FOREST CITY ENTERPRISES INC - 10-Q Quarterly Report

QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

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.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


			Page No.

PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		Forest City Enterprises, Inc. and Subsidiaries
		Consolidated Balance Sheets — October 31, 2003 (Unaudited) and January 31, 2003		2
		Consolidated Statements of Earnings (Unaudited) — Three and Nine Months Ended October 31, 2003 and 2002		3
		Consolidated Statements of Comprehensive Income (Unaudited) — Nine Months Ended October 31, 2003 and 2002		4
		Consolidated Statements of Shareholders’ Equity (Unaudited) — Nine Months Ended October 31, 2003 and 2002		4
		Consolidated Statements of Cash Flows (Unaudited) — Nine Months Ended October 31, 2003 and 2002		5 - 6
		Notes to Consolidated Financial Statements (Unaudited)		7 - 18
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			19 - 57
	Item 3. Quantitative and Qualitative Disclosures about Market Risk			58 - 60
	Item 4. Controls and Procedures			61
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings			61
	Item 4. Submission of Matters to a Vote of Security-Holders			61
	Item 6. Exhibits and Reports on Form 8-K			62 - 68
Signatures				69


			October 31, 2003			January 31, 2003

			(Unaudited)
			(in thousands)
Assets
Real Estate
	Completed rental properties		$	4,446,313		$	3,866,625
	Projects under development			529,384			572,476
	Land held for development or sale			36,432			35,036

		Total Real Estate		5,012,129			4,474,137
	Less accumulated depreciation			(706,878	)		(615,653	)

		Real Estate, net		4,305,251			3,858,484
Cash and equivalents				175,958			122,356
Restricted cash				133,455			127,046
Notes and accounts receivable, net				417,981			286,652
Inventories				35,743			38,638
Investments in and advances to real estate affiliates				460,345			489,205
Other assets				211,340			154,828

		Total Assets	$	5,740,073		$	5,077,209

Liabilities and Shareholders' Equity
Liabilities
Mortgage debt, nonrecourse			$	3,478,990		$	3,016,107
Notes payable				137,730			79,484
Long-term credit facility				62,500			135,250
Senior and subordinated debt				320,400			220,400
Accounts payable and accrued expenses				645,078			585,042
Deferred income taxes				288,253			255,888

		Total Liabilities		4,932,951			4,292,171
Minority interest				60,951			79,066

Commitments and Contingencies
Company-Obligated Trust Preferred Securities				—			—
Shareholders' Equity
Preferred stock — without par value
	5,000,000 shares authorized; no shares issued			—			—
Common stock — $.33 1/3 par value
	Class A, 96,000,000 shares authorized; 36,509,636 and 35,678,086 shares issued, 36,240,344 and 35,525,067 outstanding, respectively			12,170			11,892
	Class B, convertible, 36,000,000 shares authorized; 13,716,192 and 14,547,742 shares issued, 13,716,192 and 14,130,592 outstanding, respectively			4,572			4,850

				16,742			16,742
Additional paid-in capital				234,668			232,029
Retained earnings				505,722			470,348

				757,132			719,119
Less treasury stock, at cost; 269,292 Class A and 0 Class B shares and 153,019 Class A and 417,150 Class B shares, respectively				(1,971	)		(4,425	)
Accumulated other comprehensive loss				(8,990	)		(8,722	)

	Total Shareholders' Equity			746,171			705,972

		Total Liabilities and Shareholders' Equity	$	5,740,073		$	5,077,209

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(Unaudited)


			Three Months Ended October 31,						Nine Months Ended October 31,

			2003			2002			2003			2002

			(in thousands, except per share data)
Revenues
	Rental properties		$	242,532		$	194,697		$	666,441		$	569,143
	Lumber trading			39,627			23,296			86,508			72,896
	Equity in earnings of unconsolidated real estate entities			11,433			10,735			33,103			31,493

				293,592			228,728			786,052			673,532

Expenses
	Operating expenses			169,841			140,713			452,518			406,361
	Interest expense			50,509			39,958			142,140			127,469
	Loss on early extinguishment of debt			—			355			10,718			735
	Provision for decline in real estate			—			957			2,728			957
	Depreciation and amortization			31,062			30,356			91,300			84,285

				251,412			212,339			699,404			619,807

Loss on disposition of other investments				—			—			(431	)		(116	)

Earnings before income taxes				42,180			16,389			86,217			53,609

Income tax expense
		Current		(2,813	)		(4,320	)		1,080			4,053
		Deferred		20,098			11,028			31,669			16,429

				17,285			6,708			32,749			20,482

Earnings before minority interest and discontinued operations				24,895			9,681			53,468			33,127
Minority interest				(1,466	)		(183	)		(8,565	)		(2,037	)

Earnings from continuing operations				23,429			9,498			44,903			31,090
Discontinued operations, net of tax and minority interest
		(Loss) earnings from operations		(1,301	)		(557	)		(1,433	)		670
		Gain on disposition of operating properties		3,844			—			3,897			—

				2,543			(557	)		2,464			670

Net earnings			$	25,972		$	8,941		$	47,367		$	31,760

Basic earnings per common share
		Earnings from continuing operations	$	0.47		$	0.19		$	0.90		$	0.63
		Earnings from discontinued operations, net of tax and minority interest		0.05			(0.01	)		0.05			0.01

		Net earnings	$	0.52		$	0.18		$	0.95		$	0.64

Diluted earnings per common share
		Earnings from continuing operations	$	0.46		$	0.19		$	0.89		$	0.62
		Earnings from discontinued operations, net of tax and minority interest		0.05			(0.01	)		0.05			0.01

		Net earnings	$	0.51		$	0.18		$	0.94		$	0.63

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)


			Nine Months Ended October 31,

			2003			2002

			(in thousands)
Net earnings			$	47,367		$	31,760

Other comprehensive (loss) income, net of tax:
	Unrealized gains (losses) on investments in securities:
		Unrealized gain (loss) on securities		305			(512	)
	Unrealized derivative (losses) gains:
		Change in unrealized losses and gains on interest rate contracts, net of minority interest		(573	)		694

Other comprehensive (loss) income, net of tax				(268	)		182

Comprehensive income			$	47,099		$	31,942

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders Equity
(Unaudited)


		Common Stock
																								Accumulated
		Class A				Class B						Additional						Treasury Stock						Other
												Paid-In			Retained									Comprehensive
		Shares		Amount		Shares			Amount			Capital			Earnings			Shares			Amount			Income (Loss)			Total

		(in thousands)
Nine Months Ended October 31, 2003
	Balances at January 31, 2003		35,678	$	11,892		14,548		$	4,850		$	232,029		$	470,348			570		$	(4,425	)	$	(8,722	)	$	705,972
	Net earnings															47,367												47,367
	Other comprehensive loss, net of tax																								(268	)		(268	)
	Dividends $.24 per share															(11,993	)											(11,993	)
	Conversion of Class B to Class A shares		832		278		(832	)		(278	)																	—
	Exercise of stock options												1,700						(188	)		1,441						3,141
	Income tax benefit from stock option exercises												1,065															1,065
	Restricted stock issued												(1,013	)					(113	)		1,013						—
	Amortization of unearned compensation												887															887

	Balances at October 31, 2003		36,510	$	12,170		13,716		$	4,572		$	234,668		$	505,722			269		$	(1,971	)	$	(8,990	)	$	746,171

Nine Months Ended October 31, 2002
	Balances at January 31, 2002		35,101	$	11,700		15,125		$	5,042		$	228,263		$	432,939			762		$	(6,140	)	$	(9,291	)	$	662,513
	Net earnings															31,760												31,760
	Other comprehensive income, net of tax																								182			182
	Dividends $.17 per share


Ohio		34-0863886

(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)


Terminal Tower 50 Public Square Suite 1100 Cleveland, Ohio		44113

(Address of Principal Executive Offices)		Zip Code


Class		Outstanding at December 1, 2003

Class A Common Stock, $.33 1/3 par value		36,240,544 shares




Class B Common Stock, $.33 1/3 par value		13,715,992 shares