SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended September 30, 1997
Commission File Number
0-9811
BFC FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Florida 59-2022148
(State of Organization) (I.R.S. Employer Identification Number)
1750 E. Sunrise Boulevard
Ft. Lauderdale, Florida 33304
(Address of Principal Executive Office) (Zip Code)
(954) 760-5200
Registrant's telephone number, including area code
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 each of the Registrant's classes of
common stock, as of the latest practicable date:
Class A common stock of $.01 par value, 586,727 shares outstanding.
Class B common stock of $.01 par value, 2,346,907 shares outstanding.
<PAGE>
BFC Financial Corporation and Subsidiaries
Index to Consolidated Financial Statements
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Financial Condition as of September 30,
1997 and December 31, 1996
Consolidated Statements of Operations for the three and nine month
periods ended September 30, 1997 and 1996
Consolidated Statements of Stockholders' Equity for the nine months
ended September 30, 1997
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996
Notes to Unaudited Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Financial Condition
September 30, 1997 and December 31, 1996
(in thousands, except share data)
(Unaudited)
Assets
1997 1996
---- ----
Cash and cash equivalents $ 446 1,796
Securities available for sale 2,062 6,819
Investment in BankAtlantic Bancorp, Inc. ("BBC") 62,701 59,039
Mortgage notes and related receivables, net 1,894 2,180
Real estate acquired in debenture exchanges, net 7,226 10,383
Real estate held for development and sale, net 6,026 6,497
Real estate joint venture 2,641 --
Escrow for redeemed debenture liability 5,125 10,528
Other assets 1,673 1,599
------- -------
Total assets $89,794 98,841
======= =======
Liabilities and Stockholders' Equity
Exchange debentures, net 1,777 2,953
Deferred interest on the exchange debentures 2,036 2,806
Redeemed debenture liability 5,692 16,182
Mortgage payables and other borrowings 23,031 25,498
Other liabilities 511 4,663
Deferred income taxes 8,940 5,277
------- -------
Total liabilities 41,987 57,379
Commitments and contingencies
Stockholders' equity:
Preferred stock of $.01 par value; authorized
10,000,000 shares; none issued -- --
Class A common stock of $.01 par value,
authorized 20,000,000 shares; issued and outstanding
586,727 and 0 shares in 1997 and 1996 5 --
Class B common stock, of $.01 par value; authorized
20,000,000 shares; issued and outstanding
2,346,907 in 1997 and 2,327,682 in 1996 21 21
Additional paid-in capital 18,800 20,610
Retained earnings 28,518 20,520
------- -------
Total stockholders' equity before
BBC net unrealized appreciation
on debt securities available for sale,
net of deferred income taxes 47,344 41,151
BBC net unrealized appreciation
on debt securities available for sale,
net of deferred income taxes 463 311
------- -------
Total stockholders' equity 47,807 41,462
------- -------
Total liabilities and stockholders' equity $89,794 98,841
======= =======
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Operations
For the nine and three month periods ended September 30, 1997 and 1996
(in thousands, except per share data)
(Unaudited)
Nine months ended Three months ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues:
Interest on mortgage notes and
related receivables $ 166 256 54 69
Interest and dividends on securities
available for sale and escrow accounts 365 553 110 209
Earnings on real estate rental operations, 772 872 251 287
Sale of real estate 992 9,700 843 --
Net gain from sale of BBC common stock 1,349 -- -- --
Net gain from retirement of debt 187 -- 187 --
Reversal of provision for litigation 2,272 -- -- --
Other income, net 200 545 2 391
------ ------ ------ ------
Total revenues 6,303 11,926 1,447 956
------ ------ ------ ------
Costs and expenses:
Interest on exchange debentures 595 959 155 323
Interest on mortgages payable
and other borrowings 1,533 1,871 496 613
Cost of sale of real estate 676 6,411 658 --
Loss on disposition of mortgage
notes and investment, net -- 289 -- 57
Expenses related to real estate held
for development and sale, net 156 127 67 42
Loss in real estate joint venture, net 16 -- 17 --
Employee compensation and benefits 863 859 276 297
Occupancy and equipment 31 34 11 10
General and administrative, net 768 808 148 231
------ ------ ------ ------
Total cost and expenses 4,638 11,358 1,828 1,573
------ ------ ------ ------
Income (loss) before equity in earnings
of BBC, income taxes and
extraordinary items 1,665 568 (381) (617)
Equity in earnings of BBC 8,579 5,297 2,807 576
------ ------ ------ ------
Income (loss) before income taxes
and extraordinary items 10,244 5,865 2,426 (41)
Provision for income taxes 3,114 1,306 577 --
------ ------ ------ ------
Income (loss) before extraordinary items 7,130 4,559 1,849 (41)
Extraordinary items:
Gain from debt restructuring, net of
deferred income taxes of $114,000
for the nine months ended
September 30, 1997 181 -- -- --
Gain on settlements of Exchange
litigation, net of deferred income taxes
of $435,000 and $62,000 for the nine and
three month periods ended September 30,
1997, respectively and $606,000 for
the nine months ended September 30, 1996 692 755 92 --
------ ------ ------ ------
Net income (loss) $8,003 5,314 1,941 (41)
====== ====== ====== ======
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Income (loss) per common and
common equivalent share:
Before extraordinary items $ 2.38 1.60 0.61 (0.01)
Extraordinary items 0.29 0.26 0.03 --
------ ------ ------ ------
Net income (loss) per common and
common equivalent share $ 2.67 1.86 0.64 (0.01)
====== ====== ====== ======
Income (loss) per common and
common equivalent share
assuming full dilution:
Before extraordinary items $ 2.31 1.58 0.60 (0.01)
Extraordinary items 0.28 0.26 0.03 --
------ ------ ------ ------
Net income (loss) per common and
common equivalent share
assuming full dilution $ 2.59 1.84 0.63 (0.01)
====== ====== ====== ======
Weighted average number of common
and common equivalent shares
outstanding 2,995 2,849 3,039 2,894
====== ====== ====== ======
Weighted average number of common
and common equivalent shares
outstanding assuming full dilution 3,081 2,881 3,102 2,976
====== ====== ====== ======
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the nine months ended September 30, 1997
(in thousands)
(Unaudited)
Addi-
tional
Common Paid-in Retained
Stock Capital Earnings Other Total
----- ------- -------- ----- -----
Balance at
December 31, 1996 $ 21 20,610 20,520 311 41,462
Net effect of other BBC
capital transactions -- (1,966) -- -- (1,966)
Change in BBC net
unrealized appreciation
on securities
available for
sale-net of deferred
income taxes -- -- -- 152 152
5 for 4 stock split
October 1997 5 -- (5) -- --
Exercise of stock options -- 156 -- -- 156
Net income -- -- 8,003 -- 8,003
------ ------- ------ ------ -------
Balance at
September 30, 1997 $ 26 18,800 28,518 463 47,807
====== ======= ====== ====== =======
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1997 and 1996
(In thousands)
(Unaudited)
September 30,
-------------
1997 1996
---- ----
Operating activities:
Income before extraordinary items 7,130 4,559
Adjustments to reconcile income before
extraordinary items to net cash (used)
provided by operating activities:
Equity in earnings of BBC (8,579) (5,297)
Depreciation 513 594
Expenses related to real estate held for
development and sale, net 156 127
Loss in real estate joint venture, net 16 --
Increase in deferred income taxes 3,114 1,306
Accretion on exchange debentures
and mortgages payable 11 12
Amortization of discount on
loans receivable (34) (45)
Gain on sale of real estate, net (316) (3,289)
Net gain from sale of BBC common stock (1,349) --
Gain from litigation cost, net -- (211)
Loss on disposition of mortgage notes and
investment, net -- 289
Net gain from retirement of debt (187) --
Reversal of provision for litigation (2,272) --
Fundings for litigation settlement (1,801) --
Proceeds received from litigation settlement -- 1,109
Increase in the Exchange escrows
to fund settlement liability (5,148) --
Proceeds from the 1991 Exchange escrow -- 2,903
Increase in deferred interest on the
exchange debentures 531 555
Accrued interest income on escrow accounts (183) (144)
Interest accrued regarding redeemed
debenture liability 52 391
Decrease in other liabilities (8) (232)
Decrease in other assets 89 123
------- -------
Net cash provided (used in) operating activities (8,265) 2,750
------- -------
Investing activities:
Proceeds from the sales of real estate
acquired in debenture exchanges 131 --
Proceeds from the sale of real estate -- 6,489
Proceeds from the sale of BBC common stock 3,720 --
Common stock dividends received from BBC 737 656
Purchase of securities available for sale (19,039) (38,487)
Proceeds from redemption and maturities
of securities available for sale 23,774 31,399
Principal reduction on loans 136 2,420
Decrease (increase) in real estate 476 (225)
Addition to office properties and equipment (21) --
Improvements to real estate acquired in
debenture exchanges (3) (42)
------- -------
Net cash provided by investing activities 9,911 2,210
------- -------
Financing activities:
Issuance of common stock 92 --
Increase in borrowings 9,144 --
Repayments of borrowings (12,232) (1,931)
------- -------
Net cash (used in)
financing activities (2,996) (1,931)
------- -------
Increase (decrease) in cash and cash equivalents (1,350) 3,029
Cash and cash equivalents at beginning of period 1,796 1,152
------- -------
Cash and cash equivalents at end of period 446 4,181
======= =======
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
BFC Financial Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
September 30, 1997
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 1996 Annual Report and should be read in
conjunction with the notes to the consolidated financial statements which appear
in that report.
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, 1997, the unaudited
consolidated results of operations for the nine and three months ended September
30, 1997 and 1996 and the unaudited consolidated cash flows for the nine months
ended September 30, 1997 and 1996. 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 1997 presentation.
2. INVESTMENT IN BANKATLANTIC BANCORP, INC.
A reconciliation of the carrying value in BankAtlantic Bancorp, Inc. ("BBC") to
BBC stockholders' equity at September 30, 1997 and December 31, 1996 is as
follows:
September 30, December 31,
1997 1996
---- ----
BBC stockholders' equity $ 156,558 147,704
Ownership percentage 41.14% 41.52%
--------- ---------
64,408 61,327
Purchase accounting adjustments (1,707) (2,288)
--------- ---------
Investment in BBC $ 62,701 59,039
========= =========
During January and June 1997, the Company sold 359,844 shares of BankAtlantic
Bancorp, Inc. Class A common stock. Net proceeds received from these sales
amounted to approximately $3.7 million and a net gain of approximately $1.3
million was recognized during the nine month period ended September 30, 1997.
The Company owned 41.14% of all outstanding BBC common stock at September 30,
1997. At September 30, 1997, the Company's ownership of BBC Class A and B common
stock was approximately 37% and 46%, respectively.
On October 27, 1997, BBC filed a registration statement with the Securities and
Exchange commission relating to proposed public offerings of 3.0 million shares
of Class A Common Stock, and $100.0 million of Convertible Subordinated
Debentures. The offering price of the Class A Common Stock and the terms of the
Convertible Subordinated Debentures will be determined at the time offerings
become effective and will be subject to, among other things, market conditions.
There is no assurance that the proposed offerings will be completed.
3. SECURITIES AVAILABLE FOR SALE
Included in securities available for sale at September 30, 1997 and December 31,
1996 was approximately $2.1 million and $6.8 million of U.S. Treasury Bills and
other investments, respectively. Market value at September 30, 1997 and December
31, 1996 approximated book value.
4. CONSOLIDATED STATEMENTS OF CASH FLOWS
Other non-cash financing and investing activities and other supplemental cash
flow items for the nine months ended September 30, 1997 and 1996 were as follows
(in thousands):
September 30,
1997 1996
---- ----
Change in stockholders' equity resulting
from the Company's proportionate share
of BBC's net unrealized appreciation
(depreciation) on securities available
for sale, less related deferred income taxes 152 (2,643)
====== ======
Transfers from escrow accounts to reflect
payments on the redeemed debenture liability 10,765 505
====== ======
Effect of issuance of BBC's common stock
by BBC to shareholders other than BFC -- 1,274
====== ======
Net effect of other BBC capital transactions (1,966) (536)
====== ======
Net gain associated with the settlements
of the Exchange litigation, net of deferred
income taxes 692 755
====== ======
Net gain on debt restructuring, net of deferred
income taxes 181 --
====== ======
Loss on disposition of mortgage
notes and investment, net -- 289
====== ======
BBC's dividends on common stock
declared and received in subsequent period 288 215
====== ======
Increase in equity for the tax effect related to
the exercise of employee stock options 64 --
====== ======
Conversion of mortgage receivable to an
equity interest in an affiliated partnership 184 --
====== ======
Interest paid on borrowings 1,611 1,874
====== ======
Income taxes paid -- 122
====== ======
5. REAL ESTATE
On October 29, 1996, a balloon payment of approximately $9.4 million was due on
the mortgage note that was secured by the Burlington Manufacturers Outlet
Center. Such payment was not made and the Company received a default notice from
the lender. The Company entered into an agreement for forbearance and an
extension agreement, which extended the maturity through April 1997. In April
1997, new financing was obtained from an unaffiliated lender and the previous
mortgage note was satisfied. The principal amount of the current mortgage note
is approximately $9.1 million, the note bears interest at a rate of 9.20% per
annum, requires monthly payments of $77,992 and matures on May 1, 2007. Upon
satisfaction of the previous mortgage note, the Company recognized an
extraordinary gain of approximately $181,000 from debt restructuring, net of
deferred income taxes.
The Company sold, effective October 1, 1996, a 50% interest in a property
acquired in the 1989 Exchange. The remaining 50% interest in the property is
being accounted for as a real estate joint venture. Because of the Company's
continuing involvement, a gain on sale of approximately $0.6 million was
deferred, reducing the Company's carrying value in the joint venture.
In 1994, the Company 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.
The Company bears the risk of loss, if any, under the arrangement. On such
basis, the Company acquired interests in two properties. In June 1994, an entity
controlled by the Company acquired from an independent third party 23.7 acres of
unimproved land known as the "Cypress Creek" property located in Fort
Lauderdale, Florida. In March 1996, the Cypress Creek property was sold to an
unaffiliated third party for approximately $9.7 million and the company
recognized a gain of approximately $3.3 million. In connection therewith, the
Abdo Group received approximately $2.9 million as their share of the profit from
the transaction, which is included in cost of sale of real estate. As part of
the sale of the Cypress Creek property, the Company received an interest in an
unaffiliated limited partnership that will entitle it to receive approximately
4.5% of any profits, if any, from development and operation of the property. In
December 1994, an entity controlled by the Company acquired from an unaffiliated
seller 60.1 acres of unimproved land known as the "Centerport" property in
Pompano Beach, Florida. In August 1997, approximately four acres were sold from
the Centerport property to unaffiliated third parties for approximately $843,000
and the company recognized a net gain from the sale of real estate of
approximately $185,000. Included in cost of sales is approximately $185,000
representing the Abdo Group profit participation from the transaction. All
proceeds from the sale were utilized to reduce the borrowing for which the
Centerport property serves as partial collateral. The current balance on the
borrowing is approximately $7.2 million and is due to an unaffiliated lender.
Payment of profit participation will be deferred until the lender is repaid. The
remainder of the Centerport property is currently being marketed for sale. and
serves as partial collateral for a
6. OTHER MATTERS
On October 6, 1997, the Board of Directors of the Company declared a 25 percent
common stock dividend payable in shares of the Company's newly designated Class
A Common Stock to the Company's common stockholders of record on October 6,
1997. The shares of Class A Common Stock were issued on October 21, 1997. The
Class A Common Stock is a newly authorized series of the Company's capital stock
and no shares were outstanding prior to the dividend. Pursuant to the Company's
Articles of Incorporation, the Company's then existing common stock was
automatically redesignated as "Class B Common Stock" without changing any of its
rights and preferences upon the authorization by the Board of the stock
dividend. The Class A Common Stock and the Class B Common Stock have
substantially identical terms except that (i) the Class B Common Stock is
entitled to one vote per share while the Class A Common Stock will have no
voting rights other than those required by Florida law and (ii) each share of
Class B Common Stock is convertible at the option of the holder thereof into one
share of Class A Common Stock. All share and per share amounts included herein
have been adjusted to reflect the stock dividend.
<PAGE>
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 41.14% of the outstanding common stock 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").
Except for historical information contained herein, the matters discussed in
this report are forward-looking statements made pursuant to the safe harbor
provisions of the Securities Litigation Reform Act of 1995. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, including but not limited
to, economic, competitive and other factors affecting the Company's operations,
markets, products and services, expansion strategies and other factors discussed
elsewhere in this report and the documents filed by the Company with the
Securities and Exchange Commission. Many of these factors are beyond the
Company's control. Actual results could differ materially from these
forward-looking statements. In light of these risks and uncertainties, there is
no assurance that the results discussed in such forward-looking statements
contained in this report will, in fact, occur. The Company does not undertake
any obligation to publicly release the results of any revisions to these
forward-looking statements to reflect future events or circumstances.
Results of Operations
For the quarter ended September 30, 1997, the Company reported net income of
approximately $1.9 million or $.64 primary and $.63 fully diluted income per
common and common equivalent share as compared to net loss of approximately
$41,000 on or $.01 primary and fully diluted loss per common and common
equivalent share for the comparable period in 1996. Operations for the quarter
ended September 30, 1997 included an extraordinary gain of approximately $92,000
or $.03 primary and fully diluted income per common and common equivalent share.
The 1997 extraordinary gain, net of deferred income taxes was due to changes in
the estimate of the amount of the settlement liability associated with the
exchange litigation.
For the nine month period ended September 30, 1997, the Company reported net
income of approximately $8.0 million or $2.67 primary and $2.59 fully diluted
income per common and common equivalent share as compared to net income of
approximately $5.3 million or $1.86 primary and $1.84 fully diluted income per
common and common equivalent share for the comparable period in 1996. Operations
for 1997, included extraordinary gains of approximately $873,000 or $.29 primary
and $.28 fully diluted income per common and common equivalent share. The 1997
extraordinary gains, net of deferred income taxes was due to changes in the
estimate of the amount of the settlement liability associated with the exchange
litigation of approximately $692,000 and a $181,000 gain on debt restructuring.
Operations for 1996 included extraordinary gains, net of deferred income taxes
of approximately $755,000 or $.26 primary and fully diluted income per common
and common equivalent share, relating to changes in the estimate of the amount
of the settlement liability associated with the exchange litigation.
The increase in revenues of approximately $491,000 for the quarter ended
September 30, 1997, as compared to the comparable period in 1996 was primarily
due to sale of real estate of approximately $843,000 and the net gain from
retirement of debt of approximately $187,000. This increase in revenues was
offset in part by decreases in interest on mortgage notes and related
receivables of approximately $15,000, interest and dividends on securities
available for sale and escrow accounts of approximately $99,000, earnings on
real estate rental operations, net of approximately $36,000 and other income,
net of approximately $389,000.
The decrease in revenues of approximately $5.6 million for the nine month period
ended September 30, 1997, as compared to the comparable period in 1996 was
primarily due to decreases in revenues from sale of real estate of approximately
$8.7 million, interest on mortgage notes and related receivables of
approximately $90,000, interest and dividends on securities available for sale
and escrow accounts of approximately $188,000, earnings on real estate rental
operations, net of approximately $100,000 and other income, net of approximately
$345,000. This decrease in revenues was offset in part by an increase in
revenues associated with the net gain from the sale of BBC Class A common stock
of approximately $1.3 million, the net gain from retirement of debt of
approximately $187,000 and the reversal of provision for litigation of
approximately $2.3 million.
In February 1997, the Company sold 12.7 acres located in Birmingham, Alabama to
an unaffiliated third party for approximately $149,000 and the company
recognized a net gain on the sale of approximately $132,000. In August 1997,
approximately four acres were sold from the Centerport property to unaffiliated
third parties for approximately $843,000 and the company recognized a net gain
from the sale of real estate of approximately $185,000. Included in cost of
sales is approximately $185,000 representing the Abdo Group profit participation
from the transaction. In June 1994, an entity controlled by the Company acquired
from an independent third party 23.7 acres of unimproved land know as "Cypress
Creek" located in Fort Lauderdale, Florida. In March 1996, Cypress Creek was
sold to an unaffiliated third party for approximately $9.7 million and the
company recognized a net gain of approximately $3.3 million.
During January and June 1997, the Company sold 359,844 shares of BankAtlantic
Bancorp, Inc. Class A common stock. Net proceeds received from these sales
amounted to approximately $3.7 million and a net gain of approximately $1.3
million was recognized during the nine month period ended September 30, 1997.
During the quarter ended September 30, 1997, the Company recognized a net gain
from retirement of debt of approximately $187,000, upon redemption of exchange
debentures at a discount.
In connection with the Short vs. Eden, et al. litigation, the Company at
December 31, 1996 had an accrual of approximately $3.0 million included in other
liabilities. The Company in April 1997 disbursed approximately $783,000 and
received a release and satisfaction of judgment. Accordingly, the remaining
accrual of approximately $2.3 million was reversed during the quarter ended June
30, 1997. (See Item 3. "Litigation" in the Company's 1996 Annual Report)
Interest on mortgage notes and related receivables decreased for the nine and
three month periods ended September 30, 1997, as compared to the same periods in
1996 primarily due to the satisfaction of a loan receivable in 1996 and
reductions in the amount of mortgage note receivables from affiliated limited
partnerships held by the Company.
Interest and dividends on securities available for sale and escrow accounts
decreased for the nine and three month periods ended September 30, 1997, as
compared with the same periods in 1996 primarily due to decreases in investable
funds attributable to the funding of litigation.
Earnings on real estate rental operations, net, decreased for the nine and three
month periods ended September 30, 1997, as compared to the same periods in 1996
primarily due to the sale of a 50% interest in a property acquired in the 1989
Exchange and the accounting for the remaining ownership as a real estate joint
venture. This decrease was partially offset by an increase in net operating
income at a property acquired in the 1991 Exchange.
Other income, decreased for the nine and three month periods ended September 30,
1997 as compared to the same periods in 1996 primarily due a net gain of
approximately $211,000 in 1996 associated with the settlement of litigation
related to the cleanup of contamination on a property formerly owned by the
Company. An additional $142,000 was also recognized in 1996 when the first
mortgage holder on a property formerly owned by the Company allowed release of
funds from an escrow account for an improvement reserve that was established
during the time the Company owned the property.
The increase in cost and expenses of approximately $255,000 for the quarter
ended September 30, 1997 as compared to same period in 1996 was primarily due to
the cost of sale of real estate of approximately $658,000, expenses related to
real estate held for development and sale, net of approximately $25,000 and the
inclusion of the loss in real estate joint venture, net of approximately $17,000
in 1997. This increase was offset with (i) decreases in interest on exchange
debentures of approximately $168,000, (ii) decreases in interest on mortgage
payable and other borrowings of approximately $117,000, (iii) the inclusion of
the loss on disposition of mortgage notes and investments, net of approximately
$57,000 in 1996 results, (iv) decreases in employee compensation and benefits of
approximately $21,000 and (iv) decreases in general and administrative, net of
approximately $83,000.
The decrease in cost and expenses of approximately $6.7 million for the nine
month period ended September 30, 1997 as compared to the comparable period in
1996 was primarily due to: (i) decreases in interest on exchange debentures of
approximately $364,000, (ii) decreases in interest on mortgage payable and other
borrowings of approximately $338,000, (iii) decreases in the cost of sale of
real estate of approximately $5.7 million (iv) the inclusion of the loss on
disposition of mortgage notes and investments, net of approximately $289,000 in
1996 results and (v) decreases in general and administrative, net of
approximately $40,000. This decrease was partially offset with an increase in
expenses related to real estate held for development and sale, net of
approximately $29,000 and the inclusion of the loss in real estate joint
venture, net of approximately $16,000 in 1997
Interest on exchange debentures decreased for the nine and three month periods
ended September 30, 1997 as compared to the same periods in 1996 as a result of
the accrual of interest during 1996 on the delayed funding of the 1989 Exchange
settlement liability and the reduction in the amount payable on the exchange
debentures.
Interest on mortgage payables and other borrowings decreased for the nine and
three month periods ended September 30, 1997 as compared to the same periods in
1996 primarily due to the sale during 1996 of a 50% interest in a property
acquired in the 1989 Exchange and a reduction in borrowings.
The Company recorded a loss on the disposition of mortgage notes and investment,
net, of approximately $232,000 in connection with the March 1996 disposition of
three mortgage notes and an investment due from affiliated limited partnerships.
During the quarter ended September 30, 1996, the Company wrote-off an additional
$57,000 related to these limited partnerships. During 1996, the limited
partnerships were liquidated.
Expenses related to real estate held for development and sale, net increased for
the nine and three month periods ended September 30, 1997 as compared to the
same periods in 1996 primarily due to an increase in administrative expenses.
Employee compensation and benefits decreased for the quarter ended September 30,
1997 as compared to the same period in 1996 primarily due to decreases in
officers' insurance and salary.
General and administrative, net decreased for the nine and three month periods
ended September 30, 1997 as compared to the same periods in 1996 primarily due
to decreased legal fees. Additionally, general and administrative, net decreased
for the nine month period ended as compared to the same period in 1996 due to a
1996 provision relating to the Kugler litigation of approximately $65,000. This
decrease was offset in part by increases in trustee fees, intangible taxes,
professional and consulting fees associated with the ABC litigation and a
decrease in the reimbursement of administrative costs from an affiliated
partnership. The partnership was liquidated in 1996, upon the sale of its
property.
BBC's net income applicable to common shareholders for the nine and three month
periods ended September 30, 1997 was $19.6 million and $6.4 million,
respectively, compared to net income of $11.4 million and $1.1 million for the
nine and three month periods ended September 30, 1996, respectively. The
Company's equity in BBC's net income for the nine and three month periods ended
September 30, 1997 was $8.6 million and $2.8 million, respectively, compared to
its equity in BBC's net income of $5.3 million and $576,000 for the nine and
three month periods ended September 30, 1996, respectively. The increase in
equity in earnings of BBC was due to an increase in earnings by BBC, partially
offset by the Company's decreased ownership percentage in BBC. The Company's
ownership in BBC decreased to 41.14% of all outstanding BBC common stock at
September 30, 1997. The decrease in ownership was attributable to the sale of
359,844 shares of BBC's Class A common stock by the Company during 1997. This
decrease was partially offset by changes in BBC's outstanding common stock
primarily due to the repurchase of its shares. At September 30, 1997, the
Company's ownership of BBC Class A and B common stock was approximately 37% and
46%, respectively.
Financial Condition
BFC's total assets at September 30, 1997 and at December 31, 1996 were $89.8
million and $98.8 million, respectively. The majority of the difference at
September 30, 1997 as compared to December 31, 1996 was due to decreases in (i)
securities available for sale, (ii) mortgage notes and related receivables, net,
(iii) real estate held for development and sale, net (iv) real estate acquired
in debenture exchanges, net and (v) escrow for redeemed debenture liability.
These decreases were offset in part by increases in investment in BBC and in a
real estate joint venture.
Securities available for sale decreased in connection with the funding of the
1989 Exchange settlement escrow account of approximately $5.1 million and the
funding of the Kugler and Short litigation settlement of approximately $1.0
million and $783,000, respectively. This decrease was partially offset by net
proceeds of approximately $3.7 million received in connection with the sale of
359,844 shares of BBC's Class A common stock that was invested in securities
available for sale.
Mortgage notes and related receivables, net, decreased due to the conversion of
approximately $184,000 of a note due from an affiliated limited partnership to
an equity position in the partnership in January 1997.
The decrease in real estate acquired in debenture exchanges, net and increase in
real estate joint venture was due to the sale of a 50% interest in a property
acquired in the 1989 Exchange. The remaining 50% interest in the property was
accounted for as a real estate joint venture. Because of the Company's
continuing involvement in the 50% of the property sold, a gain on sale of
approximately $0.6 million was deferred and will reduce the Company's carrying
value in the joint venture.
Escrow for redeemed debenture liability decreased due to payments made in
accordance with the terms of the Exchange litigation settlements. This decrease
was offset in part by the funding of the second half of the Meador (1989
Exchange) settlement escrow account of approximately $5.1 million.
Exchange debentures and deferred interest on the exchange debentures decreased
primarily due to the redemption of Exchange debentures and identification of
class members that were previously estimated to belong to the group of debenture
holders classified as "Holders in Due Course". The decrease in deferred interest
on the exchange debentures was offset in part by an increase in the deferral of
interest on the Exchange debentures pursuant to their terms.
Redeemed debenture liability decreased due to payments made in accordance with
the terms of the Exchange litigation settlements.
Mortgages payable and other borrowing decreased primarily due to the (i) payment
of approximately $1.2 million on a revolving line of credit, (ii) payment of
approximately $792,000 upon the sale of approximately four acres at the
Centerport property (iii) payment of an outstanding balance on a broker line of
credit of approximately $131,000 and (iv) principal payments made on loans
according to their terms. This decrease was offset in part by a net increase in
borrowing of approximately $200,000 relating to an April 1997 debt restructuring
and refinancing of a mortgage loan secured by the Burlington, North Carolina
property.
Other liabilities decreased primarily due to the payment of approximately $1.0
million in connection with the Kugler litigation escrow account. In connection
with the Short litigation, at December 31, 1996, the Company had an accrual of
approximately $3.0 million included in other liabilities. The Company in April
1997 disbursed approximately $783,000 and received a release and satisfaction of
judgment. Accordingly, the remaining accrual of approximately $2.3 million was
reversed during the quarter ended June 30, 1997. (See Item 3. "Litigation",
Short vs Eden United, Inc., et. al. in the Company's 1996 Annual Report)
Investment in BBC increased by $3.7 million due to an increase in equity in
earnings of BBC of approximately $8.6 million and the change in BBC's net
unrealized appreciation on debt securities available for sale, net of deferred
income taxes of approximately $152,000, reduced by the sale of 359,844 shares of
BBC Class A common stock having a book value of approximately $2.4 million,
dividends of approximately $0.7 million in 1997 and the net effect of other BBC
capital transactions of approximately $2.0 million.
Liquidity and Capital Resources
In connection with the Short litigation, the Company in April 1997, disbursed
approximately $783,000 and received a release and satisfaction of judgment. At
December 31, 1996, the Company had an accrual of approximately $3.0 million
included in other liabilities with respect to this matter. The remaining accrual
in the amount of approximately $2.3 million was reversed during 1997. (See Item
3. "Litigation ", Short vs. Eden United, Inc., et. al. in the Company's 1996
Annual Report)
The Company in October 1996 and March 1997, respectively, paid approximately
$3.7 million and $1.0 million into an escrow account to fund the settlement of
the Kugler litigation. On April 30, 1997, the Courts approved the Kugler
settlement. (See Item 3. "Litigation", Kugler, et.al. v. I.R.E. Real Estate
Income Fund, et.al. in the Company's 1996 Annual Report)
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 1996
Annual Report. In connection with the settlements, the Company deposited $30.6
million into settlement escrow accounts, including a deposit of $5.1 million in
March 1997 to the 1989 Exchange settlement escrow. All of the funding required
in connection with the Exchange settlement escrow accounts had been provided for
as of March 31, 1997. The time period for filing a claim in connection with the
1991 Exchange and Meador claimants has expired and the time period for Purcell
claimants expires in January 1998. In 1997, based upon claims made and paid
pursuant to the settlements of the Exchange litigation an extraordinary gain,
net of deferred income taxes of approximately $692,000 and $92,000 was
recognized for the nine and three month periods ended September 30, 1997,
respectively relating to Class Members No Longer Owning Debentures (as defined).
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 the settlements were reached ("Holders in Due Course"), or debentures held
by persons that opted out of the litigation. 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. Items considered in the decision to defer
the interest payment would include, among other items, the ability to identify
which debentures are held by Holders in Due Course and current operating
expenses. Since December 31, 1991, the Company has deferred interest payments on
its subordinated debentures. The Company believes it has sufficient current
liquidity to meet its operating needs.
During January and June 1997, the Company sold 359,844 shares of BankAtlantic
Bancorp, Inc. Class A common stock. Net proceeds received from these sales
amounted to approximately $3.7 million and a net gain of approximately $1.3
million was recognized during the nine month period ended September 30, 1997.
As previously indicated, the Company holds approximately 41.14% of all BBC's
outstanding common stock. Presently, BBC has paid a regular quarterly dividend
since its formation and management of BBC has indicated that it currently
anticipates that it will pay regular quarterly cash dividends on its common
stock. The Company's cash position and its ability to meet its obligations will
in part be dependent on the financial condition of BBC and the payment by BBC of
dividends to its shareholders, including the Company.
On October 27, 1997, BBC filed a registration statement with the Securities and
Exchange commission relating to proposed public offerings of 3.0 million shares
of Class A Common Stock, and $100.0 million of Convertible Subordinated
Debentures. The offering price of the Class A Common Stock and the terms of the
Convertible Subordinated Debentures will be determined at the time offerings
become effective and will be subject to, among other things, market conditions.
There is no assurance that the proposed offerings will be completed
At September 30, 1997, BankAtlantic's core, Tier 1 risk-based and total
risk-based capital ratios were 6.65%, 10.06% and 11.31%, respectively. Based on
these capital ratios, BankAtlantic meets the definition of a well-capitalized
institution.
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: 1997 1996
---- ----
Operating activities $(8,265) 2,750
Investing activities 9,911 2,210
Financing activities (2,996) (1,931)
------ ------
Decrease in cash and cash equivalents $(1,350) 3,029
======= =====
The changes in cash flow used or provided by 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 and loss on disposition of
mortgage notes and investments, net. 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 and reversal of provision for litigation. 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 period but
also by these other adjustments.
The primary sources of funds to the Company for the nine months ended September
30, 1997 were proceeds from the sale of real estate, sale of BBC Class A common
stock, increased borrowings, principal reduction on loan receivables, proceeds
from redemption and maturities of securities available for sale, revenues from
property operations, and dividends from BBC. These funds were primarily utilized
to reduce mortgage payables and other borrowings, to fund litigation settlements
including the funding of the exchange escrow, to purchase securities available
for sale, and to fund operating expenses and general and administrative
expenses.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
a) The annual meeting of stockholders was held on October 29, 1997.
b) At the meeting Carl E.B. McKenry was elected to serve a three-year
term expiring at the 2000 Annual Meeting. The term of office for Earl
Pertnoy, John E. Abdo and Alan B. Levan continued after the meeting.
c) Matters voted upon were:
* Election of Carl E.B. McKenry - 2,191,659 shares cast for and 75,
051 shares withheld.
* Amendment to BFC Financial Corporation Stock Option Plan -
1,569,162 shares cast for; 87,141 shares against; 5,958 shares
abstain; and 744,108 shares non-votes.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K:
Form 8-K dated October 6, 1997, Item 5, reporting the declaration
of a 25% common stock dividend payable in shares of the Company's
newly designated Class A Common Stock and the redesignation of
the then currently outstanding common stock as Class B Common
Stock.
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 4, 1997 By: /s/ Alan B. Levan
-------------------------------
Alan B. Levan, President
Date: November 4, 1997 By: /s/ Glen R. Gilbert
-------------------------------
Glen R. Gilbert, Executive Vice
President and Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1997 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
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