-----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, J5CuJgzU7DCtaK3CfnFQo6fKZ4/a2GvvPwnObFEz3p1mHkQUSSFkwIld3022p5Qr M9SXhijF0IMwuIl7Rd+aCw== 0000950152-98-003752.txt : 19980504 0000950152-98-003752.hdr.sgml : 19980504 ACCESSION NUMBER: 0000950152-98-003752 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980430 SROS: NONE 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: SEC FILE NUMBER: 001-04372 FILM NUMBER: 98604818 BUSINESS ADDRESS: STREET 1: 1100 TERMINAL TOWER STREET 2: 50 PUBLIC SQ CITY: CLEVELAND STATE: OH ZIP: 44113 BUSINESS PHONE: 2162671200 MAIL ADDRESS: STREET 1: 10800 BROOKPARK ROAD CITY: CLEVLAND STATE: OH ZIP: 44130 10-K 1 FOREST CITY ENTERPRISES, INC. 1 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 [NO FEE REQUIRED] For the fiscal year ended January 31, 1998 ----------------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO 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.) 1100 Terminal Tower 50 Public Square Cleveland, Ohio 44113 - -------------------------------------- ------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 216-621-6060 ------------------------------- 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 ($.33 1/3 par value) New York Stock Exchange Class B Common Stock ($.33 1/3 par value) New York 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 4, 1998 the aggregate market value of the voting stock held by non-affiliates of the registrant amounted to $358,166,158 and $75,440,615 for Class A and Class B common stock, respectively. The number of shares of registrant's common stock outstanding on March 4, 1998 was 9,596,936 and 5,392,340 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, 1998 (1997 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 9, 1998 are incorporated by reference into Part III of this Form 10-K. 2 FOREST CITY ENTERPRISES, INC. ANNUAL REPORT ON FORM 10-K JANUARY 31, 1998 TABLE OF CONTENTS Page ---- PART I Item 1. Business 1 Item 2. Properties 4 Item 3. Legal Proceedings 4 Item 4. Submission of Matters to a Vote of Security Holders 4 Item 4A. Executive Officers of the Registrant 5 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 7 Item 6. Selected Financial Data 7 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 7 Item 8. Financial Statements and Supplementary Data 7 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 8 PART III Item 10. Directors and Executive Officers of the Registrant 8 Item 11. Executive Compensation 8 Item 12. Security Ownership of Certain Beneficial Owners and Management 8 Item 13. Certain Relationships and Related Transactions 8 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 10 Signatures 20 3 PART I Item 1. Business - ---------------- Founded 78 years ago and publicly traded since 1960, Forest City Enterprises, Inc. (with its Subsidiaries, the "Company" or "Forest City") is one of the leading real estate development companies in the United States. It owns, develops, acquires and manages commercial and residential real estate projects in 21 states and the District of Columbia. At January 31, 1998, the Company had $3.0 billion in consolidated assets, of which approximately $2.7 billion was invested in real estate. The Company is organized into four principal business groups: * The Commercial Group, which owns, develops, acquires and operates shopping centers, office buildings and mixed-use projects including hotels. * The Residential Group, which develops, acquires, owns and operates the Company's multi-family properties. * The Land Group, which owns and develops raw land into master planned communities and other residential developments for resale. * The Lumber Trading Group, which operates the Company's lumber wholesaling business. Each group operates autonomously and both the Commercial Group and the Residential Group have separate development, acquisition, leasing, property and financial management functions. As a result, each of these groups is able to perform all of the tasks necessary to develop and maintain a property from selecting a project site to financing the project to managing the completed project. The Company's "Corporate" Activities relate to general corporate items. Commercial Group - ---------------- The Company has developed retail projects for more than 50 years and office, mixed-use and hotel projects for more than 30 years. Today, the Commercial Group owns a diverse portfolio in both urban and suburban locations in 12 states. The Commercial Group targets densely populated locations where it uses its expertise to develop complex projects, often employing public/private partnerships. As of January 31, 1998, the Commercial Group owned interests in 59 completed projects, including 33 retail properties, 21 office properties and five hotels. The Company opened its first strip shopping center in 1948, and its first enclosed regional mall in 1962. Since then, it has developed urban retail centers, entertainment based centers, community centers and power centers focused on "big box" retailing (collectively, "Specialty Retail Centers"), as well as regional malls. As of January 31, 1998, the Commercial Group's existing shopping center portfolio consisted of 14 regional malls with a total GLA of 4.3 million square feet and 19 Specialty Retail Centers with a total GLA of 3.9 million square feet. Malls are generally developed in collaboration with anchor stores that usually own their own facilities as integral parts of the mall structure and environment and which do not generate significant direct payments to the Company. In contrast, anchor stores at specialty retail and power centers generally are tenants under long-term leases which contribute significant rental payments to the Company. While the Company continues to develop regional malls in strong markets, the Company recently has pioneered the concept of bringing "big box" retailing to urban locations previously ignored by major retailers. With high population densities and disposable income levels at or near those of the suburbs, urban development is proving to be economically advantageous for the Company, for the tenants who realize high sales per square foot and for the cities, which benefit from the new jobs created in the urban locations. At January 31, 1998, the Company's operating portfolio of office/mixed-use and hotel projects consists of 21 office buildings containing 6.7 million square feet, including mixed-use projects with an aggregate of 164,000 gross leasable square feet of retail space and five hotels with 1,530 rooms. 1 4 Item 1. Business (continued) - ---------------------------- In its office development activities, Forest City is primarily a build-to-suit developer which works with tenants to meet their highly specialized requirements. The Company's office development has focused primarily on mixed-use projects in urban developments, often built in conjunction with hotels and shopping centers or as part of a major office campus. As a result of this focus on new urban developments, 50% of the Company's office buildings were built within the last eight years and are concentrated in four new urban developments located in Brooklyn, New York, Cleveland, Ohio, Cambridge, Massachusetts and Pittsburgh, Pennsylvania. Residential Group - ------------------ The Company's Residential Group develops, acquires, owns, leases and manages residential rental property in 17 states and the District of Columbia. The Company has been engaged in apartment community development for over 50 years beginning in northeast Ohio and gradually expanding nationally. Its portfolio includes mature middle-market apartments in geographically attractive suburbs, newer and higher end apartments in unique urban locations and newer apartments in the suburbs. The Residential Group, which focuses on large apartment complexes, does not develop or operate single-family housing or condominium projects. At January 31, 1998, the Residential Group's operating portfolio consists of 32,111 units in which Forest City has an ownership interest, including 9,402 units of syndicated senior citizen subsidized housing that the Company manages and in which it owns a residual interest. Land Group - ---------- The Company has been in the land business since the 1930's. The Land Group acquires and sells both raw land and developed lots to residential, commercial and industrial customers. The Land Group projects attract national, regional and local builders. The Land Group develops raw land into master planned communities, mixed-use and other residential developments and currently owns more than 5,300 acres of undeveloped land for this purpose. The Company currently has major land development projects in five states. Historically, the Land Group's activities focused on land development projects in northeast Ohio. Over time, the Group's activities expanded to larger, more complex projects, and regional expansion into western New York State. In the last ten years, the Group has extended its activities on a national basis, first in Arizona, and more recently in Florida and Nevada. In addition to the sales activities of the Land Group, the Company also sells land acquired by its Commercial Group and Residential Group adjacent to their respective projects. Proceeds from such land sales are included in the revenues of such Groups. Forest City Trading Group - -------------------------- The Company's original business was selling lumber to homebuilders. The Company expanded this business in 1969 through its acquisition of Forest City Trading Group, Inc., which is a lumber wholesaler to customers in all 50 states and all Canadian provinces. Through twelve strategically located trading offices in the United States and Canada, employing over 300 traders, Forest City sold the equivalent of eight billion board feet of lumber in 1997, with a gross sales volume of nearly $3 billion, making the Company one of the largest lumber wholesalers in North America. The Lumber Trading Group currently has offices in nine states and Vancouver, British Columbia. The Company opens offices in response to the changing demands of the lumber industry. In 1996, the Lumber Trading Group opened a new Houston, Texas office as part of the Lumber Trading Group's strategic initiative to increase its participation in the southern pine market, which is growing in popularity as logging restrictions limit production in the Pacific Northwest. The Lumber Trading Group's core business is supplying lumber for new home construction and to the repair and remodeling markets. Approximately 60% of the Lumber Trading Group's sales for 1997 involve back-to-back trades in which the Company brings together a buyer and seller for an immediate purchase and sale. The balance of transactions are trades in which the Company takes a short-term ownership position and is at risk for lumber market fluctuations. This risk, however, is reduced by the implementation of our lumber hedging strategy. 2 5 Item 1. Business (continued) - ----------------------------- Competition The real estate industry is highly competitive in all major markets. With regard to the Commercial and Residential Groups, there are numerous other developers, managers and owners of commercial and residential real estate that compete with the Company nationally, regionally and/or locally in seeking management and leasing revenues, land for development, properties for acquisition and disposition and tenants for properties, some of whom may have greater financial resources than the Company. There can be no assurance that the Company will successfully compete for new projects or have the ability to react to competitive pressures on existing projects caused by factors such as declining occupancy rates or rental rates. In addition, tenants at the Company's retail properties face continued competition in attracting customers from retailers at other shopping centers, catalogue companies, warehouse stores, large discounters, outlet malls, wholesale clubs and direct mail and telemarketers. The existence of competing developers, managers and owners and competition to the Company's tenants could have a material adverse effect on the Company's ability to lease space in its properties and on the rents charged or concessions granted, could materially and adversely affect the Company's results of operations and cash flows, and could affect the realizable value of assets upon sale. With regard to the Lumber Trading Group, the lumber wholesaling business is highly competitive. Competitors in the lumber brokerage business include numerous brokers and in-house sales departments of lumber manufacturers, many of which are larger and have greater resources than the Company. Forest City was incorporated in Ohio in 1960 as a successor to a business started in 1921. Number of Employees - ------------------- The Company had 3,588 employees as of January 31, 1998, of which 2,691 were full-time and 897 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 36 of the 1997 Annual Report to Shareholders. 3 6 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, Inc. maintains its headquarters in Portland, Oregon with 21 administrative and sales offices and one processing plant located in nine states and one sales office in Canada. The "Forest City Rental Properties Corporation Portfolio of Real Estate," presented on pages 22 and 23 of the 1997 Annual Report to Shareholders, lists the shopping centers, office buildings, hotels and apartments in which Forest City Rental Properties Corporation has an interest and is incorporated herein by reference. Item 3. Legal Proceedings - ------------------------- An action was filed in August 1997 against Forest City Trading Group, Inc. (a wholly-owned subsidiary of the Company) and 10 of its subsidiaries, all of which are in the business of trading lumber. The complaint alleges improper calculation and underpayment of commissions and other related claims. Plaintiffs purport to represent a class of 300 to 500 traders who are current and former employees of Forest City Trading Group, Inc. and its 10 subsidiaries. Plaintiffs have not moved for class certification as of this date and no class has been certified. The Company believes that any exposure will be limited to Forest City Trading Group, Inc. and its subsidiaries. The Company intends to defend the suit vigorously and the litigation is not expected to have a material adverse effect upon the financial condition, results of operations or cash flows of the Company. The Company, through subsidiaries, owns a 14.6% interest in the Seven Hills development, located in Henderson, Nevada, which is owned by the Silver Canyon Partnership and is being developed in conjunction with a golf course. In August, 1997, a class-action lawsuit was filed by the current homeowners in Seven Hills against the Silver Canyon Partnership, the golf course developers, and other entities, including the Company. In addition, a separate lawsuit was filed by some of the production homebuilding companies at Seven Hills, against some of the same parties, not including the Company. Both suits seek a commitment for public play on the golf course, as well as damages, The Silver Canyon Partnership, the Company and its subsidiaries are responding to both suits, and are attempting to reach an appropriate resolution with all parties involved. Sales efforts are continuing at the Seven Hills development, and because these events are recent, it is not yet possible to determine the extent of any impact on the Partnership's financial performance. The Company believes it has meritorious defenses to these claims and intends to defend against them vigorously. The Company believes that any exposure will be limited to the Silver Canyon Partnership and is not expected to have a material adverse effect upon the financial condition, results of operations or cash flows of the Company. 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. 4 7 Item 4 (a). 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 9, 1998. 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 9, 1998.
Date Name and Position(s) Held Appointed Age - --------------------------- --------- ---- Albert B. Ratner Co-Chairman of the Board of Directors of the Company since June 1995, Vice Chairman of the Board of the Company from June 1993 to June 1995, Chief Executive Officer prior to July 1995 and President prior to July 1993. 6-13-95 70 Samuel H. Miller Co-Chairman of the Board of Directors of the Company since June 1995, Chairman of the Board of the Company from June 1993 to June 1995 and Vice Chairman of the Board, Chief Operating Officer of the Company prior to June 1993, Treasurer of the Company since December 1992. 6-13-95 76 Nathan Shafran Honorary Vice Chairman of the Board of Directors since June 1997, Vice Chairman of the Board of Directors of the Company prior to June 1997. 3-11-87 84 Charles A. Ratner President of the Company since June 1993, Chief Executive Officer of the Company since June 1995, Chief Operating Officer from June 1993 to June 1995 and Executive Vice President prior to June 1993, Director. 6-13-95 56 James A. Ratner Executive Vice President, Director, Officer of various subsidiary corporations. 3-09-88 53 Ronald A. Ratner Executive Vice President, Director, Officer of various subsidiary corporations. 3-09-88 51
6 8
Date Name and Position(s) Held Appointed Age - ------------------------- --------- ---- Thomas G. Smith Senior Vice President, Chief Financial Officer, Secretary, Officer of various subsidiary corporations. 9-03-85 57 William M. Warren Senior Vice President, General Counsel and Assistant Secretary. 5-16-72 69 Brian J. Ratner Senior Vice President--Development since January 1997, Vice President--Urban Entertainment from June 1995 to December 1996, Vice President from May 1994 to June 1995 and an officer of various subsidiaries. 1-01-97 40 Linda M. Kane Vice President and Corporate Controller since April 1995, Asset Manager--Commercial Group from July 1992 to April 1995 and Financial Analyst--Residential Group from October 1990 to July 1992. 4-01-95 40
Note: Nathan Shafran is the uncle of Charles A. Ratner, James A. Ratner and Ronald A. Ratner, who are brothers, and is the uncle of Albert B. Ratner. Albert B. Ratner is the father of Brian J. Ratner and Deborah Ratner Salzberg and is first cousin to Charles A. Ratner, James A. Ratner and Ronald A. Ratner. 7 9 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters - ------------------------------------------------------------------------------- Information required by this item is incorporated by reference to "Quarterly Consolidated Financial Data (Unaudited)" which appears on page 42 of the 1997 Annual Report to Shareholders. Item 6. Selected Financial Data - -------------------------------- The information required by this item is incorporated by reference to "Selected Financial Data" on page 24 of the 1997 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 43 through 49 of the 1997 Annual Report to Shareholders. Item 7(A). Quantitative and Qualitative Disclosure About Market Risk - -------------------------------------------------------------------- Not applicable until fiscal year ending January 31, 1999. Item 8. Financial Statements and Supplementary Data - --------------------------------------------------- The financial statements and supplementary data required by this item are incorporated by reference to "Report of Independent Accountants," "Consolidated Financial Statements," "Notes to Consolidated Financial Statements" and "Quarterly Consolidated Financial Data (Unaudited)" located on pages 25 through 42 of the 1997 Annual Report to Shareholders. Financial Statement Schedule II, "Valuation and Qualifying Accounts" and Schedule III, "Real Estate and Accumulated Depreciation" are included in Part IV, Item 14(d). Item 9. Changes In and Disagreements With Accountants on Accounting and - -------------------------------------------------------------------------- Financial Disclosure ---------------------- None. 8 10 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 11, 1998 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 Form 10-K. (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 11, 1998 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 11, 1998 and is incorporated herein by reference. 9 11 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K - ------------------------------------------------------------------------- (a) List of documents filed as part of this report. 1. The following financial statements and supplementary data included in the 1997 Annual Report to Shareholders are incorporated by reference in Part II, Item 8. Report of Independent Accountants Consolidated Balance Sheets - January 31, 1998 and 1997 Consolidated Statements of Earnings for the three years ended January 31, 1998 Consolidated Statements of Shareholders' Equity for the three years ended January 31, 1998 Consolidated Statements of Cash Flows for the three years ended January 31, 1998 Notes to Consolidated Financial Statements Quarterly Consolidated Financial Data (Unaudited) 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. 2. Financial statement schedules required by Part II, Item 8 are included in Part IV, Item 14(d): Page No ------- Schedule II - Valuation and Qualifying Accounts for the years ended January 31, 1998, 1997 and 1996 17 Schedule III - Real Estate and Accumulated Depreciation at January 31, 1998 with reconciliations for the years ended January 31, 1998, 1997 and 1996 18 - 19 The report of the independent accountants with respect to the above listed financial statement schedules appears on page 16. 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. 3. Exhibits - see (c) below. (b) Reports on Form 8-K filed during the three months ended January 31, 1998: None. (c) Exhibits. Exhibit Number Description of Document -------- ----------------------- 3.1 - Amended Articles of Incorporation adopted as of October 11, 1983, incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q for the quarter ended October 31, 1983 (File No. 1-4372). 3.2 - Code of Regulations as amended June 14, 1994, incorporated by reference to Exhibit 3.2 to the Company's Form 10-K for the fiscal year ended January 31, 1997 (File No.1-4372). 10 12 Exhibit Number Description of Document -------- ----------------------- 3.3 - Certificate of Amendment by Shareholders to the Articles of Incorporation of Forest City Enterprises, Inc. dated June 24, 1997, incorporated by reference to Exhibit 4.14 to the Company's Registration Statement on Form S-3 (Registration No. 333-41437). 4.1 - Form of Senior Subordinated Indenture between the Company and National City Bank, as Trustee thereunder, incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-3 (Registration No. 333-22695). 4.2 - Form of Junior Subordinated Indenture between the Company and National City Bank, as Trustee thereunder, incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Registration No. 333-22695). 4.3 - Form of Senior Subordinated Indenture between the Company and The Bank of New York, as Trustee thereunder, incorporated by reference to Exhibit 4.22 to the Company's Registration Statement on Form S-3 (Registration No. 333-41437). 10.1 - Credit Agreement, dated as of December 10, 1997, by and among Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 10.38 to the Company's Form 10-Q for the quarter ended October 31, 1997 (File No. 1-4372). 10.2 - Guaranty of Payment of Debt, dated as of December 10, 1997, by and among Forest City Enterprises, Inc., the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 10.39 to the Company's Form 10-Q for the quarter ended October 31, 1997 (File No. 1-4372). 10.3 - First Amendment to Credit Agreement, dated as of January 20, 1998, by and among Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 4.19 to the Company's Registration Statement on Form S-3 (File No. 333-41437). 10.4 - First Amendment to Guaranty of Payment of Debt, dated as of January 20, 1998, by and among Forest City Enterprises, Inc., the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 4.20 to the Company's Registration Statement on Form S-3 (File No. 333-41437). 10.5 - Letter Agreement, dated as of February 25, 1998, by and among Forest City Enterprises, Inc., Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 4.21 to the Company's Registration Statement on Form S-3 (File No. 333-41437). 11 13 Exhibit Number Description of Document ------ ----------------------- 10.6 - Second Amendment to Credit Agreement, dated as of March 6, 1998, by and among Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, dated March 6, 1998 (File No. 1-4372). 10.7 - Second Amendment to Guaranty of Payment of Debt, dated as of March 6, 1998, by and among Forest City Enterprises, Inc., the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 10.2 to the Company's Form 8-K, dated March 6, 1998 (File No. 1-4372). 10.8 - Stock Purchase Agreement, dated May 7, 1997, between Forest City Enterprises, Inc. and Richard Miller, Aaron Miller and Gabrielle Miller, incorporated by reference to Exhibit 10.34 to the Company's Form 10-Q for the quarter ended April 30, 1997 (File No. 1-4372). 10.9 - Letter Agreement, dated August 14, 1997, adjusting the interest rate in the Stock Purchase Agreement, dated May 7, 1997, between Forest City Enterprises, Inc. and Richard Miller, Aaron Miller and Gabrielle Miller, incorporated by reference to Exhibit 10.35 to the Company's Form 10-Q for the quarter ended July 31, 1997 (File No. 1-4372). (ii) 10.10 - Supplemental Unfunded Deferred Compensation Plan for Executives, incorporated by reference to Exhibit 10.9 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.11 - Deferred Compensation Agreement between Forest City Enterprises, Inc. and Thomas G. Smith, dated December 27, 1995, incorporated by reference to Exhibit 10.33 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.12 - 1994 Stock Option Plan, including forms of Incentive Stock Option Agreement and Nonqualified Stock Option Agreement, incorporated by reference to Exhibit 10.10 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.13 - Employment Agreement entered into as of September 25, 1989 by the Company and Albert B. Ratner, incorporated by reference to Exhibit 10.11 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.14 - First Amendment to Employment Agreement entered into as of December 6, 1996 by the Company and Albert B. Ratner, incorporated by reference to Exhibit 10.12 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 12 14 Exhibit Number Description of Document ------ ----------------------- (i) (ii) 10.15 - Employment Agreement entered into on April 6, 1998, effective as of February 1, 1997, by the Company and Samuel H. Miller. (i) (ii) 10.16 - Employment Agreement entered into on April 6, 1998, effective as of February 1, 1997, by the Company and Charles A. Ratner. (i) (ii) 10.17 - First Amendment to Employment Agreement (dated April 6, 1998) entered into as of April 24, 1998 by the Company and Charles A. Ratner. (ii) 10.18 - First Amendment to Employment Agreement (dated December 6, 1996 and superseded by Employment Agreement dated April 6, 1998) entered into as of December 6, 1996 by the Company and Charles A. Ratner, incorporated by reference to Exhibit 10.18 to the Company's Form 10-K for the year ended January 31, 1997 (File No.1-4372). (i) (ii) 10.19 - Employment Agreement entered into on April 6, 1998, effective as of February 1, 1997, by the Company and James A. Ratner. (i) (ii) 10.20 - Employment Agreement entered into on April 6, 1998, effective as of February 1, 1997, by the Company and Ronald A. Ratner. (ii) 10.21 - Employment Agreement entered into as of September 25, 1989 by the Company and Nathan P. Shafran, incorporated by reference to Exhibit 10.14 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.22 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Deborah Ratner Salzberg and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner, dated June 26, 1996, incorporated by reference to Exhibit 10.19 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.23 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Brian J. Ratner and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner, dated June 26, 1996, incorporated by reference to Exhibit 10.20 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.24 - Letter Supplement to Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Brian J. Ratner and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner, effective June 26, 1996, incorporated by reference to Exhibit 10.21 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 13 15 Exhibit Number Description of Document ------ ----------------------- (ii) 10.25 - Letter Supplement to Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Deborah Ratner Salzberg and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner, effective June 26, 1996, incorporated by reference to Exhibit 10.22 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.26 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1992 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the lives of Charles Ratner and Ilana Horowitz (Ratner), dated November 2, 1996, incorporated by reference to Exhibit 10.23 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.27 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.24 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.28 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.25 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.29 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.26 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.30 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.27 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.31 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.28 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 14 16 Exhibit Number Description of Document ------- ----------------------- (ii) 10.32 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.29 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.33 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.30 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.34 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.31 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.35 - Letter Supplement to Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between James Ratner and Albert Ratner, Trustees under the Charles Ratner 1992 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the lives of Charles Ratner and Ilana Ratner, effective November 2, 1996, incorporated by reference to Exhibit 10.32 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (i) 13 - 1997 Annual Report to Shareholders. (i) 21 - Subsidiaries of the Registrant. See page 20. (i) 23(A) - Consent of Coopers & Lybrand, L.L.P. regarding Form S-3 (Registration No. 333-22695). (i) 23(B) - Consent of Coopers & Lybrand, L.L.P. regarding Form S-3 (Registration No. 333-41437). (i) 23(C) - Consent of Coopers & Lybrand, L.L.P. regarding Form S-8 (Registration No. 33-65054). (i) 23(D) - Consent of Coopers & Lybrand, L.L.P. regarding Form S-8 (Registration No. 33-65058). (i) 24 - Powers of attorney. (i) 27 - Financial Data Schedules. - ------------------------- Note (i) - Filed herewith. Note (ii) - Reflects management contracts or other compensatory arrangements required to be filed as an exhibit pursuant to Item 14(c) of this Form 10-K. 15 17 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 25 of the 1997 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 10 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 11, 1998 16 18 FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Item 14(d). Financial Statement Schedule
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, 1998 $4,994 $4,794 $1,619 (a) $8,169 ====== ====== ====== ====== Year Ended January 31, 1997 $3,687 $2,714 $1,407 (a) $4,994 ====== ====== ====== ====== Year Ended January 31, 1996 $4,208 $ 714 $1,235 (a) $3,687 ====== ====== ====== ======
(a) Uncollectible accounts written off. 17 19 FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
Initial cost to Company Cost capitalized Amount of -------------------------------- subsequent to acquisition encumbrance Buildings ------------------------------- at January 31, and Carrying Description of Property 1998 Land Improvements Improvements costs - ----------------------- --------------- ------------- ------------------------------------------------- Apartments: Miscellaneous investment $ 482,439 $ 54,195 $ 460,252 $ 42,591 $ 23,183 Shopping Centers: Cleveland, Ohio 60,963 - 137,137 8,130 6,150 Miscellaneous investments 710,140 62,621 503,281 131,092 41,653 Office Buildings: Miscellaneous investments 701,710 26,767 683,473 171,943 36,003 Leasehold improvements and other equipment: Miscellaneous investments - - 18,574 - - Under Construction: Miscellaneous investments 39,591 44,722 206,694 - - Undeveloped Land: Miscellaneous investments 24,088 46,099 - - - ------------- --------- ----------- --------- --------- Total $ 2,018,931 $ 234,404 $ 2,009,411 $ 353,756 $ 106,989 ============= ========= =========== ========= ========= Gross amount at which carried at close of 31-Jan-98 ------------------------------------------------------- Building and Total Description of Property Land improvements (A) (B) - ----------------------- --------------- ------------------------------------ Apartments: Miscellaneous investment $ 63,667 $ 516,554 $ 580,221 Shopping Centers: Cleveland, Ohio - 151,417 151,417 Miscellaneous investments 77,191 661,456 738,647 Office Buildings: Miscellaneous investments 30,154 888,032 918,186 Leasehold improvements and other equipment: Miscellaneous investments - 18,574 18,574 Under Construction: Miscellaneous investments 44,722 206,694 251,416 Undeveloped Land: Miscellaneous investments 46,099 - 46,099 ---------- ----------- ------------- Total $ 261,833 $ 2,442,727 $ 2,704,560 ========= =========== ============= Range of lives (in years) on which depreciation in Accumulated latest income depreciation statement is computed at January 31, Date of Date ------------------------ Description of Property 1998 (C) construction acquired Bldg. Improvements - ----------------------- -------------- ------------------ --------- ----- ------------ Apartments: Miscellaneous investment $ 117,188 Various - Various Various Shopping Centers: Cleveland, Ohio 24,853 1988-1990 - 50 50 Miscellaneous investments 127,177 Various - Various Various Office Buildings: Miscellaneous investments 167,159 Various - Various Various Leasehold improvements and other equipment: Miscellaneous investments 12,257 - Various Various Various Under Construction: Miscellaneous investments - Undeveloped Land: Miscellaneous investments - --------- Total $ 448,634 =========
(A) The aggregate cost at January 31, 1998 for federal income tax purposes was $ 2,577,360. For (B) and (C) refer to the following page. (Continued) 18 20 FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
For the Years Ended January 31, ---------------------------------------------------------------- 1998 1997 1996 ------------------- ---------------- --------------- (in thousands) (B) Reconciliations of total real estate carrying value are as follows: Balance at beginning of period $ 2,520,179 $ 2,425,083 $ 2,322,136 Additions during period - Improvements 205,051 148,025 130,296 Other acquisitions 90,438 22,264 28,587 ------------------- ---------------- --------------- 295,489 170,289 158,883 ------------------- ---------------- --------------- Deductions during period - Cost of real estate sold (111,108) (75,193) (55,936) ------------------- ---------------- --------------- Balance at end of period $ 2,704,560 $ 2,520,179 $ 2,425,083 =================== ================ =============== (C) Reconciliations of accumulated depreciation are as follows: Balance at beginning of period $ 399,830 $ 347,912 $ 303,012 Additions during period - Charged to profit or loss 56,923 52,979 50,821 Deductions during period - Retirement and sales (8,119) (1,061) (5,921) ------------------- ---------------- --------------- Balance at end of period $ 448,634 $ 399,830 $ 347,912 =================== ================ ===============
19 21 Item 14. Exhibit 21 - 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.
Percentage of Voting Securities Owned By State of Name of Subsidiary Immediate Parent Incorporation ------------------ ---------------- ------------- Forest City Rental Properties Corporation 100 Ohio Forest City Commercial Group, Inc. 100 Ohio Tower City Land Corporation 100 Ohio Tusar, Inc. 100 Ohio In Town Hotels, Inc. 100 Ohio FC Peripheral Land, Inc. 100 Delaware Forest City Pierrepont, Inc. 100 New York Forest Bay, Inc. 100 Ohio Forest City Residential Group, Inc. 100 Ohio Forest City Bayside Corporation 100 Ohio FL-Pembroke, Inc. 100 Florida Forest City Trading Group, Inc. 100 Oregon Sunrise Development Company 100 Ohio Sunrise Land Company 100 Ohio FC Granite, Inc. 100 Ohio
20 22 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: April 29, 1998 BY: /s/ Charles A. Ratner ---------------------- -------------------------------------- (Charles A. Ratner, President and Chief Executive Officer) 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.
Signature Title Date --------- ----- ---- /s/ Albert B. Ratner Co-Chairman of the Board and Director April 29, 1998 - ----------------------------- (Albert B. Ratner) /s/ Samuel H. Miller Co-Chairman of the Board, Treasurer April 29, 1998 - ----------------------------- and Director (Samuel H. Miller) * President, Chief Executive Officer April 29, 1998 - ----------------------------- and Director (Principal Executive (Charles A. Ratner) Officer) /s/ Thomas G. Smith Senior Vice President, Chief April 29, 1998 - ----------------------------- Financial Officer and Secretary (Thomas G. Smith) (Principal Financial Officer) /s/ Linda M. Kane Vice President and Corporate Controller April 29, 1998 - ----------------------------- (Principal Accounting Officer) (Linda M. Kane) /s/ James A. Ratner Executive Vice President and Director April 29, 1998 - ----------------------------- (James A. Ratner) /s/ Ronald A. Ratner Executive Vice President and Director April 29, 1998 - ----------------------------- (Ronald A. Ratner) /s/ Brian J. Ratner Senior Vice President and Director April 29, 1998 - ----------------------------- (Brian J. Ratner) /s/ Deborah Ratner Salzberg Director April 29, 1998 - ----------------------------- (Deborah Ratner Salzberg) /s/ J Maurice Struchen Director April 29, 1998 - ----------------------------- (J Maurice Struchen)
23
Signature Title Date --------- ----- ---- /s/ Michael P. Esposito, Jr. Director April 29, 1998 - ----------------------------- (Michael P. Esposito, Jr.) /s/ Scott S. Cowen Director April 29, 1998 - ----------------------------- (Scott S. Cowen) /s/ Jerry V. Jarrett Director April 29, 1998 - ----------------------------- (Jerry V. Jarrett) /s/ Joan K. Shafran Director April 29, 1998 - ----------------------------- (Joan K. Shafran)
The Registrant plans to furnish security holders a copy of the Annual Report and Proxy material by May 11, 1998. * The undersigned, pursuant to a Power of Attorney executed by each of the Directors and Officers identified above and filed with the Securities and Exchange Commission, by signing his name hereto, does hereby sign and execute this Form 10-K on behalf of each of the persons noted above, in the capacities indicated. By: /s/ Charles A. Ratner April 29, 1998 --------------------------------------- (Charles A. Ratner, Attorney-in-Fact) 24 Exhibit Index ------------- Exhibit Number Description of Document ------- ----------------------- 3.1 - Amended Articles of Incorporation adopted as of October 11, 1983, incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q for the quarter ended October 31, 1983 (File No. 1-4372). 3.2 - Code of Regulations as amended June 14, 1994, incorporated by reference to Exhibit 3.2 to the Company's Form 10-K for the fiscal year ended January 31, 1997 (File No.1-4372). 3.3 - Certificate of Amendment by Shareholders to the Articles of Incorporation of Forest City Enterprises, Inc. dated June 24, 1997, incorporated by reference to Exhibit 4.14 to the Company's Registration Statement on Form S-3 (Registration No. 333-41437). 4.1 - Form of Senior Subordinated Indenture between the Company and National City Bank, as Trustee thereunder, incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-3 (Registration No. 333-22695). 4.2 - Form of Junior Subordinated Indenture between the Company and National City Bank, as Trustee thereunder, incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Registration No. 333-22695). 4.3 - Form of Senior Subordinated Indenture between the Company and The Bank of New York, as Trustee thereunder, incorporated by reference to Exhibit 4.22 to the Company's Registration Statement on Form S-3 (Registration No. 333-41437). 10.1 - Credit Agreement, dated as of December 10, 1997, by and among Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 10.38 to the Company's Form 10-Q for the quarter ended October 31, 1997 (File No. 1-4372). 10.2 - Guaranty of Payment of Debt, dated as of December 10, 1997, by and among Forest City Enterprises, Inc., the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 10.39 to the Company's Form 10-Q for the quarter ended October 31, 1997 (File No. 1-4372). 10.3 - First Amendment to Credit Agreement, dated as of January 20, 1998, by and among Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 4.19 to the Company's Registration Statement on Form S-3 (File No. 333-41437). 25 10.4 - First Amendment to Guaranty of Payment of Debt, dated as of January 20, 1998, by and among Forest City Enterprises, Inc., the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 4.20 to the Company's Registration Statement on Form S-3 (File No. 333-41437). 10.5 - Letter Agreement, dated as of February 25, 1998, by and among Forest City Enterprises, Inc., Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 4.21 to the Company's Registration Statement on Form S-3 (File No. 333-41437). 10.6 - Second Amendment to Credit Agreement, dated as of March 6, 1998, by and among Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, dated March 6, 1998 (File No. 1-4372). 10.7 - Second Amendment to Guaranty of Payment of Debt, dated as of March 6, 1998, by and among Forest City Enterprises, Inc., the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 10.2 to the Company's Form 8-K, dated March 6, 1998 (File No. 1-4372). 10.8 - Stock Purchase Agreement, dated May 7, 1997, between Forest City Enterprises, Inc. and Richard Miller, Aaron Miller and Gabrielle Miller, incorporated by reference to Exhibit 10.34 to the Company's Form 10-Q for the quarter ended April 30, 1997 (File No. 1-4372). 10.9 - Letter Agreement, dated August 14, 1997, adjusting the interest rate in the Stock Purchase Agreement, dated May 7, 1997, between Forest City Enterprises, Inc. and Richard Miller, Aaron Miller and Gabrielle Miller, incorporated by reference to Exhibit 10.35 to the Company's Form 10-Q for the quarter ended July 31, 1997 (File No. 1-4372). (ii) 10.10 - Supplemental Unfunded Deferred Compensation Plan for Executives, incorporated by reference to Exhibit 10.9 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.11 - Deferred Compensation Agreement between Forest City Enterprises, Inc. and Thomas G. Smith, dated December 27, 1995, incorporated by reference to Exhibit 10.33 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.12 - 1994 Stock Option Plan, including forms of Incentive Stock Option Agreement and Nonqualified Stock Option Agreement, incorporated by reference to Exhibit 10.10 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.13 - Employment Agreement entered into as of September 25, 1989 by the Company and Albert B. Ratner, incorporated by reference to Exhibit 10.11 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 26 (ii) 10.14 - First Amendment to Employment Agreement entered into as of December 6, 1996 by the Company and Albert B. Ratner, incorporated by reference to Exhibit 10.12 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (i) (ii) 10.15 - Employment Agreement entered into on April 6, 1998, effective as of February 1, 1997, by the Company and Samuel H. Miller. (i) (ii) 10.16 - Employment Agreement entered into on April 6, 1998, effective as of February 1, 1997, by the Company and Charles A. Ratner. (i) (ii) 10.17 - First Amendment to Employment Agreement (dated April 6, 1998) entered into as of April 24, 1998 by the Company and Charles A. Ratner. (ii) 10.18 - First Amendment to Employment Agreement (dated December 6, 1996 and superseded by Employment Agreement dated April 6, 1998) entered into as of December 6, 1996 by the Company and Charles A. Ratner, incorporated by reference to Exhibit 10.18 to the Company's Form 10-K for the year ended January 31, 1997 (File No.1-4372). (i) (ii) 10.19 - Employment Agreement entered into on April 6, 1998, effective as of February 1, 1997, by the Company and James A. Ratner. (i) (ii) 10.20 - Employment Agreement entered into on April 6, 1998, effective as of February 1, 1997, by the Company and Ronald A. Ratner. (ii) 10.21 - Employment Agreement entered into as of September 25, 1989 by the Company and Nathan P. Shafran, incorporated by reference to Exhibit 10.14 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.22 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Deborah Ratner Salzberg and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner, dated June 26, 1996, incorporated by reference to Exhibit 10.19 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.23 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Brian J. Ratner and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner, dated June 26, 1996, incorporated by reference to Exhibit 10.20 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.24 - Letter Supplement to Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Brian J. Ratner and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner, effective June 26, 1996, incorporated by reference to Exhibit 10.21 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.25 - Letter Supplement to Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Deborah Ratner Salzberg and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner, effective June 26, 1996, incorporated by reference to Exhibit 10.22 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 27 (ii) 10.26 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1992 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the lives of Charles Ratner and Ilana Horowitz (Ratner), dated November 2, 1996, incorporated by reference to Exhibit 10.23 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.27 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.24 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.28 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.25 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.29 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.26 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.30 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.27 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.31 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.28 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.32 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.29 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.33 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated 28 by reference to Exhibit 10.30 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.34 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.31 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (ii) 10.35 - Letter Supplement to Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between James Ratner and Albert Ratner, Trustees under the Charles Ratner 1992 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the lives of Charles Ratner and Ilana Ratner, effective November 2, 1996, incorporated by reference to Exhibit 10.32 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). (i) 13 - 1997 Annual Report to Shareholders. (i) 21 - Subsidiaries of the Registrant. See page 20 of Form 10-K. (i) 23(A)- Consent of Coopers & Lybrand, L.L.P. regarding Form S-3 (Registration No. 333-22695). (i) 23(B)- Consent of Coopers & Lybrand, L.L.P. regarding Form S-3 (Registration No. 333-41437). (i) 23(C)- Consent of Coopers & Lybrand, L.L.P. regarding Form S-8 (Registration No. 33-65054). (i) 23(D)- Consent of Coopers & Lybrand, L.L.P. regarding Form S-8 (Registration No. 33-65058). (i) 24 - Powers of attorney. (i) 27 - Financial Data Schedules. - ---------------------------- Note (i) - Filed herewith. Note (ii) - Reflects management contracts or other compensatory arrangements required to be filed as an exhibit pursuant to Item 14(c) of this Form 10-K. EX-10.15 2 EX-10.15 1 Exhibit 10.15 AGREEMENT THIS AGREEMENT MADE AND ENTERED INTO at Cleveland, Ohio this 6th day of April, 1998, by and between FOREST CITY ENTERPRISES, INC., an Ohio corporation, of 1100 Terminal Tower, 50 Public Square, Cleveland, Ohio 44113-2203, hereinafter referred to as "Company", and SAM H. MILLER of 18605 Parkland Drive, Shaker Heights, Ohio, hereinafter referred to as "Employee". WHEREAS, the Company and the Employee desire to terminate the Employment Agreement dated September 25, 1989 and enter into a new Employment Agreement to be effective as of February 1, 1997, and WHEREAS, the Compensation Committee of this Company has recommended a change in salary for the Employee to be effective as of February 1, 1997. NOW, THEREFORE, it is agreed that: 1. That the Employment Agreement dated September 25, 1989 is hereby terminated as of February 1, 1997, and that the effective date of this Employment Agreement is February 1, 1997. 2. The Employee, in consideration of the promises and agreements of the Company herein contained, hereby promises to continue in the employ of the Company for a period of one (1) year from the date of February 1, 1997, as an Executive and Officer of the Company and to perform such duties as may be required of him in such capacities by the Company, faithfully, honestly, diligently and to the satisfaction of the Company. Said employment shall continue for additional periods of one (1) year each until termination by mutual consent, death, or by either party giving ninety (90) days written notice to either amend or terminate this Employment Agreement to the other party prior to the termination of any such one (1) year period. 3. In consideration whereof, the company promises and agrees to pay the Employee a base salary of FOUR HUNDRED THOUSAND AND 00/100 DOLLARS ($400,000.00) per year, payable from time to time during each employment year. 4. In consideration of this Employment Agreement, if the Employee dies while in the employ of the Company, the Company agrees to pay to the beneficiaries of the Employee as stipulated in his Will, or designated by written notice to the Company from the Employee during his lifetime, or designated by operation of law if the Employee dies intestate, fifty percent (50%) of the base salary stated above of said Employee plus fifty percent (50%) of the average bonuses granted to the Employee during the five (5) calendar years preceding his death. Such payment to be of five (5) years following the decease of said Employee; said sum to be payable in quarterly installments to said beneficiaries of said deceased Employee. 5. It is mutually agreed by and between the parties hereto that the Company may cancel or terminate this Employment Agreement at any time prior to the expiration of said one (1) year period, or any renewal thereof, without notice, for any conduct on the part of the Employee which injures the Company's business, such as, but not limited to, intemperance, negligence, failure to follow instructions or perform and fulfill the obligations on the Employee's part to be performed hereunder to the satisfaction of the Company. IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first above written. FOREST CITY ENTERPRISES, INC. By:____________________________ CHARLES A. RATNER, President By:_____________________________ THOMAS G. SMITH, Secretary -------------------------------- SAM H. MILLER, Employee EX-10.16 3 EXHIBIT 10.16 1 Exhibit 10.16 AGREEMENT THIS AGREEMENT MADE AND ENTERED INTO at Cleveland, Ohio this 6th day of April, 1998, by and between FOREST CITY ENTERPRISES, INC., an Ohio corporation, of 1100 Terminal Tower, 50 Public Square, Cleveland, Ohio 44113-2203, hereinafter referred to as "Company", and CHARLES A. RATNER of 16980 South Park Boulevard, Shaker Heights, Ohio, hereinafter referred to as "Employee". WHEREAS, the Company and the Employee desire to terminate the Employment Agreement dated May 10, 1994 and enter into a new Employment Agreement to be effective as of February 1, 1997, and WHEREAS, the Compensation Committee of this Company has recommended a change in salary for the Employee to be effective as of February 1, 1997. NOW, THEREFORE, it is agreed that: 1. That the Employment Agreement dated May 10, 1994 is hereby terminated as of February 1, 1997, and that the effective date of this Employment Agreement is February 1, 1997. 2. The Employee, in consideration of the promises and agreements of the Company herein contained, hereby promises to continue in the employ of the Company for a period of one (1) year from the date of February 1, 1997, as an Executive and Officer of the Company and to perform such duties as may be required of him in such capacities by the Company, faithfully, honestly, diligently and to the satisfaction of the Company. Said employment shall continue for additional periods of one (1) year each until termination by mutual consent, death, or by either party giving ninety (90) days written notice to either amend or terminate this Employment Agreement to the other party prior to the termination of any such one (1) year period. 3. In consideration whereof, the company promises and agrees to pay the Employee a base salary of FOUR HUNDRED THOUSAND AND 00/100 DOLLARS ($400,000.00) per year, payable from time to time during each employment year. 4. In consideration of this Employment Agreement, if the Employee dies while in the employ of the Company, the Company agrees to pay to the beneficiaries of the Employee as stipulated in his Will, or designated by written notice to the Company from the Employee during his lifetime, or designated by operation of law if the Employee dies intestate, fifty percent (50%) of the base salary stated above of said Employee plus fifty percent (50%) of the average bonuses granted to the Employee during the five (5) calendar years preceding his death. Such payment to be of five (5) years following the decease of said Employee; said sum to be payable in quarterly installments to said beneficiaries of said deceased Employee. 5. It is mutually agreed by and between the parties hereto that the Company may cancel or terminate this Employment Agreement at any time prior to the expiration of said one (1) year period, or any renewal thereof, without notice, for any conduct on the part of the Employee which injures the Company's business, such as, but not limited to, intemperance, negligence, failure to follow instructions or perform and fulfill the obligations on the Employee's part to be performed hereunder to the satisfaction of the Company. IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first above written. FOREST CITY ENTERPRISES, INC. By:____________________________ ALBERT B. RATNER, Vice Chairman of the Board By:_____________________________ THOMAS G. SMITH, Secretary -------------------------------- CHARLES A. RATNER, Employee EX-10.17 4 EXHIBIT 10.17 1 Exhibit 10.17 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT DATED APRIL 6, 1998 THIS FIRST AMENDMENT MADE AND ENTERED INTO at Cleveland, Ohio as of the 24th day of April, 1998, by and between FOREST CITY ENTERPRISES, INC. the "Company" and CHARLES A. RATNER the "Employee" to an Agreement between said parties dated April 6, 1998. WHEREAS, the parties to this Agreement had entered into a First Amendment to an Employment Agreement dated February 1, 1994, which Amendment was dated December 6, 1996, and WHEREAS, the parties have agreed that said Amendment dated December 6, 1996, shall be in full force and effect notwithstanding that the Employment Agreement dated February 1, 1994, has been terminated. NOW THEREFORE, it is agreed that: 1. The First Amendment dated December 6, 1996, to Employment Agreement (which was dated February 1, 1994) shall remain in full force and effect. 2. In all other respects the Employment Agreement dated April 6, 1998, is in full force and effect except as amended hereby. IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first above written. FOREST CITY ENTERPRISES, INC. By:_________________________________ Thomas G. Smith, Secretary ------------------------------------- CHARLES A. RATNER, Employee EX-10.19 5 EXHIBIT 10.19 1 Exhibit 10.19 AGREEMENT --------- THIS AGREEMENT MADE AND ENTERED INTO at Cleveland, Ohio this 6th day of April, 1998, by and between FOREST CITY ENTERPRISES, INC., an Ohio corporation, of 1100 Terminal Tower, 50 Public Square, Cleveland, Ohio 44113-2203, hereinafter referred to as "Company", and JAMES A. RATNER of 19750 Shaker Boulevard, Shaker Heights, Ohio, hereinafter referred to as "Employee". WHEREAS, the Company and the Employee desire to terminate the Employment Agreement dated March 30, 1993 and enter into a new Employment Agreement to be effective as of February 1, 1997, and WHEREAS, the Compensation Committee of this Company has recommended a change in salary for the Employee to be effective as of February 1, 1997. NOW, THEREFORE, it is agreed that: 1. That the Employment Agreement dated March 30, 1993 is hereby terminated as of February 1, 1997, and that the effective date of this Employment Agreement is February 1, 1997. 2. The Employee, in consideration of the promises and agreements of the Company herein contained, hereby promises to continue in the employ of the Company for a period of one (1) year from the date of February 1, 1997, as an Executive and Officer of the Company and to perform such duties as may be required of him in such capacities by the Company, faithfully, honestly, diligently and to the satisfaction of the Company. Said employment shall continue for additional periods of one (1) year each until termination by mutual consent, death, or by either party giving ninety (90) days written notice to either amend or terminate this Employment Agreement to the other party prior to the termination of any such one (1) year period. 3. In consideration whereof, the company promises and agrees to pay the Employee a base salary of THREE HUNDRED TWENTY-FIVE THOUSAND AND 00/100 DOLLARS ($325,000.00) per year, payable from time to time during each employment year. 4. In consideration of this Employment Agreement, if the Employee dies while in the employ of the Company, the Company agrees to pay to the beneficiaries of the Employee as stipulated in his Will, or designated by written notice to the Company from the Employee during his lifetime, or designated by operation of law if the Employee dies intestate, fifty percent (50%) of the base salary stated above of said Employee plus fifty percent (50%) of the average bonuses granted to the Employee during the five (5) calendar years preceding his death. Such payment to be of five (5) years following the decease of said Employee; said sum to be payable in quarterly installments to said beneficiaries of said deceased Employee. 5. It is mutually agreed by and between the parties hereto that the Company may cancel or terminate this Employment Agreement at any time prior to the expiration of said one (1) year period, or any renewal thereof, without notice, for any conduct on the part of the Employee which injures the Company's business, such as, but not limited to, intemperance, negligence, failure to follow instructions or perform and fulfill the obligations on the Employee's part to be performed hereunder to the satisfaction of the Company. IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first above written. FOREST CITY ENTERPRISES, INC. By:____________________________ CHARLES A. RATNER, President By:_____________________________ THOMAS G. SMITH, Secretary -------------------------------- JAMES A. RATNER, Employee EX-10.20 6 EXHIBIT 10.20 1 Exhibit 10.20 AGREEMENT --------- THIS AGREEMENT MADE AND ENTERED INTO at Cleveland, Ohio this 6th day of April, 1998, by and between FOREST CITY ENTERPRISES, INC., an Ohio corporation, of 1100 Terminal Tower, 50 Public Square, Cleveland, Ohio 44113-2203, hereinafter referred to as "Company", and RONALD A. RATNER of 17300 Parkland Drive, Shaker Heights, Ohio, hereinafter referred to as "Employee". WHEREAS, the Company and the Employee desire to terminate the Employment Agreement dated March 30, 1993 and enter into a new Employment Agreement to be effective as of February 1, 1997, and WHEREAS, the Compensation Committee of this Company has recommended a change in salary for the Employee to be effective as of February 1, 1997. NOW, THEREFORE, it is agreed that: 1. That the Employment Agreement dated March 30, 1993 is hereby terminated as of February 1, 1997, and that the effective date of this Employment Agreement is February 1, 1997. 2. The Employee, in consideration of the promises and agreements of the Company herein contained, hereby promises to continue in the employ of the Company for a period of one (1) year from the date of February 1, 1997, as an Executive and Officer of the Company and to perform such duties as may be required of him in such capacities by the Company, faithfully, honestly, diligently and to the satisfaction of the Company. Said employment shall continue for additional periods of one (1) year each until termination by mutual consent, death, or by either party giving ninety (90) days written notice to either amend or terminate this Employment Agreement to the other party prior to the termination of any such one (1) year period. 3. In consideration whereof, the company promises and agrees to pay the Employee a base salary of THREE HUNDRED TWENTY-FIVE THOUSAND AND 00/100 DOLLARS ($325,000.00) per year, payable from time to time during each employment year. 4. In consideration of this Employment Agreement, if the Employee dies while in the employ of the Company, the Company agrees to pay to the beneficiaries of the Employee as stipulated in his Will, or designated by written notice to the Company from the Employee during his lifetime, or designated by operation of law if the Employee dies intestate, fifty percent (50%) of the base salary stated above of said Employee plus fifty percent (50%) of the average bonuses granted to the Employee during the five (5) calendar years preceding his death. Such payment to be of five (5) years following the decease of said Employee; said sum to be payable in quarterly installments to said beneficiaries of said deceased Employee. 5. It is mutually agreed by and between the parties hereto that the Company may cancel or terminate this Employment Agreement at any time prior to the expiration of said one (1) year period, or any renewal thereof, without notice, for any conduct on the part of the Employee which injures the Company's business, such as, but not limited to, intemperance, negligence, failure to follow instructions or perform and fulfill the obligations on the Employee's part to be performed hereunder to the satisfaction of the Company. IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first above written. FOREST CITY ENTERPRISES, INC. By:____________________________ CHARLES A. RATNER, President By:_____________________________ THOMAS G. SMITH, Secretary -------------------------------- RONALD A. RATNER, Employee EX-13 7 EXHIBIT 13 1 Exhibit 13
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES FOREST CITY RENTAL PROPERTIES CORPORATION PORTFOLIO OF REAL ESTATE SHOPPING CENTERS Date of Opening/ % of Name Acquisition Ownership Location - ------------------------------------------------------------------ Antelope Valley Mall 1990 78.00% Palmdale, CA Atlantic Center 1996 75.00% Brooklyn, NY * Atlantic Center Site V 1998 70.00% Brooklyn, NY Avenue at Tower City 1990 100.00% Cleveland, OH Ballston Common 1986 100.00% Arlington, VA Boulevard Mall 1962 50.00% Amherst, NY Bowling Green Mall 1966 50.00% Bowling Green, KY Bruckner Boulevard 1996 70.00% Bronx, NY Canton Centre 1981 100.00% Canton, OH Chapel Hill Mall 1966 50.00% Akron, OH Chapel Hill Suburban 1969 50.00% Akron, OH Charleston Town Center 1983 50.00% Charleston, WV Courtland Center 1968 100.00% Flint, MI Courtyard 1990 50.00% Flint, MI Flatbush Avenue 1995 80.00% Brooklyn, NY * 42nd Street 1999 70.00% Manhattan, NY Galleria at Sunset 1996 60.00% Henderson, NV Gallery at MetroTech 1990 80.00% Brooklyn, NY Golden Gate 1958 50.00% Mayfield Hts., OH Grand Avenue 1997 70.00% Queens, NY Gun Hill Road 1997 70.00% Bronx, NY Hunting Park 1996 70.00% Philadelphia, PA Manhattan Town Center 1987 37.50% Manhattan, KS Marketplace at Riverpark 1996 50.00% Fresno, CA Midtown Plaza 1961 50.00% Parma, OH Newport Plaza 1977 50.00% Newport, KY Northern Boulevard 1997 70.00% Queens, NY Plaza at Robinson Town Center 1989 50.00% Pittsburgh, PA * Richmond Avenue 1998 70.00% Staten Island, NY Rolling Acres Mall 1975 80.00% Akron, OH Showcase 1996 20.00% Las Vegas, NV South Bay Galleria 1985 50.00% Redondo Beach, CA South Bay Southern 1978 100.00% Redondo Beach, CA Summit Park Mall 1972 100.00% Wheatfield, NY Tucson Mall 1982 67.50% Tucson, AZ Tucson Place 1989 100.00% Tucson, AZ
Leasable Name Major Tenants Square Feet - ------------------------------------------------------------------------------------------------------ Antelope Valley Mall Sears; Penney's; Gottshalk's; Harris; Mervyn's 839,000 Atlantic Center Caldor; Sports Authority; Pathmark; OfficeMax; Old Navy 391,000 * Atlantic Center Site V Sneaker Stadium 47,000 Avenue at Tower City Dillard's 790,000 Ballston Common Hecht's; Penney's; Sport & Health 490,000 Boulevard Mall Jenss; Penney's; Kaufmann's 772,000 Bowling Green Mall Kroger; Quality Big Lots 242,000 Bruckner Boulevard Pergament; Seaman's; YoungWorld; Old Navy 114,000 Canton Centre Kaufmann's; Penney's; Montgomery Ward 680,000 Chapel Hill Mall Kaufmann's; Penney's; Sears 882,000 Chapel Hill Suburban Value City; Petzazz 112,000 Charleston Town Center Kaufmann's; Penney's; Sears; Montgomery Ward; Stone & Thomas 897,000 Courtland Center Crowley's; Penney's; Mervyn's 460,000 Courtyard V.G.'s Market; Home Depot; OfficeMax 233,000 Flatbush Avenue Edward's Supermarket 136,000 * 42nd Street AMC Theaters; Madame Tussaud's Wax Museum 296,000 Galleria at Sunset Dillard's; Robinsons-May; Mervyn's; Penney's 892,000 Gallery at MetroTech Toys "R" Us 163,000 Golden Gate OfficeMax; Old Navy; Champs; Michael's; Home Place 260,000 Grand Avenue Edward's Supermarket 100,000 Gun Hill Road Home Depot; Sneaker Stadium 147,000 Hunting Park Caldor; US Kidz; Payless Shoes 144,000 Manhattan Town Center Dillard's; Penney's; Sears 380,000 Marketplace at Riverpark Best Buy; Target; Marshall's; Penney's 453,000 Midtown Plaza Hills 256,000 Newport Plaza IGA 157,000 Northern Boulevard Edward's Supermarket; Marshall's; Old Navy 214,000 Plaza at Robinson Town Center T.J. Maxx; IKEA; Hills; Marshall's; Sears 455,000 * Richmond Avenue Circuit City; Staples 76,000 Rolling Acres Mall Kaufmann's; Penney's; Sears; Dillard's; Target 1,014,000 Showcase Coca-Cola(R); All Star Cafe; M&M's World/Ethel M. Chocolates; Game Works; United Artists 189,000 South Bay Galleria Robinsons-May; Mervyn's; Nordstrom's; General Cinema 953,000 South Bay Southern CompUSA 160,000 Summit Park Mall Bon-Ton; Jenss; Sears, 695,000 Tucson Mall Broadway's; Foley's; Dillard's; Mervyn's; Penney's; Sears 1,293,000 Tucson Place Wal-Mart; Homelife; OfficeMax 276,000 ---------- Shopping Centers at January 31, 1998 15,658,000 ========== Shopping Centers at January 31, 1997 14,775,000 ==========
OFFICE BUILDINGS Date of Opening/ % of Name Acquisition Ownership Location - ---------------------------------------------------------------------------------------------- Chagrin Plaza I & II 1969 66.67% Beachwood, OH Chase Financial Tower 1991 95.00% Cleveland, OH Clark Building 1989 50.00% Cambridge, MA Eleven MetroTech Center 1995 65.00% Brooklyn, NY Emery-Richmond 1991 50.00% Warrensville Hts., OH Halle Building 1986 75.00% Cleveland, OH Jackson Building 1987 100.00% Cambridge, MA Liberty Center 1986 50.00% Pittsburgh, PA M.K. Ferguson Plaza 1990 1.00% Cleveland, OH Nine MetroTech 1997 65.00% Brooklyn, NY One MetroTech 1991 65.00% Brooklyn, NY One Pierrepont Plaza 1988 85.00% Brooklyn, NY Richards Building 1990 100.00% Cambridge, MA San Vicente 1983 25.00% Brentwood, CA Signature Square I 1986 50.00% Beachwood, OH Signature Square II 1989 50.00% Beachwood, OH Skylight Office Tower 1991 92.50% Cleveland, OH Station Square 1994 100.00% Pittsburgh, PA Ten MetroTech Center 1991 80.00% Brooklyn, NY Terminal Tower 1983 100.00% Cleveland, OH Two MetroTech 1990 65.00% Brooklyn, NY * University Park at MIT-Millennium 1998 50.00% Cambridge, MA * University Park at MIT-Phase II 1999 100.00% Cambridge, MA
Leasable Name Major Tenants Square Feet - ------------------------------------------------------------------------------------------------------------------------- Chagrin Plaza I & II National City Bank 116,000 Chase Financial Tower Chase Financial 119,000 Clark Building Oravax 122,000 Eleven MetroTech Center E-9ll - City of New York 216,000 Emery-Richmond Allstate Insurance 5,000 Halle Building Sealy, Inc.; North American Refractories Co. 379,000 Jackson Building Ariad Pharmaceuticals 99,000 Liberty Center Federated Investors 526,000 M.K. Ferguson Plaza M.K. Ferguson; Chase Financial 482,000 Nine MetroTech Fire Department - City of New York 317,000 One MetroTech Brooklyn Union; Bear Stearns 932,000 One Pierrepont Plaza Morgan Stanley; Goldman Sachs; U.S. Attorney 672,000 Richards Building Genzyme Tissue Repair; Alkermes 126,000 San Vicente Foote, Cone; Needham, Harper 469,000 Signature Square I Ciuni & Panichi 79,000 Signature Square II Sterling Software 81,000 Skylight Office Tower Ernst & Young, L.L.P. 321,000 Station Square Woodson's; Grand Concourse 144,000 Ten MetroTech Center Internal Revenue Service 409,000 Terminal Tower Forest City Enterprises, Inc. 583,000 Two MetroTech Securities Industry Automation Corp. 521,000 * University Park at MIT-Millennium Millennium Pharmaceuticals, Inc.; Monsanto 276,000 * University Park at MIT-Phase II Star Market; Tofias, Fleishman, Shapiro & Co.; Comp USA 172,000 --------- Office Buildings at January 31, 1998 7,166,000 ========= Office Buildings at January 31, 1997 6,890,000 =========
HOTELS Date of Opening/ % of Name Acquisition Ownership Location Rooms - ------------------------------------------------------------------------------------------------------------------------ Budgetel 1982 28.35% Mayfield Hts., OH 102 Charleston Marriott 1983 95.00% Charleston, WV 354 DoubleTree at Liberty Center 1986 50.00% Pittsburgh, PA 616 DoubleTree at Millender Center 1985 4.00% Detroit, MI 250 * Hotel at 42nd Street 1999 56.00% Manhattan, NY 449 Ritz-Carlton 1990 95.00% Cleveland, OH 208 * University Park Hotel at MIT 1998 50.00% Cambridge, MA 210 ------- Hotel Rooms at January 31, 1998 2,189 ======= Hotel Rooms at January 31, 1997 1,530 =======
* These properties were under construction as of January 31, 1998. 22 2 FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES FOREST CITY RENTAL PROPERTIES CORPORATION PORTFOLIO OF REAL ESTATE
APARTMENTS Date of Opening/ % of Leasable Name Acquisition Ownership Location Units - ----------------------------------------------------------------------------------------------------------------------------- Bayside Village I, II & III 1988-1989 50.00% San Francisco, CA 862 * Big Creek 1996-1998 50.00% Parma Hts., OH 232 Boot Ranch 1991 50.00% Tampa, FL 236 Boulevard Towers 1969 50.00% Amherst, NY 402 Camelot 1967 50.00% Parma, OH 150 Chapel Hill Towers 1969 50.00% Akron, OH 402 Cherry Tree 1996-1997 50.00% Strongsville, OH 276 Chestnut Lake 1969 50.00% Strongsville, OH 789 Clarkwood 1963 50.00% Warrensville Hts., OH 568 Classic Residence by Hyatt 1990 50.00% Chevy Chase, MD 339 Classic Residence by Hyatt 1989 50.00% Teaneck, NJ 221 Colony Woods 1997 100.00% Bellevue, WA 396 Copper Creek 1992 20.00% Houston, TX 300 Deer Run I & II 1987-1989 43.03% Twinsburg, OH 562 Emerald Palms 1996 100.00% Miami, FL 419 * Enclave 1997-1998 1.00% San Jose, CA 637 Fenimore Court 1982 0.50% Detroit, MI 144 Fort Lincoln II 1979 45.00% Washington, D.C. 176 Fort Lincoln III & IV 1981 24.90% Washington, D.C. 306 Granada Gardens 1966 50.00% Warrensville Hts., OH 940 * Grand 1998 0.90% North Bethesda, MD 546 Greenbriar 1992 20.00% Houston, TX 400 Hamptons 1969 50.00% Beachwood, OH 649 Highlands I & II 1988-1990 100.00% Grand Terrace, CA 556 Hunter's Hollow 1990 50.00% Strongsville, OH 208 Independence Place I 1976 50.00% Parma Hts., OH 202 Kennedy Lofts 1990 0.50% Cambridge, MA 142 Knolls 1995 1.00% Orange, CA 260 Laurels 1995 100.00% Justice, IL 520 Lenox Club 1991 0.50% Arlington, VA 385 Lenox Park 1992 0.50% Silver Spring, MD 406 Liberty Hills 1979-1986 50.00% Solon, OH 396 Metropolitan 1989 100.00% Los Angeles, CA 270 Midtown Towers 1969 50.00% Parma, OH 635 Millender Center 1985 4.00% Detroit, MI 339 Museum Towers 1997 89.00% Philadelphia, PA 286 Noble Towers 1979 50.00% Pittsburgh, PA 133 Oaks 1994 100.00% Bryan, TX 248 One Franklintown 1988 100.00% Philadelphia, PA 335 Palm Villas 1991 100.00% Henderson, NV 350 Panorama Towers 1978 99.00% Los Angeles, CA 154 Parmatown 1972-1973 100.00% Parma, OH 412 Pavilion 1992 0.50% Chicago, IL 1,115 Pebble Creek 1995-1996 50.00% Twinsburg, OH 148 Peppertree 1993 100.00% College Station, TX 208 Pine Ridge Valley 1967-1974 50.00% Willoughby, OH 1,147 Queenswood 1990 0.70% Corona, NY 296 Regency Towers 1994 100.00% Jackson, NJ 372 Shippan Avenue 1980 100.00% Stamford, CT 148 Studio Colony 1986 80.00% Los Angeles, CA 450 Surfside Towers 1970 50.00% Eastlake, OH 246 Tam-A-Rac I, II & III 1990-1997 50.00% Willoughby, OH 454 Trolley Plaza 1981 100.00% Detroit, MI 351 Trowbridge 1988 53.25% Southfield, MI 304 Twin Lake Towers 1966 50.00% Denver, CO 254 Village Green 1994-1995 25.00% Beachwood, OH 360 Vineyards 1995 100.00% Broadview Hts., OH 336 Waterford Village 1994 1.00% Indianapolis, IN 520 White Acres 1966 50.00% Richmond Hts., OH 473 Whitehall Terrace 1997 100.00% Kent, OH 188 Woodforest Glen 1992 20.00% Houston, TX 336 ------ 23,895 Senior Citizen Apartments 9,402 ------ Apartments at January 31, 1998 33,297 ====== Apartments at January 31, 1997 32,938 ======
* These properties were under construction as of January 31, 1998. 3 Forest City Enterprises, Inc. and Subsidiaries Selected Financial Data
For the Years Ended January 31, - --------------------------------------------------------------------------------------------------------------------------- 1998 1997 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------------- (in thousands, except per share data) Operating Results Revenues ........................................... $ 632,669 $ 610,449 $ 529,433 $ 522,608 $ 519,379 ================================================================== Operating earnings, net of tax (1) ................. $ 24,539 $ 6,986 $ 13,490 $ 6,774 $ 718 Provision for decline in real estate, net of tax ... -- (7,413) (6,073) (4,986) -- Gain (loss) on disposition of properties, net of tax (23,356) 9,598 (478) (20,321) 1,494 -------------------------------------------------------------------- Net earnings (loss) before extraordinary gain ...... 1,183 9,171 6,939 (18,533) 2,212 Extraordinary gain, net of tax ..................... 19,356 2,900 1,847 60,449 -- -------------------------------------------------------------------- Net earnings ....................................... $ 20,539 $ 12,071 $ 8,786 $ 41,916 $ 2,212 ================================================================== Earnings per Common Share BASIC AND DILUTED Net earnings (loss) before extraordinary gain .. $ 0.08 $ 0.70 $ 0.51 $ (1.37) $ 0.16 Extraordinary gain, net of tax ................. 1.34 0.22 0.14 4.48 -- -------------------------------------------------------------------- Net earnings ................................... $ 1.42 $ 0.92 $ 0.65 $ 3.11 $ 0.16 ================================================================== Cash dividends declared-Class A and Class B ........ $ 0.25 $ 0.27 $ 0.17 $ 0.13 $ -- ================================================================== January 31, - --------------------------------------------------------------------------------------------------------------------------- 1998 1997 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------------- (in thousands) FINANCIAL POSITION Consolidated assets ........................... $ 2,963,353 $ 2,760,673 $ 2,642,756 $ 2,584,734 $ 2,668,057 Real estate portfolio, at cost ................ $ 2,704,560 $ 2,520,179 $ 2,425,083 $ 2,322,136 $ 2,405,066 Long-term debt, including mortgage debt ....... $ 2,132,931 $ 1,991,428 $ 1,940,059 $ 1,878,270 $ 2,022,249 - ---------------------------------------------------------------------------------------------------------------------------- FOREST CITY RENTAL PROPERTIES CORPORATION - REAL ESTATE ACTIVITY (2) Total real estate - end of year Completed rental properties, before depreciation ............................. $ 2,390,969 $ 2,227,859 $ 2,085,284 $ 1,995,629 $ 2,101,528 Projects under development ................ 251,416 215,960 246,240 230,802 214,111 ------------------------------------------------------------------------ 2,642,385 2,443,819 2,331,524 2,226,431 2,315,639 Accumulated depreciation .................. (436,377) (387,733) (338,216) (293,465) (272,518) ------------------------------------------------------------------------ Rental properties, net of depreciation .. $ 2,206,008 $ 2,056,086 $ 1,993,308 $ 1,932,966 $ 2,043,121 ======================================================================== Real Estate Activity during the year Completed rental properties Capital additions ....................... $ 166,740 $ 160,690 $ 89,028 $ 77,265 $ 50,384 Acquisitions ............................ 90,438 22,264 28,587 32,811 5,198 Dispositions (3)(4) ..................... (94,068) (40,379) (27,960) (215,975) - ------------------------------------------------------------------------ 163,110 142,575 89,655 (105,899) 55,582 ------------------------------------------------------------------------ Projects under development New development ......................... 154,746 98,403 58,798 49,585 54,317 Transferred to completed rental properties (119,290) (128,683) (43,360) (32,894) (28,393) ------------------------------------------------------------------------ 35,456 (30,280) 15,438 16,691 25,924 ------------------------------------------------------------------------ Increase (decrease) in rental properties, at cost $ 198,566 $ 112,295 $ 105,093 $ (89,208) $ 81,506 ========================================================================
(1) Excludes the provision for decline in real estate and gain (loss) on disposition of properties, net of tax. (2) The table includes only the real estate activity for Forest City Rental Properties Corporation. (3) Reflects the sale of Toscana, a residential complex containing 563 units in Irvine, California, during the year ended January 31, 1998. (4) Reflects the sale of Park LaBrea Towers, a residential complex containing 2,825 units in Los Angeles, California, during the year ended January 31, 1995. 4 Forest City Enterprises, Inc. and Subsidiaries Consolidated Balance Sheets
January 31, - --------------------------------------------------------------------------------------------------------------------------- 1998 1997 - --------------------------------------------------------------------------------------------------------------------------- (dollars in thousands, except per share data) Assets Real Estate Completed rental properties ................................................... $ 2,407,045 $ 2,247,393 Projects under development .................................................... 251,416 220,137 Land held for development or sale ............................................. 46,099 52,649 ---------------------------- 2,704,560 2,520,179 Less accumulated depreciation ................................................. (448,634) (399,830) ---------------------------- Total Real Estate .......................................................... 2,255,926 2,120,349 Cash ............................................................................. 54,854 41,302 Notes and accounts receivable, net ............................................... 191,719 204,959 Inventories ...................................................................... 58,696 48,769 Investments in and advances to affiliates ........................................ 202,409 164,510 Other assets ..................................................................... 199,749 180,784 ---------------------------- $ 2,963,353 $ 2,760,673 ============================ Liabilities and Shareholders' Equity Liabilities Mortgage debt, nonrecourse ....................................................... $ 2,018,931 $ 1,898,428 Accounts payable and accrued expenses ............................................ 361,398 387,060 Notes payable .................................................................... 34,819 38,964 Long-term debt ................................................................... 114,000 93,000 Deferred income taxes ............................................................ 117,723 115,488 Deferred profit .................................................................. 34,537 35,755 ---------------------------- Total Liabilities .......................................................... 2,681,408 2,568,695 ---------------------------- Shareholders' Equity Preferred stock - convertible, without par value; 5,000,000 and 1,000,000 shares authorized, respectively; no shares issued ..... -- -- Common stock - $.33 1/3 par value Class A, 48,000,000 and 16,000,000 shares authorized; 9,906,686 and 7,932,358 shares issued, 9,593,036 and 7,696,408 outstanding, respectively ........... 3,301 2,643 Class B, convertible, 18,000,000 and 6,000,000 shares authorized; 5,535,290 and 5,554,618 shares issued, 5,396,240 and 5,415,568 outstanding, respectively . 1,844 1,851 ---------------------------- 5,145 4,494 Additional paid-in capital ....................................................... 119,421 43,996 Retained earnings ................................................................ 168,864 152,077 ---------------------------- 293,430 200,567 Less treasury stock, at cost; 1998: 313,650 Class A and 139,050 Class B shares, 1997: 235,950 Class A and 139,050 Class B shares .............................. (11,485) (8,589) ---------------------------- Total Shareholders' Equity ................................................. 281,945 191,978 ---------------------------- $ 2,963,353 $ 2,760,673 ============================
The accompanying notes are an integral part of these consolidated financial statements. 5 Forest City Enterprises, Inc. and Subsidiaries Consolidated Statements Of Earnings
For the Years Ended January 31, - ------------------------------------------------------------------------------------ 1998 1997 1996 - -------------------------------------------------------------------------------------- (in thousands, except per share data) Revenues .................................. $ 632,669 $ 610,449 $ 529,433 ----------------------------------- Operating expenses ........................ 379,531 386,970 305,819 Interest expense .......................... 136,322 133,364 130,001 Provision for decline in real estate ...... -- 12,263 9,581 Depreciation and amortization ............. 74,793 73,304 65,716 ----------------------------------- 590,646 605,901 511,117 ----------------------------------- Gain (loss) on disposition of properties .. (38,638) 17,574 (754) ----------------------------------- Earnings before income taxes .............. 3,385 22,122 17,562 ----------------------------------- Income tax expense (benefit) Current ................................ (1,478) 1,935 370 Deferred ............................... 3,680 11,016 10,253 ----------------------------------- 2,202 12,951 10,623 ----------------------------------- Net earnings before extraordinary gain .... 1,183 9,171 6,939 Extraordinary gain, net of tax ............ 19,356 2,900 1,847 ----------------------------------- Net earnings .............................. $ 20,539 $ 12,071 $ 8,786 =================================== Basic and diluted earnings per common share Net earnings before extraordinary gain . $ .08 $ .70 $ .51 Extraordinary gain, net of tax ......... 1.34 .22 .14 ----------------------------------- Net earnings .............................. $ 1.42 $ .92 $ .65 ===================================
The accompanying notes are an integral part of these consolidated financial statements. 6
Forest City Enterprises, Inc. and Subsidiaries Consolidated Statements Of Shareholders' Equity Common Stock ------------------------------ Class A Class B Additional Treasury Stock ------------------------------- Paid-In Retained -------------- Shares Amount Shares Amount Capital Earnings Shares Amount Total - --------------------------------------------------------------------------------------------------------------------------- (in thousands, except per share data) BALANCES AT JANUARY 31, 1995........... 7,719 $2,572 5,768 $1,922 $44,014 $137,052 - $ - $185,560 Net earnings ........................ 8,786 8,786 Dividends-$.17 per share ............ (2,248) (2,248) Conversion of Class B shares to Class A shares ..................... 188 63 (188) (63) - Purchase of treasury stock .......... 116 (2,509) (2,509) ------------------------------------------------------------------------------- BALANCES AT JANUARY 31, 1996 .......... 7,907 2,635 5,580 1,859 44,014 143,590 116 (2,509) 189,589 Net earnings ........................ 12,071 12,071 Dividends: Annual 1996 -$.21 per share ....... (2,797) (2,797) Quarterly 1997-$.06 per share (one quarter) .................... (787) (787) Conversion of Class B shares to Class A shares ..................... 25 8 (25) (8) - Purchase of treasury stock .......... 259 (6,080) (6,080) Cash in lieu of fractional shares from three-for-two stock split ......... (18) (18) ------------------------------------------------------------------------------- BALANCES AT JANUARY 31, 1997 .......... 7,932 2,643 5,555 1,851 43,996 152,077 375 (8,589) 191,978 Net earnings ........................ 20,539 20,539 Dividends: Quarterly 1997 -$.06 per share (three quarters) ................. (2,703) (2,703) Quarterly 1998- $.07 per share (one quarter) .................... (1,049) (1,049) Issuance of 1,955,000 Class A common shares in public offering ......... 1,955 651 75,425 76,076 Conversion of Class B shares to Class A shares ..................... 20 7 (20) (7) - Purchase of treasury stock .......... 78 (2,896) (2,896) ------------------------------------------------------------------------------- BALANCES AT JANUARY 31, 1998 ........ 9,907 $3,301 5,535 $1,844 $119,421 $168,864 453 $(11,485) $281,945 ===============================================================================
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements Of Cash Flows For the Years Ended January 31, - ----------------------------------------------------------------------------------------------------------- 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------- (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Rents and other revenues received ............................ $ 587,851 $ 532,177 $ 509,708 Proceeds from land sales ..................................... 46,619 44,297 44,740 Land development expenditures ................................ (32,670) (25,741) (24,163) Operating expenditures ....................................... (404,285) (349,246) (321,701) Interest paid ................................................ (133,999) (134,554) (132,009) -------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES .................. 63,516 66,933 76,575 -------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures ......................................... (242,831) (157,601) (122,878) Proceeds from disposition of properties ...................... -- 26,040 15,950 Investments in and advances to affiliates .................... (33,737) (8,048) (9,986) -------------------------------------- NET CASH USED IN INVESTING ACTIVITIES ...................... (276,568) (139,609) (116,914) -------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Increase in nonrecourse mortgage and long-term debt .......... 385,807 174,409 119,706 Principal payments on nonrecourse mortgage debt on real estate (102,518) (55,880) (43,631) Payments on long-term debt ................................... (109,000) (23,000) (30,000) Increase in notes payable .................................... 48,574 23,613 8,427 Payments on notes payable .................................... (57,407) (10,195) (9,497) Decrease (increase) in restricted cash ....................... 3,600 (15,200) -- Payment of deferred financing costs .......................... (12,142) (10,037) (7,242) Sale of common stock, net .................................... 76,076 -- -- Purchase of treasury stock ................................... (2,896) (6,080) (2,509) Dividends paid to shareholders ............................... (3,490) (2,797) (2,248) -------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES .................. 226,604 74,833 33,006 -------------------------------------- NET INCREASE (DECREASE) IN CASH ................................. 13,552 2,157 (7,333) CASH AT BEGINNING OF YEAR ....................................... 41,302 39,145 46,478 -------------------------------------- CASH AT END OF YEAR ............................................. $ 54,854 $ 41,302 $ 39,145 ======================================
7 Forest City Enterprises, Inc. and Subsidiaries Consolidated Statements Of Cash Flows
For the Years Ended January 31, - --------------------------------------------------------------------------------------------------------------------------- 1998 1997 1996 - --------------------------------------------------------------------------------------------------------------------------- (in thousands) RECONCILIATION OF NET EARNINGS TO CASH PROVIDED BY OPERATING ACTIVITIES NET EARNINGS .......................................................... $ 20,539 $ 12,071 $ 8,786 Depreciation ....................................................... 56,923 52,979 50,821 Amortization ....................................................... 17,870 20,325 14,895 Deferred income taxes .............................................. 2,071 10,377 11,461 Loss (gain) on disposition of properties ........................... 38,638 (17,574) 754 Provision for decline in real estate ............................... -- 12,263 9,581 Extraordinary gain ................................................. (22,174) (4,797) (3,055) Decrease in land held for development or sale ...................... 396 8,980 2,887 Decrease (increase) in notes and accounts receivable ............... 10,019 (40,579) 29,425 Increase in inventories ............................................ (9,927) (7,583) (2,237) Increase in other assets ........................................... (27,168) (20,918) (24,519) (Decrease) increase in accounts payable and accrued expenses ....... (22,453) 43,351 (26,380) (Decrease) increase in deferred profit ............................. (1,218) (1,962) 4,156 ---------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES .......................... $ 63,516 $ 66,933 $ 76,575 ==================================
SUPPLEMENTAL NON-CASH DISCLOSURE: The schedule below represents the effect of the following non-cash transactions: January 31, 1998: * Increase in interest in Skylight Office Tower, Antelope Valley Mall and Station Square * Disposition of interest in Toscana * Reduction of interest in MIT Phase II * Disposition of interest in Woodridge January 31, 1997: * Reduction of interests in Granite Development Partners L.P. and the Clark Building * Disposition of interest in Beachwood Place January 31, 1996: * Increase in interest in Liberty Center Venture
Operating Activities Land held for development or sale .................................. $ 3,022 $ 15,650 $ -- Notes and accounts receivable ...................................... (5,072) 3,797 -- Other assets ....................................................... (1,125) 5,175 -- Accounts payable and accrued expenses .............................. (3,470) (5,311) -- Deferred taxes ..................................................... 164 -- -- ----------------------------------- Total effect on operating activities ............................. $ (6,481) $ 19,311 $ -- =================================== Investing Activities Additions to completed rental properties .......................... $(45,272) $ -- $(15,714) Disposition of completed rental properties ........................ 53,547 16,085 -- Investments in and advances to affiliates ......................... 4,131 3,338 -- ----------------------------------- Total effect on investing activities ............................ $ 12,406 $ 19,423 $(15,714) =================================== Financing Activities Assumption of nonrecourse mortgage and long-term debt.............. $ 38,375 $ -- $ 15,714 Disposition of nonrecourse mortgage and long-term debt............. (48,988) (39,362) -- Notes payable ..................................................... 4,688 628 -- ----------------------------------- Total effect on financing activities ............................ $ (5,925) $(38,734) $ 15,714 ===================================
The accompanying notes are an integral part of these consolidated financial statements. 8 Forest City Enterprises, Inc. and Subsidiaries A. Summary Of Significant Accounting Policies - -------------------------------------------------------------------------------- NATURE OF BUSINESS Forest City Enterprises, Inc. is a major, vertically integrated national real estate company with four principal business groups. THE COMMERCIAL GROUP develops, acquires, owns and operates shopping centers, office buildings and mixed-use projects including hotels. The RESIDENTIAL GROUP develops or acquires, and owns and operates the Company's multi-family properties. The LAND GROUP owns and develops raw land into master planned communities and other residential developments for resale. The LUMBER TRADING Group operates the Company's lumber wholesaling business. Forest City Enterprises, Inc. owns approximately $2.7 billion of properties at cost in 21 states and Washington, D.C. The Company's executive offices are in Cleveland, Ohio. Regional offices are located in New York, Los Angeles, Boston, Tucson, Detroit, Washington, D.C. and San Francisco. FISCAL YEAR The years 1997, 1996 and 1995 refer to the fiscal years ended January 31, 1998, 1997 and 1996, respectively. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Forest City Enterprises, Inc. and all wholly-owned subsidiaries ("Company"). The Company also includes its proportionate 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 are included in retained earnings, with no significant amounts at January 31, 1998. The Company is required to make estimates and assumptions when preparing its financial statements and accompanying notes in conformity with generally accepted accounting principles. Actual results could differ from those estimates. 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 (SFAS) No. 66, "Accounting for Sales of Real Estate" for reporting 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 25 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 commercial properties. LUMBER BROKERAGE - The Company recognizes the gross margin on these sales as revenue. Sales invoiced for the years 1997, 1996 and 1995 were approximately $2,940,000,000, $2,884,000,000 and $2,337,500,000, 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 are 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 real estate 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 range from 20 to 50 years. Major 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. The Company periodically reviews its properties to determine if its carrying costs will be recovered from future operating cash flows. In cases where the Company does not expect to recover its carrying costs, an impairment loss is recorded as a provision for decline in real estate. LAND OPERATIONS Land held for development or sale is stated at the lower of carrying amount or fair value less cost to sell. 30 9 Forest City Enterprises, Inc. and Subsidiaries A. Summary Of Significant Accounting Policies (continued) CASH AND CASH EQUIVALENTS The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates market value. The Company maintains operating cash and reserve for replacement balances in financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000. INVENTORIES The lumber brokerage inventories are stated at the lower of cost or market. Inventory cost is determined by specific identification and average cost methods. 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. Additionally, restricted deposits and funded reserves are included in other assets and represent deposits with mortgage lenders for taxes and insurance, security deposits, capital replacement, improvement and operating reserves, bond funds and development and construction escrows. INCOME TAXES Deferred tax assets and liabilities 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 general business tax credits which it expects to use as a reduction of the deferred tax expense. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company determined the estimated fair value of its debt and hedging instruments 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 and hedging instruments. INTEREST RATE PROTECTION AGREEMENTS The Company maintains a practice of hedging its variable interest rate risk by purchasing interest rate caps or entering into interest rate swap agreements for periods of one to five years. The principal 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 obligations. 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 benefit period as interest expense in the Consolidated Statements of Earnings. STOCK-BASED COMPENSATION The Company follows Accounting Principles Board Opinion (APBO) No. 25, "Accounting for Stock Issued to Employees", and related Interpretations to account for stock-based compensation. As such, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of grant over the amount the employee is required to pay for the stock. CAPITAL STOCK Class B common stock is convertible into Class A common stock on a share-for-share basis. The 5,000,000 authorized shares of preferred stock without par value, none of which have been issued, are convertible into Class A common stock. Class A common shareholders elect 25% of the members of the Board of Directors and Class B common shareholders elect the remaining directors annually. The Company currently has 12 directors. EARNINGS PER SHARE In 1997, the Company adopted the principles of SFAS 128 "Earnings per Share". All prior period per share amounts have been restated to conform to the new accounting principles. Basic earnings per share are computed by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilutive effect of the Company's stock option plan by adjusting the denominator using the treasury stock method. The sum of the four quarters' earnings per share may not equal the annual earnings per share due to the weighting of stock and option activity occurring during the year. All earnings per share disclosures appearing in these financial statements were computed assuming dilution unless otherwise indicated. NEW ACCOUNTING STANDARDS In June 1997, the FASB issued SFAS 131 "Disclosures about Segments of an Enterprise and Related Information", which is effective for years beginning after December 15, 1997. This statement provides guidance on the determination of reporting segments and requires interim financial statement disclosure. The Company does not anticipate that significant changes to the segment information historically provided in its annual financial statements will occur as a result of the adoption of SFAS 131. Beginning with the Company's Quarterly Report on Form 10-Q for the quarter ending April 30, 1998, the Company will include interim segment information. 31 10 Forest City Enterprises, Inc. and Subsidiaries B. Real Estate And Related Accumulated Depreciation And Nonrecourse Mortgage Debt The components of real estate cost and related nonrecourse mortgage debt are presented below.
January 31, 1998 - --------------------------------------------------------------------------------------------------------------------------- Less Accumulated Nonrecourse Total Cost Depreciation Net Cost Mortgage Debt - --------------------------------------------------------------------------------------------------------------------------- (in thousands) Completed rental properties Residential............................$ 580,221 $ 117,188 $ 463,033 $ 482,439 Commercial Shopping centers..................... 890,064 152,030 738,034 771,103 Office and other buildings........... 918,186 167,159 751,027 701,710 Corporate and other equipment.......... 18,574 12,257 6,317 -- ---------------------------------------------------------------------- 2,407,045 448,634 1,958,411 1,955,252 ---------------------------------------------------------------------- Projects under development Residential............................ 32,307 -- 32,307 215 Commercial Shopping centers..................... 99,696 -- 99,696 17,968 Office and other buildings........... 119,413 -- 119,413 21,408 ---------------------------------------------------------------------- 251,416 -- 251,416 39,591 ---------------------------------------------------------------------- Land held for development or sale......... 46,099 -- 46,099 24,088 ---------------------------------------------------------------------- $2,704,560 $ 448,634 $2,255,926 $2,018,931 ======================================================================
C. Notes And Accounts Receivable, Net - ------------------------------------------------------------ Notes and accounts receivable are summarized below. January 31, - ------------------------------------------------------------ 1998 1997 - ------------------------------------------------------------ (in thousands) Lumber brokerage...........$ 134,197 $ 153,944 Real estate sales.......... 18,278 14,509 Syndication activities..... 12,197 12,865 Receivable from tenants.... 17,730 12,795 Other receivables ......... 17,486 15,840 --------------------------------- 199,888 209,953 Allowance for doubtful accounts ............... (8,169) (4,994) --------------------------------- $ 191,719 $ 204,959 =================================
Notes receivable at January 31, 1998 of $25,787,000, reflected in the table above, are collectible primarily over five years, with $7,185,000 being due within one year. The weighted average interest rate at January 31, 1998 and 1997 was 9.10% and 9.20%, respectively. In July 1996, the Lumber Trading Group 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, 1998 and 1997, the Company had received $49,000,000 and $34,000,000, respectively, as net proceeds from this transaction. The program is nonrecourse to the Company and the Company bears no risk as to the collectability of the accounts receivable. An interest in additional accounts receivable may be sold as collections reduce previously sold interests. D. Accounts Payable And Accrued Expenses Included in accounts payable and accrued expenses at January 31, 1998 and 1997 are book overdrafts of approximately $57,222,000 and $66,971,000, 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. 32 11 Forest City Enterprises, Inc. and Subsidiaries E. 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, - --------------------------------------------------------------- 1998 1997 - --------------------------------------------------------------- (in thousands) Payable To Banks................. $ 19,024 $ 15,191 Other................. 15,795 23,773 ------------------------------------- $ 34,819 $ 38,964 =====================================
Notes payable to banks reflects borrowings on the Lumber Trading Group's $47,000,000 bank lines of credit. The Company has the right to borrow an additional $10,000,000 for up to 90 days through May 31, 1998 under these bank lines of credit. The bank lines of credit allow for up to $5,000,000 in outstanding letters of credit ($716,000 were outstanding at January 31, 1998) which reduce the credit available to Lumber Trading Group. Borrowings under these bank lines of credit, which are nonrecourse to the Company, are collateralized by all the assets of the Lumber Trading Group, bear interest at the lender's prime rate and have a fee of 1/5% per annum on the unused portion of the available commitment. These bank lines of credit are subject to review and extension annually. Other notes payable relate to improvements and construction funded by tenants, property and liability insurance premium financing and advances from affiliates and partnerships. The weighted average interest rate on notes payable was 7.89% and 7.99% at January 31, 1998 and 1997, respectively. Interest expense on notes payable was $6,068,000 in 1997, $5,978,000 in 1996 and $5,177,000 in 1995. Interest paid on notes payable was $6,407,000 in 1997, $5,250,000 in 1996 and $5,189,000 in 1995. F. Mortgage Debt, Nonrecourse Mortgage debt, which is collateralized by completed rental properties, projects under development and certain undeveloped land, is as follows.
January 31, - --------------------------------------------------------------- 1998 1997 - --------------------------------------------------------------- (dollars in thousands) Rate (1) Rate (1) -------- -------- Fixed..........$ 1,118,748 7.88% $ 917,547 7.96% Variable - Swapped..... 283,710 7.97% 330,385 7.79% Unhedged.... 388,969 7.94% 438,784 7.08% Tax-Exempt.. 151,051 4.76% 134,302 4.38% UDAG and other subsidized.. loans....... 76,453 2.36% 77,410 2.60% ----------- ---------- $ 2,018,931 7.46% $1,898,428 7.25% =========== ========== (1) The weighted average interest rates shown above include both the base index and the lender margin.
Debt related to projects under development at January 31, 1998 totals $39,591,000, out of a total commitment from lenders of $99,528,000. Of this outstanding debt, $32,243,000 is variable-rate debt and $7,348,000 is fixed-rate debt. The Company generally borrows funds for development and construction projects with maturities of three to seven years utilizing variable-rate financing. Upon opening and achieving stabilized operations, the Company generally obtains long-term fixed-rate financing. As of January 31, 1998, the Company had entered into London Interbank Offered Rate ("LIBOR") interest rate swap agreements for durations ranging from one to five years, as follows.
Swap Base Principal LIBOR Rate Period Outstanding - --------------------------------------------------------------- (dollars in thousands) 6.25% 03/15/96 - 12/29/00 $ 21,096 6.28% 05/01/96 - 11/12/01 31,520 6.54% 06/03/96 - 10/31/00 56,199 6.64% 01/02/97 - 01/04/99 38,925 6.50% 04/15/97 - 04/15/99 96,470 6.43% 06/16/97 - 01/28/02 39,500 ---------- $ 283,710 ==========
The effect of these interest rate swap agreements reduces the Company's outstanding taxable variable-rate debt at January 31, 1998 to $388,969,000, which is 19.3% of the total nonrecourse mortgage debt. In addition, the Company has purchased 6.50%, 6.50% and 7.25% LIBOR interest rate caps for its variable-rate debt in the amount of $293,675,000, $400,000,000 and $200,000,000, respectively, for the years ending January 31, 1999, 2000 and 2001, respectively. The interest rate caps for the years ending January 31, 2000 and 2001 where purchased during April 1998. The Urban Development Action Grants and other subsidized 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 under-developed areas. A right to participate by the local government in the future cash flows of the project is generally a condition of these loans. Participation in annual cash flows generated from operations is recognized as an expense in the period earned. Participation in appreciation and cash flows 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. Mortgage debt maturities for the next five years ending January 31 are as follows: 1999, $105,165,000; 2000, $499,392,000; 2001, $322,201,000; 2002, $152,966,000, and 2003, $147,600,000. The Company is engaged in discussions with its current lenders and is actively pursuing new lenders to extend and refinance maturing mortgage debt. The Company intends to convert a significant portion of its existing variable-rate debt to fixed-rate mortgages in order to reduce the volatility in the Company's project mortgage interest expense. Interest incurred on mortgage debt was $138,546,000 in 1997, $127,531,000 in 1996 and $125,370,000 in 1995. Interest paid on mortgage debt was $118,915,000 in 1997, $122,188,000 in 1996 and $118,829,000 in 1995. 33 12 Forest City Enterprises, Inc. and Subsidiaries G. Long-Term Debt Long-term debt is as follows.
January 31, 1998 1997 - ------------------------------------------------------- (in thousands) Term loan .......................$ 60,000 $45,000 Revolving credit loans........... 54,000 48,000 ---------------------- $114,000 $93,000 ======================
The $80,000,000 revolving credit agreement maturing July 25, 1998 and related term loan was replaced on December 10, 1997 with a $165,000,000 revolving credit facility and $60,000,000 term loan with a group of banks. The revolving credit facility matures December 10, 2000 and allows for up to $30,000,000 in outstanding letters of credit ($16,188,000 were outstanding at January 31, 1998), which reduce the revolving credit portion available to the Company. At each anniversary date, the maturity date of the revolving credit facility may be extended by one year by unanimous consent of the banks. At its maturity date, the outstanding revolving credit loans, if any, may be converted by the Company to a four-year term loan. On March 6, 1998, the credit agreement was amended to: 1) allow a $200,000,000 Senior Note offering (see Note Q); 2) require the use of the offering proceeds to pay off the term loan and outstanding revolving credit loans; 3) convert the credit agreement to be solely a $225,000,000 revolving credit facility; and 4) provide for a $2,500,000 quarterly reduction (beginning April 1, 1998) of the revolving credit limit. On March 16, 1998, the Company paid off the term loan and revolving credit loans totaling $114,000,000 with proceeds from the $200,000,000 Senior Note offering (Note Q). The credit agreement provides, among other things, for 1) interest rates of 1/4% over the prime rate or 2% over LIBOR; 2) maintenance of two debt service coverage ratios and specified level of net worth and cash flow (as defined); and 3) restriction on dividend payments. At January 31, 1998, $9,101,000 of retained earnings were available for payment of dividends. The Company purchased 6.5% LIBOR interest rate caps covering $25,000,000 of revolving credit loans in 1998 and 7.5% LIBOR caps covering $45,000,000 in 1999. Interest incurred on long-term debt was $7,811,000 in 1997, $7,880,000 in 1996 and $8,815,000 in 1995. Interest paid on long-term debt was $8,677,000 in 1997, $7,116,000 in 1996 and $7,991,000 in 1995. CONSOLIDATED INTEREST Total interest incurred on all forms of indebtedness (included in Notes E, F and G) was $154,206,000 in 1997, $141,389,000 in 1996 and $139,362,000 in 1995 of which $17,884,000, $8,025,000 and $9,361,000 was capitalized, respectively. Interest incurred for 1997 includes $1,781,000 for the purchase of a treasury option to fix the interest rate on the new $200,000,000 Senior Notes (see Note Q) issued March 16, 1998. Because the cap was not advantageous, the option was not exercised and was written off to interest expense. Interest paid on all forms of indebtedness was $133,999,000 in 1997, $134,554,000 in 1996 and $132,009,000 in 1995. H. Income Taxes The income tax provision (benefit) consists of the following components.
For the Years Ended January 31, - ------------------------------------------------------------------------- 1998 1997 1996 - ------------------------------------------------------------------------- (in thousands) Current Federal .................. $ (2,706) $ 896 $ 159 Foreign .................. 330 580 143 State .................... 898 459 68 ------------------------------------------ (1,478) 1,935 370 ------------------------------------------ Deferred Federal .................. 4,301 6,985 6,083 Foreign .................. 32 (126) -- State .................... (653) 4,157 4,170 ------------------------------------------ 3,680 11,016 10,253 ------------------------------------------ Total provision ............. $ 2,202 $ 12,951 $ 10,623 ==========================================
The effective tax rate for income taxes varies from the federal statutory rate of 35% for 1997, 1996 and 1995 due to the following items.
For the Years Ended January 31, - ------------------------------------------------------------------------ 1998 1997 1996 - ------------------------------------------------------------------------ (in thousands) Statement earnings before income taxes...........$ 3,385 $ 22,122 $ 17,562 ====================================== Income taxes computed at the statutory rate ...........$ 1,185 $ 7,742 $ 6,146 Increase (decrease) in tax resulting from: State taxes, net of federal benefit............ 83 3,000 2,220 Contribution carryover.................. 1,032 811 520 Nondeductible lobbying costs............. -- 811 -- Adjustment of prior estimated taxes............ (134) (111) 566 Valuation allowance......... -- 351 897 Other items................. 36 347 274 -------------------------------------- Total provision .................$ 2,202 $ 12,951 $ 10,623 =======================================
34 13 Forest City Enterprises, Inc. and Subsidiaries H. Income Taxes (continued) An analysis of the deferred tax provision is as follows.
For the Years Ended January 31, - ----------------------------------------------------------------------- 1998 1997 1996 - ----------------------------------------------------------------------- (in thousands) Excess of tax over statement depreciation and amortization .......... $ 2,194 $ 4,730 $ 5,743 Allowance for doubtful accounts deducted for statement purposes................... (585) (349) 461 Costs on land and rental properties under development expensed for tax purposes................... 100 3,244 (515) Revenues and expenses recognized in different periods for tax and statement purposes......... 3,909 (2,652) 6,224 Development fees deferred for statement purposes................... (395) (109) (1,326) Provision for decline in real estate............. -- (1,650) 3,547 Deferred state taxes, net of federal benefit......... (530) 2,392 2,565 Interest on construction advances deferred for statement purposes......... (1,207) (189) (953) Utilization and (benefits) of tax loss carry-forward recognized against deferred taxes............. (1,509) 3,187 (5,656) Deferred compensation......... 1,703 2,061 (734) Valuation allowance........... -- 351 897 -------------------------------------- Deferred provision............ $ 3,680 $ 11,016 $ 10,253 ======================================
The types of differences that give rise to significant portions of the deferred income tax liability for 1997 are as follows.
Temporary Deferred Tax Differences (Asset) Liability - --------------------------------------------------------------- (in thousands) Depreciation ................ $ 235,337 $ 93,076 Capitalized costs ........... 137,599 54,420 Net operating losses ........ (89,903) (35,557) General business credits .... -- (3,205) Other ....................... 10,667 8,989 ------------------------------- $ 293,700 $ 117,723 ===============================
Income taxes paid (refunded) totaled $6,247,000, $830,000 and $(888,000) in 1997, 1996 and 1995, respectively. At January 31, 1998, the Company had a net operating loss carryforward for tax purposes of $89,903,000 which will expire in the years ending January 31, 2005 through January 31, 2011 and general business credits carryovers of $3,205,000 which will expire in the years ending January 31, 2003 through January 31, 2011. The Company's deferred tax liability at January 31, 1998 is comprised of deferred liabilities of $231,525,000, deferred assets of $118,548,000 and a valuation allowance related to state taxes and general business credits of $4,746,000. 35 14 Forest City Enterprises, Inc. and Subsidiaries I. Segment Information Principal business groups are determined by the type of customer served or the product sold. The COMMERCIAL GROUP owns, develops, acquires and operates shopping centers, office buildings and mixed-use projects including hotels. The Residential Group develops or acquires, and owns and operates the Company's multi-family properties. The LAND GROUP owns and develops raw land into master planned communities and other residential developments for resale to users principally in Arizona, Florida, Nevada, New York and Ohio. The LUMBER TRADING GROUP operates the Company's lumber wholesaling business. Corporate includes interest on corporate borrowings and general administrative expenses. The following tables summarize selected financial data by business segment for the fiscal years ended January 31, 1998, 1997 and 1996.
For the Years Ended January 31, ------------------------------------------------------------------ Earnings (Loss) Before Revenues Income Taxes ------------------------------------------------------------------ 1998 1997 1996 1998 1997 1996 ------------------------------------------------------------------ (in thousands) Commercial Group (1) .............................. $ 330,117 $ 314,762 $ 298,912 $ 18,979 $ 9,914 $ 23,444 Residential Group (1) ............................. 135,253 116,878 106,103 28,153 7,148 7,602 Land Group ........................................ 44,614 53,888 42,889 5,184 6,007 3,823 Lumber Trading Group (2) .......................... 122,169 124,491 81,093 9,242 8,966 5,826 Provision for decline in real estate .............. -- -- -- -- (12,263) (9,581) Gain (loss) on disposition of properties .......... -- -- -- (38,638) 17,574 (754) Corporate (1) ..................................... 516 430 436 (19,535) (15,224) (12,798) ------------------------------------------------------------------ Consolidated ................................... $ 632,669 $ 610,449 $ 529,433 $ 3,385 $ 22,122 $ 17,562 ==================================================================
Identifiable Assets at January 31, ---------------------------------------------- 1998 1997 1996 ---------------------------------------------- (in thousands) Commercial Group (1) ........... $1,956,418 $1,749,539 $1,678,494 Residential Group (1) .......... 646,574 646,024 616,515 Land Group ..................... 87,909 88,953 121,031 Lumber Trading Group ........... 199,602 209,901 172,305 Corporate (1) .................. 72,850 66,256 54,411 ------------------------------------------ Consolidated ................ $2,963,353 $2,760,673 $2,642,756 ==========================================
Real Estate for the Years Ended January 31, -------------------------------------------------------------------------------------- Depreciation Additions, net & Amortization -------------------------------------------------------------------------------------- 1998 1997 1996 1998 1997 1996 -------------------------------------------------------------------------------------- (in thousands) Commercial Group (1) .............. $ 221,597 $ 91,793 $ 87,592 $ 56,996 $ 54,875 $ 49,572 Residential Group (1) ............. (34,723) 26,236 27,666 14,682 15,419 14,001 Land Group ........................ (1,594) (25,658) (8,887) 740 748 59 Lumber Trading Group .............. 860 2,285 (504) 2,202 2,140 1,962 Corporate (1) ..................... (1,759) 440 (2,920) 173 122 122 -------------------------------------------------------------------------------------- Consolidated ................... $ 184,381 $ 95,096 $ 102,947 $ 74,793 $ 73,304 $ 65,716 ====================================================================================== (1) Interest income and capitalized interest on development projects for years ended January 31, 1997 and January 31, 1996 related to projects in the Commercial and Residential Groups was previously reported in Corporate and has been reclassified to the Commercial and Residential Groups to conform to the presentation which management believes better matches such items with the operating group to which they relate. (2) The Company recognizes the gross margin on lumber brokerage sales as revenue. Sales invoiced for the years ended January 31, 1998, 1997 and 1996 were approximately $2,940,000,000, $2,884,000,000 and $2,337,500,000, respectively.
36 15 Forest City Enterprises, Inc. and Subsidiaries 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 Ending January 31, - --------------------------------------------------------------------------- (in thousands) 1999 ................................... $ 168,698 2000 ................................... 163,615 2001 ................................... 155,834 2002 ................................... 143,904 2003 ................................... 133,008 Later years ............................ 952,944 ------------ Total minimum future rentals $ 1,718,003 ============
Most of the commercial leases include provisions for reimbursements of other charges including real estate taxes and operating costs. Total reimbursements amounted to $63,479,000, $61,300,000 and $59,867,000 in 1997, 1996 and 1995, respectively. THE COMPANY AS LESSEE The Company is a lessee under various operating leasing arrangements for real property and equipment having terms expiring through 2095, excluding optional renewal periods. Minimum fixed rental payments under long-term leases (over one year) in effect at January 31, 1998 are as follows. For the Years Ending January 31, - -------------------------------------------------------- (in thousands) 1999 ..................................... $ 8,528 2000 ..................................... 7,908 2001 ..................................... 7,276 2002 ..................................... 6,474 2003 ..................................... 5,567 Later years .............................. 170,888 ---------- Total minimum lease payments ............. $ 206,641 ========== Rent expense was $10,273,000, $8,813,000 and $6,986,000 for 1997, 1996 and 1995, respectively. K. Contingent Liabilities As of January 31, 1998, the Company has guaranteed loans totaling $3,960,000 and has $16,904,000 in outstanding letters of credit, including $716,000 which relates to Lumber Trading Group. 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, results of operations or cash flows of the Company. 37 16 Forest City Enterprises, Inc. and Subsidiaries L. Stock Option Plan Shares may be awarded under the 1994 Stock Option Plan ("Plan") to key employees in the form of either incentive stock options or non-qualified stock options. The aggregate number of shares that may be awarded during the term of the Plan is 375,000 shares, subject to adjustments under the Plan. The maximum number of shares that may be awarded to any employee during any calendar year is 37,500 shares. The exercise price of all non-qualified 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 of incentive stock options 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 incentive stock option shall not be less than 110% of the fair market value of a share on the date granted. The Plan is administered by the Compensation Committee of the Board of Directors. During 1996, 180,900 Class A fixed stock options were granted. The options have a term of 10 years and vest over two to four years. No options were granted in 1997 and 1995. The Company applies APBO 25 and related Interpretations in accounting for its Plan. Accordingly, no compensation cost has been recognized for its Plan. Had compensation cost been determined in accordance with SFAS 123, net earnings and earnings per share for 1997 and 1996 would have been reduced to the pro forma amounts indicated below.
1997 1996 - -------------------------------------------------------------------- Basic and Basic and Diluted Diluted Net Earnings Net Earnings Earnings Per Share Earnings Per Share - -------------------------------------------------------------------- As reported $ 20,539 $ 1.42 $ 12,071 $ 0.92 Pro forma $ 19,974 $ 1.38 $ 11,846 $ 0.90
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for the grant in 1996: dividend yield of .5%; expected volatility of 30.7%; risk-free interest rate of 6.5%; and expected life of 8.7 years. A summary of stock option activity during 1997 and 1996 is presented below.
1997 1996 Weighted Average Shares Shares Exercise Price - ----------------------------------------------------------------------------------------------------- Outstanding at beginning of year ........... 180,900 -- $ 28.75 Granted .................................... -- 180,900 $ 28.75 Exercised .................................. -- -- Forfeited .................................. (3,600) -- $ 28.75 -------- --------- Outstanding at end of year ................. 177,300 180,900 $ 28.75 ======== ========= Options exercisable at year end ............ -- -- ======== ========= Weighted average fair value of options granted during the year .......... $ -- $ 14.37 ======== ========= Range of exercise prices ................... $ 28.75 $ 28.75 ======== ========= Weighted average remaining contractual life ........................ 8.6 years 9.6 years ========= ========= Number of shares available for granting of options at end of year ...... 197,700 194,100 ======== =========
Stock Options Granted in 1998 - On March 17, 1998, 192,700 Class A fixed stock options were granted. These options have a term of 10 years, vest over two to four years and have an exercise price of $57.00. 38 17 Forest City Enterprises, Inc. and Subsidiaries M. Capital Stock On December 11, 1996, the Board of Directors declared a three-for-two stock split of the Company's common stock payable February 17, 1997 to shareholders of record on February 3, 1997. The stock split was effected as a stock dividend. The stock split is given retroactive effect to the beginning of the earliest period presented in the accompanying Consolidated Balance Sheets and Consolidated Statements of Shareholders' Equity by transferring the par value of the additional shares issued from the additional paid-in capital account to the common stock accounts. All share and per share data included in this annual report, including stock option plan information, have been restated to reflect the stock split. On May 20, 1997, the Company sold to the public 1,955,000 shares of Class A common stock at an initial price of $42.00 per share. On June 10, 1997, the shareholders approved amendments to the Company's Articles of Incorporation to increase the Company's authorized shares to: a) 48,000,000 shares of Class A common stock from 16,000,000 shares; b) 18,000,000 shares of Class B common stock from 6,000,000 shares; and c) 5,000,000 shares of preferred stock from 1,000,000 shares. On August 18, 1997, the Company purchased 77,700 shares of Class A common stock owned by three children of Samuel H. Miller, the Company's Co-Chairman of the Board of Directors, and Ruth Miller. The purchase price was $36.50 per share plus 8% interest from May 7, 1997 to August 18, 1997, less dividends paid between those two dates, for a total of $2,896,000. During 1996, the Company repurchased 232,950 shares of Class A and 26,550 shares of Class B common stock, and during 1995, the Company repurchased 3,000 shares of Class A and 112,500 shares of Class B common stock. All of these repurchased shares were held in treasury at January 31, 1998. N. Earnings Per Share The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for "net earnings before extraordinary gain."
Weighted Net Earnings Average Before Common Extraordinary Shares Per Gain Outstanding Common (Numerator) (Denominator) Share - ----------------------------------------------------------------------------------- (dollars in thousands) Year ended January 31, 1998 Basic earnings per share ....................... $ 1,183 14,452,960 $ 0.08 Effect of dilutive securities - stock options ...... -- 29,251 -- ---------- ---------- -------- Diluted earnings per share ....................... $ 1,183 14,482,211 $ 0.08 ========== ========== ======== Year ended January 31, 1997 Basic earnings per share ....................... $ 9,171 13,155,236 $ 0.70 Effect of dilutive securities - stock options ...... -- 16,664 -- ---------- ---------- -------- Diluted earnings per share ....................... $ 9,171 13,171,900 $ 0.70 ========== ========== ========
O. Summarized Financial Information Forest City Rental Properties Corporation ("Rental Properties") is a wholly-owned subsidiary engaged in the development, acquisition and management of real estate projects, including apartment complexes, regional malls and shopping centers, hotels, office buildings and mixed-use facilities. Condensed consolidated balance sheets and statements of earnings for Rental Properties and its subsidiaries follows. 39 18 Forest City Enterprises, Inc. and Subsidiaries O. Summarized Financial Information (continued) FOREST CITY RENTAL PROPERTIES CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
January 31, - --------------------------------------------------------------------------------------------------------------------------- 1998 1997 - --------------------------------------------------------------------------------------------------------------------------- (in thousands) ASSETS Real Estate Completed rental properties ............................................... $ 2,390,969 $ 2,227,859 Projects under development ................................................ 251,416 215,960 -------------------------------------- 2,642,385 2,443,819 Less accumulated depreciation ............................................. (436,377) (387,733) -------------------------------------- Total Real Estate ....................................................... 2,206,008 2,056,086 Cash ......................................................................... 36,763 14,194 Other assets ................................................................. 406,522 286,864 -------------------------------------- $ 2,649,293 $ 2,357,144 ======================================= LIABILITIES AND SHAREHOLDER'S EQUITY LIABILITIES Mortgage debt, nonrecourse ................................................... $ 1,994,843 $ 1,866,730 Accounts payable and accrued expenses ........................................ 144,831 110,362 Long-term debt ............................................................... 114,000 93,000 Other liabilities and deferred credits ....................................... 243,989 168,371 -------------------------------------- Total Liabilities ......................................................... 2,497,663 2,238,463 -------------------------------------- SHAREHOLDER'S EQUITY Common stock and additional paid-in capital .................................. 5,378 5,378 Retained earnings ............................................................ 146,252 113,303 -------------------------------------- Total Shareholder's Equity ................................................ 151,630 118,681 -------------------------------------- $ 2,649,293 $ 2,357,144 ======================================
FOREST CITY RENTAL PROPERTIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS
For the Years Ended January 31, - --------------------------------------------------------------------------------------------------------------------------- 1998 1997 1996 - --------------------------------------------------------------------------------------------------------------------------- (in thousands) REVENUES ......................................................... $ 465,370 $ 426,226 $ 398,576 ------------------------------------------------------ Operating expenses ............................................... 229,856 228,110 198,282 Interest expense ................................................. 123,713 121,186 117,560 Provision for decline in real estate ............................. -- 11,684 9,581 Depreciation and amortization .................................... 71,678 70,221 63,557 ------------------------------------------------------ 425,247 431,201 388,980 ------------------------------------------------------ Gain (loss) on disposition of properties ......................... (35,505) 17,574 (754) ------------------------------------------------------ EARNINGS BEFORE INCOME TAXES ..................................... 4,618 12,599 8,842 ------------------------------------------------------ INCOME TAX EXPENSE (BENEFIT) Current ....................................................... (2,437) (989) (1,213) Deferred ...................................................... 6,455 9,515 6,925 ------------------------------------------------------ 4,018 8,526 5,712 ------------------------------------------------------ NET EARNINGS BEFORE EXTRAORDINARY GAIN ........................... 600 4,073 3,130 Extraordinary gain, net of tax ................................... 19,356 2,900 1,847 ------------------------------------------------------ NET EARNINGS ..................................................... $ 19,956 $ 6,973 $ 4,977 ======================================================
40 19 Forest City Enterprises, Inc. and Subsidiaries P. Sale of Toscana, Gain (Loss) On Disposition And Extraordinary Gain SALE OF TOSCANA - During February 1997, the Company sold Toscana, a 563-unit apartment complex in Irvine, California, back to the original land owner and settled litigation related to the property. As a result, the Company recorded operating income of $9,146,000, after tax, a loss on disposition of property of $21,464,000, after tax, and an extraordinary gain of $16,884,000, after tax, related to the extinguishment of a portion of the property's nonrecourse mortgage debt. The net result of these transactions to the Company is after-tax income of $4,566,000. GAIN (LOSS) ON DISPOSITION OF PROPERTIES - Gain (loss) on disposition of properties totaled a loss of $ 38,638,000, a gain of $17,574,000 and a loss of $754,000 in 1997, 1996 and 1995, respectively. During 1997, the Company sold its interest in Woodridge, a land development project in suburban Chicago, Illinois and recorded a loss on disposition of $3,133,000 ($1,892,000 after tax) and the Company recorded a loss on disposition of Toscana of $35,505,000 ($21,464,000 after tax). The 1996 gain primarily reflects the disposition of the Company's 18.63% interest in Beachwood Place, a regional shopping center in Cleveland, Ohio ($17,788,000 or $9,715,000 after tax). The 1995 loss was primarily the result of the disposition of Vineyard Village, a California apartment building. EXTRAORDINARY GAIN - Extraordinary gain, net of tax, totaled $19,356,000, $2,900,000 and $1,847,000 in 1997, 1996 and 1995, respectively, representing extinguishment of nonrecourse debt and related accrued interest. In 1997, the properties which recorded extraordinary gain on extinguishment of nonrecourse debt are Toscana ($18,081,000, or $16,884,000 after tax); Halle Office Building in Cleveland, Ohio ($3,569,000 or $2,156,000 after tax); and San Vicente, an office building in Brentwood, California ($524,000 or $316,000 after tax). In 1996, the properties which recorded extraordinary gain on extinguishment of nonrecourse debt are Enclave, an apartment complex in San Jose, California ($3,297,000 or $1,993,000 after tax) related to the parcels deeded back to the original land owner and the Clark Building, an office building in Cambridge, Massachusetts ($1,500,000 or $907,000 after tax). The extraordinary gain recorded in 1995 related to Liberty Center, a mixed-use commercial property in Pittsburgh, Pennsylvania ($3,055,000 or $1,847,000 after tax). Q. Subsequent Event PUBLIC DEBT OFFERING - On March 16, 1998, the Company issued $200,000,000 of 8.50% Senior Notes ("Senior Notes") in a public offering. Proceeds were used to repay $114,000,000 of its term loan and revolving credit loans as described in Note G. The remaining proceeds will be used to finance projects currently under development and to pursue new real estate opportunities. The Senior Notes mature on March 15, 2008. Accrued interest is payable on March 15 and September 15 of each year. The Senior Notes are unsecured senior obligations of the Company, however, they are subordinated to all existing and future indebtedness and other liabilities of the Company's subsidiaries, including the revolving credit facility described in Note G. The Senior Notes agreement contains covenants providing, among other things, limitations on the incurrence of additional debt and payment of dividends. Had the Senior Notes been outstanding at January 31, 1998, the Company would have been in compliance with the covenants. 20 Forest City Enterprises, Inc. and Subsidiaries Quarterly Consolidated Financial Data (Unaudited)
Quarter Ended - --------------------------------------------------------------------------------------------------------------------------- Jan. 31, Oct. 31, July 31, Apr. 30, 1998 1997 1997 1997 - --------------------------------------------------------------------------------------------------------------------------- (in thousands, except per share data) Revenues ................................................... $ 184,591 $ 154,975 $ 142,035 $ 151,068 Earnings (loss) before income taxes ........................ $ 4,451 $ 12,062 $ 5,480 $ (18,608) Net earnings (loss) before extraordinary gain (1) .......... $ (1,149) $ 10,649 $ 2,947 $ (11,264) Net earnings (loss) ........................................ $ 4,020 $ 10,649 $ 6,089 $ (219) BASIC AND DILUTED EARNINGS PER SHARE Net earnings (loss) before extraordinary gain (1)(2) .... $ (.08) $ .71 $ .20 $ (.86) Net earnings (loss) (2) ................................. $ .27 $ .71 $ .42 $ (.02) Dividends declared per common share (3) Quarterly dividend Class A .............................................. $ .07 $ .06 $ .06 $ .06 Class B .............................................. $ .07 $ .06 $ .06 $ .06 Market price range of common stock Class A High ............................................... $ 58.88 $ 62.50 $ 54.94 $ 50.38 Low ................................................ $ 53.25 $ 52.50 $ 41.75 $ 39.50 Class B High ............................................... $ 58.75 $ 60.75 $ 54.88 $ 50.00 Low ................................................ $ 53.75 $ 53.50 $ 42.75 $ 42.00
Quarter Ended - ----------------------------------------------------------------------------------------------------------------------------------- Jan. 31, Oct. 31, July 31, Apr. 30, 1997 1996 1996 1996 - ----------------------------------------------------------------------------------------------------------------------------------- (in thousands, except per share data) Revenues ..................................................... $ 169,177 $ 163,809 $ 148,492 $ 128,971 Earnings (loss) before income taxes (4) ...................... $ 2,065 $ 15,527 $ 5,488 $ (958) Net earnings (loss) before extraordinary gain (1)(4) ......... $ (759) $ 8,054 $ 2,822 $ (946) Net earnings (loss) .......................................... $ (759) $ 10,047 $ 3,729 $ (946) BASIC AND DILUTED EARNINGS PER SHARE Net earnings (loss) before extraordinary gain (1)(4) ...... $ (.05) $ .61 $ .21 $ (.07) Net earnings (loss) ....................................... $ (.05) $ .76 $ .28 $ (.07) Dividends declared per common share Annual dividend Class A ................................................ $ -- $ .21 $ -- $ -- Class B ................................................ $ -- $ .21 $ -- $ -- Quarterly dividend Class A ................................................ $ .06 $ -- $ -- $ -- Class B ................................................ $ .06 $ -- $ -- $ -- Market price range of common stock Class A High ................................................. $ 41.67 $ 33.08 $ 28.08 $ 25.50 Low .................................................. $ 32.67 $ 27.83 $ 24.50 $ 22.00 Class B High ................................................. $ 40.67 $ 32.67 $ 28.08 $ 25.42 Low .................................................. $ 32.75 $ 27.92 $ 24.92 $ 22.17 Both classes of common stock are traded on the New York Stock Exchange under the symbols FCEA and FCEB. As of March 12, 1998, the number of registered holders of Class A and Class B common stock were 842 and 659, respectively. (1) Excludes the extraordinary gain, net of tax of $19,356,000 ($1.34 per share) and $2,900,000 ($.22 per share) in fiscal 1997 and 1996, respectively. These items are explained in Note P in the Notes to Consolidated Financial Statements. (2) The sum of 1997 quarterly earnings per share does not equal annual earnings per share due to the weighting of stock and option activity during the year. (3) Future dividends will depend upon such factors as earnings, capital requirements and financial condition of the Company. Retained earnings of $9,101,000 was available for payment of dividends as of January 31, 1998, under the restrictions contained in the term loan and revolving credit agreement with a group of banks. (4) Third quarter 1996 data has been restated to reflect the reclassification of $3,297,000, before taxes, from provision for decline in real estate to extraordinary gain. This reclassification represents a $.15 reduction in net earnings (loss) before extraordinary gain per common share, but has no effect on net earnings of the Company.
21 Forest City Enterprises, Inc. and Subsidiaries GENERAL The Company owns, develops, acquires and manages commercial and residential real estate properties in 21 states and the District of Columbia. The Company owns a portfolio that is diversified both geographically and by property types and operates through four principal business groups: Commercial Group, Residential Group, Land Group and Lumber Trading Group. The Company uses an additional measure, along with net earnings, to report its operating results. This measure, referred to as Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDT"), is not a measure of operating results or cash flows from operations as defined by generally accepted accounting principles. However, the Company believes that EBDT provides additional information about its operations and, along with net earnings, is necessary to understand its operating results. The Company's view is that EBDT is also an indicator of the Company's ability to generate cash to meet its funding requirements. EBDT is defined and discussed in detail under "Results of Operations - EBDT." EBDT for 1997 grew by 18.3% (or 7.6% per share) to $106,910,000, or $7.38 per share of common stock assuming dilution, from $90,404,000, or $6.86 per share of common stock assuming dilution, in 1996. EBDT grew by $7,167,000 in the Residential Group primarily as a result of a litigation settlement reported by the Residential Group related to Toscana, a 563-unit apartment complex in Irvine, California (see "Results of Operations-Other Transactions - Sale of Toscana") and $7,741,000 in the Commercial Group primarily from openings of new properties. In addition, EBDT increased in Corporate Activities from a reduction in current taxes which was attributable primarily to higher tax benefits in the current year relating to higher pre-tax losses and a refund of alternative minimum tax for 1996 received in 1997. EBDT grew by 10.2% (or 12.8% per share) in 1996 from $82,021,000, or $6.08 per share of common stock assuming dilution, in 1995. This increase in EBDT was primarily the result of the addition of new retail properties, improved operating results from the Company's existing portfolio, acquisition of apartment projects, sales of land by the Commercial and Land Groups, strong lumber trading activity and lower interest rates. RESULTS OF OPERATIONS The Company reports its results of operations by each of its four principal business groups as it believes it provides the most meaningful understanding of the Company's financial performance. The major components of EBDT are Revenues, Operating Expenses and Interest Expense, each of which is discussed below. Net Operating Income ("NOI") is defined as Revenues less Operating Expenses. See the information in the table "Earnings before Depreciation, Amortization and Deferred Taxes" at the end of this Management's Discussion and Analysis of Financial Condition and Results of Operations. NET OPERATING INCOME FROM REAL ESTATE OPERATIONS - NOI from the combined Commercial Group and Residential Group for 1997 was $234,730,000 compared to $201,737,000 in 1996, a 16.4% increase. NOI for 1997 included $15,000,000 of non-recurring Toscana litigation settlement proceeds. Adjusting for this item, NOI would have increased by 8.9%. Comparable NOI (NOI for properties in operation throughout both periods) increased 4.6% from 1996 to 1997 and 2.5% from 1995 to 1996. Including the expected NOI for the twelve months after stabilization for the 11 properties that were opened, expanded or acquired in 1997 and the additional NOI from the purchase of additional ownership interests in two properties during 1997, NOI would be approximately $245,000,000 for 1997. COMMERCIAL GROUP REVENUES - Revenues for the Commercial Group increased $15,355,000, or 4.9%, to $330,117,000 in 1997 from $314,762,000 in 1996. This increase is primarily the result of 1997 property openings including Nine MetroTech in Brooklyn, New York ($1,495,000), Atlantic Center in Brooklyn, New York ($6,856,000), Bruckner Boulevard in the Bronx, New York ($1,422,000), Gun Hill Road in the Bronx, New York ($749,000), Northern Boulevard in Queens, New York ($282,000) and Grand Avenue in Queens, New York ($156,000). Properties which opened in 1996 had a full year of operations in 1997 and generated additional revenues include: Showcase in Las Vegas, Nevada ($1,623,000), Galleria at Sunset in Henderson, Nevada ($901,000) and Marketplace at Riverpark in Fresno, California ($690,000). In addition, the Ritz-Carlton hotel in Cleveland, Ohio realized increased revenues in 1997 over the prior year of $1,897,000 and comparable office building revenues increased by approximately $6,300,000. These increases were partially offset by 1996 land sales which did not recur ($2,989,000), reduction in revenues from Beachwood Place in Cleveland, Ohio which was sold in 1996 ($1,389,000) (see "-Other Transactions - Gain (Loss) on Disposition of Properties") and the closing of the Handy Andy stores that were the Company's tenants ($3,034,000). In 1996, Commercial Group revenues increased by $15,850,000, or 5.3%, from $298,912,000 in 1995. This increase was primarily the result of the opening of the Galleria at Sunset ($5,578,000), improved performance from existing properties ($6,412,000) and the benefit of a full year of operating results from properties that opened in 1995 ($5,403,000). These increases were offset by a reduction in revenues due to the dispositions of Beachwood Place ($786,000) and Victor Village located in Victorville, California ($438,000) and the loss of revenue from ten leases rejected by Handy Andy which went bankrupt in 1996 ($1,109,000). OPERATING AND INTEREST EXPENSES - During 1997, operating expenses for the Commercial Group decreased $1,359,000, or 0.8%, to $167,107,000 from $168,466,000 in 1996. The decrease in operating expenses was attributable primarily to costs associated with the sale of land in 1996 ($5,066,000) which did not recur in 1997, partially offset by the opening of new retail properties ($3,638,000) and costs associated with increased hotel occupancy ($1,379,000). At January 31, 1998, the Commercial Group's property level expenses for properties opened since 1994 had increased at a compounded annual rate of only 0.7%. Interest expense increased $5,528,000 in 1997, or 6.8%, to $87,035,000 from $81,507,000 in 1996. The increase in interest expense was attributable to the financing of new properties. 43 22 Forest City Enterprises, Inc. and Subsidiaries In 1996, operating and interest expenses for the Commercial Group increased $22,126,000 and $1,951,000 (15.1% and 2.5%), respectively, over 1995 from $146,340,000 and $79,556,000, respectively. The increase in operating expenses was primarily attributable to the decrease in EBDT ($6,565,000) resulting from an unusually low cost basis in land sold in 1995 (on comparable sales revenues), increased development expenses ($5,726,000) and the opening of new properties ($5,089,000). The increase in interest expense was attributable to the financing of new properties. NET OPERATING INCOME - Commercial Group NOI for 1997 was $163,010,000, compared to $146,296,000 in 1996, a 11.4% increase. NOI increased 4.1% from 1996 to 1997 for Commercial Group properties in operation throughout both years and 0.9% from 1995 to 1996. Including the expected NOI for the twelve months after stabilization for the four Commercial Group properties that were opened or acquired in 1997 and the additional NOI from the purchase of additional ownership interests in two properties during 1997, NOI would be approximately $185,000,000 for 1997. RESIDENTIAL GROUP REVENUES - Revenues for the Residential Group increased by $18,375,000, or 15.7% in 1997 to $135,253,000 from $116,878,000 in 1996. This increase reflects proceeds from the Toscana litigation settlement ($15,000,000 - see "- Other Transactions - Sale of Toscana"), development fees from The Knolls, a 260-unit apartment community in Orange, California ($1,145,000), the acquisitions in 1997 of Museum Towers, a 286-unit high rise apartment building in Philadelphia, Pennsylvania ($2,477,000), Colony Woods, a 396 unit garden apartment complex in Bellevue, Washington ($1,186,000) and Whitehall Terrace, a 188-unit apartment building in Kent, Ohio ($309,000), and a full year of operations for Emerald Palms, a 419-unit apartment complex in Miami, Florida which was acquired in 1996 ($1,041,000). Revenues increased $1,039,000 from the opening of 294 additional units at three existing apartment developments in Cleveland, Ohio. In addition, revenues for comparable properties improved over last year ($3,906,000), offset by the loss of revenue due to the sale of Toscana ($7,206,000). Average occupancy in 1997 remained at 96%, consistent with the 1996 level. Revenues for the Residential Group increased by $10,775,000, or 10.2%, in 1996 from $106,103,000 in 1995. This increase reflected a full year of performance from the 1995 acquisitions of Laurels, a 520-unit apartment complex in Justice, Illinois ($2,701,000) and Vineyards, a 336-unit apartment community in Cleveland, Ohio ($1,887,000). Revenues in 1996 were also favorably impacted by the addition of 336 units at four existing developments in Cleveland, Ohio ($874,000) and the 1996 acquisition of Emerald Palms ($2,563,000). These revenue increases were partially offset by the disposition of Vineyard Village, a 152-unit apartment building in Ontario, California. OPERATING AND INTEREST EXPENSES - Operating expenses for the Residential Group increased by $2,096,000, or 3.4%, to $63,533,000 in 1997 from $61,437,000 in 1996. Interest expense decreased by $4,063,000, or 12.3 %, to $28,884,000 in 1997 from $32,947,000 in 1996. The increase in operating expenses is attributable primarily to the 1997 acquisitions of Museum Towers ($1,049,000), Colony Woods ($652,000) and Whitehall Terrace ($127,000), a full year of operations for Emerald Palms ($556,000) which was acquired in 1996, the addition of 294 units at three existing apartment projects in Cleveland, Ohio ($389,000) and normal inflationary growth on the portfolio (approximately $1,300,000), partially offset by a decrease in operating expenses due to the sale of Toscana ($2,899,000). During the fiscal years ended January 31, 1995 through January 31, 1998, comparable operating expenses for the Residential Group increased at a compounded annual rate of 2.6%. The decrease in interest expenses is primarily the result of the sale of Toscana ($4,097,000). Operating and interest expenses for the Residential Group increased in 1996 by $7,438,000 and $2,430,000 (or 13.8% and 8.0%), respectively, from $53,999,000 and $30,517,000, respectively, in 1995. The majority of the increase in operating and interest expense reflected the expenses and debt service associated with the addition of Laurels, Vineyards and the 336 new units added at existing properties discussed above. NET OPERATING INCOME - Residential Group NOI for 1997 was $71,720,000, compared to $55,441,000 in 1996, a 29.4% increase. Excluding $15,000,000 of litigation settlement proceeds which is included in NOI for 1997, NOI increased 2.3% from 1996. NOI increased 5.9% from 1996 to 1997 for Residential Group properties in operation throughout both years, and 6.7% from 1995 to 1996. Including the expected NOI for the twelve months after stabilization for the seven Residential Group properties that were opened, expanded or acquired in 1997, NOI would be approximately $60,000,000 for 1997. LAND GROUP REVENUES - Revenues for the Land Group decreased by $9,274,000, or 17.2%, to $44,614,000 in 1997 from $53,888,000 in 1996. This decrease was attributable primarily to 1996 land sale activity at Silver Lakes in Fort Lauderdale, Florida and a significant sale of land located in Miami, Florida in the third quarter of 1996, both of which did not recur in 1997. Sales of land and related earnings vary from period to period, depending on management's decisions regarding the disposition of significant land holdings. Revenues for the Land Group increased by $10,999,000, or 25.6%, in 1996 from $42,889,000 in 1995. This increase reflected income from the sale of a parcel of land in Miami, Florida ($9,029,000) and increased sales at the Silver Lakes development in Fort Lauderdale, Florida ($2,343,000). OPERATING AND INTEREST EXPENSES - Operating expenses and interest expense decreased by $7,213,000 and $1,238,000 (or 17.6% and 18.2%), respectively, in 1997 to $33,855,000 and $5,575,000, respectively, from $41,068,000 and $6,813,000, respectively, in 1996. Operating expenses increased by $9,966,000 and interest expense decreased by $1,151,000 (or 32.0% and 14.5%), respectively, in 1996 from $31,102,000 and $7,964,000, respectively, in 1995. The fluctuation in operating expenses primarily reflects the change in land sales volume between years. The decrease in interest expense was due primarily to the reduction in interest-bearing debt. 44 23 Forest City Enterprises, Inc. and Subsidiaries LUMBER TRADING GROUP REVENUES - Revenues for the Lumber Trading Group decreased by $2,322,000, or 1.9%, to $122,169,000 in 1997 from $124,491,000 in 1996. The decrease was due primarily to a reduced level of trading activity in 1997 compared to 1996 ($5,219,000), partially offset by an increase in volume at Forest City/Babin, a wholesaler of major appliances, cabinets and hardware to housing contractors ($2,420,000). Revenues for the Lumber Trading Group increased by $43,398,000, or 53.5%, from $81,093,000 in 1995. Of this increase, $26,708,000 reflected the consolidation of the revenues of Forest City/Babin for the first time. At the end of 1995, the Company acquired the remaining 50% interest in Forest City/Babin and began consolidating this wholly-owned subsidiary. The Company previously accounted for its 50% interest in Forest City/Babin under the equity method. The remaining increase was primarily due to an increase in Lumber Trading Group's margins as a result of increased housing starts. OPERATING AND INTEREST EXPENSES - Operating expenses for the Lumber Trading Group decreased in 1997 by $2,686,000, or 2.4%, to $107,673,000 from $110,359,000 in 1996. This decrease reflected the fluctuation in variable expenses due to decreased trading sales volume. Interest expense for 1997 increased by $88,000, or 1.7%, to $5,254,000 from $5,166,000 in 1996. Operating and interest expenses for the Lumber Trading Group increased in 1996 by $40,170,000 and $88,000 (or 57.2% and 1.7%), respectively, from $70,189,000 and $5,078,000, respectively, in 1995. A significant portion of this increase ($25,844,000 and $572,000 in operating expenses and interest expenses, respectively) was the result of the Forest City/Babin acquisition described above. The remaining $14,326,000 increase in operating expenses reflected the increase in variable expenses due to increased trading sales volume. The remaining $484,000 decrease in interest expense was the result of reduced inventory and a reduced rate of interest on Lumber Trading Group's lines of credit. CORPORATE ACTIVITIES REVENUES - Revenues for the Corporate Activities increased $86,000, or 20.0%, in 1997 to $516,000 from $430,000 in 1996. Revenues of the Corporate Activities decreased $6,000, or 1.4% in 1996 from $436,000 in 1995. Corporate Activities revenues consists primarily of interest income on investments made by the Company and vary from year to year depending on interest rates and the amount invested. OPERATING AND INTEREST EXPENSES - Operating expenses for Corporate Activities increased $1,755,000, or 20.1%, in 1997 to $10,478,000 from $8,723,000 for 1996. Corporate Activities operating expenses increased $2,375,000, or 37.4%, in 1996 from $6,348,000 in 1995. These increases represent general corporate expenses. Interest expense increased $2,643,000, or 38.1% in 1997 to $9,574,000 from $6,931,000 in 1996. Interest expense increased $45,000, or .7%, in 1996 from $6,886,000 in 1995. Corporate Activities interest expense consists primarily of interest expense on the term loan and revolving credit facility that has not been allocated to a principal business group. Beginning in 1997, capitalized interest on development projects, which was previously reported as Corporate Activities, is reported by the principal business group developing the project. Prior years' interest expense for Corporate Activities, Commercial Group and Residential Group have been restated to reflect this presentation. OTHER TRANSACTIONS PROVISION FOR DECLINE IN REAL ESTATE -The Company's provision for decline in real estate totaled $-0-, $12,263,000 and $9,581,000 in 1997, 1996 and 1995, respectively. In 1996, the Company entered into a joint venture agreement with MGM to develop a casino/retail project which substantially changed the scope of the Company's original development of the project. The 1996 provision for decline in real estate includes $5,104,000 of development costs incurred by the Company which management determined to write-off as a result of the change in the scope of the project. In addition, the Company recorded a provision for decline in real estate relating to the land acquired for Enclave, a 637-unit apartment complex in San Jose, California, resulting from an adjustment of $5,583,000 to write down the land to its fair market value. The 1995 provision for decline in real estate primarily reflected the write-off of development costs of $7,242,000 associated with future phases of Toscana (see"-Sale of Toscana") based on management's determination that the Company would not pursue future development at this location. Also in 1995, the provision included an adjustment of $1,404,000 relating to the write-down of parcels of land to fair market value which were originally acquired for Enclave and deeded back to the original land owner. GAIN (LOSS) ON DISPOSITION OF PROPERTIES - Gain (loss) on disposition of properties totaled a loss of $38,638,000, a gain of $17,574,000 and a loss of $754,000 in 1997, 1996 and 1995, respectively. During 1997, the Company sold its interest in Woodridge, a land development project in suburban Chicago, Illinois and recorded a loss on disposition of $3,133,000 ($1,892,000 after tax) and recorded a loss on disposition of Toscana of $35,505,000 ($21,464,000 after tax, see"-Sale of Toscana"). The 1996 gain primarily reflects the disposition of the Company's 18.63% interest in Beachwood Place, a regional shopping center in Cleveland, Ohio of $17,788,000 ($9,715,000 after tax). The 1995 loss was primarily the result of the disposition of Vineyard Village, a California apartment building. EXTRAORDINARY GAIN - Extraordinary gain, net of tax, totaled $19,356,000, $2,900,000 and $1,847,000 in 1997, 1996 and 1995, respectively, representing extinguishment of nonrecourse debt and related accrued interest. In 1997, the properties which recorded extraordinary gain on extinguishment of nonrecourse debt are Toscana ($18,081,000 or $16,884,000 after tax, see "- Sale of Toscana"); Halle Office Building in Cleveland, Ohio ($3,569,000 or $2,156,000 after tax); and San Vicente, an office building in Brentwood, California ($524,000 or $316,000 after tax). In 1996, the properties which recorded extraordinary gain on extinguishment of nonrecourse debt are Enclave, a 637-unit apartment complex in San Jose, California related to the parcels deeded back to the original land owner ($3,297,000 or $1,993,000 after tax, see "-Provision for Decline in Real Estate") and Clark Building, 45 24 Forest City Enterprises, Inc. and Subsidiaries an office building in Cambridge, Massachusetts ($1,500,000 or $907,000 after tax). SALE OF TOSCANA - During February 1997, the Company sold Toscana, a 563-unit apartment complex in Irvine, California, back to the original land owner and settled litigation related to the property. As a result, the Company recorded operating income of $9,146,000, after tax, a loss on disposition of property of $21,464,000, after tax, and an extraordinary gain of $16,884,000, after tax, related to the extinguishment of a portion of the property's nonrecourse mortgage debt. Proceeds from the litigation settlement resulted in EBDT of $6,991,000 for the year ended January 31, 1998. The net result of these transactions to the Company is after-tax income of $4,566,000. INCOME TAXES - Income tax expense totaled $2,202,000, $12,951,000 and $10,623,000, respectively, in 1997, 1996 and 1995. At January 31, 1998, the Company had a tax net operating loss carryforward ("NOL") of $89,903,000 (generated primarily over time in the ordinary course of business from the significant impact of depreciation expense from real estate properties on the Company's net earnings) which will expire in the years ending January 31, 2005 through January 31, 2011 and general business credits carryovers of $3,205,000 which will expire in the years ending January 31, 2003 through January 31, 2011. The Company's policy is to utilize its NOL before it expires and will consider a variety of strategies to implement that policy. Federal, state and local income taxes paid (refunded) totaled $6,247,000, $830,000 and ($888,000) in 1997, 1996 and 1995, respectively. In 1997, the Company paid no regular Federal corporate income tax and paid $5,084,000 in Federal Alternative Minimum Tax. NET EARNINGS - In 1997, the Company's net earnings grew to $20,539,000, or $1.42 per share of common stock, from $12,071,000, or $.92 per share of common stock, in 1996. In 1995, net earnings were $8,786,000, or $.65 per share of common stock. EBDT - Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDT") is defined as net earnings from operations before depreciation, amortization and deferred taxes on income, and excludes provision for decline in real estate, gain (loss) on disposition of properties and extraordinary gain. The Company excludes depreciation and amortization expense from EBDT because they are non-cash items and the Company believes the values of its properties, in general, have appreciated over time in excess of their original cost. Deferred income taxes are excluded because they are a non-cash item. Payment of income taxes has not been significant and is not expected to be significant in the foreseeable future. The provision for decline in real estate is excluded from EBDT because it is a non-cash item that varies from year to year based on factors unrelated to the Company's overall financial performance. The Company excludes gain (loss) on the disposition of properties from EBDT because it develops and acquires properties for long-term investment, not short-term trading gains. As a result, the Company views dispositions of properties other than commercial outlots or land held by the Land Group as nonrecurring items. Extraordinary gains are generally the result of the restructuring of nonrecourse debt obligations and are not considered to be a component of the Company's operating results. FINANCIAL CONDITION AND LIQUIDITY On March 16, 1998, the Company sold $200,000,000 of 8.50% Senior Notes due March 15, 2008 in a public offering. Proceeds from the sale of these notes were used to repay $114,000,000 outstanding under the FCRPC Credit Agreement (defined below) with the remainder to be used to finance projects currently under development and to pursue new real estate opportunities. On May 20, 1997, the Company sold 1,955,000 shares of its Class A common stock at $42 per share and realized net proceeds, after offering costs, of $76,076,000. The proceeds were used to repay the outstanding balance on the revolving credit facility ($71,000,000) and the remainder was allocated for working capital. On December 10, 1997, the Company replaced its $37,500,000 term loan due July 1, 2001 and its $80,000,000 revolving credit facility with a Forest City Rental Properties Corporation ("FCRPC") Credit Agreement. The FCRPC Credit Agreement with a group of nine banks provides for a $225,000,000 revolving credit facility maturing December 10, 2000, unless extended, and a quarterly reduction of $2,500,000 commencing April 1, 1998 and allows for up to $30,000,000 in outstanding letters of credit, which reduces the revolving credit available to the Company. As of January 31, 1998, the Company had $114,000,000 of recourse debt outstanding under the FCRPC Credit Agreement. The FCRPC Credit Agreement provides, among other things, for 1) interest rates of 1/4% over the prime rate or 2% over the London Interbank Offered Rate ("LIBOR"); 2) maintenance of two debt service coverage ratios and specified level of net worth and cash flow (as defined) and 3) restriction on dividend payments. The Company has purchased LIBOR interest rate caps for the debt under the FCRPC Credit Agreement in the amount of $25,000,000 at 6.5% for 1998 and $45,000,000 at 7.5% for 1999. The Company believes that its sources of liquidity and capital are adequate. The Company's principal sources of funds are cash provided by operations, the revolving credit facility and refinancings of existing properties. The Company's principal use of funds are the financing of new developments, capital expenditures and payments on nonrecourse mortgage debt on real estate. The Lumber Trading Group is financed separately from the rest of the Company's principal business groups, and the financing obligations of Lumber Trading Group are not recourse to the Company. Accordingly, the liquidity of Lumber Trading Group is discussed separately below under "Lumber Trading Group Liquidity." 46 25 Forest City Enterprises, Inc. and Subsidiaries MORTGAGE REFINANCINGS During the year ended January 31, 1998, the Company completed approximately $614,000,000 in financings, including $433,000,000 in refinancings, $115,000,000 for new development projects and $66,000,000 in acquisition mortgages. The Company is pursuing the refinancing of its nonrecourse mortgage debt which matures within the next 12 months. In addition, the Company is attempting to extend the maturities and/or refinance the nonrecourse debt that is coming due in 1999 and 2000, generally pursuing long-term fixed rate debt to take advantage of recent low interest rate levels. INTEREST RATE EXPOSURE At January 31, 1998, the composition of nonrecourse mortgage debt is as follows:
Amount Rate(1) - ------------------------------------------------------------------- (in thousands) Fixed $ 1,118,748 7.88% Variable - Swapped(2) 283,710 7.97% Unhedged 388,969 7.94% Tax-Exempt 151,051 4.76% UDAG and other subsidized loans (fixed) 76,453 2.36% ------------ $ 2,018,931 7.46% ============ (1) The weighted average interest rates shown above include both the base index and the lender margin. (2) Interest rates swaps have an average term of 2.1 years as of January 31, 1998.
With respect to taxable variable-rate debt, the Company generally attempts to obtain interest rate protection for such debt with a maturity in excess of one year. In addition, the Company has purchased 6.50%, 6.50% and 7.25% interest rate caps for its variable-rate debt portfolio in the amount of $293,675,000, $400,000,000 and $200,000,000, respectively, for the fiscal years ending January 31, 1999, 2000 and 2001, respectively. The Company generally does not hedge tax-exempt debt because, since 1990, the base rate of this type of financing has averaged only 3.80% and has never exceeded 7.90%. At January 31, 1998, a 100 basis point increase in taxable interest rates would increase the annual pre-tax interest cost of the Company's taxable variable-rate debt by approximately $3,900,000. Although tax-exempt rates generally increase in an amount that is smaller than corresponding changes in taxable interest rates, a 100 basis point increase in tax-exempt interest rates would increase the annual pre-tax interest cost of the Company's tax-exempt variable-rate debt by approximately $1,500,000. LUMBER TRADING GROUP LIQUIDITY The Lumber Trading Group is separately financed with two lines of credit and an accounts receivable sale program. These credit facilities are without recourse to the Company. The Lumber Trading Group's two lines of credit total a $47,000,000 commitment. These credit lines are secured by the assets of the Lumber Trading Group and are used by the Trading Group to finance its working capital needs. At January 31, 1998, the Lumber Trading Group had approximately $27,000,000 of available credit under these facilities. The Lumber Trading Group has sold an undivided ownership interest in a pool of accounts receivable of up to a maximum of $90,000,000 and uses this program to finance its working capital needs. At January 31, 1998, $49,000,000 had been sold under this accounts receivable program. The Company believes that the amounts available under these credit facilities, together with the accounts receivable sale program, will be sufficient to meet the Lumber Trading Group's liquidity needs. CASH FLOWS Net cash provided by operating activities was $63,516,000 and $66,933,000 for the years ended January 31, 1998 and 1997, respectively. The decrease in net cash provided by operating activities in 1997 from 1996 is primarily the result of a $6,929,000 increase in land development expenditures and a $55,039,000 increase in operating expenditures, primarily due to the decrease in Lumber Trading Group accounts payable and accrued expenses. This decrease was partially offset by a $55,674,000 increase in collection of revenues received primarily due to the decrease in Lumber Trading Group accounts receivable and a $2,322,000 increase in proceeds from land sales. Net cash used in investing activities totaled $276,568,000 and $139,609,000 for the years ended January 31, 1998 and 1997, respectively. Capital expenditures, other than development and acquisition activities, totaled $39,421,000 (including both recurring and investment capital expenditures) in 1997 and were financed primarily with cash provided by operating activities. In 1997, net cash used in investing activities reflected the Company's use of $203,410,000 of funds for acquisition and development activities, which were financed with approximately $181,000,000 in new mortgage indebtedness and borrowings on the revolving credit facility. In addition, $33,737,000 was used for investments in and advances to affiliates, and includes investments in The Grand, a syndicated project in North Bethesda, Maryland ($12,931,000); Enclave, another syndicated project in San Jose, California ($3,441,000); advances on behalf of our partners in projects in Pittsburgh, Pennsylvania ($1,513,000) and advances on behalf of the Company's New York affiliate for equity contributions in development projects ($11,118,000). Net cash provided by financing activities totaled $226,604,000 and $74,833,000 in the year ended January 31, 1998 and 1997, respectively. Net proceeds from the sale of 1,955,000 shares of Class A common stock in May of 1997 were $76,076,000, which were initially used to repay the Company's revolving credit facility. The Company's refinancing of mortgage indebtedness is discussed above in "Mortgage Refinancings" and borrowings under new mortgage indebtedness for acquisition and development activities is included in the preceding paragraph discussing net cash used in investing activities In addition, net cash provided by financing activities in 1997 reflected net repayment of a $6,365,000 note payable relating to the purchase of the Company's additional 33-1/3% interest in the Pittsburgh Mall, the release of 47 26 Forest City Enterprises, Inc. and Subsidiaries $3,600,000 in restricted cash related to the financing of Atlantic Center in Brooklyn, New York, payment of deferred financing costs of $12,142,000, purchase of 77,700 shares of treasury stock for $2,896,000 and payment of $3,490,000 of dividends. SHELF REGISTRATION On December 3, 1997, the Company filed a shelf registration statement with the Securities and Exchange Commission for the potential offering on a delayed basis of up to $250,000,000 in debt or equity securities. This registration is in addition to the shelf registration filed March 4, 1997 of up to $250,000,000 in debt or equity securities. The Company sold approximately $82,000,000 through an equity offering on May 20, 1997 and $200,000,000 through a debt offering completed on March 16, 1998. The Company currently has available on shelf registration statements approximately $218,000,000 of debt, equity or any combination thereof. STOCK SPLIT, DIVIDENDS, CAPITALIZATION AND TREASURY STOCK PURCHASE A three-for-two stock split of both the Company's Class A and Class B Common Stock was effective February 17, 1997 to shareholders of record at the close of business on February 3, 1997. The stock split was effected as a stock dividend. Quarterly cash dividends of $.06 per share (post-split) on shares of both Class A and Class B Common Stock were paid on March 17, June 16, September 15 and December 15, 1997. The first 1998 quarterly dividend of $.07 per share on shares of both Class A and Class B Common Stock was paid on March 16, 1998 to shareholders of record at the close of business on March 2, 1998. The second 1998 quarterly dividend of $.07 per share on shares of both Class A and Class B Common stock will be paid on June 15, 1998 to shareholders of record at the close of business on June 1, 1998. On June 10, 1997, the shareholders approved an amendment to the Company's Articles of Incorporation to increase the Company's capitalization to a) 48,000,000 shares of Class A Common Stock from 16,000,000 shares; b) 18,000,000 shares of Class B Common Stock from 6,000,000 shares; and c) 5,000,000 shares of preferred stock from 1,000,000 shares. On August 18, 1997, the Company purchased 77,700 shares of Class A common stock owned by Richard Miller, Aaron Miller and Gabrielle Miller, the children of Samuel H. Miller, the Company's Co-Chairman of the Board of Directors, and Ruth Miller, who died on November 26, 1996. The repurchase provided funds necessary to pay taxes on the estate of Ruth Miller. The shares were purchased at a price of $36.50 per share for an aggregate purchase price of $2,836,050 plus 8.0% interest from May 7, 1997 to August 18, 1997, less any dividends paid between those two dates, for a total of $2,896,000. NEW ACCOUNTING STANDARDS In February 1997, FASB issued SFAS 128 "Earnings per Share," which is effective for fiscal years ending after December 15, 1997. This Statement simplifies the standards for computing earnings per share ("EPS") and makes them comparable to international EPS standards. The Company adopted the provisions of SFAS 128 in its 1997 Annual Report. The adoption of this statement does not have a material impact on EPS. In June 1997, FASB issued SFAS 131 "Disclosures about Segments of an Enterprise and Related Information," which is effective for periods beginning after December 15, 1997. This statement provides guidance on the determination of reporting segments and requires interim financial statement disclosure. The Company does not anticipate that significant changes to the segment information historically provided in its annual financial statements will occur as a result of the adoption of SFAS 131. Beginning with the Company's quarterly report on Form 10-Q for the quarter ending April 30, 1998, the Company will include interim segment information. YEAR 2000 Management has undertaken a program to prepare the Company's financial and operating computer systems and ancillary applications for the year 2000. All necessary software modifications are expected to occur in a timely manner at a cost which is not expected to be material. INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS This Annual Report, together with other statements and information publicly disseminated by the Company, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements reflect management's current views with respect to financial results related to future events and are based on assumptions and expectations which may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial or otherwise, may differ from the results discussed in the forward-looking statements. Risks and other factors that might cause differences, some of which could be material, include, but are not limited to, the effect of economic and market conditions on a nation-wide basis as well as regionally in areas where the Company has a geographic concentration of properties; failure to consummate financing arrangements; development risks, including lack of satisfactory financing, construction and lease-up delays and cost overruns; the level and volatility of interest rates; financial stability of tenants within the retail industry, which may be impacted by competition and consumer spending; the rate of revenue increases versus expenses increases; the cyclical nature of the lumber wholesaling business; as well as other risks listed from time to time in the Company's reports filed with the Securities and Exchange Commission. The Company has no obligation to revise or update any forward-looking statements as a result of future events or new information. Readers are cautioned not to place undue reliance on such forward-looking statements. 48 27 Forest City Enterprises, Inc. and Subsidiaries
THREE YEAR SUMMARY OF EARNINGS BEFORE DEPRECIATION, AMORTIZATION AND DEFERRED TAXES (in thousands) Commercial Group Residential Group ----------------------------------- ---------------------------------- 1997 1996 1995 1997 1996 1995 - ---------------------------------------------------------------------------------------- ---------------------------------- Revenues ......................................... $ 330,117 $ 314,762 $ 298,912 $ 135,253 $ 116,878 $ 106,103 Operating expenses, including depreciation and amortization for non-real estate Groups .... 167,107 168,466 146,340 63,533 61,437 53,999 Interest expense ................................. 87,035 81,507 79,556 28,884 32,947 30,517 Income tax provision (benefit) ................... 2,202 (1,243) 9,465 10,851 (2,324) 717 ----------------------------------- ---------------------------------- 256,344 248,730 235,361 103,268 92,060 85,233 ----------------------------------- ---------------------------------- Earnings before depreciation, amortization and deferred taxes (EBDT) .......................... $ 73,773 $ 66,032 $ 63,551 $ 31,985 $ 24,818 $ 20,870 =================================== ================================== Land Group Lumber Trading Group ----------------------------------- ---------------------------------- 1997 1996 1995 1997 1996 1995 - ---------------------------------------------------------------------------------------- ---------------------------------- Revenues ......................................... $ 44,614 $ 53,888 $ 42,889 $ 122,169 $ 124,491 $ 81,093 Operating expenses, including depreciation and amortization for non-real estate Groups .... 33,855 41,068 31,102 107,673 110,359 70,189 Interest expense ................................. 5,575 6,813 7,964 5,254 5,166 5,078 Income tax provision (benefit) ................... 1,858 2,078 (358) 4,043 3,913 2,823 ------------------------------------ ---------------------------------- 41,288 49,959 38,708 116,970 119,438 78,090 ------------------------------------ ---------------------------------- Earnings before depreciation, amortization and deferred taxes (EBDT) .......................... $ 3,326 $ 3,929 $ 4,181 $ 5,199 $ 5,053 $ 3,003 ==================================== ================================== Corporate Activities Total ------------------------------------ ---------------------------------- 1997 1996 1995 1997 1996 1995 - ----------------------------------------------------------------------------------------- ---------------------------------- Revenues ......................................... $ 516 $ 430 $ 436 $ 632,669 $ 610,449 $ 529,433 Operating expenses, including depreciation and amortization for non-real estate Groups .... 10,478 8,723 6,348 382,646 390,053 307,978 Interest expense ................................. 9,574 6,931 6,886 136,322 133,364 130,001 Income tax provision (benefit) ................... (12,163) (5,796) (3,214) 6,791 (3,372) 9,433 ------------------------------------ ---------------------------------- 7,889 9,858 10,020 525,759 520,045 447,412 ------------------------------------ ---------------------------------- Earnings before depreciation, amortization and deferred taxes (EBDT) .......................... $ (7,373) $ (9,428) $ (9,584) $ 106,910 $ 90,404 $ 82,021 ========================================================================== Reconciliation to net earnings: Earnings before depreciation, amortization and deferred taxes (EBDT) ....... $ 106,910 $ 90,404 $ 82,021 Depreciation and amortization - real estate Groups ......................... (71,678) (70,221) (63,557) Deferred taxes - real estate Groups ........................................ (10,693) (13,197) (4,974) Provision for decline in real estate, net of tax ........................... -- (7,413) (6,073) Gain (loss) on disposition of properties, net of tax ....................... (23,356) 9,598 (478) Extraordinary gain, net of tax ............................................. 19,356 2,900 1,847 ---------------------------------- Net earnings ............................................................... $ 20,539 $ 12,071 $ 8,786 ==================================
EX-23.A 8 EXHIBIT 23.A 1 Exhibit 23(A) CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statement of Forest City Enterprises, Inc. and subsidiaries on Form S-3 (File No. 333-22695) of our report dated March 11, 1998, except for Notes F, G and Q as to which the date is April 20, 1998, on our audits of the consolidated financial statements and financial statement schedules of Forest City Enterprises, Inc. and subsidiaries as of January 31, 1998 and 1997, and for the years ended January 31, 1998, 1997 and 1996, which report is included in this Annual Report of Form 10-K. Coopers & Lybrand L.L.P. Cleveland, Ohio April 28, 1998 EX-23.B 9 EXHIBIT 23.B 1 Exhibit 23(B) CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statement of Forest City Enterprises, Inc. and subsidiaries on Form S-3 (File No. 333-41437) of our report dated March 11, 1998, except for Notes F, G and Q as to which the date is April 20, 1998, on our audits of the consolidated financial statements and financial statement schedules of Forest City Enterprises, Inc. and subsidiaries as of January 31, 1998 and 1997, and for the years ended January 31, 1998, 1997 and 1996, which report is included in this Annual Report on Form 10-K. Coopers & Lybrand, L.L.P. Cleveland, Ohio April 28, 1998 EX-23.C 10 EXHIBIT 23.C 1 Exhibit 23(C) CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statement of Forest City Enterprises, Inc. and subsidiaries n Form S-8 (File No. 33-65054) of our report dated March 11, 1998, except for Notes F, G and Q as to which the date is April 20, 1998, on our audits of the consolidated financial statements and financial statement schedules of Forest City Enterprises, Inc. and subsidiaries as of January 31, 1998 and 1997, and for the years ended January 31, 1998, 1997 and 1996, which report is included in this Annual Report on Form 10-K. Coopers & Lybrand, L.L.P. Cleveland, Ohio April 28, 1998 EX-23.D 11 EXHIBIT 23.D 1 Exhibit 23(D) CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statement of Forest City Enterprises, Inc. and subsidiaries on Form S-8 (File No. 33-65058) of our report dated March 11, 1998, except for Notes F, G and Q as to which the date is April 20, 1998, on our audits of the consolidated financial statements and financial statement schedules of Forest City Enterprises, Inc. and subsidiaries as of January 31, 1998 and 1997, and for the years ended January 31, 1998, 1997 and 1996, which report is included in this Annual Report on Form 10-K. Coopers & Lybrand, L.L.P. Cleveland, Ohio April 28, 1998 EX-24 12 EXHIBIT 24 1 Exhibit 24 DIRECTOR AND OFFICER OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director and Officer of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner, with full power of substitution and resubstitution, as attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 1998, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney and any such substitute. EXECUTED as of March 27, 1998. Signature: ----------------------------------------- Printed Name: Ronald Ratner -------------------------------------- Title: Executive Vice President --------------------------------------------- 2 DIRECTOR AND OFFICER OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director and Officer of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner, with full power of substitution and resubstitution, as attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 1998, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney and any such substitute. EXECUTED as of March 26, 1998. Signature: ----------------------------------------- Printed Name: James Ratner --------------------------------------- Title: Executive Vice President ------------------------------------------------ 3 DIRECTOR AND OFFICER OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director and Officer of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner, with full power of substitution and resubstitution, as attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 1998, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney and any such substitute. EXECUTED as of March 26, 1998. Signature: ------------------------------------- Printed Name: Brian J. Ratner ------------------------------------- Title: Sr. Vice President - Development ------------------------------------- 4 DIRECTOR AND OFFICER OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director and Officer of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner, with full power of substitution and resubstitution, as attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 1998, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney and any such substitute. EXECUTED as of March 27, 1998. Signature: ------------------------------------- Printed Name: Albert Ratner ------------------------------------- Title: Co-Chairman of the Board ------------------------------------- 5 DIRECTOR AND OFFICER OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director and Officer of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner, with full power of substitution and resubstitution, as attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 1998, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney and any such substitute. EXECUTED as of March 27, 1998. Signature: ------------------------------------- Printed Name: Samuel H. Miller ------------------------------------- Title: Treasurer & Co-Chairman of the Board ------------------------------------- 6 DIRECTOR OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner, with full power of substitution and resubstitution, as attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 1998, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of March 28, 1998. Signature: ---------------------------------------- Printed Name: J Maurice Struchen ------------------------------------ Title: Director --------------------------------- 7 DIRECTOR OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner, with full power of substitution and resubstitution, as attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 1998, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of March 27, 1998. Signature: ---------------------------------- Printed Name: Joan K. Shafran ------------------------------- Title: Director ------------------------------------- 8 DIRECTOR OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner, with full power of substitution and resubstitution, as attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 1998, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of March 27, 1998. Signature: -------------------------------- Printed Name: Deborah Ratner Salzberg ------------------------------ Title: Vice President, Asset Manager ------------------------------------- 9 DIRECTOR OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner, with full power of substitution and resubstitution, as attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 1998, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of March 26, 1998. Signature: ------------------------------------- Printed Name: Jerry V. Jarrett ------------------------------------- Title: Director ------------------------------------- 10 DIRECTOR OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner, with full power of substitution and resubstitution, as attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 1998, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of March 26, 1998. Signature: -------------------------- Printed Name: Michael P. Esposito ------------------------ Title: Director -------------------------------- 11 DIRECTOR OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner, with full power of substitution and resubstitution, as attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 1998, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of March 27, 1998. Signature: ------------------------------- Printed Name: Scott Cowen ---------------------------- Title: Director ------------------------------------- 12 OFFICER OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Officer of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner, with full power of substitution and resubstitution, as attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 1998, and any and all amendments thereto to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of March 27, 1998 Signature: ------------------------------- Printed Name: Thomas G. Smith ------------------------------------- Title: CFO, Sr. V.P., Secretary ----------------------------------- 13 OFFICER OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Officer of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner, with full power of substitution and resubstitution, as attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 1998, and any and all amendments thereto to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of March 28, 1998 Signature: ---------------------------------- Printed Name: Linda M. Kane ------------------------------ Title: Vice President - Corp.Controller ------------------------------------- EX-27.1 13 EXHIBIT 27.1
5 1,000 3-MOS 6-MOS 9-MOS 12-MOS JAN-31-1997 JAN-31-1997 JAN-31-1997 JAN-31-1996 FEB-01-1996 FEB-01-1996 FEB-01-1996 FEB-01-1995 APR-30-1996 JUL-31-1996 OCT-31-1996 JAN-31-1996 29,065 27,879 27,494 39,145 0 0 0 0 166,106 175,676 197,831 171,864 4,495 4,994 5,257 3,687 59,192 41,472 42,329 41,186 0 0 0 0 2,446,129 2,485,103 2,528,538 2,425,083 359,552 372,630 385,668 347,912 2,642,059 2,651,312 2,174,952 2,631,046 0 0 0 0 1,945,972 1,977,485 1,990,211 1,945,120 0 0 0 0 0 0 0 0 2,997 2,997 2,997 2,997 188,155 191,884 199,133 189,101 2,642,059 2,651,312 2,714,952 2,631,046 0 0 0 0 128,971 277,463 441,272 529,433 0 0 0 0 96,915 207,317 328,764 371,535 0 0 0 0 0 0 0 0 33,013 66,550 99,401 130,001 (957) 4,530 23,354 17,562 (11) 2,654 11,431 10,623 (946) 1,876 11,923 6,939 0 0 0 0 0 907 907 1,847 0 0 0 0 (946) 2,783 12,830 8,786 (.07) .21 .97 .65 (.07) .21 .97 .65 In the consolidated financial statements for the year ended January 31, 1997, INTEREST AND OTHER INCOME was combined with SALES AND OPERATING REVENUES and reported on a single line captioned REVENUES. This tag is restated to report REVENUES, previously it reported SALES AND OPERATING REVENUES. This tag is restated to report Diluted Earnings Per Share in accordance with Statement of Financial Accounting Standards No. 128. Additionally, the earnings per share has been restated to give effect to the three-for-two stock split effective February 17, 1997.
EX-27.2 14 EXHIBIT 27.2
5 1,000 9-MOS 6-MOS 3-MOS JAN-31-1998 JAN-31-1998 JAN-31-1998 FEB-01-1997 FEB-01-1997 FEB-01-1997 OCT-31-1997 JUL-31-1997 APR-30-1997 27,096 31,697 20,698 0 0 0 202,752 171,851 208,340 6,134 5,710 5,523 46,645 43,812 46,864 0 0 0 2,638,586 2,557,883 2,481,849 435,623 421,037 408,082 2,822,802 2,724,466 2,668,182 0 0 0 2,033,752 1,991,766 1,962,429 0 0 0 0 0 0 5,145 5,145 4,494 285,322 275,835 194,950 2,822,802 2,724,466 2,668,182 0 0 0 448,078 293,103 151,068 0 0 0 314,246 203,988 101,062 0 0 0 0 0 0 96,261 63,606 33,109 (1,066) (13,128) (18,608) (3,398) (4,811) (7,344) 2,332 (8,317) (11,264) 0 0 0 14,187 14,187 11,045 0 0 0 16,519 5,870 (219) 1.16 0.42 (0.02) 1.16 .42 (.02) This tag is restated to report Diluted Earnings Per Share in accordance with Statement of Financial Accounting Standards No. 128.
EX-27.3 15 EXHIBIT 27.3
5 1,000 12-MOS JAN-31-1997 FEB-01-1996 JAN-31-1997 41,302 0 209,953 4,994 48,769 0 2,520,179 399,830 2,741,405 0 1,993,351 0 0 4,494 196,073 2,741,405 0 610,449 0 460,274 0 0 133,364 22,122 12,951 9,171 0 2,900 0 12,071 .92 .92 The Company declared a three-for-two stock split of its Class A and Class B common stock payable February 17, 1997. The stock split was given retroactive effect to the January 31, 1997 consolidated balance sheet. Prior financial data schedules were not restated for the stock split. In the consolidated financial statements for the year ended January 31, 1997, INTEREST AND OTHER INCOME was combined with SALES AND OPERATING REVENUES and reported on a single line captioned REVENUES. This tag is restated to report REVENUES, previously it reported SALES AND OPERATING REVENUES. This tag is restated to report Diluted Earnings Per Share in accordance with Statement of Financial Accounting Standards No. 128.
EX-27.4 16 EXHIBIT 27.4
5 1,000 YEAR JAN-31-1998 FEB-01-1997 JAN-31-1998 54,854 0 199,888 8,169 58,696 0 2,704,560 448,634 2,963,353 0 2,132,931 0 0 5,145 288,285 2,963,353 0 632,669 0 454,324 0 0 136,322 3,385 2,202 1,183 0 19,356 0 20,539 1.42 1.42
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