BBX Capital Corporation (NYSE: BBX)(OTCQX: BBXTB) (“BBX Capital” or the “Company”) today reported its third quarter 2017 results.
Highlights:
- Total consolidated revenues were $226.3 million, an 8% increase from the same period in 2016, driven mainly by trade sales from IT’SUGAR, which was acquired by BBX Capital in June 2017.
- Net income available to common shareholders was $8.2 million, a 54% decrease from the same period in 2016. 2016 included higher recoveries on previously charged-off loans and gains on the sales of legacy real estate assets in our BBX Capital Real Estate Division.
- Diluted earnings per share was $.08, a 62% decrease from the same period in 2016, primarily due to an increase in the weighted average of diluted common shares outstanding coupled with the results of our net income as described above.
- Free cash flow generated from operating activities less capital expenditures was $24 million, a 74% increase from the same period in 2016, primarily driven by an increase in cash provided by the operating activities of BBX Capital Real Estate in connection with joint venture distributions.
- Bluegreen Vacations Corporation’s (“Bluegreen Vacations®” or “Bluegreen”) system-wide sales of VOIs, net were $170.2 million vs. $172.7 million. Bluegreen’s management estimates that system-wide sales of VOIs, net were adversely impacted by approximately $6.2 million as a result of office closures and other business disruptions caused by Hurricane Irma in September 2017.
- Bluegreen’s Adjusted EBITDA was $39.0 million vs. $41.4 million (3). Bluegreen’s management estimates that Adjusted EBITDA was adversely impacted by approximately $2.4 million as a result of office closures and other business disruptions caused by Hurricane Irma in September 2017.
“We are pleased with the overall growth and momentum delivered during the third quarter of 2017 by all three of BBX Capital’s verticals, which includes Bluegreen Vacations, our BBX Capital Real Estate division and BBX Capital Middle Markets division. For the three-month period ending September 30, 2017, Bluegreen Vacations reported $170.2 million in system-wide sales of VOIs, $27.4 million of other fee-based services revenue, and Adjusted EBITDA of $39.0 million. During the third quarter of 2017, Bluegreen Vacations also deepened its management bench with the promotion of David Pontius to Chief Operating Officer and the appointment of Famous Rhodes as Chief Marketing Officer,” commented Alan B. Levan, Chairman and Chief Executive Officer of BBX Capital. “BBX Capital Real Estate delivered positive performance during the third quarter primarily driven by its joint venture activities and loan recoveries. Renin continued its constructive momentum driven primarily by improvement in trade sales and gross margin. Lastly, BBX Sweet Holdings’ recently acquired business, IT’SUGAR, generated $22.6 million in revenue and $2.3 million of income before taxes during the third quarter.
“BBX Capital’s goal remains building long-term shareholder value rather than focusing on quarterly or annual earnings. Since many of BBX Capital’s assets do not generate income on a regular or predictable basis, our objective is long-term growth as measured by increases in book value and intrinsic value over time,” Levan concluded.
Balance Sheet Highlights:
As of September 30, 2017, BBX Capital had total consolidated assets of $1.5 billion and shareholders’ equity attributable to BBX Capital of $493.7 million compared to $1.4 billion and $400.6 million, respectively, as of September 30, 2016. At September 30, 2017, BBX Capital’s book value per share was $5.08 compared to $4.70 at September 30, 2016.
The following selected information relates to the operating activities of Bluegreen, BBX Capital Real Estate, BBX Sweet Holdings and Renin. See the supplemental tables below for the consolidating statements of operations for the three and nine month periods ended September 30, 2017 and 2016.
Bluegreen – Select Financial Data
Bluegreen Vacations is a leading vacation ownership company that markets and sells vacation ownership interests (“VOIs”) and manages resorts in attractive leisure and urban destinations. Its resort network includes 67 Vacation Club and Club Associate Resorts primarily located in popular, high-volume, “drive-to” vacation locations. Through Bluegreen’s points-based system, approximately 210,000 owners in its Vacation Club have the flexibility to stay at units available at any of our resorts and have access to almost 11,000 other hotels and resorts through partnerships and exchange networks. Bluegreen’s sales and marketing platform is supported by exclusive marketing relationships with nationally-recognized consumer brands, such as Bass Pro Shops and Choice Hotels, which drive sales within our core demographic. Bluegreen also offers fee-based resort management, financial, and sales and marketing services, to or on behalf of third parties. In addition, Bluegreen provides financing to FICO® score-qualified individual purchasers of VOIs, which generates significant interest income.
Highlights during the third quarter of 2017 include:
| Three-Month Period Ended | ||||||
| ($ in thousands) | September 30, | |||||
| 2017 | 2016 | |||||
| Sales of third party VOIs-commission basis | $ | 97,963 | $ 88,059 | |||
| VOI sales – secondary market arrangements | 38,732 | 45,404 | ||||
| Sales of VOIs – just-in-time basis | 14,306 | 11,094 | ||||
| Sales of VOIs made under Bluegreen’s “capital-light” business activities(1), gross of equity trade allowances(2) | 151,001 | 144,557 | ||||
| Traditional VOI sales | 76,727 | 107,528 | ||||
| Less: Equity trade allowances | (57,543) | (79,349) | ||||
| System-wide sales of VOIs, net of equity trade allowances(2) | $ | 170,185 | $ 172,736 | |||
| ($ in thousands, except for per transaction, per guest, guest tour data) | Three-Month Period Ended September 30, | |||||
| 2017 | 2016 | |||||
| Average sales price per transaction | $ | 15,055 | $ | 13,679 | ||
| Average sales volume per guest | $ | 2,513 | $ | 2,196 | ||
| (Decrease) increase in guest tours | -13% | 15% | ||||
| Fee-based sales commission revenue | $ | 69,977 | $ | 59,383 | ||
| Other fee-based service revenues | $ | 27,386 | $ | 26,810 | ||
| Income before taxes | $ | 34,066 | $ | 38,878 | ||
| EBITDA (3) | $ | 38,810 | $ | 43,190 | ||
| Adjusted EBITDA (3) | $ | 38,960 | $ | 41,387 | ||
| Free cash flow generated from operating activities less capital expenditures | $ | 14,613 | $ | 18,547 | ||
- Bluegreen’s sales of VOIs under its “capital-light” business activities include sales of VOIs under fee-based sales and marketing arrangements, just-in-time inventory acquisition arrangements, and secondary market arrangements. Under “just-in-time” arrangements, Bluegreen enters into agreements with third-party developers that allow Bluegreen to buy VOI inventory from time to time in close proximity to the timing of when Bluegreen intends to sell such VOIs. Bluegreen also acquires VOI inventory from resorts’ homeowner’s associations (“HOAs”) and other third parties close to the time Bluegreen intends to sell such VOIs. Such VOIs are typically obtained by the HOAs through foreclosure in connection with maintenance fee defaults, and are generally acquired by Bluegreen at a significant discount. Bluegreen refers to sales of inventory acquired through these arrangements as “Secondary Market Sales.
- Equity trade allowances are amounts granted to customers upon trading in their existing VOIs in connection with the purchase of additional VOIs.
- See the supplemental tables included in this release for a reconciliation of Bluegreen’s income before taxes to EBITDA and Adjusted EBITDA.
Bluegreen estimates that system-wide sales of VOIs, net and Adjusted EBITDA were adversely impacted by approximately $6.2 million and $2.4 million, respectively, as a result of office closures and other business disruptions caused by Hurricane Irma in September 2017.
Exclusive of the adverse impact of Hurricane Irma, Bluegreen’s system-wide sales of VOIs, net during the three months ended September 30, 2017 as compared to the same periods of 2016 was impacted by a 14% increase in the average sales volume per guest (“VPG”), partially offset by a 13% decrease in the number of guest tours. During 2017, Bluegreen began screening the credit qualifications of potential marketing guests, resulting in a higher average transaction price, higher VPG, and a lower number of tours. Bluegreen believes its screening of marketing guests will ultimately result in improved efficiencies in its sales process. In July 2017, Bluegreen adopted new consumer-oriented materials to support the purchase of lower-point VOIs and reinstated its former, lower minimum transaction size requirements resulting in an increase in its sales-to-tour conversion ratio.
Fee-based sales commission revenue increased during 2017 primarily due to the factors described above related to the increase in system-wide sales of VOIs, net. Bluegreen earned an average sales and marketing commission of 71% during the three months ended September 30, 2017 as compared to 67% during the same period in 2016. The increase in sales and marketing commissions as a percentage of fee-based sales is primarily related to an incentive commission of $2.9 million related to the achievement of certain sales thresholds pursuant to the terms and conditions of the applicable contractual arrangement, with no such comparable incentive commission earned in the three months ended September 30, 2016.
Other-fee-based service revenues increased 2% for the three months ended September 30, 2017 as compared to the same period in 2016. The resort properties managed by Bluegreen increased from 46 as of September 30, 2016 to 48 as of September 30, 2017 due to the addition of new managed properties in Charleston, SC and Banner Elk, NC. Fee-based management services revenues increased during the 2017 period as compared to the 2016 period primarily as a result of increases in the number of managed resorts and the increase in the number of owners in the Bluegreen Vacation Club.
General and administrative expenses, which represent expenses directly attributable to sales and marketing operations and corporate overhead, were $25.8 million and $20.3 million during the three months ended September 30, 2017 and 2016, respectively. The increase during 2017 is primarily attributable to the $2.9 million severance accrued in connection with the retirement of a Bluegreen executive during September 2017.
Additional selected supplemental financial data regarding the results of Bluegreen’s operations for the periods ended September 30, 2017, are available on the BBX Capital website and may be viewed by accessing http://ir.bbxcapital.com/supplemental-financial-data.
BBX Capital Real Estate – Select Financial Data
BBX Capital Real Estate is active in the acquisition, ownership and management of real estate development projects and investments in joint ventures. BBX Capital Real Estate also holds legacy assets previously owned by BankAtlantic consisting of loans and charged off loans and judgments.
Highlights during the third quarter of 2017 include:
| Three-Month Period Ended | ||||
| ($ in thousands) | September 30, | |||
| 2017 | 2016 | |||
| Equity in earnings of unconsolidated real estate joint ventures | 2,451 | 4,480 | ||
| Recoveries from loans previously charged off | 2,005 | 10,944 | ||
| Net (losses) gains on the sales of assets | (18) | 5,035 | ||
Equity in earnings of unconsolidated real estate joint ventures reflects earnings from real estate joint ventures generally involved in the development of properties for residential and commercial use. The equity in earnings for the three months ended September 30, 2017 and 2016 primarily reflects earnings from the Hialeah Communities joint venture. During the three months ended September 30, 2017 and 2016, the Hialeah Communities joint venture closed on 36 and 87 single-family homes, respectively, and as of September 30, 2017, the venture had executed sales contracts on 392 single-family homes, of which 373 transactions had closed, in a planned development of 394 single-family homes.
Recoveries from loan previously charged off for the three months ended September 30, 2017 and 2016 were mainly generated by legacy loans. Due to the nature of these collection activities and the declining balances of legacy loans, it is not expected that BBX Capital Real Estate will continue to generate recoveries consistent with historical amounts.
Net gains on the sales of assets for the three months ended September 30, 2016 were mainly generated from the sales of foreclosed commercial land parcels.
BBX Capital Middle Market
BBX Capital Middle Market: Renin – Select Financial Data
Renin is engaged in the design, manufacture, and distribution of specialty doors, systems and hardware, and home décor products in Canada, the United States, and Europe.
Highlights during the third quarter of 2017 include:
| Three-Month Period Ended | ||||
| ($ in thousands) | September 30, | |||
| 2017 | 2016 | |||
| Trade sales | 16,623 | 15,624 | ||
| Gross margin | 4,605 | 4,114 | ||
| Gross margin percentage | % | 27.70 | 26.33 | |
| Income (loss) before taxes | 90 | (359 | ) | |
The improvement in trade sales for the three months ended September 30, 2017 compared to the same 2016 period reflects increased sales volume from Renin’s retail channel customers driven mainly by higher sales of its barn door product. The improvement in the gross margin percentage for the three months ended September 30, 2017 compared to the same 2016 period resulted primarily from a higher proportion of sales of higher margin door and hardware products. The increase in income before taxes reflects the improved gross margin.
BBX Capital Middle Market: BBX Sweet Holdings – Select Financial Data
BBX Sweet Holdings primarily consists of companies acquired in the confectionery industry. We consider certain of the businesses included in the BBX Sweet Holdings’ segment to be in the early development stages and their activities included costs to consolidate manufacturing facilities and upgrade information system applications. In June 2017, BBX Sweet Holdings acquired IT’SUGAR, a specialty candy retailer with 95 retail locations in 26 states and Washington, DC for net cash consideration of approximately $58.4 million.
Highlights during the third quarter of 2017 include:
| Three Month Period Ended | |||||
| ($ in thousands) | September 30, | ||||
| 2017 | 2016 | ||||
| Trade sales | 28,257 | 6,454 | |||
| Gross margin | 11,287 | 1,290 | |||
| Gross margin percentage | % | 39.94 | 19.99 | ||
| Loss before taxes | (1,267 | ) | (2,767 | ) | |
The improvement in BBX Sweet Holdings performance for the three months ended September 30, 2017 compared to the same 2016 period primarily resulted from the operating results of IT’SUGAR, which was acquired in June 2017.
BBX Capital Middle Market: MOD Pizza
The Company’s activities relating to its MOD Pizza franchise operations included building infrastructure to support plans to open approximately 60 MOD franchised pizza restaurant locations throughout Florida over the next five to seven years. The Company opened its first MOD Pizza franchise location in Parkland, FL, on October 24, 2017, and anticipates opening three additional locations during the first quarter of 2018.
For more complete and detailed information regarding BBX Capital and its financial results, business, operations and risks, please see BBX Capital’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, and BBX Capital’s Annual Report on Form 10-K for the year ended December 31, 2016, which are available on the SEC’s website, https://www.sec.gov, and on BBX Capital’s website, www.BBXCapital.com.
About BBX Capital Corporation:
BBX Capital Corporation (NYSE: BBX)(OTCQX: BBXTB), is a diversified holding company whose activities include its ownership of Bluegreen Vacations Corporation and, through its Real Estate and Middle Market Divisions, the acquisition, ownership and management of joint ventures and investments in real estate and real estate development projects and middle market operating businesses. As of September 30, 2017, BBX Capital had total consolidated assets of $1.5 billion, shareholders’ equity attributable to BBX Capital of $493.7 million, and total equity of $539.9 million. At September 30, 2017, BBX Capital’s book value per share was $5.08 compared to $4.70 at September 30, 2016.
About Bluegreen Vacations Corporation:
Bluegreen Vacations Corporation (formerly Bluegreen Corporation), founded in 1966 and headquartered in Boca Raton, Florida, is a leading vacation ownership company that markets and sells vacation ownership interests and manages resorts in attractive leisure and urban destinations. The Bluegreen Vacation Club is a flexible, points-based, deeded vacation ownership plan with approximately 210,000 owners, 67 Club and Club Associate Resorts and access to more than 11,000 other hotels and resorts through partnerships and exchange networks. Bluegreen Vacations also offers a portfolio of comprehensive, fee-based resort management, financial, and sales and marketing services, to or on behalf of third parties.
For more information, please visit:
BBX Capital: www.BBXCapital.com
Bluegreen Vacations Corporation: www.BluegreenVacations.com
