Company Quick10K Filing
Quick10K
Bluegreen Vacations
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$15.03 75 $1,120
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
8-K 2019-08-06 Earnings
8-K 2019-07-30 Other Events
8-K 2019-06-20 Shareholder Vote
8-K 2019-06-18 Enter Agreement, Exhibits
8-K 2019-05-30 Leave Agreement, Exhibits
8-K 2019-05-24 Other Events
8-K 2019-05-14 Regulation FD
8-K 2019-05-06 Earnings
8-K 2019-04-19 Other Events
8-K 2019-03-25 Other Events
8-K 2019-03-04
8-K 2019-02-22 Earnings
8-K 2019-02-22 Regulation FD
8-K 2019-01-14 Other Events
8-K 2018-11-28 Regulation FD
8-K 2018-11-26 Other Events
8-K 2018-11-06 Officers
8-K 2018-11-05 Earnings
8-K 2018-10-29 Off-BS Arrangement, Exhibits
8-K 2018-10-19 Other Events
8-K 2018-08-20 Off-BS Arrangement
8-K 2018-08-08 Regulation FD
8-K 2018-08-02 Earnings, Exhibits
8-K 2018-07-18 Other Events
8-K 2018-05-16 Shareholder Vote
8-K 2018-05-14 Officers
8-K 2018-05-10 Regulation FD
8-K 2018-05-03 Earnings
8-K 2018-04-20 Off-BS Arrangement, Other Events, Exhibits
8-K 2018-04-19 Other Events
8-K 2018-04-12 Off-BS Arrangement, Exhibits
8-K 2018-03-15 Off-BS Arrangement, Officers, Exhibits
8-K 2018-03-06 Earnings, Exhibits
8-K 2018-02-26 Regulation FD
8-K 2018-01-11 Regulation FD
8-K 2018-01-03 Other Events
NFG National Fuel Gas 4,910
MTSC MTS Systems 1,020
TOWR Tower International 433
WFT Weatherford 381
VERU Veru 97
DVD Dover Motorsports 74
ARKR Ark Restaurants 69
EMG Emergent Capital 0
SBP SB Partners 0
LOVV Love International Group 0
BXG 2019-06-30
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-10.2 bxg-20190630xex10_2.htm
EX-10.3 bxg-20190630xex10_3.htm
EX-31.1 bxg-20190630xex31_1.htm
EX-31.2 bxg-20190630xex31_2.htm
EX-32.1 bxg-20190630xex32_1.htm
EX-32.2 bxg-20190630xex32_2.htm

Bluegreen Vacations Earnings 2019-06-30

BXG 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 bxg-20190630x10q.htm 10-Q 2019 Q2 - 10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549



FORM 10-Q



   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended June 30, 2019



OR

   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________



Commission file number 001-19292



BLUEGREEN VACATIONS CORPORATION

(Exact name of registrant as specified in its charter)





 

 

 

 



Florida

 

03-0300793

 



(State or other jurisdiction of

 

(I.R.S. Employer

 



incorporation or organization)

 

Identification No.)

 



4960 Conference Way North, Suite 100, Boca Raton, Florida 33431

(Address of principal executive offices) (Zip Code)



Registrant’s telephone number, including area code:  (561) 912-8000



Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:





 

 

 

 

Title of Each class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, $0.01 par value

BXG

New York Stock Exchange





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      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      No 



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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  

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 Act).     Yes      No 



As of August 1, 2019, there were 74,445,923 shares of the registrant’s common stock, $.01 par value, outstanding.




 

BLUEGREEN VACATIONS CORPORATION

FORM 10-Q TABLE OF CONTENTS



 

2


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.



BLUEGREEN VACATIONS CORPORATION

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share and per share data) 







 

 

 

 

 

 



 

 

 

 

 

 



 

June 30,

 

December 31,



 

2019

 

2018

ASSETS 

 

 

 

 

 

 

Cash and cash equivalents

 

$

180,166 

 

$

219,408 

Restricted cash ($19,018 and $28,400 in VIEs at June 30, 2019

 

 

 

 

 

 

and December 31, 2018, respectively)

 

 

47,745 

 

 

53,726 

Notes receivable, net ($308,042 and $341,975 in VIEs

 

 

 

 

 

 

at June 30, 2019 and December 31, 2018, respectively)

 

 

440,854 

 

 

439,167 

Inventory

 

 

342,220 

 

 

334,149 

Prepaid expenses

 

 

14,946 

 

 

10,097 

Other assets

 

 

57,970 

 

 

49,796 

Operating lease assets - See Note 7

 

 

23,395 

 

 

 —

Intangible assets, net

 

 

61,556 

 

 

61,845 

Loan to related party

 

 

80,000 

 

 

80,000 

Property and equipment, net

 

 

102,361 

 

 

98,279 

Total assets

 

$

1,351,213 

 

$

1,346,467 



 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Accounts payable

 

$

18,270 

 

$

19,515 

Accrued liabilities and other

 

 

102,183 

 

 

80,364 

Operating lease liabilities  - See Note 7

 

 

24,584 

 

 

 —

Deferred income

 

 

17,668 

 

 

16,522 

Deferred income taxes

 

 

81,015 

 

 

91,056 

Receivable-backed notes payable - recourse

 

 

86,820 

 

 

76,674 

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

 

 

351,316 

 

 

382,257 

Lines-of-credit and notes payable

 

 

136,796 

 

 

133,391 

Junior subordinated debentures

 

 

71,691 

 

 

71,323 

Total liabilities

 

 

890,343 

 

 

871,102 



 

 

 

 

 

 

Commitments and Contingencies  - See Note 10

 

 

 

 

 

 



 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

Common stock, $.01 par value, 100,000,000 shares authorized; 74,445,923

 

 

 

 

 

 

shares issued and outstanding at June 30, 2019 and December 31, 2018

 

 

744 

 

 

744 

Additional paid-in capital

 

 

270,369 

 

 

270,369 

Retained earnings

 

 

137,299 

 

 

158,641 

Total Bluegreen Vacations Corporation shareholders' equity

 

 

408,412 

 

 

429,754 

Non-controlling interest

 

 

52,458 

 

 

45,611 

Total shareholders' equity

 

 

460,870 

 

 

475,365 

Total liabilities and shareholders' equity

 

$

1,351,213 

 

$

1,346,467 



See accompanying Notes to Consolidated Financial Statements - Unaudited

3


 

BLUEGREEN VACATIONS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (UNAUDITED)

(In thousands, except per share data) 







 

 

 

 

 

 

 

 

 

 

 

 

 



 

For the Three Months Ended

 

For the Six Months Ended

 



 

June 30,

 

June 30,

 



 

2019

 

2018

 

2019

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross sales of VOIs

 

$

80,221 

 

$

82,027 

 

$

143,105 

 

$

146,187 

 

Estimated uncollectible VOI notes receivable

 

 

(11,919)

 

 

(13,454)

 

 

(23,072)

 

 

(21,473)

 

Sales of VOIs

 

 

68,302 

 

 

68,573 

 

 

120,033 

 

 

124,714 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Fee-based sales commission revenue

 

 

55,343 

 

 

60,086 

 

 

100,555 

 

 

105,940 

 

Other fee-based services revenue

 

 

30,703 

 

 

30,391 

 

 

60,271 

 

 

58,415 

 

Cost reimbursements

 

 

17,358 

 

 

14,059 

 

 

37,594 

 

 

30,260 

 

Interest income

 

 

21,875 

 

 

21,118 

 

 

43,883 

 

 

42,240 

 

Other income, net

 

 

1,993 

 

 

710 

 

 

2,082 

 

 

891 

 

Total revenue

 

 

195,574 

 

 

194,937 

 

 

364,418 

 

 

362,460 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of VOIs sold

 

 

10,572 

 

 

6,789 

 

 

14,420 

 

 

8,601 

 

Cost of other fee-based services

 

 

19,924 

 

 

16,634 

 

 

42,792 

 

 

34,045 

 

Cost reimbursements

 

 

17,358 

 

 

14,059 

 

 

37,594 

 

 

30,260 

 

Selling, general and administrative expenses

 

 

147,668 

 

 

109,580 

 

 

237,882 

 

 

203,129 

 

Interest expense

 

 

10,061 

 

 

8,495 

 

 

19,567 

 

 

16,262 

 

Total costs and expenses

 

 

205,583 

 

 

155,557 

 

 

352,255 

 

 

292,297 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income before non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

  and (benefit) provision for income taxes

 

 

(10,009)

 

 

39,380 

 

 

12,163 

 

 

70,163 

 

(Benefit) provision for income taxes

 

 

(3,957)

 

 

9,353 

 

 

1,346 

 

 

16,554 

 

Net (loss) income

 

 

(6,052)

 

 

30,027 

 

 

10,817 

 

 

53,609 

 

Less: Net income attributable to
  non-controlling interest

 

 

5,131 

 

 

3,317 

 

 

6,847 

 

 

5,924 

 

Net (loss) income attributable to Bluegreen

 

 

 

 

 

 

 

 

 

 

 

 

 

 Vacations Corporation shareholders

 

$

(11,183)

 

$

26,710 

 

$

3,970 

 

$

47,685 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive (loss) income attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 Bluegreen Vacations Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 shareholders

 

$

(11,183)

 

$

26,710 

 

$

3,970 

 

$

47,685 

 



 

 

 

 

 

 

 

 

 

 

 

 

 







4


 

BLUEGREEN VACATIONS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (UNAUDITED)

(In thousands, except per share data)







 

 

 

 

 

 

 

 

 

 

 

 

 



 

For the Three Months Ended

 

For the Six Months Ended

 



 

June 30,

 

June 30,

 



 

2019

 

2018

 

2019

 

2018

 

(Loss) Earnings per share attributable to
  Bluegreen Vacations Corporation
  shareholders - Basic and diluted

 

$

(0.15)

 

$

0.36 

 

$

0.05 

 

$

0.64 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares
  outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

74,446 

 

 

74,734 

 

 

74,446 

 

 

74,734 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

 

$

0.17 

 

$

0.15 

 

$

0.34 

 

$

0.30 

 





See accompanying Notes to Consolidated Financial Statements - Unaudited

5


 

BLUEGREEN VACATIONS CORPORATION

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(In thousands)







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

Equity Attributable
to Bluegreen Vacations Corporation
Shareholders

 

 

Common
Shares
Issued

  

 

 

Total

 

Common
Stock

 

Additional
Paid-in-
Capital

 

Retained
Earnings

 

Equity
Attributable to
Non-Controlling
Interest

74,445,923 

 

Balance at December 31, 2018

 

$

475,365 

 

$

744 

 

$

270,369 

 

$

158,641 

 

$

45,611 

 —

 

Net income

 

 

16,869 

 

 

 —

 

 

 —

 

 

15,153 

 

 

1,716 

 —

 

Dividends to shareholders

 

 

(12,655)

 

 

 —

 

 

 —

 

 

(12,655)

 

 

 —

74,445,923 

 

Balance at March 31, 2019

 

 

479,579 

 

 

744 

 

 

270,369 

 

 

161,139 

 

 

47,327 

 —

 

Net loss

 

 

(6,052)

 

 

 —

 

 

 —

 

 

(11,183)

 

 

5,131 

 —

 

Dividends to shareholders

 

 

(12,657)

 

 

 —

 

 

 —

 

 

(12,657)

 

 

 —

74,445,923 

 

Balance at June 30, 2019

 

$

460,870 

 

$

744 

 

$

270,369 

 

$

137,299 

 

$

52,458 









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

Equity Attributable
to Bluegreen Vacations Corporation
Shareholders

 

 

Common
Shares
Issued

  

 

 

Total

 

Common
Stock

 

Additional
Paid-in-
Capital

 

Retained
Earnings

 

Equity
Attributable to
Non-Controlling
Interest

74,734,455 

 

Balance at December 31, 2017

 

$

433,654 

 

$

747 

 

$

274,366 

 

$

115,520 

 

$

43,021 

 —

 

Net income

 

 

23,582 

 

 

 —

 

 

 —

 

 

20,975 

 

 

2,607 

 —

 

Dividends to shareholders

 

 

(11,210)

 

 

 —

 

 

 —

 

 

(11,210)

 

 

 —

74,734,455 

 

Balance at March 31, 2018

 

 

446,026 

 

 

747 

 

 

274,366 

 

 

125,285 

 

 

45,628 

 —

 

Net income

 

 

30,027 

 

 

 —

 

 

 —

 

 

26,710 

 

 

3,317 

 —

 

Dividends to shareholders

 

 

(11,210)

 

 

 —

 

 

 —

 

 

(11,210)

 

 

 —

74,734,455 

 

Balance at June 30, 2018

 

$

464,843 

 

$

747 

 

$

274,366 

 

$

140,785 

 

$

48,945 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



See accompanying Notes to Consolidated Financial Statements - Unaudited





6


 

BLUEGREEN VACATIONS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)







 

 

 

 

 

 



 

 

 

 

 

 



 

For the Six Months Ended



 

June 30,



 

2019

 

2018

Operating activities:

 

 

 

 

 

 

Net income

 

$

10,817 

 

$

53,609 

Adjustments to reconcile net income to net cash provided

 

 

 

 

 

 

by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

9,056 

 

 

7,597 

Gain on disposal of property and equipment

 

 

(1,945)

 

 

 —

Provision for loan losses

 

 

23,055 

 

 

21,447 

(Benefit) provision for deferred income taxes

 

 

(10,041)

 

 

2,215 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Notes receivable

 

 

(24,742)

 

 

(24,236)

Prepaid expenses and other assets

 

 

(11,674)

 

 

(16,122)

Inventory

 

 

(8,071)

 

 

(25,770)

Accounts payable, accrued liabilities and other, and

 

 

 

 

 

 

deferred income

 

 

25,157 

 

 

4,475 

Net cash provided by operating activities

 

 

11,612 

 

 

23,215 



 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(14,516)

 

 

(15,105)

Proceeds from sale of property and equipment

 

 

1,820 

 

 

 —

Net cash used in investing activities

 

 

(12,696)

 

 

(15,105)



 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

Proceeds from borrowings collateralized

 

 

 

 

 

 

by notes receivable

 

 

45,095 

 

 

73,706 

Payments on borrowings collateralized by notes receivable

 

 

(66,769)

 

 

(68,531)

Proceeds from borrowings collateralized

 

 

 

 

 

 

by line-of-credit facilities and notes payable

 

 

20,386 

 

 

50,042 

Payments under line-of-credit facilities and notes payable

 

 

(17,407)

 

 

(24,671)

Payments of debt issuance costs

 

 

(132)

 

 

(187)

Dividends paid

 

 

(25,312)

 

 

(22,420)

Net cash (used in) provided by financing activities

 

 

(44,139)

 

 

7,939 

Net (decrease) increase in cash and cash equivalents

 

 

 

 

 

 

and restricted cash

 

 

(45,223)

 

 

16,049 

Cash, cash equivalents and restricted cash at beginning of period

 

 

273,134 

 

 

243,349 

Cash, cash equivalents and restricted cash at end of period

 

$

227,911 

 

$

259,398 



7


 

BLUEGREEN VACATIONS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)







 

 

 

 

 

 



 

 

 

 

 

 



 

For the Six Months Ended



 

June 30,



 

2019

 

2018



 

 

 

 

 

 

Supplemental schedule of operating cash flow information:

 

 

 

 

 

 

Interest paid, net of amounts capitalized

 

$

16,871 

 

$

14,250 

Income taxes paid

 

$

14,357 

 

$

14,618 







 

 

 

 

 

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

 

Acquisition of inventory, property, and equipment for notes payable

 

$

 —

 

$

24,258 



See accompanying Notes to Consolidated Financial Statements - Unaudited

8


 

BLUEGREEN VACATIONS CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

 

1.  Organization and Basis of Financial Statement Presentation



Bluegreen Vacations Corporation is referred to in this report together with its consolidated subsidiaries as “Bluegreen Vacations”, “Bluegreen”, “the Company”, “we”, “us” and “our”. Bluegreen has prepared the accompanying unaudited consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. 

In our opinion, the financial information furnished herein reflects all adjustments consisting of normal recurring items necessary for a fair presentation of our financial position, results of operations, and cash flows for the interim periods reported in this Quarterly Report on Form 10-Q. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and, accordingly, actual results could differ from those estimates.  The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or any other future interim or annual periods. The accompanying financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2018, included in our Annual Report on Form 10-K filed with the SEC on March 8, 2019. 



Our Business



We are a leading vacation ownership company that markets and sells vacation ownership interests (“VOIs”) and manages resorts in popular leisure and urban destinations. Our 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 our Vacation Club have the right to use a limited number of units in connection with their VOI ownership). We market, sell and manage 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 our points-based system, the approximately 217,000 owners in our Vacation Club have the flexibility to stay at units available at any of our resorts and have access to approximately 11,300 other hotels and resorts through partnerships and exchange networks. The resorts in which we market, sell or manage VOIs were either developed or acquired by us, or were developed and are owned by third parties. We earn fees for providing sales and marketing services to third party developers. We also earn 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, we provide financing to qualified VOI purchasers, which generates significant interest income.



We derive a significant portion of our revenue from our capital-light business model, which utilizes our 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. Our capital-light business activities include sales of VOIs owned by third-party developers pursuant to which we are paid a commission (“fee-based sales”) and sales of VOIs that we purchase under just-in-time (“JIT”) arrangements with third-party developers or from secondary market sources. In addition, as described above, we provide other fee-based services, including resort management, mortgage servicing, title services and construction management, and generate income through financing provided to qualified VOI purchasers in connection with VOI sales.



Principles of Consolidation and Basis of Presentation



Our unaudited consolidated financial statements include the accounts of all of our wholly-owned subsidiaries, entities in which we hold a controlling financial interest, including Bluegreen/Big Cedar Vacations, LLC (a joint venture in which we are deemed to hold a controlling financial interest based on our 51% equity interest, our active role as the day-to-day manager of its activities, and our majority voting control of its management committee, (“Bluegreen/Big Cedar Vacations”), and variable interest entities (sometimes referred to herein as “VIEs”) of which we are the primary beneficiary, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Consolidations (Topic 810). We do not consolidate the statutory business trusts formed by us to issue trust preferred securities as these entities represent

9


 

VIEs in which we are not the primary beneficiary. The statutory business trusts are accounted for under the equity method of accounting. All significant intercompany balances and transactions have been eliminated in consolidation.

 

2. Recently Issued Accounting Pronouncements



Recently Adopted Accounting Standards 



In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” as subsequently amended by ASU 2018-01, ASU 2018-10, ASU 2018-11 and ASU 2018-20. This standard requires assets and liabilities to be recognized on the balance sheet of a lessee 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 previously required by lease accounting standards, Topic 840, but without explicit bright lines. This standard also requires extensive quantitative and qualitative disclosures, including significant judgments made by management in applying the standard, intended to provide greater insight into the amount, timing, and uncertainty of cash flows arising from leases.



We adopted this standard on January 1, 2019, and applied the transition guidance as of the date of adoption under the current period adjustment method.  As a result, we recognized right-of-use assets and lease liabilities associated with our leases on January 1, 2019, with no cumulative-effect adjustment to the opening balance of accumulated earnings, while the comparable prior periods in our financial statements will continue to be reported in accordance with Topic 840, including the disclosures required by Topic 840. 



The new standard includes a number of optional practical expedients under the transition guidance. We elected the package of practical expedients which allowed us to not reassess prior conclusions about lease identification, lease classification, and initial direct costs. We 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 associated non-lease components are accounted for as a single lease component for lease classification, recognition, and measurement purposes. 



Upon adoption of the standard on January 1, 2019, we recognized an operating lease liability of $26.5 million and an operating lease asset of $25.6 million. The difference between the operating lease liability and operating lease asset primarily reflects the reclassification of accrued and prepaid straight-line rent from accrued liabilities and prepaid expenses to the operating lease assets in our consolidated balance sheet. The implementation of the standard did not have a material impact on our consolidated statements of operations or cash flows. See Note 7: Leases for additional information regarding the accounting for lease contracts.



Accounting Standards Not Yet Adopted



In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326)” (“ASU 2016-13”), which introduces an approach of estimating credit losses on certain types of financial instruments based on expected losses. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan losses. Further, public entities will be required 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 us on January 1, 2020. Early adoption is permitted. We are currently evaluating the impact that ASU 2016-13 may have on our consolidated financial statements. 

In June

 

2016, the FASB issued ASU 2013-13, “Financial Instruments—Credit Losses (Topic 326)” (“ASU 2016-13”), which introduces an approach of estimating credit losses on certain types of financial instruments based on expected losses.  ASU 2016-13 also expands the disclosure requirements regarding an Entitiey’s assumptions, models, and methods for estimating the allowance for loan losses.  Further, public entities will be required 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 In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326)” (“ASU 2016-13”), which introduces an approach of estimating credit losses on certain types of financial instruments based on expected losses. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan losses. Further, public entities will be required 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 us on January 1, 2020. Early adoption is permitted. We are currently evaluating the impact that ASU 2016-13 may have on our consolidated financial statements.  

 

 

 

 

 

 

 

 



10


 

3. Revenue From Contracts with Customers



We operate our business in the following two segments: (i) Sales of VOIs and financing; and (ii) Resort operations and club management. The table below sets forth our disaggregated revenue by segment from contracts with customers (dollars in thousands).







 

 

 

 

 

 

 

 

 

 

 

 



 

For the Three Months Ended

 

For the Six Months Ended



 

June 30,

 

June 30,



 

2019

 

2018

 

2019

 

2018



 

 

 

 

 

 

 

 

 

 

 

 

Sales of VOIs (1)

 

$

68,302 

 

$

68,573 

 

$

120,033 

 

$

124,714 

Fee-based sales commission revenue (2)

 

 

55,343 

 

 

60,086 

 

 

100,555 

 

 

105,940 

Resort and club management revenue (2)

 

 

25,603 

 

 

25,562 

 

 

51,039 

 

 

49,514 

Cost reimbursements (2)

 

 

17,358 

 

 

14,059 

 

 

37,594 

 

 

30,260 

Title fees (1)

 

 

3,040 

 

 

3,175 

 

 

5,768 

 

 

5,863 

Other revenue (2)

 

 

2,060 

 

 

1,654 

 

 

3,464 

 

 

3,038 

Revenue from customers

 

 

171,706 

 

 

173,109 

 

 

318,453 

 

 

319,329 

Interest income (1)

 

 

21,875 

 

 

21,118 

 

 

43,883 

 

 

42,240 

Other income, net

 

 

1,993 

 

 

710 

 

 

2,082 

 

 

891 

Total revenue

 

$

195,574 

 

$

194,937 

 

$

364,418 

 

$

362,460 



(1) Included in our sales of VOIs and financing segment described in Note 13: Segment Reporting.

(2) Included in our resort operations and club management segment described in Note 13: Segment Reporting.



Please refer to Note 13: Segment Reporting for additional information related to our segments.





11


 

4.  Notes Receivable



The table below provides information relating to our notes receivable and our allowance for loan losses as of June 30, 2019 and December 31, 2018 (dollars in thousands):







 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

June 30,

 

December 31,



 

2019

 

2018

Notes receivable secured by VOIs:

 

 

 

 

 

 

VOI notes receivable - non-securitized

 

$

169,531 

 

$

124,642 

VOI notes receivable - securitized

 

 

404,147 

 

 

447,850 



 

 

573,678 

 

 

572,492 

Allowance for loan losses - non-securitized

 

 

(37,381)

 

 

(28,258)

Allowance for loan losses - securitized

 

 

(96,105)

 

 

(105,875)

VOI notes receivable, net

 

$

440,192 

 

$

438,359 

Allowance as a % of VOI notes receivable

 

 

23% 

 

 

23% 



 

 

 

 

 

 

Notes receivable secured by homesites: (1)

 

 

 

 

 

 

Homesite notes receivable

 

 

736 

 

 

898 

Allowance for loan losses

 

 

(74)

 

 

(90)

Homesite notes receivable, net

 

$

662 

 

$

808 

Allowance as a % of homesite notes receivable

 

 

10% 

 

 

10% 

Total notes receivable:

 

 

 

 

 

 

Gross notes receivable

 

$

574,414 

 

$

573,390 

Allowance for loan losses

 

 

(133,560)

 

 

(134,223)

Notes receivable, net

 

$

440,854 

 

$

439,167 

Allowance as a % of gross notes receivable

 

 

23% 

 

 

23% 



(1)

Notes receivable secured by homesites were originated through a business, substantially all the assets of which were sold by us in 2012.    



The weighted-average interest rate charged on our notes receivable was 15.0% and 15.1% at June 30, 2019 and December 31, 2018, respectively.  All of our VOI loans bear interest at fixed rates.  The weighted-average interest rate charged on our notes receivable secured by VOIs was 15.0% and 15.1% at June 30, 2019 and December 31, 2018, respectively.  Our VOI notes receivable are generally secured by property located in Florida, Missouri, Nevada, South Carolina, Tennessee, and Wisconsin.



Allowance for Loan Losses



The activity in our allowance for loan losses (including with respect to our homesite notes receivable) was as follows (in thousands):







 

 

 

 

 

 



 

 

 

 

 

 



 

For the Six Months Ended



 

June 30,



 

 

2019

 

 

2018

Balance, beginning of period

 

$

134,223 

 

$

123,791 

Provision for loan losses

 

 

23,055 

 

 

21,447 

Less: Write-offs of uncollectible receivables 

 

 

(23,718)

 

 

(21,633)

Balance, end of period

 

$

133,560 

 

$

123,605 



12


 

We monitor the credit quality of our receivables on an ongoing basis.  We hold large amounts of homogeneous VOI notes receivable and assess uncollectibility based on pools of receivables as we do not believe that there are significant concentrations of credit risk with any individual counterparty or groups of counterparties.  In estimating loan losses, we do not use a single primary indicator of credit quality but instead evaluate our 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 percentage of gross notes receivable outstanding by FICO score of the borrower at the time of origination, was as follows:

 





 

 

 

 

 



As of



June 30,

 

December 31,



2019

 

2018

FICO Score

 

 

 

 

 

700+

58.00 

%

 

57.00 

%

600-699

39.00 

 

 

39.00 

 

<600

2.00 

 

 

3.00 

 

No Score (1)

1.00 

 

 

1.00 

 

Total

100.00 

%

 

100.00 

%



(1)

VOI notes receivable attributable to borrowers without a FICO score are primarily related to foreign borrowers. 



The following table shows the delinquency status of our VOI notes receivable (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

June 30,

 

December 31,



 

2019

 

2018

Current

 

$

541,778 

 

$

541,783 

31-60 days

 

 

5,689 

 

 

5,783 

61-90 days

 

 

5,206 

 

 

4,516 

Over 91 days (1)

 

 

21,005 

 

 

20,410 

Total

 

$

573,678 

 

$

572,492 



(1)

Includes $13.0 million and $14.3 million of VOI notes receivable as of June 30, 2019 and December 31, 2018, respectively, 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 our receivable-backed notes payable transactions. These VOI notes receivable have been reflected in the allowance for loan losses.

 

5.  Variable Interest Entities



We sell VOI notes receivable through special purpose finance entities. These transactions are generally structured as non-recourse to us and are designed to provide liquidity for us 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. We service 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, we generally retain a portion of the securities and continue 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 us; 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 June 30, 2019, we were in compliance with all material terms under our securitization transactions, and no trigger events had occurred.



13


 

In accordance with applicable accounting guidance for the consolidation of VIEs, we analyze our variable interests, which may consist of loans, servicing rights, guarantees, and equity investments, to determine if an entity in which we have a variable interest is a VIE. The analysis includes a review of both quantitative and qualitative factors. We base our quantitative analysis on the forecasted cash flows of the entity and our qualitative analysis on the structure of the entity, including our decision-making ability and authority with respect to the entity, and relevant financial agreements. We also use a qualitative analysis to determine if we must consolidate a VIE as the primary beneficiary. In accordance with applicable accounting guidance, we have determined these securitization entities to be VIEs of which we are the primary beneficiary and, therefore, we consolidate the entities into our financial statements.



Under the terms of certain of our VOI note sales, we have the right to repurchase or substitute a limited amount of defaulted notes for new notes at the outstanding principal balance plus accrued interest.  Voluntary repurchases and substitutions by us of defaulted notes for the six months ended June 30, 2019 and 2018 were $4.5 million and $3.1 million, respectively. Our maximum exposure to loss relating to our 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 assets and liabilities of our consolidated VIEs are as follows (in thousands):







 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

June 30,

 

December 31,



 

2019

 

2018



 

 

 

 

 

 

Restricted cash

 

$

19,018 

 

$

28,400 

Securitized notes receivable, net

 

 

308,042 

 

 

341,975 

Receivable backed notes payable - non-recourse

 

 

351,316 

 

 

382,257 



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

 

6.  Inventory



Our VOI inventory consists of the following (in thousands):







 

 

 

 

 

 



 

 

 

 

 

 



 

As of



 

June 30,

 

December 31,



 

2019

 

2018



 

 

 

 

 

 

Completed VOI units

 

$

267,897 

 

$

237,010 

Construction-in-progress

 

 

537 

 

 

26,587 

Real estate held for future development

 

 

73,786 

 

 

70,552 

Total

 

$

342,220 

 

$

334,149 

 

7. Leases



We are the lessee under various operating leases for certain sales offices, call centers, office space, equipment and vehicles. Some leases include one or more options to renew, at our or the lessor’s discretion, for renewal terms of one year or more. Certain of our lease agreements include rental payments based on a percentage of sales generated at the location, and others include rental payments adjusted periodically for inflation. Our lease agreements do not contain residual value guarantees or restrictive covenants which we believe to be material.

14


 



We recognize operating lease assets and operating lease liabilities associated with lease agreements with an initial term of greater than 12 months, while lease agreements with an initial term of 12 months or less are not recorded in our consolidated balance sheet. We generally do not include lease payments associated with renewal options, including those that are exercisable at our discretion, in the measurement of our operating lease assets and liabilities as we are not reasonably certain that such option will be exercised.  The table below sets forth information regarding our lease agreements with an initial term of greater than 12 months (dollars in thousands):





 

 

 



 

As of



 

June 30,



 

2019

Operating Lease Asset

 

$

23,395 

Operating Lease Liability

 

 

24,584 

Weighted Average Lease Term (in years) (1)

 

 

4.1 

Weighted Average Discount Rate (2)

 

 

5.30% 



(1)

Our weighted average lease term excludes one real estate lease that expires in May 2056.

(2)

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future lease payments.  To estimate incremental borrowing rates, we consider various factors, including the rates applicable to our recently issued debt and credit facilities and prevailing financial market conditions. We use the incremental borrowing rate as of January 1, 2019 for operating leases that commenced prior to that date.



We generally recognize lease costs associated with our operating leases on a straight-line basis over the lease term, while variable lease payments that do not depend on an index or rate are recognized as variable lease costs in the period in which the obligation for those payments is incurred.  The table below sets forth information regarding our lease costs which are reflected in selling, general and administrative expenses in our consolidated statement of operations and comprehensive income for the three and six months ended June 30, 2019 (in thousands):







 

 

 

 

 

 



 

For the Three Months Ended

 

For the Six Months Ended



 

June 30,

 

June 30,



 

2019

 

2019

Fixed rental costs

 

$

1,772 

 

$

3,894 

Short-term lease cost

 

 

1,132 

 

 

2,302 

Variable lease cost

 

 

649 

 

 

1,248 

Total operating lease costs

 

$

3,553 

 

$

7,444 



 

 

 

 

 

 



15


 

The table below sets forth information regarding the maturity of our operating lease liabilities (in thousands):







 

 

 

As of June 30,

 

Operating Leases

2019

  

$

6,433 

2020

  

 

5,550 

2021

  

 

4,421 

2022

  

 

4,063 

2023

 

 

2,175 

After 2023

  

 

12,121 

Total lease payments

  

$

34,763 

Less: Interest

 

 

10,179 

Present value of operating lease liabilities

 

$

24,584 



 

 

 



Upon the adoption of the new lease accounting standard on January 1, 2019 (as described in Note 2 above), we recognized an operating lease liability of $26.5 million and an operating lease asset of $25.6 million. The difference between the operating lease liability and operating lease asset primarily reflects the reclassification of accrued and prepaid straight-line rent from accrued liabilities and prepaid expenses to the operating lease assets in our consolidated balance sheet. The operating lease payments set forth in the table above exclude $0.5 million of minimum lease payments under lease agreements executed but not yet commenced as of June 30, 2019, as we have not received possession of the leased property.  Included in our statement of cash flows under operating activities for the six months ended June 30, 2019 was $3.4 million of cash paid for amounts included in the measurement of lease liabilities. During the six months ended June 30, 2019, we obtained $1.1 million of right-of-use assets in exchange for new operating lease liabilities.



8.  Debt



Lines-of-Credit and Notes Payable



We have outstanding borrowings with various financial institutions and other lenders.  Financial data related to our lines of credit and notes payable (other than receivable-backed notes payable, which are discussed below) as of June 30, 2019 and December 31, 2018, was as follows (dollars in thousands):



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

As of



 

June 30, 2019

 

December 31, 2018



 

Balance

 

Interest
Rate

 

Carrying
Amount of
Pledged
Assets

 

Balance

 

Interest
Rate

 

Carrying
Amount of
Pledged
Assets



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2013 Notes Payable

 

$

16,875 

 

5.50%

 

 

21,106 

 

$

28,125 

 

5.50%

 

$

22,878 

Fifth Third Bank Note Payable  

 

 

3,711 

 

5.44%

 

 

7,802 

 

 

3,834 

 

5.34%

 

 

7,892 

NBA Éilan Loan

 

 

20,893 

 

5.69%

 

 

30,880 

 

 

25,603 

 

5.60%

 

 

35,615 

Fifth Third Syndicated LOC

 

 

75,000 

 

5.11%

 

 

101,038 

 

 

55,000 

 

5.27%

 

 

92,415 

Fifth Third Syndicated Term

 

 

21,562 

 

5.08%

 

 

29,049 

 

 

22,500 

 

5.37%

 

 

27,724 

Unamortized debt issuance costs

 

 

(1,245)

 

 

 

 —

 

 

(1,671)

 

 

 

 —

         Total

 

$

136,796 

 

 

 

$

189,875 

 

$

133,391 

 

 

 

$

186,524 





There were no new debt issuances or significant changes related to the above listed lines-of-credit or notes payable during the six ended months June 30, 2019. See Note 9 to our Consolidated Financial Statements included in our 2018 Annual Report on Form 10-K for additional information regarding the lines-of-credit and notes payable.



16


 

Receivable-Backed Notes Payable 



Financial data related to our receivable-backed notes payable facilities was as follows (dollars in thousands):