Back to GetFilings.com



 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended April 30, 2004

Commission file number          1-4372            

FOREST CITY ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)
     
Ohio   34-0863886
     
(State or other jurisdiction of
incorporation or organization) 		  (I.R.S. Employer
Identification No.)
         
Terminal Tower
Suite 1100 		  50 Public Square
Cleveland, Ohio 		  44113
     
(Address of principal executive offices)   Zip Code

Registrant’s telephone number, including area code         216-621-6060         

      

(Former name, former address and former fiscal year, if changed since last report).

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES    X    NO      

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
YES    X    NO      

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

     
Class   Outstanding at June 3, 2004
 
Class A Common Stock, $.33 1/3 par value
  36,410,782 shares
 
    
Class B Common Stock, $.33 1/3 par value
  13,615,305 shares

 

 

(THIS PAGE INTENTIONALLY LEFT BLANK)

 

 

Forest City Enterprises, Inc. and Subsidiaries

Table of Contents

         
        Page
PART I. FINANCIAL INFORMATION    
Item 1.      
      2
      3
      4
      4
      5 – 6
      7 – 22
Item 2.     23 – 39
Item 3.     40 – 42
Item 4.     43
PART II. OTHER INFORMATION
Item 1.     43
Item 6.     44 – 49
Signatures   50
Certifications   51 – 53

 

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements

Forest City Enterprises, Inc. and Subsidiaries
Consolidated Balance Sheets

                 
      April 30, 2004       January 31, 2004  
    (Unaudited)
    (in thousands)
Assets
                
Real Estate
                
Completed rental properties
   $ 5,323,901     $ 4,523,748  
Projects under development
     676,443       544,389  
Land held for development or sale
     48,711       33,450  
 
                
Total Real Estate
     6,049,055       5,101,587  
Less accumulated depreciation
     (812,323 )     (730,705 )
 
                
Real Estate, net
     5,236,732       4,370,882  
Cash and equivalents
     67,715       107,491  
Restricted cash
     330,951       257,795  
Notes and accounts receivable, net
     455,048       422,765  
Inventories
     76,703       46,140  
Investments in and advances to real estate affiliates
     368,922       432,584  
Other assets
     307,384       257,415  
 
                
 
Total Assets
   $ 6,843,455     $ 5,895,072  
 
                
 
Liabilities and Shareholders’ Equity
                
Liabilities
                
Mortgage debt, nonrecourse
   $ 4,356,196     $ 3,634,177  
Notes payable
     184,279       152,111  
Long-term credit facility
     —       56,250  
Senior and subordinated debt
     420,400       320,400  
Accounts payable and accrued expenses
     746,318       639,824  
Deferred income taxes
     298,342       294,925  
 
                
 
Total Liabilities
     6,005,535       5,097,687  
 
Minority interest
     81,118       48,474  
 
                
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; 36,610,301 and 36,509,836 shares issued, 36,410,560 and 36,270,496 outstanding, respectively
     12,203       12,170  
Class B: convertible, 36,000,000 shares authorized; 13,615,527 and 13,715,992 shares issued and outstanding, respectively
     4,539       4,572  
 
                
 
     16,742       16,742  
Additional paid-in capital
     236,659       235,398  
Retained earnings
     499,242       496,537  
 
                
 
     752,643       748,677  
Less treasury stock, at cost: 199,741 and 239,340 Class A shares, respectively
     (1,462 )     (1,752 )
Accumulated other comprehensive income
     5,621       1,986  
 
                
Total Shareholders’ Equity
     756,802       748,911  
 
                
 
Total Liabilities and Shareholders’ Equity
   $ 6,843,455     $ 5,895,072  
 
                

The accompanying notes are an integral part of these consolidated financial statements.

2

 

Forest City Enterprises, Inc. and Subsidiaries
Consolidated Statements of Earnings
(Unaudited)

                 
    Three Months Ended April 30,
    2004   2003
    (in thousands, except per share data)
Revenues
                
Rental properties
   $ 248,444     $ 210,861  
Lumber trading
     40,137       19,901  
 
                
 
     288,581       230,762  
 
                
Expenses
                
Operating expenses
     174,326       140,654  
Interest expense
     59,942       43,815  
Depreciation and amortization
     40,947       29,350  
 
                
 
     275,215       213,819  
 
                
 
Equity in earnings of unconsolidated real estate entities
     6,244       9,843  
 
                
 
Gain on disposition of other investments
     —       22  
 
                
Earnings before income taxes
     19,610       26,808  
 
                
 
Income tax expense
                
Current
     1,922       2,884  
Deferred
     3,577       6,645  
 
                
 
     5,499       9,529  
 
                
Earnings before minority interest, discontinued operations and cumulative effect of change in accounting principle
     14,111       17,279  
Minority interest
     (7,328 )     (2,540 )
 
                
 
Earnings from continuing operations
     6,783       14,739  
Discontinued operations, net of tax and minority interest
                
Loss from operations
     (106 )     —  
Gain on disposition of operating properties
     11,787       53  
 
                
 
     11,681       53  
 
                
 
Cumulative effect of change in accounting principle, net of tax (Note A)
     (11,261 )     —  
 
                
 
Net earnings
   $ 7,203     $ 14,792  
 
                
 
Basic earnings per common share
                
Earnings from continuing operations
   $ 0.14     $ 0.30  
Earnings from discontinued operations, net of tax and minority interest
     0.23       —  
Cumulative effect of change in accounting principle, net of tax
     (0.23 )     —  
 
                
Net earnings
   $ 0.14     $ 0.30  
 
                
Diluted earnings per common share
                
Earnings from continuing operations
   $ 0.13     $ 0.29  
Earnings from discontinued operations, net of tax and minority interest
     0.23       —  
Cumulative effect of change in accounting principle, net of tax
     (0.22 )     —  
 
                
Net earnings
   $ 0.14     $ 0.29  
 
                

The accompanying notes are an integral part of these consolidated financial statements.

3

 

Forest City Enterprises, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)

                 
    Three Months Ended April 30,
    2004   2003 (restated)
    (in thousands)
Net earnings
   $ 7,203     $ 14,792  
Other comprehensive income, net of tax:
                
Unrealized gains on investments in securities:
                
Unrealized gains on securities, net of minority interest
     770       3,695  
Unrealized derivative gains/(losses):
                
Change in unrealized gains/(losses) on interest rate contracts, net of minority interest
     2,865       (1,183 )
 
                
Other comprehensive income, net of tax
     3,635       2,512  
 
                
Comprehensive income
   $ 10,838     $ 17,304  
 
                

Forest City Enterprises, Inc. and Subsidiaries
Consolidated Statements of Shareholders’ Equity
(Unaudited)

                                                                                 
                                                                    Accumulated    
    Common Stock   Additional                           Other    
    Class A   Class B   Paid-In   Retained   Treasury Stock   Comprehensive    
    Shares   Amount   Shares   Amount   Capital   Earnings   Shares   Amount   Income (Loss)   Total
    (in thousands)
Three Months Ended April 30, 2004
                                                                                
Balances at January 31, 2004
     36,510     $ 12,170       13,716     $ 4,572     $ 235,398     $ 496,537       239     $ (1,752 )   $ 1,986     $ 748,911  
Net earnings
                                             7,203                               7,203  
Other comprehensive income, net of tax
                                                                     3,635       3,635  
Dividends $.09 per share
                                             (4,498 )                             (4,498 )
Conversion of Class B to Class A shares
     100       33       (100 )     (33 )                                             —  
Exercise of stock options
                                     448               (39 )     290               738  
Income tax benefit from stock option exercises
                                     505                                       505  
Amortization of unearned compensation
                                     308                                       308  
 
                                                                                
Balances at April 30, 2004
     36,610     $ 12,203       13,616     $ 4,539     $ 236,659     $ 499,242       200     $ (1,462 )   $ 5,621     $ 756,802  
 
                                                                                
 
Three Months Ended April 30, 2003
                                                                                
Balances at January 31, 2003
     35,678     $ 11,892       14,548     $ 4,850     $ 232,029     $ 470,348       570     $ (4,425 )   $ (332 )   $ 714,362  
Net earnings
                                             14,792                               14,792  
Other comprehensive income, net of tax (restated)
                                                                     2,512       2,512  
Dividends $.06 per share
                                             (2,979 )                             (2,979 )
Conversion of Class B to Class A shares
     481       161       (481 )     (161 )                                             —  
Exercise of stock options
                                     480               (62 )     494               974  
Restricted stock issued
                                     (1,013 )             (113 )     1,013               —  
Amortization of unearned compensation
                                     236                                       236  
 
                                                                                
Balances at April 30, 2003
     36,159     $ 12,053       14,067     $ 4,689     $ 231,732     $ 482,161       395     $ (2,918 )   $ 2,180     $ 729,897  
 
                                                                                

The accompanying notes are an integral part of these consolidated financial statements.

4

 

Forest City Enterprises, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)

                 
    Three Months Ended April 30,
    2004   2003
    (in thousands)
Cash Flows from Operating Activities
                
Rents and other revenues received
   $ 225,155     $ 220,901  
Cash distributions from unconsolidated entities
     7,610       4,240  
Proceeds from land sales
     27,387       11,076  
Land development expenditures
     (23,824 )     (12,075 )
Operating expenditures
     (174,869 )     (158,726 )
Interest paid
     (43,221 )     (48,630 )
 
                
 
Net cash provided by operating activities
     18,238       16,786  
 
                
 
Cash Flows from Investing Activities
                
Capital expenditures
     (207,433 )     (106,592 )
Proceeds from disposition of operating properties and other investments
     26,521       54  
Change in investments in and advances to real estate affiliates
     (11,715 )     7,722  
 
                
 
Net cash used in investing activities
     (192,627 )     (98,816 )
 
                
 
Cash Flows from Financing Activities
                
Proceeds from issuance of senior notes
     100,000       —  
Payment of senior notes issuance costs
     (3,620 )     —  
Increase in borrowings under the long-term credit facility
     —       19,000  
Increase in nonrecourse mortgage debt
     222,149       89,259  
Payments on long-term credit facility
     (56,250 )     (6,250 )
Principal payments on nonrecourse mortgage debt
     (95,698 )     (54,726 )
Increase in notes payable
     36,033       4,828  
Payments on notes payable
     (20,953 )     (9,131 )
Change in restricted cash and book overdrafts
     (45,229 )     (3,272 )
Payment of deferred financing costs
     (4,211 )     (1,418 )
Exercise of stock options
     738       974  
Dividends paid to shareholders
     (4,500 )     (2,980 )
Increase (decrease) in minority interest
     6,154       (2,982 )
 
                
 
Net cash provided by financing activities
     134,613       33,302  
 
                
 
Net decrease in cash and equivalents
     (39,776 )     (48,728 )
Cash and equivalents at beginning of period
     107,491       122,356  
 
                
 
Cash and equivalents at end of period
   $ 67,715     $ 73,628  
 
                

The accompanying notes are an integral part of these consolidated financial statements.

5

 

Forest City Enterprises, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(Unaudited)

                 
    Three Months Ended April 30,
    2004   2003
    (in thousands)
Reconciliation of Net Earnings to Cash Provided by Operating Activities
                
Net Earnings
   $ 7,203     $ 14,792  
Minority interest
     7,328       2,540  
Depreciation
     33,541       24,585  
Amortization
     7,406       4,765  
Equity in earnings of unconsolidated entities
     (6,244 )     (9,843 )
Cash distributions from unconsolidated entities
     7,610       4,240  
Deferred income taxes
     4,066       5,110  
Gain on disposition of other investments
     —       (22 )
Discontinued operations:
                
Loss on early extinguishment of debt
     238       —  
Depreciation
     105       452  
Amortization
     2       121  
Gain on disposition of operating properties
     (19,499 )     (411 )
Minority interest
     —       218  
Cumulative effect of change in accounting principle
     18,628       —  
(Increase) decrease in land included in projects under development
     (1,283 )     13,887  
Increase in land held for development or sale
     (2,727 )     (2,073 )
(Increase) decrease in notes and accounts receivable
     (72,260 )     9,249  
(Increase) decrease in inventories
     (30,563 )     927  
(Increase) decrease in other assets
     (1,168 )     144  
Increase (decrease) in accounts payable and accrued expenses
     65,855       (51,895 )
 
                
 
Net cash provided by operating activities
   $ 18,238     $ 16,786  
 
                

Supplemental Non-Cash Disclosures:

The schedule below represents the effect of the following non-cash transactions for the three months ended April 30:

         
2004
  •   Change in consolidation methods due to FIN 46 No. (R).
Change to full consolidation method of accounting from equity method due to acquisition of partners’ interests in four properties: Lenox Park, Lenox Club and Pavilion in the Residential Group and Tangerine in the Land Development Group.
      Modification of certain provisions of the Company’s arrangement with its partner in the New York operations for certain property partnerships.
2003
  •   Increase in interest in Station Square Freight House, a specialty retail center.
Disposition of interest in Trowbridge, a supported-living community.
                 
Operating Activities
                
Notes and accounts receivable
   $ 39,977     $ (106 )
Increase in land held for development or sale
     (12,534 )     —  
Other assets
     (67,307 )     (1,705 )
Increase in deferred taxes
     (3,038 )     —  
Accounts payable and accrued expenses
     42,211       4,111  
 
                
Total effect on operating activities
   $ (691 )   $ 2,300  
 
                
Investing Activities
                
Reduction in investments in and advances to real estate affiliates
   $ 55,383     $ —  
(Increase) decrease of total real estate
     (680,425 )     11,014  
 
                
Total effect on investing activities
   $ (625,042 )   $ 11,014  
 
                
Financing Activities