-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NME/Xy8kiED6ao96xcGwBLjCho2VvKKvwt8yGq8sRtDesjZ6decu6+B4jtVRdcaN TY0/Kgn33QkKW7yJGW7d1A== 0000038067-96-000010.txt : 19960617 0000038067-96-000010.hdr.sgml : 19960617 ACCESSION NUMBER: 0000038067-96-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960614 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOREST CITY ENTERPRISES INC CENTRAL INDEX KEY: 0000038067 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 340863886 STATE OF INCORPORATION: OH FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04372 FILM NUMBER: 96581397 BUSINESS ADDRESS: STREET 1: 10800 BROOKPARK RD CITY: CLEVELAND STATE: OH ZIP: 44130 BUSINESS PHONE: 2162671200 MAIL ADDRESS: STREET 1: 10800 BROOKPARK ROAD CITY: CLEVLAND STATE: OH ZIP: 44130 10-Q 1 FOREST CITY ENTERPRISES FIRST QUARTER 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended April 30, 1996 Commission file number 1-4372 FOREST CITY ENTERPRISES, INC. (Exact name of registrant as specified in its charter) Ohio 34-0863886 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10800 Brookpark Road Cleveland, Ohio 44130 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 216-267-1200 None (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at May 28, 1996 Class A Common Stock, $.33 1/3 par value 5,121,098 shares Class B Common Stock, $.33 1/3 par value 3,620,516 shares FOREST CITY ENTERPRISES, INC. INDEX Page No. Part I. Financial Information: Item 1. Financial Statements Forest City Enterprises, Inc. and Subsidiaries: Consolidated Balance Sheets - April 30, 1996 (Unaudited) and January 31, 1996 3-4 Consolidated Statements of Earnings and Retained Earnings (Unaudited) - Three Months Ended April 30, 1996 and 1995 5 Consolidated Statements of Cash Flows (Unaudited) - Three Months Ended April 30, 1996 and 1995 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-11 Part II. Other Information: Item 1. Legal Proceedings 11 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12 PART I - FINANCIAL INFORMATION FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
April 30, 1996 January 31, 1996 -------------- ---------------- (Unaudited) (in thousands) ASSETS Real Estate Completed rental properties $2,144,994 $2,101,564 Projects under development 222,760 246,240 Land held for development or sale 78,375 77,279 ---------- ---------- 2,446,129 2,425,083 Less accumulated depreciation (359,552) (347,912) ---------- ---------- Total Real Estate 2,086,577 2,077,171 Cash 29,065 39,145 Notes and accounts receivable, net of allowance for doubtful accounts of $4,495 and $3,687, respectively 161,611 168,177 Inventories 59,192 41,186 Investments in and advances to affiliates 147,194 145,238 Other assets 158,420 160,129 ---------- ---------- $2,642,059 $2,631,046 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Mortgage debt, nonrecourse $1,835,146 $1,832,059 Accounts payable and accrued expenses 367,845 350,131 Notes payable 19,741 19,856 Long-term debt 110,826 113,061 Deferred income taxes 104,751 105,111 Deferred profit 21,187 21,239 ---------- ---------- Total Liabilities 2,459,496 2,441,457 ---------- ---------- SHAREHOLDERS' EQUITY Preferred stock - convertible, without par value; 1,000,000 shares authorized; no shares issued - - Common stock, $.33 1/3 par value Class A, 16,000,000 shares authorized; 5,278,398 and 5,271,327 shares issued, 5,121,098 and 5,269,327 shares outstanding, respectively 1,759 1,757 Class B, convertible, 6,000,000 shares authorized; 3,713,216 and 3,720,287 shares issued, 3,620,516 and 3,645,287 shares outstanding, respectively 1,238 1,240 ---------- ---------- 2,997 2,997 Additional paid-in capital 45,511 45,511 Retained earnings 142,644 143,590 ---------- ---------- 191,152 192,098 Less treasury stock, at cost; 157,300 and 2,000 Class A shares and 92,700 and 75,000 Class B shares, respectively (8,589) (2,509) ---------- ---------- Total Shareholders' Equity 182,563 189,589 ---------- ---------- $2,642,059 $2,631,046 ========== ==========
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (Unaudited)
Three Months Ended April 30, ---------------------------- 1996 1995 ----------- ----------- (dollars in thousands, except per share data) Sales and operating revenues $ 123,741 $ 108,298 Interest and other income 5,230 3,286 ----------- ----------- Total revenues 128,971 111,584 Operating expenses 80,335 67,928 Interest expense 33,013 31,745 Depreciation and amortization 16,581 16,188 ----------- ----------- Loss before income taxes (958) (4,277) ----------- ----------- Income taxes Current 348 133 Deferred (360) (1,201) ----------- ----------- (12) (1,068) ----------- ----------- Net loss (946) (3,209) Retained earnings at beginning of period 143,590 137,052 ----------- ----------- Retained earnings at end of period $ 142,644 $ 133,843 =========== =========== Net loss per common share $ (.11) $ (.36) =========== =========== Weighted average common shares outstanding 8,857,691 8,991,614 =========== ===========
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended April 30, ---------------------------- 1996 1995 ---------- ---------- (in thousands) Operating Activities Net (loss) $ (946) $ (3,209) Depreciation and amortization 16,581 16,188 Deferred income taxes (360) (1,201) (Increase) in land held for development or sale (1,096) (733) Decrease in notes and accounts receivable, net 6,566 17,048 (Increase) decrease in inventories (18,006) 789 (Increase) decrease in other assets (1,689) 1,587 Increase (decrease) in accounts payable and accrued expenses 17,714 (24,493) (Decrease) increase in deferred profit (52) 100 -------- -------- Net cash provided by operating activities 18,712 6,076 -------- -------- Investing Activities Capital expenditures (21,493) (24,316) (Increase) in investments in and advances to affiliates (1,956) (5,858) -------- -------- Net cash used in investing activities (23,449) (30,174) -------- -------- Financing Activities Increase in mortgage and long-term debt 13,336 14,569 Principal payments on mortgage debt on real estate (6,806) (7,957) Payments on long-term debt (5,678) (4,590) Increase in notes payable 1,557 321 Payments on notes payable (1,672) (3,711) Purchase of treasury stock (6,080) - -------- -------- Net cash used in financing activities (5,343) (1,368) -------- -------- Net (decrease) in cash (10,080) (25,466) Cash at beginning of period 39,145 46,478 -------- -------- Cash at end of period $ 29,065 $ 21,012 ======== ========
The enclosed financial statements have been prepared on a basis consistent with accounting principles applied in the prior periods and reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the periods presented. All such adjustments were of a normal recurring nature. Results of operations for the three months ended April 30, 1996 and 1995 are not necessarily indicative of results of operations which may be expected for the full year. The following discussion and analysis of business segments of Forest City Enterprises, Inc. and all majority-owned subsidiaries ("Company") should be read in conjunction with the financial statements and the footnotes thereto contained in the January 31, 1996 annual report ("Form 10-K"). Certain amounts in the accompanying January 31, 1996 Balance Sheet have been reclassified to conform to the current presentation. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - ------------------------------------------------------------------------------- Earnings Before Depreciation and Deferred Taxes ("EBDT") were $15,957,000 for the quarter ended April 30, 1996 compared to $14,136,000 for the first quarter of fiscal 1995. EBDT consists of net loss before gain (loss) on disposition of properties and the provision for decline in real estate plus noncash charges from real estate operations of depreciation and amortization and deferred income taxes. Consolidated sales and operating revenues were $123,741,000 for the three months ended April 30, 1996 versus $108,298,000 for the quarter ended April 30, 1995. The increase in revenues is due to acquisition of apartment complexes, the opening of commercial properties and a strong lumber trading quarter. The net loss was $946,000 for the quarter ended April 30, 1996 compared to $3,209,000 for the three months ended April 30, 1995. This improvement is attributable to earnings from newly-opened commercial properties. During 1995, the Company realigned its business segments for financial reporting purposes. Beginning with the first quarter of 1996, Management will comment on each of the Company's Strategic Business Units: Forest City Residential Group Forest City Commercial Group Forest City Land Group Forest City Trading Group FOREST CITY RESIDENTIAL GROUP Forest City Residential Group is made up of two divisions: Apartments and Residential Development. Apartments owns, leases and manages residential properties. Residential Development develops new properties, acquires existing real estate and manages syndicated partnerships. Revenues for the three months ended April 30, 1996 were $26,363,000 versus $23,997,000 for the first quarter of 1995. The increase in revenues is due to the acquisition of apartment complexes in 1995. Pre-tax earnings were $578,000 for the first quarter of 1996 compared to pre-tax earnings of $820,000 for the three months ended April 30, 1995. FOREST CITY COMMERCIAL GROUP Forest City Commercial Group owns, acquires, develops and manages retail, office, urban entertainment, hotel and mixed-use properties. Revenues for the three months ended April 30, 1996 were $67,938,000 compared to $62,436,000 for the first quarter of 1995. The increase in revenues is due to the opening of several retail properties, one office building and the acquisition of additional ownership interest in a mixed-use project. Pre-tax earnings for the quarter ended April 30, 1996 were $734,000 compared to pre-tax loss of $1,930,000 for the three months ended April 30, 1995. The improvement in earnings is the result of the openings of new projects and improved operations of the existing portfolio. FOREST CITY LAND GROUP The sales of residential, commercial and industrial land were $4,237,000 for the first quarter of 1996 versus $4,899,000 for the comparable period in 1995. The pre-tax loss was $1,463,000 for the three months ended April 30, 1996 versus $1,978,000 for the first quarter of 1995. The decrease in the loss is primarily attributable to the generation of fee income by the Land Group. Sales of land and related earnings vary from period to period, depending on management's decisions regarding the disposition of significant land holdings. FOREST CITY TRADING GROUP Forest City Trading Group's revenues were $25,203,000 for the three months ended April 30, 1996 compared to revenues of $16,966,000 for the first quarter of 1995. The increase in revenues is primarily attributable to the acquisition of the Company's building materials business as a wholly-owned subsidiary on January 1, 1996. Prior to this date, this joint venture was accounted for on the equity method. Pre-tax earnings for the first quarter of 1996 were $1,017,000 versus $424,000 for the same period in 1995. This is the result of a strong first quarter of 1996 for the lumber brokerage business. FINANCIAL CONDITION AND LIQUIDITY Net cash provided by operating activities totaled $18,712,000 for the quarter ended April 30, 1996 versus $6,076,000 for the quarter ended April 30, 1995. The increase in cash provided by operating activities is primarily a result of 1) the increase in accounts payable of Forest City Trading Group, which is offset by an increase in lumber inventories, 2) the increase in accounts payable due to the timing of payments relating to Commercial Group development activity in the first quarter of 1996, net of 3) a decrease in accounts receivables sold under Forest City Trading Group's agreement to sell an undivided interest in a pool of accounts receivables. Net cash used in investing activities totaled $23,449,000 for the quarter ended April 30, 1996 versus $30,174,000 during the quarter ended April 30, 1995. The change in net cash used in investing activities is primarily the result of timing of completion of the Company's ongoing development activities. The net cash used in financing activities was $5,343,000 for the quarter ended April 30, 1996 versus $1,368,000 for the quarter ended April 30, 1995. The purchase of treasury stock resulted in an increase in the net cash used in financing activities. At April 30, 1996, the Company's wholly-owned real estate subsidiary, Forest City Rental Properties Corporation, had a total of $105,500,000 outstanding under its $70,000,000 term loan and $80,000,000 revolving credit agreement. The Company is required to make quarterly principal payments of $2,500,000 under the term loan. The Company has reached agreement with two banks to establish a new $8,500,000 letter of credit line to be implemented in 1996. The Company's mortgage debt, all of which is nonrecourse, totaled $1,835,146,000 at April 30, 1996. The Company has followed a policy of obtaining debt which is nonrecourse to the Company. However, the Company does guarantee completion of the initial construction of certain projects. During 1996 to date, the Company completed $299,800,000 of financing, including $126,500,000 in new mortgages and $173,300,000 in refinancing existing mortgages. Just as we have been able to refinance our debt that has matured in the past, we expect to either extend the maturing dates of our loans as they come due or refinance the projects. Forest City Trading Group (FCTG) has a three-year agreement maturing July 15, 1996 under which it is selling an undivided ownership interest in a pool of accounts receivable up to a maximum of $90,000,000. FCTG has reached an agreement to extend this maturity date to July 15, 1999. FCTG also has a bank line of credit of $40,000,000 with the right to borrow an additional $10,000,000 for up to 90 days through June 30, 1996. The Company has reached an agreement to extend this maturity date to May 31, 1998. At April 30, 1996, $13,929,000 was outstanding under this line of credit. The sources of liquidity of the Company and its subsidiaries are unused bank lines, cash flow from operations, refinancing of properties with larger mortgages and sales of real estate. The sources of funds will continue to be used principally for the development of additional real estate projects, the acquisition of existing real estate and the repayment of recourse debt. The Residential and Commercial Groups generally mortgage their properties on an intermediate- to long-term nonrecourse basis with maturities of five years and higher. The Company has financed most of its development and construction projects with medium-term bank loans bearing floating rates of interest. When the financing terms are favorable, the Company securitizes its nonrecourse debt on longer-term basis as well as obtains fixed rate mortgage debt for certain properties. The Company has a substantial amount of variable-rate debt that has enabled it to benefit from historically low interest rates. With variable-rate debt of approximately $1 billion, the current level of interest rates and any future rate changes will have an impact on future cash flow. Interest rate protection has been purchased for the vast majority of the portfolio for 1996 and the Company plans to purchase additional interest rate protection and fix rates as is deemed appropriate. During 1996 to date, the Company has fixed or has received commitments to fix $690,700,000 of variable rate loans to maturity, and $156,000,000 of variable rate loans have been fixed for one year expiring May 1, 1997. NEW ACCOUNTING STANDARDS In March 1995, The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 121 establishes accounting standards for the review of impairment of a long-lived asset whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The Company has adopted the provisions of SFAS 121, which have no material effect on the financial position or results of operations of the Company. In October 1995, the FASB issued SFAS 123 "Accounting for Stock-Based Compensation." To date, the Company has not granted options under its Stock Option Plan. Once stock options are granted, the Company will analyze whether to adopt the recognition provisions of SFAS 123 or apply the existing accounting rules contained in Accounting Principles Board Opinion 25 "Accounting for Stock Issued to Employees." GENERAL Forest City had both investment tax credits and substantial tax net operating loss carryforwards ("NOL") at the end of 1995. The Company projects that this NOL will decrease during 1996, primarily due to property transactions. The Company's policy is to utilize these NOL's before they expire and will consider a variety of strategies to implement that policy. These NOL's generally will not begin to expire before January 31, 2005. PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is involved in various claims and lawsuits incidental to its business. The Company's General Counsel is of the opinion that none of these claims and lawsuits will have a material adverse effect on the Company. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - none. (b) Reports on Form 8-K filed for the three months ended April 30, 1996 - none. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FOREST CITY ENTERPRISES, INC. (Registrant) Date June 14, 1996 /s/ Thomas G. Smith Thomas G. Smith, Senior Vice President and Chief Financial Officer Date June 14, 1996 /s/ Linda M. Kane Linda M. Kane, Vice President, Corporate Controller EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE FOR 1ST QUARTER 10-Q
5 1000 3-MOS JAN-31-1997 FEB-01-1996 APR-30-1996 29065 0 166106 4495 59192 0 2446129 359552 2642059 0 1945972 2997 0 0 188155 2642059 0 123741 0 96915 0 0 33013 (957) (11) (946) 0 0 0 (946) (.11) 0
-----END PRIVACY-ENHANCED MESSAGE-----