May 10, 2017 — BBX Capital Corporation (“BBX Capital” or the “Company”) (OTCQX: BBXT) (OTCQX: BBXTB) reported financial results for the three month period ended March 31, 2017.

BBX Capital Selected Financial Data (Consolidated)

First Quarter 2017 Compared to First Quarter 2016:

  • Total consolidated revenues of $171.8 million vs. $165.7 million
  • Net income to common shareholders of $17.9 million vs. $5.5 million
  • Diluted earnings per share of $0.17 vs. $0.06
  • Income before income taxes of $33.7 million vs. $12.5 million
  • Net gains on cancellation of debt $6.9 million
  • SEC litigation reimbursements from insurance carrier of $5.0 million
  • Reversal in 2017 of previously paid SEC civil penalty of $4.6 million
  • “Free cash flow” (cash flow from operating activities less capital expenditures) was a cash outflow of $5.2 million compared to a cash inflow of $15.0 million

As of March 31, 2017, BBX Capital had total consolidated assets of $1.4 billion, shareholders’ equity of $477.9 million, and total consolidated equity of $521.6 million.

“We are pleased with BBX Capital’s overall results and accomplishments during the quarter, particularly the achievements attained at Bluegreen Vacations® and Renin,” commented Alan B. Levan, Chairman and Chief Executive Officer of BBX Capital. “BBX Capital’s goal is to build long-term shareholder value as opposed to 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 continues to be long-term growth as measured by increases in book value and intrinsic value over time.

Mr. Levan went on to say, “As we previously announced on May 8, 2017, a federal jury after a six week trial rendered a verdict in favor of me and BankAtlantic Bancorp and against the SEC on all counts, finally ending a very unfortunate nine-year ordeal.”

The following selected information relates to the operating activities of Bluegreen, BBX Capital Real Estate and Renin. See the supplemental tables below for the consolidating statements of operations for the three month periods ended March 31, 2017 and 2016.

Bluegreen Selected Financial Data 

First Quarter 2017 Compared to First Quarter 2016:

  • System-wide sales of VOIs, net of equity trade allowances (2), were $130.0 million vs. $126.9 million. Included in system-wide sales are sales of VOIs made under Bluegreen’s “capital-light” business strategy (1), which were $110.4 million vs. $98.6 million, gross of equity trade allowances (2):
    • Sales of third party VOIs -commission basis were $66.2 million vs. $60.1 million and generated sales and marketing commissions of $45.2 million vs. $40.1 million
    • Secondary market sales of VOIs were $38.7 million vs. $34.2 million
    • Just-in-time sales of VOIs were $5.6 million vs. $4.3 million
  • Average sales price per transaction was $15,940 vs. $13,227
  • Sales volume per guest was $2,452 vs. $2,306
  • Other fee-based services revenue was $26.1 million vs. $25.6 million
  • Income before taxes was $30.8 million vs. $27.4 million.
  • EBITDA was $34.4 million vs. $30.4 million (3)
  • “Free cash flow” (cash flow from operating activities less capital expenditures) was $0.1 million compared to $31.3 million during the same period in 2016

(1) Bluegreen’s sales of VOIs under its “capital-light” business strategy 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’ property owner associations (“POAs”) and other third parties close to the time Bluegreen intends to sell such VOIs. Such VOIs are typically obtained by the POAs 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.”
(2) Equity trade allowances are amounts granted to customers upon trading in their existing VOIs in connection with the purchase of additional VOIs.
(3) See the supplemental tables included in this release for a reconciliation of EBITDA to income before taxes.

Bluegreen Summary for the Three Month Period Ended March 31, 2017 

System-wide sales of VOIs were $130.0 million and $126.9 million during the three months ended March 31, 2017 and 2016, respectively. The growth in system-wide sales during the three months ended March 31, 2017, is primarily attributable to an increase of 21% in the average sales price per transaction partially offset by a decrease of 5% in the number of guest tours as well as a decrease in the number of VOI sales transactions. During the three months ended March 31, 2017, Bluegreen increased its minimum transaction size and its screening of marketing guests. These changes resulted in a higher average transaction price and a lower number (5% reduction) of tours and sale-to-tour conversion ratio.

Fee-Based Sales commission revenue was $45.2 million and $40.1 million, respectively, during the three months ended March 31, 2017 and 2016. The increase in the sales of third-party developer inventory on a commission basis during the 2017 period was due primarily to the factors described above related to the increase in system-wide sales of VOIs. Bluegreen earned an average sales and marketing commission of 68% and 67% during the three months ended March 31, 2017 and 2016, respectively.

Other fee-based services revenue increased 2% to $26.1 million for the three months ended March 31, 2017. At March 31, 2017 and 2016, Bluegreen managed a total of 47 and 46 timeshare resort properties and hotels, respectively. Fee-based management services revenues increased during the 2017 period 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.

Selling and marketing expenses were $67.4 million and $65.9 million during the three months ended March 31, 2017 and 2016, respectively. As a percentage of system-wide sales of VOIs, selling and marketing expenses were 52% during each of the three months ended March 31, 2017 and 2016. As discussed above, during the three months ended March 31, 2017, Bluegreen increased its screening of marketing guests, resulting in a lower number of guest tours during the period.

General and administrative expenses, consisting of corporate overhead and expenses directly attributable to sales and marketing operations, were $21.6 million and $24.2 million during the three months ended March 31, 2017 and 2016, respectively. As a percentage of system-wide sales of VOIs, general and administrative expenses were 17% and 19% during the three months ended March 31, 2017 and 2016, respectively. The decrease was driven by lower personnel related costs, partially offset by higher information technology related costs.

Net interest spread was $14.7 million and $14.3 million during the three months ended March 31, 2017 and 2016, respectively. The increase in net interest spread during the three months ended March 31, 2017 was primarily due to the lower weighted-average cost of borrowing.

Bluegreen generated “free cash flow” (cash flow from operating activities less capital expenditures) of $0.1 million during the three months ended March 31, 2017 compared to $31.3 million during the three months ended March 31, 2016. The decrease in 2017 was due in part to increased spending on the acquisition and development of inventory in 2017, changes in the components of working capital and a decrease in cash realized within 30 days of VOI sales from 43% in the 2016 quarter to 40% in the same 2017 quarter

Additional selected supplemental financial data regarding the results of Bluegreen’s operations for the quarter ending March 31, 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 

BBX Capital Real Estate is principally active in the acquisition, ownership and management of joint ventures and investments in real estate development projects. BBX Capital Real Estate also holds legacy assets consisting of loans and charged off loans and judgments. Highlights during the first quarter of 2017:

  • Equity in earnings of unconsolidated real estate joint ventures were $3.7 million primarily associated with closings on single-family units by the Hialeah Communities joint venture.
  • Recoveries from loans previously charged off of $3.1 million

Middle Market 

BBXCapital Middle Market Division is principally active in the acquisition, investment and management of middle market operating businesses, which include the following:

Renin 

Renin is engaged