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
September 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: (954) 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 November 7, 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
September 30, 1995 and December 31, 1994
(in thousands, except share data)
(Unaudited)
ASSETS
1995 1994
------ ------
Cash and cash equivalents $ 426 711
Securities available for sale 5,351 5,869
Investment in BankAtlantic Bancorp, Inc. ("BBC") 49,605 43,768
Mortgage notes and related receivables, net 6,503 4,904
Real estate acquired in debenture exchanges, net 11,046 11,169
Investments in and advances to real estate
joint ventures 9,857 9,912
Escrow for redeemed debenture liability 8,975 12,223
Other assets 2,640 2,735
------ ------
Total assets $ 94,403 91,291
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Exchange debentures, net 6,545 6,616
Mortgage payables and other borrowings 27,790 26,618
Deferred interest on the exchange debentures 4,477 3,494
Redeemed debenture liability 15,260 18,395
Other liabilities 9,245 9,636
------ ------
Total liabilities 63,317 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 19,803 21,025
Retained earnings 10,801 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 30,341 26,439
BBC net unrealized appreciation
on debt securities available for
sale-net of deferred income taxes 745 93
------ ------
Total stockholders' equity 31,086 26,532
------ ------
Total liabilities and stockholders' equity $ 94,403 91,291
====== ======
See accompanying notes to unaudited consolidated financial statements.
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Operations
For the Nine and Three month Periods Ended September 30, 1995 and 1994
(in thousands, except per share data)
(Unaudited)
Nine Months Three Months
Ended Ended
September 30, September30,
---------------- --------------
1995 1994 1995 1994
---- ---- ---- ----
REVENUES:
Interest on mortgage notes and
related receivables $ 332 544 110 181
Interest and dividends on other
investment securities 499 553 146 149
Earnings on real estate
operations, net 651 1,482 289 343
Gain on disposition of
real estate, net 206 1,073 - 1,132
Insurance settlement - 2,500 - -
Other income, net 430 308 26 37
------ ------ ------ ------
Total revenues 2,118 6,460 571 1,842
------ ------ ------ ------
COSTS AND EXPENSES:
Interest on exchange debentures 1,384 4,902 472 1,293
Interest on mortgages payable
and other borrowings 1,927 1,991 645 614
Provision for loss on real estate
acquired in debenture exchange - 531 - -
Provision for loan losses - 624 - -
Loss from real estate joint
venture investments 154 - 56 -
Employee compensation and benefits 757 843 251 266
Occupancy and equipment 35 42 9 16
General and administrative, net 797 1,018 183 169
------ ------ ------ ------
Total cost and expenses 5,054 9,951 1,616 2,358
------ ------ ------ ------
(Loss) before equity in earnings
of BBC and extraordinary items (2,936) (3,491) (1,045) (516)
Equity in earnings of BBC 7,005 5,948 2,406 2,056
------ ------ ------ ------
Income before extraordinary items 4,069 2,457 1,361 1,540
Extraordinary items:
Gain from debt restructuring 825 - 825 -
Gain on settlement of
Exchange litigation 230 14,186 230 6,432
------ ------ ------ ------
NET INCOME $ 5,124 16,643 2,416 7,972
====== ====== ====== ======
Income per common and common
equivalent share:
Before extraordinary items $ 1.85 1.20 0.60 0.75
Extraordinary items 0.48 6.90 0.46 3.13
------ ------ ------ ------
Net income per common and common
equivalent share $ 2.33 8.10 1.06 3.88
====== ====== ====== ======
Income per common and common
equivalent share assuming full
dilution:
Before extraordinary items $ 1.83 1.20 0.59 0.75
Extraordinary items 0.47 6.90 0.46 3.13
------ ------ ------ ------
Net income per common and common
equivalent share assuming full
dilution $ 2.30 8.10 1.05 3.88
====== ====== ====== ======
Weighted average number of common and
common equivalent shares outstanding 2,199 2,056 2,288 2,056
====== ====== ====== ======
Weighted average number of common and
common equivalent shares outstanding
assuming full dilution 2,227 2,056 2,310 2,056
====== ====== ====== ======
See accompanying notes to unaudited consolidated financial statements.
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the Nine Months Ended September 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 shareholders
other than
BFC Financial
Corporation - (1,222) - - - (1,222)
Change in BBC net
unrealized
appreciation on
debt securities
available for
sale-net of
deferred income
taxes - - - - 652 652
Net income - - 5,124 - - 5,124
------ ------- -------- ----- ----- -----
Balance at
September 30, 199 $ 17 19,803 10,801 (280) 745 31,086
====== ====== ====== ==== ==== ======
See accompanying notes to unaudited consolidated financial statements
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flow
For the Nine Months Ended September 30, 1995 and 1994
(In thousands)
(Unaudited)
September 30,
---------------------
1995 1994
---- ----
Operating activities:
Income before extraordinary items $ 4,069 2,457
Adjustments to reconcile income to
net cash provided (used) by operating
activities:
Equity in earnings of BBC (7,005) (5,948)
Depreciation 567 1,223
Provision for loss on loans receivable - 624
Provision for loss on real estate acquired
in debenture exchange - 531
(Gain) on disposition of
real estate, net (206) (1,073)
Loss from joint venture operations 154 -
Accretion on exchange debentures
and mortgage payables 22 110
Tax effect of real estate acquired
in debenture exchange - (67)
Amortization of discount on
loans receivable (80) (51)
Increase in deferred interest on the
exchange debentures 1,068 4,842
Decrease in other liabilities (13) (162)
Accrued interest income on escrow accounts (216) (191)
Interest accrued regarding redeemed
debenture liability 294 -
Increase in other assets (29) (216)
------ ------
Net cash provided (used)
by operating activities (1,375) 2,079
------ ------
Investing activities:
Common stock dividends received from BBC 598 565
Purchase of securities available
for sale (14,776) (48,751)
Proceeds from redemption and maturities
of securities available for sale 15,294 63,981
Increase in the escrow to fund redeemed
debenture liability - (16,500)
Principal reduction on loans receivable 320 186
Loans originated (475) -
Additions to office properties and equipment (33) (12)
Increase in investments in and advances
to real estate joint ventures (99) (3,663)
Proceeds from the sale of real estate 341 2,031
Improvements to real estate acquired in
debenture exchanges (337) (391)
------ ------
Net cash provided (used) by
Investing activities 833 (2,554)
Financing activities: ------ ------
Increase in borrowings 501 3,500
Repayment of borrowings (244) (557)
------ ------
Net cash provided by financing
Activities 257 2,943
------ ------
Increase (decrease) in cash and
Cash equivalents (285) 2,468
Cash and cash equivalents
At beginning of period 711 349
------ ------
Cash and cash equivalents
At end of quarter $ 426 2,817
====== ======
See notes to unaudited consolidated financial statements.
BFC Financial Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
September 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 September 30, 1995, the unaudited
consolidated results of operations for the nine and three month periods ended
September 30, 1995 and 1994 and the unaudited consolidated cash flows for the
nine months ended September 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
September 30, 1995 and December 31, 1994 is as follows:
September 30, December 31,
1995 1994
-------- ----------
BBC stockholders' equity $ 120,844 105,520
Preferred stock of BBC (7,030) (7,030)
------- -------
BBC common stockholders' equity 113,814 98,490
Ownership percentage 46.22% 48.00%
------- -------
52,605 47,275
Purchase accounting adjustments (3,000) (3,507)
------- -------
Investment in BBC $ 49,605 43,768
======= =======
BFC 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 is
approximately $143,000 and is included in securities available for sale in the
accompanying statements of financial condition. All such preferred stock was
redeemed by BBC in October 1995 for approximately $334,000.
4. SECURITIES AVAILABLE FOR SALE
- ---------------------------------
Included in securities available for sale at September 30, 1995 was
approximately $5,097,000 and $254,000 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 September 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 nine months ended
September 30, 1995 and 1994 are as follows (in thousands):
September 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 652 402
======= =======
Transfers from escrow accounts to reflect
payments on the redeemed debenture liability 3,603 6,333
======= =======
Effect of issuance of BBC's common stock by BBC
to shareholders other than BFC 1,222 15
======= =======
The net gain associated with the settlements
of the Exchange litigation 230 14,186
======= =======
Mortgages eliminated in connection with the
disposition of real estate acquired in
debenture exchange - 3,494
======= =======
Net gain from debt restructuring 825 -
======= =======
Deferred gain from debt restructuring - 356
======= =======
BBC's dividends on common stock
declared and not received 216 191
======= =======
Interest paid on borrowings 1,849 1,852
======= =======
6. OTHER MATTERS
- ----------------
In September 1994, the Company attempted to negotiate an extension of a $1.0
million balloon payment on a note payable that matured in June 1993. However,
the lender exercised the acceleration provision on the note and in September
1994, the underlying security that consisted of five wrap mortgage receivables
from affiliated limited partnerships was transferred to an affiliate of the
lender. In September 1994, the Company removed the related receivables and
payables from its books but deferred the gain because negotiations with the
lender were ongoing. At that time the Company remained liable to the lender for
the difference between the balance owed at the time of the acceleration and the
amount the lender sold the underlying security for. The Company continued
negotiations with the lender and in September 1995, an agreement was reached
whereby the lender was paid $500,000, two of the wrap mortgage receivables were
transferred to the affiliated limited partnerships and three of the wrap
mortgage receivables were transferred to the Company. Further, the Company was
released from any further liability to the lender. The three wrap mortgage
receivables transferred to the Company were reinstated on the Company's books at
their former carrying value reduced by payments made between September 1994 and
September 1995. The Company has accounted for this transaction as a debt
restructuring and accordingly reflected the gain on the transaction as an
extraordinary item in its financial statements. The components of the deferred
gain in 1994 and the gain recognized in 1995 are as follows:
1995 1994
------ ------
Mortgage notes and related receivables, net (1,728,527) (3,212,862)
Underlying mortgage payables 1,520,607 2,757,299
Other liabilities 52,648 91,345
Credit from lender on sale of receivables 720,000 720,000
Balance forgiven by lender 260,768 -
--------- ----------
Gain deferred 355,782
==========
Gain recognized 825,496
=========
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 46.22% 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"). In
July 1994, BankAtlantic consummated a reorganization into a holding company
structure which resulted 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 September 30, 1995 the Company reported net income of
approximately $2.4 million or $1.06 primary and $1.05 fully diluted income per
common and common equivalent share as compared to net income of approximately
$8.0 million or $3.88 primary and $3.88 fully diluted income per common and
common equivalent share for the comparable period in 1994. Operations for the
quarter ended September 30, 1995 included extraordinary gains of approximately
$1.1 million or $.46 primary and $.46 fully diluted income per common and common
equivalent share, attributable to an adjustment on the settlement of the
exchange litigation of approximately $230,000 and a gain from debt restructuring
of approximately $825,000. Operations for the quarter ended September 30, 1994
included an extraordinary gain of approximately $6.4 million or $3.13 primary
and $3.13 fully diluted income per common and common equivalent share,
attributable to the gain on the settlement of litigation relating to the
exchange transactions.
For the nine month period ended September 30, 1995 the Company reported net
income of approximately $5.1 million or $2.33 primary and $2.30 fully diluted
income per common and common equivalent share as compared to net income of
approximately $16.6 million or $8.10 primary and $8.10 fully diluted income per
common and common equivalent share for the comparable period in 1994.
Operations for 1995 included extraordinary gains of approximately $1.1 million
or $.48 primary and $.47 fully diluted income per common and common equivalent
share, attributable to an adjustment on the settlement of the 1991 exchange
litigation of approximately $230,000 and gain from debt restructuring of
approximately $825,000. Operations for 1994 included an extraordinary gain of
approximately $14.2 million or $6.90 primary and $6.90 fully diluted income per
common and common equivalent share, attributable to the gain on the settlement
of litigation relating to the exchange transactions.
The decrease in revenues of approximately $4.3 million and $1.3 million for the
nine and three month periods ended September 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, gain on disposition
of real estate and an insurance settlement in 1994 of approximately $2.5
million. Such decrease in revenues was partially offset by an increase in other
income, net in 1995.
Interest on mortgage notes and related receivables decreased for the nine and
three month periods ended September 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.
Interest and dividends on other investment securities decreased for the nine
month period ended September 30, 1995 as compared to the comparable period in
1994 primarily due to a decrease in investable funds.
Earnings on real estate operations, net decreased for the nine and three month
periods ended September 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. The 1994
gain on disposition of real estate, net of approximately $1.1 million was
attributable to the gain of approximately $981,000 on the sale of two properties
acquired in the 1991 exchange and the net gain of approximately $91,000 on the
foreclosure of two properties acquired in the 1989 exchange.
The 1994 insurance settlement in the amount of $2.5 million was associated with
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 nine month period ended September 30, 1995
as compared to the same period 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 $4.9 million and $742,000 for
the nine and three month periods ended September 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 acquired in debenture exchanges
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 $154,000 in 1995.
Interest on exchange debentures decreased for the nine and three month periods
ended September 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 nine
month period ended September 30, 1995 as compared to the comparable period 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 nine month periods ended
September 30, 1995 as compared to the same periods in 1994 was attributable to
decreases in legal expenses, a provision in 1994 of approximately $99,000 for
the Hess litigation, property management expenses, stockholders expenses and
trustee fees. This decrease was offset by an increase in the reversal in 1994 of
previously accrued expenses that will not be incurred as a result of the
settlement of litigation, leasing expenses related to a property owned by the
Company and amortization expenses.
BBC's net income applicable to common shareholders for the nine and three month
periods ended September 30, 1995 was $13.7 million and $4.8 million,
respectively, compared to net income of $12.8 million and $4.4 million for the
nine and three month periods ended September 30, 1994, respectively. The
Company's equity in BBC's net income for the nine and three month periods ended
September 30, 1995 was $7.0 million and $2.4 million, respectively, compared to
its equity in BBC's net income of $5.9 million and $2.1 million for the nine and
three month periods ended September 30, 1994, respectively.
Financial Condition
- -------------------
BFC's total assets at September 30, 1995 and at December 31, 1994 were $94.4 and
$91.3 million, respectively. The majority of the difference at September 30,
1995 as compared to December 31, 1994 was due to increases in mortgage notes and
related receivables, net of approximately $1.6 million and investment in BBC of
approximately $5.8 million. These increases were offset by decreases in
securities available for sale of approximately $518,000 and escrow for redeemed
debenture liability of approximately $3.2 million.
Mortgage notes and related receivables, net and mortgage payable and other
borrowings increased due to the debt restructuring of a note payable. (See note
6.)
In December 1994, the Company established a broker line of credit in the amount
of $850,000 which is collateralized by 170,000 shares of BankAtlantic Bancorp,
Inc. common stock. In September 1995, the Company borrowed $500,000 from the
above account, increasing mortgage payable and other borrowings.
Investment in BBC increased by $5.8 million due to the equity in earnings of BBC
for the nine months ended September 30, 1995, reduced by the common stock
dividends declared in 1995 and the $1.2 million effect of issuance of BBC common
stock by BBC to BBC shareholders other than BFC.
At September 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 for a hearing
before the Indiana Supreme Court. Based upon the ruling by the Court of Appeals,
the Company has filed motions for a reduction in the appeal bond, however, until
the Supreme Court rules, it is unlikely that the appeal bond will be reduced. 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.
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 the $21.0 million subordinated
debentures that it sold in September 1995. 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. These dividend and interest payments are
dependent upon BankAtlantic's ability to pay dividends to BBC. Additionally,
repayment by BBC of the $21.0 million subordinated debentures 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.
An agreement to sell the Cypress Creek property to an unaffiliated third party
with a closing scheduled to occur during the fourth quarter of 1995 has been
entered into. Consummation of this sale pursuant to the contract is subject to a
number of conditions and there is no assurance that the conditions will be met
or that the property will be sold pursuant to the agreements. The agreement
required a series of deposit/option payments prior to closing, all of which have
been received. A previously disclosed agreement to sell the Centerport property
was terminated during the third quarter of 1995 in accordance with its terms.
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):
Nine months ended
September 30,
------------------------
Net cash provided (used) by: 1995 1994
------- -------
Operating activities $ (1,375) 2,079
Investing activities 833 (2,554)
Financing activities 257 2,943
------- -------
Increase (decrease) in cash $ (285) 2,468
======= =======
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 nine months ended September
30, 1995 were revenues from property operations, collections on mortgage
receivables, sale of real estate, sale of securities available for sale,
increase in borrowings and dividends from BBC. These funds were primarily
utilized for operating expenses at the properties, capital improvements at the
properties, loans originated, 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 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 tortuous 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 for a hearing
before the Indiana Supreme Court. Based upon the ruling by the Court of Appeals,
the Company has filed motions for a reduction in the appeal bond, however, until
the Supreme Court rules, it is unlikely that the appeal bond will be reduced. 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 September 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: November 7, 1995 By: /s/ Glen R. Gilbert
--------------------------------------
Glen R. Gilbert, Senior Vice President
and Chief Financial Officer
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This schedule contains summary financial information extracted from the Form
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