Company Quick10K Filing
BBX Capital
Price4.63 EPS0
Shares94 P/E11
MCap437 P/FCF7
Net Debt-417 EBIT109
TEV19 TEV/EBIT0
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-11
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BBX 10Q Quarterly Report

Part I – Financial Information
Item 1. Financial Statements
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 c858-20200331xex31_1.htm
EX-31.2 c858-20200331xex31_2.htm
EX-32.1 c858-20200331xex32_1.htm
EX-32.2 c858-20200331xex32_2.htm

BBX Capital Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
1.91.51.10.80.40.02012201420172020
Assets, Equity
0.30.20.10.1-0.0-0.12012201420172020
Rev, G Profit, Net Income
0.10.0-0.0-0.1-0.1-0.22012201420172020
Ops, Inv, Fin

10-Q 1 c858-20200331x10q.htm 10-Q 20200331 Q1

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION



Washington, DC  20549



FORM 10-Q



[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



For the Quarter Ended March 31, 2020



[   ] 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

 

59‑2022148

(State or other jurisdiction of incorporation or organization)

 

(I.R.S Employer Identification No.)



 

 

401 East Las Olas Boulevard, Suite 800

 

 

Fort Lauderdale, Florida

 

33301

(Address of principal executive office)

 

(Zip Code)







(954) 940-4900

(Registrant's telephone number, including area code)





 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $.01 par value

BBX

New York Stock Exchange

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)



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 every Interactive Data File required to be submitted 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 such files).



YES [X]NO [   ]



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 [ ]

Accelerated filer[X]

Non-accelerated filer [ ]

Smaller reporting company [ ] 

Emerging growth company [ ]

 

 

 



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 Exchange Act).



YES [   ]NO [ X ]

The number of shares outstanding of each of the registrant’s classes of common stock as of May 4, 2020 is as follows:

 

Class A Common Stock of $.01 par value,  78,106,148 shares outstanding.
Class B Common Stock of $.01 par value, 18,466,942 shares outstanding.



 


 

 





 

 

BBX Capital Corporation

TABLE OF CONTENTS



Part I.

Item 1.

Financial Statements

 



 

 



Condensed Consolidated Statements of Financial Condition as of March 31, 2020 and December 31, 2019 - Unaudited

1



Condensed Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended March 31, 2020 and 2019 - Unaudited

2



Condensed Consolidated Statements of Changes in Equity for the Three  Months Ended March 31,  2020 and 2019 - Unaudited

3



Condensed Consolidated Statements of Cash Flows for the Three Months Ended March  31, 2020 and 2019 - Unaudited

4



Notes to Condensed Consolidated Financial Statements - Unaudited

6

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

30

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

56

Item 4.

Controls and Procedures

56



 

 

Part II.

OTHER INFORMATION

 



 

 

Item 1.

Legal Proceedings

56

Item 1A.

Risk Factors

56

Item 6.

Exhibits

58



Signatures

59



  

 

 

 


 

 



PART I  FINANCIAL INFORMATION



Item 1. Financial Statements







 

 

 

 

 

 



 

 

 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Financial Condition - Unaudited

(In thousands, except share data)



 

 

 

 

 

 



 

March 31,

 

December 31,



 

2020

 

2019

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

397,518 

 

 

356,604 

Restricted cash ($17,456 in 2020 and $22,534 in 2019 in variable interest entities ("VIEs"))

 

 

34,719 

 

 

50,266 

Notes receivable

 

 

585,159 

 

 

589,198 

Less: Allowance for loan losses

 

 

(155,166)

 

 

(140,630)

Notes receivable, net ($288,435 in 2020 and $292,590 in 2019 in VIEs)

 

 

429,993 

 

 

448,568 

Trade inventory

 

 

22,531 

 

 

22,843 

Vacation ownership interest ("VOI") inventory

 

 

347,293 

 

 

346,937 

Real estate ($11,348 in 2020 and $11,297 in 2019 held for sale)

 

 

63,098 

 

 

65,818 

Investments in unconsolidated real estate joint ventures

 

 

59,373 

 

 

57,330 

Property and equipment, net

 

 

129,536 

 

 

129,686 

Goodwill

 

 

14,864 

 

 

37,248 

Intangible assets, net

 

 

68,026 

 

 

68,186 

Operating lease assets

 

 

103,108 

 

 

109,351 

Other assets

 

 

106,437 

 

 

98,134 

Total assets

 

$

1,776,496 

 

 

1,790,971 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

27,821 

 

 

25,957 

Deferred income 

 

 

15,343 

 

 

18,074 

Escrow deposits

 

 

12,900 

 

 

22,711 

Other liabilities

 

 

91,988 

 

 

120,362 

Receivable-backed notes payable - recourse

 

 

80,473 

 

 

88,569 

Receivable-backed notes payable - non-recourse (in VIEs)

 

 

339,224 

 

 

334,246 

Notes payable and other borrowings

 

 

265,689 

 

 

188,731 

Junior subordinated debentures

 

 

137,476 

 

 

137,254 

Operating lease liabilities

 

 

121,300 

 

 

123,430 

Deferred income taxes

 

 

81,492 

 

 

87,558 

Total liabilities

 

 

1,173,706 

 

 

1,146,892 

Commitments and contingencies (See Note 12)

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

1,863 

 

 

4,009 

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 75,663,645 in 2020 and 75,530,331 in 2019

 

 

757 

 

 

755 

Class B Common Stock of $.01 par value; authorized 20,000,000 shares;

 

 

 

 

 

 

issued and outstanding 15,824,539 in 2020 and 15,957,853 in 2019

 

 

158 

 

 

160 

Additional paid-in capital

 

 

154,339 

 

 

152,775 

Accumulated earnings

 

 

365,690 

 

 

394,551 

Accumulated other comprehensive income

 

 

967 

 

 

1,554 

Total shareholders' equity

 

 

521,911 

 

 

549,795 

Noncontrolling interests

 

 

79,016 

 

 

90,275 

Total equity

 

 

600,927 

 

 

640,070 

Total liabilities and equity

 

$

1,776,496 

 

 

1,790,971 



 

 

 

 

 

 



 

 

 

 

 

 

See Notes to Condensed Consolidated  Financial Statements Unaudited

 

1

 


 

 





 





 

 

 

 

 

 



 

 

 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Operations and Comprehensive Income - Unaudited

(In thousands, except per share data)



 

 

 

 

 

 



 

For the Three Months Ended March 31,



 

2020

 

2019

Revenues:

 

 

 

 

 

 

Sales of VOIs 

 

$

45,128 

 

 

51,731 

Fee-based sales commissions

 

 

41,365 

 

 

45,212 

Other fee-based services

 

 

29,314 

 

 

29,568 

Cost reimbursements

 

 

19,120 

 

 

17,044 

Trade sales

 

 

40,877 

 

 

45,984 

Sales of real estate inventory

 

 

6,439 

 

 

4,236 

Interest income

 

 

21,316 

 

 

21,415 

Net (losses) gains on sales of real estate assets

 

 

(47)

 

 

1,332 

Other revenue

 

 

574 

 

 

830 

Total revenues

 

 

204,086 

 

 

217,352 

Costs and Expenses:

 

 

 

 

 

 

Cost of VOIs sold

 

 

4,099 

 

 

3,848 

Cost of other fee-based services

 

 

22,711 

 

 

22,868 

Cost reimbursements

 

 

19,120 

 

 

17,044 

Cost of trade sales

 

 

29,772 

 

 

32,290 

Cost of real estate inventory sold

 

 

4,632 

 

 

2,643 

Interest expense

 

 

9,833 

 

 

11,148 

Recoveries from loan losses, net

 

 

(3,512)

 

 

(961)

Impairment losses

 

 

28,283 

 

 

618 

Selling, general and administrative expenses

 

 

126,853 

 

 

121,993 

Total costs and expenses

 

 

241,791 

 

 

211,491 

Equity in net earnings (losses) of unconsolidated real estate joint ventures

 

 

551 

 

 

(17)

Other income

 

 

231 

 

 

513 

Foreign exchange gain 

 

 

278 

 

 

(Loss) income before income taxes

 

 

(36,645)

 

 

6,362 

Benefit (provision) for income taxes

 

 

5,830 

 

 

(1,724)

Net (loss) income

 

 

(30,815)

 

 

4,638 

Less: Net (loss) income attributable to noncontrolling interests

 

 

(2,505)

 

 

3,139 

Net (loss) income attributable to shareholders

 

$

(28,310)

 

 

1,499 



 

 

 

 

 

 

Basic (loss) earnings per share

 

$

(0.31)

 

 

0.02 

Diluted (loss) earnings per share

 

$

(0.31)

 

 

0.02 

Basic weighted average number of common shares outstanding

 

 

91,488 

 

 

93,220 

Diluted weighted average number of common and common equivalent shares outstanding

 

 

91,488 

 

 

94,487 

Cash dividends declared per Class A common share

 

$

 —

 

 

0.0125 

Cash dividends declared per Class B common share

 

$

 —

 

 

0.0125 



 

 

 

 

 

 

Net (loss) income

 

$

(30,815)

 

 

4,638 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

Unrealized (loss) gain on securities available for sale

 

 

(37)

 

 

28 

Foreign currency translation adjustments

 

 

(550)

 

 

101 

Other comprehensive (loss) income, net

 

 

(587)

 

 

129 

Comprehensive (loss) income, net of tax

 

 

(31,402)

 

 

4,767 

Less: Comprehensive (loss) income attributable to noncontrolling interests

 

 

(2,505)

 

 

3,139 

Comprehensive (loss) income attributable to shareholders

 

$

(28,897)

 

 

1,628 



 

 

 

 

 

 



 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited

 

2

 


 

 

 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Changes in Equity - Unaudited

For the Three Months Ended March 31, 2019 and 2020

(In thousands)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

Shares of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 



 

 

Common Stock

 

 

Common

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 



 

 

Outstanding

 

 

Stock

 

 

Additional

 

 

 

 

 

Comprehen-

 

 

Total

 

 

Non-

 

 

 



 

 

Class

 

 

Class

 

 

Paid-in

 

 

Accumulated

 

 

sive

 

 

Shareholders'

 

 

controlling

 

 

Total



 

 

A

 

 

B

 

 

A

 

 

B

 

 

Capital

 

 

Earnings

 

 

Income

 

 

Equity

 

 

Interests

 

 

Equity

Balance, December 31, 2018

 

 

78,379 

 

 

14,841 

 

$

784 

 

 

148 

 

 

161,684 

 

 

385,789 

 

 

1,215 

 

 

549,620 

 

 

87,988 

 

 

637,608 

Cumulative effect from the adoption of ASU 2016-02, net of income taxes and redeemable noncontrolling interest

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(2,202)

 

 

 —

 

 

(2,202)

 

 

 —

 

 

(2,202)

Net income excluding $220 of loss attributable to redeemable noncontrolling interest

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,499 

 

 

 —

 

 

1,499 

 

 

3,359 

 

 

4,858 

Other comprehensive income

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

129 

 

 

129 

 

 

 —

 

 

129 

Distributions to noncontrolling interests

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(1,220)

 

 

(1,220)

Class A common stock cash dividends declared

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(989)

 

 

 —

 

 

(989)

 

 

 —

 

 

(989)

Class B common stock cash dividends declared

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(242)

 

 

 —

 

 

(242)

 

 

 —

 

 

(242)

Share-based compensation

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

3,049 

 

 

 —

 

 

 —

 

 

3,049 

 

 

 —

 

 

3,049 

Balance, March 31, 2019

 

 

78,379 

 

 

14,841 

 

$

784 

 

 

148 

 

 

164,733 

 

 

383,855 

 

 

1,344 

 

 

550,864 

 

 

90,127 

 

 

640,991 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2019

 

 

75,530 

 

 

15,958 

 

$

755 

 

 

160 

 

 

152,775 

 

 

394,551 

 

 

1,554 

 

 

549,795 

 

 

90,275 

 

 

640,070 

Net loss excluding $2,743 of loss attributable to redeemable noncontrolling interest

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(28,310)

 

 

 —

 

 

(28,310)

 

 

238 

 

 

(28,072)

Other comprehensive loss

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(587)

 

 

(587)

 

 

 —

 

 

(587)

Bluegreen purchase and retirement of its common stock

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(1,167)

 

 

 —

 

 

 —

 

 

(1,167)

 

 

(10,574)

 

 

(11,741)

Distributions to noncontrolling interests

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(923)

 

 

(923)

Accretion of redeemable noncontrolling interest

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(551)

 

 

 —

 

 

(551)

 

 

 —

 

 

(551)

Conversion of common stock from Class B to Class A

 

 

133 

 

 

(133)

 

 

 

 

(2)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Share-based compensation

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

2,731 

 

 

 —

 

 

 —

 

 

2,731 

 

 

 —

 

 

2,731 

Balance, March 31, 2020

 

 

75,663 

 

 

15,825 

 

$

757 

 

 

158 

 

 

154,339 

 

 

365,690 

 

 

967 

 

 

521,911 

 

 

79,016 

 

 

600,927 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited



3

 


 

 



 





 

 

 

 

 

 



 

 

 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Cash Flows - Unaudited

(In thousands)



 

 

 

 

 

 



 

 

 

 

 

 



 

For the Three Months Ended March 31,



 

2020

 

2019

Operating activities:

 

 

 

 

 

 

Net (loss) income

 

$

(30,815)

 

 

4,638 

Adjustment to reconcile net income to net cash

 

 

 

 

 

 

used in operating activities:

 

 

 

 

 

 

Recoveries from loan losses, net

 

 

(3,512)

 

 

(961)

Provision for notes receivable allowances

 

 

30,353 

 

 

11,145 

Depreciation, amortization and accretion, net

 

 

6,902 

 

 

6,875 

Share-based compensation expense

 

 

2,731 

 

 

3,049 

Net losses (gains) on sales of real estate and property and equipment

 

 

 

 

(1,332)

Equity (earnings) losses of unconsolidated real estate joint ventures

 

 

(551)

 

 

17 

Return on investment in unconsolidated real estate joint ventures

 

 

1,430 

 

 

277 

(Decrease) increase in deferred income tax

 

 

(6,052)

 

 

1,093 

Impairment losses

 

 

28,283 

 

 

618 

Interest accretion on redeemable 5% cumulative preferred stock

 

 

 —

 

 

209 

Increase in notes receivable

 

 

(11,184)

 

 

(7,607)

Increase in VOI inventory

 

 

(356)

 

 

(8,237)

Decrease (increase) in trade inventory

 

 

312 

 

 

(613)

Decrease in real estate inventory

 

 

1,241 

 

 

2,192 

Net change in operating lease asset and operating lease liability

 

 

294 

 

 

 —

Increase in other assets

 

 

(10,582)

 

 

(6,726)

Decrease in other liabilities

 

 

(38,491)

 

 

(11,203)

Net cash used in operating activities

 

 

(29,994)

 

 

(6,566)

Investing activities:

 

 

 

 

 

 

Return of investment in unconsolidated real estate joint ventures

 

 

 —

 

 

2,068 

Investments in unconsolidated real estate joint ventures

 

 

(2,922)

 

 

(4,920)

Proceeds from repayment of loans receivable

 

 

3,909 

 

 

1,179 

Proceeds from sales of real estate held-for-sale

 

 

100 

 

 

1,936 

Additions to real estate held-for-sale and held-for-investment

 

 

(51)

 

 

(289)

Purchases of property and equipment

 

 

(6,549)

 

 

(9,693)

Decrease in cash from other investing activities

 

 

 —

 

 

(42)

Net cash used in investing activities

 

 

(5,513)

 

 

(9,761)



 

 

 

 

 

(Continued)



4

 


 

 

 









 

 

 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Cash Flows - Unaudited

(In thousands)



 

 

 

 

 

 



 

 

 

 

 

 



 

For the Three Months Ended March 31,



 

2020

 

2019

Financing activities:

 

 

 

 

 

 

Repayments of notes payable and other borrowings

 

 

(44,076)

 

 

(75,493)

Proceeds from notes payable and other borrowings

 

 

118,943 

 

 

14,791 

Payments for debt issuance costs

 

 

(185)

 

 

(115)

Payments of interest of redeemable 5% cumulative preferred stock

 

 

 —

 

 

(125)

Purchase and retirement of subsidiary common stock

 

 

(11,741)

 

 

 —

Dividends paid on common stock

 

 

(1,144)

 

 

(934)

Distributions to noncontrolling interests

 

 

(923)

 

 

(1,220)

Net cash provided by (used in)  financing activities

 

 

60,874 

 

 

(63,096)

Increase (decrease) in cash, cash equivalents and restricted cash

 

 

25,367 

 

 

(79,423)

Cash, cash equivalents and restricted cash at beginning of period 

 

 

406,870 

 

 

421,097 

Cash, cash equivalents and restricted cash at end of period 

 

$

432,237 

 

 

341,674 



 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

Interest paid on borrowings, net of amounts capitalized

 

$

9,095 

 

 

9,745 

Income taxes paid

 

 

217 

 

 

862 

Supplementary disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

Construction funds receivable transferred to real estate

 

 

 —

 

 

2,288 

Operating lease assets recognized upon adoption of ASC 842

 

 

 —

 

 

113,183 

Operating lease liabilities recognized upon adoption of ASC 842

 

 

 —

 

 

123,240 

Operating lease assets obtained in exchange for new operating lease liabilities

 

 

3,139 

 

 

5,864 

Increase in other assets upon issuance of Community Development District Bonds

 

 

185 

 

 

8,110 

Assumption of Community Development District Bonds by builders

 

 

1,532 

 

 

1,035 

Reconciliation of cash, cash equivalents and restricted cash:

 

 

 

 

 

 

Cash and cash equivalents

 

 

397,518 

 

 

296,317 

Restricted cash

 

 

34,719 

 

 

45,357 

Total cash, cash equivalents, and restricted cash

 

$

432,237 

 

 

341,674 



 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited

 





 

5

 


 

 

BBX Capital Corporation

Notes to Condensed Consolidated Financial Statements - Unaudited

 

1.    Organization and Basis of Financial Statement Presentation



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.”



BBX Capital has two classes of common stock. Holders of the Class A common stock are entitled to one vote per share, which in the aggregate represents 22% of the combined voting power of the Class A common stock and the Class B common stock. Class B common stock represents the remaining 78% of the combined vote. The percentage of total common equity represented by Class A and Class B common stock was 83% and 17%, respectively, at March  31, 2020. Class B common stock is convertible into Class A common stock on a share for share basis at any time at the option of the holder.



Basis of Financial Statement Presentation



The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, these financial statements do not include all of the information and disclosures required by GAAP for complete financial statements.



Financial statements prepared in conformity with GAAP require the Company to make estimates based on assumptions about current and, for some estimates, future economic and market conditions which affect reported amounts and related disclosures in the Company’s financial statements. Due to, among other things, the impact and potential future impact of the ongoing novel coronavirus disease (“COVID-19”) pandemic, which is discussed in more detail throughout this report, actual conditions could differ from the Company’s expectations and estimates, which could materially affect the Company’s results of operations and financial condition. The severity, magnitude, and duration, as well as the economic consequences, of the COVID-19 pandemic, are uncertain, rapidly changing, and difficult to predict. As a result, the Company’s accounting estimates and assumptions may change over time in response to COVID-19. Such changes could result in, among other adjustments, future impairments of goodwill, intangibles, and long-lived assets, inventory reserves, and incremental changes in the Company’s allowance for loan losses. 



In management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which include normal recurring adjustments, that are necessary for a fair statement of the condensed consolidated financial condition of the Company at March 31, 2020; the condensed consolidated results of operations and comprehensive income of the Company for the three months ended March 31, 2020 and 2019; the condensed consolidated changes in equity of the Company for the three months ended March 31, 2020 and 2019; and the condensed consolidated cash flows of the Company for the three months ended March 31, 2020 and 2019. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or any other future period.



These unaudited condensed consolidated financial statements and related notes are presented as permitted by Form 10-Q and should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 13, 2020. 



The condensed 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.



Certain amounts for prior periods have been reclassified to conform to the presentation for the current period. The reclassification had no impact on the Company’s statements of operations and comprehensive income or statements of cash flows.



6

 


 

 

Principal Investments



The Company’s principal investments are Bluegreen Vacations Corporation (“Bluegreen” or “Bluegreen Vacations”), BBX Capital Real Estate LLC (“BBX Capital Real Estate” or “BBXRE”), BBX Sweet Holdings, LLC (“BBX Sweet Holdings”), and Renin Holdings, LLC (“Renin”).



Bluegreen



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 23 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 high-volume, “drive-to” vacation destinations, including Orlando, Las Vegas, Myrtle Beach and Charleston, among others. Through its points-based system, the approximately 221,000 owners in Bluegreen’s Vacation Club have the flexibility to stay at units available at its resorts and have access to over 11,350 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 for 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 qualified VOI purchasers, which generates significant interest income.



During the three months ended March 31, 2020, Bluegreen repurchased and retired 1,878,400 shares of its common stock for $11.7 million. As of March 31, 2020, the Company owns approximately 93% of Bluegreen’s common stock.



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, including investments in multifamily apartment and townhome communities, single-family master-planned communities, and commercial properties located primarily in Florida. In addition, BBX Capital Real Estate owns a 50% equity interest in The Altman Companies, LLC (the “Altman Companies”), a developer and manager of multifamily apartment communities, and manages the legacy assets acquired in connection with the Company’s sale of BankAtlantic in 2012, including portfolios of loans receivable and real estate properties.



BBX Sweet Holdings



BBX Sweet Holdings is engaged in the ownership and management of operating businesses in the confectionery industry, including IT’SUGAR, Hoffman’s Chocolates, and Las Olas Confections and Snacks. IT’SUGAR is a specialty candy retailer which has approximately 100 retail locations, which include a mix of high-traffic resort and entertainment, lifestyle, mall/outlet, and urban locations in over 25 states and Washington D.C., and its products include bulk candy, candy in giant packaging, and novelty items. Hoffman’s Chocolates is a retailer of gourmet chocolates with retail locations in South Florida, and Las Olas Confections and Snacks is a manufacturer and wholesaler of chocolate and other confectionery products.



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 the United States and Canada. In addition to its own manufacturing, Renin also sources various products and raw materials from China and Vietnam.



Other



In addition to its principal investments, the Company has investments in other operating businesses, including a restaurant located in South Florida that was acquired through a loan foreclosure and an insurance agency.  The Company previously operated as a franchisee of MOD Pizza restaurant locations in Florida and exited these operations in September 2019.



7

 


 

 

Impact of the COVID-19 Pandemic



The COVID-19 pandemic has been, and continues to be, an unprecedented disruption in the U.S. and global economies and the industries in which the Company operates due to, among other things, government ordered “shelter in place” and “stay at home” orders and advisories, travel restrictions, and restrictions on business operations, including required closures of resorts and retail locations. The disruptions arising from the pandemic and the reaction of the general public had a significant adverse impact on the Company's financial condition and operations during the three months ended March 31, 2020. The duration and severity of the pandemic and related disruptions, as well as the adverse impact on economic and market conditions, are uncertain; however, given the nature of these circumstances, the adverse impact of the pandemic on the Company’s consolidated results of operations, cash flows, and financial condition in 2020 has been, and is expected to continue to be, material. Furthermore, although the duration and severity of the effects of the pandemic are uncertain, it is expected that demand for many of the Company’s products and services may remain weak for a significant length of time, and the Company cannot predict if and when the industries in which the Company operates will return to pre-pandemic levels.



Although the impact of the COVID-19 pandemic on the Company’s principal investments, including management’s efforts to mitigate the effects of the pandemic, has varied, as described in further detail below, BBX Capital and its subsidiaries have taken steps to manage expenses through cost saving initiatives and reductions in employee head count and taken actions to increase liquidity and strengthen the Company’s financial position, including drawing cash from certain available lines of credit, reducing planned capital expenditures, and in the case of BBX Capital and Bluegreen, suspending the payment of quarterly dividends. As of March 31, 2020, the Company’s consolidated cash balances were $397.5 million, including $137.8 million held directly by BBX Capital.



The following summarizes the current impact of the COVID-19 pandemic on the Company’s principal investments:



Bluegreen



Bluegreen temporarily closed all of its VOI sales centers; its retail marketing operations at Bass Pro Shops, Cabela’s stores, and outlet malls; and the Choice Hotels call transfer program. In addition, some of Bluegreen’s Club and Club Associate Resorts were closed in accordance with government mandates and advisories. As a result of the effect of the pandemic, Bluegreen implemented several cost mitigating activities, including a reduction in workforce and the implementation of temporary furloughs and reduced work hours. In addition, as a precautionary measure designed to provide it with additional liquidity, Bluegreen reduced its new inventory acquisition and development expenditures, drew down $60.0 million under its credit facilities and various receivable backed facilities, and suspended its quarterly dividends. Bluegreen is continuing to monitor the course of the COVID-19 pandemic but is currently developing a plan to reopen these operations, including accepting guests at certain of its resorts as of May 16, 2020 and reopening VOI sales centers and marketing operations beginning in June 2020, in each case on a phased schedule, subject to the restrictions of applicable government orders and the safety of its owners, guests, and employees.



The Company expects that the impact of the COVID-19 pandemic will materially adversely affect Bluegreen’s operating results and financial condition for the year ended December 31, 2020, and a sustained adverse impact on Bluegreen’s revenues, net income, or other operating results due to the COVID-19 pandemic could result in failures to comply with various loan covenants in its outstanding indebtedness. While there is no assurance that it will be successful, Bluegreen will seek waivers from its lenders where necessary. 



BBX Capital Real Estate



Construction activities remain ongoing at BBXRE’s existing projects; however, the effects of the COVID-19 pandemic, including “shelter in place” and “stay at home” orders and advisories and increased unemployment and economic uncertainty, have disrupted sales activities at BBXRE’s single-family home developments and rental activities at its multifamily apartment developments. In addition, the effects of the pandemic, including the impact on general economic conditions and real estate and credit markets, have increased uncertainty related to the expected timing and pricing of future sales of multifamily apartment developments, single-family homes, and developed lots at BBXRE’s Beacon Lake Community, as well as the commencement of new multifamily apartment developments. While the Company expects that the impact of the COVID-19 pandemic will adversely affect BBXRE’s operating results and financial condition for the year ended December 31, 2020, particularly with respect to the expected timing of sales, the Company determined that its existing real estate investments were not impaired as of March 31, 2020 as the impact of the pandemic on real estate values was uncertain at such time. BBXRE will continue to monitor economic and market conditions and may recognize impairment losses in future periods to the extent that the effects of the pandemic have a severe and sustained adverse impact on the real estate market.

8

 


 

 



BBX Sweet Holdings



As of March 31, 2020, IT’SUGAR had closed all of its retail locations and furloughed all store employees and the majority of its corporate employees. At the current time, IT’SUGAR is not generating any trade sales other than limited sales through its website and wholesale channels and has not made rent payments to the landlords of its retail locations. IT’SUGAR is currently in discussions with its landlords for rent abatements or deferrals and is hopeful that it will be in a position to commence a phased reopening of its retail locations starting in May 2020, subject to the implementation of revised store floor plans and increased sanitation protocols. However, as a result of the prolonged closure of its retail locations that commenced in March 2020, IT’SUGAR does not believe that it will have sufficient liquidity to continue its full operations if it is unable to obtain significant rent abatements or deferrals from its landlords and amended payment terms from its vendors and, if it is not successful with these negotiations, may decide to pursue a formal or informal restructuring. Further, even if IT’SUGAR is in a position to reopen its retail locations and continue its operations, the effects of the COVID-19 pandemic on demand and future sales levels, including a recessionary economic environment and the potential impact of the pandemic on consumer behavior, remain uncertain and could have a long-term and significant adverse impact on IT’SUGAR’s business, results of operations, and financial condition and its ability to continue its operations. As a result, the Company recognized $24.7 million of impairment losses related to IT’SUGAR’s goodwill and long-lived assets during the quarter ended March 31, 2020. See Note 8 for additional information with respect to the recognition of these impairment losses.



In addition to the material adverse impact of the COVID-19 pandemic on IT’SUGAR’s operations, BBX Sweet Holdings’ other operations have also been adversely impacted by the pandemic. In particular, Hoffman’s Chocolates has closed all of its retail locations to customer traffic and limited sales to curbside pickup (where allowable by government mandates) and online customers. In addition, Hoffman’s Chocolates is in discussions with its landlords for rent abatements and deferrals. While Las Olas Confections and Snacks has continued to operate its manufacturing facility and sell products to its wholesale customers, its sales activity has declined as a result of the effects of the pandemic. In response to the effects of the pandemic, both Hoffman’s Chocolates and Las Olas Confections and Snacks have implemented several cost mitigating activities, including a reduction of workforce and indefinite furlough of certain employees.



Renin



Renin is continuing to operate both of its manufacturing and distribution facilities, source various products and raw materials from China and Vietnam, and sell its products through various channels. While its operating results for the three months ended March 31, 2020 were not significantly impacted by the COVID-19 pandemic,  Renin’s sales volumes have declined subsequent to March 31, 2020, which management believes is attributable to the effects of the pandemic, including a recessionary economic environment and rising unemployment. In addition, such effects could have a significant adverse impact on Renin’s results of operations and financial condition in future periods, particularly to the extent that an economic downturn is prolonged in nature or results in material disruptions in the supply chains for its products and raw materials. Renin is continuing to monitor the potential effects of the pandemic and is exploring various opportunities through which it could attempt to mitigate such effects, including increasing online sales and implementing cost reduction initiatives.



Recently Adopted Accounting Pronouncements



The Financial Accounting Standards Board (“FASB”) has issued the following Accounting Standards Updates (“ASU”) and guidance relevant to the Company’s operations which were adopted as of January 1, 2020:



ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (as subsequently amended and clarified by various ASUs). This standard introduces an approach of estimating credit losses on certain types of financial instruments based on expected losses and expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating its allowance for credit losses. The standard also requires entities to record an allowance for credit losses for available for sale debt securities rather than reduce the carrying amount under the other-than temporary impairment model. 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). The Company adopted this standard on January 1, 2020 using a modified retrospective method. The Company did not recognize a cumulative effect adjustment upon adoption of the standard as Bluegreen’s VOI notes receivable are recorded net of an allowance that is calculated in accordance with ASC 606, Revenue from Contracts, and which complies with the requirements of ASC 326. The Company also elected the practical expedient to not measure an allowance for credit losses for accrued interest receivables, as the Company’s 

9

 


 

 

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 not resumed until such loans are less than 90 days past due. In addition, the application of the standard did not have a material impact on the Company’s remaining instruments that are within the scope of the standard. As such, the adoption of the standard did not have a material impact on the Company’s consolidated financial statements. 



ASU 2018-15, Intangibles (Topic 350-40): Goodwill and Other – Internal–Use Software. This standard requires a customer in a cloud computing arrangement that is a service contract (“CCA”) to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. The standard also requires entities to present implementation costs related to a CCA in the same financial statement line items as the CCA service fees. The Company adopted this standard on January 1, 2020 and is applying the transition guidance as of the date of adoption prospectively, under the current period adjustment method. Upon adoption of the standard, the Company reclassified $1.9 million of capitalized implementation costs related to a CCA that was in the implementation phase as of January 1, 2020 from property and equipment to prepaid expenses. The adoption of the standard did not have a material impact on the Company’s 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 measurement, and changes in measurements applied. This standard was effective for the Company on January 1, 2020, and the adoption of the standard did not have a material impact on the Company’s consolidated financial statements and disclosures.



Future Adoption of Recently Issued Accounting Pronouncements



The FASB has issued the following accounting pronouncements and guidance relevant to the Company’s operations which had not been adopted by the Company as of March 31, 2020: 



ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard removes specific exceptions to the general principles in Topic 740 including exceptions related to (i) the incremental approach for intraperiod tax allocations, (ii) accounting for basis differences when there are ownership changes in foreign investments, and (iii) interim period income tax accounting for year-to-date losses that exceed anticipated losses. The statement is effective for the Company on January 1, 2021 and interim periods within that fiscal year. Early adoption is permitted. The Company is currently evaluating the impact that this standard may have on its consolidated financial statements.



ASU No. 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard provides relief for companies preparing for discontinuation of LIBOR in response to the Financial Conduct Authority (the regulatory authority over LIBOR) 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 $87.7 million of LIBOR indexed receivable-backed notes payable and lines of credit, $225.2 million of LIBOR indexed lines of credit and notes payable (which are not receivable-backed) that mature after 2021, and $177.1 million of LIBOR indexed junior subordinated debentures. Although companies can apply this standard immediately, the guidance will only be available for a limited time, generally through December 31, 2022. The Company is currently evaluating the potential impact that the eventual replacement of the LIBOR benchmark interest rate could have on its results of operations, liquidity and consolidated financial statements and the related impact that this standard may have on its consolidated financial statements



FASB Staff Q&A Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic (Topic 842): The FASB issued guidance on lease concessions related to the effects of the COVID-19 pandemic allowing entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic as if the enforceable rights and obligations for those concessions existed in the lease contract (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the lease contract). Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance of Topic 842. The election only applies to concessions that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. The Company has elected to account

10

 


 

 

for lease concessions related to the effects of the COVID-19 pandemic as if the rights and obligations related to such concessions existed in the related lease agreements.





2.    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 generally 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 March  31, 2020, Bluegreen was in compliance with all material terms under its securitization transactions, and no trigger events had occurred. However, there is no assurance that compliance will be maintained in the future.



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 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 the 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 for the three months ended March 31, 2020 and 2019 were $4.3 million and $2.1 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 regarding the assets and liabilities of Bluegreen’s consolidated VIEs included in the Company’s condensed consolidated statements of financial condition (in thousands):







 

 

 

 

 

 



 

 

 

 

 

 



 

March 31,

 

December 31,



 

2020

 

2019

Restricted cash

 

$

17,456 

 

 

22,534 

Securitized notes receivable, net

 

 

288,435 

 

 

292,590 

Receivable backed notes payable - non-recourse

 

 

339,224 

 

 

334,246 



The restricted cash and the securitized notes receivable balances disclosed in the table above are restricted to satisfy obligations of the VIEs.

 

11