-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, rRzHaG05UoDbtlUwva2s+Om+jsCJk/fo4AcMWj+mLDnYJqENTKRJTpXP+59GGE+C EzFQ/Ij2VNKFQgbms3MChg== 0000038067-95-000005.txt : 19950502 0000038067-95-000005.hdr.sgml : 19950502 ACCESSION NUMBER: 0000038067-95-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950131 FILED AS OF DATE: 19950428 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04372 FILM NUMBER: 95532969 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-K 1 FOREST CITY ENTERPRISES 10K FOR THE PERIOD ENDED 1/31/95 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended January 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the transition period from to Commission file number 1-4372 FOREST CITY ENTERPRISES, INC. (Exact name of registrant as specified in its charter) Ohio 34-0863886 (State of incorporation) (I.R.S. Employer 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 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Class A Common Stock ($.33 1/3 par value) American Stock Exchange Class B Common Stock ($.33 1/3 par value) American Stock Exchange 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] On March 1, 1995 the aggregate market value of the voting stock held by non- affiliates of the registrant amounted to $94,793,528 and $40,916,529 for Class A and Class B common stock, respectively. The number of shares of registrant's common stock outstanding on March 1, 1995 was 5,156,159 and 3,835,455 for Class A and Class B common stock, respectively. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Annual Report to Shareholders for the fiscal year ended January 31, 1995 (1994 Annual Report to Shareholders) are incorporated by reference into Parts I and II of this Form 10-K. Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held June 13, 1995 are incorporated by reference into Part III of this Form 10-K. PART I Item 1. Business Forest City Enterprises, Inc. and subsidiaries (the "Company" or "Forest City Enterprises") is a major, vertically integrated national real estate company principally engaged in the development, construction, ownership and management of commercial and residential real estate throughout the United States. The Company has four major lines of business. The Company's real estate is organized into three major product lines. The Residential Group develops, leases and manages the Company's residential properties. The Commercial Group owns, acquires, develops and manages retail, office and urban entertainment projects. The Land Group acquires and sells both raw land and develops lots to commercial, industrial and residential users. The Wholesale Lumber division is primarily a wholesale lumber trading company. The following material provides additional information about the Company's principal operating groups. I. Residential Group The Residential Group develops, leases and manages our residential properties. In addition to acquiring or developing new residential assets for the Company, this division is responsible for increasing cash flow and long-term value of the existing portfolio by deciding when to refinance, optimizing our leasing strategy and determining the appropriate level of capital expenditures. II. Commercial Group The Commercial Group owns, acquires, develops and manages retail, office and urban entertainment projects throughout the United States. Development activities focus on locating opportunities, structuring deals as advantageously as possible, obtaining favorable financing, supervising construction and handling the initial leasing of developed properties. Management operations concentrate on increasing cash flow and long-term value by leasing the properties, deciding when to refinance and setting the appropriate level of capital expenditures. We use our expertise and entrepreneurial skills to maximize the value of our existing assets and to identify development opportunities with an emphasis on major cities and changing demographics. III. Land Group The Land Group acquires and sells both raw land and developed lots to commercial, industrial and residential users. The Group's efforts are currently concentrated on major developments in Arizona, California, Florida, Illinois, Nevada, New York and Ohio. Competition in this segment is dominated by price, location and availability of product. IV. Wholesale Lumber Division Lumber Brokerage--Forest City Trading Group, Inc., with fourteen offices in the United States and two offices in Canada, conducts the lumber brokerage portion of the Company's business. Lumber brokerage consists of the purchase of lumber and plywood from sawmills and other specialty products for immediate resale to retailers and other large purchasers of lumber throughout the United States. Approximately 88% of the Division's transactions are direct shipments from the sawmills to the customer. The remainder of its business is delivered from inventory stored at public warehouse facilities. Wholesale Lumber--This unit is comprised of two joint ventures in northeastern Ohio which are accounted for on the equity method. Forest City and North American Lumber supplies building materials and lumber to general contractors. Forest City/Babin is a wholesaler of major home appliances, cabinets and hardware to housing contractors. The principal factors of competition in this unit are price, service and product availability. Number of Employees The Company had 3,068 employees as of January 31, 1995, of which 2,293 were full-time and 775 were part-time. Segments of Business Financial information about industry segments required by this item is incorporated by reference to Note I "Segment Information" which appears on page 26 of the 1994 Annual Report to Shareholders. Item 2. Properties The Corporate headquarters of Forest City Enterprises is located in Cleveland, Ohio and is owned by the Company. Forest City Trading Group maintains its headquarters in Portland, Oregon with fourteen administrative and sales offices and one manufacturing plant located in eight states and two sales offices in Canada. The "Forest City Rental Properties Corporation Portfolio of Real Estate," presented on pages 14 and 15 of the 1994 Annual Report to Shareholders, lists the shopping centers, office buildings, hotels and apartments in which Rental Properties has an interest and is incorporated herein by reference. Item 3. 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, except for the claims discussed below which may or may not have a material effect, none of the other claims and lawsuits will have a material adverse effect on the Company. The Company holds a partnership interest in Grant Liberty Development Group Associates ("GLDGA"). GLDGA and Metropolitan Life Insurance Company ("Metropolitan") hold ownership interests of 40% and 60%, respectively, in Liberty Center Venture ("Partnership"). Metropolitan is also the holder of the nonrecourse mortgage which encumbers the property held by the Partnership. In July 1990, GLDGA initiated an action against Metropolitan alleging Metropolitan violated its fiduciary duty to the Partnership by refusing to refinance or reduce the interest rate on the mortgage and by making decisions detrimental to the Partnership. Subsequently, in March 1991, Metropolitan filed an action against the Partnership to foreclose on the mortgage and obtain title to the property. Currently, the parties have reached an agreement in principle to settle this action, subject to entering into a definitive agreement. Although the Company has reason to believe that a definitive agreement will be consummated, there can be no assurance of this. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the fourth quarter. Executive Officers of the Registrant The following list is included as an unnumbered Item in Part I of this Report in lieu of being included in the Proxy Statement for the Annual Meeting of Shareholders to be held on June 13, 1995. The names, ages and positions held by the executive officers of the Company are presented in the following list. Each individual has been appointed to serve for the period which ends with the Annual Meeting of Shareholders scheduled for June 13, 1995.
Date Name and Position(s) Held Appointed Age Family Relationship Max Ratner Founder Chairman of the Board, 6-08-93 87 Brother-in-law of Nathan Shafran; Director, Officer of various Uncle of Albert B. Ratner; subsidiary corporations. Father of Charles A. Ratner, James A. Ratner and Ronald A. Ratner Albert B. Ratner Vice Chairman of the Board, 6-08-93 67 Chief Executive Officer, Director, Officer of various subsidiary corporations. Samuel H. Miller Chairman of the Board, 6-08-93 73 Treasurer, Director, Officer of various subsidiary corporations. Charles A. Ratner President, Chief Operating 6-08-93 53 Officer, Director, Officer of various subsidiary corporations. Nathan Shafran Vice Chairman of the Board, 3-11-87 81 Director, Officer of various subsidiary corporations. James A. Ratner Executive Vice President, 3-09-88 50 Director, Officer of various subsidiary corporations. Ronald A. Ratner Executive Vice President, 3-09-88 48 Director, Officer of various subsidiary corporations. Thomas G. Smith Senior Vice President, Chief 9-03-85 54 Financial Officer, Secretary, Officer of various subsidiary corporations. William M. Warren Senior Vice President and 5-16-72 66 General Counsel. D. Layton McCown Vice President-Corporate 8-17-86 46 Controller.
PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Information required by this item is incorporated by reference to the "Quarterly Consolidated Financial Data (Unaudited)" which appears on page 29 of the 1994 Annual Report to Shareholders. Item 6. Selected Financial Data The information required by this item is incorporated by reference to the "Selected Financial Data" on page 16 of the 1994 Annual Report to Shareholders. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information required by this item is incorporated by reference to "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 30 and 31 of the 1994 Annual Report to Shareholders. Item 8. Financial Statements and Supplementary Data The financial statements and supplementary data for Forest City Enterprises, Inc. and subsidiaries are incorporated by reference to pages 17 through 29 of the 1994 Annual Report to Shareholders. Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant (a) Identification of Directors is contained in a definitive proxy statement which the registrant anticipates will be filed by May 5, 1995 and is incorporated herein by reference. (b) Pursuant to General Instruction G of Form 10-K and Item 401(b) of Regulation S-K, Executive Officers of the Registrant are reported in Part I of this Report. (c) The disclosure of delinquent filers, if any, under Section 16(a) of the Securities Exchange Act of 1934 is contained in a definitive proxy statement which the registrant anticipates will be filed by May 5, 1995 and is incorporated herein by reference. Item 11. Executive Compensation; Item 12. Security Ownership of Certain Beneficial Owners and Management; and Item 13. Certain Relationships and Related Transactions Information required under these sections is contained in a definitive proxy statement which the registrant anticipates will be filed by May 5, 1995 and is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. The following financial statements of Forest City Enterprises, Inc. and subsidiaries and the report of the independent accountants included in the 1994 Annual Report to Shareholders are incorporated by reference in Part II, Item 8. Report of Independent Accountants Consolidated Balance Sheets - January 31, 1995 and January 31, 1994 Consolidated Statements of Earnings for the three years ended January 31, 1995 Consolidated Statements of Shareholders' Equity for the three years ended January 31, 1995 Consolidated Statements of Cash Flows for the three years ended January 31, 1995 Notes to Consolidated Financial Statements Individual financial statements of 50% or less owned persons accounted for by the equity method have been omitted because such 50% or less owned persons considered in the aggregate as a single subsidiary would not constitute a significant subsidiary. (a) 2. The following consolidated financial statement schedules are included in Part IV, Item 14(d): For the three years ended January 31, 1995: Page No. Schedule II - Valuation and Qualifying Accounts IV-4 At January 31, 1995 with reconciliations for the three years ended January 31, 1995: Schedule III - Real Estate and Accumulated Depreciation IV-5 & 6 The report of the registrant's independent accountants with respect to the above listed financial statement schedules as of and for the years ended January 31, 1995, 1994 and 1993 appears on page IV-3 of this Report. Schedules other than those listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown in the consolidated financial statements or notes thereto. Columns omitted from schedules filed have been omitted because the information is not applicable. (a) 3. Exhibits: No. 3.1 - Amended Articles of Incorporation adopted as of October 11, 1983, was filed with Form 10-Q for the quarter ended October 31, 1983 and is incorporated herein by reference. No. 3.2 - Code of Regulations as amended June 11, 1991 was filed with Form 10-K for the fiscal year ended January 31, 1992 and is incorporated herein by reference. No. 10.1 - Credit Agreement, dated as of July 25, 1994, among Forest City Rental Properties Corporation, the banks named therein and Society National Bank, as agent, was filed with Form 10-Q for the quarter ended July 31, 1994 and is incorporated herein by reference. No. 10.2 - Guaranty of Payment of Debt, dated as of July 25, 1994, between Forest City Enterprises, Inc. and the banks named therein was filed with Form 10-Q for the quarter ended July 31, 1994 and is incorporated herein by reference. No. 13 - 1994 Annual Report to Shareholders Page No. No. 22 - Subsidiaries of the Registrant IV-7 (Parents and Subsidiaries) (b) Reports on Form 8-K filed during the three months ended January 31, 1995: None. REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors and Shareholders Forest City Enterprises, Inc. Our report on the consolidated financial statements of Forest City Enterprises, Inc. and subsidiaries has been incorporated by reference in this Form 10-K from page 17 of the 1994 Annual Report to Shareholders of Forest City Enterprises, Inc. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in the index on page IV-1 of this Form 10-K. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. /s/ Coopers & Lybrand L.L.P. Cleveland, Ohio March 10, 1995 FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions Balance at Charged to Balance at Beginning Costs and End of Description of Period Expenses Deductions Period ----------- ---------- ---------- ---------- ---------- (in thousands) Allowance for doubtful accounts Year Ended January 31, 1995 $5,322 $1,320 $2,434(A) $4,208 ====== ====== ====== ====== Year Ended January 31, 1994 $3,683 $3,078 $1,439(A) $5,322 ====== ====== ====== ====== Year Ended January 31, 1993 $5,226 $1,827 $3,370(A) $3,683 ====== ====== ====== ====== (A) Uncollectible accounts written off.
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION Range of lives Gross amount at which (in yrs) on --Initial cost-- -Cost capitalized carried at close of Acc. which depr. in Amount of ---to Company--- ----subsequent--- January 31, 1995 depr. at latest income encumbrance Buildings --to acquisition- Buildings Jan. 31, statement Description at Jan. 31, and Carrying and Total 1995 Date of Date is computed of Property 1995 Land imprvmnts. Imprvmnts. costs Land imprvmnts. AB (C) construc. acquired Bldg. Improv. (in thousands) Apartments: Misc. invest. $452,255 $ 45,996 $ 459,277 $ 10,139 $ 28,019 $ 65,256 $ 478,175 $ 543,431 $ 84,186 Various - Various Various Shopping Centers: Cleveland, Ohio 64,917 - 143,287 6,198 - - 149,485 149,485 14,748 1988-1990 - 50 50 Misc. invest. 499,323 33,218 335,549 105,578 34,303 47,589 461,059 508,648 92,441 Various - Various Various Office Buildings: New York, New York 133,250 - 133,277 1,942 - - 135,219 135,219 7,332 1989-1991 - 50 - Misc. invest. 512,675 15,295 482,251 120,288 43,383 15,399 645,818 661,217 96,353 Various - Various Various Leasehold improvements and other equipment: Misc. invest. - - 13,168 - - - 13,168 13,168 7,952 - Various Various Various Under Construction: Misc. invest. 47,871 87,111 143,691 - - 87,111 143,691 230,802 - Undeveloped Land: Misc. invest. 58,979 80,166 - - - 80,166 - 80,166 - ---------- -------- ---------- -------- -------- -------- ---------- ---------- -------- Total $1,769,270 $261,786 $1,710,500 $244,145 $105,705 $295,521 $2,026,615 $2,322,136 $303,012 ========== ======== ========== ======== ======== ======== ========== ========== ======== (A) The aggregate cost at January 31, 1995 for federal income tax purposes was $2,173,488. (B) Reconciliations of total real estate carrying value are as follows: For the Years Ended January 31, 1995 1994 1993 (in thousands) Balance at beginning of period $2,405,066 $2,310,970 $2,281,731 Additions during period - Improvements 134,557 127,035 111,083 Other acquisitions 32,811 5,198 - ---------- ---------- ---------- 167,365 132,233 111,083 ---------- ---------- ---------- Deductions during period - Cost of real estate sold (250,298) (38,137) (81,844) ---------- ---------- ---------- Balance at end of period $2,322,136 $2,405,066 $2,310,970 ========== ========== ========== (C) Reconciliations of accumulated depreciation are as follows: For the Years Ended January 31, 1995 1994 1993 (in thousands) Balance at beginning of period $ 282,313 $ 243,019 $ 204,212 Additions during period - Charged to profit or loss 49,869 48,840 44,410 Deductions during period - Retirement and sales (29,170) (9,546) (5,603) ---------- ---------- ---------- Balance at end of period $ 303,012 $ 282,313 $ 243,019 ========== ========== ==========
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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: 4/28/95 BY: /s/ Albert B. Ratner (Albert B. Ratner, Vice Chairman of the Board) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Founder Chairman of the Board /s/ Max Ratner and Director 4/28/95 (Max Ratner) (Date) Vice Chairman of the Board and Director /s/ Albert B. Ratner (Principal Executive Officer) 4/28/95 (Albert B. Ratner) (Date) Chairman of the Board, Treasurer /s/ Samuel H. Miller and Director 4/28/95 (Samuel H. Miller) (Date) President, Chief Operating Officer /s/ Charles A. Ratner and Director 4/28/95 (Charles A. Ratner) (Date) Senior Vice President, Chief Financial Officer and Secretary /s/ Thomas G. Smith (Principal Financial Officer) 4/28/95 (Thomas G. Smith) (Date) Vice President and Corporate Controller /s/ D. Layton McCown (Principal Accounting Officer) 4/28/95 (D. Layton McCown) (Date) /s/ Nathan Shafran Vice Chairman of the Board and Director 4/28/95 (Nathan Shafran) (Date) /s/ James A. Ratner Executive Vice President and Director 4/28/95 (James A. Ratner) (Date) /s/ Ronald A. Ratner Executive Vice President and Director 4/28/95 (Ronald A. Ratner) (Date) /s/ Scott S. Cowen Director 4/28/95 (Scott S. Cowen) (Date) The registrant plans to furnish security holders a copy of the Annual Report and Proxy material by May 5, 1995. Exhibits Filed Electronically The following exhibits are included in this electronic filing and are located after this index. Exhibit No. 22 - Parents and Subsidiaries Portions of the 1994 Annual Report to Shareholders that are incorporated by reference into this electronic filing: - Selected Financial Data - Report of Independent Accountants - Financial Statements of Forest City Enterprises, Inc. and subsidiaries - Quarterly Consolidated Financial Data (Unaudited) - Management's Discussion and Analysis of Financial Condition and Results of Operations Item 14. Exhibit 22 - Parents and Subsidiaries The voting securities of the subsidiaries below are in each case owned by Forest City Enterprises, Inc. except where a subsidiary's name is indented, in which case that subsidiary's voting securities are owned by the next preceding subsidiary whose name is not so indented. All subsidiaries of the parent except those which are 50%-owned are included in the consolidated financial statements of the registrant:
Percentage of Voting Securities Owned by State of Name of Subsidiary Immediate Parent Incorporation Forest City Rental Properties Corporation 100 (a) Ohio Campus Condos, Inc. 100 (a) California Center Courtland, Inc. 100 (a) Ohio F.C. Irvine, Inc. 100 (a) California F.C. Laurel, Inc. 100 (a) California F.C. Parklabrea Residential-A, Inc. 100 (a) Delaware F.C. Parklabrea Residential-B, Inc. 100 (a) Delaware F.C. Parklabrea Residential-C, Inc. 100 (a) Delaware F.C. Parklabrea Towers, Inc. 100 (a) Ohio F.C. Superblock, Inc. 100 (a) Delaware F.C. Wisconsin, Inc. 100 (a) Maryland FL-Pembroke, Inc. 100 (a) Florida Forest City 38 Sidney Street, Inc. 100 (a) Ohio Forest City B.U.G. Building, Inc. 100 (a) New York Forest City Cambridge, Inc. 100 (a) Ohio Forest City Central Station, Inc. 100 (a) Ohio Forest City Commercial Construction Co., Inc. 100 (a) Ohio Forest City East Coast, Inc. 100 (a) New York Forest City Finance Corporation 100 (a) Ohio Forest City Franklin Town Corp. 100 (a) Ohio Forest City Fulton Street Building, Inc. 100 (a) New York Forest City Investment Partners Millender, Inc. 100 (a) Ohio Forest City Rental Properties Corporation of Nevada, Inc. 100 (a) Nevada Forest City S.I.A.C. Building, Inc. 100 (a) New York Forest City Southpark Two, Inc. 100 (a) California Parklabrea Finance Corp. 100 (a) Delaware Terminal Investments, Inc. 100 (a) Ohio Tower City Land Corporation 100 (a) Ohio Tower City Retail, Inc. 100 (a) Ohio Forest City Residential Development, Inc. 100 (a) Ohio Forest City Trading Group, Inc. 100 (a) Oregon Sunrise Development Co. 100 (a) Ohio Sunrise Land Co. 100 (a) Ohio FC-Granite, Inc. 100 (a) Ohio (a) Subsidiaries included in consolidated financial statements.
SELECTED FINANCIAL DATA For the Years Ended January 31, 1995 1994 1993 1992 1991 - --------------------------------------------------------------------------------------------------------------------------------- (in thousands, except per share data) OPERATING RESULTS Sales and operating revenues $ 499,635 $ 502,903 $ 463,626 $ 419,815 $ 381,955 ============================================================== Net earnings (loss) Operating earnings (loss), net of tax (1) $ 6,774 $ 718 $ (4,712) $ (5,083) $ (9,834) Gain (loss) on disposition of properties and other provisions, net of tax (2) (25,307) 1,494 17,399 (1,105) 12,986 -------------------------------------------------------------- $ (18,533) $ 2,212 $ 12,687 $ (6,188) $ 3,152 ============================================================== Earnings before depreciation and deferred taxes Operating earnings (loss), net of tax (1) $ 6,774 $ 718 $ (4,712) $ (5,083) $ (9,834) Adjustments related to real estate operations (3) Depreciation and amortization 63,956 63,901 57,896 50,543 39,224 Deferred income taxes 10,532 10,865 19,021 1,789 13,761 Accrued interest of a rental property not paid - 5,495 4,870 3,973 3,293 -------------------------------------------------------------- Real estate adjustments 74,488 80,261 81,787 56,305 56,278 -------------------------------------------------------------- $ 81,262 $ 80,979 $ 77,075 $ 51,222 $ 46,444 ============================================================== Per common share Net earnings (loss) (4) $ (2.06) $ .25 $ 1.41 $ (.69) $ .35 ============================================================== Dividends declared Class A $ .20 $ - $ - $ - $ .46 Class B $ .20 $ - $ - $ - $ .40 January 31, 1995 1994 1993 1992 1991 - --------------------------------------------------------------------------------------------------------------------------------- (in thousands) FINANCIAL POSITION Consolidated assets $2,584,734 $2,668,057 $2,625,404 $2,556,261 $2,350,343 Real estate portfolio, at cost $2,322,136 $2,405,066 $2,310,970 $2,281,731 $2,080,522 Long-term debt, including mortgage debt $1,881,917 $2,026,451 $1,972,160 $1,980,985 $1,807,683 FOREST CITY RENTAL PROPERTIES CORPORATION - REAL ESTATE ACTIVITY Total real estate - end of year Completed rental properties, before depreciation $1,995,629 $2,101,528 $2,045,946 $1,878,394 $1,600,276 Projects under development 230,802 214,111 188,187 316,771 385,042 -------------------------------------------------------------- 2,226,431 2,315,639 2,234,133 2,195,165 1,985,318 Accumulated depreciation (293,465) (272,518) (232,905) (193,683) (160,616) -------------------------------------------------------------- Rental properties, net of depreciation $1,932,966 $2,043,121 $2,001,228 $2,001,482 $1,824,702 ============================================================== Activity during the year Completed rental properties Additions $ 77,265 $ 50,384 $ 200,440 $ 279,319 $ 462,796 Purchased 32,811 5,198 - - 28,143 Sold (215,975) - (32,888) (1,201) (36,254) -------------------------------------------------------------- (105,899) 55,582 167,552 278,118 454,685 -------------------------------------------------------------- Projects under development New development 49,585 54,317 39,045 199,346 387,582 Transferred to completed rental properties (32,894) (28,393) (167,629) (267,617) (453,751) -------------------------------------------------------------- 16,691 25,924 (128,584) (68,271) (66,169) -------------------------------------------------------------- Increase (decrease) in rental properties, at cost $ (89,208) $ 81,506 $ 38,968 $ 209,847 $ 388,516 ============================================================== (1) Represents operating earnings (loss), excluding the gain (loss) on disposition of properties and the provision for decline in real estate. Also excludes extraordinary gain in fiscal 1994 of $60,449,000. (2) Includes the provision for decline in real estate. (3) These adjustments represent amounts related to the Company's real estate operations in Rental Properties only. (4) Excludes the extraordinary gain in fiscal 1994 of $60,449,000.
REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors and Shareholders Forest City Enterprises, Inc. We have audited the consolidated balance sheets of Forest City Enterprises, Inc. and subsidiaries as of January 31, 1995 and 1994, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the three years in the period ended January 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Forest City Enterprises, Inc. and subsidiaries as of January 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended January 31, 1995 in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand L.L.P. Cleveland, Ohio March 10, 1995 CONSOLIDATED BALANCE SHEETS
January 31, 1995 1994 - ------------------------------------------------------------------------------------ (dollars in thousands) ASSETS Real Estate Completed rental properties $2,011,168 $2,116,557 Projects under development 230,802 214,111 Land held for development or sale 80,166 74,398 ------------------------- 2,322,136 2,405,066 Less accumulated depreciation (303,012) (282,313) ------------------------- Total Real Estate 2,019,124 2,122,753 Cash 46,478 21,798 Notes and accounts receivable, net 197,602 198,549 Inventories and construction contracts in progress 38,949 63,220 Investments in and advances to affiliates 139,318 113,351 Other assets 143,263 148,386 ------------------------- $2,584,734 $2,668,057 ========================= LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Mortgage debt, nonrecourse $1,769,270 $1,930,999 Accounts payable and accrued expenses 375,350 361,023 Notes payable 22,340 39,183 Long-term debt 112,647 95,452 Deferred income taxes 93,650 69,449 Deferred profit 25,917 26,509 ------------------------- Total Liabilities 2,399,174 2,522,615 ------------------------- 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; 5,146,226 shares outstanding 1,715 1,715 Class B, convertible, 6,000,000 shares authorized; 3,845,388 shares outstanding 1,282 1,282 ------------------------- 2,997 2,997 Additional paid-in capital 45,511 45,511 Retained earnings 137,052 96,934 ------------------------- Total Shareholders' Equity 185,560 145,442 ------------------------- $2,584,734 $2,668,057 ========================= The accompanying notes are an integral part of these statements.
CONSOLIDATED STATEMENTS OF EARNINGS
For the Years Ended January 31, 1995 1994 1993 - ------------------------------------------------------------------------------------------------- (in thousands, except per share data) Sales and operating revenues $499,635 $502,903 $463,626 Interest and other income 22,973 16,476 10,843 -------------------------------------- 522,608 519,379 474,469 -------------------------------------- Operating expenses 323,736 338,308 310,621 Interest expense 116,821 111,494 111,309 Provision for decline in real estate 10,133 - 9,438 Depreciation and amortization 65,580 65,309 59,272 -------------------------------------- 516,270 515,111 490,640 -------------------------------------- Gain (loss) on disposition of properties (30,835) 2,268 39,322 -------------------------------------- EARNINGS (LOSS) BEFORE INCOME TAXES (24,497) 6,536 23,151 -------------------------------------- INCOME TAXES Current 6,057 710 1,655 Deferred (12,021) 3,614 8,809 -------------------------------------- (5,964) 4,324 10,464 -------------------------------------- NET EARNINGS (LOSS) BEFORE EXTRAORDINARY GAIN (18,533) 2,212 12,687 Extraordinary gain, net of tax 60,449 - - -------------------------------------- NET EARNINGS $ 41,916 $ 2,212 $ 12,687 ====================================== NET EARNINGS PER SHARE Earnings (loss) before extraordinary gain, net of tax $ (2.06) $ .25 $ 1.41 Extraordinary gain, net of tax 6.72 - - -------------------------------------- NET EARNINGS PER SHARE $ 4.66 $ .25 $ 1.41 ====================================== The accompanying notes are an integral part of these statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Stock ------------------------------- Class A Class B Additional ------------------------------- Paid-in Retained Shares Amount Shares Amount Capital Earnings - --------------------------------------------------------------------------------------------------------------- (in thousands) BALANCES AT JANUARY 31, 1992 5,128 $1,709 3,864 $1,288 $45,511 $ 82,035 Net earnings 2,687 Conversion of Class B shares to Class A shares 13 4 (13) (4) ---------------------------------------------------- BALANCES AT JANUARY 31, 1993 5,141 1,713 3,851 1,284 45,511 94,722 Net earnings 2,212 Conversion of Class B shares to Class A shares 5 2 (5) (2) ---------------------------------------------------- BALANCES AT JANUARY 31, 1994 5,146 1,715 3,846 1,282 45,511 96,934 Net earnings 41,916 Dividends -- Class A and B - $.20 per share (1,798) ---------------------------------------------------- BALANCES AT JANUARY 31, 1995 5,146 $1,715 3,846 $1,282 $45,511 $137,052 ====================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended January 31, 1995 1994 1993 - ------------------------------------------------------------------------------------------------- (in thousands) OPERATING ACTIVITIES Net earnings $ 41,916 $ 2,212 $ 12,687 Depreciation and amortization 65,580 65,309 59,272 Deferred income taxes 24,201 3,614 8,809 Accrued interest of a rental property not payable until future years - 5,495 4,870 (Gain) loss on disposition of properties 30,835 (2,268) (39,322) Provision for decline in real estate 10,133 - 9,438 Extraordinary gain (90,823) - - (Increase) decrease in land held for development or sale (5,768) (11,147) 8,992 (Increase) decrease in notes and accounts receivable 947 48,993 (42,353) (Increase) decrease in inventories and construction contracts in progress 24,271 (20,397) (7,311) Increase in accounts payable and accrued expenses 37,403 4,263 54,830 Increase (decrease) in deferred profit (592) 3,929 2,593 (Increase) in other assets (10,588) (45,655) (13,664) -------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 127,515 54,348 58,841 -------------------------------------- INVESTING ACTIVITIES Capital expenditures (121,602) (92,495) (76,318) Proceeds from disposition of properties 15,264 1,859 25,205 Investments in and advances to affiliates (25,967) (6,946) (6,709) -------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (132,305) (97,582) (57,822) -------------------------------------- FINANCING ACTIVITIES Increase in mortgage and long-term debt 99,894 111,256 61,479 Payments on long-term debt (17,555) (25,719) (14,153) Principal payments on mortgage debt on real estate (34,228) (36,741) (23,858) Increase in notes payable 434 1,332 13,775 Payments on notes payable (17,277) (26,579) (14,726) Dividends paid to shareholders (1,798) - - -------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 29,470 23,549 22,517 -------------------------------------- NET INCREASE (DECREASE) IN CASH 24,680 (19,685) 23,536 CASH AT BEGINNING OF YEAR 21,798 41,483 17,947 -------------------------------------- CASH AT END OF YEAR $ 46,478 $ 21,798 $ 41,483 ====================================== The accompanying notes are an integral part of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FISCAL YEAR The years 1994, 1993 and 1992 refer to the fiscal years ended January 31, 1995, 1994 and 1993, respectively. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Forest City Enterprises, Inc. and all wholly-owned subsidiaries ("Enterprises" and the "Company"). The Company also includes its share of the assets, liabilities and results of operations of its real estate partnerships, joint ventures and majority-owned corporations. These entities are included as of their respective fiscal year-ends (generally December 31). All significant intercompany accounts and transactions between consolidated entities have been eliminated. Entities which the Company does not control are accounted for on the equity method. Undistributed earnings of such entities included in retained earnings are $2,486,000 at January 31, 1995. Certain prior years' amounts in the accompanying financial statements have been reclassified to conform to the current year's presentation. RECOGNITION OF REVENUE AND PROFIT REAL ESTATE SALES - The Company follows the provisions of Statement of Financial Accounting Standards No. 66 for reporting the gain on the disposition of properties. LEASING OPERATIONS - The Company enters into leases with tenants in its rental properties. The lease terms of tenants occupying space in the shopping centers and office buildings range from 1 to 20 years, excluding leases with anchor tenants. Minimum rent revenues are recognized when due from tenants. Leases with most shopping center tenants provide for percentage rents when the tenants' sales volumes exceed stated amounts. The Company is also reimbursed for certain expenses related to operating its properties. LUMBER BROKERAGE - The Company recognizes the gross margin on these sales as revenue. Sales invoiced for the years 1994 through 1992 were approximately $2,697,500,000, $2,447,800,000 and $1,723,800,000, respectively. CONSTRUCTION - Revenue and profit on long-term fixed-price contracts are reflected under the percentage-of-completion method. On reimbursable cost-plus fee contracts, revenues are recorded in the amount of the accrued reimbursable costs plus proportionate fees at the time the costs were incurred. RECOGNITION OF COSTS AND EXPENSES Operating expenses primarily represent the recognition of operating costs, administrative expenses and taxes other than income taxes. For financial reporting purposes, interest and taxes during development and construction are capitalized as a part of the project cost. Depreciation is generally computed on a straight-line method over the estimated useful asset lives. The estimated useful lives of buildings vary from 20 to 50 years, leasehold improvements from 4 to 51.5 years, and other equipment from 1 to 10 years. Major renewals and improvements are capitalized and expensed through depreciation charges. Repairs, maintenance and minor improvements are expensed as incurred. Costs and accumulated depreciation applicable to assets retired or sold are eliminated from the respective accounts and any resulting gains or losses are reported in the consolidated statements of earnings. LAND OPERATIONS Land held for development or sale is stated at the lower of cost or market. OTHER ASSETS Included in other assets are costs incurred in connection with obtaining financing, which are deferred and amortized over the life of the related debt. Costs incurred in connection with leasing space to tenants are also included in other assets and are deferred and amortized on the straight-line method over the lives of the related leases. INCOME TAXES Deferred income taxes reflect the tax consequences on future years of differences between the tax and financial statement basis of assets and liabilities at year-end. The Company has recognized the benefits of its tax loss carryforward and investment tax credits as a reduction of the deferred tax expense. CAPITAL STOCK Class B common stock is convertible into Class A common stock on a share-for- share basis. The 1,000,000 authorized shares of preferred stock without par value, none of which have been issued, are convertible into Class A common stock. Class A common stockholders elect three members of the Board of Directors and Class B common stockholders elect the remaining nine directors annually. EARNINGS PER SHARE Earnings per share are computed by dividing net earnings by the weighted average number of common shares outstanding during the year of 8,991,614 in 1994, 1993 and 1992. B. REAL ESTATE AND RELATED ACCUMULATED DEPRECIATION AND INDEBTEDNESS The components of real estate cost and the related nonrecourse mortgage indebtedness are presented below.
January 31, 1995 ----------------------------------------------- Total Accumulated Net Amount of Classification Cost Depreciation Cost Indebtedness - ------------------------------------------------------------------------------------------------ (in thousands) Completed rental properties Shopping centers $ 658,133 $107,189 $ 550,944 $ 564,240 Apartments 543,431 84,186 459,245 452,255 Office and other buildings 796,436 103,685 692,751 645,925 Corporate and other equipment 13,168 7,952 5,216 - ----------------------------------------------- 2,011,168 303,012 1,708,156 1,662,420 ----------------------------------------------- Projects under development 230,802 - 230,802 47,871 Land held for development or sale 80,166 - 80,166 58,979 ----------------------------------------------- $2,322,136 $303,012 $2,019,124 $1,769,270 ===============================================
C. NOTES AND ACCOUNTS RECEIVABLE, NET Notes and accounts receivable are summarized below.
January 31, 1995 1994 - ------------------------------------------------------------------------ (in thousands) Lumber brokerage $124,318 $122,235 Real estate sales 17,840 16,915 Syndication activities 29,620 30,001 Receivables from tenants 13,164 16,758 Construction contracts 184 407 Other receivables 16,684 17,555 --------------------- 201,810 203,871 Allowance for doubtful accounts (4,208) (5,322) --------------------- $197,602 $198,549 =====================
Notes receivable at January 31, 1995 of $42,919,000, primarily reflected above in real estate sales and syndication activities, are collectible primarily over 5 years, with $11,985,000 being due within one year. The weighted average interest rate at January 31, 1995 was 10.1%. In July 1993, Forest City Trading Group, the Company's lumber brokerage subsidiary, entered into a three-year agreement under which it is selling an undivided interest in a pool of accounts receivable up to a maximum of $90,000,000. At January 31, 1995 and 1994, the Company had received $25,000,000 and $50,000,000, respectively, as net proceeds from this transaction. An interest in additional accounts receivable may be sold as collections reduce previously sold interests. D. INVENTORIES AND CONSTRUCTION CONTRACTS IN PROGRESS The detail of the balances are as follows.
January 31, 1995 1994 - -------------------------------------------------------------------- (in thousands) Lumber brokerage $37,818 $62,818 Other 1,131 402 ------------------- $38,949 $63,220 ===================
The lumber brokerage inventory is stated at the lower of cost or market. Inventory cost is determined by specific identification and average cost methods. E. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Included in accounts payable and accrued expenses at January 31, 1995 and 1994 are book overdrafts of approximately $54,970,000 and $60,434,000, respectively. The overdrafts are a result of the Company's cash management program and represent checks issued but not yet presented to a Company bank for collection. F. NOTES PAYABLE The components of notes payable, which represent indebtedness whose original maturity dates are within one year of issuance, are as follows.
January 31, 1995 1994 - -------------------------------------------------------------------- (in thousands) Payable To Banks $11,914 $26,555 Other 10,426 12,628 ------------------- $22,340 $39,183 ===================
The Company has a bank line of credit of $40,000,000. The Company has the right to borrow an additional $10,000,000 for up to 90 days through May 31, 1995 under this bank line of credit. Borrowings under this bank line of credit are collateralized by all the assets of the Company's lumber brokerage subsidiary and bear interest at a rate up to 0.6% over prime and has a fee of 1/4% per annum on the unused portion of the available commitment. This bank line of credit is subject to review and extension annually on May 31. At January 31, 1995, there was $11,914,000 outstanding under the bank line of credit. The weighted average interest rate was 9.1% and 6.6% at January 31, 1995 and 1994, respectively. In June 1991, the Company borrowed $10,000,000 from a shareholder, the Ratner, Miller and Shafran families, pursuant to a nonrecourse loan and security agreement. The loan is collateralized by selected real estate assets of the Company and a note receivable. Interest is payable monthly at a rate of 2% over prime with an 8% minimum. Prior to loan maturity, which has been extended to December 31, 1995, loan principal payments are due from proceeds from sales or financing of the selected properties and collections on the note receivable. At January 31, 1995, $8,623,000 was outstanding in notes payable. G. LONG-TERM DEBT MORTGAGE DEBT ON REAL ESTATE Mortgage debt, which is collateralized by completed rental properties, projects under development and certain undeveloped land, is as follows.
January 31, 1995 1994 - --------------------------------------------------------------------------- (in thousands) Fixed interest rates ranging from 1.5% to 14% $ 695,144 $ 778,998 Variable interest rates ranging from 2.9% to 11.3% 1,034,786 1,112,297 Commercial paper having a weighted average interest rate of 6.2% 39,340 39,704 ------------------------- $1,769,270 $1,930,999 =========================
The debt related to projects under development at January 31, 1995 totals $47,869,000, out of a total commitment from lenders of $102,341,000. Of this outstanding debt, $34,344,000 is variable-rate debt and $13,525,000 is fixed-rate debt. The Company generally borrows funds for development and construction projects on a long-term basis, usually with maturities of five to seven years, which allows the property to achieve stabilized operations before refinancing is required. The Company has a practice of purchasing interest rate caps on a substantial portion of its variable-rate debt to provide protection against significant increases in interest rates. The coverage generally extends for one to two years. In lieu of purchasing interest rate caps, the Company periodically has fixed the interest rates on a short-term basis (generally for periods not exceeding one year) when favorable market conditions exist. The Company has purchased the following interest rate caps for $3,871,000 on its variable-rate debt at January 31, 1995.
Original Cap Principal Base Rate Cap Rate Maturity Outstanding --------- -------- ---------------- ----------- (in thousands) LIBOR 3.50% July 10, 1995 $ 23,238 LIBOR 6.25% July 31, 1995 $677,962 LIBOR 7.00% July 31, 1995 $160,739 LIBOR 8.00% February 1, 1996 $880,955 LIBOR 6.85% May 1, 2000 $ 24,560
The only known risk to the Company through its interest-rate hedging strategy is the potential inability of the financial institution from which the interest-rate protection was purchased to cover all of its losses. To mitigate this exposure, the Company purchases its interest-rate protection from either the institution that holds the debt or from institutions with a minimum A credit rating. The cost of interest-rate protection is capitalized in other assets in the consolidated balance sheets and amortized over the period benefited as interest expense in the consolidated statements of earnings. Included in the fixed-rate debt above is $54,564,000 of Urban Development Action Grant loans. These loans bear interest at rates which are below prevailing commercial lending rates and are granted to the Company as an inducement to develop real estate in economically underdeveloped localities. A right to participate by the local government in the future cash flow of the project is generally a condition of these loans. The Company also has entered into a small number of mortgage obligations and leases with tenants that enable the debt holder or lessee to participate in appreciation and cash flow, as defined, generated from operations, sale or refinancing. Participation in annual cash flow generated from operations is recognized as an expense in the period earned. Participation in appreciation and cash flow resulting from a sale or refinancing is recorded as an expense at the time of sale or is capitalized as additional basis and amortized if amounts are paid prior to the disposition of the property. The Company had a nonrecourse mortgage on which a portion of the interest expense was accrued currently but was not payable until future years when certain requirements were satisfied. These requirements generally related to a specified level of cash flow or the sale or refinancing of the property. Interest accrued but not paid was $5,495,000 and $4,870,000 in 1993 and 1992, respectively. See Note N for further discussion. Annual maturities of the mortgage debt for the next five years ending January 31 are as follows: 1996, $242,996,000; 1997, $175,311,000; 1998, $393,700,000; 1999, $175,659,000; and 2000, $129,261,000. The Company is negotiating with its current lenders and expects to refinance or extend the maturity dates of its nonrecourse mortgage debt that matures. In certain instances, the Company will seek alternative sources of financing to replace certain debt that matures. LONG-TERM DEBT Long-term debt is as follows.
January 31, 1995 1994 - --------------------------------------------------------------------------------- (in thousands) Seven-year term loan $ 65,000 $ - Revolving credit agreement 44,000 - Six-year and seven-year term loans - 91,250 Other debt 3,647 4,202 -------------------- $112,647 $95,452 ====================
During 1994, the Company replaced its six-year term loan, its $15,000,000 short-term line of credit and its seven-year term loan with a seven-year, $70,000,000 term loan and a three-year, $70,000,000 revolving credit agreement. Quarterly principal payments of $2,500,000 on the seven-year term loan commenced October 1, 1994. The revolving credit agreement allows for up to $20,000,000 in outstanding letters of credit, which shall reduce the revolving credit portion available to the Company. At its maturity, the revolving credit agreement may be renewed annually or converted to a seven-year term loan by the Company. The seven-year term loan and revolving credit agreement provide, among other things, for 1) interest rates ranging from 1/4% to 3/4% over the prime rate or 2% to 2-1/2% over the London Interbank Offered Rate ("LIBOR"); 2) the maintenance of a specified level of net worth and cash flow (as defined); and 3) a restriction on dividend payments. At January 31, 1995, approximately $3,202,000 of retained earnings were available for payment of dividends. Interest rates on the other debt ranged primarily from 6.0% to 10.4% at January 31, 1995. Maturities of other debt for the next five years ending January 31 are as follows: 1996, $324,000; 1997, $378,000; 1998, $338,000; 1999, $214,000; and 2000, $2,267,000. In accordance with Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," the Company determined the estimated fair value of its debt and interest rate caps by aggregating the various types (i.e. fixed rate versus variable rate debt) and discounting future cash payments at interest rates that the Company believes approximates the current market. There was no material difference in the carrying amount and the estimated fair value of the Company's total mortgage debt. Total interest incurred on all forms of indebtedness was $123,871,000 in 1994, $117,826,000 in 1993 and $126,755,000 in 1992, of which $7,049,000, $6,332,000 and $15,446,000 was capitalized, respectively. The following are non-cash supplemental disclosures related to the consolidated statements of cash flows. Interest actually paid on all forms of indebtedness, net of interest capitalized, was $118,573,000, $103,311,000 and $106,120,000 for 1994, 1993 and 1992, respectively. As described in further detail in Note N, $140,000,000 in nonrecourse mortgage debt and other liabilities was assumed by the purchaser of Park Labrea Towers. During 1992, the Company sold a shopping center to a limited partnership in which it retained a 50% interest. The purchaser assumed $35,000,000 of nonrecourse mortgage debt collateralized by the shopping center. H. INCOME TAXES The provision (benefit) for income taxes consists of the following components.
For the Years Ended January 31, 1995 1994 1993 - -------------------------------------------------------------------------------- (in thousands) Current Federal $ 4,827 $ 376 $ 716 State 1,230 334 939 ------------------------------- 6,057 710 1,655 ------------------------------- Deferred Federal (9,945) 2,985 6,383 State (2,076) 629 2,426 ------------------------------- (12,021) 3,614 8,809 ------------------------------- Total provision (benefit) $ (5,964) $4,324 $10,464 ===============================
In August 1993, the United States Congress passed the Omnibus Budget Reconciliation Act of 1993. Among other things, this law increased the federal corporate tax rate from 34% to 35% effective January 1, 1993. The impact on the Company is an increase in income taxes and a decrease in net earnings of $1,742,000 for the year ended January 31, 1994, of which $1,658,000 relates to timing items at January 31, 1993. The effective tax rate for income taxes varies from the federal statutory rate of 35% for 1994 and 1993 and 34% for 1992 due to the following items.
For the Years Ended January 31, 1995 1994 1993 - ---------------------------------------------------------------------------------- (in thousands) Financial earnings (loss) before income taxes $(24,497) $ 6,536 $23,151 ================================= Income taxes computed at the statutory rate $ (8,574) $ 2,288 $ 7,871 Increase (decrease) in tax resulting from: Minimum tax (refund) and audit adjustments - (2,559) - Valuation allowance 102 1,362 - Rate difference for change in tax law - 1,658 - Losses without tax benefits 2,067 - - State taxes, net of federal benefit (839) 556 2,221 Adjustment of prior estimated taxes 589 771 - Contribution carryover 494 477 333 Other items 197 (229) 39 --------------------------------- Total provision $ (5,964) $ 4,324 $10,464 =================================
An analysis of the deferred tax provision is as follows.
For the Years Ended January 31, 1995 1994 1993 - ---------------------------------------------------------------------------------- (in thousands) Excess of tax over statement depreciation and amortization $ 8,046 $ 9,976 $ 9,736 Allowance for doubtful accounts deducted for statement purposes (464) (476) 563 Costs on land and rental properties under development expensed for tax 366 309 2,704 Revenues and expenses recognized in different periods for tax and statement (16,621) (8,793) (10,800) Development fees deferred for statement (400) (701) - Provision for decline in real estate (3,547) - (1,056) Deferred state taxes, net of federal benefit 757 564 1,066 Interest on construction advances deferred for statement 1,609 1,721 2,441 Benefits of tax loss carry-forward recognized against deferred taxes (1,869) (1,021) 4,155 Audit adjustments - (985) - Rate difference per change in tax law - 1,658 - Valuation allowance 102 1,362 - --------------------------------- Deferred provision $(12,021) $ 3,614 $ 8,809 =================================
The types of differences that give rise to significant portions of the deferred income tax liability are as follows.
Temporary Deferred Tax Differences (Asset) Liability ----------- ----------------- (in thousands) Depreciation $197,926 $ 78,280 Capitalized costs 148,277 58,644 Net operating losses (82,626) (32,679) Investment tax credits - (4,476) Other (32,109) (6,119) --------------------- $231,468 $ 93,650 =====================
Income taxes paid totaled $3,244,000, $324,000 and $449,000 in 1994, 1993 and 1992, respectively. At January 31, 1995, the Company had a net operating loss carryforward for tax purposes of $82,626,000 which will expire in the years ending January 31, 2005 through January 31, 2010 and an investment tax credit carryover of $4,476,000 which will expire in the years ending January 31, 2002 through January 31, 2005. The Company's deferred tax liability at January 31, 1995 is comprised of deferred liabilities of $196,075,000, deferred assets of $105,923,000 and a valuation allowance related to state taxes and investment credits of $3,498,000. I. SEGMENT INFORMATION Business segments are determined by the type of customer served or the product sold. Rental Properties include apartments, shopping centers, office buildings and hotels. It also includes data relating to the management of real estate. The Land Division develops and markets land to home builders and commercial and industrial users principally in Arizona, California, Florida, Illinois, Nevada, New York and Ohio. The Residential Development Division manages syndicated partnerships and acquires selected completed real estate at advantageous prices. The Wholesale Lumber Division sells lumber and building products to retailers, commercial contractors and homebuilders. Corporate includes capitalized interest on the Company's equity in development projects, interest expense on borrowings for investment activities, development fee income, miscellaneous development expenses and interest income on notes receivable for properties previously syndicated, as well as general and administrative expenses. The following tables summarize selected financial data by business segment for the fiscal years ended January 31, 1995, 1994 and 1993.
Earnings (Loss) Before Sales and Operating Revenues (a) Income Taxes ---------------------------------- ---------------------------------- For the Years Ended January 31, 1995 1994 1993 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------------- (in thousands) Rental Properties $373,080 $367,160 $353,743 $ 9,601 $ 119 $(11,482) Land Division 46,427 46,238 36,877 3,290 5,405 3,186 Residential Development Division 2,072 2,504 5,121 3,796 1,284 1,160 Wholesale Lumber Division (b) 78,056 87,001 67,885 4,906 8,654 6,629 Gain on disposition of properties - - - (30,835) 2,268 39,322 Provision for decline in real estate - - - (10,133) - (9,438) Corporate - - - (5,122) (11,194) (6,226) ------------------------------------------------------------------------- Consolidated $499,635 $502,903 $463,626 $(24,497) $ 6,536 $ 23,151 ========================================================================= Real Estate -------------------------------------------------------- Depreciation Identifiable Assets at Additions, net and Amortization ---------------------------------- ----------------------------- ------------------------- For the Years Ended January 31, 1995 1994 1993 1995 1994 1993 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------------------------- (in thousands) Rental Properties Completed $1,858,126 $1,982,198 $1,975,580 $(105,899) $55,582 $167,552 $63,956 $63,885 $57,875 Under development 240,202 197,361 192,602 16,691 25,924 (128,584) - - - Land Division 126,680 120,035 94,650 5,791 11,155 (8,990) 90 102 103 Residential Development Division 55,795 38,064 35,166 7 38 - 22 29 25 Wholesale Lumber Division 175,107 198,617 204,005 542 1,126 860 1,377 1,124 1,075 Corporate (c) 128,824 131,782 123,401 (62) 271 (1,599) 135 169 194 -------------------------------------------------------------------------------------------- Consolidated $2,584,734 $2,668,057 $2,625,404 $ (82,930) $94,096 $ 29,239 $65,580 $65,309 $59,272 ============================================================================================ (a) Interdivision sales are not significant except for sales of buildings by the Residential Development Division to Rental Properties, which amounted to approximately $5,762,000 for the year ended January 31, 1993. These sales are at cost and are eliminated in consolidation. (b) The Company recognizes the gross margin on lumber brokerage sales as revenue. Gross value of lumber sold for the years ended January 31, 1995, 1994 and 1993 was approximately $2,697,500,000, $2,447,800,000 and $1,723,800,000, respectively. (c) Corporate assets consist primarily of the investments in and advances to affiliates and capitalized interest on the Company's equity in projects under development.
J. LEASES THE COMPANY AS LESSOR The following summarizes the minimum future rental income to be received on noncancelable operating leases of commercial properties that generally extend for periods of more than one year.
For the Years Ended January 31, - ----------------------------------------------------------- (in thousands) 1996 $ 138,040 1997 132,704 1998 125,670 1999 119,930 2000 110,326 Later years 653,798 ---------- Total minimum future rentals $1,280,468 ==========
Further, most of the commercial leases also include provisions for additional rental income based on sales volume and other charges including real estate taxes and operating costs. Percentage rents and other charges amounted to $3,419,000 and $83,881,000 in 1994, $3,282,000 and $70,641,000 in 1993 and $3,754,000 and $72,719,000 in 1992. THE COMPANY AS LESSEE The Company is a lessee under various leasing arrangements for real property and equipment having terms expiring through 2019, excluding optional renewal periods. These leases are operating leases. Minimum fixed rental payments under long-term leases (over one year) in effect at January 31, 1995 are as follows.
For the Years Ended January 31, - -------------------------------------------------------- (in thousands) 1996 $ 4,774 1997 4,302 1998 3,669 1999 3,091 2000 2,478 Later years 14,511 ------- Total minimum lease payments $32,825 =======
Rent expense was $5,110,000, $11,351,000 and $12,061,000 for 1994, 1993 and 1992, respectively. K. CONTINGENT LIABILITIES As of January 31, 1995 the Company has guaranteed loans totaling $1,236,000 and has $11,158,000 in outstanding letters of credit. The Company customarily guarantees lien-free completion of its construction. Upon completion the guarantees are released. The Company is also involved in certain claims and litigation related to its operations. Based upon the facts known at this time, management is of the opinion that the ultimate outcome of all such claims and litigation will not have a materially adverse effect on the financial condition of the Company. L. STOCK OPTION PLAN During 1994, the Board of Directors of the Company and the stockholders approved the 1994 Stock Option Plan ("Plan"). Shares may be awarded under the Plan to key employees in the form of either incentive stock options or nonqualified stock options. The aggregate number of shares that may be awarded during the term of the Plan is 250,000 shares, subject to adjustments under the Plan. The maximum number of shares that may be awarded to any employee during any calendar year is 25,000 shares. The exercise price of all nonqualified and incentive stock options shall be at least equal to the fair market value of a share on the date the option is granted unless the grantee constructively owns more than ten percent of the total combined voting power of all classes of stock of the Company, in which case the exercise price of each nonqualified stock option shall not be less than 110% of the fair market value of a share on the date the incentive stock option award is granted. The Plan is administered by the Compensation Committee of the Board of Directors. No options have been granted under the Plan at January 31, 1995. M. SUMMARIZED FINANCIAL INFORMATION Forest City Rental Properties Corporation ("Rental Properties") is a wholly-owned subsidiary engaged in the development and management of real estate projects, including regional malls and shopping centers, hotels, office and mixed-use facilities and apartment complexes. Condensed consolidated balance sheets and statements of earnings for Rental Properties and its subsidiaries follows.
CONSOLIDATED BALANCE SHEETS January 31, 1995 1994 - -------------------------------------------------------------------------- (in thousands) ASSETS Real Estate Completed rental properties $1,995,629 $2,101,528 Projects under development 230,802 214,111 ------------------------- 2,226,431 2,315,639 Less accumulated depreciation (293,465) (272,518) ------------------------- Total Real Estate 1,932,966 2,043,121 Cash 8,333 6,217 Other assets 260,949 236,760 ------------------------- $2,202,248 $2,286,098 ========================= LIABILITIES AND SHAREHOLDER'S EQUITY LIABILITIES Mortgage debt, nonrecourse $1,710,291 $1,883,139 Accounts payable and accrued expenses 144,304 122,077 Long-term debt 109,084 92,083 Other liabilities and deferred credits 131,838 121,856 ------------------------- Total Liabilities 2,095,517 2,219,155 ------------------------- SHAREHOLDER'S EQUITY Common stock and additional paid-in capital 5,378 5,378 Retained earnings 101,353 61,565 ------------------------- Total Shareholder's Equity 106,731 66,943 ------------------------- $2,202,248 $2,286,098 =========================
CONSOLIDATED STATEMENTS OF EARNINGS For the Years Ended January 31, 1995 1994 1993 - ----------------------------------------------------------------------------------- (in thousands) Sales and operating revenues $373,080 $367,160 $353,743 Interest and other income 13,778 8,247 5,192 ---------------------------------- Total revenues 386,858 375,407 358,935 ---------------------------------- Operating expenses 205,707 214,805 209,890 Interest expense 104,836 102,414 104,260 Provision for decline in real estate 10,133 - 9,438 Depreciation and amortization 63,956 63,901 57,896 ---------------------------------- 384,632 381,120 381,484 ---------------------------------- Gain (loss) on disposition of properties (30,835) 2,268 39,322 ---------------------------------- EARNINGS (LOSS) BEFORE INCOME TAXES (28,609) (3,445) 16,773 INCOME TAXES (7,948) (2,625) 5,804 ---------------------------------- NET EARNINGS (LOSS) BEFORE EXTRAORDINARY GAIN (20,661) (820) 10,969 EXTRAORDINARY GAIN, NET OF TAX 60,449 - - ---------------------------------- NET EARNINGS (LOSS) $ 39,788 $ (820) $ 10,969 ==================================
N. LOSS ON SALE AND EXTRAORDINARY GAIN In 1986, the Company had acquired Park Labrea Towers, a residential complex containing 2,825 units, in Los Angeles, California. At the time of acquisition, the Company also entered into a development agreement on the remaining units it had not purchased. In January 1995, the Company concluded an agreement under which $84,177,000 of the mortgage debt was forgiven. Subsequent to this transaction, the real estate was sold to a third party for approximately $140,000,000, an amount equal to the outstanding debt and other liabilities. The Company also sold its future development rights in the total Park Labrea real estate project for approximately $15,600,000. The effect of these transactions was to reduce net assets by approximately $180,000,000 and mortgage debt by approximately $220,000,000 while stockholders' equity increased by approximately $37,000,000. As a result of these transactions, the Company will have no future involvement in Park Labrea. A substantial portion of the debt forgiveness represents interest expense accrued in prior years through operations that was not paid. The Company also had nonrecourse mortgage debt forgiveness on two other properties during 1994 totaling $6,646,000. The forgiveness of debt totaling $60,449,000, net of tax of $30,374,000, is included in the financial statements as an extraordinary gain. The subsequent loss on the sale of Park Labrea and the sale of future development rights are reported as a loss on disposition of properties of $30,835,000. QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)
First Second Third Fourth Quarter Quarter Quarter Quarter ------------------ ------------------ ------------------ ------------------ Fiscal Year 1994 1993 1994 1993 1994 1993 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------- (in thousands, except per share data) Sales and operating revenues $111,896 $127,905 $130,533 $114,905 $127,951 $119,753 $129,255 $140,340 Earnings (loss) before income taxes $ (2,310) $ 2,866 $ (881) $ 1,360 $ (644) $ 1,684 $(20,662) $ 626 Net earnings (loss) before extraordinary gain (a) (c) $ (1,882) $ 1,323 $ (793) $ 179 $ (600) $ (590) $(15,258) $ 1,300 Net earnings (loss) per common share (a) (c) $ (.21) $ .15 $ (.09) $ .02 $ (.06) $ (.07) $ (1.70) $ .15 Dividends declared per common share (b) Class A $ - $ - $ - $ - $ .20 $ - $ - $ - Class B $ - $ - $ - $ - $ .20 $ - $ - $ - Market price range of common stock Class A High $ 43 3/8 $ 33 1/4 $ 38 3/4 $ 36 1/2 $ 37 1/2 $ 44 1/8 $ 32 1/4 $ 41 3/8 Low $ 36 1/2 $ 23 3/4 $ 34 $ 30 3/8 $ 30 1/4 $ 35 1/8 $ 27 3/4 $ 38 1/4 Class B High $ 46 3/8 $ 33 1/2 $ 40 3/8 $ 36 5/8 $ 38 $ 44 1/8 $ 33 1/4 $ 43 1/2 Low $ 40 1/2 $ 23 3/4 $ 37 5/8 $ 30 3/4 $ 32 5/8 $ 36 1/4 $ 29 1/2 $ 38 1/2 Both classes of common stock are traded on the American Stock Exchange under the symbols, FCEA and FCEB. High and low prices shown are based upon data provided by the Exchange. As of March 1, 1995, the number of registered holders of Class A and Class B common stock were 969 and 760, respectively. (a) Excludes the extraordinary gain, net of tax of $60,449,000 ($6.72 per share), recorded in 1994. This item is explained in Note N in the Notes to Consolidated Financial Statements. (b) No dividends were declared in 1993. Future dividends will depend upon such factors as the earnings, capital requirements and financial condition of the Company. Approximately $3,202,000 of retained earnings were available for payment of dividends as of January 31, 1995, under the restrictions contained in the seven-year term loan and revolving credit agreement with a group of banks. (c) In 1994, the Company recorded adjustments during the fourth quarter which increased net earnings by approximately $5,600,000, or $.62 per share. These adjustments primarily related to interest expense accrued earlier in 1994 that was not paid due to the forgiveness of debt of Park Labrea Towers.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Earnings Before Depreciation and Deferred Taxes from Operations ("EBDT") was $81,262,000, slightly up from $80,979,000 reported in 1993. EBDT for 1992 was $77,075,000. EBDT consists of net earnings before gain on disposition of properties and the provision for decline in real estate plus noncash charges from real estate operations of depreciation and amortization, deferred income taxes and accrued interest on mortgage notes of a rental property that is not payable until future years. Consolidated sales and operating revenues were $499,635,000, $502,903,000 and $463,626,000 in 1994, 1993 and 1992, respectively. The net earnings from operations, including gain on disposition of properties and the provision for decline in real estate, was a loss of $18,533,000 in 1994 as compared to net earnings of $2,212,000 in 1993 and $12,687,000 in 1992. The gain (loss) on disposition of properties and the provision for decline in real estate, net of tax, which vary from year to year and are not considered by management to be a part of the on-going results of operations, was a loss of $25,307,000 in 1994 versus net earnings of $1,494,000 in 1993 and $17,399,000 in 1992. The Company also recorded an extraordinary gain, net of tax, of $60,449,000 in 1994 that reflects the forgiveness of $84,177,000 of mortgage debt on Park Labrea Towers. The subsequent sale of this property is included in the gain (loss) on disposition of properties. Beginning in fiscal 1994, EBDT no longer contains an adjustment for accrued interest on mortgage notes of a rental property that is not payable until future years as this was related to Park Labrea. See footnote N in the Notes to the Consolidated Financial Statements for additional information on this transaction. INVESTMENT REAL ESTATE - FOREST CITY RENTAL PROPERTIES CORPORATION OPERATIONS The Company conducts the development and management of its real estate portfolio through Forest City Rental Properties Corporation. Sales and operating revenues were $373,080,000 in 1994 versus $367,160,000 in 1993 and $353,743,000 in 1992. The increase in revenues is attributable to the improvement in occupancy in the portfolio as well as the effect of the Company's residential property acquisition program under which the Company acquired an additional 1,140 units during 1994. The net earnings before gain on disposition of properties and the provision for decline in real estate for 1994 was $4,646,000 versus net losses of $2,314,000 in 1993 and $6,430,000 in 1992. The improvement in earnings is due primarily to an improvement in occupancy in the operating portfolio. While the Company has added over $1 billion to its completed real estate portfolio during the past six years, the pace of growth has slowed. Most of the properties recently added are now leased and generating cash flow. DISPOSITION OF PROPERTIES AND OTHER PROVISIONS During 1994, the Company sold Park Labrea Towers and its future development rights, resulting in a pre-tax loss of approximately $30,800,000. During 1992, the Company sold the Galleria at South Bay shopping center to a limited partnership in which the Company retained a 50% interest, resulting in a pre- tax profit of approximately $38,500,000. There were no major sales in 1993. The Company continually evaluates the realization of the investment in its real estate projects by reviewing their current operations and future projected results. As a result of such analysis, the Company provided a provision for the decline in real estate of $10,133,000 in 1994, representing a provision for our Laurel Plaza shopping center which was heavily damaged in the earthquake in January 1994 in Los Angeles. The Company expects to close on the sale of this property in 1995. A provision of $9,438,000 was recorded in 1992. No such provision was provided in 1993. LAND DIVISION The sales of residential, commercial and industrial land were $46,427,000 in 1994 versus $46,238,000 in 1993 and $36,877,000 in 1992. The pre-tax earnings were $3,290,000 in 1994 versus $5,405,000 in 1993 and $3,186,000 in 1992. The decrease in profit in 1994 is largely due to a full year of operations for Granite Development Partners, L.P. ("Granite"), a self-liquidating limited partnership created during the fourth quarter of 1993. The Company expects to begin closing on sales in Granite in late 1995. Sales of land and related earnings vary from period to period, depending upon management's decisions regarding the disposition of significant land holdings. RESIDENTIAL DEVELOPMENT DIVISION Revenues in 1994 were $2,072,000 versus $2,504,000 and $5,121,000 in 1993 and 1992, respectively. Pre-tax income was $3,796,000 in 1994, $1,284,000 in 1993 and $1,160,000 in 1992. The majority of the efforts of this division are now directed toward acquiring completed real estate at favorable prices for the Company's portfolio and continuing to oversee the operations of properties syndicated in prior years. The increase in income in 1994 versus 1993 is due to the recognition of the Company's portion of operating income related to properties previously syndicated. WHOLESALE LUMBER DIVISION Forest City Trading Group's revenues were $78,056,000, down from $87,001,000 in 1993. Revenues were $67,885,000 in 1992. Pre-tax earnings from this division, including earnings from the Company's building materials business which is accounted for on the equity method, were $4,906,000 in 1994, $8,654,000 in 1993 and $6,629,000 in 1992. The decrease in revenues and profitability in 1994 from 1993 is due to the steep decline in the market price of lumber that occurred during the first quarter of 1994 and the associated negative impact upon the division's physical inventory. Physical inventory levels had grown during 1993 due to market price increases and the volume of trading. When the market price of lumber fell during the first quarter of 1994, the division sold its physical inventory at a loss. FINANCIAL CONDITION AND LIQUIDITY Net cash provided by operating activities totaled $127,515,000 in 1994 versus $54,348,000 in 1993 and $58,841,000 in 1992. The increase in cash provided by operating activities in 1994 as compared to 1993 primarily is due to: 1) a buildup in 1993 of the Company's lumber brokerage inventory due to market conditions did not recur in 1994; 2) included in other assets are restricted funds of a partnership that were raised in 1993 which did not recur in 1994; 3) accounts payable and accrued expenses increased in 1994 in part due to the addition of two apartment buildings and on-going development activity; all of which was partially offset by a decrease in accounts receivable in 1993 resulting from the Company's lumber brokerage subsidiary's agreement to sell an undivided interest in a pool of accounts receivable. Net cash used in investing activities totaled $132,305,000 in 1994 versus $97,582,000 in 1993 and $57,822,000 in 1992, respectively. The net cash provided by financing activities in 1994 was $29,470,000 versus $23,549,000 in 1993 and $22,517,000 in 1992. On-going development activity is reflected in the increases in capital expenditures, investments in and advances to affiliates and mortgage debt. The Company also acquired two apartment buildings in 1994 which resulted in an increase in capital expenditures and mortgage debt in 1994 as compared to 1993. An increase in long-term debt in 1993 as compared to 1994 resulted from the issuance of senior notes by Granite. Payments on long-term debt decreased in 1994 due to the renegotiation of the unsecured corporate banking line of credit agreement in 1994. Payments on notes payable in 1994 were less than in 1993 due to the change in debt agreements of the Company's lumber brokerage subsidiary that occurred in 1993. The Company's wholly-owned subsidiary, Forest City Rental Properties Corporation, renegotiated its unsecured corporate banking line of credit during 1994. The Company's two term loans that totaled $91,250,000 at January 31, 1994 and its $15,000,000 short-term line of credit were replaced by a $70,000,000 term loan and a $70,000,000 revolving credit agreement. The $70,000,000 term loan is a seven-year agreement providing for interest to be payable monthly at rates based on LIBOR plus an increment ranging from 2% in years 1 through 3 to 2 1/4% in years 4 and 5 and 2 1/2% in years 6 and 7. Quarterly principal payments of $2,500,000 commenced October 1, 1994. The $70,000,000 revolving credit agreement is for a three-year period with interest payable monthly based on LIBOR plus 2%. At termination the Company and the banks may agree to renew the revolver or the Company may convert it to a seven-year term loan with the same principal payment and interest rate terms as the $70,000,000 term loan. There was $109,000,000 outstanding under these two loans at January 31, 1995. The Company's mortgage debt, all of which is nonrecourse, totaled $1,769,270,000 at January 31, 1995. The Company has followed a policy of obtaining debt which is nonrecourse to the Company. However, the Company does guarantee the completion of the initial construction of certain projects. During 1994 and 1993, approximately $750,000,000 of mortgage debt matured which was either extended or refinanced. In addition, we have raised approximately $112,000,000 in new debt. Just as we have been able to refinance our debt that has matured in the past, we expect either to extend the maturity dates of our loans as they come due in 1995 or refinance the projects. The Company's lumber brokerage subsidiary 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. The Company 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 May 31, 1995. At January 31, 1995, $11,914,000 was outstanding under this line of credit. The sources of liquidity of the Company and its subsidiary are unused bank lines, cash flow from operations, refinancings of rental 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. Forest City Rental Properties generally mortgages its properties on an intermediate- to long-term nonrecourse basis with maturities of five years and higher. It has financed most of its development and construction projects with shorter- to intermediate-term bank loans bearing floating rates of interest. We have now begun a program of securitizing our nonrecourse debt on longer-term bases as well as obtaining fixed rate mortgage debt for certain properties when the financing terms are favorable. The Company has a substantial amount of variable-rate debt that has enabled it to benefit from historically low interest rates. However, interest rates have risen over the past year. With variable-rate debt in excess of $1 billion, the current level of interest rates and any future rate increases could have an impact on cash flow in 1995. We have purchased interest rate protection on the vast majority of the portfolio for 1995 and are beginning to purchase interest rate caps for 1996. We will continue to purchase interest rate protection and fixed rates as we deem appropriate. GENERAL Forest City had both investment tax credits and substantial tax net operating loss carryforwards ("NOL") at the end of 1994. The Company projects that this NOL will increase during 1995 due to its real estate operations. 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, 2004. EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE FOR 10-K
5 1000 12-MOS JAN-31-1995 FEB-01-1994 JAN-31-1995 46478 0 201810 4208 38949 0 2322136 303012 2584734 0 1881917 2997 0 0 182563 2584734 0 499635 0 389316 0 0 116821 (24497) (5964) (18533) 0 60449 0 41916 4.66 0
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