.
See Notes to Consolidated Financial Statements
F-3
BBX Capital Corporation
Consolidated Statements of Operations and Comprehensive Income
(In thousands, except per share data)
For the Years Ended December 31,
2017
*As Adjusted
2016
*As Adjusted
2018
Revenues:
Sales of VOIs
Fee-based sales commissions
Other fee-based services
Cost reimbursements
Trade sales
Sales of real estate inventory
Interest income
Net gains on sales of real estate assets
Other revenue
Total revenues
Costs and Expenses:
Cost of VOIs sold
Cost of other fee-based services
Cost reimbursements
Cost of trade sales
Cost of real estate inventory sold
Interest expense
Recoveries from loan losses, net
Impairment losses
Net gains on cancellation of junior
subordinated debentures
Reimbursements of litigation costs and penalty
Selling, general and administrative expenses
Total costs and expenses
Equity in net earnings of unconsolidated
real estate joint ventures
Foreign exchange gain (loss)
Income before income taxes
(Provision) benefit for income taxes
Net income
Less: Net income attributable to noncontrolling interests
Net income attributable to shareholders
Basic earnings per share
Diluted earnings per share
Basic weighted average number of common shares
outstanding
Diluted weighted average number of common and
common equivalent shares outstanding
Cash dividends declared per Class A common share
Cash dividends declared per Class B common share
Net income
Other comprehensive (loss) income, net of tax:
Unrealized (losses) gains on securities available for sale
Foreign currency translation adjustments
Other comprehensive (loss) income, net
Comprehensive income, net of tax
Less: Comprehensive income attributable
to noncontrolling interests
$
$
$
$
$
$
$
Comprehensive income attributable to shareholders
$
* See Note 2 for a summary of adjustments.
254,225
216,422
118,024
62,534
179,486
21,771
85,501
4,563
5,067
947,593
23,813
72,968
62,534
125,648
14,116
41,938
(8,603)
4,668
-
(600)
537,941
874,423
14,194
68
87,432
(31,639)
55,793
20,691
35,102
0.37
0.36
242,017
229,389
111,819
52,639
142,085
-
83,708
1,451
6,462
869,570
17,679
64,560
52,639
105,918
-
35,205
(7,495)
7,431
(6,929)
(13,169)
533,478
789,317
12,541
(193)
92,601
9,702
102,303
18,378
83,925
0.85
0.81
273,873
201,829
103,448
49,557
95,839
-
85,747
3,213
8,647
822,153
28,829
61,149
49,557
80,363
-
36,037
(20,508)
4,656
-
-
515,481
755,564
12,178
219
78,986
(36,390)
42,596
13,166
29,430
0.34
0.34
95,298
98,745
86,902
97,860
0.040
0.040
55,793
(47)
(194)
(241)
55,552
20,691
34,861
103,916
0.030
0.030
102,303
135
406
541
102,844
18,378
84,466
87,492
0.015
0.015
42,596
(33)
584
551
43,147
13,166
29,981
See Notes to Consolidated Financial Statements
F-4
BBX Capital Corporation
Consolidated Statement of Changes in Equity
For Each of the Years in the Three Year Period Ended December 31, 2018
(In thousands)
Shares of
Common
Stock
Common
Stock
Outstanding Amount Additional
Accumulated
Other
Total
Non-
Class
A
B
Class
A B
Paid-in Accumulated Comprehensive Shareholders' controlling Total
Equity
Capital
Earnings
Interests
Income
Equity
73,212 11,346 $ 732 113
143,231
232,134
616
376,826
106,080
482,906
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,608
- 1,531
- 15
1,101
12,038
- 121
-
-
-
-
-
-
-
-
-
-
-
-
-
48,366
-
-
-
(1,880)
(247)
(19)
(2)
(7,299)
38
(38)
-
-
-
1,389
593
14
6
(20)
48
-
-
-
-
-
-
-
10
6,350
10,487
29,430
-
-
10,487
29,430
888
13,166
11,375
42,596
-
-
-
-
-
(1,174)
(212)
-
-
-
-
-
360
360
-
360
-
-
1,608
413
2,021
1,116
(1,116)
-
191
48,678
(65,572)
(16,894)
-
-
-
-
-
-
-
-
-
(12,250)
(12,250)
(1,174)
(212)
(7,320)
-
-
10
6,350
-
-
-
-
-
-
-
(1,174)
(212)
(7,320)
-
-
10
6,350
84,845 13,185 848 132
193,347
270,665
1,167
466,159
41,609
507,768
Balance,
December 31,
2015
Cumulative
effect from the
adoption of ASU
2014-09 and
ASU 2017-05*
Net income
Other
comprehensive
income
Subsidiaries'
capital
transactions
Increase in
investment in
BCC from share
exchange
agreements
Issuance of Class
A Common
Stock and
consideration
paid to acquire
BCC
noncontrolling
interests
Distributions to
noncontrolling
interests
Class A
Common Stock
cash dividends
declared
Class B Common
Stock cash
dividends
declared
Repurchase and
retirement of
Common Stock
Conversion of
Common Stock
from Class B to
Class A
Issuance of
Common Stock
from vesting of
restricted stock
awards
Issuance of
Common Stock
from exercise of
options
Share-based
compensation
Balance,
December 31,
2016
Cumulative
effect from
excess tax
benefits on share
based
compensation
associated with
the adoption of
-
-
-
-
-
3,054
-
3,054
-
3,054
83,925
-
83,925
18,203
102,128
541
541
-
541
ASU 2016-09
Net income
excluding $175
of earnings
attributable to
redeemable
noncontrolling
interest
Other
comprehensive
income
Bluegreen initial
public offering,
net of income
taxes
Distributions to
noncontrolling
interests
Class A
Common Stock
cash dividends
declared
Class B Common
Stock cash
dividends
declared
Repurchase and
retirement of
Common Stock
Conversion of
Common Stock
from Class B to
Class A
Issuance of
Common Stock
from vesting of
restricted stock
awards
Issuance of
Common Stock
from exercise of
options
Share-based
compensation
Balance,
December 31,
2017
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,303
-
-
-
-
-
-
-
-
-
-
-
(3,716)
(176)
(37)
(2)
(27,585)
95
(95)
-
-
-
4,315 1,049
43 10
(53)
150
-
-
-
3
-
-
-
60
12,259
-
-
-
(2,711)
(501)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,303
33,632
83,935
-
(11,390)
(11,390)
(2,711)
-
(2,711)
(501)
(27,624)
-
-
63
12,259
-
-
-
-
-
-
(501)
(27,624)
-
-
63
12,259
667,522
Continued
85,689 13,963 $ 857 140
228,331
354,432
1,708
585,468
82,054
F-5
BBX Capital Corporation
Consolidated Statement of Changes in Equity
For Each of the Years in the Three Year Period Ended December 31, 2018
(In thousands)
Shares of
Common
Stock
Common
Stock
Outstanding Amount Additional
Accumulated
Other
Total
Non-
Class
A
B
Class
A B
Paid-in Accumulated Comprehensive Shareholders' controlling Total
Interests Equity
Capital
Earnings
Income
Equity
85,689 13,963 $ 857 140
228,331
354,432
1,708
585,468
82,054 667,522
252
(252)
-
-
-
35,102
-
35,102
21,061 56,163
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,124)
-
-
-
-
-
(587)
-
-
-
-
-
-
-
-
-
-
(3,281)
(716)
-
-
-
-
-
-
-
-
Balance,
December 31,
2017
Cumulative effect
from the adoption
of ASU 2016-01
Net income
excluding $370 of
loss attributable to
redeemable
noncontrolling
interest
Other
comprehensive loss
Distributions to
noncontrolling
interests
Bluegreen
repurchase and
retirement of its
common stock
Increase in
noncontrolling
interest from loan
foreclosure
Purchase of
noncontrolling
interest
Class A Common
Stock cash
dividends declared
Class B Common
Stock cash
dividends declared
Repurchase and
retirement of
Common Stock
from tender offer
Repurchase and
retirement of
Common Stock
Conversion of
Common Stock
from Class B to
Class A
Issuance of
Common Stock
from vesting of
restricted stock
awards
(6,486)
-
(65)
-
(60,076)
(1,990)
(505)
(20)
(5)
(16,981)
38
(38)
1
(1)
-
1,101 1,421
11 14
(25)
-
-
-
-
-
-
245
12,901
27
Issuance of
Common Stock
from exercise of
options
Share-based
compensation
Balance,
December 31,
2018
*See Note 2 for a summary of
-
-
-
-
-
-
-
-
-
-
-
-
(241)
(241)
-
(241)
-
-
-
-
-
-
-
-
-
-
-
-
-
(14,284) (14,284)
(2,124)
(1,876)
(4,000)
-
704
704
(587)
329
(258)
(3,281)
-
(3,281)
(716)
-
(716)
(60,141)
- (60,141)
(17,006)
- (17,006)
-
-
245
12,901
-
-
-
-
-
-
245
12,901
78,379 14,841 $ 784 148
161,684
385,789
1,215
549,620
87,988 637,608
adjustments.
See Notes to Consolidated Financial Statements
F-6
BBX Capital Corporation
Consolidated Statements of Cash Flows
(In thousands)
For the Years Ended December 31,
2016
2017
*As
*As
Adjusted
Adjusted
2018
$
55,793
102,303
42,596
(8,603)
51,236
25,739
12,901
-
(4,563)
(14,194)
17,679
27,444
4,668
-
1,061
(63,545)
(32,022)
3,882
12,001
(1,607)
(1,231)
86,639
12,080
(29,070)
19,394
17,431
(1,221)
(45,550)
569
-
(4,696)
(31,063)
(7,495)
46,412
20,731
12,259
-
(1,451)
(12,541)
12,852
(12,680)
7,431
(6,929)
1,207
(47,470)
(42,757)
(2,261)
(273)
(7,410)
3,671
65,599
6,440
(5,310)
11,168
15,081
(1,642)
(22,045)
341
(58,418)
(380)
(54,765)
(20,508)
45,544
17,670
6,350
6,099
(3,213)
(12,178)
13,267
35,715
4,656
-
1,169
(59,219)
(18,323)
(1,834)
-
6,090
17,282
81,163
3,321
(3,370)
46,454
23,606
(8,176)
(12,939)
2,321
-
(2,019)
49,198
Continued
Operating activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Recoveries from loan losses, net
Provision for notes receivable allowances
Depreciation, amortization and accretion, net
Share-based compensation expense
Share-based compensation expense of subsidiaries
Net gains on sales of real estate assets
Equity in earnings of unconsolidated real estate joint ventures
Return on investment in unconsolidated real estate joint ventures
Increase (decrease) in deferred income tax
Impairment losses
Net gains on cancellation of junior subordinated debentures
Interest accretion on redeemable 5% cumulative preferred stock
Increase in notes receivable
Increase in VOI inventory
Decrease (increase) in trade inventory
Decrease (increase) in real estate inventory
(Increase) decrease in other assets
(Decrease) increase in other liabilities
Net cash provided by operating activities
Investing activities:
Return of investment in unconsolidated real estate joint ventures
Investments in unconsolidated real estate joint ventures
Repayment of loans receivable
Proceeds from sales of real estate held-for-sale
Additions to real estate held-for-sale and held-for-investment
Purchases of property and equipment
Proceeds from the sale of property and equipment
Cash paid for acquisition, net of cash received
Decrease in cash from other investing activities
Net cash (used in) provided by investing activities
F-7
BBX Capital Corporation
Consolidated Statements of Cash Flows
(In thousands)
Financing activities:
Repayments of notes payable and other borrowings
Proceeds from notes payable and other borrowings
Redemption of junior subordinated debentures
Payments for debt issuance costs
Payments of interest on redeemable 5% cumulative preferred stock
Repurchase and retirement of Common Stock
Repurchase and retirement of subsidiaries’ common stock
Purchase of BCC noncontrolling interest
Purchase of noncontrolling interest
Proceeds from the exercise of stock options
Dividends paid on Common Stock
Bluegreen initial public offering, net of offering costs
Distributions to noncontrolling interests
Net cash (used in) provided by financing activities
Increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental cash flow information:
Interest paid on borrowings
Income taxes paid
Income taxes refunded
$
$
Supplementary disclosure of non-cash investing and financing
activities:
Construction funds receivable transferred to real estate
Loans receivable transferred to real estate
Loans held-for-sale transferred to loans receivable
Acquisition of VOI inventory, property and equipment for notes
payable
Reduction in redeemable 5% cumulative preferred stock
Reduction in note receivable from holder of
redeemable 5% cumulative preferred stock
Real estate transferred to property and equipment
Property and equipment transferred to real estate
Decrease in deferred tax liabilities due to cumulative effect of
excess
tax benefits
Increase in other assets upon issuance of Community
Development District Bonds
Assumption of Community Development District Bonds by
developer
Issuance of common stock to acquire BCC noncontrolling interest
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents, and restricted cash
$
For the Years Ended December 31,
2016
2017
*As
*As
Adjusted
Adjusted
2018
(279,737)
336,951
-
(1,121)
(563)
(77,147)
(4,000)
-
(258)
245
(3,812)
-
(14,284)
(43,726)
11,850
409,247
421,097
37,424
3,801
-
14,548
1,673
-
24,258
4,862
(5,000)
-
-
(233,132)
246,771
(11,438)
(3,390)
(750)
(27,624)
-
-
-
63
(2,937)
95,923
(11,390)
52,096
62,930
346,317
409,247
29,980
4,015
-
11,276
1,365
-
-
-
-
-
6,181
(281,177)
285,682
-
(4,608)
(750)
(7,320)
(4,151)
(16,894)
-
10
(856)
-
(12,250)
(42,314)
88,047
258,270
346,317
32,139
2,203
(2,695)
-
4,807
16,078
-
-
-
6,557
-
-
3,054
-
15,996
5,572
-
366,305
54,792
421,097
-
-
-
362,526
46,721
409,247
20,743
-
48,487
299,861
46,456
346,317
*See Note 2 for a summary of adjustments.
See Notes to Consolidated Financial Statements
F-8
BBX Capital Corporation
Notes to Consolidated Financial Statements
1. Organization
BBX Capital Corporation and its subsidiaries (the “Company” or, unless otherwise indicated or the
context otherwise requires, “we,” “us,” or “our”) is a Florida-based diversified holding company. BBX
Capital Corporation as a standalone entity without its subsidiaries is referred to as “BBX Capital.”
In December 2016, BBX Capital completed the acquisition of all the outstanding shares of the former
BBX Capital Corporation (“BCC”) not previously owned by it. Prior to the acquisition, BBX Capital
had an 82% equity interest in BCC and a direct 54% equity interest in Woodbridge Holdings, LLC
(“Woodbridge”), and BCC held the remaining 46% interest in Woodbridge. As a result of the
acquisition, BCC and Woodbridge are wholly-owned subsidiaries of BBX Capital, and on January 30,
2017, the Company changed its name from BFC Financial Corporation to BBX Capital Corporation.
See Note 4 for additional information regarding the acquisition of BCC.
Principal Investments
The Company’s principal investments include Bluegreen Vacations Corporation (“Bluegreen” or
“Bluegreen Vacations”), BBX Capital Real Estate LLC (“BBX Capital Real Estate”), Renin Holdings,
LLC (“Renin”), and IT’SUGAR, LLC (“IT’SUGAR”).
Bluegreen is a leading vacation ownership company that markets and sells VOIs and manages resorts in
popular leisure and urban destinations. Bluegreen’s resort network includes 45 Club Resorts (resorts in
which owners in the Bluegreen Vacation Club (“Vacation Club”) have the right to use most of the units
in connection with their VOI ownership) and 24 Club Associate Resorts (resorts in which owners in
Bluegreen’s Vacation Club have the right to use a limited number of units in connection with their VOI
ownership). Bluegreen markets, sells and manages VOIs in resorts, which are generally located in
popular, high-volume, “drive-to” vacation destinations, including Orlando, Las Vegas, Myrtle Beach,
Charleston and New Orleans, among others. Through its points-based system, the approximately
216,000 owners in Bluegreen’s Vacation Club have the flexibility to stay at units available at its resorts
and have access to over 11,000 other hotels and resorts through partnerships and exchange networks.
The resorts in which Bluegreen markets, sells or manages VOIs were either developed or acquired by
Bluegreen, or were developed and are owned by third parties. Bluegreen earns fees for providing sales
and marketing services to third party developers. Bluegreen also earns fees by providing management
services to the Vacation Club and homeowners’ associations (“HOAs”), mortgage servicing, VOI title
services, reservation services, and construction design and development services. In addition, Bluegreen
provides financing to FICO score-qualified purchasers of VOIs, which generates significant interest
income.
Prior to the fourth quarter of 2017, Woodbridge owned 100% of Bluegreen’s common stock. During the
fourth quarter of 2017, Bluegreen completed an initial public offering (“IPO”) of its common stock in
which Bluegreen sold to the public 3,736,723 shares of its common stock and Woodbridge, as a selling
shareholder, sold to the public 3,736,722 shares of Bluegreen’s common stock. In addition, during the
fourth quarter of 2018, Bluegreen repurchased and retired 288,532 shares of its common stock for $4.0
million. As a result of Bluegreen’s IPO and subsequent share repurchases, BBX Capital owns
approximately 90.3% of Bluegreen’s common stock through Woodbridge.
BBX Capital Real Estate is engaged in the acquisition, development, construction, ownership,
financing, and management of real estate and investments in real estate joint ventures. Included in the
Company’s real estate investments is a 50% interest in The Altman Companies LLC, a developer and
manager of multifamily apartment communities.
Renin is engaged in the design, manufacture, and distribution of sliding doors, door systems and
hardware, and home décor products and operates through its headquarters in Canada and two
manufacturing and distribution facilities in the United States and Canada.
F-9
IT’SUGAR is a specialty candy retailer which operates approximately 100 retail locations in over 25
states and Washington D.C., and its products include bulk candy, giant candy packaging, and novelty
items that are sold at its retail locations, which include a mix of high-traffic resort and entertainment,
lifestyle, mall/outlet, and urban locations. IT’SUGAR was acquired by the Company in June 2017.
In addition to its principal investments, the Company has other investments in various operating
businesses, including restaurant locations throughout Florida and companies in the confectionery
industry.
2. Basis of Presentation and Significant Accounting Policies
Consolidation Policy - The consolidated financial statements include the accounts of BBX Capital’s
wholly-owned subsidiaries, other entities in which BBX Capital or its subsidiaries hold controlling
financial interests, and any VIEs in which BBX Capital or one of its consolidated subsidiaries is deemed
the primary beneficiary of the VIE. All significant inter-company accounts and transactions have been
eliminated in consolidation.
Use of Estimates – The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (“GAAP”) requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates. On an ongoing
basis, management evaluates its estimates, including those that relate to the estimated future sales value
of inventory; the recognition of revenue; the allowance for credit losses; the recovery of the carrying
value of VOI inventories and real estate; the measurement of assets and liabilities at fair value,
including amounts recognized in business combinations and items measured at fair value on a non-
recurring basis, such as intangible assets, goodwill, and real estate; the amount of the deferred tax
valuation allowance and accounting for uncertain tax positions; and the estimate of contingent
liabilities related to litigation and other claims and assessments. Management bases its estimates on
historical experience and on various other assumptions that it believes to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ
materially from these estimates under different assumptions and conditions.
Reclassifications - Certain amounts for prior years have been reclassified to conform to the revised
financial statement presentation for 2018. The Company’s adoption of the new revenue recognition
accounting standard on a full retrospective basis required the Company to restate certain previously
reported results. For further details regarding the impact of the adoption of the standard, see the
“Recently Adopted Accounting Pronouncements” section below. In addition, the Company reclassified
its loans receivable to other assets in its consolidated statement of financial condition. Loans receivable
had an outstanding balance of $6.2 million and $19.5 million as of December 31, 2018 and 2017,
respectively.
Cash, Cash Equivalents, and Restricted Cash - Cash equivalents consist of demand deposits at
financial institutions, money market funds, and other short-term investments with original maturities at
the time of purchase of 90 days or less. Cash in excess of the Company’ immediate operating
requirements are generally invested in short-term time deposits and money market instruments that
typically have original maturities at the date of purchase of three months or less. Restricted cash
consists primarily of customer deposits held in escrow accounts and cash collected on pledged/secured
notes receivable not yet remitted to lenders. Cash and cash equivalents are maintained at various
financial institutions located throughout the United States, as well as in Canada and Aruba, in amounts
exceeding the $250,000 federally insured limit. Accordingly, the Company is subject to credit risk.
Revenue Recognition
Sales of VOIs – Revenue is recognized for sales of VOIs after control of the VOI is deemed transferred
to the customer, which is when the legal rescission period has expired on a binding executed VOI sales
agreement and the collectability of the note receivable from the buyer, if any, is reasonably assured.
Transfer of control of the VOI to the buyer is deemed to occur when the legal rescission period expires
as the risk and rewards associated with VOI ownership are transferred to the buyer at that time. The
Company records Bluegreen’s customer deposits from contracts within the legal rescission period in
restricted cash and escrow deposits in the Company’s consolidated statements of financial condition, as
such amounts are refundable until the legal rescission period has expired. In cases where construction
and development of Bluegreen’s developed resorts has not been substantially completed, Bluegreen
defers all of the
F-10
revenues and associated expenses for the sales of VOIs until construction is substantially complete and
the resort may be occupied.
Bluegreen generally offers qualified purchasers financing for up to 90% of the purchase price of VOIs.
The typical financing provides for a term of ten years and a fixed interest rate, is fully amortizing in
equal installments, and may be prepaid without penalty. For sales of VOIs for which Bluegreen provides
financing, Bluegreen reduces the transaction price for expected credit losses, which it considers to be
variable consideration. To the extent Bluegreen determines that it is probable that a significant reversal
of cumulative revenue recognized may occur, it records an estimate of variable consideration as a
reduction to the transaction price of the sales of VOIs until the uncertainty associated with the variable
consideration is resolved. Bluegreen’s estimates of variable consideration are based on the results of its
static pool analysis, which relies on historical payment data for similar VOI notes receivable and tracks
uncollectibles for each period’s sales over the entire life of the notes. Bluegreen also considers whether
historical economic conditions are comparable to then current economic conditions, as well as
variations in underwriting standards. Bluegreen reviews its estimate of variable consideration on at least
a quarterly basis. VOI sales where no financing is provided do not have any significant payment terms.
Rental operations, including accommodations provided through the use of Bluegreen’s sampler
program, are accounted for as incidental operations whereby incremental carrying costs in excess of
incremental revenues are expensed as incurred. During each of the years presented, Bluegreen’s
aggregate rental revenue and sampler revenue was less than the aggregate carrying cost of its VOI
inventory. Accordingly, Bluegreen recorded such revenue as a reduction to the carrying cost of VOI
inventory, which is included in cost of other fee-based services in the Company’s consolidated
statements of operations and comprehensive income for each year.
Fee-based sales commissions - Fee-based sales commission revenue is recognized when a sales
transaction with a VOI purchaser is consummated in accordance with the terms of the fee-based sales
agreement with the third-party developer, it is probable that a significant reversal of such revenue will
not occur, and the related consumer rescission period has expired.
Other fee-based services and cost reimbursements - Revenue associated with Bluegreen’s other fee-
based services is recognized as follows:
·
·
·
Resort and club management revenue and related cost reimbursements are recognized as
services are rendered. These services provided to the resort HOAs are comprised of day-to-
day services to operate the resort, including management services and certain accounting and
administrative functions. Management services provided to the Vacation Club include
managing the reservation system and providing owner, billing, and collection services.
Bluegreen’s management contracts are typically structured as cost-plus, with an initial term of
three years and automatic one-year renewals. Bluegreen believes these services to be a series
of distinct goods and services to be accounted for as a single performance obligation over time
and recognizes revenue as the customer receives the benefits of its services. Bluegreen
allocates variable consideration to the distinct good or service within the series, such that
revenue from management fees and cost reimbursements is recognized in each period as the
uncertainty with respect to such variable consideration is resolved.
Resort title fee revenue is recognized when escrow amounts are released and title documents
are completed.
Rental revenues are recognized on a daily basis, which is consistent with the period for which
the customer benefits from such service. Revenue from the sampler program is typically
recognized within a year from sale as guests complete stays at the resorts.
· Mortgage servicing revenue is recognized as services are rendered.
Fees received in advance are generally included in deferred income in the Company’s consolidated
statement of financial condition until the related service is rendered and revenue is recognized as stated
above.
Trade sales – Revenue is recognized on trade sales as follows:
·
Revenue is recognized on wholesale trade sales when control of the products is transferred to
customers, which generally occurs when the products are shipped or the customers accept
delivery. Wholesale trade sales typically have payment terms between 10 and 90 days. Certain
customer trade sale contracts have provisions for right of return, volume rebates, and price
concessions. These types of discounts are accounted for as variable consideration, and the
Company uses the expected value method to calculate the estimated reduction in the trade
sales revenue. The inputs used in the expected value method include historical experience
with the customer, sales forecasts, and outstanding purchase orders.
F-11
·
·
Revenue is recognized on retail trade sales at the point of sale, which occurs when products
are sold at the Company’s retail locations.
Sales and other taxes imposed by governmental authorities that are collected by the Company
from customers are excluded from revenue or the transaction price.
Sales of real estate inventory - Revenue is generally recognized on sales of real estate inventory to
customers when the sales are closed and title passes to the buyer. The Company generally receives
payment from the sale of real estate inventory at the date of closing. In addition, certain real estate sales
contracts provide for a contingent purchase price. The contingent purchase price in contracts pursuant to
which the Company sells developed lots to homebuilders is generally calculated as a percentage of the
proceeds that the homebuilders receive from sales to their own customers, and the Company does not
receive payment of such amounts until the homebuilders close on such sales. The Company accounts
for contingent purchase price as variable consideration and estimates the amount of such consideration
that may be recognized upon the closing of the real estate transaction based on the expected value
method. The estimate of variable consideration is recognized as revenue to the extent that it is not
probable that a significant revenue reversal in the amount of cumulative revenue recognized will occur
when the uncertainty associated with the variable consideration is subsequently resolved. The inputs
used in the expected value method include current sales prices (net of incentives), historical contingent
purchase price receipts, and sales contracts on similar properties.
Interest income - Bluegreen provides financing for a significant portion of sales of its owned VOIs.
Bluegreen recognizes interest income from financing VOI sales on the accrual method as earned based
on the outstanding principal balance, interest rate, and terms stated in each individual financing
agreement.
Interest income from other loans receivable originated by the Company is recognized on accruing loans
when management determines that it is probable that all of the principal and interest will be collected in
accordance with the loan’s contractual terms. Interest income is recognized on non-accrual loans on a
cash basis. Loans receivable are included in other assets in the Company’s statements of financial
condition.
Net gains on sales of real estate assets – Net gains on sales of real estate assets represents sales of assets
to non-customers. Gains (or losses) are recognized from sales to non-customers when the control of the
asset has been transferred to the buyer, which generally occurs when title passes to the buyer.
Other revenue – Other revenue is primarily comprised of rental income from properties under operating
leases. Rental income is recognized as rents become due, and rental payments received in advance are
deferred until earned.
Notes Receivable - Bluegreen’s notes receivable are carried at amortized cost less an allowance for
credit losses, and its loan origination costs are deferred and recognized over the life of the related notes
receivable. Interest income is suspended, and previously accrued but unpaid interest income is reversed,
on all delinquent notes receivable when principal or interest payments are more than 90 days
contractually past due and is not resumed until such notes receivable are less than 90 days past due.
After 120 days, Bluegreen’s notes receivable are generally written off against the allowance for credit
loss.
VOI Inventory - Bluegreen’s VOI inventory is primarily comprised of completed VOIs, VOIs under
construction, and land held for future VOI development. Completed VOI inventory is carried at the
lower of (i) cost, including costs of improvements and amenities incurred subsequent to acquisition,
capitalized interest and real estate taxes, and other costs incurred during construction, or (ii) estimated
fair market value, less costs to sell. VOI inventory and cost of sales are accounted for under timeshare
accounting rules, which require the use of a specific method of the relative sales value method for
relieving VOI inventory and recording cost of sales. Under the relative sales value method, cost of sales
is calculated as a percentage of net sales using a cost-of-sales percentage that is the ratio of total
estimated development costs to total estimated VOI revenue, including the estimated incremental
revenue from the resale of repossessed VOI inventory that is generally obtained as a result of the default
of the related receivable. In addition, pursuant to timeshare accounting rules, Bluegreen does not relieve
inventory for VOI cost of sales related to anticipated credit losses. Accordingly, no adjustment is made
when inventory is reacquired upon default of the related receivable.
Bluegreen also periodically evaluates the recoverability of the carrying amount of its undeveloped or
under development resort properties in accordance with ASC 360, Property, Plant and Equipment
(“ASC 360”), which provides guidance relating to the accounting for the impairment or disposal of
long-lived assets. No impairment charges were recorded with respect to VOI inventory during any of the
years presented.
F-12
Trade Inventory – Trade inventory is measured at the lower of cost or market. Cost includes all costs of
conversions, including materials, direct labor, production overhead, depreciation of equipment, and
shipping costs. Raw materials are stated at the lower of approximate cost, on a first-in, first-out or
average cost basis, and market is determined by reference to replacement cost. Raw materials are not
written down unless the goods in which they are incorporated are expected to be sold for less than cost,
in which case, they are written down by reference to replacement cost of the raw materials. Finished
goods and work in progress are stated at the lower of cost or market determined on a first-in, first-out or
average cost basis. Shipping and handling fees billed to customers are recorded as trade sales, and
shipping and handling fees paid by the Company are recorded as cost of goods sold.
In valuing inventory, the Company makes assumptions regarding the write-downs required for excess
and obsolete inventory based on judgments and estimates formulated from available information.
Estimates for excess and obsolete inventory are based on historical and forecasted usage. Inventory is
also examined for upcoming expiration, and write-downs are recorded where appropriate.
Real Estate – From time to time, the Company acquires real estate or takes possession or ownership of
real estate through the foreclosure of collateral on loans receivable. Such real estate is classified as real
estate held-for-sale, real estate held-for-investment, or real estate inventory. When real estate is
classified as held-for-sale, it is initially recorded at fair value less estimated selling costs and
subsequently measured at the lower of cost or estimated fair value less selling costs. When real estate is
classified as held-for-investment, it is initially recorded at fair value and, if applicable, is depreciated in
subsequent periods over its useful life using the straight-line method. Real estate is classified as real
estate inventory when the property is under development for sale to customers and is measured at cost,
including costs of improvements and amenities incurred subsequent to acquisition, capitalized interest
and real estate taxes, and other costs incurred during the construction period. Expenditures for capital
improvements are generally capitalized, while the ongoing costs of holding and operating real estate are
charged to selling, general and administrative expenses as incurred. Impairments required on loans
receivable at the time of foreclosure of real estate collateral are charged to the allowance for loan
losses, while impairments of real estate required under ASC 360 to reflect subsequent declines in fair
value are recorded as impairment losses in the Company’s consolidated statement of operations and
comprehensive income.
Investments in Unconsolidated Real Estate Joint Ventures - The Company uses the equity method of
accounting to record its interests in entities in which it has significant influence but does not hold a
controlling financial interest and to record its investment in VIEs in which it is not the primary
beneficiary. Under the equity method, an investment is reflected on the statement of financial condition
of an investor as a single amount, and an investor’s share of earnings or losses from its investment is
reflected in the statement of operations as a single amount. The investment is initially measured at cost
and subsequently adjusted for the investor’s share of the earnings or losses of the investee and
distributions received from the investee. The investor recognizes its share of the earnings or losses of
the investee in the periods in which they are reported by the investee in its financial statements rather
than in the period in which an investee declares a distribution. Intra-entity profits and losses on assets
still remaining with an investor or investee are eliminated.
The Company recognizes earnings or losses on certain equity method investments based on the
hypothetical liquidation at book value (“HLBV”) method. Under the HLBV method, earnings or losses
are recognized based on how an entity would allocate and distribute its cash if it were to sell all of its
assets and settle its liabilities for their carrying amounts and liquidate at the reporting date. The HLBV
method is used to calculate earnings or losses for equity method investments when the contractual cash
disbursements are different than the investors’ equity interest.
Interest expense is capitalized by the Company on investments, advances, or loans to real estate joint
ventures accounted for under the equity method that have commenced qualifying activities, such as real
estate development projects. The capitalization of interest expense ceases when the investee completes
its qualifying activities, and total capitalized interest expense cannot exceed interest expense incurred.
The Company reviews its investments on an ongoing basis for indicators of other-than-temporary
impairment. This determination requires significant judgment in which the Company evaluates, among
other factors, the fair market value of the investments, general market conditions, the duration and
extent to which the fair value of an investment is less than cost, and the Company’s intent and ability to
hold an investment until it recovers. The Company also considers specific adverse conditions related to
the financial health and business outlook of the investee, including industry and market performance,
rating agency actions, and expected future operating and financing cash flows. If a decline in the fair
value of an investment is determined to be other-than-temporary, an impairment charge is recorded to
reduce the investment to its fair value, and a new cost basis in the investment is established.
F-13
Property and Equipment - Land is carried at cost. Property and equipment are carried at cost less
accumulated depreciation. Depreciation is primarily computed on the straight-line method over the
estimated useful lives of the assets which generally range up to 40 years for buildings and building
improvements, from 3 to 14 years for office furniture, fixtures, and equipment, from 3 to 5 years for
transportation and equipment, and from 3 to 14 years for leasehold improvements. The cost of leasehold
improvements is amortized using the straight-line method over the shorter of the terms of the related
leases or the estimated useful lives of the improvements.
Expenditures for new property, leasehold improvements, and equipment and major renewals and
betterments are capitalized. Expenditures for maintenance and repairs are expensed as incurred, and
gains or losses on disposal of assets are reflected in current operations.
The cost of software developed for internal use is capitalized in accordance with the accounting
guidance for costs of computer software developed or obtained for internal use. The capitalization of
costs of software developed for internal use commences during the development phase of the project
and ends when the software is ready for its intended use. Software developed or obtained for internal
use is generally amortized on a straight-line basis over 3 to 5 years. The Company capitalized costs of
software for internal use of $10.2 million and $6.2 million for the years ended December 31, 2018 and
2017, respectively.
Goodwill and Intangible Assets
Goodwill – The Company recognizes goodwill upon the acquisition of a business when the fair values
of the consideration transferred and any noncontrolling interests in the acquiree are in excess of the fair
value of the acquiree’s identifiable net assets. The Company tests goodwill for potential impairment on
an annual basis as of December 31 or during interim periods if impairment indicators exist. The
Company first assesses qualitatively whether it is necessary to perform goodwill impairment testing.
Impairment testing is performed when it is more likely than not that the fair value of a reporting unit is
less than its carrying amount, including goodwill. The Company evaluates various factors affecting a
reporting unit in its qualitative assessment, including, but not limited to, macroeconomic conditions,
industry and market considerations, cost factors, and financial performance.
Prior to January 1, 2017, the Company performed a two-step goodwill impairment test if management
concluded from the qualitative assessment that testing was required, which was the case for certain of
the Company’s reporting units during the year ended December 31, 2016. The first step of the goodwill
impairment test was used to identify potential impairment and consisted of comparing the fair value of a
reporting unit with its carrying value. If the fair value of the reporting unit exceeded its carrying value,
goodwill was considered not impaired, and the second step of the impairment test was not performed. If
the fair value of the reporting unit was less than the carrying value, the second step of the test was used
to measure the amount of goodwill impairment, if any, associated with the reporting unit and consisted
of comparing the implied goodwill in the reporting unit to its carrying amount. If the carrying amount
of the goodwill exceeded the implied goodwill, the Company recorded an impairment for the excess
amount. The implied goodwill was determined in the same manner as the amount of goodwill
recognized in a business combination.
During the year ended December 31, 2017, the Company adopted Accounting Standards Update
(“ASU”) No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for
Goodwill Impairment, which amended Topic 350 and removed the second step of the two-step goodwill
impairment test described above. Under the amended guidance, if the carrying amount of a reporting
unit exceeds its fair value, the Company records an impairment for the excess amount, although the
impairment loss is limited to the amount of goodwill allocated to the reporting unit.
Intangible assets - Intangible assets consist primarily of indefinite-lived management contracts
recognized upon the consolidation of Bluegreen in November 2009. The remaining balance in
intangible assets includes various amortizable intangible assets that are amortized on a straight-line
basis of their respective estimated useful lives, including trade names, non-competition agreements, and
off-market lease agreements acquired in connection with business combinations that were initially
recorded at fair value at the applicable acquisition date, as well as area development and franchise
contracts that were initially recorded at cost.
Indefinite-lived intangible assets are not amortized and are tested for impairment on at least an annual
basis, or more frequently if events and circumstances indicate that it is more likely than not that the
related carrying amounts may be impaired. The Company evaluates indefinite-lived intangible assets
for impairment by first qualitatively considering relevant events and circumstances to determine
whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its
carrying amount. If it is more likely than not that the fair value of the indefinite-lived intangible asset is
greater than its carrying amount, the indefinite-lived intangible asset is not impaired. If the Company
concludes that it is more likely than not that the fair value of an indefinite-lived intangible asset is less
than
F-14
its carrying amount, the Company estimates the fair value of the indefinite-lived intangible asset and
compares the estimated fair value to the carrying amount. If the fair value of the indefinite-lived
intangible asset is less than the carrying value, an impairment is recognized for the difference.
Amortizable intangible assets are tested for recoverability whenever events or changes in circumstances
indicate that the carrying amount of the intangible asset may not be recoverable. The carrying amount
of an intangible asset is not considered recoverable when the carrying amount exceeds the sum of the
undiscounted cash flows expected to result from the use of the intangible asset. To the extent that the
carrying amount of an intangible asset exceeds the sum of such undiscounted cash flows, an impairment
is measured and recorded based on the amount by which the carrying amount of the intangible asset
exceeds its fair value.
Trade Receivables – Trade receivables are recorded at the invoiced amount and do not bear interest.
The Company maintains an allowance for doubtful accounts for estimated losses inherent in its trade
receivable portfolio. In establishing the required allowance, management considers various factors,
including historical losses, current market conditions, the customers' financial condition, the amount of
receivables in dispute, and the current receivables aging and payment patterns. The Company reviews
its allowance for doubtful accounts on a quarterly basis. Past due balances over 90 days and over a
specified amount are reviewed individually for collectibility. Account balances are charged off against
the allowance after all standard means of collection have been exhausted and the potential for recovery
is considered remote. Trade receivables are included in other assets in the Company’s consolidated
statements of financial condition and had an outstanding balance of $18.3 million and $16.0 million as
of December 31, 2018 and 2017, respectively.
Deferred Financing Costs – Deferred financing costs are comprised of costs incurred in connection
with obtaining financing from third-party lenders and are presented in the Company’s consolidated
statement of financial condition as other assets or as a direct deduction from the carrying amount of the
associated debt liability. These costs are capitalized and amortized to interest expense over the terms of
the related financing arrangements. As of December 31, 2018 and 2017, unamortized deferred financing
costs presented in other assets totaled $5.6 million and $5.8 million, respectively, while unamortized
costs presented against the associated debt liabilities totaled $9.1 million and $8.7 million, respectively.
Interest expense from the amortization of deferred financing costs for the years ended December 31
2018, 2017 and 2016 was $3.5 million, $3.1 million, and $3.1 million, respectively.
Advertising – The Company expenses advertising costs, which are primarily marketing costs, as
incurred. Advertising expenses totaled $138.9 million, $148.6 million and $146.0 million for the years
ended December 31, 2018, 2017 and 2016, respectively, and are included in selling, general and
administrative expenses in the accompanying consolidated statements of operations and comprehensive
income.
Bluegreen has entered into marketing arrangements with various third parties. For the years ended
December 31, 2018, 2017 and 2016, sales of VOIs to prospects and leads generated by Bass Pro
accounted for approximately 14%, 15%, and 16%, respectively, of total VOI sales volume.
Income Taxes – The Company and its subsidiaries in which it owns 80% or more of the voting power
and value of the subsidiary’s stock file a consolidated U.S. Federal and Florida income tax return. Other
than Florida, the Company and its subsidiaries file separate or unitary state income tax returns for each
jurisdiction. Subsidiaries in which the Company owns less than 80% of the outstanding equity are not
included in the Company’s consolidated U.S. Federal or Florida state income tax return.
The provision for income taxes is based on income before taxes reported for financial statement
purposes after adjustment for transactions that do not have tax consequences. Deferred tax assets and
liabilities are recognized according to the estimated future tax consequences attributable to differences
between the carrying value of existing assets and liabilities and their respective tax basis. Deferred tax
assets and liabilities are measured using the enacted tax rates as of the date of the statement of financial
condition. The effect of a change in tax rates on deferred tax assets and liabilities is reflected in the
period that includes the statutory enactment date. A deferred tax asset valuation allowance is recorded
when it has been determined that it is more likely than not that deferred tax assets will not be
realized. If a valuation allowance is recorded, a subsequent change in circumstances that causes a
change in judgment about the realization of the related deferred tax amount could result in the reversal
of the deferred tax valuation allowance.
An uncertain tax position is defined as a position taken or expected to be taken in a tax return that is not
based on clear and unambiguous tax law and which is reflected in measuring current or deferred income
tax assets and liabilities for interim or annual periods. The Company may recognize the tax benefit
from an uncertain tax position only if it believes
F-15
that it is more likely than not that the tax position will be sustained on examination by the taxing
authorities based on the technical merits of the position. The Company measures the tax benefits
recognized based on the largest benefit that has a greater than 50% likelihood of being realized upon
ultimate resolution. The Company recognizes interest and penalties related to unrecognized tax benefits
in its provision for income taxes.
Noncontrolling Interests – Noncontrolling interests reflect third parties’ ownership interests in entities
that are consolidated in the Company’s financial statements but are less than 100% owned by the
Company. A noncontrolling interest is recognized as equity in the consolidated statement of financial
condition and presented separately from the equity attributable to BBX Capital’s shareholders, while a
noncontrolling interest that is redeemable for cash at the holder’s option or upon a contingent event
outside of the Company’s control is classified as redeemable noncontrolling interests and presented in
the mezzanine section between total liabilities and equity in the consolidated statement of financial
condition. A change in the ownership interests of a subsidiary is accounted for as an equity transaction
if the Company retains its controlling financial interest in the subsidiary.
The amounts of consolidated net income and comprehensive income attributable to BBX Capital’s
shareholders and noncontrolling interests are separately presented in the Company’s consolidated
statement of operations and comprehensive income.
Accounting for Loss Contingencies – Loss contingencies, including those arising from legal actions,
are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be
reasonably estimated.
Earnings Per Share - Basic earnings per share is computed by dividing net income attributable to BBX
Capital’s shareholders by the weighted average number of common shares outstanding for the period.
Diluted earnings per share is computed in the same manner as basic earnings per share but also reflects
potential dilution that could occur if options to acquire common shares or restricted stock awards of the
Company were exercised or vest. Common stock options and restricted stock awards, if dilutive, are
considered in the weighted average number of dilutive common shares outstanding based on the
treasury stock method. Diluted earnings per share also takes into consideration the potential dilution
from securities issued by subsidiaries that enable their holders to obtain the subsidiary’s common stock.
The resulting net income amount is divided by the weighted average number of dilutive common shares
outstanding.
Stock-Based Compensation – Compensation cost for unvested restricted stock awards is based on the
fair value of the award on the measurement date, which is generally the grant date, and is recognized on
a straight-line basis over the requisite service period of the award, which is generally four years for
unvested restricted stock awards. The fair value of unvested restricted stock awards is generally the
market price of the Company’s common stock on the grant date.
Recently Adopted Accounting Pronouncements
The Financial Accounting Standards Board (“FASB”) has
the following accounting
pronouncements and guidance relevant to the Company’s operations which have been adopted as of
January 1, 2018:
issued
ASU No. 2014-09 – Revenue Recognition (Topic 606). In May 2014, the FASB issued a new standard
related to revenue recognition (as subsequently amended and clarified by various ASUs). Under the
new standard, revenue is recognized when an entity satisfies a performance obligation by transferring to
a customer control over promised goods or services and is recognized in an amount that reflects the
consideration which the entity expects to receive in exchange for those goods or services. In addition,
the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash
flows arising from contracts with customers.
The Company adopted the standard on January 1, 2018 under the full retrospective method, and
accordingly, results for prior periods have been adjusted to apply the new standard as shown below.
The adoption of the standard affected Bluegreen in certain areas. Under the standard, Bluegreen is
required to present reimbursements of costs for payroll and insurance premiums associated with resorts
managed by Bluegreen and on behalf of third parties on a gross basis in revenues, while such
reimbursements were previously presented net against the related costs. In addition, the standard
impacted the timing of the recognition of revenue from sales of VOIs due to the removal of certain
bright line tests regarding the determination of the adequacy of a buyer’s commitment under prior
industry-specific accounting guidance. Bluegreen concluded that the recognition of other various
revenue streams, including fee-based sales commissions and rental revenues, remained materially
unchanged.
F-16
The adoption of the standard affected the Company’s real estate activities primarily in relation to the
recognition of contingent revenue on sales of real estate inventory, as the standard results in such
revenue being recognized sooner than under prior industry-specific accounting guidance.
The adoption of the standard did not materially affect revenue recognition associated with the
Company’s trade sales. Retail trade sales performance obligations are generally satisfied at the time of
the sales transaction, as customers of the retail business typically pay in cash at the time of transfer of
the promised goods, while wholesale trade sales performance obligations are generally satisfied when
the promised goods are shipped by the Company or received by the customer. However, the Company
has historically recognized shipping and handling costs in selling, general and administration expenses,
and upon the adoption of the standard, the Company began accounting for such costs as a fulfillment
cost in cost of trade sales.
The Company has elected to use the following practical expedients in connection with the adoption of
the standard:
• We utilize the transaction price upon completion of the contract for certain contracts with
customers;
• We do not disclose the value of unsatisfied performance obligations for contracts with an
original expected length of one year or less or unsatisfied performance obligations or unsatisfied
promises to transfer a distinct good or service that forms a part of a single performance
obligation recognized over time;
• We expense all marketing and sales costs as incurred;
• We exclude from the transaction price all taxes assessed by a governmental authority that are
imposed on a specified transaction concurrent with the closing thereof and are collected by the
Company from a customer;
• We do not disclose remaining performance obligations for variable consideration when the
variable consideration is allocated entirely to a wholly unsatisfied performance obligation;
• We do not disclose remaining performance obligations when revenue is recognized based on the
Company’s right to invoice;
• We account for shipping and handling activities that occur after the control of the goods is
transferred to a customer as fulfillment activities instead of a separate performance obligation;
• We recognize incremental costs of obtaining a contract as an expense when incurred if the
amortization period of the asset is one year or less; and
• We do not adjust the transaction price for the effects of a significant financial component if we
expect, at the contract inception, that the performance obligations will be satisfied within one
year or less.
ASU No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets
(Subtopic 610-20). This standard provides guidance on the recognition of gains and losses from the
transfer of nonfinancial assets to non-customers and requires that an entity must identify each distinct
nonfinancial asset or in substance nonfinancial asset promised to a non-customer or counterparty and
derecognize each asset when the counterparty obtains control of the asset.
This standard significantly changed the guidance on the transfer of real estate to unconsolidated joint
ventures. Under prior guidance, the transfer of real estate to an unconsolidated joint venture was
accounted for as a partial sale, resulting in the recognition of a partial gain, and the noncontrolling
interest retained was measured at historical cost, resulting in a basis adjustment to the seller’s
investment in the joint venture. In addition, the partial gain could be deferred if the sale did not satisfy
certain criteria for gain recognition. As a result, the Company previously accounted for the transfer of
land to certain unconsolidated real estate joint ventures for initial capital contributions as partial sales,
resulting in deferred gains and basis adjustments related to our investment in such ventures. However,
under the new standard, the full gain is recognized upon the transfer of control of real estate to an
unconsolidated joint venture, and any noncontrolling interest retained is measured at fair value.
The Company adopted the standard on January 1, 2018 under the full retrospective method and,
accordingly, results for prior periods have been adjusted to apply the new standard as shown below.
F-17
The following represents the impact of the adoption of ASU 2014-09 and ASU 2017-05 on our
Consolidated Statements of Financial Condition as of December 31, 2017 and December 31, 2016 and
our Consolidated Statements of Operations for the years ended December 31, 2017 and 2016 (in
thousands, except per share data):
Statement of Financial Condition:
Notes receivable, net
Investment in unconsolidated real estate
joint ventures
Property and equipment, net
Other assets
Other liabilities
Deferred income
Deferred income taxes
Total equity
Statement of Operations:
Sales of VOIs
Cost reimbursements
Cost reimbursements
Cost of VOIs sold
Trade sales
Net gains on sales of real estate assets
Cost of trade sales
Selling, general and administrative
expenses
Equity in earnings of unconsolidated real
estate joint ventures
Income before income taxes
Benefit for income taxes
Net income
Less: Net income attributable to
noncontrolling interests
Net income attributable to shareholders $
$
Basic earnings per share
$
Diluted earnings per share
As of and for the Year Ended December 31, 2017
As
Previously
Reported
ASU 2014-
09
Adjustments
ASU 2017-
05
Adjustments As Adjusted
$
431,801
(4,943)
-
426,858
$
$
47,275
112,858
121,824
103,926
36,311
43,093
653,501
239,662
-
-
17,439
142,798
1,944
97,755
-
(929)
929
-
(19,418)
3,755
10,720
2,355
52,639
52,639
240
(713)
-
8,163
3,959
-
-
(462)
-
1,120
3,301
-
-
-
-
-
(493)
-
51,234
111,929
122,753
103,464
16,893
47,968
667,522
242,017
52,639
52,639
17,679
142,085
1,451
105,918
541,901
(8,423)
-
533,478
-
1,662
954
2,616
(24)
2,640
(1,942)
(2,435)
1,525
(910)
-
(910)
12,541
92,601
9,702
102,303
18,378
83,925
0.85
0.81
14,483
93,374
7,223
100,597
18,402
82,195
0.83
0.79
F-18
Statement of Financial Condition:
Notes receivable, net
Investment in unconsolidated real estate
joint ventures
Property and equipment, net
Other assets
Other liabilities
Deferred income
Deferred income taxes
Total equity
Statement of Operations:
Sales of VOIs
Cost reimbursements
Cost reimbursements
Cost of VOIs sold
Trade sales
Net gains on sales of real estate assets
Cost of trade sales
Selling, general and administrative
expenses
Equity in earnings of unconsolidated real
estate joint ventures
Income before income taxes
Provision for income taxes
Net income
Less: Net income attributable to
noncontrolling interests
Net income attributable to shareholders $
$
Basic earnings per share
$
Diluted earnings per share
As of and for the Year Ended December 31, 2016
As
Previously
Reported
ASU 2014-
09
Adjustments
ASU 2017-
05
Adjustments As Adjusted
$
430,480
(4,680)
-
425,800
$
$
43,491
95,998
130,333
95,611
37,015
44,318
495,454
266,142
-
-
27,346
95,996
5,487
74,341
-
(590)
590
-
(17,493)
4,711
8,102
7,731
49,557
49,557
1,483
(157)
-
6,022
5,901
-
-
(956)
-
2,645
4,212
-
-
-
-
-
(2,274)
-
49,392
95,408
130,923
94,655
19,522
51,674
507,768
273,873
49,557
49,557
28,829
95,839
3,213
80,363
520,087
(4,606)
-
515,481
13,630
78,036
(36,379)
41,657
13,295
28,362
0.33
0.32
-
4,676
(1,448)
3,228
300
2,928
(1,452)
(3,726)
1,437
(2,289)
(429)
(1,860)
12,178
78,986
(36,390)
42,596
13,166
29,430
0.34
0.34
The cumulative effect of adopting ASU 2014-09 and ASU 2017-05 was to increase total equity from the
amount originally reported as of January 1, 2016 of $482.9 million to $494.3 million, an adjustment of
$11.4 million.
ASU No. 2017-09, Compensation – Stock Compensation (Topic 718). This update was issued to provide
guidance on determining which changes to the terms and conditions of share-based compensation
awards require an entity to apply modification accounting under Topic 718. Under this guidance, an
entity must apply modification accounting to changes to terms or conditions of a share-based
compensation award unless there is no change in the fair value, vesting, or classification of the modified
award as compared to the original award. The update is effective for fiscal years beginning after
December 15, 2017 and for interim periods within those annual periods. The Company adopted this
update on January 1, 2018. The adoption of this update did not have a material impact on the
Company’s consolidated financial statements.
ASU No. 2017-01, Business Combinations - Clarifying the Definition of a Business. This update was
issued to clarify the determination of whether an entity has acquired or sold a business. The definition
of a business affects many areas of accounting, including acquisitions, disposals, goodwill, and
consolidation, and the update is intended to assist entities in the determination of whether transactions
should be accounted for as acquisitions or disposals of assets or businesses. The update is expected to
result in more acquisitions being accounted for as asset purchases instead of business combinations.
The update is effective for fiscal years beginning after December 15, 2017. The Company adopted this
update on January 1, 2018 using the prospective transition method. The adoption of this update resulted
F-19
in the Company accounting for Bluegreen’s acquisition of the Éilan Hotel & Spa in April 2018 as an
asset acquisition, and consequently, all transaction costs were capitalized as part of the assets acquired.
investments
ASU No. 2016-01 –– Financial Instruments – Overall (Topic 825) – Recognition and Measurement of
Financial Assets and Financial Liabilities. This update requires all equity
in
unconsolidated entities (other than those accounted for using the equity method of accounting) to
generally be measured at fair value through earnings and eliminates the available-for-sale classification
for equity securities with readily determinable fair values and the cost method for equity investments
without readily determinable fair values. However, the update allows entities to elect to record equity
investments without readily determinable fair values at cost, less impairments. This update also
simplifies the impairment assessment for equity investments and requires the use of an exit price when
measuring the fair value of financial instruments for disclosure purposes. The update is effective for
fiscal years beginning after December 15, 2017. The Company adopted this update on January 1, 2018
and recognized a cumulative effect adjustment of $0.3 million, net of tax, to accumulated earnings as of
January 1, 2018 for equity securities with readily determinable fair values. The update was adopted
prospectively for $2.4 million of equity securities without readily determinable fair values as of January
1, 2018. The adoption of this update did not have a material impact on the Company’s consolidated
financial statements.
ASU No. 2018-02 –– Income Statement – Reporting Comprehensive Income (Topic 220) –
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This update
provides an entity with an option to reclassify to accumulated earnings the stranded tax effects within
accumulated other comprehensive income associated with the reduction in the corporate income tax rate
from the enactment of the U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”). The Company elected
to adopt this update as of January 1, 2018 and reclassified the stranded income tax effects from the Tax
Reform Act into accumulated earnings as of the adoption date. The adoption of this update did not have
a material impact on the Company’s consolidated financial statements.
ASU No. 2018-05 –– Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.
118. This update amended Topic 740 to incorporate the guidance previously provided by SEC Staff
Accounting Bulletin No. 118 (“SAB 118”) related to the application of Topic 740 in the reporting
period in which the Tax Reform Act was signed into law. The Company adopted SAB 118 in the fourth
quarter of 2017, and therefore, the Company’s subsequent adoption of this update on January 1, 2018
had no impact on its accounting for income taxes in 2018. See Note 14 for additional information
regarding the Company’s accounting for income taxes and the Tax Reform Act.
Future Adoption of Recently Issued Accounting Pronouncements
The FASB has issued the following accounting pronouncements and guidance relevant to the
Company’s operations which have not been adopted as of December 31, 2018:
ASU No. 2016-02 – Leases (Topic 842). This standard, as subsequently amended and clarified by
various ASUs, requires lessees to recognize assets and liabilities for the rights and obligations created
by leases of assets. For income statement purposes, the standard retains a dual model which requires
leases to be classified as either operating or finance based on criteria that are largely similar to those
applied in current lease accounting but without explicit bright lines. The standard also requires
extensive quantitative and qualitative disclosures, including significant judgments and assumptions
made by management in applying the standard, intended to provide greater insight into the amount,
timing, and uncertainty of cash flows arising from leases.
The Company adopted the standard on January 1, 2019 and is applying the transition guidance as of the
date of adoption under the current-period adjustment method. As a result, the Company will recognize
right-of-use assets and lease liabilities associated with its leases on January 1, 2019, with a cumulative-
effect adjustment to the opening balance of accumulated earnings, while the comparable prior periods
in the Company’s financial statements will continue to be reported in accordance with Topic 840,
including the disclosures of Topic 840.
The standard includes a number of optional practical expedients under the transaction guidance. The
Company has elected the package of practical expedients which allows the Company to not reassess
prior conclusions about lease identification, lease classification, and initial direct costs. The Company
has also made accounting policy elections by class of underlying asset to not apply the recognition
requirements of the standard to leases with terms of 12 months or less and to not separate non-lease
components from lease components. Consequently, each separate lease component and the non-lease
components associated with that lease component will be accounted for as a single lease component for
lease classification, recognition, and measurement purposes.
F-20
Upon adoption of the standard, the Company expects to recognize an estimated lease liability ranging
from $121.0 million t o $126.0 million and a right-of-use asset ranging from $110.0 million to
$117.0 million on January 1, 2019. The difference between the estimated lease liability and right-of-use
asset primarily reflects the reclassification of accrued straight-line rent and unamortized tenant
allowances from other liabilities in the Company’s statement of financial condition to a reduction of the
right-of-use asset. In addition, the Company expects to recognize an impairment loss ranging from
$2.0 million to $4.0 million in connection with the recognition of right-of-use assets for certain retail
locations as a cumulative-effect adjustment to the opening balance of accumulated earnings. The
Company believes that the standard will not have a material impact on its statement of operations and
cash flows.
ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on
Financial Instruments. This standard introduces an approach of estimating credit losses on certain types
of financial instruments based on expected losses and will expand the disclosure requirements
regarding an entity’s assumptions, models, and methods for estimating its allowance for credit losses. In
addition, the standard requires entities to disclose the amortized cost balance for each class of financial
asset by credit quality indicator, disaggregated by the year of origination (i.e., by vintage year). This
standard will be effective for the Company on January 1, 2020, and early adoption is permitted
beginning on January 1, 2019. The Company is currently evaluating the impact that ASU 2016-13 may
have on its consolidated financial statements.
ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the
Disclosure Requirements for Fair Value Measurement. This standard modifies the disclosure
requirements in Topic 820 related to the valuation techniques and inputs used in fair value
measurements, uncertainty in measurements, and changes in measurements applied. This standard is
effective for the Company in annual periods beginning after December 15, 2019 and for interim periods
within those annual periods, and early adoption is permitted. The Company is currently evaluating the
impact that ASU 2018-13 may have on the footnote disclosures in its consolidated financial statements.
3. Revenue Recognition
The table below sets forth the Company’s revenue disaggregated by category (in thousands):
Sales of VOIs
Fee-based sales commissions
Resort and club management revenue
Cost reimbursements
Title fees
Other customer revenue
Trade sales - wholesale
Trade sales - retail
Sales of real estate inventory
Revenue from customers
Interest income
Net gains on sales of real estate assets
Other revenue
$
For the Years Ended December 31,
2016
2017
2018
273,873
242,017
254,225
201,829
229,389
216,422
84,318
91,080
99,535
49,557
52,639
62,534
13,838
14,742
12,205
5,292
6,284
5,997
89,725
89,223
82,800
6,114
52,862
96,686
-
-
21,771
724,546
777,949
852,462
85,747
83,708
85,501
3,213
1,451
4,563
8,647
6,462
5,067
Total revenues
$
947,593
869,570
822,153
4. Acquisitions and Mergers
Acquisition of IT’SUGAR
On June 16, 2017, the Company acquired IT’SUGAR, a specialty candy retailer with approximately
100 retail locations in over 25 states and Washington, D .C., through the acquisition of all of its Class A
Preferred Units and 90.4% of its Class B Common Units for cash consideration of approximately $58.4
million, net of cash acquired. The
F-21
remaining 9.6% of IT’SUGAR’s Class B Common Units is owned by JR Sugar Holdings, LLC (“JR
Sugar”), an entity owned by the founder and CEO of IT’SUGAR.
The consolidated net assets and results of operations of IT’SUGAR are included in the Company’s
consolidated financial statements commencing on June 16, 2017 and resulted in the following impact to
trade sales and income before income taxes from the acquisition date to December 31, 2017 (in
thousands):
Trade sales
Income before income taxes
Purchase Price Allocation
June 16, 2017
to December 31,
2017
$
$
46,765
2,598
The Company accounted for the acquisition of IT’SUGAR using the acquisition method of accounting,
which requires, among other things, that the assets acquired and liabilities assumed associated with an
acquiree be recognized at their fair values at the acquisition date. The following table summarizes the
purchase price allocation based on the Company’s valuation, including the fair values of the assets
acquired, liabilities assumed, and the redeemable noncontrolling interest in IT’SUGAR at the
acquisition date (in thousands):
Property and equipment
Cash, inventory and other assets
Identifiable intangible assets (1)
Total assets acquired
Accounts payable and other liabilities
Identifiable intangible liabilities (2)
Total liabilities assumed
Fair value of identifiable net assets
Redeemable noncontrolling interest
Goodwill
Purchase consideration
Less: cash acquired
Cash paid for acquisition less cash acquired
Acquisition-related costs included in selling, general and administrative
expenses
$
$
$
18,747
12,212
4,512
35,471
(5,370)
(716)
(6,086)
29,385
(2,490)
35,164
62,059
(3,641)
58,418
2,963
(1)
(2)
Identifiable intangible assets were comprised of $4.2 million, $0.2 million and $0.1 million associated with
IT’SUGAR’s trademark, favorable operating lease agreements, and a noncompetition agreement, respectively.
Identifiable intangible liabilities were comprised of unfavorable operating lease agreements.
The fair values reported in the above table were estimated by the Company using available market
information and appropriate valuation methods. As considerable judgment is involved in estimates of
fair value, the fair values presented above are not necessarily indicative of the amounts that the
Company could realize in a current market exchange. The use of different market assumptions and/or
estimation methods could have a material effect on the estimated fair value amounts.
The following summarizes the Company’s methodologies for estimating the fair values of certain assets
and liabilities associated with IT’SUGAR:
Property and Equipment
Property and equipment acquired consisted primarily of leasehold improvements at IT’SUGAR’s retail
stores. The fair value of the leasehold improvements and other equipment was estimated based on the
replacement cost approach.
F-22
Identifiable Intangible Assets and Liabilities
The identifiable intangible assets acquired primarily consisted of the fair value of IT’SUGAR’s
trademark, which was estimated using the relief-from-royalty method, a form of the income approach.
Under this approach, the fair value was estimated by calculating the present value using a risk-adjusted
discount rate of the expected future royalty payments that would have to be paid if the IT’SUGAR
trademark was not owned.
The identifiable intangible assets and liabilities also included the fair value of IT’SUGAR’s operating
lease agreements associated with its retail stores. The fair values of these assets and liabilities were
estimated by calculating the present value using a risk-adjusted discount rate of the difference between
the contractual amounts to be paid pursuant to the lease agreements and the estimate of market lease
rates at the acquisition date.
The $4.2 million trademark intangible asset is being amortized over 15 years, and the $0.2 million of
favorable lease agreements and the $0.7 million of unfavorable lease agreements are being amortized
over a weighted average period of 6.5 years. The noncompetition agreement is being amortized over
five years.
Goodwill
The goodwill recognized in connection with the acquisition reflects the difference between the
estimated fair value of the net assets acquired and the Company’s consideration paid to acquire
IT’SUGAR. The goodwill recognized in the acquisition is deductible for income tax purposes.
Pro Forma Information (unaudited)
The following unaudited pro forma financial data presents the Company’s revenues and earnings for the
years ended December 31, 2017 and 2016 as if the acquisition was completed on January 1, 2016 (in
thousands):
Trade sales
Income before income taxes
Net income (1)
Net income attributable to shareholders (1)
$
$
$
$
Pro Forma
For the Years Ended
December 31,
Actual
For the Years Ended
December 31,
2017
178,643
93,273
102,703
84,356
2016
172,612
74,594
39,904
27,136
2017
142,085
92,601
102,303
83,925
2016
95,839
78,986
42,596
29,430
(1) The pro forma net income and net income attributable to shareholders for the year ended December 31, 2017
were adjusted to exclude $3.0 million of acquisition-related costs.
The unaudited pro forma financial data reported in the above table does not purport to represent what
the actual results of the Company’s operations would have been assuming that the acquisition date was
January 1, 2016, nor does it purport to predict the Company’s results of operations for future periods.
Noncontrolling Interest
Under the terms of IT’SUGAR’s operating agreement, JR Sugar may require the Company to purchase
for cash its Class B Common Units of IT’SUGAR upon the occurrence of certain events, including
events relating to the employment agreement between the Company and the CEO of IT’SUGAR, as
described below. The purchase price payable by the Company for such Class B Common Units will be
determined based on the circumstance giving rise to such purchase obligation in accordance with
prescribed formulas set forth in IT’SUGAR’s operating agreement. In addition, commencing on the
seventh anniversary of the acquisition date, the Company shall have the right, but not the obligation, to
require JR Sugar to sell its Class B Common Units to the Company in accordance with a prescribed
formula set forth in IT’SUGAR’s operating agreement.
As a result of the redemption features, JR Sugar’s Class B Common Units are considered redeemable
noncontrolling interests and reflected in the mezzanine section as a separate line item in the Company’s
consolidated statement of financial condition. As the noncontrolling interests are not currently subject to
redemption but are probable of becoming redeemable in a future period, the Company is measuring the
noncontrolling interests by accreting changes in the estimated purchase price from the acquisition date
to the earliest redemption date and may adjust the carrying
F-23
amount of such interests to equal the calculated value in the event it is in excess of the carrying amount
of such interests at such time.
Employment and Loan Agreements
In connection with the acquisition of IT’SUGAR, the Company entered into an employment agreement
with the founder and CEO of IT’SUGAR for his continued services as CEO of IT’SUGAR. Upon the
occurrence of certain events constituting a breach of the employment agreement by the CEO resulting
in his termination, the Company may exercise its ability to purchase JR Sugar’s Class B Common Units
for cash for an amount equal to the lesser of the fair market value of such units determined in
accordance with the prescribed formula set forth in IT’SUGAR’s operating agreement and the initial
value ascribed to such units at the acquisition date. Similarly, upon the occurrence of certain “not for
cause” termination events associated with the termination of the CEO’s employment, JR Sugar may
require the Company to purchase its Class B Common Units for cash for an amount equal to the greater
of the fair market value of such units determined in accordance with the prescribed formula set forth in
IT’SUGAR’s operating agreement and the initial value ascribed to such units at the acquisition date.
Concurrent with the acquisition, JR Sugar borrowed $2.0 million from the Company in the form of two
promissory notes, as partial consideration for the purchase of its 9.6% ownership of IT’SUGAR’s Class
B Common Units. The notes mature on June 16, 2024, and a portion of the aggregate principal balance
and accrued interest of such notes will be forgiven on an annual basis provided that IT’SUGAR’s CEO
continues to remain employed with the Company pursuant to his employment agreement. The notes
receivable are presented as a deduction from the balance of the related Class B Common Units included
in redeemable noncontrolling interests in the consolidated statement of financial condition.
Merger of BCC
On December 15, 2016, BBX Capital acquired all of the outstanding shares of BCC not previously
owned by it. Pursuant to the terms of the Agreement and Plan of Merger, dated as of July 27, 2016, as
amended on October 20, 2016, between BBX Capital, a wholly-owned subsidiary of BBX Capital
(“Merger Sub”), and BCC (the “Merger Agreement”), BCC merged with and into Merger Sub , and
BCC is now a wholly owned subsidiary of BBX Capital.
Pursuant to the terms of the Merger Agreement, each share of BCC’s Class A Common Stock
outstanding immediately prior to December 15, 2016 (other than shares held by the Company and
shares as to which appraisal rights were exercised in accordance with Florida law) was converted into
the right to receive, at the election of the holder thereof, either (i) $20.00 in cash, without interest (the
“Cash Consideration”), or (ii) 5.4 shares of BBX Capital’s Class A Common Stock (the “Stock
Consideration” and, collectively with the Cash Consideration, the “Merger Consideration”). Shares of
BCC’s Class A Common Stock which were converted into the right to receive Merger Consideration
but as to which no election was made were converted into the right to receive Cash Consideration.
Based on the foregoing, BBX Capital paid to BCC’s shareholders a total of approximately
$16.9 million of Cash Consideration and issued to BCC’s shareholders a total of approximately
12.0 million shares of its Class A Common Stock as Stock Consideration.
BBX Capital held an approximately 82% equity interest in BCC prior to the Merger and, as a result of
the Merger, owns 100% of BCC. The merger was accounted for as an equity transaction as the
Company increased its ownership interest in BCC and retained its controlling financial interest. As a
result, no gain or loss was recognized in the Company’s consolidated statement of operations and
comprehensive income in connection with the merger, and the difference between the consideration
paid and the amount of noncontrolling interest was recognized in additional paid-in capital.
Pursuant to the terms of the Merger Agreement, effective upon consummation of the merger on
December 15, 2016, BBX Capital adopted and assumed BCC’s 2014 Stock Incentive Plan, as amended,
and BCC’s 2005 Restricted Stock and Option Plan, as amended (collectively, the “BCC Equity Plans”).
Options and restricted stock awards granted under the BCC Equity Plans and outstanding at December
15, 2016, including those held by BBX Capital’s executive officers, other employees, and directors,
were converted into BBX Capital’s options or restricted stock awards, as the case may be. As a re sult,
pursuant to the terms of the Merger Agreement, 5,090,354 restricted shares of BBX Capital’s Class A
Common Stock awards were issued in exchange for 942,657 restricted shares of BCC’s Class A
Common Stock awards outstanding as of December 15, 2016, and options to acquire 6,614 shares of
BCC’s Class A Common Stock were exchanged for options to acquire 35,716 shares of BBX Capital’s
Class A Common Stock as of December 31, 2016.
F-24
5. Consolidated Variable Interest Entities
Bluegreen sells VOI notes receivable through special purpose finance entities. These transactions are
generally structured as non-recourse to Bluegreen and are designed to provide liquidity for Bluegreen
and to transfer the economic risks and benefits of the notes receivable to third parties. In a
securitization, various classes of debt securities are issued by the special purpose finance entities that
are generally collateralized by a single tranche of transferred assets, which consist of VOI notes
receivable. Bluegreen services the securitized notes receivable for a fee pursuant to servicing
agreements negotiated with third parties based on market conditions at the time of the securitization.
In these securitizations, Bluegreen generally retains a portion of the securities and continues to service
the securitized notes receivable. Under these arrangements, the cash payments received from obligors
on the receivables sold are generally applied monthly to pay fees to service providers, make interest and
principal payments to investors, and fund required reserves, if any, with the remaining balance of such
cash retained by Bluegreen; however, to the extent the portfolio of receivables fails to satisfy specified
performance criteria (as may occur due to, among other things, an increase in default rates or credit loss
severity) or other trigger events occur, the funds received from obligors are required to be distributed on
an accelerated basis to investors. Depending on the circumstances and the transaction, the application of
the accelerated payment formula may be permanent or temporary until the trigger event is cured. As of
December 31, 2018, Bluegreen was in compliance with all applicable terms under its securitization
transactions, and no trigger events had occurred.
In accordance with the applicable accounting guidance for the consolidation of VIEs, Bluegreen
analyzes its variable interests, which may consist of loans, servicing rights, guarantees, and equity
investments, to determine if an entity in which Bluegreen has a variable interest is a VIE. The analysis
includes a review of both quantitative and qualitative factors. Bluegreen bases its quantitative analysis
on the forecasted cash flows of the entity and its qualitative analysis on the structure of the entity,
including its decision-making ability and authority with respect to the entity, and relevant financial
agreements. Bluegreen also uses its qualitative analysis to determine if Bluegreen must consolidate a
VIE as the primary beneficiary. In accordance with the applicable accounting guidance, Bluegreen has
determined these securitization entities to be VIEs of which Bluegreen is primary beneficiary and,
therefore, Bluegreen consolidates the entities into its financial statements.
Under the terms of certain VOI note sales, Bluegreen has the right to repurchase or substitute a limited
amount of defaulted notes for new notes at the outstanding principal balance plus accrued interest.
Bluegreen’s voluntary repurchases and substitutions of defaulted notes during 2018, 2017 and 2016
were $13.7 million, $9.5 million, and $6.5 million, respectively. Bluegreen’s maximum exposure to loss
relating to its non-recourse securitization entities is the difference between the outstanding VOI notes
receivable and the notes payable, plus cash reserves and any additional residual interest in future cash
flows from collateral.
The table below sets forth information related to the assets and liabilities of Bluegreen’s consolidated
VIEs included in the Company’s consolidated statements of financial condition (in thousands):
December 31,
2018
2017
Restricted cash
Securitized notes receivable, net
Receivable backed notes payable - non-recourse
$
28,400
341,975
382,257
19,488
279,188
336,421
The restricted cash and the securitized notes receivable balances disclosed in the table above are
restricted to satisfy obligations of the VIEs.
F-25
6. Notes Receivable
The table below sets forth information relating to Bluegreen’s notes receivable and related allowance
for credit losses (dollars in thousands):
Notes receivable:
VOI notes receivable - non-securitized
VOI notes receivable - securitized
Notes receivable secured by homesites (1)
Gross notes receivable
Allowance for loan losses - non-securitized
Allowance for loan losses - securitized
Allowance for loan losses - homesites (1)
Notes receivable, net
Allowance as a % of gross notes receivable
December 31,
2018
2017
$
$
124,642
447,850
898
573,390
(28,258)
(105,875)
(90)
439,167
23%
184,971
364,349
1,329
550,649
(38,497)
(85,161)
(133)
426,858
22%
(1) Notes receivable secured by homesites were originated through a business, substantially all of the assets of
which were sold by Bluegreen in 2012.
The weighted-average interest rate on Bluegreen’s notes receivable was 15.1% and 15.3% at December
31, 2018 and 2017, respectively. Bluegreen’s VOI notes receivable bear interest at fixed rates and are
generally secured by property located in Florida, Missouri, Nevada, South Carolina, Tennessee, and
Wisconsin.
The table below sets forth future principal payments due on Bluegreen’s notes receivable (including
notes receivable secured by homesites) during each of the five years subsequent to December 31, 2018
and thereafter (in thousands):
2019
2020
2021
2022
2023
Thereafter
Gross notes receivable
December 31, 2018
61,093
59,746
63,759
68,046
70,472
250,274
573,390
$
$
Credit Quality of Notes Receivable and the Allowance for Credit Losses
Bluegreen monitors the credit quality of its receivables on an ongoing basis. Bluegreen holds large
amounts of homogeneous VOI notes receivable and assesses uncollectibility based on pools of
receivables as Bluegreen does not believe that there are significant concentrations of credit risk with any
individual counterparty or groups of counterparties. In estimating credit losses, Bluegreen does not use
a single primary indicator of credit quality but instead evaluates its VOI notes receivable based upon a
static pool analysis that incorporates the aging of the respective receivables, default trends, and
prepayment rates by origination year, as well as the FICO scores of the borrowers.
The activity in Bluegreen’s allowance for credit losses (including notes receivable secured by
homesites) was as follows (in thousands):
Balance, beginning of period
Provision for loan losses
Write-offs of uncollectible receivables
Balance, end of period
For the Years Ended December 31,
2017
2018
120,270
123,791
46,412
51,236
(42,891)
(40,804)
123,791
134,223
2016
114,187
45,544
(39,461)
120,270
$
$
The percentage of gross notes receivable outstanding by FICO score at origination was as follows:
F-26
FICO Score
700+
600-699
<699
No score (1)
Total
December 31,
2018
2017
57.00 %
39.00
3.00
1.00
54.00 %
41.00
3.00
2.00
100.00 % 100.00 %
(1) VOI notes receivables without a FICO score are primarily related to foreign borrowers.
The table below sets forth information regarding the delinquency status of Bluegreen’s VOI notes
receivable (in thousands):
Current
31-60 days
61-90 days
> 90 days (1)
Total
December 31,
2018
2017
$
$
541,783
5,783
4,516
20,410
572,492
525,482
6,088
4,897
12,853
549,320
(1)
Includes $14.3 million and $7.6 million as of December 31, 2018 and 2017, respectively, related to VOI notes
receivable that, as of such date, had defaulted but the related VOI note receivable balance had not yet been
charged off in accordance with the provisions of certain of Bluegreen's receivable-backed notes payable
transactions. These VOI notes receivable have been reflected in the allowance for credit losses.
7. Trade Inventory
The Company’s trade inventory consisted of the following (in thousands):
Raw materials
Paper goods and packaging materials
Finished goods
Total trade inventory
8. VOI Inventory
December 31,
2018
2017
$
$
2,718
1,122
16,270
20,110
3,320
865
19,717
23,902
Bluegreen’s VOI inventory consisted of the following (in thousands):
December 31,
2018
2017
Completed VOI units
Construction-in-progress
Real estate held for future VOI development
Total VOI inventory
$
$
237,010
26,587
70,552
334,149
194,503
22,334
64,454
281,291
Bluegreen increased the average selling price of its VOIs by 3% in December 2018, 4% in June 2017,
and 5% in September 2016. As a result of these pricing changes, Bluegreen’s management increased its
estimate of total gross margin generated on the sale of its VOI inventory. Under the relative sales value
method prescribed for timeshare developers to relieve the cost of VOI inventory, changes to the
estimate of gross margin expected to be generated on the sale of VOI inventory are recognized on a
retrospective basis in earnings. Accordingly, during the years ended December 31, 2018, 2017, and
2016, Bluegreen recognized a benefit to cost of VOIs sold of $3.6 million, $5.1 million,
F-27
and $5.6 million, respectively.
9. Real Estate
The Company’s real estate consisted of the following (in thousands):
Real estate held-for-sale:
Land
Rental properties
Residential single-family
Other
Total real estate held-for-sale
Real estate held-for-investment:
Land
Other
Total real estate held-for-investment
Real estate inventory
Total real estate
0
December 31,
2018
2017
$
$
18,439
-
832
931
20,202
10,976
-
10,976
23,778
54,956
20,528
6,181
1,119
-
27,828
13,066
839
13,905
26,803
68,536
10. Investments in Unconsolidated Real Estate Joint Ventures
As of December 31, 2018, the Company had equity interests in unconsolidated real estate joint ventures
involved in the development of multifamily apartment and townhome communities, as well as single-
family master planned communities. In addition, the Company owns a 50% equity interest in The
Altman Companies, LLC (the “Altman Companies”), a developer and manager of multifamily
apartment communities.
Investments in unconsolidated real estate joint ventures are accounted for as unconsolidated variable
interest entities. See Note 5 for information regarding the Company’s investments in consolidated
variable interest entities.
F-28
Investments in unconsolidated real estate joint ventures consisted of the following (in thousands):
December
31,
2018
Ownership(1)
December
31,
2017
Ownership(1)
Altis at Kendall Square, LLC
Altis at Lakeline - Austin Investors LLC
Altis at Shingle Creek, LLC
Altis at Grand Central Capital, LLC
Altis Promenade Capital, LLC
Altis at Bonterra - Hialeah, LLC
Altis Ludlam - Miami Investor, LLC
Altis Suncoast Manager, LLC
Altis Pembroke Gardens, LLC
Altis Fairways, LLC
Altis Wiregrass, LLC
The Altman Companies, LLC (2)
ABBX Guaranty, LLC
New Urban/BBX Development, LLC
Sunrise and Bayview Partners, LLC
Hialeah Communities, LLC
PGA Design Center Holdings, LLC
CCB Miramar, LLC
The Addison on Millenia Investment,
LLC
BBX/S Millenia Blvd Investments, LLC
Centra Falls, LLC
Centra Falls II, LLC
BBX/Label Chapel Trail Development,
LLC
Total
$
70
4,531
83
2,549
2,195
21,602
675
1,857
1,284
1,876
1,897
14,893
2,500
98
1,439
182
691
1,575
35
137
16
38
4,515
64,738
$
20.24 %
34.47
2.50
11.07
6.61
96.73
33.30
33.30
0.41
0.42
2.22
50.00
50.00
50.00
50.00
57.00
40.00
35.00
48.00
90.00
7.14
7.14
46.75
78
4,156
338
1,872
962
19,566
-
-
-
-
-
-
-
2,064
1,499
473
1,862
1,225
5,933
5,611
159
551
4,885
51,234
20.24 %
33.74
2.50
10.54
5.00
95.00
-
-
-
-
-
-
-
50.00
50.00
57.00
40.00
35.00
48.00
90.00
7.14
7.14
46.75
(1) The Company’s ownership percentage in each real estate joint venture represent s the Company’s percentage of the
contributed capital in each venture. The operating agreements for many of these ventures provide for a
disproportionate allocation of distributions to the extent that certain investors receive specified returns on their
investments, and as a result, these percentages do not necessarily reflect the Company’s economic interest in the
expected distributions from such ventures.
(2) The investment in The Altman Companies, LLC includes $2.3 million of transaction costs.
Unconsolidated Variable Interest Entities
In accordance with the applicable accounting guidance for the consolidation of VIEs, the Company
analyzes its investments in real estate joint ventures to determine if such entities are VIEs, and to the
extent that such entities are VIEs, if the Company is the primary beneficiary. Based on the Company’s
analysis of the forecasted cash flows and structure of these ventures, including the respective operating
agreements governing these entities, the Company has determined that its real estate joint ventures are
VIEs in which the Company is not the primary beneficiary, and therefore, the Company accounts for its
investments in the real estate joint ventures under the equity method of accounting. The Company’s
conclusions are primarily based on the determination that the Company does not have the power to
direct activities of the entities that most significantly affect their economic performance. In the majority
of the joint ventures, the Company is not the operating manager and has limited protective rights under
the operating agreements, while in certain joint ventures, the investors share decision-making authority
in a manner that prevents any individual investor from exercising power over such entities. The
Company’s maximum exposure to loss in its unconsolidated real estate joint ventures was $67.2 million
as of December 31, 2018.
Basis Differences
The aggregate difference between the Company’s net investments in unconsolidated real estate joint
ventures and its underlying equity in the net assets of such ventures was $11.9 million as of December
31, 2018, which includes $10.3 million associated with the Company’s investment in the Altman
Companies and seven multifamily apartment
F-29
developments at fair value, as described below, and $1.6 million associated with the capitalization of
interest on real estate development projects. The $10.3 million fair value basis adjustment was
primarily assigned to goodwill and real estate assets in the amount of $2.9 million and $7.4 million,
respectively.
Equity in Net Earnings of Unconsolidated Real Estate Joint Ventures
For the years ended December 31, 2018, 2017 and 2016, the equity earnings of unconsolidated real
estate joint ventures was $14.2 million, $12.5 million and $12.2 million, respectively. Equity earnings
for the year ended December 31, 2018 includes $9.3 million in equity earnings from The Addison on
Millenia joint venture, which includes the Company’s share of the gain recognized by the venture upon
the sale of its multifamily apartment facility. Equity earnings for the year ended December 31, 2017
and 2016 includes $11.0 million and $8.5 million, respectively, in equity earnings from the Hialeah
Communities joint venture, which reflects the Company’s share of the profits recognized by the venture
upon the sale of single-family homes in its master planned community.
The Altman Companies, LLC
In November 2018, the Company acquired a 50% equity interest in The Altman Companies, LLC (the
“Altman Companies”), a joint venture between the Company and Joel Altman (“JA”) engaged in the
development, construction, and management of multifamily apartment communities, for cash
consideration of $14.6 million, including $2.3 million in transaction costs.
The Altman Companies owns 100% of the membership interests in Altman Development Company and
Altman Management Company and 60% of the membership interests in Altman-Glenewinkel
Construction and generates revenues from the performance of development, general contractor, leasing,
and property management services to joint ventures that are formed to invest in development projects
originated by the platform. In addition, BBXRE and JA invest in the managing member of such joint
ventures based on their relative ownership percentages in the Altman Companies.
Pursuant to the operating agreement of the Altman Companies, the Company will acquire an additional
40% equity interest in the Altman Companies from JA for a purchase price of $9.4 million in January
2023, while JA can also, at his option or in other predefined circumstances, require the Company to
purchase his remaining 10% equity interest in the Altman Companies for $2.4 million. However, JA
will retain his membership interests, including his decision making rights, in the managing member of
any development joint ventures that are originated prior to the Company’s acquisition of additional
equity interests in the Altman Companies. In addition, in certain circumstances, the Company may
acquire the 40% membership interests in Altman-Glenewinkel Construction that are not owned by the
Altman Companies for a purchase price based on prescribed formulas in the operating agreement of
Altman-Glenewinkel Construction.
Under the terms of the operating agreement of the Altman Companies, the venture is being jointly
managed by the Company and JA until the Company’s acquisition of the additional 40% equity interest
from JA, with the partners sharing decision making authority for all significant operating and financing
decisions. To the extent that the parties cannot reach consensus on a matter, the operating agreement
generally provides that a third party will resolve such matter; however, for certain decisions, the
operating agreement provides that the venture cannot proceed with such matters without approval from
both parties.
In connection with its investment in the Altman Companies, the Company acquired interests in the
managing member of seven multifamily apartment developments, including four developments in which
the Company had previously invested as a non-managing member, for aggregate cash consideration of
$8.8 million. In addition, the Company and JA each contributed $2.5 million to ABBX Guaranty, LLC,
a newly formed joint venture established to provide guarantees on the indebtedness and construction
cost overruns of new real estate joint ventures formed by the Altman Companies.
F-30
Summarized Financial Information of Certain Unconsolidated Real Estate Joint Ventures
The tables below set forth financial information, including condensed statements of financial condition
and operations, related to the Addison on Millenia joint venture (in thousands):
Assets
Cash
Properties and equipment
Other assets
Total assets
Liabilities and Equity
Notes payable
Other liabilities
Total liabilities
Total equity
Total liabilities and equity
December 31,
2018
2017
68
-
86
154
-
12
12
142
154
427
40,381
117
40,925
27,139
2,161
29,300
11,625
40,925
$
$
$
$
For the Years Ended December 31,
2016
2017
2018
Net gains on sales of real estate assets
Other revenue
Total revenues
Total expenses
Net earnings (losses)
Equity in net earnings of unconsolidated real estate
joint venture - The Addison at Millenia Investment,
LLC
$
$
$
$
22,203
3,858
26,061
(2,266)
23,795
-
1,303
1,303
(1,794)
(491)
9,283
(146)
-
-
-
-
-
-
The tables below set forth financial information, including condensed statements of financial condition
and operations, related to the Hialeah Communities joint venture (in thousands):
December 31,
2018
2017
675
-
-
-
675
-
277
277
398
675
1,750
221
-
137
2,108
161
1,347
1,508
600
2,108
$
$
$
$
Assets
Cash
Real estate inventory
Properties and equipment
Other assets
Total assets
Liabilities and Equity
Notes payable
Other liabilities
Total liabilities
Total equity
Total liabilities and equity
F-31
Total revenues
Costs of sales
Other expenses
Net earnings (losses)
Equity in net earnings of unconsolidated real estate
joint venture - Hialeah Communities, LLC
$
$
$
For the Years Ended December 31,
2016
2017
2018
406
(64)
(44)
298
80,407
(51,072)
(5,134)
24,201
84,860
(62,315)
(4,562)
17,983
55
11,043
8,476
11. Property and Equipment
The Company’s property and equipment consisted of the following (in thousands):
December 31,
2018
2017
Land, building and building improvements
Leasehold improvements
Office equipment, furniture, fixtures and software
Transportation
Accumulated depreciation
Property and equipment, net
$
$
80,887
41,278
86,759
3,097
212,021
(72,393)
139,628
67,538
32,419
74,261
670
174,888
(62,959)
111,929
The Company’s selling, general and administrative expenses and cost of trade sales for the years ended
December 31, 2018, 2017, and 2016 included approximately $20.2 million, $15.6 million, and $11.7
million, respectively, of depreciation expense.
12. Goodwill and Intangible Assets
Goodwill
The activity in the balance of the Company’s goodwill was as follows (in thousands):
Balance, beginning of period
Acquisitions
Impairment losses
Balance, end of period
For the Years Ended December 31,
2017
2018
2016
$
$
39,482
1,727
(3,961)
37,248
6,731
35,164
(2,413)
39,482
7,601
-
(870)
6,731
The Company recognized $1.7 million of goodwill in connection with the acquisition of an operating
business through a loan foreclosure during the year ended December 31, 2018 and $35.2 million of
goodwill in connection with the acquisition of IT’SUGAR during the year ended December 31, 2017.
The goodwill associated with IT’SUGAR is included in the Company’s IT’SUGAR reportable segment,
while the remaining goodwill relates to operating businesses included in the “Other” category for
segment reporting.
During the years ended December 31, 2018, 2017, and 2016, the Company determined that the fair
values of certain of its operating businesses in the confectionery industry were below their respective
carrying values as of the applicable testing dates and recognized goodwill impairment losses of $4.0
million, $2.4 million, and $0.9 million, respectively. As described in Note 2, the goodwill impairment
losses recognized during the year ended December 31, 2018 and 2017 were measured based on the
excess of the applicable reporting unit’s carrying value over its fair value, while the loss recognized
during the year ended December 31, 2016 was measured based on the excess of the carrying amount of
the reporting unit’s goodwill over its implied goodwill as of the testing date.
F-32
The decline in the fair value of these operating businesses in the confectionary industry and the related
recognition of goodwill impairment losses primarily resulted from ongoing losses in these operations
and various strategic initiatives related to such businesses, including the consolidation of manufacturing
facilities, a reduction in corporate personnel and infrastructure, and the elimination of various
unprofitable brands.
Intangible Assets
The Company’s intangible assets consisted of the following (in thousands):
Class
Intangible assets:
Management contracts
Trademarks
Customer relationships
Lease premium
Franchise agreements
Other
Accumulated amortization
Total intangible assets
December 31,
2018
2017
$
$
61,293
8,522
70
2,313
740
777
73,715
(4,005)
69,710
61,293
8,471
70
2,313
640
777
73,564
(3,115)
70,449
Management contracts are indefinite-lived intangible assets and are not amortized.
Trademarks and customer relationships are amortized using the straight-line method over their expected
useful lives, which range from 12 to 20 years.
The off-market lease intangibles are amortized using the straight-line method over the remaining lease
terms following the acquisition date of the related lease agreements, which is 5 to 9 years.
The Company has entered into franchise agreements with a franchisor, and the costs related to these
agreements are amortized using the straight-line method over their expected useful lives, which range
from 7 to 10 years.
Amortization Expense
The Company’s selling, general and administrative expenses for the years ended December 31, 2018,
2017 and 2016 included approximately $0.8 million, $0.9 million and $0.9 million, respectively, of
amortization expense associated with intangible assets.
The table below sets forth the estimated aggregate amortization expense of intangible assets during each
of the five years subsequent to December 31, 2018 (in thousands):
Years Ending December 31,
2019
2020
2021
2022
2023
F-33
Total
799
799
778
725
647
Impairment Testing
The Company tests amortizable intangible assets for recoverability whenever events or changes in
circumstances indicate that the carrying amount of an intangible asset, or an asset group which includes
an intangible asset, may not be recoverable. Due to ongoing losses associated with certain of the
Company’s operating businesses in the confectionery industry and strategic initiatives related to such
businesses, as described above, the Company tested certain asset groups associated with these
businesses for recoverability during the years ended December 31, 2018, 2017 and 2016 and determined
that the carrying amounts of certain asset groups exceeded the estimated undiscounted future cash
flows expected to result from the use of such assets during the years ended December 31, 2017 and
2016. As a result, during the years ended December 31, 2017 and 2016, the Company recognized
intangible asset impairment losses of $1.9 million and $1.5 million, respectively. The Company did not
recognize any intangible asset impairment losses during the year ended December 31, 2018. The
intangible asset impairment losses were measured based on the amount by which the carrying amounts
of the intangible assets exceeded their respective estimated fair values.
Valuation Methods for Goodwill and Intangible Asset Impairment Testing
The Company utilizes a discounted cash flow methodology as well as the guideline public company
market approach method to determine the fair value of its goodwill and indefinite-lived intangible
assets. The discounted cash flow methodology establishes fair value by estimating the present value of
the projected future cash flows to be generated from reporting units or asset groups. The discount rate
applied to the projected future cash flows to arrive at the present value is intended to reflect all risks of
ownership and the associated risks of realizing the stream of projected future cash flows. The Company
generally used a five to ten-year period in computing discounted cash flow values. The most significant
assumptions used in the discounted cash flow methodology are the discount rate, the terminal value, and
the forecast of future cash flows. The guideline public company method determines fair value based
upon the consideration of trading prices of publicly held stocks of comparable companies. The
significant inputs are enterprise value to revenue and enterprise value to earnings before interest, taxes,
depreciation and amortization (“EBITDA”). Based on the inputs, multiples of revenue and EBITDA are
derived to approximate the fair value of the reporting unit.
To the extent that impairment testing was required, the Company estimated the fair values of certain of
its trademark and customer relationship intangible assets. The relief from royalty valuation method, a
form of the income approach, was used to estimate the fair value of trademarks. The fair value of
trademarks was determined by calculating the present value of the expected future estimated royalty
payments that would have to be paid if the trademarks were not owned. The fair value of the net
royalties saved was estimated based on discounted cash flows at a risk adjusted discount rate. The
multi-period excess earnings method, a form of the income approach, was used to estimate the fair
value of customer relationships. The multi-period excess earnings method isolates the expected cash
flows attributable to the customer relationship intangible asset and discounts these cash flows at a risk
adjusted discount rate.
Inherent in the Company’s determinations of fair value are certain judgments and estimates relating to
future cash flows, including the Company’s assessment of current economic indicators and market
valuations, and assumptions about the Company’s strategic plans with regard to its operating businesses.
Due to the uncertainties associated with such evaluations, actual results could differ materially from
such estimates.
Other
During the year ended December 31, 2018, the Company ceased operations at its candy manufacturing
facility in Utah and incurred various costs in connection with this initiative, including severance costs
for certain employees. In addition, the Company remains liable under its lease agreement for the
manufacturing facility, which has estimated future minimum rental payments o f $2.1 million as of
December 31, 2018, and has recognized a lease liability of $1.0 million that is included in other
liabilities in the Company’s consolidated statement of financial condition as of December 31,
2018. The Company is also continuing to evaluate its wholesale businesses in the confectionery
industry. To the extent that the Company decides to divest of or otherwise exit certain of these
operations, the Company may recognize additional impairment charges and incur additional costs in
future periods. As of December 31, 2018, the net book value of the Company’s wholesale businesses in
the confectionery industry was $5.7 million.
F-34
13. Debt
The table below sets forth the contractual minimum principal payments of debt during each of the five
years subsequent to December 31, 2018 and thereafter (in thousands):
Notes
Payable
and
$
and Other
Borrowings
68,159
13,251
84,462
11,916
2,423
23,013
203,224
Receivable
Receivable
Backed
Notes
Payable -
Recourse
-
-
7,262
12,346
30,617
26,449
76,674
Backed
Notes
Payable -
Junior
Subordinated
Non-recourse Debentures
-
-
-
-
-
177,129
177,129
-
-
-
-
-
389,064
389,064
Total
68,159
13,251
91,724
24,262
33,040
615,655
846,091
2019
2020
2021
2022
2023
Thereafter
Unamortized debt issuance
costs
Unamortized purchase
discount
Total Debt
(2,337)
-
(6,807)
(1,200)
(10,344)
-
200,887
$
-
76,674
-
382,257
(39,504)
136,425
(39,504)
796,243
The minimum contractual payments set forth in the table above may differ from actual payments due to
the timing of principal payments required upon (1) the sale of real estate assets that serve as collateral
on certain debt (release payments) and (2) cash collections of pledged or transferred notes receivable.
F-35
Notes Payable and Other Borrowings
The table below sets forth information regarding the Company’s notes payable and other borrowings
(dollars in thousands):
December 31, 2018
December 31, 2017
Carrying
Amount
of
Pledged
Assets
Debt
Balance
Interest
Rate
Carrying
Amount
of
Pledged
Assets
Debt
Balance
Interest
Rate
$
28,125
5.50% $
22,878 $
46,500
5.50% $
29,403
-
3,834
-
25,603
-
-
5.34%
5.60%
-
7,892
-
35,615
2,715
4,080
5,089
-
6.72%
4.36%
4.75%
-
9,884
8,071
15,260
-
55,000
5.27%
92,415
20,000
4.27%
75,662
22,500
5.37%
27,724
23,750
4.32%
23,960
(1,671)
133,391
(1,940)
$ 100,194
Bluegreen:
2013 Notes Payable
Pacific Western Term
Loan
Fifth Third Bank Note
NBA Line of Credit
NBA Éilan Loan
Fifth Third Syndicated
Line of Credit
Fifth Third Syndicated
Term Loan
Unamortized debt
issuance costs
Total Bluegreen
$
Other:
Community Development
District Obligations
$
24,583
4.25-
6.00% $
23,778 $
21,435
4.50-
6.00% $
26,803
TD Bank Term Loan and
Line of Credit
Anastasia Note Payable
Iberia $50.0 million
8,117
-
5.47%
-
Revolving Line of Credit
30,000
5.35%
(1)
(2)
12,890
1,471
4.02%
5.00%
-
Iberia $5.0 million
Revolving
Line of Credit
Banc of America Leasing
& Capital Equipment
Note
Unsecured Note
Other
Unamortized debt
issuance costs
Total other
Total notes payable and
other borrowings
-
-
-
3,820
4.12%
555
3,400
1,507
4.75%
6.00%
5.25%
(3)
(4)
1,968
-
3,400
1,544
6.00%
5.25%
(666)
67,496
200,887
$
$
(640)
43,920
$
$ 144,114
(1)
(1)
-
(1)
-
(4)
1,993
-
-
(1) The collateral is a blanket lien on the respective company’s assets.
(2) The collateral is membership interests in Woodbridge having a value of not less than $100.0 million.
(3) The collateral is a security interest in the equipment financed by the underlying note. Additionally, IT’SUGAR is
guarantor on the note.
(4) BBX Capital is guarantor on the note.
Bluegreen
2013 Notes Payable – In March 2013, Bluegreen issued $75.0 million of senior secured notes (the
“2013 Notes Payable”) in a private financing transaction. The 2013 Notes Payable are secured by
certain of Bluegreen’s assets, including the cash flows from the residual interests relating to certain
term securitizations and the VOI inventory in
F-36
the BG Club 36 resort in Las Vegas, Nevada. Pursuant to the terms of the 2013 Notes Payable,
Bluegreen is required to periodically pledge reacquired VOI inventory in the BG Club 36 resort.
Bluegreen may also pledge additional residual interests from other term securitizations. In September
2016, the 2013 Notes Payable were amended to reduce the interest rate from 8.05% to 5.50%. The 2013
Notes Payable mature in March 2020. The terms of the 2013 Notes Payable include certain covenants
and events of default, which Bluegreen’s management considers to be customary for transactions of this
type. The proceeds from the 2013 Notes Payable were used to fund a portion of the consideration paid
to Bluegreen’s former shareholders in connection with BBX Capital’s acquisition of all of Bluegreen’s
then-outstanding shares in April 2013.
Pacific Western Term Loan - Bluegreen had a non-revolving term loan with Pacific Western Bank (the
“Pacific Western Term Loan”) that was secured by unsold inventory and undeveloped land at the
Bluegreen Odyssey Dells Resort. During the year ended December 31, 2018, Bluegreen repaid in full
the then outstanding balance of the Pacific Western Term Loan.
Fifth Third Bank Note Payable - In April 2008, Bluegreen entered into a note payable with Fifth Third
Bank (the “Fifth Third Bank Note Payable”) to finance an acquisition of real estate. The Fifth Third
Bank Note Payable matures in August 2021. Principal and interest on amounts outstanding under the
Fifth Third Bank Note Payable are payable monthly through maturity. The interest rate under the note
equals the 30-day LIBOR plus 3.00%.
NBA Line of Credit. Bluegreen/Big Cedar Vacations had a revolving line of credit with NBA (the “NBA
Line of Credit”) with a borrowing limit of $20 million. The NBA Line of Credit provided for a
revolving advance period expiring in September 2020 and maturity in March 2025 and was secured by
unsold inventory and a building under construction at Bluegreen/Big Cedar Vacations’ The Cliffs at
Long Creek Resort. During the year ended December 31, 2018, Bluegreen repaid in full the then
outstanding balance of the NBA Line of Credit. In connection with such repayment, availability under
the NBA Receivables Facility described below was increased by $20.0 million, and there is no further
availability under this line.
NBA Éilan Loan – In April 2018, Bluegreen purchased the Éilan Hotel & Spa in San Antonio, Texas for
approximately $34.3 million. In connection with the acquisition, Bluegreen entered into a non-
revolving acquisition loan with NBA (the “NBA Éilan Loan”). The NBA Éilan Loan provides for
advances of up to $27.5 million, $24.3 million of which was used to fund the acquisition of the resort,
$1.7 million of which was used to fund certain improvement costs, and up to an additional $1.5 million,
which may be drawn upon through April 2019, to fund certain future improvement costs. Principal
payments will be effected through release payments from sales of VOIs at the Éilan Hotel & Spa that
serve as collateral for the NBA Éilan Loan, subject to a minimum amortization schedule, with the
remaining balance due at maturity in April 2023. Borrowings under the NBA Éilan Loan bear interest at
an annual rate equal to one-month LIBOR plus 3.25%, subject to a floor of 4.75%.
Fifth Third Syndicated Line of Credit and Fifth Third Syndicated Term Loan - In December 2016,
Bluegreen entered
into a $100.0 million syndicated credit facility with Fifth Third Bank as
administrative agent and lead arranger and certain other bank participants as lenders. The facility
includes a $75.0 million revolving line of credit (the “Fifth Third Syndicated Line of Credit”) and a
$25.0 million term loan (the “Fifth Third Syndicated Term Loan”) with quarterly amortization
requirements. Amounts borrowed under the facility generally bear interest at LIBOR plus 2.75% -
3.75% depending on Bluegreen’s lev erage ratio, are collateralized by certain of Bluegreen’s VOI
inventory, sales center buildings, management fees and short-term receivables, and will mature in
December 2021.
Other Notes Payable
Community Development District Obligations
- A community development district or similar
development authority (“CDD”) is a unit of local government created under various state and/or local
statutes to encourage planned community development and allow for the construction of infrastructure
improvements through alternative financing sources, including the tax-exempt bond markets. A CDD is
generally created through the approval of the local city or county in which the CDD is located and is
controlled by a Board of Supervisors representing the landowners within the CDD. In connection with
the Company’s development of the Beacon Lakes Community, The Meadow View at Twin Creeks
CDD (the “Beacon Lakes CDD”) was formed by St. Johns County, Florida to use bond financing to
fund construction of infrastructure improvements at the Beacon Lakes Community. The Beacon Lakes
CDD issues bonds periodically to fund ongoing construction of the Beacon Lakes Community, and in
February 2019, November 2018 and November 2016, the Beacon Lakes CDD issued $8.1 million,
$16.5 million and $21.4 million, respectively, of bonds.
F-37
The obligation to pay principal and interest on the bonds issued by the Beacon Lakes CDD is assigned
to each parcel within the CDD, and the Beacon Lakes CDD has a lien on each parcel. If the owner of
the parcel does not pay this obligation, the Beacon Lakes CDD can foreclose on the lien. The CDD
bond obligations, including interest and the associated lien on the property, are typically payable,
secured and satisfied by revenues, fees or assessments levied on the property benefited.
The total amount of CDD bond obligations outstanding with respect to the Beacon Lakes Community
was $24.6 million as of December 31, 2018. The assessments to be levied by the CDD are fixed or
determinable amounts. The CDD bond obligations outstanding as of December 31, 2018 have fixed
interest rates ranging from 4.25% to 6.00% and mature at various times during the years 2026 through
2049. The Company at its option has the ability to repay a specified portion of the bonds at the time
that it sells developed lots in the Beacon Lakes Community.
Upon the issuance of CDD bond obligations by the Beacon Lakes CDD, the Company records an
obligation for the CDD bond obligations with a corresponding increase in other assets. The CDD bonds
are secured by a lien on the Beacon Lakes property which is included in “Real Estate” in the
Company’s Consolidated Statement of Financial Condition with a carrying amount of $23.8 million as
of December 31, 2018. The Company relieves the CDD bond obligation associated with a particular
parcel when the purchaser of the property assumes the obligation which occurs automatically upon such
purchaser’s acquisition of the property or upon repayment by the Company. Included in “Other Assets”
in the Company’s Consolidated Statement of Financial Condition as of December 31, 2018 and 2017
was $11.4 million and $9.5 million, respectively, of funds that the Company does not have the right of
setoff on the Company’s CDD bond obligations. Construction funds receivable associated with the CDD
bond obligations is reduced with a corresponding increase in real estate inventory when the CDD
disburses the funds to contractors for the construction of infrastructure improvements.
Toronto-Dominion Commercial Bank (“TD Bank”) Term Loan and Line of Credit - Renin maintains a
credit facility with TD Bank. Under the terms and conditions of the credit facility, TD Bank provides
term loans for up to $1.7 million and loans under a revolving credit facility for up to approximately
$16.3 million based on available collateral, as defined in the facility, and subject to Renin’s compliance
with the terms and conditions of the facility, including certain specific financial covenants.
Amounts outstanding under the revolving credit facility bear interest at the Canadian or United States
Prime Rate plus a margin of 1.00% per annum or the three-month LIBOR rate plus a margin of 2.75%
per annum. Outstanding principal on the revolving credit facility is payable one-year from the date of
the advance. As of December 31, 2018, the amount outstanding under the revolving credit facility was
$7.0 million and is scheduled to mature in September 2019.
The term loans were funded in three tranches aggregating $1.6 million through July 2017. Amounts
outstanding under the term loans bear interest at fixed interest rates ranging from 5.8% to 6.2% for one-
year from the date of the applicable drawdown for each loan. Annually, the fixed interest rates adjust to
a variable rate based on Canadian or United States Prime Rate plus a margin of 1.00% per annum or the
three-month LIBOR rate plus a margin of 2.75% per annum. The amounts outstanding under the term
loans mature between June 2020 and July 2022.
Amounts outstanding under the term loans and borrowings under the revolving credit facility require
monthly interest payments.
Under the terms and conditions of the TD Bank credit facility, Renin is required to comply with certain
financial covenants, including a quarterly debt service coverage ratio and a quarterly total debt to
tangible net worth ratio, as defined in the facility. The facility also contains customary affirmative and
negative covenants, including those that, among other things, limit the ability of Renin to incur liens or
engage in certain asset dispositions, mergers or consolidations, dissolutions, liquidations or winding up
of its businesses. The credit facility is collateralized by all of Renin’s assets.
Anastasia Note Payable – In 2014, the Company acquired the outstanding common shares of Anastasia
Confections, LLC (“Anastasia”), an operating business in the confectionery industry, and a portion of
the purchase price was funded through the issuance of a $7.5 million note payable to the seller (the
“Anastasia Note Payable”) that was guaranteed by the Company. During the year ended December 31,
2018, the Company repaid in full the then outstanding balance of the Anastasia Note Payable.
Iberia $50.0 million Revolving Line of Credit - On March 6, 2018, BBX Capital, BCC, Woodbridge,
and certain other wholly-owned subsidiaries of the Company entered into a Loan and Security
Agreement and related agreements with
F-38
Iberiabank (“Iberia”), as administrative agent and lender, and City National Bank of Florida, as lender,
which provide for a $50.0 million revolving line of credit. Amounts borrowed under the facility accrue
interest at a floating rate of 30-day LIBOR plus a margin of 3.0% to 3.75% or the Prime Rate plus a
margin of 1.50% to 2.25%. The applicable margin is based on BBX Capital’s debt to EBITDA ratio.
Payments of interest only will be payable monthly. The facility matures, and all outstanding principal
and interest will be payable, on March 6, 2020, with a twelve month renewal option at BBX Capital’s
request, subject to the satisfaction of certain conditions. The facility is secured by a pledge of a
percentage of BBX Capital’s membership interests in Woodbridge having a value of not less than $100
million. Borrowings under the facility may be used for business acquisitions, real estate investments,
stock repurchases, letters of credit and general corporate purposes.
Under the terms and conditions of the Loan and Security Agreement, BBX Capital is required to
comply with certain financial covenants, including maintaining minimum unencumbered liquidity and
complying with financial ratios related to fixed charge coverage and debt to EBITDA. The Loan and
Security Agreement also contains customary affirmative and negative covenants, including those that,
among other things, limit the ability of BBX Capital and the other borrowers to incur additional
indebtedness and to make certain loans and investments.
In January 2019, the Company repaid the $30.0 million outstanding balance on the facility as of
December 31, 2018.
Iberia $5.0 million Revolving Line of Credit – A wholly-owned subsidiary of the Company previously
had a revolving line of credit with Iberia that was secured by the assets of various subsidiaries and
guaranteed by BBX Capital. During the year ended December 31, 2018, the Company repaid in full
the then outstanding balance of the line of credit.
Banc of America Leasing & Capital Equipment Note – In September 2018, IT’SUGAR entered into a
Master Loan and Security Agreement with Banc of America Leasing & Capital, LLC which sets forth
the terms and conditions pursuant to which IT’SUGAR may borrow funds to purchase equipment under
one or more equipment security notes. The agreement contains customary representations and
covenants. Each equipment note constitutes a separate, distinct and independent financing of equipment,
is secured by a security interest in the purchased equipment, and is an unconditional contractual
obligation of IT’SUGAR. As of December 31, 2018, there was one equipment note outstanding with a
balance of $0.6 million. The equipment note bears interest at a fixed rate of 4.75% per annum and is
payable in 36 consecutive monthly principal and interest installments of $18,516 with a maturity date of
September 2021. The equipment note is subject to a prepayment charge equal to one percent of the
amount prepaid multiplied by the number of years or fraction thereof for the then remaining equipment
note term.
Bank of America Revolving Line of Credit - In August 2018, IT’SUGAR entered into a revolving credit
facility with Bank of America. Under the terms and conditions of the credit facility, Bank of America
has agreed to provide a revolving line of credit to IT’SUGAR for up to $4.0 million based on available
collateral, as defined by the credit facility, and subject to IT’SUGAR’s compliance with the terms and
conditions of the credit facility, including certain specific financial covenants. The revolving credit
facility is available through August 2021, and amounts outstanding bear interest at a LIBOR daily
floating rate plus 1.50% or a monthly LIBOR rate subject to the terms and conditions of the credit
facility. Payments of interest only are payable monthly. There were no borrowings outstanding under
the credit facility as of December 31, 2018.
Under the terms and conditions of this revolving line of credit, IT’SUGAR is required to comply with
certain financial covenants, including quarterly and annual debt service coverage ratios. The facility
also contains various covenants, including those that, among other things, limit the ability of
IT’SUGAR to incur liens, make certain investments, or engage in certain asset acquisitions or
dispositions.
Unsecured Note – In October 2017, a wholly-owned subsidiary of the Company issued a $3.4 million
unsecured note to the seller of real estate to the Chapel Trail real estate joint venture, in which the
subsidiary has a 46.75% equity interest. The unsecured note was part of the subsidiary’s initial capital
contribution to the venture. The note is not secured by the Company’s equity interest in the joint
venture or the venture’s underlying property, and BBX Capital guarantees the repayment of the
unsecured note. The unsecured note accrues interest at a fixed rate of 6.0% per annum, with monthly
interest only payments, and matures in October 2022.
Other – Other notes payable is a term loan payable by a wholly-owned subsidiary of the Company. The
loan had an outstanding balance of $1.5 million as of December 31, 2018 and 2017, respectively, and is
collateralized by land and buildings that had a carrying value of $2.0 million as of December 31, 2018
and 2017. The Company is a guarantor on this note payable.
F-39
Receivable-Backed Notes Payable
The table below sets forth information regarding Bluegreen’s receivable-backed notes payable facilities
(dollars in thousands):
December 31, 2018
December 31, 2017
Principal
Balance of
Pledged/
Secured
Debt
Receivables Balance
Principal
Balance of
Pledged/
Secured
Receivables
Interest
Rate
Debt
Balance
Interest
Rate
$
17,654
5.25% $
22,062 $
24,990
5.00% $
30,472
$
$
48,414
10,606
76,674
5.27%
5.52%
$
57,805
13,730
93,597 $
44,414
15,293
84,697
4.10%
6.00%
53,730
19,516
103,718
$
-
- $
- $
16,144
40,074
4.75-
5.50%
45,283
16,771
4.31% $
4.75-
6.90%
19,866
18,659
15,212
2.94%
16,866
23,227
2.94%
25,986
27,573
3.20%
29,351
37,163
3.20%
39,510
44,230
3.02%
47,690
58,498
3.02%
61,705
63,982
3.35%
72,590
83,142
3.35%
91,348
83,513
3.12%
95,877
107,624
3.12%
119,582
114,480
4.02%
125,916
-
-
-
(6,807)
$ 382,257
$ 458,931
-
-
(6,148)
433,573 $ 336,421
527,170 $ 421,118
$
$
-
376,656
480,374
$
$
Receivable-backed
notes
payable - recourse:
Liberty Bank Facility
NBA Receivables
Facility
Pacific Western Facility
Total
Receivable-backed
notes
payable - non-
recourse:
KeyBank/DZ Purchase
Facility
Quorum Purchase
Facility
2012 Term
Securitization
2013 Term
Securitization
2015 Term
Securitization
2016 Term
Securitization
2017 Term
Securitization
2018 Term
Securitization
Unamortized debt
issuance costs
Total
Total receivable-
backed debt
Liberty Bank Facility – Since 2008, Bluegreen has maintained a revolving VOI notes receivable
hypothecation facility (the “Liberty Bank Facility”) with Liberty Bank which provides for advances on
eligible receivables pledged under the Liberty Bank Facility, subject to specified terms and conditions,
during a revolving credit period. On March 12, 2018, the Liberty Bank Facility was amended and
restated to extend the revolving credit period from March 2018 to March 2020, extend the maturity date
from November 2020 until March 2023, and amend the interest rate on borrowings as described below.
Subject to its terms and conditions, the Liberty Bank Facility provides for advances of (i) 85% of the
unpaid principal balance of Qualified Timeshare Loans assigned to agent, and (ii) 60% of the unpaid
principal balance of Non-Conforming Qualified Timeshare Loans assigned to agent, during the
revolving credit period of the facility. Maximum permitted outstanding borrowings under the Liberty
Bank Facility are $50.0 million, subject to the terms of the facility. Through March 31, 2018,
borrowings under the Liberty Bank Facility accrued interest at the Wall Street Journal (“WSJ”) Prime
Rate plus 0.50% per annum, subject to a 4.00% floor. Pursuant to the March 2018 amendment to the
Liberty Bank Facility, effective April 1, 2018, all borrowings outstanding under the facility accrue
interest at an annual rate equal to the WSJ Prime Rate, subject to a 4.00% floor. Subject to the terms of
the facility, principal and interest on borrowings under the Liberty Bank Facility are paid as cash is
collected on the pledged receivables, with the remaining balance being due by maturity.
NBA Receivables Facility. Bluegreen/Big Cedar Vacations has a revolving VOI hypothecation facility
(the “NBA Receivables Facility”) with NBA. The NBA Receivables Facility provides for advances at a
rate of 85% on eligible receivables pledged under the facility, subject to eligible collateral and specified
terms and conditions, during a revolving credit period expiring in 2020 and allows for maximum
borrowings of up to $70.0 million. The maturity date for the facility is March 2025. The interest rate
applicable to future borrowings under the NBA Receivables Facility is equal to the 30-day LIBOR plus
2.75% (with an interest rate floor of 3.50%). Subject to the terms of the facility, principal and interest
payments received on pledged receivables are applied to principal and interest due under the facility,
with the remaining outstanding balance being due by maturity.
F-40
Pacific Western Facility - Bluegreen has a revolving VOI notes receivable hypothecation facility (the
“Pacific Western Facility”) with Pacific Western Bank, which provides for advances on eligible VOI
notes receivable pledged under the facility, subject to specified terms and conditions, during a revolving
credit period. Maximum outstanding borrowings under the Pacific Western Facility are $40.0 million,
subject to eligible collateral and customary terms and conditions. On August 15, 2018, the Pacific
Western Facility was amended to extend the revolving advance period from September 2018 to
September 2021, extend the maturity date from September 2021 until September 2024 (in each case
subject to an additional 12-month extension at the option of Pacific Western Bank). Eligible “A” VOI
notes receivable that meet certain eligibility and FICO score requirements, which Bluegreen’s believes
are typically consistent with loans originated under its current credit underwriting standards, are subject
to an 85% advance rate. The Pacific Western Facility also allows for certain eligible “B” VOI notes
receivable (which have less stringent FICO score requirements) to be funded at a 53% advance rate. In
addition, pursuant to the amendment, effective September 21, 2018, all borrowings outstanding under
the Pacific Western facility accrue interest at an annual rate equal to 30-day LIBOR plus 3.00%;
provided, however, that a portion of the borrowings, to the extent such borrowings are in excess of
established debt minimums, will accrue interest at 30-day LIBOR plus 2.75%. Subject to the terms of
the facility, principal repayments and interest on borrowings under the Pacific Western Facility are paid
as cash is collected on the pledged VOI notes receivable, subject to future required decreases in the
advance rates after the end of the revolving advance period, with the remaining outstanding balance
being due by maturity.
KeyBank/DZ Purchase Facility. Bluegreen has a VOI notes receivable purchase facility (the
“KeyBank/DZ Purchase Facility”) with DZ Bank AG Deutsche Zentral-Genossenschaftsbank, Frankfurt
AM Main (“DZ”), and KeyBank National Association (“KeyBank”) which permits maximum
outstanding financings of $80.0 million, with an advance period expiring in December 2019 and an
advance rate of 80%. The KeyBank/DZ Purchase Facility will mature and all outstanding amounts will
become due thirty-six months after the revolving advance period has expired, or earlier under certain
circumstances set forth in the facility. Interest on amounts outstanding under the facility is tied to an
applicable index rate of the LIBOR rate, in the case of amounts funded by KeyBank, and a cost of funds
rate or commercial paper rates, in the case of amounts funded by or through DZ. The interest rate
payable under the facility is the applicable index rate plus 2.75% until the expiration of the revolving
advance period and thereafter will be the applicable index rate plus 4.75%. Subject to the terms of the
facility, Bluegreen will receive the excess cash flows generated by the VOI notes receivable sold
(excess meaning after payments of customary fees, interest and principal under the facility) until the
expiration of the VOI notes receivable advance period, at which point all of the excess cash flow will be
paid to the note holders until the outstanding balance is reduced to zero. While ownership of the VOI
notes receivable included in the facility is transferred and sold for legal purposes, the transfer of these
VOI notes receivable is accounted for as a secured borrowing for financial reporting purposes. The
facility is nonrecourse.
Quorum Purchase Facility - Bluegreen and Bluegreen/Big Cedar Vacations have a VOI notes receivable
purchase facility (the “Quorum Purchase Facility”) with Quorum Federal Credit Union (“Quorum”),
pursuant to which Quorum agreed to purchase eligible VOI notes receivable in an amount of up to an
aggregate $50.0 million purchase price, subject to certain conditions precedent and other terms of the
facility. On April 6, 2018, the Quorum Purchase Facility was amended to extend the revolving purchase
period from June 30, 2018 to June 30, 2020, and provided for a fixed interest rate of 4.95% per annum
on advances made through September 30, 2018. The interest rate on advances made after September 30,
2018 under the Quorum Purchase Facility will be set at the time of funding based on rates mutually
agreed upon by all parties. The amendment also reduced the loan purchase fee from 0.50% to 0.25%
and extended the maturity of the Quorum Purchase Facility from December 2030 to December 2032. Of
the amounts outstanding under the Quorum Purchase Facility at December 31, 2018, $4.0 million
accrues interest at a rate per annum of 4.75%, $31.1 million accrues interest at a rate per annum of
4.95%, $2.5 million accrues interest at a rate per annum of 5.0%, and $2.0 million accrues interest at a
rate per annum of 5.5%. The Quorum Purchase Facility provides for an 85% advance rate on eligible
receivables sold under the facility; however, Quorum can modify this advance rate on future purchases
subject to the terms and conditions of the Quorum Purchase Facility. Eligibility requirements for VOI
notes receivable sold include, among others, that the obligors under the VOI notes receivable sold be
members of Quorum at the time of the note sale. Subject to performance of the collateral, Bluegreen or
Bluegreen/Big Cedar Vacations, as applicable, will receive any excess cash flows generated by the VOI
notes receivable transferred to Quorum under the facility (excess meaning after payments of customary
fees, interest, and principal under the facility) on a pro-rata basis as borrowers make payments on their
VOI notes receivable. While ownership of the VOI notes receivable included in the Quorum Purchase
Facility is transferred and sold for legal purposes, the transfer of these VOI notes receivable is
accounted for as a secured borrowing for financial reporting purposes. The facility is nonrecourse.
2017 Term Securitization – On June 6, 2017, Bluegreen completed a private offering and sale of
approximately $120.2 million of investment grade, VOI receivable-backed notes (the “2017 Term
Securitization”). The 2017 Term Securitization consisted of the issuance of two tranches of VOI
receivable-backed notes: approximately $88.8 million
F-41
of Class A notes and approximately $31.4 million of Class B notes with note interest rates of 2.95% and
3.59%, respectively, which blended to an overall weighted average note interest rate of approximately
3.12%. The gross advance rate for this transaction was 88%. The notes mature in October 2032.
The amount of the VOI notes receivable sold to BXG Receivables Note Trust 2017 (the “2017 Trust”)
was approximately $136.5 million. The gross proceeds of such sales to the 2017 Trust were $120.2
million. A portion of the proceeds was used to repay KeyBank and DZ $32.3 million, representing all
amounts then outstanding (including accrued interest) under the KeyBank/DZ Purchase Facility, repay
Liberty Bank approximately $26.8 million (including accrued interest) under Bluegreen’s existing
facility with Liberty Bank, capitalize a reserve fund, and pay fees and expenses associated with the
transaction. In April 2017, Bluegreen, as servicer, redeemed the notes related to BXG Receivables Note
Trust 2010-A for approximately $10.0 million, and certain of the VOI notes receivable in such trust
were sold to the 2017 Trust in connection with the 2017 Term Securitization. The remainder of the
proceeds from the 2017 Term Securitization were used by Bluegreen for general corporate purposes.
While ownership of the VOI notes receivable included in the 2017 Term Securitization is transferred
and sold for legal purposes, the transfer of these VOI notes receivable is accounted for as a secured
borrowing for financial accounting purposes. Accordingly, no gain or loss was recognized as a result of
this transaction. Subject to the performance of the collateral, Bluegreen will receive any excess cash
flows generated by the VOI notes receivable transferred under the 2017 Term Securitization (excess
meaning after payments of customary fees, interest, and principal under the 2017 Term Securitization)
on a pro-rata basis as borrowers make payments on their VOI notes receivable.
2018 Term Securitization - In October 2018, Bluegreen completed the 2018 Term Securitization, a
private offering and sale of approximately $117.7 million of investment-grade, VOI receivable-backed
notes (the "Notes"), including approximately $49.8 million of Class A Notes, approximately $33.1
million of Class B Notes and approximately $34.8 million of Class C Notes with interest rates of 3.77%,
3.95% and 4.44%, respectively, which blends to an overall weighted average interest rate of
approximately 4.02%. The gross advance rate for this transaction was 87.2%. The Notes mature in
February 2034.
The amount of the VOI notes receivables sold to BXG Receivables Note Trust 2018 (the “Trust”) was
approximately $135.0 million, approximately $109.0 million of which was sold to the Trust at closing,
approximately $23.9 million of which was subsequently sold to the 2018 Trust in 2018, and the
remainder of which was sold to the Trust in January 2019. The gross proceeds of such sales to the Trust
were approximately $117.7 million. A portion of the proceeds received at the closing was used to:
repay KeyBank and DZ Bank approximately $49.2 million, representing all amounts outstanding
(including accrued
the KeyBank/DZ Purchase Facility; repay Liberty Bank
approximately $20.4 million under Liberty Bank Facility; repay Pacific Western Bank approximately
$7.1 million under the Pacific Western Bank Facility; capitalize a reserve fund; and pay fees and
expenses associated with the transaction. The remainder of the proceeds from the 2018 Term
Securitization are were used for general corporate purposes.
interest) under
While ownership of the VOI receivables included in the 2018 Term Securitization is transferred and
sold for legal purposes, the transfer of these VOI receivables is accounted for as a secured borrowing
for financial accounting purposes. Accordingly, no gain or loss was recognized as a result of the
transaction.
Subject to performance of the collateral, Bluegreen will receive any excess cash flows generated by the
receivables transferred under the 2018 Term Securitization (meaning excess cash after payments of
customary fees, interest, and principal under the 2018 Term Securitization) on a pro-rata basis as
borrowers make payments on their VOI loans.
Other Non-Recourse Receivable-Backed Notes Payable – In addition to the above described facilities,
Bluegreen has a number of other nonrecourse receivable-backed notes payable facilities, as set forth in
the table above. During 2018, Bluegreen repaid $51.0 million under these additional receivable-backed
notes payable facilities During 2018, Bluegreen repaid $62.0 million under these additional receivable-
backed notes payable facilities, including the payment in full of the notes payable issued in connection
with the 2010 Term Securitization. During 2017, Bluegreen wrote off the related unamortized debt
issuance cost of $0.3 million.
F-42
Junior Subordinated Debentures
The table below sets forth information regarding the Company’s junior subordinated debentures (dollars
in thousands):
December 31,
2018
2017
Woodbridge - Levitt Capital Trusts I
- IV
$
Bluegreen Statutory Trusts I - VI
Unamortized debt issuance costs
Unamortized purchase discount
Total junior subordinated
debentures
Effective
Interest Maturity
Years (2)
Effective
Carrying
Interest
Amounts Rates (1)
6.20 -
6.65% $
7.32 -
7.70%
66,302
110,827
(1,200)
(39,504)
Carrying
Amounts Rates (1)
5.14 -
5.19%
6.18 -
6.59%
66,302
110,827
(1,272)
(40,443)
2035 - 2036
2035 - 2037
$
136,425
$ 135,414
(1) The Company’s junior subordinated debentures bear interest at three-month LIBOR (subject to quarterly
adjustment) plus a spread ranging from 3.80% to 4.90%.
(2) All of the junior subordinated debentures were eligible for redemption by Woodbridge and Bluegreen, as
applicable, as of December 31, 2018 and 2017.
Woodbridge and Bluegreen have each formed statutory business trusts (collectively, the “Trusts”), each
of which issued trust preferred securities and invested the proceeds thereof in junior subordinated
debentures of Woodbridge and Bluegreen, respectively. The Trusts are VIEs in which Woodbridge and
Bluegreen, as applicable, are not the primary beneficiaries. Accordingly, the Company and its
subsidiaries do not consolidate the operations of these Trusts; instead, the beneficial interests in the
Trusts are accounted for under the equity method of accounting. Included in other assets as of
December 31, 2018 and 2017 was $2.1 million of equity in the Trusts. Interest on the junior
subordinated debentures and distributions on the trust preferred securities are payable quarterly in
arrears at the same interest rate.
During January 2017, Woodbridge purchased approximately $11.1 million of Levitt Capital Trust II
(“LCTII”) trust preferred securities for $6.7 million and purchased approximately $7.7 million of Levitt
Capital Trust III (“LCTIII”) trust preferred securities for $4.7 million, and in February 2017,
Woodbridge delivered the purchased securities to the respective trusts in exchange for the cancellation
of $11.1 million of Woodbridge’s junior subordinated debentures held by LCTII and $7.7 million of
Woodbridge’s junior subordinated debentures held by LCTIII. As a result, in February 2017,
Woodbridge recognized a $6.9 million gain associated with the cancellation of the notes, which is
included in net gains on cancellation of junior subordinated debentures in the Company’s consolidated
statement of operations for the year ended December 31, 2017.
Debt Compliance and Amounts Available under Credit Facilities
As of December 31, 2018, BBX Capital and its subsidiaries were in compliance with all financial debt
covenants under its debt instruments.
As of December 31, 2018, Bluegreen had availability of approximately $193.3 million under its
receivable-backed purchase and credit facilities, inventory lines of credit, and corporate credit line,
subject to eligible collateral and the terms of the facilities, as applicable. As of December 31, 2018,
BBX Capital and its other subsidiaries had availability of approximately $31.4 million under revolving
lines of credit, subject to eligible collateral and the terms of the facilities, as applicable.
F-43
14. Income Taxes
The Company’s United States and foreign components of income before income taxes are as follows (in
thousands):
U.S.
Foreign
Total
For the Years Ended December 31,
2016
2017
2018
$
$
88,284
(852)
87,432
92,115
486
92,601
78,579
407
78,986
The Company’s provision for income taxes consisted of the following (in thousands):
For the Years Ended December 31,
2017
2018
2016
Current:
Federal
State
Deferred:
Federal
State
Provision (benefit) for income taxes
$
$
676
3,519
4,195
22,824
4,620
27,444
31,639
1,211
1,767
2,978
(14,368)
1,688
(12,680)
(9,702)
(339)
1,014
675
36,404
(689)
35,715
36,390
The table below sets forth a reconciliation of the Company's expected Federal income tax provision to
the actual provision for income taxes (dollars in thousands):
For the Years Ended December 31,
2017(1)
2018(1)
2016(1)
Income tax provision at expected
federal income tax rate
$
18,360 21.00 % $ 32,410 35.00 % $ 27,646 35.00 %
Increase (decrease) resulting from:
Provision for state taxes, net of
federal effect
Effect of federal rate change-2017
tax reform
Taxes related to noncontrolling
interests in subsidiaries not
consolidated for income tax
purposes
Nondeductible executive
compensation
Bluegreen initial public offering
SEC penalty
Increase in valuation allowance
Other – net
Provision (benefit) for income taxes $
6,446
7.37
3,607
3.90
529
0.67
-
-
(45,267)(48.88)
-
-
(2,519)
(2.88)
(4,467) (4.82)
(3,432) (4.35)
8,421
-
-
266
665
9.63
-
-
0.30
0.76
4.65
4,309
1,467
1.58
(1,593) (1.72)
0.03
(193) (0.21)
25
7,301
-
-
3,807
539
9.24
-
-
4.82
0.68
31,639 36.18 % $
(9,702)(10.47)% $ 36,390 46.06 %
(1) Expected tax is computed based upon income before income taxes.
F-44
The Company’s deferred income taxes consisted of the following significant components (in
thousands):
December 31,
2017
2016
2018
Deferred tax assets:
Allowance for loan losses, tax certificate losses and
write-downs for financial statement purposes
$
Federal and State NOL and tax credit carryforward (1)
Real estate valuation
Share based compensation
Property and equipment
Other
Total gross deferred tax assets
Valuation allowance (1)
Total deferred tax assets
Deferred tax liabilities:
Installment sales treatment of notes
Intangible assets
Junior subordinated debentures
Deferral of VOI sales and costs under timeshare accounting
Property and equipment
Other
Total gross deferred tax liabilities
Net deferred tax liability
Less net deferred tax liability at beginning of period
Reclassify alternative minimum tax credit to other assets
Bluegreen initial public offering
Cumulative effect for excess tax benefits recognized in
accumulated earnings associated with share based
compensation
Other
Less change in net deferred tax liability for amounts included
29,969
97,102
7,519
-
-
7,394
141,984
(86,533)
55,451
104,126
14,162
9,378
8,654
3,351
2,143
141,814
(86,363)
47,968
11,169
-
-
(235)
in other comprehensive income
(Provision) benefit for deferred income taxes
17
(27,444)
$
25,604
132,650
9,117
24
1,642
7,365
176,402
(86,267)
90,135
100,717
14,322
9,144
10,071
-
3,849
138,103
(47,968)
51,674
-
11,988
(3,054)
-
40
12,680
43,729
194,051
16,828
232
3,015
11,183
269,038
(107,169)
161,869
152,074
24,501
16,349
15,150
-
5,469
213,543
(51,674)
15,939
-
-
-
-
20
(35,715)
(1) Federal and state NOLs and the related valuation allowances at December 31, 2017 and 2016 were decreased by
$16.0 million and $24.6 million, respectively, from amounts reflected in the Company’s prior period financial
statements to reflect the write-off of NOLs subject to the Section 382 limitation that cannot be utilized before
expiration (which is discussed in further detail below).
Impact of the Tax Reform Act
On December 22, 2017, the Tax Reform Act was signed into law. In addition to changes or limitations
to certain tax deductions, including limitations on the deductibility of interest payable to related and
unrelated lenders and further limiting deductible executive compensation, the Tax Reform Act
permanently lowered the federal corporate tax rate to 21% from the previous maximum rate of 35%,
effective for tax years commencing January 1, 2018. As a result of the Tax Reform Act, SAB 118 and
ASU 2018-05 were issued to address the application of ASC 740 in situations in which an entity does
not have the necessary information available, prepared, or analyzed in reasonable detail to complete the
accounting for certain income tax effects of the Tax Reform Act. Under this guidance, an entity may
record provisional amounts for the impact of the Tax Reform Act which may be revised during a one
year “measurement period.” In accordance with this guidance, the Company remeasured its net deferred
tax liabilities in the fourth quarter of 2017 due to the reduction of the corporate tax rate to 21% and
recorded a provisional tax benefit of $45.3 million in its statement of operations for the year ended
December 31, 2017. During the year ended December 31, 2018, the Company completed its analysis of
the tax effects of the Tax Reform Act and reduced the provisional tax benefit recognized for the year
ended December 31, 2017 by $2.8 million as a result of its analysis of the impact of the Tax Reform
Act had on the deductibility of certain compensation to covered employees. The recognition of this
adjustment during the year ended December 31, 2018 increased the Company’s effective tax rate from
33.0% to 36.2%.
F-45
The Tax Reform Act also repealed the alternative minimum tax effective in 2018 and allows credits
associated with the alternative minimum tax to be applied to fully offset regular income taxes. Any
credits that are not used to reduce regular income taxes are refundable at 50% for the years 2019
through 2020 and 100% refundable in 2021. The Company has alternative minimum tax credit
carryforwards of $11.2 million as of December 31, 2018 that were reclassified from deferred tax
liabilities to other assets in the Company’s consolidated statement of financial condition as of December
31, 2018.
Valuation Allowance on Deferred Tax Assets
The Company evaluates its deferred tax assets to determine if valuation allowances are required. In the
evaluation, management considers net operating loss (“NOL”) carryback availability, expectations of
sufficient future taxable income, trends in earnings, existence of taxable income in recent years, the
future reversal of temporary differences, and available tax planning strategies that could be
implemented, if required. Valuation allowances are established based on the consideration of all
available evidence using a more likely than not standard. Based on the Company’s evaluations, which
are discussed in further detail below, the deferred tax valuation allowances increased by $0.3 million
and $25,000 for the year ended December 31, 2018 and 2017, respectively. The $25,000 increase in the
deferred tax valuation allowance as of December 31, 2017 is in addition to the decrease in the valuation
allowance of $25.7 million from the permanent reduction in the corporate tax rate from 35% to 21%.
As of December 31, 2018, the Company has established a valuation allowance of $86.4 million relating
to the deferred tax asset of $97.1 million for federal and state NOL and tax credit carryforwards, as the
Company’s ability to utilize a portion of these carryforwards to reduce future tax liability income is
subject to significant limitations. The table below sets forth information regarding the federal and state
NOL and tax credit carryforwards and the applicable valuation allowance as of December 31, 2018 (in
thousands):
Federal and
State
NOL and
Credit
Gross
Deferred
Tax
Net
Deferred
Tax
Valuation
Carryforward
Asset
Allowance
Asset
Florida NOL-BBX
$
20,878
907
-
907
Non-Florida State NOLs
224,300
10,135
2,403
7,732
Federal NOL SRLY Limitation
227,595
47,795
47,795
Florida NOL SRLY Limitation
Other Federal tax credits-SRLY
Limitation
Federal NOL Section 382
Limitation
Florida NOL Section 382
Limitation
Canadian NOL
Canadian capital losses
Total
$
750,987
32,630
32,630
2,372
1,822
245
2,372
-
-
1,011
1,011
2,372
8,674
5,639
4,045
1,477
185
97,102
185
86,396
-
10,706
Year
Expires
2030-
2034
2019-
2038
2026-
2034
2026-
2034
2025-
2031
2023-
2029
2024-
2029
2033-
2038
Do
not expire
-
-
-
1,822
245
-
The Company evaluated all positive and negative evidence available as of the reporting date, including
tax planning strategies, the ability to file a consolidated return with its subsidiaries, the expected future
reversal of existing taxable temporary differences, and expected future taxable income (primarily from
Bluegreen) exclusive of reversing temporary differences and carry forwards. Based on this evaluation,
the Company has determined that it is more likely than not that it will be able to realize $10.7 million of
the deferred tax asset that is attributed to the Company’s federal and state NOL and credit
carryforwards.
As of December 31, 2018, the Company had estimated Florida NOL carryforwards of approximately
$20.9 million which expire from 2030 through 2034. These NOLs are not subject to any limitation and
can be applied to the taxable income of any subsidiary of the Company. No valuation allowance is
needed for these NOLs.
As of December 31, 2018, Bluegreen had non-Florida state NOL carryforwards of $224.3 million which
expire from 2019 through 2038. These NOLs can only be utilized against Bluegreen’s (or a subsidiary
of Bluegreen) income allocable to the state in which the NOL was generated. A valuation allowance is
maintained for those state NOLs where the NOL is not more likely than not realizable.
F-46
As of December 31, 2018, the Company had federal and Florida NOL carryforwards and federal tax
credit carryforwards that can only be utilized if the separate entity that generated them has separate
company taxable income (“SRLY NOL Limitation”). These carryforwards cannot be utilized against
most of the Company’s subsidiaries’ taxable income, including Bluegreen. As such, a full valuation
allowance has been established for these carryforwards.
In addition, as a result of the Company’s merger with Woodbridge in September 2009, the Company
experienced a “change of ownership” as that term is defined in the Internal Revenue Code. This change
of ownership resulted in a significant limitation of the amount of the Company’s pre-merger NOLs that
can be utilized by the Company annually (the “Section 382 limitation”). The federal and Florida annual
limit is approximately $788,000 and $513,000, respectively. As a result, the amounts in the table
represent the NOLs that more likely than not can be utilized before expiration.
As of December 31, 2018, BBX Capital’s Canadian subsidiaries had NOL carryforwards. As the
Canadian operation has had cumulative taxable losses in recent years, a full valuation allowance has
been applied to these NOL carryforwards. In addition, one of the Canadian subsidiaries has a capital
loss carryforward that can only be used to reduce capital gains, and the tax on Canadian capital gains is
50% of the Canadian tax rate. Canadian capital loss carryforwards do not expire. A full valuation
allowance is maintained for the Canadian capital loss carryforward as it is unlikely that the Canadian
subsidiary will generate capital gains in the future.
Other
On September 21, 2009, the Company adopted a shareholder rights agreement aimed at protecting its
ability to use available NOLs to offset future taxable income. See Note 18 for additional information
regarding the Company’s rights agreement.
The Company evaluates its tax positions based upon guidelines of ASC 740, which clarifies the
accounting for uncertainty in tax positions. Based on an evaluation of uncertain tax provisions, the
Company is required to measure tax benefits based on the largest amount of benefit that is greater than
50% likely of being realized upon settlement. There were no unrecognized tax benefits at December
31, 2018, 2017 or 2016.
The Company is no longer subject to federal or Florida income tax examinations by tax authorities for
tax years before 2015. Several of the Company’s subsidiaries are no longer subject to income tax
examinations in certain state, local and non-U.S. jurisdictions for tax years before 2013.
Certain of the Company’s state income tax filings are under routine examination. While there is no
assurance as to the results of these audits, the Company does not currently anticipate any material
adjustments in connection with these examinations.
15. Commitments and Contingencies
Litigation Matters
In the ordinary course of business, BBX Capital and its subsidiaries are parties to lawsuits as plaintiff or
defendant involving its operations and activities. Bluegreen is subject to claims or proceedings from
time to time relating to the purchase, sale, marketing, or financing of VOIs and other business activities.
Additionally, from time to time in the ordinary course of business, the Company is involved in disputes
with existing and former employees, vendors, taxing jurisdictions and various other parties and also
receives individual consumer complaints and complaints through regulatory and consumer agencies,
including Offices of State Attorneys General. The Company takes these matters seriously and attempts
to resolve any such issues as they arise.
Reserves are accrued for matters in which management believes it is probable that a loss will be
incurred and the amount of such loss can be reasonably estimated. Management does not believe that
the aggregate liability relating to known contingencies in excess of the aggregate amounts accrued will
have a material impact on the Company’s results of operations or financial condition. However,
litigation is inherently uncertain, and the actual costs of resolving legal claims, including awards of
damages, may be substantially higher than the amounts accrued for these claims and may have a
material adverse impact on the Company’s results of operations or financial condition.
Adverse judgements and the costs of defending or resolving legal claims may be substantial and may
have a material adverse impact on the Company’s financial statements. Management is not at this time
able to estimate a range of
F-47
reasonably possible losses with respect to matters in which it is reasonably possible that a loss will
occur. In certain matters, management is unable to estimate the loss or reasonable range of loss until
additional developments provide information sufficient to support an assessment of the loss or
reasonable range of loss. Frequently in these matters, the claims are broad, and the plaintiffs have not
quantified or factually supported their claim.
Securities and Exchange Commission Complaint
In 2012, the SEC brought an action in the United States District Court for the Southern District of
Florida against BCC and Alan B. Levan, BCC’s Chairman and Chief Executive Officer. Following an
initial trial in 2014 and the reversal on appeal of certain judgments of the district court by the Eleventh
Circuit Court of Appeals, a second trial was held in 2017, and on May 8, 2017, the jury rendered a
verdict in favor of BCC and Mr. Levan and against the SEC on all counts.
In connection with the Eleventh Circuit Court of Appeals’ reversal of certain judgments in the first trial,
which became final on January 31, 2017, and the resolution of the matter in favor of BCC and Mr.
Levan in the second trial, BBX Capital received legal fees and costs reimbursements from its insurance
carrier of approximately $8.6 million as well as the release of the $4.6 million penalty assessed against
BCC in the first trial. The legal fees and costs reimbursements and the release of the penalty are
reflected in the Company’s statement of operations in reimbursements of litigation costs and penalty for
the year ended December 31, 2017. The Company received an additional $0.6 million of legal fees and
costs reimbursements during the year ended December 31, 2018.
The following is a description of certain ongoing litigation matters:
BBX Capital Litigation
There were no material pending legal proceedings against BBX Capital or its subsidiaries excluding
Bluegreen as of December 31, 2018.
Bluegreen Litigation
On August 24, 2016, Whitney Paxton and Jeff Reeser filed a lawsuit against Bluegreen Vacations
Unlimited, Inc. (“BVU”), a wholly-owned subsidiary of Bluegreen, and certain of its employees
(collectively, the “Defendants”) seeking to establish a class action of former and current employees of
BVU and alleging violations of plaintiffs’ rights under the Fair Labor Standards Act of 1938 (the
“FLSA”) and breach of contract. The lawsuit also sought damages in the amount of the unpaid
compensation owed to the plaintiffs. The court granted preliminary approval of class action in
September 2017 to conditionally certify collective action and facilitate notice to potential class members
be granted with respect to certain employees and denied as to others. In February 2019, the parties
agreed to settle the matter for an immaterial amount. It is expected that the court will approve the
settlement and the dismissal of the lawsuit after the settlement documents are fully prepared and
executed.
On September 22, 2017, Stephen Potje, Tamela Potje, Sharon Davis, Beafus Davis, Matthew Baldwin,
Tammy Baldwin, Arnor Lee, Angela Lee, Gretchen Brown, Paul Brown, Jeremy Estrada, Emily
Estrada, Michael Oliver, Carrie Oliver, Russell Walters, Elaine Walters, and Mike Ericson, individually
and on behalf of all other similarly situated, filed a purported class action lawsuit against Bluegreen
which asserts claims for alleged violations of the Florida Deceptive and Unfair Trade Practices Act and
the Florida False Advertising Law. In the complaint, the plaintiffs alleged the making of false
representations in connection with Bluegreen’s sales of VOIs, including representations regarding the
ability to use points for stays or other experiences with other vacation providers, the ability to cancel
VOI purchases and receive a refund of the purchase price and the ability to roll over unused points, and
that annual maintenance fees would not increase. The purported class action lawsuit was dismissed
without prejudice after mediation. However, on or about April 24, 2018, plaintiffs re-filed their
individual claims in Palm Beach County Circuit Court. Bluegreen intends to file a motion for summary
judgment seeking dismissal of the suit.
On January 4, 2018, Gordon Siu, individually and on behalf of all others similarly situated, filed a
lawsuit against BVU and Choice Hotels International, Inc. which asserted claims for alleged violations
of California law that relates to the recording of telephone conversations with consumers. Plaintiff
alleged that, after staying at a Choice Hotels resort, defendants placed a telemarketing call to plaintiff to
sell the Choice Hotels customer loyalty program and a vacation package at a Choice Hotel via the
Bluegreen Getaways vacation package program. Plaintiff alleged that he was not timely informed that
the phone conversation was being recorded and sought certification of a class comprised of other
persons recorded on calls without their consent within one year before the filing of the original
complaint. After BVU moved to dismiss the complaint, plaintiff amended his complaint to dismiss one
of the two causes of action
F-48
in the original complaint on the basis that that particular statute only concerns land line phones. Plaintiff
and Choice agreed to a confidential settlement, and Choice was dismissed from this lawsuit. On
November 22, 2018, the parties agreed to settle the matter for a nominal amount. In January 2019, the
settlement was approved, and the case is now closed.
On June 28, 2018, Melissa S. Landon, Edward P. Landon, Shane Auxier and Mu Hpare, individually
and on behalf of all others similarly situated, filed a purported class action lawsuit against the Company
and BVU asserting claims for alleged violations of the Wisconsin Timeshare Act, Wisconsin law
prohibiting illegal referral selling, and Wisconsin law prohibiting illegal attorney’s fee provisions.
Plaintiffs allegations include that Bluegreen failed to disclose the identity of the seller of real property
at the beginning of Bluegreen’s initial contact with the purchaser; that Bluegreen misrepresented who
the seller of the real property was; that Bluegreen misrepresented the buyer’s right to cancel; that
Bluegreen included an illegal attorney’s fee provision in the sales document(s); that Bluegreen offered
an illegal “today only” incentive to purchase; and that Bluegreen utilizes an illegal referral selling
program to induce the sale of VOIs. Plaintiffs seek certification of a class consisting of all persons who,
in Wisconsin, purchased from Bluegreen one or more VOIs within six years prior to the filing of this
lawsuit. Plaintiffs seek statutory damages, attorneys’ fees and injunctive relief. Bluegreen believes the
lawsuit is without merit and intends to vigorously defend the action. Bluegreen has filed a motion to
dismiss the complaint, which is pending.
On January 7, 2019, Shehan Wijesinha filed a purported class action lawsuit alleging violations of the
Telephone Consumer Protection Act. It is alleged that BVU called plaintiff’s cell phone for
telemarketing purposes using an automated dialing system and that plaintiff did not give BVU his
express written consent to do so. Plaintiffs seek certification of a class comprised of other persons in the
United States who received similar calls from or on behalf of BVU without the person’s consent.
Plaintiffs seeks monetary damages, attorneys’ fees, and injunctive relief. Bluegreen believes the lawsuit
is without merit and intends to vigorously defend the action.
On January 7, 2019, Debbie Adair and thirty-four other timeshare purchasers filed a lawsuit against
BVU and Bass Pro alleging violations of the Tennessee Consumer Protection Act, the Tennessee Time-
share Act, the California Time-Share Act, fraudulent misrepresentation for failure to make certain
required disclosures, fraudulent inducement for inducing purchasers to remain under contract past
rescission, unauthorized practice of law, civil conspiracy, unjust enrichment, and breach of contract.
Plaintiffs seek rescission of their contracts, money damages, including statutory treble damages, or in
the alternative, punitive damages in an amount not less than $0.5 million. Bluegreen believes the
lawsuit is without merit and intends to vigorously defend the action. Bluegreen has agreed to indemnify
Bass Pro with respect to the claims brought against Bluegreen in this proceeding.
Commencing in 2015, it came to Bluegreen’s attention that its collection efforts with respect its VOI
notes receivable were being impacted by a then emerging, industry-wide trend involving the receipt of
“cease and desist” letters from exit firms and their attorneys purporting to represent certain VOI owners.
Following receipt of these letters, Bluegreen is unable to contact the owners unless allowed by law.
Bluegreen believes these exit firms have encouraged such owners to become delinquent and ultimately
default on their obligations and that such actions and Bluegreen’s inability to contact the owners are a
primary contributor to the increase in its annual default rates. Bluegreen’s average annual default rates
have increased from 6.9% in 2015 to 8.4% in 2018. Bluegreen also estimates that approximately 14.4%
of the total delinquencies on its VOI notes receivable as of December 31, 2018 related to VOI notes
receivable subject to this issue. Bluegreen has in a number of cases pursued, and may in the future
pursue, legal action against the VOI owners, and in certain circumstances against the exit firms.
On December 21, 2018, Bluegreen and BVU filed a lawsuit against timeshare exit firm Totten Franqui
and certain other affiliated timeshare exit companies (“TPEs”). In the compliant, Bluegreen argues that
through various forms of deceptive advertising, as well as inappropriate direct contact with VOI owners,
the TPEs made false statements about Bluegreen and provided misleading information to the VOI
owners. Bluegreen also believes that the TPEs induce Bluegreen’s VOI owners to breach their contracts
and stop making payments to Bluegreen, which typically results in a default on the VOI note and
termination of the VOI. Thereafter, the TPEs, despite often times doing no more than encouraging non-
payment, claim that they “helped” the consumer “exit” their timeshare contract. Bluegreen believes
that all of this results in the consumer paying fees to the TPEs in exchange for illusory services.
Bluegreen has asserted claims under the Lanham Act, as well as tortious interference with contractual
relations, civil conspiracy to commit tortious interference, and other claims.
F-49
Commitments under Operating Leases
The Company and its subsidiaries are lessees under various operating leases for real estate and
equipment.
The table below sets forth the approximate minimum future rental payments under such leases
(excluding executory costs) during each of the five years subsequent to December 31, 2018 and
thereafter (in thousands):
Years Ending December 31,
2019 $
2020
2021
2022
2023
Thereafter
Total $
Amount
26,871
24,525
23,022
20,682
17,564
41,299
153,963
Certain of the Company’s leases give the Company options to renew the lease at a stipulated rental
amount for additional five to seven year periods.
The Company’s selling, general and administrative expenses and cost of trade sales included the
following rental expenses (in thousands):
Rental expense for premises and equipment
$
41,079
30,832
18,706
For the Years Ended December 31,
2016
2017
2018
Other Commitments, Contingencies, and Guarantees
In lieu of paying maintenance fees for unsold VOI inventory, Bluegreen provides subsidies to certain
HOAs to provide for funds to operate and maintain vacation ownership properties in excess of
assessments collected from owners of the VOIs. During the years ended December 31, 2018, 2017 and
2016, Bluegreen made payments related to such subsidies of $13.9 million, $12.6 million, and $13.9
million, respectively, which are included in cost of other fee-based services. As of December 31, 2018
and 2017, Bluegreen had no accrued liabilities for such subsidies.
In August 2016, BBX Capital entered into a severance arrangement with a former executive pursuant to
which the executive is entitled to receive $3.7 million in cash payments over a three year period ending
in August 2019. As of December 31, 2018, $0.7 million remained payable under this arrangement.
In September 2017, Bluegreen entered into an agreement with a former executive in connection with his
retirement. Pursuant to the terms of the agreement, Bluegreen agreed to make payments totaling
approximately $2.9 million through March 2019. As of December 31, 2018, $0.8 million remained
payable under this agreement. Further, in December 2018, Bluegreen entered into an agreement with
another executive in connection with his retirement. Pursuant to the terms of the agreement, Bluegreen
agreed to make payments totaling approximately $2.0 million through December 2019, all of which
remained payable as of December 31, 2018.
In March 2018, Bluegreen’s compensation committee approved in principle the material terms of an
Executive Leadership Incentive Plan (the “ELIP”), which provides for the grant of cash-settled
performance units (“Performance Units”) and cash-settled stock appreciation rights (“SARs”) to
participants in the ELIP. It is contemplated that each participant will be granted award opportunities
representing a percentage of his or her base salary (the “Target LTI”). In the case of certain of
Bluegreen’s executive officers, the award will be divided 30% to SARs and 70% to Performance Units.
For other participants, including certain of Bluegreen’s senior vice presidents, certain vice presidents,
and certain other employees, the award will be 100% in Performance Units. Performance Units will
represent the right of the recipient to receive a cash payment based on the achievement of levels of
EBITDA and return on invested capital (“ROIC”) during a two-year period. SARs granted under the
ELIP, upon exercise after vesting, will entitle the holder to a cash payment in an amount equal to the
excess of the market price of Bluegreen’s common stock on the date of exercise over the exercise price
of the SAR. The SARs will vest in equal annual installments on the first, second, and third anniversary
of the date of grant and have a five-year term. In March 2018, Bluegreen’s compensation committee
approved grants of 639,643 SARs, of which 559,194 remain outstanding as of December
F-50
31, 2018, at an exercise price of $19.72 per share to certain of Bluegreen’s officers, as well as
Performance Units to receive up to approximately $7.4 million in 2020 to certain members of
management, depending on actual results for the two years ending December 31, 2019. In addition, the
ELIP includes an interim award based on 2018 EBITDA performance and cash generation, payable in
2019. As of December 31, 2018, Bluegreen had $3.4 million accrued for the ELIP, which is included in
other liabilities in the Company’s consolidated statement of financial condition.
Bluegreen has an exclusive marketing agreement with Bass Pro, a nationally-recognized retailer of
fishing, marine, hunting, camping and sports gear, that provides Bluegreen with the right to market and
sell vacation packages at kiosks in each of Bass Pro’s retail locations and through other means. As of
December 31, 2018, Bluegreen sold vacation packages in 69 of Bass Pro’s stores. Bluegreen
compensates Bass Pro based on VOI sales generated through the program. No compensation is paid to
Bass Pro under the agreement on sales made at Bluegreen/Big Cedar Vacations’ resorts. During the
years ended December 31, 2018, 2017 and 2016, VOI sales to prospects and leads generated by the
agreement with Bass Pro accounted for approximately 14%, 15% and 16%, respectively, of
Bluegreen’s VOI sales volume. Bluegreen has continued to meet with Bass Pro’s leadership in an effort
to resolve the issues which arose between the parties in 2017 and 2018. While there is no assurance that
a resolution will be reached, Bluegreen remains optimistic that it will achieve a resolution of the
outstanding issues. Bluegreen is hopeful that the resolution will address the timing of entry into the
Cabela’s stores and an extension of the parties’ agreements. If reached, the resolution may include a
restructuring of the amount and timing of compensation paid to Bass Pro. In the meantime, Bluegreen
continues to execute its vacation package marketing strategy under the current agreement with Bass
Pro. While Bluegreen does not believe that any material additional amounts are due to Bass Pro,
Bluegreen’s future results would be impacted if the issues are not resolved and by any change in the
compensation payable to Bass Pro or the calculation of payments or reimbursements utilized pursuant
to the agreements.
BBX Capital guarantees certain obligations of its wholly-owned subsidiaries and unconsolidated real
estate joint ventures, including the following:
·
·
·
·
BBX Capital is a guarantor of 50% of the outstanding balance of a third party loan to the
Sunrise and Bayview Partners, LLC real estate joint venture, which had an outstanding
balance of $5.0 million as of December 31, 2018.
BBX Capital is the guarantor of a $1.5 million note payable owed to Centennial Bank by a
wholly-owned subsidiary. The note payable is collateralized by property and equipment with a
carrying amount of approximately $2.0 million.
In October 2017, a wholly-owned subsidiary of BBX Capital issued a $3.4 million unsecured
note to the seller of real estate to the Chapel Grove joint venture in which the subsidiary has a
46.75% equity interest. The unsecured note was part of the subsidiary’s initial capital
contribution to the Chapel Trail real estate joint venture. The note is not secured by the joint
venture property, and BBX Capital guarantees the repayment of the unsecured note.
BBX Capital’s wholly-owned subsidiary, Food for Thought Restaurant Group, LLC, enters
into lease agreements to operate MOD Super-Fast Pizza (“MOD Pizza”) restaurant locations.
As of December 31, 2018, BBX Capital is a guarantor on four of the lease agreements with
estimated future minimum rental payments of $5.0 million.
BBX Capital is a guarantor on the lease of a manufacturing facility in Utah. The Company exited the
manufacturing facility during 2018 and recognized a lease liability on the cease-use date. As of
December 31, 2018, the lease liability was $1.0 million and is included in other liabilities in the
Company’s consolidated statement of financial condition.
16. Stock Incentive Plans
Restricted Stock and Stock Options Plans
The Company has three share-based compensation plans: the BBX Capital Corporation 2014 Incentive
Plan (the “2014 Plan”), the BBX Capital 2005 Restricted Stock and Option Plan, and the BBX Capital
2014 Stock Incentive Plan. The BBX Capital 2005 Restricted Stock and Option Plan and the BBX
Capital 2014 Stock Incentive Plan are collectively referred to as the “BCC Equity Plans.”
As described in Note 4, the Company assumed the BCC Equity Plans upon consummation of the
merger with BCC on December 15, 2016. Pursuant to the Merger Agreement, awards outstanding under
the BCC Equity Plans at December 15, 2016, including options and restricted stock awards, continue to
be outstanding and governed by the
F-51
BCC Equity Plans, except that such awards were converted into BBX Capital’s options or restricted
stock awards, as applicable. As a result, pursuant to the terms of the Merger Agreement, 5,090,354
restricted shares of BBX Capital’s Class A Common Stock and non-qualifying stock options to acquire
35,716 shares of BBX Capital’s Class A Common Stock were issued on December 15, 2016. No further
awards will be granted under the BCC Equity Plans.
The maximum term of incentive and non-qualifying stock options issuable under the 2014 Plan is ten
years. Vesting is established by the Compensation Committee of the board of directors in connection
with each grant of options or restricted stock awards. There were no options issued or outstanding under
the 2014 Plan as of December 31, 2018.
The 2014 Plan permits the issuance of awards for up to 800,000 shares of the Company’s Class A
Common Stock and up to 10,700,000 shares of the Company’s Class B Common Stock. Awards for up
to 317,776 shares of Class A Common Stock and 1,923,975 shares of Class B Common Stock remained
available for grant under the 2014 Plan as of December 31, 2018, although in January 2019, awards of
1,923,975 restricted shares of the Company’s Class B Common Stock were granted to the Company’s
executive officers under the 2014 Plan.
Compensation cost for stock options and restricted stock awards is based on the fair value of the award
on the measurement date, which is generally the grant date. The fair value of the Company’s stock
options is estimated using the Black-Scholes option-pricing model, while the fair value of unvested
restricted stock awards is generally based on the market price of the Company’s common stock on the
grant date. The Company recognizes compensation costs on a straight-line basis over the requisite
service period of the awards, and the impact of forfeitures are recognized when they occur.
Stock Option Activity
There were no options granted to employees or non-employee directors during the three-year period
ended December 31, 2018.
The table below sets forth information on the Company’s outstanding options:
Outstanding at December 31, 2017
Exercised
Forfeited
Expired
Outstanding at December 31, 2018
Exercisable at December 31, 2018
Available for grant at December 31, 2018
Weighted
Average
Exercise
Outstanding
Options
Price
27,346 $
(27,346)
-
-
- $
- $
2,241,751
8.98
8.98
0.00
0.00
0.00
0.00
Weighted
Average
Remaining
Contractual
Term
0.43
Aggregate
Intrinsic
Value ($000)
-
6
0.00
0.00
During the years ended December 31, 2018, 2017 and 2016, the Company received net proceeds of
approximately $245,000, $63,000 and $10,000, respectively, upon the exercise of stock options, and the
total intrinsic value of exercised options during such periods was $6,000, $881,000, and $143,000,
respectively.
F-52
Restricted Stock Activity
The table below sets forth information regarding the Company’s unvested restricted stock award
activity for the year ended December 31, 2018:
Unvested balance outstanding, beginning of period
Granted
Vested
Forfeited
Unvested balance outstanding, end of period
Unvested
Restricted
Stock
4,994,515 $
1,487,051
(3,295,020)
-
3,186,546 $
Weighted
Average
Grant Date
Fair Value
3.39
8.70
3.92
-
5.32
The Company issued restricted stock awards to certain officers during the years ended December 31,
2018 and 2016, while there were no restricted stock awards issued during the year ended December 31,
2017. The table below sets forth information regarding the restricted stock awards granted during the
years ended December 31, 2018 and 2016:
Grant Date
12/15/2016
12/22/2016
1/9/2018
Number of
Awards Granted
5,090,354
1,823,565
1,487,051
(2)
(1)
(1)
$
Per Share
Weighted Average
Grant Date
Fair Value
2.74
4.3
8.7
Requisite
Service Period (3)
1.63 Years
4 years
4 years
(1) The awards are issuable in shares of BBX Capital ’s Class B Common Stock.
(2) Pursuant to the Merger Agreement, the Company assumed and adopted the BCC Equity Plans as of December
15, 2016 and 942,657 shares of BCC’s restricted stock units were retired in exchange for the issuance of
restricted stock units with respect to approximately 5.1 million shares of BBX Capital 's Class A Common Stock.
(3) The awards vest ratably in annual installments over the requisite service period.
In addition to the above awards, on January 8, 2019, the Company’s Compensation Committee of the
board of directors granted awards of 1,923,975 restricted shares of BBX Capital’s Class B Common
Stock to the Company’s executive officers under the 2014 Plan. The aggregate grant date fair value of
the January 2019 awards was $11.8 million, and the shares vest ratably in annual installments of
approximately 481,000 shares over four periods beginning on October 1, 2019.
Between September 30, 2018 through October 5, 2018, award recipients surrendered a total of 789,729
shares of Class A Common Stock and 505,148 shares of Class B Common Stock to the Company to
satisfy the $9.4 million tax withholding obligation associated with the vesting of 3,295,020 restricted
shares. The Company retired the surrendered shares.
The fair value of shares of BBX Capital’s restricted stock awards which vested during the years ended
December 31, 2018, 2017 and 2016 was $24.0 million, $45.2 million and $10.3 million, respectively,
while the fair value of shares of BCC restricted stock awards which vested during the year ended
December 31, 2016 was $10.0 million.
The Company recognized restricted stock compensation expense related to BBX Capital restricted
stock awards of approximately $12.9 million, $12.3 million and $6.4 million during the years ended
December 31, 2018, 2017, and 2016, respectively, and recognized tax benefits of $0.4 million and $0.8
million for the years ended December 31, 2017 and 2016, respectively. There were no tax benefits
recognized on restricted stock compensation expense for these awards for the year ended December 31,
2018. The Company also recognized restricted stock compensation expense and tax benefits related to
BCC restricted stock awards of $6.1 million and $0.7 million, respectively, during the year ended
December 31, 2016.
As of December 31, 2018, the total unrecognized compensation cost related to the Company’s unvested
restricted stock awards was approximately $14.9 million. The cost is expected to be recognized over a
weighted-average period of approximately 2.17 years.
F-53
17. Employee Benefit Plans and Incentive Compensation Program
Defined Contribution 401(k) Plan
BBX Capital and its subsidiaries sponsor four Employee Retirement Plans under Internal Revenue Code
Section 401(k). Although there are variations in the eligibility requirements under such plans,
employees who have completed 90 days of service and have reached the age of 21 are generally eligible
to participate in the Company’s 401(k) plans. For the year ending December 31, 2018, an eligible
employee under the plan was entitled to contribute up to $18,500, while an eligible employee over 50
years of age was entitled to contribute up to $24,500. During the years ended December 31, 2018, 2017
and 2016, the Company generally matched 100% of the first 3% of employee contributions and 50% of
the next 2% of employee contributions, and the match amounts generally vested immediately. Further,
Bluegreen may make additional discretionary matching contributions to its plan not to exceed 4% of
each participant’s compensation. For the years ended December 31, 2018, 2017 and 2016, the Company
recorded expense for contributions to the 401(k) plans totaling approximately $5.6 million, $5.7
million, and $5.5 million, respectively.
18. Common Stock and Redeemable 5% Cumulative Preferred Stock
Common Stock
BBX Capital’s Articles of Incorporation authorize the Company to issue both Class A Common Stock,
par value $.01 per share, and Class B Common Stock, par value $.01 per share. Under Florida law and
the Company’s Articles of Incorporation, holders of Class A Common Stock and Class B Common
Stock vote together as a single class on most matters presented to a vote of the Company’s shareholders.
On such matters, holders of Class A Common Stock are entitled to one vote for each share held, with all
holders of Class A Common Stock possessing in the aggregate 22% of the total voting power, while
holders of Class B Common Stock possess the remaining 78% of the total voting power. If the number
of shares of Class B Common Stock outstanding decreases to 1,800,000 shares, the Class A Common
Stock’s aggregate voting power will increase to 40%, and the Class B Common Stock will have the
remaining 60%. If the number of shares of Class B Common Stock outstanding decreases to 1,400,000
shares, the Class A Common Stock’s aggregate voting power will increase to 53%, and the Class B
Common Stock will have the remaining 47%. These relative voting percentages will remain fixed
unless the number of shares of Class B Common Stock outstanding decreases to 500,000 shares or less,
at which time the fixed voting percentages will be eliminated, and holders of Class A Common Stock
and holders of Class B Common Stock would then each be entitled to one vote per share held. Each
share of Class B Common Stock is convertible into one share of Class A Common Stock at any time at
the option of the holder. The percentage of total common equity represented by Class A and Class B
common stock was 84% and 16%, respectively, at December 31, 2018.
On September 21, 2009, the Company adopted a rights agreement (“Rights Agreement”) designed to
preserve shareholder value and protect its ability to use available net operating loss carryforwards to
offset future taxable income. The Rights Agreement provides a deterrent to shareholders from acquiring
a 5% or greater ownership interest in BBX Capital’s Class A Common Stock and Class B Common
Stock, taken as a whole, without the prior approval of the board of directors. Shareholders of the
Company at September 21, 2009 were not required to divest any shares.
Share Repurchase Program
In September 2009, the board of directors approved a share repurchase program which authorized the
repurchase of up to 20,000,000 shares of BBX Capital’s Class A and Class B Common Stock at an
aggregate cost of no more than $10.0 million. Under this program, BBX Capital repurchased 1.0
million shares of its Class A Common Stock for approximately $3.0 million during April 2016 and 1.0
million shares of its Class A Common Stock for approximately $6.2 million and during April 2017.
In June 2017, the board of directors approved a share repurchase program which replaced the
September 2009 share repurchase program and authorizes the repurchase of up to 5,000,000 shares of
BBX Capital’s Class A Common Stock and Class B Common Stock at an aggregate cost of up to $35.0
million. As of December 31, 2018, BBX Capital repurchased 1,521,593 shares of its Class A Common
Stock for approximately $10.0 million pursuant to the June 2017 share repurchase program.
Cash Tender Offer
In April 2018, BBX Capital completed a cash tender offer pursuant to which it purchased and retired
6,486,486 shares of its Class A Common Stock at a purchase price of $9.25 per share for an aggregate
purchase price of approximately
F-54
$60.1 million, inclusive of acquisition costs. As of April 19, 2018, the shares purchased in the tender
offer represented approximately 7.6% of the total number of outstanding shares of BBX Capital’s Class
A Common Stock and 6.3% of BBX Capital’s total issued and outstanding equity (which includes the
issued and outstanding shares of BBX Capital’s Class B Common Stock).
Redeemable 5% Cumulative Preferred Stock
As of December 31, 2018, the Company has outstanding 10,000 shares of 5 % Cumulative Preferred
Stock at a stated value of $1,000 per share. The shares of 5% Cumulative Preferred Stock are
redeemable at the option of the Company, from time to time, at a redemption price of $1,000 per share.
Shares of the 5% Cumulative Preferred Stock are also subject to mandatory redemption as described
below. The 5% Cumulative Preferred Stock’s liquidation preference is equal to its stated value of
$1,000 per share plus any accumulated and unpaid dividends or an amount equal to the applicable
redemption price in a voluntary liquidation or winding up of the Company. Holders of the 5%
Cumulative Preferred Stock have no voting rights, except as provided by Florida law, and are entitled to
receive, when and as declared by the Company’s board of directors, cumulative quarterly cash
dividends on each such share at a rate per annum of 5% of the stated value from the date of issuance.
The Company pays regular quarterly cash dividends on its 5% Cumulative Preferred Stock. The 5%
Cumulative Preferred Stock is subject to mandatory redemption and accordingly is classified as a
liability in the Company’s consolidated statements of financial condition. The Company is required to
redeem the preferred shares in $5.0 million annual payments in each of the years ending December 31,
2019 and 2020.
During December 2013, the Company made a $5.0 million loan to the holders of the 5% Cumulative
Preferred Stock. The loan was secured by 5,000 shares of the 5% Cumulative Preferred Stock, had a
term of five years, accrued interest at a rate of 5% per annum, and provided for payments of interest
only on a quarterly basis during the term of the loan. On March 31, 2018, the Company redeemed 5,000
shares of the 5% Cumulative Preferred Stock in exchange for the cancellation of the $5.0 million loan
to the holders of the 5% Cumulative Preferred Stock.
For the years ended December 31, 2018, 2017 and 2016, the Company recorded interest expense in its
consolidated statements of operations and comprehensive income of $0.9 million, $1.2 million and
$1.2 million, respectively, of which $562,500 was paid in 2018 and $750,000 was paid during each of
2017 and 2016 as dividends on the 5% Cumulative Preferred Stock.
19. Noncontrolling Interests and Redeemable Noncontrolling Interest
Noncontrolling interests in the Company’s consolidated subsidiaries consisted of the following (in
thousands):
Bluegreen (1)
Bluegreen / Big Cedar Vacations (2)
Joint ventures and other
Total noncontrolling interests
December 31,
2018
2017
$
$
41,478
45,611
899
87,988
39,271
43,021
(238)
82,054
The redeemable noncontrolling interest included in the Company’s consolidated statements of financial
condition as of December 31, 2018 and 2017 was $2.6 million and $2.8 million, respectively, which is
comprised of the 9.6% of IT’SUGAR’s Class B Units that are held by a noncontrolling interest and may
be redeemed for cash at the holder’s option upon a contingent event that is outside of the Company’s
control.
Income (loss) attributable to noncontrolling interests, including redeemable noncontrolling interests,
consisted of the following (in thousands):
Bluegreen (1)
Bluegreen / Big Cedar Vacations (2)
BCC
Joint ventures and other
$
Net income attributable to noncontrolling interests $
For the Years Ended December 31,
2016
2017
2018
8,566
12,390
-
(265)
20,691
5,639
12,760
-
(21)
18,378
-
10,126
3,060
(20)
13,166
F-55
(1) As a result of Bluegreen’s IPO during the fourth quarter of 2017 and subsequent share repurchases in 2018, the
Company owns 90.3% of Bluegreen. Bluegreen was a wholly-owned subsidiary of the Company prior to the
Bluegreen IPO.
(2) Bluegreen has a joint venture arrangement pursuant to which, it owns 51% of Bluegreen/Big Cedar Vacations.
20. Earnings Per Common Share
The table below sets forth the computations of basic and diluted earnings per common share (in
thousands, except per share data):
For the Years Ended December 31,
2017
2018
2016
Basic earnings per common share
Numerator:
Net income
Less: Net income attributable to noncontrolling interests
Net income available to shareholders
Denominator:
Basic - weighted average number of common share
outstanding
Basic earnings per common share
$
$
$
55,793
20,691
35,102
102,303
18,378
83,925
42,596
13,166
29,430
95,298
0.37
98,745
0.85
86,902
0.34
Diluted earnings per common share
Numerator:
Net income available to shareholders
$
35,102
83,925
29,430
Denominator:
Basic weighted average number of common shares
outstanding
Effect of dilutive restricted stock awards
Diluted weighted average number of common shares
outstanding
Diluted earnings per common share
$
95,298
2,562
97,860
0.36
98,745
5,171
103,916
0.81
86,902
590
87,492
0.34
During the years ended December 31, 2018 and 2017, there were no restricted stock awards that were
anti-dilutive. During the year ended December 31, 2017, options to acquire 27,346 shares of Class A
Common Stock were anti-dilutive. During the year ended December 31, 2016, approximately 55,000
restricted stock awards and options to acquire 35,716 shares of Class A Common Stock were anti-
dilutive.
21. Fair Value Measurement
Fair value is defined as the price that would be received on the sale of an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date.
There are three main valuation techniques to measure the fair value of assets and liabilities: the market
approach, the income approach and the cost approach. The market approach uses prices and other
relevant information generated by market transactions involving identical or comparable assets or
liabilities. The income approach uses financial models to convert future amounts to a single present
amount and includes present value and option-pricing models. The cost approach is based on the
amount that currently would be required to replace the service capacity of an asset and is often referred
to as current replacement cost.
The accounting literature also defines an input fair value hierarchy that has three broad levels and gives
the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable inputs (Level 3). The input fair value hierarchy is
summarized below:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted
prices for identical or similar assets or liabilities in markets that are not active, or inputs other
than quoted prices that
F-56
are observable for the asset or liability
Level 3: Unobservable inputs for the asset or liability
There were no material assets or liabilities measured at fair value on a recurring or nonrecurring basis in
the Company’s consolidated financial statements as of December 31, 2018 and 2017.
Financial Disclosures about Fair Value of Financial Instruments
The tables below set forth information related to the Company’s consolidated financial instruments (in
thousands):
Fair Value Measurements Using
Quoted
prices
in Active Significant
Fair Value Markets
Other
for IdenticalObservableUnobservable
Significant
Assets
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
Carrying
Amount
As of
December
31,
2018
As of
December
31,
2018
366,305
54,792
6,195
439,167
458,931
200,887
136,425
366,305
54,792
7,388
537,000
462,400
203,547
132,400
9,472
9,538
366,305
54,792
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,388
537,000
462,400
203,547
132,400
9,538
Fair Value Measurements Using
Quoted
prices
in Active Significant
Fair Value Markets
Other
for IdenticalObservableUnobservable
Significant
Assets
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
Carrying
Amount
As of
December
31,
2017
As of
December
31,
2017
362,526
46,721
19,454
426,858
362,526
46,721
21,125
525,000
362,526
46,721
-
-
5,000
5,000
421,118
144,114
135,414
425,900
149,438
132,000
13,974
13,977
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,125
525,000
5,000
425,900
149,438
132,000
13,977
Financial assets:
Cash and cash equivalents
Restricted cash
Loans receivable (1)
Notes receivable, net
Financial liabilities:
Receivable-backed notes payable
Notes payable and other borrowings
Junior subordinated debentures
Redeemable 5% cumulative preferred
stock
Financial assets:
Cash and cash equivalents
Restricted cash
Loans receivable (1)
Notes receivable, net
Notes receivable from preferred
shareholders (2)
Financial liabilities:
Receivable-backed notes payable
Notes payable and other borrowings
Junior subordinated debentures
Redeemable 5% cumulative preferred
stock
$
$
$
$
(1)
(2)
Included in other assets in the Company’s consolidated statements of financial condition as of December 31,
2018 and 2017.
Included in other assets in the Company’s consolidated statements of financial condition as of December 31,
2017.
Management has made estimates of fair value that it believes to be reasonable. However, because there
is no active market for many of these financial instruments, the fair value of these financial instruments
has been derived using the income approach technique with Level 3 unobservable inputs. Estimates
used in net present value financial models rely on assumptions and judgments regarding issues where
the outcome is unknown and actual results or values may
F-57
differ significantly from these estimates. These fair value estimates do not consider the tax effect that
would be associated with the disposition of the assets or liabilities at their fair value estimates. As such,
the estimated value upon sale or disposition of the asset may not be received, and the estimated value
upon disposition of the liability in advance of its scheduled maturity may not be paid.
The amounts reported in the consolidated statements of financial condition for cash and cash
equivalents and restricted cash approximate fair value.
The fair value of the Company’s accruing loans is calculated using an income approach with Level 3
inputs by discounting forecasted cash flows using estimated market discount rates. The fair value of
non-accruing collateral dependent loans is estimated using an income approach with Level 3 inputs
utilizing the fair value of the collateral adjusted for operating and selling expenses and discounted over
the estimated holding period based on the market risk inherent in the property.
The fair values of notes receivable and note receivable from preferred shareholders are estimated using
Level 3 inputs and are based on estimated future cash flows considering contractual payments and
estimates of prepayments and defaults, discounted at a market rate.
The fair value of the 5% Cumulative Preferred Stock, which is subject to mandatory redemption, is
calculated using the income approach with Level 3 inputs by discounting the estimated cash flows at a
market discount rate.
The amounts reported in the consolidated statements of financial condition relating to Bluegreen’s notes
payable and other borrowings, including receivable-backed notes payable, approximate fair value for
indebtedness that provides for variable interest rates. The fair value of Bluegreen’s fixed rate,
receivable-backed notes payable was determined using Level 3 inputs by discounting the net cash
outflows estimated to be used to repay the debt. These obligations are to be satisfied using the proceeds
from the consumer loans that secure the obligations.
The fair value of Community Development Bonds is measured using the market approach with Level 3
inputs obtained based on estimated market prices of similar financial instruments. Community
Development Bonds are included in notes payable and other borrowings in the above table.
The fair values of other borrowings (other than Bluegreen’s notes payable and other borrowings and
Community Development Bonds above) are measured using the income approach with Level 3 inputs
obtained by discounting the forecasted cash flows based on estimated market rates.
The fair value of junior subordinated debentures is estimated using Level 3 inputs based on the
contractual cash flows discounted at a market rate or based on market price quotes from the over-the-
counter bond market.
22. Certain Relationships and Related Party Transactions
The Company may be deemed to be controlled by Alan B. Levan, the Company’s Chairman and Chief
Executive Officer, and John E. Abdo, the Company’s Vice Chairman. Together, Mr. Alan Levan and
Mr. Abdo may be deemed to beneficially own shares of the Company’s Class A Common Stock and
Class B Common Stock representing approximately 77% of the Company’s total voting power. Mr.
Alan Levan and Mr. Abdo also serve as Chairman and Vice-Chairman, respectively, of Bluegreen’s
board of directors. Jarett S. Levan, the Company’s President and son of Alan Levan, and Seth M. Wise,
the Company’s Executive Vice President, also serve as directors of the Company and Bluegreen.
Woodbridge is a wholly-owned subsidiary of the Company and owns 90.3% of Bluegreen as of
December 31, 2018.
During the years ended December 31, 2018, 2017, and 2016, Bluegreen paid or reimbursed the
Company $1.6 million, $1.5 million, and $1.3 million, respectively, for management advisory, risk
management, administrative and other services. In addition, the Company received $40.4 million,
$40.0 million, and $70.0 million of dividends from Bluegreen during the years ended December 31,
2018, 2017 and 2016, respectively.
During the years ended December 31, 2018 and 2017, Bluegreen paid $0.9 million and $0.6 million,
respectively, for the acquisition of VOI inventory from a company whose president is the son of David
L. Pontius, Bluegreen’s former Executive Vice President and Chief Operating Officer.
In April 2015, pursuant to a Loan Agreement and Promissory Note, a wholly-owned subsidiary of
Bluegreen provided
F-58
an $80.0 million loan to BBX Capital. Amounts outstanding on the loan bore interest at a rate of 10%
per annum until July 2017 when the interest rate was reduced to 6% per annum. Payments of interest
are required on a quarterly basis, with the entire $80.0 million principal balance and accrued interest
being due and payable in April 2020. BBX Capital is permitted to prepay the loan in whole or in part at
any time, and prepayments will be required, to the extent necessary, in order for Bluegreen or its
subsidiaries to remain in compliance with covenants under outstanding indebtedness. During the years
e n d e d December 31, 2018, 2017, and 2016, BBX Capital paid $4.8 million, $6.4 million,
and $8.0 million, respectively, of interest expense on the loan to Bluegreen. The interest expense is
eliminated in consolidation in the Company’s consolidated financial statements.
In May 2015, the Company, BCC, Woodbridge, Bluegreen, and their respective subsidiaries entered
into an Agreement to Allocate Consolidated Income Tax Liability and Benefits pursuant to which,
among other customary terms and conditions, the parties agreed to file consolidated federal tax returns.
Under the agreement, the parties calculate their respective income tax liabilities and attributes as if each
of them were a separate filer. If any tax attributes are used by another party to the agreement to offset its
tax liability, the party providing the benefit will receive an amount for the tax benefits realized. During
the years ended December 31, 2018, 2017, and 2016, Bluegreen paid the Company $23.1 million, $39.3
million, and $26.2 million, respectively, pursuant to this agreement.
In September 2015, the Company entered into Share Exchange Agreements with Alan B. Levan, John
E. Abdo, Jarett S. Levan and Seth M. Wise (collectively, the “BCC RSU Holders”) as holders of
restricted stock units of Class A Common Stock of BCC (the “BCC RSUs”). Pursuant to the Share
Exchange Agreements, each BCC RSU Holder granted the Company the option to acquire,
simultaneously with the vesting of each BCC RSU, some or all of the shares of BCC’s Class A
Common Stock which, absent the Share Exchange Agreement, would (after withholding) have been
received by the applicable BCC RSU Holder upon the vesting of the BCC RSUs, and in return, the
Company agreed to issue to the BCC RSU Holder shares of BBX Capital’s Class A Common Stock or
Class B Common Stock having an aggregate market value equal to the aggregate market value of the
shares of BCC’s Class A Common Stock acquired by the Company upon the option exercise. Pursuant
to the Share Exchange Agreements, the market value of the shares of BBX Capital’s Class A and Class
B Common Stock and BCC’s Class A Common Stock was calculated as the closing price of the
applicable company’s class of stock on the trading day immediately preceding the date of closing of the
share exchange.
In September 2016, the Company’s board of directors approved the exercise in full of the Company’s
options with respect to all of the BCC RSUs held by the BCC RSU Holders which were scheduled to
vest between September 30, 2016 and October 4, 2016 and the issuance of shares of BBX Capital’s
Class B Common Stock to the BCC RSU Holders in exchange for such BCC RSUs. In addition, during
September 2016, each BCC RSU Holder agreed, as a result of the Company’s entry into the Merger
Agreement on July 27, 2016 and the 5.4 exchange ratio contemplated thereby, to receive no more than
5.4 shares of the Company’s Class A or Class B Common Stock for each share of BCC’s Class A
Common Stock subject to vested BCC RSUs with respect to any share exchanges effected during the
pendency of the Merger Agreement. Between September 30, 2016 and October 4, 2016, the Company
issued a total of 1,530,822 shares of its Class B Common Stock to the BCC RSU Holders and received a
total of 283,486 shares of BCC’s Class A Common Stock. Because the exchange ratio calculated by
dividing the closing price of BCC’s Class A Common Stock on each relevant date by the closing price
of the Company’s Class B Common Stock on each such date exceeded 5.4, the Company issued 5.4
shares of its Class B Common Stock for each share of BCC’s Class A Common Stock received by it
between September 30, 2016 and October 4, 2016. Upon the Company’s adoption of the BCC Equity
Plans on December 15, 2016, the Share Exchange Agreements were terminated.
F-59
The table below sets forth the number of shares of BBX Capital’s Class B Common Stock issued to the
BCC RSU Holders and the number of shares of BCC’s Class A Common Stock received by the
Company pursuant to the Share Exchange Agreements described above:
Individual Reporting
Person
Alan B. Levan
John E. Abdo
Jarett S. Levan
Seth M. Wise
Total
Date of Share
Exchange
9/30/2016
10/1/2016
9/30/2016
10/2/2016
9/30/2016
10/3/2016
9/30/2016
10/4/2016
Number of Shares of
the Company’s Class
B Common Stock
Issued to the BCC
RSU Holder
398,752
107,800
398,752
107,800
204,962
53,897
204,962
53,897
1,530,822
Number of Shares of
BCC’s Class A
Common Stock
Received by the
Company
73,843
19,963
73,843
19,963
37,956
9,981
37,956
9,981
283,486
During each of the years ended December 31, 2018, 2017 and 2016, the Company paid Abdo
Companies, Inc. approximately $306,000 in exchange for certain management services. John E. Abdo,
the Company’s Vice Chairman, is the principal shareholder and Chief Executive Officer of Abdo
Companies, Inc.
Certain of the Company’s affiliates, including its executive officers, have independently made
investments with their own funds in investments that the Company has sponsored or in which the
Company holds investments.
23. Segment Reporting
Operating segments are defined as components of an enterprise about which separate financial
information is available that is regularly reviewed by the chief operating decision maker (“CODM”) in
assessing performance and deciding how to allocate resources. Reportable segments consist of one or
more operating segments with similar economic characteristics, products and services, production
processes, type of customer, distribution system or regulatory environment.
The information provided for segment reporting is obtained from internal reports utilized by
management of the Company, and the presentation and allocation of assets and results of operations
may not reflect the actual economic costs of the segments as standalone businesses. If a different basis
of allocation were utilized, the relative contributions of the segments might differ, but the relative trends
in the segments’ operating results would, in management’s view, likely not be impacted.
During 2018, the Company completed a reorganization of various operating businesses in the
confectionery industry, including the closure of manufacturing facilities and elimination of corporate
personnel and infrastructure, which is anticipated to result in significantly reduced revenues and
operations associated with these businesses. In addition, the Company has made additional investments
in IT’SUGAR, including capital expenditures associated with new stores in high profile locations and
the hiring of new senior management personnel. As these activities have ultimately resulted in
IT’SUGAR becoming the Company’s principal investment in the confectionery industry, internal
management reports were modified to present the standalone performance of IT’SUGAR and exclude
the other operating businesses in the confectionery industry, and the CODM began utilizing the new
reporting structure to manage operations and allocate resources. As a consequence, the Company
determined that it was appropriate to report the operations of IT’SUGAR as a separate reportable
segment together with the Company’s three other reportable segments as follows: Bluegreen, BBX
Capital Real Estate, Renin, and IT’SUGAR. The Company’s segment information for the years ended
December 31, 2017 and 2016 has been updated retrospectively to conform to the current presentation.
In the segment information for the years ended December 31, 2018, 2017 and 2016, amounts set forth in
the column entitled “Other” include the Company investments in various operating businesses,
including its pizza restaurant operations as a franchisee of MOD Pizza, the remaining operating
businesses in the confectionery industry, and a controlling financial interest in a restaurant acquired in
connection with a loan receivable default. The amounts set forth in the column entitled “Reconciling
Items and Eliminations” include interest expense associated with Woodbridge’s junior subordinated
debentures, unallocated corporate overhead, and elimination entries.
F-60
The Company evaluates segment performance based on segment income before income taxes.
Set forth below is summary information regarding the Company’s reportable segments:
Bluegreen
Bluegreen markets, sells and manages VOIs in resorts generally located in popular, high-volume,
“drive-to” vacation destinations, which were developed or acquired by Bluegreen or are owned by
others, in which case Bluegreen earns fees for providing these services. Bluegreen also earns fees by
providing VOI title services, club and homeowners’ association management services, mortgage
servicing, reservation services, services related to the Traveler-Plus program, food and beverage and
other retail operations, and construction design and development services. In addition, Bluegreen
provides financing to qualified individual purchasers of VOIs, which provides significant interest
income.
BBX Capital Real Estate
BBX Capital Real Estate is engaged in the acquisition, development, construction, ownership,
financing, and management of real estate and investments in real estate joint ventures. Included in BBX
Capital Real Estate’s investments in real estate joint ventures is a 50% equity interest in The Altman
Companies, LLC, a developer and manager of multifamily apartment communities. BBX Capital Real
Estate also manages the legacy assets acquired in connection with BCC’s sale of BankAtlantic in July
2012. The legacy assets include portfolios of loans receivable, real estate properties, and loans
previously charged off by BankAtlantic.
Renin
Renin is engaged in the design, manufacture, and distribution of sliding doors, door systems and
hardware, and home décor products and operates through its headquarters in Canada and two
manufacturing and distribution facilities in Canada and the United States. In addition to its own
manufacturing, Renin also sources various products and materials from China. During 2018, total
revenues for the Renin reportable segment include $31.5 million of trade sales to two major customers
and their affiliates. Renin’s revenues generated outside the United States totaled $23.2 million for the
year ended December 31, 2018, and its properties and equipment located outside the United States had
a carrying amount of $2.95 million as of December 31, 2018.
IT’SUGAR
IT’SUGAR is a specialty candy retailer which operates approximately 100 retail locations in over 25
states and Washington, D.C., and its products include bulk candy, giant candy packaging, and novelty
items that are purchased from third-party vendors and sold at its retail locations, which include a mix of
high-traffic resort and entertainment, lifestyle, mall/outlet, and urban locations across the United States.
F-61
The table below sets forth the Company’s segment information as of and for the year ended December
31, 2018 (in thousands):
BBX
Capital
Real
Estate
-
-
-
-
-
Bluegreen
$ 254,225
216,422
118,024
62,534
-
Renin
IT'SUGAR Other
Reconciling
Items and
Eliminations
Segment
Total
-
-
-
-
254,225
-
-
-
68,417
-
-
-
79,618
-
-
-
31,472
-
85,914
21,771
2,277
-
-
-
1
-
147
-
1,201
738,320
4,563
2,653
31,264
-
-
68,417
-
159
79,778
-
1,889
33,508
23,813
72,968
62,534
-
-
-
-
-
-
-
55,483
-
-
46,718
-
-
23,468
-
34,709
14,116
-
-
638
-
-
-
(8,603)
521
-
-
-
-
-
40
-
-
-
-
275
-
4,147
-
-
-
(21)
-
(2,838)
-
(835)
(3,694)
216,422
118,024
62,534
179,486
21,771
85,501
4,563
5,067
947,593
-
-
(21)
72,968
62,534
125,648
-
6,276
-
-
14,116
41,938
(8,603)
4,668
-
-
-
-
23,813
-
(600)
(600)
415,403
609,427
9,210
15,244
9,903
66,024
35,404
82,162
22,398
50,288
45,623
51,278
537,941
874,423
-
-
14,194
-
-
68
-
-
-
-
-
-
14,194
68
$ 128,893
30,214
2,461
(2,384)
(16,780)
(54,972)
87,432
Revenues:
Sales of VOIs
Fee-based sales
commissions
Other fee-based services
Cost reimbursements
Trade sales
Sales of real estate
inventory
Interest income
Net gains on sales of real
estate assets
Other revenue
Total revenues
Costs and expenses:
Cost of VOIs sold
Cost of other fee-based
services
Cost reimbursements
Cost of trade sales
Cost of real estate
inventory sold
Interest expense
Recoveries from loan
losses, net
Impairment losses
Reimbursements of
litigation costs and penalty
Selling, general and
administrative expenses
Total costs and expenses
Equity in net earnings of
unconsolidated real estate
joint ventures
Foreign exchange gain
Income (loss) before
income taxes
Total assets
$ 1,346,467
165,109
32,354
70,693
33,112
57,285 1,705,020
Expenditures for property
and equipment
Depreciation and
amortization
Debt accretion and
amortization
Cash and cash equivalents
Equity method investments
Goodwill
Receivable-backed notes
payable
Notes payable and other
borrowings
Junior subordinated
debentures
32,539
318
796
6,022
5,875
12,392
374
1,159
4,556
2,513
4,212
3
17
184
329
-
-
-
45,550
20,994
4,745
219,408
16,103
-
-
458,931
64,738
-
-
-
-
-
-
3,883
9,126
117,785
366,305
-
35,167
2,081
-
-
-
-
-
64,738
37,248
458,931
133,391
27,333
8,117
556
1,490
30,000
200,887
71,323
-
-
-
-
65,102
136,425
F-62
The table below sets forth the Company’s segment information as of and for the year ended December
31, 2017 (in thousands):
BBX
Capital
Real
Estate
Bluegreen
Renin
IT'SUGAR Other
Reconciling
Items and
Eliminations
Segment
Total
$ 242,017
-
-
-
-
-
242,017
229,389
111,819
52,639
-
86,876
-
312
723,052
17,679
64,560
52,639
-
29,977
-
-
-
-
2,225
1,451
5,145
8,821
-
-
-
68,935
-
-
-
68,935
-
-
-
46,765
2
-
64
46,831
-
-
-
26,385
74
-
1,540
27,999
-
-
-
-
(5,469)
-
(599)
(6,068)
229,389
111,819
52,639
142,085
83,708
1,451
6,462
869,570
-
-
-
-
17,679
-
-
-
-
-
-
-
54,941
509
-
-
25,744
-
-
-
-
-
(7,495)
1,646
-
-
-
-
-
-
-
-
-
-
-
-
25,233
335
-
5,785
-
-
-
4,384
64,560
52,639
105,918
35,205
-
-
(7,495)
7,431
-
(6,929)
(6,929)
(13,169)
(13,169)
421,199
586,054
11,127
5,278
11,112
66,562
18,489
44,233
18,698
50,051
52,853
37,139
533,478
789,317
-
-
12,541
-
-
(193)
-
-
-
-
-
-
12,541
(193)
$ 136,998
16,084
2,180
2,598
(22,052)
(43,207)
92,601
Revenues:
Sales of VOIs
Fee-based sales
commissions
Other fee-based services
Cost reimbursements
Trade sales
Interest income
Net gains on sales of real
estate assets
Other revenue
Total revenues
Costs and expenses:
Cost of VOIs sold
Cost of other fee-based
services
Cost reimbursements
Cost of trade sales
Interest expense
Recoveries from loan
losses, net
Impairment losses
Net gains on cancellation
of junior subordinated
debentures
Reimbursements of
litigation costs and penalty
Selling, general and
administrative expenses
Total costs and expenses
Equity in net earnings of
unconsolidated real estate
joint ventures
Foreign exchange loss
Income (loss) before
income taxes
Total assets
$ 1,231,481
166,548
36,189
71,702
32,825
66,936 1,605,681
Expenditures for property
and equipment
Depreciation and
amortization
Debt accretion and
amortization
Cash and cash equivalents
Equity method investments
Goodwill
Receivable-backed notes
payable
Notes payable and other
borrowings
Junior subordinated
debentures
6,877
10,382
138,431
362,526
14,115
308
2,786
1,221
3,615
9,632
581
1,000
2,324
2,512
-
204
-
35,167
4,315
-
6,815
-
-
-
4,478
-
197,337
8,636
-
863
-
-
421,118
51,234
-
-
-
-
-
100,194
24,215
12,890
70,384
-
-
F-63
-
-
-
22,045
16,049
4,682
-
-
-
-
51,234
39,482
421,118
144,114
-
65,030
135,414
The table below sets forth the Company’s segment information as of and for the year ended December
31, 2016 (in thousands):
Reportable Segments
BBX
Capital
Real
Estate
Bluegreen
Renin
IT'SUGAR
Other
Revenues:
Sales of VOIs
Fee-based sales
commissions
Other fee-based services
Cost reimbursements
Trade sales
Interest income
Net gains on sales of real
estate assets
Other revenue
Total revenues
Costs and Expenses:
Cost of VOIs sold
Cost of other fee-based
services
Cost reimbursements
Cost of trade sales
Interest expense
Recoveries from loan
losses, net
Impairment losses
Selling, general and
administrative expenses
Total costs and expenses
Equity in net earnings of
unconsolidated real estate
joint ventures
Foreign exchange gain
Income (loss) before
income taxes
$ 273,873
-
-
201,829
103,448
49,557
-
89,511
-
1,724
719,942
28,829
61,149
49,557
-
30,853
-
-
-
-
3,606
3,213
5,656
12,475
-
-
-
-
-
-
-
-
65,068
-
-
-
65,068
-
-
-
51,572
313
-
-
(20,508)
2,304
-
-
419,930
590,318
11,864
(6,340)
12,545
64,430
-
-
12,178
-
$ 129,624
30,993
-
219
857
Total assets
$ 1,123,950
186,132
28,913
Expenditures for property
and equipment
Depreciation and
amortization
Debt accretion and
amortization
Cash and cash equivalents
Equity method
investments
Goodwill
Receivable-backed notes
payable
Notes payable and other
borrowings
Junior subordinated
debentures
9,605
266
1,718
9,536
603
661
4,736
144,120
-
-
-
13,628
49,392
-
414,989
-
83
(288)
-
-
-
98,382
20,743
9,692
69,044
-
-
F-64
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Reconciling
Items and
Eliminations
Segment
Total
-
-
273,873
-
-
-
30,771
14
-
1,441
32,226
-
-
-
-
(7,384)
-
(174)
(7,558)
201,829
103,448
49,557
95,839
85,747
3,213
8,647
822,153
-
-
28,829
-
-
28,791
409
-
2,352
16,150
47,702
-
-
-
4,462
61,149
49,557
80,363
36,037
-
-
(20,508)
4,656
54,992
59,454
515,481
755,564
-
-
-
-
12,178
219
(15,476)
(67,012)
78,986
46,302
51,993 1,437,290
1,350
1,949
102
19,364
-
6,731
-
4,973
-
-
12,939
12,749
-
123,037
4,921
299,861
-
-
-
-
49,392
6,731
414,989
133,790
-
83,323
152,367
24. Selected Quarterly Results (Unaudited)
The following tables summarize the results of operations for each fiscal quarter during the years ended
December 31, 2018 and 2017 (in thousands except for per share data):
2018
Revenues
Costs and expenses
Equity in net earnings of
unconsolidated real estate joint
ventures
Foreign exchange gains (losses)
Income before income taxes
Provision for income taxes
Net income
Less: Net income attributable to
noncontrolling interests
Net income attributable to
shareholders
First
Quarter
$ 218,042
197,072
20,970
Second
Quarter
243,226
221,607
21,619
Third
Fourth
Quarter
254,403
236,125
18,278
Quarter
231,922
219,619
12,303
1,280
52
22,302
(6,600)
15,702
(488)
(37)
21,094
(8,655)
12,439
373
76
18,727
(6,742)
11,985
13,029
(23)
25,309
(9,642)
15,667
Total
947,593
874,423
73,170
14,194
68
87,432
(31,639)
55,793
4,560
5,958
5,806
4,367
20,691
11,142
6,481
6,179
11,300
35,102
Basic earnings per common share
Diluted earnings per common share
$
$
0.11
0.11
0.07
0.07
0.07
0.06
0.12
0.12
0.37
0.36
Basic weighted average number of
common shares outstanding
Diluted weighted average number of
common and common equivalent shares
outstanding
99,652
94,390
93,193
94,042
95,298
102,628
97,779
96,576
95,041
97,860
2017
Revenues
Costs and expenses
Equity in net earnings of
unconsolidated real estate joint
ventures
Foreign exchange gains (losses)
Income before income taxes
(Provision) benefit for income taxes
Net income
Less: Net income attributable to
noncontrolling interests
Net income attributable to
shareholders
First
Second
Third
Fourth
Quarter
$ 185,434
156,020
29,414
Quarter
217,666
195,057
22,609
Quarter
240,896
223,246
17,650
Quarter
225,574
214,994
10,580
Total
869,570
789,317
80,253
3,236
191
32,841
(12,764)
20,077
3,087
(398)
25,298
(9,131)
16,167
2,105
(105)
19,650
(8,126)
11,524
4,113
119
14,812
39,723
54,535
12,541
(193)
92,601
9,702
102,303
2,637
3,453
3,398
8,890
18,378
17,440
12,714
8,126
45,645
83,925
Basic earnings per common share
Diluted earnings per common share
$
$
0.18
0.16
0.13
0.12
0.08
0.08
0.46
0.45
0.85
0.81
Basic weighted average number of
common shares outstanding
Diluted weighted average number of
common and common equivalent shares
outstanding
98,921
98,240
98,073
99,744
98,745
105,866
106,173
106,021
102,440
103,916
F-65
25. Subsequent Event
On March 4, 2019, BBX Capital announced its intention to take Bluegreen private through a short-form
merger under Florida law pursuant to which BBX Capital will acquire all of the outstanding shares of
Bluegreen’s common stock not currently owned by BBX Capital. If the proposed merger is completed,
Bluegreen will become a wholly-owned subsidiary of BBX Capital, and each share of Bluegreen’s
common stock outstanding at the effective time of the merger, other than shares beneficially owned by
BBX Capital and shareholders who duly exercise and perfect appraisal rights in accordance with Florida
law, will be converted into the right to receive $16.00 per share in cash . The total merger consideration
is estimated to be approximately $115.0 million. The merger is expected to be completed 30 days after
the Schedule 13E-3 filed with the SEC relating to the merger is first mailed to Bluegreen's shareholders,
or as soon as practicable thereafter. However, the merger may be terminated at any time before it
becomes effective, and there is no assurance that the merger will be consummated on the contemplated
terms, or at all.
F-66
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) to make known material information concerning the Company, including its
subsidiaries, to those officers who certify our financial reports and to other members of our senior
management. As of December 31, 2018, our management evaluated, with the participation of our Chief
Executive Officer and Chief Financial Officer, our disclosure controls and procedures. Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31,
2018, our disclosure controls and procedures were effective to ensure that information required to be
disclosed in the reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms of the Securities and
Exchange Commission and is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect
that our disclosure controls and procedures and internal control over financial reporting will prevent all
errors and all improper conduct. A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the control system are
met. Further, the design of a control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because of the inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance that all control issues and
instances of improper conduct, if any, have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty and that breakdowns can occur because of
simple error or mistake. Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the control. Further, the
design of any control system is based in part upon assumptions about the likelihood of future events,
and there can be no assurance that any such design will succeed in achieving its stated goals under all
potential future conditions.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America. As of December 31, 2018,
our management, with the participation of our Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of our internal control over financial reporting based on the framework in
Internal Control – Integrated Framework – 2013 issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). Based on such evaluation, our management concluded that our
internal control over financial reporting was effective as of December 31, 2018.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Grant Thornton LLP, our independent registered public accounting firm, has audited our internal
control over financial reporting as of December 31, 2018 and has issued an attestation report on our
internal control over financial reporting, which is included below.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
BBX Capital Corporation
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of BBX Capital Corporation (a Florida
corporation) and subsidiaries (the “Company”) as of December 31, 2018, based on criteria
established in the 2013 Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December
31, 2018, based on criteria established in the 2013 Internal Control—Integrated Framework issued by
COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for
the year ended December 31, 2018, and our report dated March 12, 2019 expressed an unqualified
opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control Over Financial Reporting.
Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit. We are a public accounting firm registered with the PCAOB and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ GRANT THORNTON LLP
Fort Lauderdale, Florida
March 12, 2019
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarter
ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None
PART III
The remaining information required by Items 10 through 14 of Part III of Form 10-K will be provided
by incorporating such information by reference to our Definitive Proxy Statement on Schedule 14A
relating to our 2019 Annual Meeting of Shareholders in the event it is filed with the Securities and
Exchange Commission by no later than 120 days after December 31, 2018. Alternatively, we may
provide the information required by Items 10 through 14 of Part III of Form 10-K in an amendment to
this Annual Report on Form 10-K under cover of Form 10-K/A, in which case such amendment will be
filed with the Securities and Exchange Commission by the end of such 120 day period.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
a) Documents Filed as Part of this Report:
1) Financial Statements
The following consolidated financial statements of BBX Capital Corporation and
its subsidiaries are included herein under Part II, Item 8 of this Report.
Reports of Independent Registered Public Accounting Firm.
Consolidated Statements of Financial Condition as of December 31,
2018 and 2017.
Consolidated Statements of Operations and Comprehensive Income
for each of the years in the three year period ended December 31,
2018.
Consolidated Statements of Changes in Equity for each of the years
in the three year period ended December 31, 2018.
Consolidated Statements of Cash Flows for each of the years in the
three year period ended December 31, 2018.
Notes to Consolidated Financial Statements.
2) Financial Statement Schedules
Schedule III – Real estate and accumulated depreciation for BBX Capital
Corporation
Schedule IV – Mortgage loans on real estate for BBX Capital Corporation
All other schedules are omitted as the required information is either not applicable
or presented in the financial statements or related notes.
3) Exhibits
The following exhibits are either filed as a part of or furnished with this report or are incorporated herein by
reference to documents previously filed as indicated below:
Exhibit
Number
2.1
2.2
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
4.3
10.1
10.2
10.3
Description
Reference
Agreement and Plan of Merger, dated July 27,
2016, by and among the Company, BBX Merger
Subsidiary LLC and BBX Capital Corporation
Letter Agreement, dated October 20, 2016,
amending the Agreement and Plan of the Merger,
dated as of July 27, 2016 by and among the
Company, BBX Merger Subsidiary LLC and
BBX Capital Corporation
Exhibit 2.1 to Registrant's Current Report on
Form 8-K filed on July 28, 2016
Exhibit 2.1 to Registrant's Current Report on
Form 8-K filed on October 20, 2016
Amended and Restated Articles of Incorporation,
effective October 8, 1997
Exhibit 3.1 of Registrant’s Registration
Statement on Form 8-A filed October 16, 1997
Amendment to the Amended and Restated
Articles of Incorporation, effective June 18, 2002
Exhibit 4 of Registrant’s Current Report on
Form 8-K filed June 27, 2002
Amendment to the Amended and Restated
Articles of Incorporation, effective April 15, 2003
Appendix B of Registrant’s Definitive Proxy
Statement on Schedule 14A filed April 18, 2003
Amendment to the Amended and Restated
Articles of Incorporation, effective February 7,
2005
Amendment to the Amended and Restated
Articles of Incorporation, effective June 22, 2004,
as amended on December 17, 2008
Appendix A of Registrant’s Definitive
Information Statement on Schedule 14C filed
January 18, 2005
Exhibit 3.1 of Registrant’s Current Report on
Form 8-K filed December 18, 2008
Amendment to the Amended and Restated
Articles of Incorporation, effective May 19, 2009
Appendix A of Registrant’s Definitive Proxy
Statement on Schedule 14A filed April 29, 2009
Amendment to the Amended and Restated
Articles of Incorporation, effective September 21,
2009
Amendment to the Amended and Restated
Articles of Incorporation, effective September 21,
2009
Amendment to the Amended and Restated
Articles of Incorporation, effective December 19,
2013
Amendment to the Amended and Restated
Articles of Incorporation, effective January 30,
2017
3.11
Bylaws, as amended
4.1
Specimen Class A Common Stock Certificate
4.2
Specimen Class B Common Stock Certificate
Rights Agreement dated as of September 21,
2009 by and between BFC Financial Corporation
and American Stock Transfer and Trust Company,
LLC as Rights Agent.
Annex D of the Joint Proxy
Statement/Prospectus that forms a part of
Amendment No. 1 to Registrant’s Registration
Statement on Form S-4 filed August 14, 2009
Exhibit 3.8 of Registrant’s Current Report on
Form 8-K filed September 25, 2009
Exhibit 3.1 of Registrant’s Current Report on
Form 8-K filed December 23, 2013
Exhibit A of the Registrant’s Definitive
Information Statement on Schedule 14C filed
January 9, 2017
Exhibit 3.1 of Registrant’s Current Report on
Form 8-K filed February 12, 2015
Exhibit 4.1 of Registrant's Annual Report on
Form 10-K for the year ended December 31,
2016 filed on March 15, 2017
Exhibit 4.2 of Registrant's Annual Report on
Form 10-K for the year ended December 31,
2016 filed on March 15, 2017
Exhibit 4.1 of Registrant’s Current Report on
Form 8-K, filed September 25, 2009
BFC Financial Corporation 2014 Stock Incentive
Plan, as amended
Appendix A to the Registrant’s Definitive Proxy
Statement on Schedule 14A filed April 24, 2015
BFC Financial Corporation 2005 Stock Incentive
Plan, as amended
BBX Capital 2005 Restricted Stock and Option
Plan, as amended
Appendix A to the Registrant’s Definitive Proxy
Statement on Schedule 14A filed November 21,
2012
Exhibit 10.3 of Registrant's Annual Report on
Form 10-K for the year ended December 31,
2016 filed on March 15, 2017
10.4
BBX Capital 2014 Stock Incentive Plan, as
amended
10.5
BBX Capital 2014 Incentive Plan, as amended
10.6
BBX Capital 2014 Incentive Plan, as amended
10.7
Employment agreement between Alan B. Levan
and BFC Financial Corporation
10.8
Employment agreement between John E. Abdo
and BFC Financial Corporation
10.9
Employment agreement between Seth M. Wise
and BFC Financial Corporation
10.10
Employment agreement between Jarett S. Levan
and BFC Financial Corporation
10.11
Employment agreement between Ray S. Lopez
and BFC Financial Corporation
10.12
Employment agreement between Alan B. Levan
and BBX Capital Corporation
10.13
Employment agreement between John E. Abdo
and BBX Capital Corporation
10.14
Employment agreement between Jarett S. Levan
and BBX Capital Corporation
10.15
Employment agreement between Seth M. Wise
and BBX Capital Corporation
10.16
Employment agreement between Ray S. Lopez
and BBX Capital Corporation
10.17
10.18
10.19
10.20
Tax Sharing Agreement dated as of May 8, 2015,
by and among BFC Financial Corporation, BBX
Capital and Bluegreen
Loan Agreement and Promissory Note, dated
April 17, 2015, between BFC Financial
Corporation and Bluegreen Specialty Finance,
LLC
Underwriting Agreement, dated November 16,
2017, by and between Bluegreen Vacations
Corporation, Woodbridge Holdings, LLC, and
Stifel, Nicolaus & Company, Incorporated and
Credit Suisse Securities (USA) LLC, as
representatives of the several underwriters named
in Schedule I thereto
Indenture between BXG Receivables Note Trust
2012-A as Issuer, Bluegreen Corporation as
Servicer, Vacation Trust, Inc. as Club Trustee,
Concord Servicing Corporation as Backup
Servicer and U.S. Bank National Association, as
Indenture Trustee, Paying Agent and Custodian,
dated as of August 15, 2012.
Exhibit 10.4 of Registrant's Annual Report on
Form 10-K for the year ended December 31,
2016 filed on March 15, 2017
Appendix A to the Registrant’s Definitive Proxy
Statement on Schedule 14A filed April 21, 2017
Appendix A to the Registrant’s Definitive Proxy
Statement on Schedule 14A filed on April 16,
2018
Exhibit 10.1 of Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30,
2012 filed on November 14, 2012
Exhibit 10.2 of Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30,
2012 filed on November 14, 2012
Exhibit 10.3 of Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30,
2012 filed on November 15, 2012
Exhibit 10.5 of Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30,
2012 filed on November 15, 2012
Exhibit 10.1 of Registrants Quarterly Report on
Form 10-Q for the quarter ended March 31,
2015 filed on May 8, 2015
Exhibit 10.10 of Registrant's Annual Report on
Form 10-K for the year ended December 31,
2016 filed on March 15, 2017
Exhibit 10.11 of Registrant's Annual Report on
Form 10-K for the year ended December 31,
2016 filed on March 15, 2017
Exhibit 10.12 of Registrant's Annual Report on
Form 10-K for the year ended December 31,
2016 filed on March 15, 2017
Exhibit 10.13 of Registrant's Annual Report on
Form 10-K for the year ended December 31,
2016 filed on March 15, 2017
Exhibit 10.14 of Registrant's Annual Report on
Form 10-K for the year ended December 31,
2016 filed on March 15, 2017
Exhibit 10.2 of Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31,
2015 filed on May 8, 2015
Exhibit (b)(1) to Amendment No. 2 of the
Schedule TO-T filed by Registrant with the
Securities and Exchange Commission on April
17, 2015
Exhibit 1.1 of Registrant's Current Report on
Form 8-K filed with the SEC on November 21,
2017
Exhibit 10.101 of Bluegreen Corporation's Form
8-K filed with the SEC on September 14, 2012
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
Sale Agreement by and among BRFC 2012-A
LLC as Depositor and BXG Receivables Note
Trust 2012-A as Issuer dated as of August 15,
2012
Transfer Agreement by and among Bluegreen
Corporation, BXG Timeshare Trust I as Seller and
BRFC 2012-A LLC as Depositor, dated as of
August 15, 2012
Purchase and Contribution Agreement by and
among Bluegreen Corporation, as Seller and
BRFC 2012-A LLC as Depositor, dated as of
August 15, 2012
Note Purchase and Collateral Trust and Security
Agreement by and among Bluegreen Corporation,
Bluegreen Vacations Unlimited, Inc., Bluegreen
Resorts Managements, Inc., and TFRI 2013-1
LLC as Obligors, Bluegreen Nevada, LLC as
Guarantor, and US National Bank as Collateral
Agent, Note Registrar and Paying Agent, and AIG
Asset Management (U.S.) LLC as Designated
Representative, dated March 26, 2013
BXG Receivables Note Trust 2013-A, Standard
Definitions
Indenture between BXG Receivables Note Trust
2013-A, as Issuer, Bluegreen Corporation, as
Servicer, Vacation Trust, Inc. as Club Trustee,
Concord Servicing Corporation, as Backup
Servicer, and U.S. Bank National Association, as
Indenture Trustee, Paying Agent and Custodian,
dated as of September 15, 2013
Sale Agreement by and among BRFC 2013-A
LLC, as Depositor, and BXG Receivables Note
Trust 2013-A, as Issuer, dated as of September
15, 2013
Transfer Agreement by and among Bluegreen
Corporation, BXG Timeshare Trust I, as Seller,
and BRFC 2013-A LLC, as Depositor, dated as of
September 15, 2013
Purchase and Contribution Agreement by and
among Bluegreen Corporation, as Seller and
BRFC 2013-A LLC as Depositor, dated as of
September 15, 2013
Second Amended and Restated Purchase and
Contribution Agreement, dated as of May 1, 2017,
between Bluegreen Corporation and Bluegreen
Timeshare Finance I
Second Amended and Restated Sale Agreement,
dated as of May 1, 2017, between Bluegreen
Timeshare Finance I and BXG Timeshare Trust I
Sixth Amended and Restated Indenture, dated as
of May 1, 2017, among BXG Timeshare Trust I,
Bluegreen Corporation, Vacation Trust, Inc.,
Concord Servicing Corporation, U.S. Bank
National Association, KeyBank National
Association and DZ Bank AG Deutsche Zentral-
Genossenschaftsbank, Frankfurt AM Main
Sixth Amended and Restated Note Funding
Agreement, dated as of May 1, 2017, by and
among Bluegreen Corporation, BXG Timeshare
Trust I, Bluegreen Timeshare Finance Corporation
I, the purchasers from time to time parties thereto
and KeyBank National Association and DZ Bank
AG Deutsche Zentral-Genossenschaftsbank,
Frankfurt AM Main
Second Amended and Restated Trust Agreement,
dated as of May 19, 2017, by and among
Bluegreen Timeshare Finance I, GSS Holdings,
Inc. and Wilmington Trust Company
Exhibit 10.102 of Bluegreen Corporation's Form
8-K filed with the SEC on September 14, 2012
Exhibit 10.103 of Bluegreen Corporation's Form
8-K filed with the SEC on September 14, 2012
Exhibit 10.104 of Bluegreen Corporation's Form
8-K filed with the SEC on September 14, 2012
Exhibit 10.1 of Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31,
2013 filed on May 15, 2013
Exhibit 10.1 of Registrant's Current Report on
Form 8-K filed on October 2, 2013
Exhibit 10.2 of Registrant's Current Report on
Form 8-K filed on October 2, 2013
Exhibit 10.3 of Registrant's Current Report on
Form 8-K filed on October 2, 2013
Exhibit 10.4 of Registrant's Current Report on
Form 8-K filed on October 2, 2013
Exhibit 10.5 of Registrant's Current Report on
Form 8-K filed on October 2, 2013
Exhibit 10.1 to Registrant's Current Report on
Form 8-K filed on May 24, 2017
Exhibit 10.2 to Registrant's Current Report on
Form 8-K filed on May 24, 2017
Exhibit 10.3 to Registrant's Current Report on
Form 8-K filed on May 24, 2017
Exhibit 10.4 to Registrant's Current Report on
Form 8-K filed on May 24, 2017
Exhibit 10.5 to Registrant's Current Report on
Form 8-K filed on May 24, 2017
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
Seventh Amended and Restated Standard
Definitions to the Transaction Documents filed as
Exhibit 10.1 through 10.5 to Registrant's Current
Report on Form 8-K filed May 19, 2017
Credit Agreement dated November 5, 2014,
among Bluegreen Corporation, as Borrower, Fifth
Third Bank, as Administrative Agent and L/C
Issuer, and Guarantors and Lenders party thereto
Indenture, dated as of January 15, 2015, between
BXG Receivables Note Trust 2015-A, as Issuer,
Bluegreen Corporation, as Servicer, Vacation
Trust, Inc. as Club Trustee, Concord Servicing
Corporation, as Backup Servicer, and U.S. Bank
National Association, as Indenture Trustee, Paying
Agent and Custodian
Sale Agreement, dated as of January 15, 2015, by
and among BRFC 2015-A LLC, as Depositor, and
BXG Receivables Note Trust 2015-A, as Issuer
Transfer Agreement, dated as of January 15,
2015, by and among Bluegreen Corporation,
BXG Timeshare Trust I, as Seller, and BRFC
2015-A LLC, as Depositor
Purchase and Contribution Agreement, dated as of
January 15, 2015, by and among Bluegreen
Corporation, as Seller, and BRFC 2015-A LLC, as
Depositor
BXG Receivables Note Trust 2015-A, Standard
Definitions
Second Amended and Restated Secured
Promissory Note dated June 25, 2015, by and
among Bluegreen Vacations Unlimited, Inc., as
Borrower, and Pacific Western Bank, as Lender
Second Amendment to Amended and Restated
Loan and Security Agreement dated June 25,
2015, by and among Bluegreen Corporation, as
Borrower, and Pacific Western Bank, as Lender
Third Amended and Restated Revolving
Promissory Note (Hypothecation Facility) dated
June 30, 2015, by and among Bluegreen / Big
Cedar Vacations, LLC, as Borrower, and National
Bank of Arizona, as Lender
First Amended and Restated Loan and Security
Agreement (Hypothecation Facility) dated June
30, 2015, by and among Bluegreen / Big Cedar
Vacations, LLC, as Borrower and National Bank
of Arizona, as Lender
First Amended and Restated Promissory Note
(Inventory Loan) dated June 30, 2015, by and
among Bluegreen / Big Cedar Vacations, LLC, as
Borrower, and National Bank of Arizona, as
Lender
First Amended and Restated Loan Agreement
(Inventory Loan) dated June 30, 2015, by and
among Bluegreen / Big Cedar Vacations, LLC, as
Borrower, and National Bank of Arizona, as
Lender
Fourth Amended and Restated Revolving
Promissory Note (Hypothecation Facility) dated
September 28, 2017, by and among Bluegreen /
Big Cedar Vacations, LLC, as Borrower, and ZB,
N.A. dba National Bank of Arizona, as Lender
Second Amended and Restated Loan and Security
Agreement (Hypothecation Facility) dated
September 28, 2017, by and among Bluegreen /
Big Cedar Vacations, LLC, as Borrower, and ZB,
N.A. dba National Bank of Arizona, as Lender
Exhibit 10.6 to Registrant's Current Report on
Form 8-K filed on May 24, 2017
Exhibit 10.1 of Registrant's Quarterly Report on
Form 10-Q filed on November 10, 2014
Exhibit 10.1 of Registrant's Current Report on
Form 8-K filed on February 3, 2015
Exhibit 10.2 of Registrant's Current Report on
Form 8-K filed on February 3, 2015
Exhibit 10.3 of Registrant's Current Report on
Form 8-K filed on February 3, 2015
Exhibit 10.4 of Registrant's Current Report on
Form 8-K filed on February 3, 2015
Exhibit 10.5 of Registrant's Current Report on
Form 8-K filed on February 3, 2015
Exhibit 10.1 of Registrant's Current Report on
Form 8-K filed on June 30, 2015
Exhibit 10.2 of Registrant's Current Report on
Form 8-K filed on June 30, 2015
Exhibit 10.1 of Registrant's Current Report on
Form 8-K filed on July 7, 2015
Exhibit 10.2 of Registrant's Current Report on
Form 8-K filed on July 7, 2015
Exhibit 10.3 of Registrant's Current Report on
Form 8-K filed on July 7, 2015
Exhibit 10.4 of Registrant's Current Report on
Form 8-K filed on July 7, 2015
Exhibit 10.1 of Registrant's Current Report on
Form 8-K filed on October 4, 2017
Exhibit 10.2 of Registrant's Current Report on
Form 8-K filed on October 4, 2017
10.50
10.51
10.52
10.53
10.54
10.55
10.56
10.57
10.58
10.59
10.60
10.61
10.62
Second Amended and Restated Promissory Note
(Inventory Loan) dated September 28, 2017, by
and among Bluegreen / Big Cedar Vacations,
LLC, as Borrower, and ZB, N.A. dba National
Bank of Arizona, as Lender
Second Amended and Restated Loan Agreement
(Inventory Loan) dated September 28, 2017, by
and among Bluegreen / Big Cedar Vacations,
LLC, as Borrower, and ZB, N.A. dba National
Bank of Arizona, as Lender
Full Guaranty (Hypothecation Facility) dated
September 30, 2010, by Bluegreen Corporation,
as Guarantor, in favor of National Bank of
Arizona, as Lender (incorporated by reference to
Exhibit 10.102 to Bluegreen’s Quarterly Report
on Form 10-Q for the quarter ended September
30, 2010, filed with the SEC on November 10,
2010)
Guarantor Consent and Ratification and
Confirmation of and Amendment to Full Guaranty
(Hypothecation Facility) dated September 28,
2017, by Bluegreen Vacations Corporation, as
Guarantor, in favor of Z.B., National Bank of
Arizona, as Lender
Full Guaranty (Inventory Loan) dated December
13, 2013, by Bluegreen Corporation, as
Guarantor, in favor of National Bank of Arizona,
as Lender
Guarantor Consent and Ratification and
Confirmation of and Amendment to Full Guaranty
(Inventory Loan) dated September 28, 2017, by
Bluegreen Vacations Corporation, as Guarantor,
in favor of Z.B., National Bank of Arizona, as
Lender
Indenture dated as of March 17, 2016, between
BXG Receivables Note Trust 2016-A, as Issuer,
Bluegreen Corporation, as Servicer, Vacation
Trust, Inc., as Club Trustee, Concord Servicing
Corporation, as Backup Servicer, and U.S. Bank
National Association, as Indenture Trustee, Paying
Agent and Custodian
Sale Agreement, dated as of March 17, 2016, by
and among BRFC 2016-A LLC, as Depositor, and
BXG Receivables Note Trust 2016-A, as Issuer
Transfer Agreement, dated as of March 17, 2016,
by and among Bluegreen Corporation, BXG
Timeshare Trust I, as Seller, and BRFC 2016-A
LLC, as Depositor
Purchase and Contribution Agreement, dated as of
March 17, 2016, by and among Bluegreen
Corporation, as Seller, and BRFC 2016-A LLC, as
Depositor
BXG Receivables Note Trust 2016-A, Standard
Definitions
Amended and Restated Credit Agreement dated
as of December 16, 2016, by and among
Bluegreen Corporation, as Borrower and Fifth
Third Bank, as Administrative Agent and L/C
Issuer
Amended and Restated Security Agreement, dated
as of December 16, 2016, by and among
Bluegreen Corporation, as Borrower, Bluegreen
Vacations Unlimited, Inc. and Bluegreen Resorts
Management, Inc. as Grantors, and Fifth Third
Bank, as Administrative Agent
Exhibit 10.3 of Registrant's Current Report on
Form 8-K filed on October 4, 2017
Exhibit 10.4 of Registrant's Current Report on
Form 8-K filed on October 4, 2017
Exhibit 10.6 of Registrant's Current Report on
Form 8-K filed on October 4, 2017
Exhibit 10.6 of Registrant's Current Report on
Form 8-K filed on October 4, 2017
Exhibit 10.7 of Registrant's Current Report on
Form 8-K filed on October 4, 2017
Exhibit 10.8 of Registrant's Current Report on
Form 8-K filed on October 4, 2017
Exhibit 10.1 to Registrant's Current Report on
Form 8-K filed on March 23, 2016
Exhibit 10.2 to Registrant's Current Report on
Form 8-K filed on March 23, 2016
Exhibit 10.3 to Registrant's Current Report on
Form 8-K filed on March 23, 2016
Exhibit 10.4 to Registrant's Current Report on
Form 8-K filed on March 23, 2016
Exhibit 10.5 to Registrant's Current Report on
Form 8-K filed on March 23, 2016
Exhibit 10.1 to Registrant's Current Report on
Form 8-K filed on December 22, 2016
Exhibit 10.2 to Registrant's Current Report on
Form 8-K filed on December 22, 2016
Indenture, dated as of June 6, 2017, between BXG
Receivables Note Trust 2017-A, as Issuer,
Bluegreen Corporation, as Servicer, Vacation
Trust, Inc. as Club Trustee, Concord Servicing
Corporation, as Backup Servicer, and U.S. Bank
National Association, as Indenture Trustee, Paying
Agent and Custodian
Sale Agreement, dated as of June 6, 2017, by and
among BRFC 2017-A LLC, as Depositor, and
BXG Receivables Note Trust 2017-A, as Issuer
Transfer Agreement, dated as of June 6, 2017, by
and among Bluegreen Corporation, BXG
Timeshare Trust I, as Seller, and BRFC 2017-A
LLC, as Depositor
Purchase and Contribution Agreement, dated as of
June 6, 2017, by and among Bluegreen
Corporation, as Seller, and BRFC 2017-A LLC, as
Depositor
BXG Receivables Note Trust 2017-A, Standard
Definitions
Loan and Security Agreement, dated March 6,
2018, by and among BBX Capital, BBX Sweet
Holdings, Food for Thought Restaurant Group-
Florida, LLC, BBX Capital Florida, LLC and
Woodbridge, collectively, as borrowers, and
Iberiabank, as administrative agent and lender
Second Amended and Restated Receivables Loan
Agreement, dated as of March 12, 2018, by and
among Bluegreen Vacations Corporation, as
Borrower, and Liberty Bank, as Lender and
Administrative and Collateral Agent
Second Amended and Restated Receivables Loan
Note, dated as of March 12, 2018, by Bluegreen
Vacations Corporation in favor of Liberty Bank
Eighth Commitment Amendment to Loan Sale
and Servicing Agreement, dated as of April 6,
2018, by and among BBCV Receivables-Q 2010
LLC, as Seller, Quorum Federal Credit Union, as
Buyer, Vacation Trust, Inc., as Club Trustee, U.S.
Bank National Association, as Custodian,
Bluegreen Vacations Corporation, as Servicer,
and Concord Servicing Corporation as Backup
Servicer.
Commitment Purchase Period Terms Letter, dated
as of April 6, 2018, by BBCV Receivables-Q
2010 LLC, as Seller, and Quorum Federal Credit
Union, as Buyer.
Eighth Commitment Amendment to Loan Sale
and Servicing Agreement, dated as of April 6,
2018, by and among BRFC-Q 2010 LLC, as
Seller, Quorum Federal Credit Union, as Buyer,
Vacation Trust, Inc., as Club Trustee, U.S. Bank
National Association, as Custodian, Bluegreen
Vacations Corporation, as Servicer, and Concord
Servicing Corporation as Backup Servicer.
Commitment Purchase Period Terms Letter, dated
as of April 6, 2018, by BRFC-Q 2010 LLC, as
Seller, and Quorum Federal Credit Union, as
Buyer.
Promissory Note, dated as of April 17, 2018, by
Bluegreen Vacations Corporation and Bluegreen
Vacations Unlimited, Inc., jointly and severally, in
favor of ZB, N.A.
10.63
10.64
10.65
10.66
10.67
10.68
10.69
10.70
10.71
10.72
10.73
10.74
10.75
Exhibit 10.1 to Registrant's Current Report on
Form 8-K filed on June 9, 2017
Exhibit 10.2 to Registrant's Current Report on
Form 8-K filed on June 9, 2017
Exhibit 10.3 to Registrant's Current Report on
Form 8-K filed on June 9, 2017
Exhibit 10.4 to Registrant's Current Report on
Form 8-K filed on June 9, 2017
Exhibit 10.5 to Registrant's Current Report on
Form 8-K filed on June 9, 2017
Exhibit 10.66 to Registrant’s Annual Report
on Form 10-K filed on March 9, 2018
Exhibit 10.1 to Registrant’s Current Report on
Form 8-K filed on March 16, 2018
Exhibit 10.2 to Registrant’s Current Report on
Form 8-K filed on March 16, 2018
Exhibit 10.1 to Registrant’s Current Report on
Form 8-K filed on April 12, 2018
Exhibit 10.2 to Registrant’s Current Report on
Form 8-K filed on April 12, 2018
Exhibit 10.3 to Registrant’s Current Report on
Form 8-K filed on April 12, 2018
Exhibit 10.4 to Registrant’s Current Report on
Form 8-K filed on April 12, 2018
Exhibit 10.2 to Registrant’s Current Report on
Form 8-K filed on April 23, 2018
Fifth Amendment to Amended and Restated Loan
and Security Agreement, dated as of August 15,
2018, by and among Bluegreen Vacations
Corporation, the Borrower, each of the financial
institutions from time to time party thereto, and
Pacific Western Bank, as Agent.
Indenture, dated as of October 15, 2018, among
BXG Receivables Note Trust 2018-A, as Issuer,
Bluegreen Vacations Corporation, as Servicer,
Vacation Trust, Inc. as Club Trustee, Concord
Servicing Corporation, as Backup Servicer, and
U.S. Bank National Association, as Indenture
Trustee, Paying Agent and Custodian
Sale Agreement, dated as of October 15, 2018, by
and between BRFC 2018-A LLC, as Depositor,
and BXG Receivables Note Trust 2018-A, as
Issuer
Transfer Agreement, dated as of October 15,
2018, by and among Bluegreen Vacations
Corporation, BXG Timeshare Trust I, as Seller,
and BRFC 2018-A LLC, as Depositor
Purchase and Contribution Agreement, dated as of
October 15, 2018, by and between Bluegreen
Vacations Corporation, as Seller, and BRFC
2018-A LLC, as Depositor
10.76
10.77
10.78
10.79
10.80
Exhibit 10.1 to Registrant’s Current Report on
Form 8-K filed on August 21, 2018
Exhibit 10.1 to Registrant’s Current Report on
Form 8-K files on October 29, 2018
Exhibit 10.2 to Registrant’s Current Report on
Form 8-K filed on October 29, 2018
Exhibit 10.3 to Registrant’s Current Report on
Form 8-K filed on October 29, 2018
Exhibit 10.4 to Registrant’s Current Report on
Form 8-K filed on October 29, 2018
10.81
BXG Receivables Note Trust 2018-A, Standard
Definitions
Exhibit 10.5 to Registrant’s Current Report on
Form 8-K filed on October 29, 2018
10.82
Acquisition Loan Agreement, dated as of April
17, 2018, by and among Bluegreen Vacations
Corporation and Bluegreen Vacations Unlimited,
Inc., jointly and severally as Borrower, and ZB,
N.A, as Lender
Exhibit 10.1 to Registrant’s Current Report on
Form 8-K filed on April 23, 2018
21.1
Subsidiaries of the Registrant
Filed with this Report
23.1
Consent of Grant Thornton LLP
Filed with this Report
31.1
31.2
32.1
32.2
Certification of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
Filed with this Report
Filed with this Report
Furnished with this Report
Furnished with this Report
101.INS XBRL Instance Document
Filed with this Report
101.SCH XBRL Taxonomy Extension Schema Document
Filed with this Report
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
Document
Filed with this Report
101.DEF
101.LAB
101.PRE
XBRL Taxonomy Extension Definition Linkbase
Document
XBRL Taxonomy Extension Labels Linkbase
Document
XBRL Taxonomy Extension Presentation
Linkbase Document
Filed with this Report
Filed with this Report
Filed with this Report
Schedule III – Real Estate Investments and Accumulated Depreciation
BBX Capital Corporation
As of December 31, 2018
(Dollars in thousands)
Initial Costs
Building and
Capitalized
Costs
Subsequent
to
Property
Land Improvements Acquisition Other
Total Accumulated
Cost
(1) Depreciation Construction Month/Year
Foreclosure
Year of
Depreciable
Lives
(Years)
RoboVault
$ 1,590
6,310
900
- 8,800
1,893
2009
4/2013
40
(1) The aggregate cost for federal income tax purposes is $5.8 million.
The following table presents the changes in BBX Capital’s real estate investments for the year ended
December 31, 2018 (in thousands):
(in thousands)
Balance at December 31, 2017
Depreciation
Subsequent additions
Transfer to real estate held-for-sale
Balance at December 31, 2018
Total
Costs
Accumulated
Depreciation
$
$
8,481
-
319
-
8,800
1,546
347
-
-
1,893
Schedule IV – Mortgage Loans on Real Estate
BBX Capital Corporation
As of December 31, 2018
(Dollars in thousands)
Interest
Final
Periodic
Face Carrying
Principal
Amount of
Loans
Subject
to
Delinquent
Description
(1)
Date (2) Terms
Liens of Loans Loans (3) or Interest
Rate Maturity Payment
Prior Amount Amount of Principal
Number
of
Loans
23 First-lien 1-4 Family (4)
6.27% 6/30/2034 Monthly $
-
7,721
4,393
6,038
13 Second lien -Consumer
3.99% 8/14/2019 Monthly
2,451
1,226
563
8 Small Business Real Estate
Total Mortgage Loans
6.69% 3/23/2024 Monthly
-
1,380
$ 2,451 10,327
1,121
6,077
845
-
6,883
(1) Represents weighted average interest rates for mortgage loans grouped by category when there is
more than one loan in the category.
(2) Represents weighted average maturity dates for mortgage loans grouped by category when there
is more than one loan in the category.
(3) The aggregate cost for federal income tax purposes was $7.3 million.
(4) The Company does not own the servicing on these loans.
The following table presents the changes in the Company’s mortgage loans for the year ended
December 31, 2018 (in thousands):
Balance at December 31, 2017
Advances on existing mortgages
Collections of principal
Foreclosures
Costs of mortgages sold
Balance at December 31, 2018
$
$
18,504
-
(10,754)
(1,673)
-
6,077
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BBX CAPITAL CORPORATION
M a r c h 12,
Levan
2019
By:
/s/ Alan
B.
Board
Alan B. Levan, Chairman of the
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
/s/ Alan B. Levan
Alan B. Levan
/s/ John E. Abdo
John E. Abdo
/s/ Jarett S. Levan
Jarett S. Levan
/s/ Seth M. Wise
Seth M. Wise
/s/ Raymond S. Lopez
Raymond S. Lopez
/s/Brett Sheppard
Brett Sheppard
/s/Norman H. Becker
Norman H. Becker
/s/Andrew R. Cagnetta, Jr
Andrew R. Cagnetta, Jr
/s/Steven M. Coldren
Steven M. Coldren
/s/ Darwin Dornbush
Darwin Dornbush
/s/Willis N. Holcombe
Willis N. Holcombe
/s/ Oscar J. Holzmann
Oscar J. Holzmann
/s/ Joel Levy
Joel Levy
/s/ William Nicholson
William Nicholson
/s/Tony P. Segreto
Tony P. Segreto
/s/ Neil A. Sterling
Neil A. Sterling
/s/Charlie C. Winningham, II
Charlie C. Winningham, II
Chairman of the Board and Chief Executive Officer
Vice Chairman of the Board
President and Director
Executive Vice President and Director
Executive Vice President and Chief Financial Officer
Chief Accounting Officer
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Date
March 12, 2019
March 12, 2019
March 12, 2019
March 12, 2019
March 12, 2019
March 12, 2019
March 12, 2019
March 12, 2019
March 12, 2019
March 12, 2019
March 12, 2019
March 12, 2019
March 12, 2019
March 12, 2019
March 12, 2019
March 12, 2019
March 12, 2019
Subsidiaries of BBX Capital Corporation
Woodbridge Holdings, LLC
BBX Capital Florida, LLC
Eden Services, Inc.
BankAtlantic Financial Ventures II, LLC
I.R.E. Property Analysts, Inc.
I.R.E. Energy 1981, Inc.
Kingsway Services Inc.
Risk Management Services, LLC
BFC/CCC, Inc.
B-D2 Holdings, LLC
B-DJ Holdings, LLC
B-26 Holdings, LLC
D-2 Acquisition
BBX Capital Captive Insurance Company, LLC
LAS Trademark, LLC
Subsidiaries of Woodbridge Holdings, LLC
Bluegreen Vacations Corporation
BXG Florida Corporation
Core Communities of South Carolina, LLC
Carolina Oak Homes, LLC
ODI Program Partnership, LLLP
PF Program Partnership, LP
PF Program GP LLC
Subsidiaries of Bluegreen Vacations Corporation
BBCV Receivables-Q 2010, LLC
Big Cedar JV Interiors, LLC
Bluegreen Asset Management Corporation
Bluegreen Beverage, LLC
Bluegreen Communities of Georgia, LLC
Bluegreen Communities of Texas, LP
Bluegreen Communities, LLC
Bluegreen Corporation of Tennessee
Bluegreen Golf Clubs, Inc.
Bluegreen Guaranty Corporation
Bluegreen HoldCo, LLC
Bluegreen Holding Corporation (Texas)
Bluegreen Louisiana, LLC
Bluegreen Nevada, LLC
Bluegreen New Jersey, LLC
Bluegreen Properties N.V.
Bluegreen Properties of Virginia, Inc.
Bluegreen Purchasing & Design, Inc.
Bluegreen Receivables Finance Corporation III
Bluegreen Resorts International, Inc.
Bluegreen Resorts Management, Inc.
Exhibit 21.1
Jurisdiction of
Organization
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Tennessee
Florida
Florida
Florida
So. Carolina
So. Carolina
Florida
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Georgia
Delaware
Delaware
Delaware
Delaware
Florida
Nevada
Delaware
Delaware
Delaware
Delaware
Aruba
Delaware
Florida
Delaware
Delaware
Delaware
Bluegreen Servicing LLC
Bluegreen Southwest Land, Inc.
Bluegreen Southwest One, L.P.
Bluegreen Specialty Finance, LLC
Bluegreen Timeshare Finance Corporation I
Bluegreen Treasury Services, LLC
Bluegreen Vacations Unlimited, Inc.
Bluegreen/Big Cedar Vacations, LLC
BRFC 2012-A LLC
BRFC 2013-A LLC
BRFC 2015-A LLC
BRFC 2016-A LLC
BRFC 2017-A LLC
BRFC 2018-A LLC
BRFC III Deed Corporation
BRFC-Q 2010, LLC
BRM Bahamas Limited
BXG Construction, LLC
BXG Mineral Holdings, LLC
Catawba Falls, LLC
Encore Rewards, Inc.
Family Fun Company, LLC
Great Vacation Destinations, Inc.
Jordan Lake Preserve Corporation
Leisure Capital Corporation
Leisure Communication Network, Inc.
Managed Assets Corporation
New England Advertising Corporation
Outdoor Traveler Destinations, LLC
Pinnacle Vacations, Inc.
Prizzma, LLC
Resort Title Agency, Inc.
SC Holdco, LLC
Select Connections, LLC
TFRI 2013-1 LLC
Subsidiaries of BBX Capital Florida, LLC
BBX Capital Real Estate, LLC
BBX Capital Partners, LLC
BBX Sweet Holdings, LLC
Food for Thought Restaurant Group – Florida, LLC
Renin Holdings, LLC
Subsidiaries of BBX Capital Real Estate, LLC
BBX Partners, Inc.
BBX Capital Asset Management, LLC
Florida Asset Resolution Group, LLC
BBX Altman Operating Entities, LLC
BBX Altis Projects, LLC
BBX Capital Real Estate Investments, LLC
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Florida
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Bahamas
Delaware
Delaware
North Carolina
Delaware
Delaware
Florida
North Carolina
Vermont
Delaware
Delaware
Vermont
Florida
Delaware
Delaware
Florida
Delaware
Delaware
Delaware
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
BBX Las Olas Investments, LLC
BBX Altman Holdings, LLC
Subsidiaries of BBX Partners Inc.
Heartwood Partners 1, LLC
Heartwood Partners 2, LLC
Heartwood Partners 3, LLC
Subsidiaries of BBX Capital Asset Management, LLC
BBX Chapel Trail, LLC
BBX Shingle Creek, LLC
BBX Miramar, LLC
BBX Centra, LLC
FL Cell Tower, LLC
BBX Bonterra Multifamily, LLC
BBX Gardens Multifamily, LLC
BBX Austin, LLC
BBX Hialeah Apartments, LLC
Hialeah Multifamily, LLC
BBX Residential Victoria Park, LLC
Premier Flagler, LLC
Banc Servicing Center, LLC
Fidelity Service, LLC
Fidelity Tax, LLC
Heartwood 3, LLC
Heartwood 4, LLC
Heartwood 7, LLC
Heartwood 11, LLC
FL Billboards, LLC
Heartwood 18, LLC
Heartwood 19, LLC
Heartwood 21, LLC
Heartwood 23, LLC
Heartwood 24, LLC
Heartwood 40, LLC
Heartwood 41, LLC
Heartwood 42, LLC
Heartwood 44, LLC
Heartwood 47, LLC
Heartwood 50, LLC
Heartwood 88, LLC
Heartwood 90, LLC
Heartwood 91, LLC
Heartwood 91-2, LLC
Heartwood 91-3, LLC
Heartwood 91-4, LLC
Heartwood 92, LLC
BBX Grand Central, LLC
BBX Promenade, LLC
BBX Ludlam-Miami, LLC
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Unique Restaurant of Mizner Park Inc.
Subsidiary of Heartwood 91-2, LLC
Subsidiaries of Florida Asset Resolution Group, LLC
Heartwood 58, LLC
FAR Holdings Group, LLC
Subsidiaries of Heartwood 58, LLC
FT Properties, LLC
Sunrise Atlantic, LLC
Heartwood 45, LLC
Heartwood 56, LLC
Heartwood 57, LLC
Subsidiaries of FAR Holdings Group, LLC
Heartwood 2, LLC
Heartwood 43, LLC
Heartwood 55, LLC
FAR 1, LLC
FAR 2, LLC
FAR 3, LLC
FAR 4, LLC
FAR 5, LLC
FAR 6, LLC
Subsidiaries of BBX Sweet Holdings, LLC
The Hoffman Commercial Group, Inc.
Good Fortunes East, LLC
Boca Bons East, LLC
B&B Bons, LLC
S&F Good Fortunes, LLC
Hoffchoc, LLC
Hoffmans Chocolate, LLC
Brea Enterprises, LLC
Chocolate Acquisition Sub, LLC dba Kron Chocolatier
Las Olas Confections and Snacks, LLC
IT’SUGAR Holdings. LLC
Jer's Chocolates, LLC
Helen Grace Chocolates, LLC
Droga Chocolates, LLC
Kencraft Confections, LLC
Sweet Acquisitions UT2
Anastasia Confections, Inc.
Subsidiary of Sweet Acquisitions UT2
Lone Peak Asia, LLC
IT’SUGAR, LLC
Subsidiary of IT’SUGAR Holdings, LLC
IT’Sugar Atlantic City, LLC
Subsidiaries of IT’Sugar, LLC
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
Florida
California
California
Florida
Utah
Utah
Florida
Utah
Florida
Delaware
IT’Sugar FLGC, LLC
Subsidiaries of Food For Thought Restaurant Group – Florida, LLC
Food For Thought Restaurant Group – LLC
Food For Thought Restaurant Group – Operations, LLC
Subsidiaries of Renin Holdings, LLC
Renin US, LLC
Renin Canada Corporation
Florida
Florida
Florida
Mississippi
Canada
Renin UK Corporation
United Kingdom
Subsidiaries of Renin Canada Corporation
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated March 12, 2019 with respect to the consolidated financial
statements and internal control over financial reporting included in the Annual Report of BBX
Capital Corporation on Form 10-K for the year ended December 31, 2018. We consent to the
incorporation by reference of said reports in the Registration Statements of BBX Capital
Corporation on Forms S-3 (File No. 333-216751 and File No. 333-219178) and on Forms S-8
(File No. 333-197195, File No. 333-206371, File No. 333-215247, File No. 333-215260, File
No. 333-218265 and File No. 333-225211).
/s/ GRANT THORNTON LLP
Fort Lauderdale, Florida
March 12, 2019
Exhibit 31.1
I, Alan B. Levan, certify that:
1)
I have reviewed this annual report on Form 10-K of BBX Capital Corporation;
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;
4) The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting
that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrant’s internal control over financial reporting.
Date: March 12, 2019
By:/s/Alan B. Levan
Alan B. Levan,
Chairman of the Board and
Chief Executive Officer
Exhibit 31.2
I, Raymond S. Lopez, certify that:
1)
I have reviewed this annual report on Form 10-K of BBX Capital Corporation;
2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3) Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;
4) The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared;
b. Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such
evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over financial
reporting; and
5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal control over financial reporting.
Date: March 12, 2019
By: /s/Raymond S. Lopez
Raymond S. Lopez,
Chief Financial Officer
Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of BBX Capital Corporation (the “Company”) for
the year ended December 31, 2018, as filed with the Securities and Exchange Commission on the date
hereof (the “Report”), I, Alan B. Levan, Chairman of the Board and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
/s/ Alan B. Levan
Name: Alan B. Levan
Title: Chairman of the Board and Chief Executive Officer
Date: March 12, 2019
Exhibit 32.2
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of BBX Capital Corporation (the “Company”) for
the year ended December 31, 2018, as filed with the Securities and Exchange Commission on the date
hereof (the “Report”), I, Raymond S. Lopez, Chief Financial Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
/s/ Raymond S. Lopez
Name: Raymond S. Lopez
Title: Chief Financial Officer
Date: March 12, 2019