BBX CAPITAL, INC. Except as otherwise noted or where the context otherwise requires, the terms "the Company," "we," "us," or "our" refers toBBX Capital, Inc. and its consolidated subsidiaries, and the term "BBX Capital " refers toBBX Capital, Inc. as a standalone entity.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements based largely on current expectations of the Company that involve a number of risks and uncertainties. All opinions, forecasts, projections, future plans, or other statements, other than statements of historical fact, are forward-looking statements and can be identified by the use of words or phrases such as "plans," "believes," "will," "expects," "anticipates," "intends," "estimates," "our view," "we see," "would," and words and phrases of similar import. The forward-looking statements in this document are also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and involve substantial risks and uncertainties. We can give no assurance that such expectations will prove to be correct. Actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements contained herein. Forward-looking statements are based largely on our expectations and are subject to a number of risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. When considering forward-looking statements, the reader should keep in mind the risks, uncertainties, and other cautionary statements made in this report and in the Company's other reports filed with theSecurities and Exchange Commission ("SEC"). The reader should not place undue reliance on any forward-looking statement, which speaks only as of the date made. This document also contains information regarding the past performance of the Company and its respective investments and operations. The reader should note that prior or current performance and pro forma financial information is not a guarantee or indication of future performance. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, and all such information should only be viewed as historical data. Future results and the accuracy of forward-looking statements may be affected by various risks and uncertainties, including the risk factors applicable to the Company which are described herein and in "Item 1. Business - Cautionary Note Regarding Forward-Looking Statements" and "Item 1A. Risk Factors" of the Company's Annual Report on Form 10-K for the year endedDecember 31, 2020 (the "2020 Annual Report"). These risks and uncertainties also include risks relating to public health issues, including, in particular, the COVID-19 pandemic, as it is not currently possible to accurately assess the expected duration and effects of the pandemic on our business. These include required closures of retail locations, travel and business restrictions, "shelter in place" and "stay at home" orders and advisories, volatility in the global and national economies and equity, credit, and commodities markets, worker absenteeism, quarantines, and other health-related restrictions; the duration and severity of the COVID-19 pandemic and the impact on demand for the Company's products and services, levels of consumer confidence, supply chains and raw materials costs; actions taken by governments, businesses, and individuals in response to the pandemic and their impact on economic activity and consumer spending, which will impact the Company's ability to successfully resume full business operations; the pace of recovery when the COVID-19 pandemic subsides and the possibility of a resurgence; competitive conditions; the Company's liquidity and the availability of capital; the effects and duration of steps the Company takes in response to the COVID-19 pandemic, including the inability to rehire or replace furloughed employees or retain employees; the impact of the emergence of IT'SUGAR from the Chapter 11 proceedings, revesting of the Company's equity interest in IT'SUGAR and reconsolidation of IT'SUGAR's results into the Company's financial statements; the potential adverse impact of the Chapter 11 proceedings and the success of the restructuring; the continuing adverse impact of the COVID-19 pandemic on IT'SUGAR's operations, results, and financial condition, including that the recessionary economic environment on demand, sales levels, and consumer behavior, as well as increased inventory, freight, and labor costs and general supply chain disruptions, have had and may continue to have a material adverse effect in future periods; the risk that IT'SUGAR may not be able to continue to increase prices without significantly impacting consumer demand and sales volume; risks relating to IT'SUGAR's business plans, including that IT'SUGAR may not be able to fund or otherwise open new retail locations, including new "temporary" locations, the Oreo Café, or a new "large format" retail location, as or when expected, or at all; the risk that IT'SUGAR may not be able to extend or enter into new lease agreements for any existing "temporary" locations which it desires to extend, whether on favorable terms or at all; risks related to the lease amendments entered into by IT'SUGAR, including that, while many of the lease amendments provide for the payment of rent based on a percentage of sales volumes for a specified period of time as opposed to fixed rental payments, the terms of many of such amendments require IT'SUGAR to resume the payment of previously scheduled fixed lease payments going forward and, as a result, IT'SUGAR's ongoing occupancy costs are expected to increase as fixed rental payments under these leases resume and IT'SUGAR's overall exposure to risks related to fixed rental obligations will increase 31 -------------------------------------------------------------------------------- and revert to pre-bankruptcy levels in relation to such locations; the risk that landlords may exercise their right to terminate leases; the inability to predict the effect of IT'SUGAR's emergence from the bankruptcy proceedings on the Company and its results of operation and financial condition, including the risk that additional impairment charges may be required in the future, the risk of heightened litigation as a result of actions taken in response to the COVID-19 pandemic; the impact of the COVID-19 pandemic on consumers, including, but not limited to, their income, their level of discretionary spending both during and after the pandemic, and their views towards the retail industry; the risk that certain of the Company's operations, including retail locations, may not continue to generate recurring sources of cash during or following the pandemic to the extent anticipated or at all; the risk that commodity, shipping, and labor price increases and widespread supply disruptions may adversely impact the gross margins ofBBX Capital Real Estate LLC ("BBX Capital Real Estate " or "BBXRE"),BBX Sweet Holdings, LLC ("BBX Sweet Holdings "), andRenin Holdings, LLC ("Renin"); the risk that homebuilders will not meet their obligations to acquire lots atBBXRE's Beacon Lake community due to the impact of higher construction costs and supply shortages of building materials, equipment and appliances; the risk that the loss of sales of products to Renin's major customers and/or Renin's efforts to maintain sales of its products to its major customers may negatively impact Renin's sales, gross margin, and profitability, require Renin to lower its prices, and result in the recognition of impairment losses related to its goodwill and long-lived assets and noncompliance with the terms of its outstanding credit facility; the risk that increased costs, higher inventory levels and other factors negatively impacting Renin's gross margins could adversely impact Renin's liquidity and its ability to remain in compliance with financial covenants under its credit facility; and the risk of BBXRE expanding its operating platform to include an industrial real estate division and investing in the development of industrial real estate assets. This Quarterly Report on Form 10-Q also contains a discussion of Renin's recent acquisition of substantially all of the assets and assumption of certain of the liabilities ofColonial Elegance, Inc. ("Colonial Elegance"), which is subject to the impact of economic, competitive and other factors affecting Renin and Colonial Elegance, including their operations, markets, marketing strategies, products and services; the risk that the integration of Colonial Elegance may not be completed on a timely basis, or as anticipated; that the anticipated expansion or growth opportunities will not be achieved or if achieved will not be advantageous; that the acquisition will not be cash accretive immediately or at all; that net income may not be generated when anticipated or at all or the acquisition may result in net losses; thatBBX Capital and/or Renin may not realize the anticipated benefits of the acquisition when or to the extent anticipated or at all; and the risks associated with the increased indebtedness incurred by Renin to finance the acquisition including, compliance with financial covenants and restrictions on Renin's activities. The Company may also become subject to litigation related to the COVID-19 pandemic, including with respect to any actions we take, fail to take, or may be required to take in response thereof. AlthoughBBX Capital and its subsidiaries believe that they have meritorious defenses in all current legal actions, the outcome of litigation and regulatory matters and timing of ultimate resolution are inherently difficult to predict and uncertain. The risk factors described in the 2020 Annual Report, as well as the other risks and factors detailed in this report and the other reports filed by the Company with theSEC , are not necessarily all of the important factors that could cause the Company's actual results to differ materially from those expressed in any of the forward-looking statements. Other unknown or unpredictable factors could cause the Company's actual results to differ materially from those expressed in any of the forward-looking statements. As a result, the Company cautions that the foregoing factors are not exclusive. Given these uncertainties, you are cautioned not to place undue reliance on forward-looking statements, and you should read this Quarterly Report on Form 10-Q with the understanding that actual future results, levels of activity, performance, and events and circumstances may be materially different from prior results or what the Company expects. The Company qualifies all forward-looking statements by these cautionary statements. Forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q, and the Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report.
Critical Accounting Policies
See Item 7 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations" under the section "Critical Accounting Policies" in the
Company's 2020 Annual Report for a discussion of the Company's critical
accounting policies.
32--------------------------------------------------------------------------------
New Accounting Pronouncements
See Note 1 to the Company's condensed consolidated financial statements included in Item 1 of this report for a discussion of new accounting pronouncements applicable to the Company.
Overview
The Company's goal is to build long-term shareholder value. Since many of the Company's assets do not generate income on a regular or predictable basis, the Company's objective is long-term growth as measured by increases in book value and intrinsic value over time. The Company regularly reviews the performance of its investments and, based upon economic, market, and other relevant factors, considers transactions involving the sale or disposition of all or a portion of its assets, investments, or subsidiaries. Further, subject to market conditions and other factors, the Company may from time to time repurchase its outstanding common stock. Prior toSeptember 30, 2020 , the Company was a wholly owned subsidiary of Bluegreen Vacations Holding Corporation ("Bluegreen Vacations "), which was formerly known asBBX Capital Corporation . As further described in the Company's 2020 Annual Report and in Note 1 to the Company's financial statements included in Item 1 of this report, onSeptember 30, 2020 ,Bluegreen Vacations completed the spin-off of the Company as a separate, publicly-traded company. In connection with the spin-off,Bluegreen Vacations issued a$75.0 million note payable to the Company that accrues interest at a rate of 6% per annum and requires payments of interest on a quarterly basis. Under the terms of the note,Bluegreen Vacations has the option in its discretion to defer interest payments under the note, with interest on the entire outstanding balance thereafter to accrue at a cumulative, compounded rate of 8% per annum until such time asBluegreen Vacations is current on all accrued payments under the note, including deferred interest. All outstanding amounts under the note will become due and payable onSeptember 30, 2025 or earlier upon certain other events. Further,Bluegreen Vacations is permitted to prepay the note in whole or in part at any time.
Impact of the COVID-19 Pandemic
The COVID-19 pandemic has resulted in an unprecedented disruption in theU.S. and global economies and the industries in which the Company operates due to, among other things, (i) government ordered "shelter in place" and "stay at home" orders and advisories, travel restrictions, and restrictions on business operations, (ii) government guidance and restrictions with respect to travel, public accommodations, social gatherings, and related matters, (iii) the general public's reaction to the pandemic, including impacts on consumer demand, (iv) disruptions in global supply chains, and (iv) increased economic uncertainty. The disruptions arising from the pandemic and the reaction of the general public have had a significant adverse impact on the Company's financial condition and operations, particularly with respect toBBX Sweet Holdings , as the effects of the pandemic required IT'SUGAR to temporarily close all of its retail locations in 2020 and ultimately resulted in IT'SUGAR and its subsidiaries filing petitions for Chapter 11 bankruptcy inSeptember 2020 . In addition, the Company's workforce has been significantly impacted by the pandemic as a result of, among other things, the implementation of temporary and permanent reductions in employee head count in order to manage expenses and various health and safety protocols necessary for the Company to maintain operations. Further, the Company has experienced significant increases in commodity, freight, inventory, and labor costs, extended lead-times for the purchase of inventory, and delays in inventory shipments, and these factors are impacting the Company's operations, including requiring the Company to maintain higher inventory balances, and may have a material impact on its operations in future periods. In addition, current levels of illness caused by COVID-19 and related variants are rising and indicate that the pandemic and its impact on the Company are not over and remain uncertain. TheCDC recently issued new guidance regarding the use of masks, and vaccination policies are increasingly being implemented by government agencies and may vary across different jurisdictions where the Company operates. In addition, various state and local government officials may in the future issue new or revised orders that are different than the ones under which the Company is currently operating. 33
-------------------------------------------------------------------------------- The duration and severity of the pandemic and related disruptions, as well as the resulting adverse impact on economic and market conditions are uncertain, and the Company may continue to be adversely impacted by these conditions in future periods. Although the impact of the COVID-19 pandemic on the Company's principal holdings and management's efforts to mitigate the effects of the pandemic has varied,BBX Capital and its subsidiaries have sought to take steps to manage expenses through cost saving initiatives and reductions in employee head count and actions to increase liquidity and strengthen the Company's financial position, including reducing planned capital expenditures. As ofJune 30, 2021 , the Company's consolidated cash balances were$101.9 million . The discussion below provides an update on the Company's principal holdings for the three and six months endedJune 30, 2021 , including the current impacts of the COVID-19 pandemic on their operations during 2021. However, this discussion should be read in conjunction with the discussion and analysis in Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's 2020 Annual Report, which provides additional information related to (i) the impacts of the COVID-19 pandemic on the Company's principal holdings since the initial outbreak of COVID-19 in 2020 and (ii) the various risks and uncertainties associated with the effects of the pandemic on the Company's principal holdings, which has had, and could in future periods have, a material adverse impact on the Company's consolidated results of operations, cash flows, and financial condition.
Summary of Consolidated Results of Operations
Consolidated Results
The following summarizes key financial highlights for the three months ended
?Total consolidated revenues of
?Income from continuing operations before income taxes of$26.8 million compared to a loss from continuing operations before income taxes of$13.4 million during the same 2020 period.
?Net income attributable to shareholders of
?Diluted earnings per share from continuing operations of$1.07 compared to a diluted loss per share from continuing operations of$0.48 for the same 2020 period.
The following summarizes key financial highlights for the six months ended
?Total consolidated revenues of
?Income from continuing operations before income taxes of$30.3 million compared to a loss from continuing operations before income taxes of$44.0 million during the same 2020 period.
?Net income attributable to shareholders of
?Diluted earnings per share from continuing operations of$1.18 compared to a diluted loss per share from continuing operations of$1.58 for the same 2020 period. The Company's consolidated results of operations for the three months endedJune 30, 2021 compared to the same 2020 period were significantly impacted by the following: ?The recognition of a$15.9 million gain on the reconsolidation of IT'SUGAR in the Company's financial statements as a result of IT'SUGAR emerging from Chapter 11 bankruptcy inJune 2021 andBBX Sweet Holdings' revesting of its control of IT'SUGAR; ?A net increase in sales activity atBBXRE's Beacon Lake Community development, as BBXRE sold 94 developed lots to homebuilders during the 2021 period compared to 23 lots during the 2020 period;
?An increase in net earnings of unconsolidated real estate joint ventures
primarily due to the Altis Promenade joint venture's sale of its multifamily
apartment community in
?The recognition of operating losses by
34
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?The recognition of impairment losses of
?A net decrease in Renin's results of operations, reflecting a decline in Renin's gross margin percentage as a result of increased costs related to raw materials and the shipment of products and ongoing expenses associated with the acquisition of Colonial Elegance, including amortization expense related to acquired intangible assets, partially offset by an increase in Renin's trade sales associated with the acquisition and increased customer demand. In addition to the items discussed above for the three months endedJune 30, 2021 compared to the same 2020 period, the Company's consolidated results of operations for the six months endedJune 30, 2021 compared to the same 2020 period were significantly impacted by the following:
?The recognition of impairment losses of
?Lower recoveries from loan losses in the 2021 period primarily reflecting a settlement with a financial institution servicing loans for BBXRE during the 2020 period. Segment Results
Information regarding income (loss) from continuing operations before income taxes by reportable segment is set forth in the table below (in thousands):
For the Three Months Ended June 30 , For
the Six Months Ended
2021 2020 Change 2021 2020 Change
BBX Capital Real Estate $ 11,869 (379) 12,248 16,787 3,672 13,115
BBX Sweet Holdings 15,957 (10,014) 25,971 15,540 (38,952) 54,492
Renin 759 1,211 (452) 1,600 1,925 (325)
Other 404 (236) 640 1,158 (3,044) 4,202
Reconciling items and
eliminations (2,164) (4,005) 1,841 (4,804) (7,633) 2,829
Income (loss) from
continuing operations
before income taxes 26,825 (13,423) 40,248 30,281 (44,032) 74,313
(Provision) benefit for
income taxes (6,588) 3,306 (9,894) (7,589) 9,214 (16,803)
Net income (loss) from
continuing operations 20,237 (10,117) 30,354 22,692 (34,818) 57,510
Discontinued operations - 604 (604) - (74) 74
Net income (loss) 20,237 (9,513) 29,750 22,692 (34,892) 57,584
Net (income) loss
attributable to
noncontrolling interests (117) 856 (973) (227) 4,312 (4,539)
Net income (loss)
attributable to
shareholders $ 20,120 (8,657) 28,777 22,465 (30,580) 53,045
BBX Capital Real Estate Reportable Segment
Segment Description
BBX Capital Real Estate (or BBXRE) is engaged in the acquisition, development, construction, ownership, financing, and management of real estate and investments in real estate joint ventures, including investments in multifamily rental apartment communities, single-family master-planned for sale housing communities, and commercial properties located primarily inFlorida . In addition, BBXRE owns a 50% equity interest in the Altman Companies, a developer and manager of multifamily apartment communities, and also manages the legacy assets acquired in connection with the Company's sale of BankAtlantic in 2012, including portfolios of loans receivable, real estate properties, and judgments against past borrowers. 35
-------------------------------------------------------------------------------- In an effort to diversify its portfolio of real estate developments, BBXRE is also currently evaluating potential investment opportunities in industrial real estate assets, including the development of warehouse and logistics facilities, and has expanded its operating platform to include an industrial real estate division. Overview As further described in the Company's 2020 Annual Report, BBXRE's operations that were impacted by the COVID-19 pandemic during 2020 have largely returned to pre-pandemic levels. Management believes this is primarily attributable to demand for single-family and multifamily apartment housing in many of the markets inFlorida in which BBXRE operates. Sales at BBXRE's single-family home developments and leasing and rent collections at its multifamily apartment developments have generally returned to pre-pandemic levels, and BBXRE believes that there has generally been a recovery in investor demand for the acquisition of stabilized multifamily apartment communities and the availability of debt and equity capital for financing new multifamily apartment developments. However, there has been a significant increase in commodity and labor prices, which has resulted in higher development and construction costs, and disruptions in supply chains for certain commodities and equipment, which has resulted in ongoing supply shortages of building materials, equipment and appliances and impacted the timing of certain projects under construction. Although such factors have not yet materially impacted BBXRE's results of operations, these increases may have a material impact on BBXRE's operating results in future periods, as described in further detail below. In addition, the effects of the COVID-19 pandemic have resulted in significant uncertainty in the overall economy, and the resulting risks and uncertainties, which are further described in the Company's 2020 Annual Report, could have a material adverse impact on BBXRE's results of operations, cash flows, and financial condition in future periods.
The Altman Companies and Related Investments
In 2018, BBXRE acquired a 50% membership interest in the Altman Companies, a joint venture between the Company andJoel Altman engaged in the development, construction, and management of multifamily apartment communities. As ofJune 30, 2021 , BBXRE had investments in six active developments sponsored by the Altman Companies, which are summarized as follows (dollars in thousands): Carrying Value of BBXRE Investment Apartment Project Status at at June 30, Project Location Units June 30, 2021 2021 Altis Grand Central Tampa, Florida 314 Stabilized - 97%$ 2,149 Occupied Altis Grand at The Odessa, Florida 350 Sold July 2021 1,115 Preserve (Suncoast ) Under Construction - Altis Little Havana Miami, Florida 224 Expected Completion 858 in 2021 Under Construction -
in 2021
Under Construction -
in 2022
Altis Lake Willis Orlando, Florida TBD Predevelopment 6,114
(Vineland Pointe)
(1)The carrying value of BBXRE's investment at June 30, 2021 includes $9.7
million related to BBXRE's investment in the preferred equity associated with
the Altis Ludlam Trail project, including the investment balance and accrued
preferred return.
During the three months ended June 30, 2021 , the Altis Promenade joint venture,
which was sponsored by the Altman Companies, sold its 338 unit multifamily
apartment community located in Lutz, Florida . As a result of the sale, BBXRE
received a cash distribution of approximately $7.1 million from the joint
venture and recognized equity earnings from its investment in the venture of
approximately $5.3 million during the three and six month ended June 30, 2021 .
Further, in July 2021 , the Altis Grand at The Preserve joint venture sold its
350-unit multifamily apartment community located in Odessa, Florida . As a result
of the sale, BBXRE received a cash distribution of approximately $5.8 million
from the joint venture and expects to recognize equity earnings from its
investment in the venture of approximately $5.0 million during the three months
ended September 30, 2021 .
?
36
-------------------------------------------------------------------------------- As previously described in the Company's 2020 Annual Report, following temporary disruptions in its operations during 2020 as a result of the COVID-19 pandemic, the operations related to the existing developments sponsored by the Altman Companies have generally returned to pre-pandemic levels. In particular, the Altman Companies collected in excess of 98% of the rents at the multifamily apartment communities under its management during the first six months of 2021, and the volume of new leases at its communities have generally returned to, and in some cases have exceeded, pre-pandemic levels and expectations. Further, based on the progress of construction at its communities currently under construction, the Altman Companies does not at the current time expect the observed increases in commodity and labor prices to have a material impact on the costs of developing these communities. The Altman Companies has also observed increased investor demand for the acquisition of stabilized multifamily apartment communities, as evidenced by the above mentioned sales of multifamily apartment communities by joint ventures sponsored by the Altman Companies. In addition to its existing development portfolio, the Altman Companies has been focused on the identification of new opportunities for its development pipeline. In this regard, it has identified various new potential development opportunities, which are primarily located inSouth Florida and the greaterTampa, Florida area, both of which are experiencing increased demand for multifamily housing, and it has also observed what it believes to be an increase in the availability of debt and equity capital for new developments. However, as it relates to these new development opportunities, the Altman Companies has observed a significant increase in commodity and labor prices, as well as supply chain disruptions and material shortages, all of which are expected to impact the costs and result in possible delays in connection with developing new multifamily apartment communities. Although the Altman Companies is continuing to evaluate the ultimate impact of these costs on the overall profitability of its potential future developments, a significant increase in development costs could have a material impact on the Altman Companies' operations, including, but not limited to, (i) an inability to close on the equity and/or debt financing necessary to commence the construction of new projects as a result of a decrease in projected investor profits and (ii) a decrease in the profits expected to be earned by BBXRE andJoel Altman as the managing members of projects that ultimately commence. These factors could result in, among other things, (i) increased operating losses at the Altman Companies due to a decline in development, general contractor, and management fees, (ii) the recognition of impairment losses by BBXRE and/or the Altman Companies related to their current investments in predevelopment expenditures and land acquired for development, including the land held by the Altis Lake Willis joint venture, and (iii) the recognition of impairment losses related to BBXRE's overall investment in the Altman Companies, as the profitability and value of the Altman Companies is directly correlated with its ability to source new development opportunities.
BBXRE is the master developer of theBeacon Lake Community , a master planned community located inSt. Johns County, Florida that is expected to be comprised of 1,476 single-family homes and townhomes. BBXRE is primarily developing the land and common areas and selling finished lots to third-party homebuilders who are constructing single-family homes and townhomes that are planned to range from 1,400 square feet to 4,400 square feet and priced from the high$200,000 's to the$600,000 's. The agreements pursuant to which BBXRE is selling finished lots to homebuilders generally provide for a base purchase price that is paid to BBXRE upon the sale of the developed lots to the homebuilders and a contingent purchase price that is calculated as a percentage of the proceeds that the homebuilders receive from the sale of the completed homes and paid to BBXRE upon the closing of such home sales. BBXRE has substantially completed the development of the lots comprising Phases 1 and 2 of theBeacon Lake Community and commenced the development of the lots comprising Phase 3 during the second quarter of 2021. The following table summarizes the status of the sale of lots to homebuilders in each phase in the development as ofJune 30, 2021 : Phase 2 Phase 1 Single-family Townhomes Phase 3 Phase 4 Total Total planned lots 302 479 196 200 299 1,476 Lots sold to homebuilders (1) (302) (307) (142) - - (751) Remaining lots to sell - 172 54 200 299 725 Lots under contract with homebuilders - (172) (54) (68) (299)(2) (593) Available lots (3) - - - 132 - 132 37
-------------------------------------------------------------------------------- (1)As further described in Note 2 to the Company's consolidated financial statements included in the 2020 Annual Report, BBXRE generally recognizes revenue related to sales of lots to homebuilders, including an estimate of any contingent purchase price expected to be collected in relation to such lots, upon the closing of the sale of such lots to the homebuilders. Although BBXRE recognizes the expected contingent purchase price associated with such lots upon the closing of the sale to the homebuilders, BBXRE ultimately does not receive any contingent purchase price related to a lot until the homebuilder closes on the sale of a home on such lot and collects the proceeds from the home sale. (2)BBXRE has entered into an agreement with an unaffiliated homebuilder to sell all of the undeveloped lots comprising Phase 4 in a single transaction. Such agreement provides for the payment of the purchase price to BBXRE at the time of closing, subject to certain adjustments contemplated in the agreement and does not provide for the payment of a contingent purchase price. (3)Although BBXRE was previously exploring the possible construction, leasing, and management of a portfolio of rental homes on the remaining lots in Phase 3, BBXRE currently expects that it will develop the remaining lots in Phase 3 and sell the finished lots to a homebuilder. During the three months endedJune 30, 2021 , BBXRE sold 70 single-family lots and 24 townhome lots compared to 23 single-family lots sold during the three months endedJune 30, 2020 . During the six months endedJune 30, 2021 , BBXRE sold 150 single-family lots and 72 townhome lots compared to 72 single-family lots and 38 townhomes lots sold during the six months endedJune 30, 2020 .
The following table summarizes the status of the sale of homes by homebuilders on lots previously sold by BBXRE to such homebuilders:
Phase 2
Phase 1 Single-family Townhomes Total
Lots sold to homebuilders 302 307 142 751
Homes closed 299 110 68 477
Homes remaining to close 3 197 74 274
At the current time, BBXRE does not expect the observed increases in commodity
and labor prices to significantly impact its costs to develop the lots in Phase
3 but does expect that the costs to construct homes on the developed lots
throughout the Beacon Lake Community will be impacted. At the current time,
BBXRE believes that homebuilders are likely to continue to meet their
obligations to acquire lots from BBXRE pursuant to the existing agreements
between BBXRE and the homebuilders, as the impact of the increase in
construction costs on the profitability of home sales is being offset to some
extent by an increase in prices for single-family homes. However, there is no
assurance that this will be the case, and the increase in construction costs
could result in requests by homebuilders to extend the timing of their purchase
of developed lots and/or failure of the homebuilders to meet their obligations
under these contracts.
Other Joint Venture Activity
In June 2019 , BBXRE invested $4.2 million in the Sky Cove joint venture, which
was formed to develop Sky Cove at Westlake, a residential community comprised of
204 single-family homes in Loxahatchee, Florida . During the six months ended
June 30, 2021 , the joint venture closed on the sale of 66 single-family homes,
and BBXRE recognized $0.9 million of equity earnings and received $2.5 million
of distributions from the venture. As of June 30, 2021 , the joint venture has
executed sales contracts on an additional 83 single-family homes, and closings
on such sales are expected to occur in 2021.
In February 2021 , BBXRE invested $4.9 million in the Sky Cove South joint
venture, which was formed to develop Sky Cove South at Westlake, a residential
community that will be adjacent to Sky Cove at Westlake and is expected to be
comprised of 197 single-family homes.
As of June 30, 2021 , BBXRE had an investment of $1.8 million in a joint venture
with CC Homes to develop Marbella, a residential community expected to be
comprised of 158 single-family homes in Miramar, Florida . As of June 30, 2021 ,
the joint venture had entered into contracts to sell all of its 158
single-family homes, and closings on sales are expected to commence during the
second half of 2021.
Although the above joint ventures expect to incur increased costs to construct
homes in their respective communities, BBXRE does not currently believe that
such increases will have a material adverse impact on the expected profitability
of these investments, as the impact of the increase in construction costs on the
profitability of home sales is expected to be offset to some extent by the
increase in prices for single-family homes as a result of higher demand.
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Other Assets
InJuly 2021 , BBXRE received a cash payment of$4.1 million related to the recovery of a loan receivable in the legacy asset portfolio and expects to recognize the amount as income in the Company's condensed consolidated statement of operations and comprehensive income during the three months endedSeptember 30, 2021 . Results of Operations
Information regarding the results of operations for BBXRE is set forth below (in thousands):
For the Three Months Ended June 30 , For
the Six Months Ended
2021 2020 Change 2021 2020 Change
Sales of real estate
inventory $ 12,390 2,839 9,551 25,925 9,278 16,647
Interest income 500 81 419 975 185 790
Net gains (losses) on
sales of real estate
assets 204 13 191 309 (34) 343
Other 438 327 111 836 787 49
Total revenues 13,532 3,260 10,272 28,045 10,216 17,829
Cost of real estate
inventory sold 5,568 1,474 4,094 13,426 6,106 7,320
Recoveries from loan
losses, net (1,137) (1,525) 388 (1,645) (5,037) 3,392
Impairment losses - 2,710 (2,710) - 2,710 (2,710)
Selling, general and
administrative expenses 1,647 1,125 522 3,621 3,461 160
Total costs and expenses 6,078 3,784 2,294 15,402 7,240 8,162
Operating income
(losses) 7,454 (524) 7,978 12,643 2,976 9,667
Equity in net earnings
of unconsolidated joint
ventures 4,443 145 4,298 4,172 696 3,476
Other expense (28) - (28) (28) - (28)
Income (loss) from
continuing operations
before income taxes $ 11,869 (379) 12,248 16,787 3,672 13,115
BBXRE's income from continuing operations before income taxes for the three
months ended
?An increase in net profits from the sale of developed lots to homebuilders at theBeacon Lake Community development, as BBXRE sold 94 developed lots during the 2021 period compared to 23 developed lots during the 2020 period, and an increase in the estimated contingent purchase price receivable from homebuilders, which is calculated as a percentage of the sales price of completed homes on the sold lots, as a result of improvements in the market for single-family housing during the 2021 period;
?An increase in equity in net earnings of unconsolidated joint ventures
primarily due to the Altis Promenade joint venture's sale of its multifamily
apartment community in
?The recognition of impairment losses during the 2020 period primarily related to certain of BBXRE's investments in unconsolidated real estate joint ventures as a result of the impact of the COVID-19 pandemic on such investments; and ?An increase in interest income associated with BBXRE's loans receivable from IT'SUGAR and its preferred equity investment in theAltis Ludlam Trail joint venture; partially offset by
?An increase in selling, general and administrative expenses primarily associated with the receipt of a legal settlement with a title company in the 2020 period which did not recur during the 2021 period; and
?A net decrease in recoveries from loan losses in 2021 on higher settlements with guarantors during the 2020 period.
39
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BBXRE's income from continuing operations before income taxes for the six months
ended June 30, 2021 compared to the same 2020 period increased by $13.1 million
primarily due to the factors described above related to the three months ended
June 30, 2021 compared to the same 2020 period.
BBX Sweet Holdings Reportable Segment
Segment Description
BBX Sweet Holdings is engaged in the ownership and management of operating businesses in the confectionery industry, including IT'SUGAR, a specialty candy retailer whose products include bulk candy, candy in giant packaging, and licensed and novelty items, Hoffman's Chocolates, a retailer of gourmet chocolates with retail locations inSouth Florida , and Las Olas Confections and Snacks, a manufacturer and wholesaler of chocolate and other confectionery products.BBX Sweet Holdings owns approximately 93% of the equity interests in IT'SUGAR. Prior toSeptember 22, 2020 , the Company consolidated the financial statements of IT'SUGAR and its subsidiaries as a result of its 93% ownership of IT'SUGAR. As further described in the Company's 2020 Annual Report and in Note 1 to the Company's condensed consolidated financial statements included in Item 1 of this report, as a result of the impact of the COVID-19 pandemic on its operations, onSeptember 22, 2020 , IT'SUGAR and its subsidiaries filed voluntary petitions to reorganize under Chapter 11 of Title 11 of theU.S. Code (the "Bankruptcy Code") in theU.S. Bankruptcy Court for the Southern District of Florida (the "Bankruptcy Court ") (the cases commenced by such filings, the "Bankruptcy Cases"), and as a result of the filings and the uncertainties surrounding the nature, timing, and specifics of the bankruptcy proceedings, the Company deconsolidated IT'SUGAR onSeptember 22, 2020 .
Overview
IT'SUGAR - Emergence from Bankruptcy
InApril 2021 , IT'SUGAR filed its proposed plan of reorganization with theBankruptcy Court . Following approval of the proposed plan by IT'SUGAR's unsecured creditors, theBankruptcy Court entered an order (the "Confirmation Order") onJune 16, 2021 confirming the plan of reorganization filed by IT'SUGAR, as modified by the Confirmation Order (the "Plan"), and the Plan became effective onJune 17, 2021 (the "Effective Date"). The following summary of the Plan is qualified in its entirety by reference to the full text of the Confirmation Order and the Plan, which are attached as Exhibits 10.4 and 10.5 to the Company's Current Report on Form 8-K filed by the Company with theSEC onJune 17, 2021 .
Pursuant to the terms of the Plan, claims against IT'SUGAR were treated as follows:
?The$4.0 million DIP credit facility and a$6.0 million pre-petition line of credit held by the Company's wholly-owned subsidiary were repaid in full through the Exit Facility (as defined and described below);
?A secured equipment note held by the Company's wholly-owned subsidiary was assumed, ratified, and reinstated on the Effective Date;
?Each holder of an allowed construction / mechanic's lien claim received payment in full in cash on the Effective Date or, in some cases, will receive such payment as soon as practicable after the Effective Date;
?Each holder of an allowed general unsecured claim received, in full satisfaction of such claims, a one-time lump sum distribution equal to 15% of its claim on the Effective Date or, in some cases, will receive such payment as soon as practicable after the Effective Date; and
?Holders of subordinated claims did not receive any distributions in respect thereof.
Payments of claims made pursuant to the Plan, along with the payment of administrative expenses and professional fees, were funded by IT'SUGAR with its cash on-hand and net proceeds from the Exit Facility provided by the Company.
On the Effective Date, IT'SUGAR entered into a secured exit credit facility with a wholly-owned subsidiary of the Company (the "Exit Facility") which provides for advances to IT'SUGAR of up to$13.0 million . The Company's wholly-owned subsidiary advanced$13.0 million to IT'SUGAR under the Exit Facility, less the repayment of the$4.0 million DIP credit facility due from IT'SUGAR and the$6.0 million pre-petition line of credit due from IT'SUGAR (both of which were superseded and replaced by the Exit Facility). 40 -------------------------------------------------------------------------------- Pursuant to the terms of the Plan, the Company's equity interests in IT'SUGAR were revested on the Effective Date, and all organizational documents of IT'SUGAR were assumed, ratified, and reinstated. Therefore, a result of the confirmation and effectiveness of the Plan and the revesting of its equity interests in IT'SUGAR, the Company was deemed to have reacquired a controlling financial interest in IT'SUGAR and consolidated the results of IT'SUGAR into its consolidated financial statements as of the Effective Date, the date that the Company reacquired control of IT'SUGAR. As a result of the reconsolidation of IT'SUGAR,BBX Sweet Holdings recognized a gain on consolidation of$15.9 million during the three and six months endedJune 30, 2021 , which reflects the remeasurement of the carrying value ofBBX Sweet Holdings' equity interests in IT'SUGAR at fair value as of the Effective Date. Further, as a result of the deconsolidation and subsequent reconsolidation of IT'SUGAR, while the section below includes discussion related to IT'SUGAR's results of operations during the course of the Chapter 11 Cases, IT'SUGAR's operating results during the period fromSeptember 22, 2020 through the Effective Date are not included inBBX Sweet Holdings' consolidated results.
IT'SUGAR - Business Update
During the course of the Chapter 11 Cases, IT'SUGAR permanently closed 17 retail locations and opened 10 "temporary" retail locations in selectU.S. locations. As of June, 30, 2021, IT'SUGAR was operating approximately 96 retail locations acrossthe United States , including the 10 "temporary" retail locations. IT'SUGAR's "temporary" retail locations required initial capital investments that were significantly lower than the investments required for IT'SUGAR's traditional retail locations, as IT'SUGAR repurposed retail spaces that were recently vacated by the prior tenants and, in many cases, utilized existing fixtures from certain of its closed locations. These temporary locations are being leased pursuant to lease agreements which have terms ranging from 13-36 months and provide for the payment of rent based on a percentage of sales generated at the applicable location. IT'SUGAR is evaluating whether it will seek to extend the term of the lease agreements for certain of these locations and is also currently evaluating additional locations in which to potentially open similar temporary retail locations under the same general terms as the existing temporary retail locations. Since June, 30, 2021, IT'SUGAR has opened 2 additional temporary locations and expects to open 2 additional temporary locations during the remainder of 2021. In addition, IT'SUGAR expects to open its first Oreo Café in the third floor of its candy "department store" at American Dream inNew Jersey inAugust 2021 . Further, inJuly 2021 , IT'SUGAR executed a lease agreement to open an 18,000 square foot retail location at the Ala Moana Center inHonolulu, Hawaii . Construction of the location has commenced, and IT'SUGAR expects to open the location during the fourth quarter of 2021. During the course of the Chapter 11 Cases, IT'SUGAR executed lease amendments with respect to 78 of its 96 retail locations. Although the specific terms of the executed lease amendments vary, the amended leases generally provide for the forgiveness of IT'SUGAR's pre-petition rent obligations, and many (but not all) of the amended leases also provide for the payment of rent based on a percentage of sales volumes (in lieu of previously scheduled fixed lease payments), generally for a period of one to two years from the commencement of the Chapter 11 Cases. Following the specified periods of time pursuant to which IT'SUGAR is required to pay rent based on a percentage of sales volumes as opposed to fixed rental payments, the amended leases generally require IT'SUGAR to resume the payment of previously scheduled fixed lease payments going forward. For certain retail locations, including four locations that historically generated operating losses largely based on the applicable fixed rental obligations prior to the amendments, the lease amendments provide for the payment of rent based on a percentage of sales volumes through the remainder of the lease term; however, in such cases, the landlords have the right under these agreements to terminate the lease agreement at any time following notice periods ranging from 30 to 60 days. Although there is no assurance that it will be able to maintain or increase its sales levels in future periods, IT'SUGAR has experienced an improvement in its sales since the filing of the Chapter 11 Cases. The following summarizes the increase/(decrease) in IT'SUGAR's comparable store sales and total revenues during the periods since the filing of the Chapter 11 Cases as compared to the comparable periods in 2019: ? 41
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Fourth Quarter 2020 First Quarter 2021 Second Quarter 2021
Compared to Fourth Compared to First Compared to Second
Quarter 2019 Quarter 2019 (2) Quarter 2019 (2)
Comparable Store -32% -10% 8%
Sales (1)
Total Revenues -23% 11% 24%
(1)Comparable store sales represent IT'SUGAR's sales at its retail locations excluding the impact of e-commerce sales and changes in its store portfolio.
(2)Because the results for the comparable 2020 periods were impacted by the closure of IT'SUGAR's locations inMarch 2020 due to the COVID-19 pandemic, the Company does not believe that IT'SUGAR's results for the comparable 2020 periods would provide a meaningful comparison in relation to its operating results for the 2021 periods. The improvement in total revenues as compared to the improvement in comparable store sales reflects, among other things, the opening of its candy "department store" at American Dream inNew Jersey inDecember 2019 , as well as an increase in e-commerce sales. However, IT'SUGAR does not currently expect a significant portion of these e-commerce sales to continue beyond the third quarter of 2021. As a result of ongoing disruptions in global supply chains, IT'SUGAR has experienced an increase in the cost of inventory and freight, as well as delays in its supply chain. To date, IT'SUGAR has generally been able to mitigate the impact of increased costs through increases in the prices of its products. However, supply chain disruptions have also impacted its ability to maintain historical inventory levels at its retail locations, and to the extent that costs continue to increase, there is no assurance that IT'SUGAR will be able to continue to increase the prices of its products without significantly impacting consumer demand and its sales volume. Further, IT'SUGAR has experienced an increase in payroll costs as a result of shortages in available labor at its retail locations. While the Company believes that the bankruptcy process has improved IT'SUGAR's financial condition as a result of the relief it obtained in relation to its pre-petition liabilities and amendments to its lease agreements that lowered its ongoing occupancy costs, the Company continues to be subject to risks and uncertainties related to IT'SUGAR that have had and could continue to have a material adverse effect on the Company and IT'SUGAR's business, results of operations, and financial condition. These risks and uncertainties include, without limitation, the impact of the reconsolidation of IT'SUGAR's results into the Company's financial statements; the potential adverse impact of the Chapter 11 Cases proceedings and the success of the restructuring; the continuing adverse impact of the COVID-19 pandemic on IT'SUGAR's operations, results, and financial condition; risks associated with the current economic environment with respect to demand, sales levels, and consumer behavior, as well as increased inventory, freight, and labor costs and general supply chain disruptions which have had and may continue to have a material adverse effect in future periods; the risk that IT'SUGAR may not be able to continue to increase prices without significantly impacting consumer demand; risks relating to IT'SUGAR's business plans, including that IT'SUGAR may not be able to fund or otherwise open new retail locations, including new "temporary" locations, the Oreo Café, or its new location at Ala Moana Center inHawaii , as or when expected, or at all; the risk that IT'SUGAR may not be able to extend or enter into new lease agreements for any existing "temporary" locations which it desires to extend, whether on favorable terms or at all; risks related to the lease amendments entered into by IT'SUGAR, including that, while many of the lease amendments provide for the payment of rent based on a percentage of sales volumes for a specified period of time as opposed to fixed rental payments, IT'SUGAR continues to bear the costs of staffing and providing inventory and the terms of many of such amendments require IT'SUGAR to resume the payment of previously scheduled fixed lease payments going forward and, as a result, IT'SUGAR's ongoing occupancy costs are expected to increase as fixed rental payments under these leases resume and IT'SUGAR's overall exposure to risks related to fixed rental obligations will increase and revert to pre-bankruptcy levels in relation to such locations; and the risk that landlords may exercise their right to terminate leases.
Hoffman's Chocolates and Las Olas Confections and Snacks
During the three and six months endedJune 30, 2021 , all of Hoffman's Chocolates locations were open, and its revenues were$1.0 million and$2.4 million , respectively, as compared to$0.6 million and$2.7 million during the comparable 2020 periods. Although its sales have shown signs of improvement since 2020, Hoffman's Chocolates' operations continue to be impacted by the effects of the COVID-19 pandemic on demand, sales levels, and consumer behavior, as its sales during 2021 continue to be lower than sales volumes in the 2019 periods. 42 -------------------------------------------------------------------------------- Las Olas Confections and Snacks' operations have not been significantly impacted by the effects of the COVID-19 pandemic, and its sales during the three and six months endedJune 30, 2021 increased by approximately 168.8% and 52.4%, respectively, as compared to its sales during the same 2020 periods. However, it is experiencing the impact of global supply chain disruptions, including increased costs for raw materials and supply chain delays.
Results of Operations
Information regarding the results of operations for
For the Three Months Ended June 30 , For
the Six Months Ended
2021 2020 Change 2021 2020 Change
Trade sales $ 10,198 5,248 4,950 15,180 26,577 (11,397)
Cost of trade sales (6,556) (9,045) 2,489 (10,384) (23,815) 13,431
Gross margin 3,642 (3,797) 7,439 4,796 2,762 2,034
Interest income 36 13 23 36 27 9
Other revenue - 85 (85) - 204 (204)
Interest expense (40) (55) 15 (66) (116) 50
Impairment losses - (595) 595 - (25,303) 25,303
Selling, general and
administrative expenses (3,590) (5,740) 2,150 (5,161) (16,640) 11,479
Total operating income
(losses) 48 (10,089) 10,137 (395) (39,066) 38,671
Other income 19 75 (56) 45 114 (69)
Gain on the
consolidation of
IT'SUGAR, LLC 15,890 - 15,890 15,890 - 15,890
Income (loss) from
continuing operations
before income taxes $ 15,957 (10,014) 25,971 15,540 (38,952) 54,492
Gross margin percentage % 35.71 (72.35) 108.06 31.59 10.39 21.20
SG&A as a percent of
trade sales % 35.20 109.38 (74.18) 34.00 62.61 (28.61)
BBX Sweet Holdings income from continuing operations before income taxes for the
three months ended June 30, 2021 compared to the same 2020 period increased by
$26.0 million primarily due to the following:
?The recognition of a $15.9 million gain on the reconsolidation of IT'SUGAR in
the Company's financial statements as a result of IT'SUGAR emerging from Chapter
11 bankruptcy in June 2021 and BBX Sweet Holdings' revesting its control of
IT'SUGAR;
?An increase in trade sales and gross margin in 2021 as a result of the impact
of the COVID-19 pandemic on BBX Sweet Holdings' operations in 2020, including
$6.0 million of trade sales from IT'SUGAR during the period from June 17, 2021
to June 30, 2021 as compared to $3.6 million during the three months ended June
30, 2020 ; and
?A net decrease in operating expenses associated with IT'SUGAR due to the
deconsolidation of IT'SUGAR in
BBX Sweet Holdings income from continuing operations before income taxes for the six months endedJune 30, 2021 compared to the same 2020 period increased by$54.5 million primarily due to the factors described above related to the three months endedJune 30, 2021 compared to the same 2020 period, as well as the recognition of impairment losses in the 2020 period due to a decline in the estimated value of the goodwill and long-lived assets associated withBBX Sweet Holdings' reporting units, including IT'SUGAR, as a result of the impact of the COVID-19 pandemic on market conditions. 43 -------------------------------------------------------------------------------- Information regarding the results of operations for IT'SUGAR fromJune 17, 2021 toJune 30, 2021 and for the three and the six months endedJune 30, 2020 , as included inBBX Sweet Holdings' consolidated results of operations, is set forth below (dollars in thousands): For the Three Months EndedJune 30 , For
the Six Months Ended
2021 2020 Change 2021 2020 Change
Trade sales $ 6,022 3,609 2,413 6,022 19,597 (13,575)
Cost of trade sales (3,114) (7,117) 4,003 (3,114) (17,828) 14,714
Gross margin 2,908 (3,508) 6,416 2,908 1,769 1,139
Other revenue - - - - 8 (8)
Interest expense (27) (35) 8 (27) (76) 49
Impairment losses - (595) 595 - (24,948) 24,948
Selling, general and
administrative expenses (2,067) (4,330) 2,263 (2,067) (13,327) 11,260
Total operating income
(losses) 814 (8,468) 9,282 814 (36,574) 37,388
Other income 3 40 (37) 3 62 (59)
Income (loss) before
income taxes $ 817 (8,428) 9,245 817 (36,512) 37,329
Gross margin percentage % 48.29 (97.20) 145.49 48.29 9.03 39.26 SG&A as a percent of trade sales % 34.32 119.98 (85.65) 34.32 68.01 (33.68) Renin Reportable Segment Segment Description Renin is engaged in the design, manufacture, and distribution of sliding doors, door systems and hardware, and home décor products and operates through its headquarters inCanada and three manufacturing and distribution facilities inthe United States andCanada . In addition to its own manufacturing, Renin also sources various products and materials fromChina ,Brazil , and certain other countries. InOctober 2020 , Renin acquired substantially all of the assets and assumed certain of the liabilities of Colonial Elegance. Headquartered inMontreal, Canada , Colonial Elegance is a supplier and distributor of building products, including barn doors, closet doors, and stair parts, and its customers include various big box retailers inthe United States andCanada which are complementary to and expand Renin's existing customer base.
Renin's products are sold through three channels in
Overview
As ofJune 30, 2021 , Renin had continued to operate its manufacturing and distribution facilities in spite of the ongoing effects of the COVID-19 pandemic. During the three and six months endedJune 30, 2021 , Renin's sales increased as compared to the same period in 2020 as a result of the acquisition of Colonial Elegance and an increase in customer demand, particularly in Renin's retail channel. Its retail channel comprised approximately 80% of its gross sales for the six months endedJune 30, 2021 as compared to approximately 62% for the same period in 2020, which reflects, among other things, the acquisition of Colonial Elegance, which expanded Renin's retail customers to include Menards, Lowe'sCanada , and Home Depot Canada. However, Renin has experienced a significant increase in costs related to shipping and raw materials, as well as delays in its supply chains, which have negatively impacted its product costs and gross margin, increased the risk that Renin will be unable to fulfill customer orders, and negatively impacted its working capital and cash flows due to increased inventory in transit and a prolonged period between when it is required to pay its suppliers and it is paid by its customers. In an effort to mitigate the impact of these factors, Renin is seeking to i) negotiate increases in prices with its customers, ii) maintain higher inventory levels in an effort to ensure that it can fulfill customer orders, iii) diversify its global supply chains, and iv) transfer the assembly of certain products from foreign suppliers to its own manufacturing facilities. Although the steps Renin is seeking to take are intended to mitigate the risks it faces, Renin's product costs and gross margin are expected to continue to be adversely impacted in 2021. Further, Renin's efforts to mitigate its increase in costs have had and may have other negative impacts on Renin's operations. In particular, the combination of higher inventory levels and the increased time between its purchase of inventory and receipt of payments from customers have negatively impacted its liquidity and required it to obtain a temporary increase in the 44
-------------------------------------------------------------------------------- availability under its credit facility with TD Bank inJuly 2021 , as further described below. In addition, although the increase in product and shipping costs is impacting the entire industry in which Renin operates, which has generally resulted in an overall increase in prices to customers, the negotiation of increased prices with customers increases the risk that customers will pursue alternative sources for Renin's products, which may result in Renin losing customers and/or require it to lower prices in an effort to retain customers. Further, while Renin is generally seeking to diversify its supply chain and limit its exposure to geographic locations and suppliers, supply chain delays and the scarcity of products and raw materials have made this difficult. InApril 2021 , Renin was notified by one of its major customers that the customer will no longer be purchasing certain products from Renin commencing in late 2021. These products were previously estimated to comprise approximately 7% of Renin's estimated net sales for fiscal 2021. Although the customer was also evaluating alternative sources for certain other products previously estimated to comprise approximately 6% of Renin's estimated net sales for fiscal 2021, Renin has been notified by the customer that it will continue to purchase such products from Renin. Although Renin was able to maintain its existing pricing for these products, Renin expects that the gross margin for these products will nevertheless be negatively impacted by the overall increase in product costs that it is experiencing. Renin expects that these events will negatively impact its sales, gross margin, and profitability and is evaluating possible cost saving initiatives to offset the impact of these events. InJuly 2021 , Renin's credit facility with TD Bank was amended effectiveJune 30, 2021 , to increase the availability under the revolving line of credit from$20.0 million to$24.0 million throughDecember 31, 2021 , at which time the availability under the line of credit will revert to$20.0 million and any amounts outstanding in excess of$20.0 million must be repaid by Renin. In addition, the amendment to the credit facility temporarily increases the maximum total leverage ratio included in the financial covenants of the facility and prohibits Renin from making distributions to the Company throughJuly 1, 2022 , at which time the leverage ratio and Renin's ability to make distributions to the Company will revert to the requirements under the facility immediately prior to the amendment. Although Renin has obtained relief in relation to its financial covenants under its credit facility with TD Bank, if Renin is unable to offset the impact of the above factors and events with cost savings initiatives and improved margins, these events could cause Renin to fall out of compliance with the terms of its outstanding credit facility with TD Bank. If Renin is required to seek a waiver from the bank as a result of noncompliance with the terms of its credit facility and is unable to obtain a waiver, it may lose availability under its line of credit, be required to provide additional collateral, and/or repay all or a portion of its borrowings, any of which would have a material adverse effect on the Company's liquidity, financial position, and results. In addition to the above, although Renin's manufacturing and distribution facilities have to date remained open throughout the pandemic, increases in COVID-19 cases inCanada may result in closures in its facilities located inCanada . Further, while consumer demand for Renin's products has generally remained strong throughout the COVID-19 pandemic, which Renin believes may be attributable to a consumer focus on home improvements, it is possible that consumer demand may shift away from home improvements as many portions of the economy reopen, particularly inthe United States . The risks and uncertainties associated with the matters described above and the significant uncertainty in the overall economy resulting from the COVID-19 pandemic, which is also further described in the Company's 2020 Annual Report, could have a material adverse impact on Renin's results of operations, cash flows, and financial condition in future periods. 45
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Results of Operations
Information regarding the results of operations for Renin is set forth below (dollars in thousands):
For the Three Months Ended June 30 , For
the Six Months Ended
2021 2020 Change 2021 2020 Change
Trade sales $ 34,378 17,175 17,203 73,069 34,621 38,448
Cost of trade sales (30,362) (13,852) (16,510) (63,018) (28,127) (34,891)
Gross margin 4,016 3,323 693 10,051 6,494 3,557
Interest expense (429) (71) (358) (839) (185) (654)
Selling, general and
administrative expenses (3,804) (2,035) (1,769) (8,108) (4,653) (3,455)
Total operating (loss)
income (217) 1,217 (1,434) 1,104 1,656 (552)
Other expense - - - - (3) 3
Foreign exchange gain
(loss) 976 (6) 982 496 272 224
Income from continuing
operations before income
taxes $ 759 1,211 (452) 1,600 1,925 (325)
Gross margin percentage % 11.68 19.35 (7.67) 13.76 18.76 (5.00)
SG&A as a percent of
trade sales % (11.07) (11.85) 0.78 (11.10) (13.44) 2.34
Renin's income from continuing operations before income taxes for the three
months ended
?A decrease in Renin's gross margin percentage as a result of increased costs related to raw materials and shipping costs;
?An increase in selling, general, and administrative expenses primarily due to ongoing expenses associated with Colonial Elegance, including amortization expense related to acquired intangible assets; and
?An increase in interest expense associated with Renin's use of its credit facility with TD Bank to fund a significant portion of the purchase price for the Colonial Elegance acquisition and to fund higher inventory balances; partially offset by
?An increase in Renin's trade sales and gross margin resulting primarily from the acquisition of Colonial Elegance inOctober 2020 and an overall increase in customer demand; and ?An increase in foreign currency exchange gains due to the impact of changes in foreign exchange rates between theU.S. dollar and Canadian dollar and an overall increase in assets and liabilities denominated in Canadian dollars as ofJune 30, 2021 as compared toJune 30, 2020 as a result of the acquisition of Colonial Elegance. Renin's income from continuing operations before income taxes for the six months endedJune 30, 2021 was$1.6 million compared to$1.9 million during the same 2020 period. The decrease was primarily due to the items discussed above for the three months endedJune 30, 2021 compared to the same 2020 period.
Other
Other in the Company's segment information includes its investments in other operating businesses, including a restaurant located inSouth Florida that was acquired through a loan foreclosure and an insurance agency. During the three months endedJune 30, 2021 , the Company recognized income from continuing operations before income taxes related to these other businesses of$0.4 million as compared to a loss of$0.2 million during the comparable period in 2020. During the six months endedJune 30, 2021 , the Company recognized income from continuing operations before income taxes related to these other businesses of$1.2 million as compared to a loss before income taxes of$3.0 million during the comparable period in 2020. The improvements in the results of operations for these businesses was primarily due to the impact of the COVID-19 pandemic on these business in 2020. In addition, during the six months endedJune 30, 2020 , the Company recognized$2.7 million of impairment losses related to certain of these investments primarily resulting from the effects of the COVID-19 pandemic on the estimated value of the businesses. 46
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Reconciling Items and Eliminations
Reconciling items and eliminations in the Company's segment information includes the following:
?
?Interest income on the
?Interest income on interest-bearing cash accounts; and
?Interest expense capitalized in connection with the development and construction of real estate.
Corporate General and Administrative Expenses
BBX Capital's corporate general and administrative expenses for the three months endedJune 30, 2021 and 2020 were$3.5 million and$4.1 million , respectively, and$7.4 million and$7.9 million , respectively, for the six months endedJune 30, 2021 and 2020. During the three and six months endedJune 30, 2020 ,BBX Capital's corporate general and administrative expenses consisted primarily of an allocation of the cost of services provided byBluegreen Vacations to the Company for various support functions, including executive compensation, legal, accounting, human resources, investor relations, and executive offices, while during the three and six months endedJune 30, 2021 , its corporate general and administrative expenses consisted of the actual costs of these functions, as many of these functions were transferred toBBX Capital in connection with the spin-off fromBluegreen Vacations .
Interest Income
BBX Capital's interest income for the three and six months endedJune 30, 2021 was$1.1 million and$2.3 million , respectively, which includes$1.1 million and$2.3 million , respectively, of interest income from its$75.0 million note receivable fromBluegreen Vacations .BBX Capital had no interest income during three and six months endedJune 30, 2020 , asBluegreen Vacations issued the$75.0 million note toBBX Capital and transferred most of its cash and short-term investments toBBX Capital in connection with the spin-off onSeptember 30, 2020 .
Provision for Income Taxes
The Company estimates its effective annual income tax rate on a quarterly basis based on current and forecasted operating results for the annual period and applies the estimated effective income tax rate to its income or loss before income taxes reduced by net income or loss attributable to noncontrolling interests in joint ventures taxed as partnerships. In addition, the Company recognizes taxes related to unusual or infrequent items or resulting from a change in judgment regarding a position taken in a prior period as discrete items in the interim period in which the event occurs. The Company's effective income tax rate was approximately 23% and 25% during the three months endedJune 30, 2021 and 2020, respectively, and 25% and 21% during the six months endedJune 30, 2021 and 2020, respectively. The Company's effective income tax rates for the three and six months endedJune 30, 2021 and 2020 were impacted by the Company's nondeductible executive compensation and state income taxes. The effective tax rate for the three and six months endedJune 30, 2021 excludes a discrete income tax expense of$4.5 million related to the gain on the consolidation of IT'SUGAR. The effective income tax rate for the 2020 period reflects an estimated ordinary taxable loss for the year endedDecember 31, 2020 resulting primarily from the effects of the COVID-19 pandemic.
Discontinued Operations
As described in Note 1 to the Company's condensed consolidated financial statements included in Item 1 of this report, Food forThought Restaurant Group ("FFTRG"), a wholly-owned subsidiary of the Company, previously entered into area development and franchise agreements with MOD Pizza related to the development of MOD Pizza franchised restaurant locations throughoutFlorida and, through 2019, had opened nine restaurant locations. InSeptember 2019 , the Company entered into an agreement with MOD Pizza to terminate the area development and franchise agreements and transferred seven of its restaurant locations, including the related assets, operations, and lease obligations, to MOD Pizza. In addition, the Company closed the remaining two locations and terminated the related lease agreements. 47 -------------------------------------------------------------------------------- The Company recognized pre-tax income from discontinued operations of$0.6 million for the three months endedJune 30, 2020 and a pre-tax loss from discontinued operations of$0.1 million for the six months endedJune 30, 2020 . The pre-tax income for the three months endedJune 30, 2020 was primarily due to a$0.9 million gain on the termination of a lease obligation, while the pre-tax loss for the six months endedJune 30, 2020 was primarily due to a$1.0 million impairment loss associated with a leased asset, partially offset by the aforementioned gain on the termination of a lease obligation.
Net Income or Loss Attributable to Noncontrolling Interests
During the three and six months endedJune 30, 2020 , the Company's condensed consolidated financial statements included the results of operations and financial position of IT'SUGAR, a partially-owned subsidiary in which it held a controlling financial interest, and as a result, the Company was previously required to attribute net income or loss to a redeemable noncontrolling interest in IT'SUGAR. As a result of the filing of the Bankruptcy Cases by IT'SUGAR and its subsidiaries, the Company deconsolidated IT'SUGAR as ofSeptember 22, 2020 and derecognized the related noncontrolling interest in IT'SUGAR. Upon the consolidation of IT'SUGAR inJune 2021 , IT'SUGAR's noncontrolling interest was initially recorded at its estimated fair value of$0.9 million . The net income attributable to noncontrolling interests of$0.1 million and$0.2 million during the three and six months endedJune 30, 2021 reflects income attributed to a 19% noncontrolling equity interest in a restaurant the Company acquired through foreclosure and a noncontrolling interest in IT'SUGAR. The net loss attributable to noncontrolling interests of$0.9 million and$4.3 million during the three and six months endedJune 30, 2020 was primarily due to the recognition of impairment losses related to goodwill and long-lived assets as a result of the COVID-19 pandemic, including$3.6 million in losses attributed to the redeemable noncontrolling interest in IT'SUGAR.
Consolidated Cash Flows
A summary of our consolidated cash flows is set forth below (in thousands):
For the Six Months
Ended
2021 2020
Cash flows provided by (used in) operating activities $ 13,009
(8,856)
Cash flows provided by (used in) investing activities 8,041
(10,324)
Cash flows (used in) provided by financing activities (9,236)
94,962
Net increase in cash, cash equivalents and restricted cash $ 11,814
75,782
Cash, cash equivalents and restricted cash at beginning of period 90,387
21,287
Cash, cash equivalents and restricted cash at end of period $ 102,201
97,069
Cash Flows from Operating Activities
The Company's cash provided by operating activities increased by$21.9 million during the six months endedJune 30, 2021 compared to the same 2020 period primarily due to higher sales of real estate inventory by BBXRE, higher returns on investments from unconsolidated real estate joint ventures, and lower operating losses atBBX Sweet Holdings . The decrease in operating losses atBBX Sweet Holdings during the 2021 period compared to the 2020 period was primarily the result of IT'SUGAR's operating losses during the 2020 period.
Cash Flows from Investing Activities
The Company's cash provided by investing activities increased by$18.4 million during the six months endedJune 30, 2021 compared to the same 2020 period primarily due to$6.9 million of cash acquired in connection with the consolidation of IT'SUGAR, higher returns of investments in unconsolidated real estate joint ventures, and lower investments in unconsolidated real estate joint ventures, partially offset by lower proceeds from the repayment of loans. 48
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Cash Flows from Financing Activities
The Company's cash used in financing activities increased by$104.2 million during the six months endedJune 30, 2021 compared to the same 2020 period, which was primarily due to a$95.1 million net transfer of cash fromBluegreen Vacations in 2020, a$11.3 million decrease in borrowings in 2021 as compared to the 2020, and the repurchase of$3.8 million of Class A Common Stock during the 2021 period, partially offset by$5.9 million of lower repayments of notes payable and other borrowings.
Seasonality
BBX Sweet Holdings' businesses are subject to seasonal fluctuations in trade sales, which causes fluctuations inBBX Sweet Holdings' quarterly results of operations. Historically, IT'SUGAR has generated its strongest retail trade sales during the months from June through August, as well as during the month of December, when families are generally on vacation, whileBBX Sweet Holdings' other operating businesses generally generate their strongest trade sales during the fourth quarter in connection with various holidays inthe United States .
Commitments
The Company's material commitments as of
The following table summarizes the contractual minimum principal and interest payments required on the Company's outstanding debt and payments required on the Company's non-cancelable operating leases by period due date as ofJune 30, 2021 (in thousands): Payments Due by Period Unamortized Debt Less than 1 - 3 4 - 5 After 5 Issuance Contractual Obligations (1) 1 year Years Years Years Costs Total Notes payable and other borrowings$ 1,510 7,765 40,877 14,831 (708) 64,275 Noncancelable operating leases 6,554 31,918 24,981 28,476 - 91,929 Purchase an additional 40% interest in the Altman Companies (2) - 9,400 - - - 9,400 Total contractual obligations 8,064 49,083 65,858 43,307 (708) 165,604 Interest Obligations (3) Notes payable and other borrowings 2,540 5,051 3,985 11,126 - 22,702 Total contractual interest 2,540 5,051 3,985 11,126 - 22,702 Total contractual obligations$ 10,604 54,134 69,843 54,433
(708) 188,306
(1)The above table excludes certain additional amounts that the Company may invest in the Altman Companies or its sponsored joint ventures.
(2)Subject to certain adjustments, including, but not limited to, reimbursements for excess working capital and predevelopment expenditures incurred at the time of purchase. (3)Assumes that the scheduled minimum principal payments are made in accordance with the table above and the interest rate on variable rate debt remains the same as the rate atJune 30, 2021 . 49
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Liquidity and Capital Resources
As ofJune 30, 2021 , the Company had cash, cash equivalents, and short-term investments of approximately$106.6 million . Management believes that the Company has sufficient liquidity to fund operations, including anticipated working capital, capital expenditure, and debt service requirements, and respond to the challenges related to the COVID-19 pandemic and current economic environment for the foreseeable future, subject to mitigation and cost reduction efforts and management's determination of whether and/or the extent to which it will fund the operations and commitments of its subsidiaries. As previously disclosed, management has evaluated and will continue to evaluate the potential operating deficits and liquidity requirements of its subsidiaries and may determine not to provide additional funding or capital to subsidiaries whose operations it believes may not be sustainable. The Company's principal sources of liquidity have historically been its available cash and short-term investments, distributions from unconsolidated real estate joint ventures, proceeds received from sales of real estate, including lot sales at theBeacon Lake Community development, and contributions fromBluegreen Vacations . However, as a result of the spin-off ofBBX Capital fromBluegreen Vacations , the Company will no longer receive capital contributions fromBluegreen Vacations . As a result, the Company believes that its primary source of liquidity for the foreseeable future will be its available cash, cash equivalents, and short-term investments, distributions from unconsolidated real estate joint ventures, and proceeds received from sales of real estate. In addition, the Company expects to receive quarterly interest payments on the$75.0 million promissory note that was issued byBluegreen Vacations in favor ofBBX Capital in connection with the spin-off. Amounts outstanding under the note accrue interest at a rate of 6% per annum, with interest payments scheduled to occur on a quarterly basis. However,Bluegreen Vacations may elect to defer such quarterly interest payments, with interest on the entire outstanding balance thereafter to accrue at a cumulative, compounded rate of 8% per annum until such time asBluegreen Vacations is current on all accrued payments under the note, including deferred interest. The Company believes that its current financial condition will allow it to meet its anticipated near-term liquidity needs. The Company may also seek additional liquidity from outside sources, including traditional bank financing, secured or unsecured indebtedness, or the issuance of equity and/or debt securities. However, these alternatives may not be available to the Company on attractive terms, or at all. The inability to raise funds through the sources discussed above would have a material adverse effect on the Company's business, results of operations, and financial condition.
Anticipated and Potential Liquidity Requirements
The Company currently expects to use its available liquidity to fund operations (including corporate expenses, working capital, capital expenditures, debt service requirements, and the Company's other commitments described above) and make additional investments in real estate, its existing operating businesses, or other opportunities. However, as discussed above, the Company's management intends to evaluate any operating deficits and liquidity requirements of its subsidiaries as a result of the impact of the COVID-19 pandemic on operations and general economic conditions and may make a determination that it will not provide additional funding or capital to its subsidiaries. InNovember 2018 , BBXRE acquired a 50% membership interest in the Altman Companies, a joint venture between BBXRE andJoel Altman engaged in the development, construction, and management of multifamily apartment communities. Although the Altman Companies generates revenues from the performance of development, general contractor, leasing, and property management services to the joint ventures that are formed to invest in the development projects that it originates, it is expected that any profits generated for BBXRE andJoel Altman would primarily be through the equity distributions that BBXRE andJoel Altman receive through their investment in the managing member of such joint ventures. Therefore, as the timing of any such distributions to BBXRE andJoel Altman is generally contingent upon the sale or refinancing of a completed development project, it is anticipated that BBXRE andJoel Altman will be required to contribute capital to the Altman Companies for its ongoing operating costs and predevelopment expenditures, as well as to the managing member of newly formed joint ventures. At the current time, BBXRE anticipates that it will invest approximately$4.0 million to$5.0 million in the Altman Companies and certain related joint ventures during the remainder of 2021 relating to planned predevelopment expenditures, ongoing operating costs, and potential operating shortfalls related to certain projects, although BBXRE currently expects to receive a reimbursement of predevelopment expenditures in connection with the commencement of a new project that would partially offset these expected contributions if the project is commenced. Further, based on its current pipeline of new potential development projects, BBXRE currently estimates that it may invest an additional$8.0 million to$9.0 million in the managing member of newly formed joint ventures for new projects during the remainder of 2021; however, the timing of the commencement of such projects may result in such estimated investments occurring in 2022 or a later period. As previously disclosed, BBXRE may also consider opportunistically 50 -------------------------------------------------------------------------------- making increased equity investments in one or more of such new projects originated by the Altman Companies. Furthermore, if the Altman Companies closes on development financing for additional projects, BBXRE expects that it would be required to contribute an estimated additional$1.25 million toABBX Guaranty, LLC , a joint venture between BBXRE andJoel Altman that provides guarantees on the indebtedness and construction cost overruns of new real estate joint ventures formed by the Altman Companies. Based on its current pipeline of new potential development projects, BBXRE currently expects that it will make this contribution toABBX Guaranty, LLC in 2022. Pursuant to the operating agreement of the Altman Companies, BBXRE will also acquire an additional 40% equity interest in the Altman Companies fromJoel Altman for a purchase price of$9.4 million , subject to certain adjustments, inJanuary 2023 , whileJoel Altman can also, at his option or in other predefined circumstances, require BBXRE to purchase his remaining 10% equity interest in the Altman Companies for$2.4 million . In addition, in certain circumstances, BBXRE may acquire the 40% membership interests in the affiliatedAltman-Glenewinkel Construction that are not owned by the Altman Companies for a purchase price based on prescribed formulas in the operating agreement ofAltman-Glenewinkel Construction . In addition to BBXRE's anticipated investments in the Altman Companies and related joint ventures, BBXRE expects that it will contribute additional capital up to approximately$1.0 million to one of its existing joint ventures during the next twenty-four months based on the current plans and estimates associated with the development project. The operating agreements of certain of the Company's real estate joint ventures contain customary buy-sell provisions which could result in either the sale of the Company's interest or the use of available cash to acquire the partner's interest, and the Company's commitments and liquidity requirements described above do not include amounts that the Company may pay as a result of the initiation of these provisions. BBXRE has recently been engaged in negotiations with its partner in one of its existing joint ventures related to the possible initiation of the buy-sell provision within the operating agreement for the venture or a similar transaction pursuant to which BBXRE may purchase the partner's interest in the venture or the partner may purchase BBXRE's interest in the venture. The partner that purchases the other partner's interest would also assume the joint venture's debt and be required to provide a guaranty on the debt. However, as of this date, the terms of the buy-sell provision have not been initiated. InOctober 2020 ,BBX Capital's board of directors approved a share repurchase program which authorized the repurchase of up to$10.0 million of shares ofBBX Capital's Class A Common Stock and Class B Common Stock. The stock repurchase authorization does not obligate the Company to repurchase any specific number of shares and may be suspended, modified, or terminated at any time byBBX Capital's board of directors without prior notice. As ofJune 30, 2021 , 597,088 shares of the Company's Class A Common Stock have been purchased for approximately$3.8 million under the share repurchase program, at an average cost of$6.29 per share, including fees. As the tender offer described below was not consummated under the share repurchase program, the Company may repurchase up to an additional$6.2 million of shares of its Common Stock pursuant to the program. InMay 2021 ,BBX Capital commenced a cash tender offer to purchase up to 4,000,000 shares of its Class A Common Stock at a purchase price of$6.75 per share, and inJune 2021 ,BBX Capital amended the terms of the tender offer to increase the purchase price from$6.75 per share to$8.00 per share and reduce the number of shares sought to be purchased from 4,000,000 shares to 3,500,000 shares. InJuly 2021 ,BBX Capital completed the cash tender offer and purchased 1,402,785 shares of its Class A Common Stock at a purchase price of$8.00 per share for an aggregate purchase price of approximately$11.2 million . The shares purchased in the tender offer represented approximately 9.3% of the total number of outstanding shares ofBBX Capital's Class A Common Stock and 7.5% ofBBX Capital's total issued and outstanding equity, which includes the issued and outstanding shares ofBBX Capital's Class B Common Stock. After giving effect to the purchase and retirement of the shares,BBX Capital had 17,317,805 shares of Common Stock issued and outstanding, consisting of 13,624,209 shares of its Class A Common Stock and 3,693,596 shares of its Class B Common Stock.
Credit Facilities with Future Availability
Toronto-Dominion Commercial Bank Credit Facility ("TD Bank "). Renin has a credit
facility with TD Bank that includes a $30.0 million term loan (the "Term Loan")
and a revolving operating loan of up to $20.0 million (which amount was
increased as described below) (the "Operating Loan"), both of which mature in
October 2025 . As of June 30, 2021 , the outstanding amounts under the Term Loan
and Operating Loan were $28.9 million and $17.4 million , respectively, with
effective interest rates of 3.24% and 3.56%, respectively.
51
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As of June 30, 2021 , Renin had availability of approximately $6.6 million under
the Operating Loan, subject to eligible collateral and the terms of the
facility. In July 2021 , Renin's credit facility with TD Bank was amended
effective June 30, 2021 , to increase the availability under the revolving line
of credit from $20.0 million to $24.0 million through December 31, 2021 , at
which time the availability under the line of credit will revert to $20.0
million and any amounts outstanding in excess of $20.0 million must be repaid by
Renin. In addition, the amendment to the credit facility temporarily increases
the maximum total leverage ratio included in the financial covenants of the
facility and prohibits Renin from making distributions to the Company through
July 1, 2022 , at which time the leverage ratio and Renin's ability to make
distributions to the Company will revert to the requirements under the terms of
the facility existing prior to the amendment.
As a result of increased costs, higher inventory levels, and the increased time
between purchases of inventory and receipt of payments from customers, Renin
expects that it will be required to utilize substantially all of its
availability under the Operating Loan in the near future and that it will have
limited availability under the facility for unforeseen circumstances, including
possible cash payment in connection with its ongoing supplier dispute, as
described below. Further, the effects of the current economic environment,
including increased costs and the potential loss of customers following efforts
to increase prices could impact Renin's ability to remain in compliance with the
financial covenants under its credit facility. This in turn could limit the
extent of availability under the Operating Loan in future periods and/or require
Renin to repay all or a portion of the borrowings from TD Bank prior to
scheduled maturity.
As described in Note 11 to the Company's condensed consolidated financial
statements included in Item 1 of this report, Renin is currently engaged in a
dispute with one of its suppliers and recognized costs related to this dispute
during the year ended December 31, 2020 . As of June 30, 2021 , this matter did
not impact Renin's compliance with the financial covenants under its outstanding
credit facility with TD Bank. However, if Renin is unable to sustain its
assertion that it is entitled to damages from the supplier and is ultimately
required to pay the supplier for outstanding amounts due to it, it may cause
Renin to be out of compliance with its covenants. If Renin is unable to comply
with its covenants, it would be required to seek a waiver from TD Bank, and if
unable to obtain a waiver, might lose availability under its Operating Loan, be
required to provide additional collateral, and/or repay all or a portion of its
borrowings, any of which could have a material adverse effect on the Company's
liquidity, financial position, and results.
LOCS Credit Facility. In July 2021 , BBX Sweet Holdings and certain of its
subsidiaries, including Las Olas Confections and Snacks, entered into a credit
agreement (the "LOCS Credit Facility") with IberiaBank which provides for a
revolving line of credit of up to $2.5 million that matures in July 2023 .
Amounts outstanding under the LOCS Credit Facility bear interest at the higher
of the Wall Street Journal Prime Rate plus 50 basis points or 3.0% per annum,
and the facility requires monthly payments of interest only, with any
outstanding principal and accrued interest due at the maturity date. The LOCS
Credit Facility is collateralized by a blanket lien on all of the assets of the
borrowers under the facility and is guaranteed by BBX Capital . Pursuant to the
terms and conditions of the credit facility, the Company is required to comply
with certain financial covenants, including a minimum liquidity requirement for
BBX Capital as guarantor under the facility, and the borrowers must maintain a
zero balance on the facility for thirty consecutive days during each calendar
year during the term of the facility.
Off-balance-sheet Arrangements
BBX Capital guarantees certain obligations of its wholly-owned subsidiaries and unconsolidated real estate joint ventures as described in further detail in Note 11 to the Company's condensed consolidated financial statements included in Item 1 of this report. The Company has investments in joint ventures involved in the development of multifamily rental apartment communities, as well as single-family master planned for sale housing communities. The Company's investments in these joint ventures are primarily accounted for under the equity method of accounting, and as a result, the Company does not recognize the assets and liabilities of these joint ventures in its financial statements. As ofJune 30, 2021 andDecember 31, 2020 , the Company's investments in these joint ventures totaled$55.3 million and$58.0 million , respectively. These unconsolidated real estate joint ventures generally finance their activities with a combination of debt financing and equity. The Company generally does not directly guarantee the financing of these joint ventures, other than as described in Note 11 to the Company's condensed consolidated financial statements included in Item 1 of this report, and the Company's maximum exposure to losses from these joint ventures is its equity investment. The Company is typically not obligated to fund additional capital to its joint ventures; however, the Company's interest in a joint venture may be diluted if the Company elects not to fund a joint venture capital call. 52
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