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 Quarter ended Commission File Number
June 30, 1995 0-9811
-------------------- ----------------------
BFC FINANCIAL CORPORATION
Florida 59-2022148
------------------------------ ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1750 E. Sunrise Boulevard
Fort Lauderdale, Florida 33304
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 760-5200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of the issuer's classes of common
stock as of August 10, 1995.
Class Shares Outstanding
---------- ------------------
Common stock, par value 2,305,682
$0.01 per share
Special Class A None outstanding
Common stock, par value
$0.01 par value
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Financial Condition
June 30, 1995 and December 31, 1994
(in thousands, except share data)
(Unaudited)
ASSETS
------
1995 1994
-------- -------
Cash and cash equivalents $ 646 711
Securities available for sale 5,365 5,869
Investment in BankAtlantic Bancorp, Inc. ("BBC") 47,440 43,768
Mortgage notes and related receivables, net 4,849 4,904
Real estate acquired in debenture exchanges, net 10,891 11,169
Investments in and advances to real estate
joint ventures 9,878 9,912
Escrow for redeemed debenture liability 9,256 12,223
Other assets 2,486 2,735
------- -------
Total assets $ 90,811 91,291
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Exchange debentures, net 6,630 6,616
Mortgage payables and other borrowings 26,476 26,618
Deferred interest on the exchange debentures 4,195 3,494
Redeemed debenture liability 15,467 18,395
Other liabilities 9,348 9,636
------- -------
Total liabilities 62,116 64,759
Commitments and contingencies
Stockholders' equity:
Preferred stock of $.01 par value; authorized
10,000,000 shares; none issued - -
Special class A common stock of $.01 par value;
authorized 20,000,000 shares; none issued - -
Common stock of $.01 par value; authorized
20,000,000 shares; issued 2,351,021
in 1995 and 1994 17 17
Additional paid-in capital 19,837 21,025
Retained earnings 8,385 5,677
Less: treasury stock
(45,339 shares for 1995 and 1994) (280) (280)
-------- --------
Total stockholders' equity before BBC
net unrealized appreciation on debt
securities available for sale
-net of deferred income taxes 27,959 26,439
BBC net unrealized appreciation
on debt securities available for
sale-net of deferred income taxes 736 93
------- -------
Total stockholders' equity 28,695 26,532
------- -------
Total liabilities and stockholders' equity $ 90,811 91,291
======= =======
See accompanying notes to unaudited consolidated financial statements.
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Operations
For the Six and Three month Periods Ended June 30, 1995 and 1994
(in thousands, except per share data)
(Unaudited)
Six Months Three Months
Ended Ended
June 30, June 30,
---------------- -------------
1995 1994 1995 1994
------- ------ ------- -----
Revenues:
Interest on mortgage notes and
related receivables $ 222 363 111 181
Interest and dividends on other
investment securities 353 404 176 198
Earnings on real estate
operations, net 362 1,135 225 560
Gain (loss) on disposition of
real estate, net 206 (59) 206 (59)
Insurance settlement - 2,500 - 2,500
Other income, net 404 271 286 226
------- ------- ------- -------
Total revenues 1,547 4,614 1,004 3,606
------- ------- ------- -------
Costs and expenses:
Interest on exchange debentures 912 3,609 461 1,819
Interest on mortgages payable
and other borrowings 1,282 1,377 647 688
Provision for loss on real estate
acquired in debenture exchange - 531 - 531
Provision for loan losses - 624 - 624
Loss from real estate joint
venture investments 98 - 13 -
Employee compensation and benefits 506 577 252 304
Occupancy and equipment 26 26 13 12
General and administrative, net 614 845 306 643
------- ------- ------- -------
Total cost and expenses 3,438 7,589 1,692 4,621
------- ------- ------- -------
(Loss) before equity in earnings
of BBC and extraordinary item (1,891) (2,975) (688) (1,015)
Equity in earnings of BBC 4,599 3,892 2,432 1,904
------- ------- ------- -------
Income before extraordinary item 2,708 917 1,744 889
Extraordinary item:
Gain on settlement of 1991
Exchange litigation - 7,754 - 7,754
-------- ------- -------- -------
Net income $ 2,708 8,671 1,744 8,643
======== ======== ======== =======
Income per common and common
equivalent share:
Before extraordinary item $ 1.26 0.45 0.81 0.43
Extraordinary item - 3.77 - 3.77
-------- -------- -------- -------
Net income per common and common
equivalent share $ 1.26 4.22 0.81 4.20
======== ======== ======= =======
Income per common and common equivalent
share assuming full dilution:
Before extraordinary item $ 1.24 0.45 0.79 0.43
Extraordinary item - 3.77 - 3.77
-------- ------- -------- -------
Net income per common and common
equivalent share assuming full
dilution $ 1.24 4.22 0.79 4.20
======= ======= ======= =======
Weighted average number of common and
common equivalent shares outstanding 2,154 2,056 2,152 2,056
======= ======= ======= =======
Weighted average number of common and
common equivalent shares outstanding
assuming full dilution 2,186 2,056 2,213 2,056
======= ======= ======= =======
See accompanying notes to unaudited consolidated financial statements
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the Six Months Ended June 30, 1995
(in thousands)
(Unaudited)
Addi-
tional Trea-
Common Paid-in Retained sury
Stock Capital earnings Stock Other Total
------ -------- -------- ------- ----- -----
Balance at
December 31, 1994 $ 17 21,025 5,677 (280) 93 26,532
Effect of issuance
of BankAtlantic
Bancorp, Inc.'s
("BBC") common
stock by BBC
to BBC's minority
shareholders - (1,188) - - - (1,188)
Change in BBC net
unrealized
appreciation on
debt securities
available for
sale-net of
deferred income
taxes - - - - 643 643
Net income - - 2,708 - - 2,708
------- -------- -------- ------ ------ -------
Balance at
June 30, 1995 $ 17 19,837 8,385 (280) 736 28,695
======= ========= ======== ======= ====== =======
See accompanying notes to unaudited consolidated financial statements
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flow
For the Six Months Ended June 30, 1995 and 1994
(In thousands)
(Unaudited)
June 30,
--------
1995 1994
---- ----
Operating activities:
Net income before extraordinary item $ 2,708 917
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Equity in earnings of BBC (4,599) (3,892)
Depreciation 375 888
Provision for loss on loans receivable - 624
Provision for loss on real estate acquired
in debenture exchange - 531
(Gain) loss on disposition of
real estate, net (206) 59
Loss from joint venture operations 98 -
Accretion on exchange debentures
and mortgage payables 14 58
Tax effect of real estate acquired
in debenture exchange - (39)
Amortization of discount on
loans receivable (15) (36)
Increase in deferred interest on the
exchange debentures 701 3,566
Increase (decrease) in other liabilities (288) 196
Accrued interest income on escrow accounts (157) (114)
Interest accrued regarding redeemed
debenture liability 196 -
Decrease (increase) in other assets 100 (225)
---------- ---------
Net cash provided provided (used)
by operating activities (1,073) 2,533
---------- ---------
Investing activities:
Common stock dividends received from BBC 382 374
Purchase of securities available
for sale (9,935) (45,475)
Proceeds from redemption and maturities
of securities available for sale 10,439 60,752
Increase in the escrow to fund redeemed
debenture liability - (13,500)
Principal reduction on loans receivable 70 130
Additions to office properties and equipment - (12)
Increase in investments in and advances
to real estate joint ventures (64) (3,649)
Proceeds from the sale of real estate 341 -
Improvements to real estate acquired in
debenture exchanges (85) (378)
---------- ---------
Net cash provided (used) by
investing activities 1,148 (1,758)
---------- ---------
Financing activities:
Increase in borrowings - 1,000
Repayment of borrowings (140) (432)
--------- ---------
Net cash provided (used) by financing
activities (140) 568
--------- ---------
Increase (decrease) in cash and
cash equivalents (65) 1,343
Cash and cash equivalents
at beginning of period 711 349
---------- ---------
Cash and cash equivalents
at end of quarter $ 646 1,692
===================
See notes to unaudited consolidated financial statements.
BFC Financial Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
June 30, 1995
1. PRESENTATION OF INTERIM FINANCIAL STATEMENTS
------------------------------------------------
The accompanying unaudited consolidated financial statements have been prepared
by BFC Financial Corporation (the "Company" or "BFC") in accordance with the
accounting policies described in its 1994 Annual Report and should be read in
conjunction with the notes to the consolidated financial statements which appear
in that report. The Company became a savings bank holding company in 1987 by
acquiring shares of the common stock of BankAtlantic, A Federal Savings Bank
("BankAtlantic"). On July 13, 1994, BankAtlantic, consummated a reorganization
into a holding company structure and BankAtlantic Bancorp, Inc. ("BBC") acquired
all of the capital stock of BankAtlantic thereby becoming a unitary savings bank
holding company. The reorganization resulted in BankAtlantic becoming a wholly-
owned subsidiary of BBC and BFC becoming a shareholder of BBC on the same
proportionate basis as was the Company's ownership in BankAtlantic. The
consolidated financial statements reflect the activities of BFC Financial
Corporation and its wholly owned subsidiaries ("BFC"). The Company's investment
in BBC is carried on the equity method. All significant intercompany accounts
and transactions have been eliminated in consolidation.
In the opinion of management, the accompanying financial statements contain such
adjustments as are necessary to present fairly the Company's unaudited
consolidated financial condition at June 30, 1995, the unaudited consolidated
results of operations for the six and three month periods ended June 30, 1995
and 1994 and the unaudited consolidated cash flows for the six months ended June
30, 1995 and 1994. Such adjustments consisted only of normal recurring items.
The unaudited consolidated financial statements and related notes are presented
as permitted by Form 10-Q and consequently, do not include certain information
and notes necessary for a complete presentation of financial condition, results
of operations and cash flows as required by generally accepted accounting
principles for financial statements. Certain prior year balances have been
reclassified to conform with the 1995 presentation.
2. INCOME PER SHARE
--------------------
Income per common share and common equivalent share was computed by dividing net
income by the weighted average number of shares of common stock and common stock
equivalents outstanding during the period. The number of common shares was
increased by the number of shares issuable on the exercise of options when the
market price of the common stock exceeds the exercise price of the options. This
increase in the number of common shares was reduced by the number of common
shares that are assumed to have been purchased with the proceeds from the
exercise of the options; those purchases were assumed to have been made at the
average price of the common stock during the period when the market price of the
common stock exceeded the exercise price of the options. For income per common
share assuming full dilution, those purchases were assumed to be made at the
market price at the end of the period, if higher than the average price during
the period.
For all periods, the shares issued in connection with a 1984 acquisition are
considered outstanding after elimination of 250,000 shares, representing the
Company's 50% ownership of the company which holds the shares issued in the
acquisition
3. INVESTMENT IN BANKATLANTIC BANCORP, INC.
--------------------------------------------
A reconciliation of the carrying value in BBC to BBC stockholders' equity at
June 30, 1995 and December 31, 1994 is as follows:
June 30, December 31,
1995 1994
-------- ----------
BBC stockholders' equity $ 116,078 105,520
Preferred stock of BBC (7,030) (7,030)
------- -------
BBC common stockholders' equity 109,048 98,490
Ownership percentage 46.41% 48.00%
------- -------
50,609 47,275
Purchase accounting adjustments (3,169) (3,507)
------- -------
Investment in BBC $ 47,440 43,768
======= =======
BFC also owns 5,600 shares of BBC 12.25% Series A Preferred Stock, 529 shares of
BBC 10.00% Series B Preferred Stock and 7,245 shares of BBC 8.00% Preferred
Stock. The aggregate purchase price relating to the acquisition of these shares
was approximately $143,000 and is included in securities available for sale in
the accompanying statements of financial condition.
4. SECURITIES AVAILABLE FOR SALE
---------------------------------
Included in securities available for sale at June 30, 1995 was approximately
$5,122,000 and $243,000 of U.S. Treasury Bills and other investments,
respectively. Included in securities available for sale at December 31, 1994
was approximately $5,639,000 and $230,000 of U.S. Treasury Bills and other
investments, respectively. Market value at June 30, 1995 and December 31, 1994
approximates book value. Approximately $4.8 million of securities are pledged
as collateral to secure a Letter of Credit issued in connection with the Short
vs. Eden United, Inc. litigation.
5. CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------
Other non-cash financing and investing activities for the six months ended
June 30, 1995 and 1994 are as follows (in thousands):
June 30,
----------
1995 1994
------- -----
The reclassification of redeemable
common stock to additional paid-in
capital due to the cancellation
of a shareholder agreement $ - 5,776
===== =====
The increase in stockholders' equity resulting
from the Company's proportionate share of BBC's
net unrealized appreciation on
debt securities available for sale,
less related deferred income taxes 643 -
===== =====
Transfers from escrow accounts to reflect
payments on the redeemed debenture liability 3,219 1,669
===== =====
Effect of issuance of BBC's common stock
to BBC's minority stockholders 1,188 3
===== =====
The net gain associated with the settlement
of the 1991 Exchange litigation - 7,754
===== =====
Mortgages eliminated in connection with the
disposition of real estate acquired in
debenture exchange - 1,714
===== =====
BBC's dividends on common stock
declared and not received 191 187
===== =====
Interest paid on borrowings 1,203 1,273
===== =====
BFC Financial Corporation and Subsidiaries
Management's Discussion and Analysis of Results
of Operations and Financial Condition
General
-------
BFC Financial Corporation (the "Company" or "BFC") is a savings bank holding
company which owns approximately 46.4% of BankAtlantic Bancorp, Inc. ("BBC").
BBC was formed in April 1994 under the laws of the state of Florida and is the
holding company for BankAtlantic, A Federal Savings Bank ("BankAtlantic"). On
July 13, 1994, BankAtlantic consummated a reorganization into a holding company
structure which results in BFC becoming a shareholder of BBC on the same
proportionate basis as it was in BankAtlantic before the reorganization.
Results of Operations
---------------------
For the quarter ended June 30, 1995 the Company reported net income of
approximately $1.7 million or $0.81 primary and $0.79 fully diluted income per
common and common equivalent share as compared to net income of approximately
$8.6 million or $4.20 primary and $4.20 fully diluted income per common and
common equivalent share for the comparable period in 1994.
For the six month period ended June 30, 1995 the Company reported net income of
approximately $2.7 million or $1.26 primary and $1.24 fully diluted income per
common and common equivalent share as compared to net income of approximately
$8.7 million or $4.22 primary and $4.22 fully diluted income per common and
common equivalent share for the comparable period in 1994. Operations for 1994
included an extraordinary gain of approximately $7.8 million or $3.77 primary
and $3.77 fully diluted income per common and common equivalent share,
attributable to the gain on the settlement of litigation relating to the
exchange in 1991 of approximately $15.4 million of BFC Financial Corporation
subordinated debentures for all the assets and liabilities of three affiliated
limited partnerships (the `1991 Exchange'').
The decrease in revenues of approximately $3.1 million and $2.6 million for the
six and three month periods ended June 30, 1995, respectively, as compared to
the comparable periods in 1994 was primarily due to decreases in interest on
mortgage notes and related receivables, interest and dividends on other
investment securities, earnings on real estate operations and an insurance
settlement in 1994 of approximately $2.5 million. Such decrease in revenues was
partially offset by a gain on disposition of real estate, net and other income,
net in 1995.
Interest on mortgage notes and related receivables decreased for the six and
three month periods ended June 30, 1995 as compared to the same periods in 1994
primarily due to a reduction in the amount of mortgage note receivables from
affiliated limited partnerships during 1994.
Interest and dividends on other investment securities decreased for the six and
three month periods ended June 30, 1995 as compared to the comparable periods in
1994 primarily due to a decrease in investable funds.
Earnings on real estate operations, net decreased for the six and three month
periods ended June 30, 1995 as compared to the same periods in 1994 primarily
due to the sale and disposition of properties in 1994.
The 1995 gain on disposition of real estate, net of approximately $206,000 was
attributable to the sale of a property located in Galesburg, Illinois. In May
1994 the IBM Executive Office Building in Kingsport, Tennessee was foreclosed by
the lender and a loss on disposition of approximately $59,000 was recorded
during the quarter ended June 30, 1994.
The 1994 insurance settlement in the amount of $2.5 million was related to
insurance proceeds received during the quarter ended June 30, 1994, associated
with the expenses incurred by the Company in connection with the 1989 and 1991
Exchange litigation. Such expenses were incurred and expensed by the Company in
prior years.
Other income, net increased for the six and three month periods ended June 30,
1995 as compared to the same periods in 1994 primarily due to proceeds received
during the quarter ended March 31, 1995 from litigation regarding an investment
that the Company wrote off in 1991 and the receipt of amounts from an affiliate
which were written-off in prior years.
The decrease in cost and expenses of approximately $4.2 million and $2.9 million
for the six and three month periods ended June 30, 1995, respectively, as
compared to the same periods in 1994 was primarily due to decreases in interest
on exchange debentures, interest on mortgage payables, employee compensation and
benefits and general and administrative expenses. Further, the 1995 periods do
not include a provision for loss on real estate axquired in debenture exchangs
of approximately $531,000 or a provision for loss on loans receivable of
approximately $624,000 which were established in 1994. This decrease was
partially offset by the loss from real estate joint venture investments of
approximately $98,000 in 1995.
Interest on exchange debentures decreased for the six and three month periods
ended June 30, 1995 as compared to the same periods in 1994 as a result of the
cancellation of debentures in connection with the 1994 settlements of litigation
pertaining to the 1991 and 1989 Exchange transactions.
The decrease in interest on mortgage payables and other borrowings for the six
and three month periods ended June 30, 1995 as compared to the comparable
periods in 1994 was due to the elimination of mortgage debt principally related
to the sale or foreclosure of properties acquired in the 1989 Exchange and 1991
Exchange. This decrease was offset in part by an increase in interest expense on
additional borrowings in 1994.
During the quarter ended June 30, 1994, the Company established a valuation
allowance of approximately $531,000 on 12.73 acres of unimproved land located in
Birmingham, Alabama and recorded a provision for loss on loans receivable due
from affiliated limited partnerships of approximately $624,000 based upon the
loans net carrying value and estimated fair value of the underlying loan
collateral.
The 1995 loss from real estate joint venture investments represents the
Company's prorata share of expenses, primarily real estate taxes, related to the
ownership of property acquired in 1994 by an entity controlled by the Company.
The decrease in general and administrative, net for the six and three month
periods ended June 30, 1995 as compared to the same periods in 1994 was
attributable to decreases in legal expenses, unaffiliated property management
expenses, stockholders expenses and trustee fees. This decrease was partially
offset by an increase in leasing expenses related to a property owned by the
Company and amortization expenses.
BBC's net income applicable to common shareholders for the six and three month
periods ended June 30, 1995 was $8.9 million and $4.7 million, respectively,
compared to net income of $8.8 million and $4.3 million for the six and three
month periods ended June 30, 1994, respectively. The Company's equity in BBC's
net income for the six and three month periods ended June 30, 1995 was $4.6
million and $2.4 million, respectively, compared to its equity in BBC's net
income of $3.9 million and $1.9 million for the six and three month periods
ended June 30, 1994, respectively.
Financial Condition
-------------------
BFC's total assets at June 30, 1995 and at December 31, 1994 were $90.8 and
$91.3 million, respectively. The majority of the difference at June 30, 1995 as
compared to December 31, 1994 was due to decreases in securities available for
sale of approximately $504,000 and an escrow for redeemed debenture liability of
approximately $3.2 million. These decreases were offset by an increase in
investment in BBC of approximately $3.7 million.
Investment in BBC increased by $3.7 million due to the equity in earnings of BBC
for the six months ended June 30, 1995, reduced by the common stock dividends
paid and declared in 1995 and the $1.2 million effect of issuance of BBC common
stock by BBC to BBC's minority shareholders.
At June 30, 1995 the decrease in the redeemed debenture liability and the
related escrow was primarily due to payments made in accordance with the terms
of the Exchange litigation settlements.
Liquidity and Capital Resources
-------------------------------
Numerous lawsuits were filed against the Company in connection with both the
1989 and 1991 Exchange offers. Settlement of these lawsuits occurred during
1994. A description of these settlements is contained in the Company's 1994
Annual Report.
As a result of the exchange litigation settlements, the Company's obligation to
pay interest on debentures is limited to only those debentures held by persons
that acquired debentures in an arms length transaction prior to the date on
which settlements were reached ("Holders in Due Course"), or debentures held by
persons that opted out of the litigation. The Company's ability to meet its
obligations and to pay interest on the debentures issued in the 1989 Exchange
and the 1991 Exchange as discussed above is substantially dependent on the
earnings and regulatory capital position of BBC. However, pursuant to the terms
of the debentures issued in the 1989 Exchange and the 1991 Exchange, the Company
may elect to defer interest payments on its subordinated debentures if
management of the Company determines in its discretion that the payment of
interest would impair the operations of the Company. Additionally, until the
Company can ascertain which debentures are held by Holders in Due Course,
interest will continue to be deferred.
In connection with certain litigation related to the purchase and sale of an
apartment complex in Indiana (See item 3. "Litigation ", Short vs. Eden United,
Inc., et.al. in the Company's 1994 Annual Report), on February 25, 1994, the
lower court on remand awarded plaintiff a judgment totaling approximately $4.5
million, including interest. The Company appealed the trial court's order and
posted an appeal bond which is currently collateralized by approximately $4.8
million of marketable securities. In prior years, the Company had accrued a
$4.5 million provision for this litigation. In July 1995, the Indiana Court of
Appeals affirmed conditionally or remanded in part and reversed in part the
decision of the trial court on remand. The effect of the Court of Appeals
opinion was to reduce the damage award to $1,285,000 from $2,570,000; disallow
prejudgment interest, set the date for computation of postjudgment interest and
fix the rate at 8% and require the use of a discount to compute the present
value of the damage award. The reduction of the damage award will be remanded to
the trial court for verification that the trial court used the same method of
damage computation as the Court of Appeals and for the trial court to determine
the present value and enter a new final judgment. Short has filed a notice for
rehearing on the Appeals Court's decision. If the decision stands as outlined
above, preliminary computations indicate that the total loss to the Company
would be approximately $500,000 not the $4.5 million dollars previously
established as a provision in connection with this litigation.
In addition to the litigation discussed above, an appellate court entered an
order reversing a lower court decision in favor of the Company and its
affiliates which related to the sale of units in two partnerships which
participated in the 1991 Exchange. (See Item 3. "Litigation", Martha Hess,
et.al. vs. Gordon, Boula, et.al. in the Company's 1994 Annual Report.) The
company has accrued $4.0 million with respect to this matter. There is no
requirement for a bond in connection with the appeal.
Much of the funds required currently for the litigation described above have
already been provided. Other funds required, in addition to those currently
available, may come from operations, borrowings against BBC stock, BBC
dividends, return of excess funds placed in escrow for litigation settlements,
return of the bond delivered in connection with the Short lawsuit, or sale
and/or refinancing of real estate and mortgages owned.
At the present time BBC has no significant operations other than those related
to its ownership of BankAtlantic and does not require funds other than to pay
certain operating expenses and interest on a $3.0 million note payable to an
unrelated financial institution. BBC's operating expenses are substantially
equal to items which would have previously been paid directly by BankAtlantic.
It is anticipated that funds for payment of these expenses will be obtained from
BankAtlantic. BBC has stated its intention to make a regular quarterly common
stock dividend and to continue monthly dividend payments on its non-cumulative
preferred stock. Funds for these dividend and interest payments are dependent
upon BankAtlantic's ability to pay dividends to BBC. Additionally, repayment by
BBC of the $3.0 million note is dependent upon dividends from BankAtlantic,
refinancing of the debt or raising additional equity capital by BBC. BBC's
management has stated that they are of the opinion that BBC will be in a
position to utilize any of such options as a source of repayment.
The Company has agreed to participate in certain real estate opportunities with
John E. Abdo, Vice Chairman of the Board, and certain of his affiliates (the
`Abdo Group''). Under the arrangement, the Company and the Abdo Group will
share equally in profits after any profit participation due to any other
partners in the ventures and after a priority return in favor of the Company. On
such basis, in June 1994, an entity controlled by the Company acquired from an
independent third party 23.7 acres of unimproved land know as the "Cypress
Creek" property located in Fort Lauderdale, Florida and in December 1994, an
entity controlled by the Company acquired from an unaffiliated seller 60.1 acres
of unimproved land know as the "Centerport" property in Pompano Beach, Florida.
The entities have entered into agreements to sell these properties to an
unaffiliated third party with closings scheduled to occur during the fourth
quarter of 1995 for Cypress Creek and prior to October 1998 for Centerport.
Consummation of these sales pursuant to their contracts is subject to a number
of conditions and there is no assurance that the conditions will be met or that
the properties will be sold pursuant to the agreements. Both agreements require
a series of deposit/option payments prior to closing. Management believes that
such payments, if made, should be sufficient to cover the cost to carry these
properties until closing. The Cypress Creek and Centerport properties serve as
partial collateral for an $8.08 million loan from an unaffiliated lender. The
loan provides for a release price of $5.0 million upon the sale of the Cypress
Creek property. In addition, under the arrangement with the Abdo Group, in May
1995, an entity controlled by the Company contracted to acquire the Regency Golf
and Beach Club at Palm-Aire in Pompano Beach, Florida (the `Regency''). The
Regency is an existing rental apartment complex having 288 apartment suites. The
acquisition is expected to close during the fourth quarter of 1995 or 1996 and
it is currently anticipated that the Company will seek partners in connection
with the acquisition of the property.
Cash Flows
----------
A summary of the Company's consolidated cash flows is as follows (in
thousands):
Six months ended
June 30,
------------------------
Net cash provided (used) by: 1995 1994
------- -------
Operating activities $ (1,073) 2,533
Investing activities 1,148 (1,758)
Financing activities (140) 568
------- -------
Increase (decrease) in cash $ (65) 1,343
======= =======
The changes in cash flow used or provided in operating activities are affected
by the changes in operations, which are discussed elsewhere herein, and by
certain other adjustments. These adjustments include additions to operating
cash flows for non-operating charges such as depreciation, valuation allowance
of real estate acquired in the debenture exchange and provision for loan
receivable. Cash flow from operating activities is also adjusted to reflect the
use or the providing of cash for increases and decreases, respectively, in
operating assets, decreases or increases, respectively of operating liabilities,
and increases in exchange debentures deferred interest. Accordingly, the
changes in cash flow from operating activities in the periods indicated above
has been impacted not only by the changes in operations during the periods but
also by these other adjustments.
The primary sources of funds to the Company, for the six months ended June 30,
1995 were revenues from property operations, collections on mortgage
receivables, sale of real estate, sale of securities available for sale and
dividends from BBC. These funds were primarily utilized for operating expenses
at the properties, capital improvements at the properties, mortgage payables on
the properties and general and administrative expenses.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Short vs. Eden United, Inc., et al. in the Marion County Superior Court, State
-----------------------------------
of Indiana. Civil Division Case No. S382 0011. In January, 1982, an individual
filed suit against a subsidiary of the Company, Eden United, Inc. ("Eden"),
seeking return of an earnest money deposit held by an escrow agent and
liquidated damages in the amount of $85,000 as a result of the failure to close
the purchase and sale of an apartment complex in Indianapolis, Indiana. Eden was
to have purchased the apartment complex from a third party and then immediately
resell it to plaintiff. The third party was named as a co-defendant and such
third party also filed a cross claim against Eden, seeking to recover the
earnest money deposit. In September 1983, Plaintiff filed an amended complaint,
naming additional subsidiaries of the Company and certain officers of the
Company as additional defendants. The amended complaint sought unspecified
damages based upon alleged fraud and interference with contract. In
interrogatory answers served in September 1987, Plaintiff stated for the first
time that he was seeking damages in the form of lost profits in the amount of
approximately $6,350,000. The case went to trial during October 1988. On April
26, 1989, the Court entered a judgment against Eden, the Company and certain
additional subsidiaries of the Company jointly and severally in the sum of
$85,000 for liquidated damages with interest accruing at 8% per annum from
September 1, 1981, nominal damages of $1.00, and punitive damages in the sum of
$100,000. The judgment also awarded the Plaintiff the return of his $85,000
escrow deposit, and awards the third party $85,000 in damages plus interest
accruing from September 14, 1981 against Eden. The Company has charged expense
for the above amounts. Both Short and the Company appealed the judgment and in
June 1991, the appellate court reversed the trial court's decision on the issue
of compensatory damages, determined that Short might be entitled to an award of
compensatory damages rather than nominal damages and remanded the case to the
trial court to determine the amount of compensatory damages to be awarded. A
hearing on remand was held on February 3, 1993. On February 25, 1994, the lower
court on remand awarded plaintiff a judgment in the amount of $85,000 for
liquidated damages for breach of contract jointly and severally from the
subsidiary, the Registrant and certain named affiliates, plus prejudgment
interest of $52,108 through May 1, 1989, plus post-judgment interest of 10% per
annum thereafter until paid. Additionally, plaintiff was awarded a judgment
against the defendants in the amount of $2,570,000 for tortious interference,
plus prejudgment interest of $469,400 through May 1, 1989, plus post-judgment
interest of 10% per annum thereafter until paid. The Company appealed the trial
court's order and posted an appeal bond which is currently collateralized by
approximately $4.8 million of marketable securities. In July 1995, the Indiana
Court of Appeals affirmed conditionally or remanded in part and reversed in part
the decision of the trial court on remand. The effect of the Court of Appeals
opinion was to reduce the damage award to $1,285,000 from $2,570,000; disallow
prejudgment interest, set the date for computation of postjudgment interest and
fix the rate at 8% and require the use of a discount to compute the present
value of the damage award. The reduction of the damage award will be remanded to
the trial court for verification that the trial court used the same method of
damage computation as the Court of Appeals and for the trial court to determine
the present value and enter a new final judgment. Short has filed a notice for
rehearing on the Appeals Court's decision. If the decision stands as outlined
above, preliminary computations indicate that the total loss to the Company
would be approximately $500,000 not the $4.5 million dollars previously
established as a provision in connection with this litigation.
Item 2 through 5.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit 27 - Financial Data Schedule
b) No report on Form 8-K was filed during the quarter ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BFC Financial Corporation
Date: August 10, 1995 By: /s/ Glen R. Gilbert
--------------------------
Glen R. Gilbert, Senior Vice President
and Chief Financial Officer
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