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

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

In management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which include normal recurring adjustments, that are necessary for a fair statement of the condensed consolidated financial condition of the Company at September 30, 2020; the condensed consolidated results of operations and comprehensive income of the Company for the three and nine months ended September 30, 2020 and 2019; the condensed consolidated changes in equity of the Company for the three and nine months ended September 30, 2020 and 2019; and the condensed consolidated cash flows of the Company for the nine months ended September 30, 2020 and 2019. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or any other future period.

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

The condensed consolidated financial statements include the accounts of BVH’s wholly-owned subsidiaries, other entities in which BVH or its wholly-owned subsidiaries hold controlling financial interests, and any VIEs in which BVH or one of its consolidated subsidiaries is deemed the primary beneficiary of the VIE. All significant inter-company accounts and transactions have been eliminated in consolidation.

Certain amounts for prior periods have been reclassified to conform to the presentation for the current period. The reclassifications did not have a material impact on the Company’s condensed consolidated statements of operations and comprehensive income or condensed consolidated statements of cash flows.

The COVID-19 pandemic resulted in, an unprecedented disruption in the U.S. economy and the travel, hospitality and vacation ownership industries due to, among other things, resort closures, travel restrictions and restrictions on business operations, including government guidance and restrictions with respect to travel, public accommodations, social gatherings and related matters. On March 23, 2020, Bluegreen temporarily closed all of its VOI sales centers; its retail marketing operations at Bass Pro Shops and Cabela’s stores and outlet malls; and its Choice Hotels call transfer program. In connection with these actions Bluegreen also canceled existing owner reservations through May 15, 2020 and new prospect guest tours through June 30, 2020. Further, some of Bluegreen’s Club and Club Associate Resorts were closed in accordance with government mandates and advisories. Beginning in mid-May 2020, Bluegreen started the process of recommencing its sales and marketing operations and its closed resorts began to welcome guests as government mandates were lifted. By September 30, 2020, Bluegreen recommenced marketing operations at 87 Bass Pro Shops and Cabela’s stores and commenced marketing operations at 5 new Cabela’s stores, Bluegreen reactivated its Choice Hotels call transfer program, all of its resorts were open, and all but one of its VOI sales centers were open. Resort occupancy for the third quarter of 2020 was approximately 70%. Additionally, in October 2020, Bluegreen recommenced marketing activities at one additional Bass Bro Shop and commenced marketing operations at 4 new Cabela’s stores for a total of 97 Bass Pro Shops and Cabela’s stores. However, there is no assurance that Bluegreen’s marketing operations at Bass Pro or Cabela’s stores or its VOI sales centers will remain open, including in the event of an increase in COVID-19 cases.

As a result of the effect of the pandemic, Bluegreen implemented several cost mitigating activities beginning in March 2020, including reductions in workforce of over 1,600 positions and the placement of another approximate 3,200 of it associates on temporary furlough or reduced work hours. As of September 30, 2020, approximately 3,200 associates had returned to work on a full-time basis for a total of approximately 4,400 full-time associates compared to approximately 6,060 full-time associates as of September 30, 2019. As a result of the effect of the COVID-19 pandemic, during the three and nine months ended September 30, 2020, Bluegreen incurred $0.4 million and $5.1 million in severance, respectively, and $1.5 million and $13.1 million, respectively, of payroll and payroll benefit expense relating to employees on temporary furlough or reduced work hours. These payments and expenses are included in selling, general and administrative expenses in the Company’s condensed consolidated statement of operations comprehensive income for the three and nine months ended September 30, 2020.

The Coronavirus Aid, Relief, and Economic Securities Act (“CARES Act”) was signed into law on March 27, 2020 in response to the COVID-19 pandemic. As of September 30, 2020, we evaluated the income tax provisions of the CARES Act and determined they would have no significant effect on either our September 30, 2020 income tax rate or the computation of our estimated effective tax rate for the year ended December 31, 2020. However, we have taken advantage of the deferral of the employer portion of the tax withholding amounts and the employee retention tax credits provided for in the CARES Act. During the nine months ended September 30, 2020, we recorded a tax withholding deferral of $5.1 million, which is included in other liabilities in our unaudited condensed consolidated statement of financial condition as of September 30, 2020, and employee retention tax credits of $6.9 million, which are included in selling, general and administrative expenses in our unaudited condensed consolidated statements of operations and comprehensive income for the nine months ended September 30, 2020.

As a precautionary measure to provide additional liquidity if needed, in March 2020, Bluegreen drew down $60 million under its lines-of-credit and pledged or sold receivables under certain of its receivable backed facilities to increase its cash position. As of September 30, 2020, Bluegreen repaid the $60.0 million borrowed under its lines-of-credit. While Bluegreen paid a special cash dividend or $1.19 per share during August 2020, there is no assurance that Bluegreen will recommence paying regular dividends or pay any other special dividends in the future. During the second quarter of 2020, Bluegreen suspended its regular quarterly cash dividends on its common stock.

Bluegreen has historically financed a majority of its sales of VOIs, and accordingly, is subject to the risk of defaults by its customers. GAAP requires Bluegreen to reduce its sales of VOIs by its estimate of uncollectible VOI notes receivable. The COVID-19 pandemic has had a material adverse impact on unemployment in the United States and economic conditions in general and the impact may continue for some time. While Bluegreen believes that it is still too early to know the full impact of COVID- 19 on its default or delinquency rates, Bluegreen believes that the COVID-19 pandemic will have a significant impact on its VOI notes receivable. Accordingly, during March 2020, Bluegreen recorded an allowance for loan losses of $12.0 million, which includes its estimate of customer defaults as a result of the COVID–19 pandemic, based on Bluegreen’s historical experience, forbearance requests received from their customers, and other factors, including but not limited to, the seasoning of the notes receivable and FICO scores of the customers.

The FASB has issued the following accounting pronouncement and guidance relevant to our operations which had not yet been adopted as of September 30, 2020: