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 March 31, 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
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(Address of Principal Executive Office) (Zip Code)
(954) 760-5200
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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:
Common stock of $.01 par value, 2,346,907 shares outstanding.
Special Class A common stock of $.01 par value, 0 shares outstanding.
<PAGE>
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Financial Condition
March 31, 1997 and December 31, 1996
(in thousands, except share data)
(Unaudited)
Assets
1997 1996
------ ------
Cash and cash equivalents $ 1,289 1,796
Securities available for sale 2,385 6,819
Investment in BankAtlantic Bancorp, Inc. ("BBC") 59,855 59,039
Mortgage notes and related receivables, net 1,962 2,180
Real estate acquired in debenture exchanges, net 7,562 10,383
Real estate held for development and sale, net 6,497 6,497
Real estate joint venture 2,672 -
Escrow for redeemed debenture liability 6,319 10,528
Other assets 1,200 1,599
------ ------
Total assets $ 89,741 98,841
====== ======
Liabilities and Stockholders' Equity
Exchange debentures, net 2,841 2,953
Deferred interest on the exchange debentures 2,879 2,806
Redeemed debenture liability 6,893 16,182
Mortgage payables and other borrowings 25,160 25,498
Other liabilities 3,517 4,663
Deferred income taxes 5,637 5,277
------ ------
Total liabilities 46,927 57,379
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 2,392,246
in 1997 and 2,373,021 in 1996 22 21
Additional paid-in capital 20,915 20,890
Retained earnings 22,793 20,520
Less: treasury stock
(45,339 shares for 1997 and 1996) (280) (280)
------ ------
Total stockholders' equity before
BBC net unrealized appreciation
(depreciation) on debt securities
available for sale, net of deferred income taxes 43,450 41,151
BBC net unrealized appreciation
(depreciation) on debt securities
available for sale, net of deferred income taxes (636) 311
------ ------
Total stockholders' equity 42,814 41,462
------ ------
Total liabilities and stockholders' equity $ 89,741 98,841
====== ======
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Operations
For the three months ended March 31, 1997 and 1996
(in thousands, except per share data)
(Unaudited)
Three months ended
March 31,
---------
1997 1996
----- -----
Revenues:
Interest on mortgage notes and
related receivables $ 56 96
Interest and dividends on securities
available for sale and escrow accounts 158 148
Earnings on real estate rental operations, net 280 355
Income in real estate joint venture, net 4 -
Sale of real estate 149 9,700
Sale of BBC common stock 920 -
Other income, net 186 73
----- -----
Total revenues 1,753 10,372
----- -----
Costs and expenses:
Interest on exchange debentures 247 320
Interest on mortgages payable
and other borrowings 514 643
Cost of sale of real estate 17 6,411
Cost of sale of BBC common stock 699 -
Loss on disposition of mortgage
notes and investment, net - 232
Expenses related to real estate held for
development and sale, net 41 31
Employee compensation and benefits 305 241
Occupancy and equipment 9 10
General and administrative, net 293 233
----- -----
Total cost and expenses 2,125 8,121
----- -----
Income (loss) before equity in earnings
of BBC, income taxes and
extraordinary items (372) 2,251
Equity in earnings of BBC 2,818 2,292
----- -----
Income before income taxes
and extraordinary items 2,446 4,543
Provision for income taxes 290 1,474
----- -----
Income before extraordinary items 2,156 3,069
Extraordinary items:
Gain on settlements of Exchange
litigation, net of income
taxes of $70,000 in 1997
and $462,000 in 1996 117 749
----- -----
Net income $2,273 3,818
===== =====
Income per common and
common equivalent share:
Before extraordinary items $ 0.91 1.38
Extraordinary items 0.05 0.33
----- -----
Net income per common and
common equivalent share $ 0.96 1.71
===== =====
Income per common and
common equivalent share
assuming full dilution:
Before extraordinary items $ 0.91 1.37
Extraordinary items 0.05 0.33
----- -----
Net income per common and
common equivalent share
assuming full dilution $ 0.96 1.70
===== =====
Weighted average number of common
and common equivalent shares
outstanding 2,367 2,228
===== =====
Weighted average number of common
and common equivalent shares
outstanding assuming full dilution 2,367 2,239
===== =====
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the three months ended March 31, 1997
(in thousands)
(Unaudited)
Addi- Retained
tional Earnings Trea-
Common Paid-in Accumulated sury
Stock Capital (Deficit) Stock Other Total
----- ------- -------- ------ ------ --------
Balance at
December 31, 1996 $ 21 20,890 20,520 (280) 311 41,462
Net effect of other BBC
capital transactions - (130) - - - (130)
Change in BBC net
unrealized appreciation
(depreciation) on debt
securities available for
sale-net of deferred
income taxes - - - - (947) (947)
Exercise of stock options 1 155 - - 156
Net income - - 2,273 - - 2,273
--- ------ ------ ---- ---- ------
Balance at
March 31, 1997 $ 22 20,915 22,793 (280) (636) 42,814
=== ====== ====== ==== ==== ======
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
BFC Financial Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For the three months ended March 31, 1997 and 1996
(In thousands)
(Unaudited)
March 31,
1997 1996
------- -------
Operating activities:
Income before extraordinary items $ 2,156 3,069
Adjustments to reconcile income
before extraordinary items to net cash
(used) by operating activities:
Equity in earnings of BBC (2,818) (2,292)
Depreciation 170 196
Expenses related to real estate held for
development and sale, net 41 31
Income in real estate joint venture, net (4) -
Increase in deferred income taxes 290 1,474
Accretion on exchange debentures
and mortgages payable 4 3
Amortization of discount on
loans receivable (11) (15)
Gain on sale of real estate, net (132) (3,289)
Gain on sale of BBC common stock, net (221) -
Loss on disposition of mortgage notes and
investment, net - 232
Fundings for litigation settlement (1,018) -
Increase in the Exchange escrows
to fund settlement liability (5,108) -
Increase in deferred interest on the
exchange debentures 190 185
Accrued interest income on escrow accounts (68) (51)
Interest accrued regarding redeemed
debenture liability 52 131
Decrease in other liabilities (57) (258)
Decrease in other assets 578 9
------- -------
Net cash (used in) operating activities (5,956) (575)
------- -------
Investing activities:
Proceeds from the sales of real estate
acquired in debenture exchanges 132 -
Proceeds from the sale of real estate - 6,489
Proceeds from the sale of BBC common stock 916 -
Common stock dividends received from BBC 227 214
Purchase of securities available for sale (11,766) (6,428)
Proceeds from redemption and maturities
of securities available for sale 16,198 -
Principal reduction on loans 45 1,278
Increase in real estate (65) (245)
Improvements to real estate acquired in
debenture exchanges - (40)
------- -------
Net cash provided by investing activities 5,687 1,268
------- -------
Financing activities:
Issuance of common stock 92 -
Repayments of borrowings (330) (1,261)
------- -------
Net cash (used in)
financing activities (238) (1,261)
------- -------
Decrease in cash and cash equivalents (507) (568)
Cash and cash equivalents at beginning of period 1,796 1,152
------- -------
Cash and cash equivalents at end of period $ 1,289 584
======= =======
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
BFC Financial Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
March 31, 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 March 31, 1997, the unaudited consolidated
results of operations for the three months ended March 31, 1997 and 1996 and the
unaudited consolidated cash flows for the three months ended March 31, 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 March 31, 1997 and December 31, 1996 is as follows:
March 31, December 31,
1997 1996
---- ----
BBC stockholders' equity $ 152,605 147,704
Ownership percentage 40.59% 41.52%
------- -------
61,942 61,327
Purchase accounting adjustments (2,087) (2,288)
------- -------
Investment in BBC $ 59,855 59,039
======= =======
In January 1997, the Company sold 87,875 shares of BankAtlantic Bancorp, Inc.
Class A common stock. Net proceeds received from the sale amounted to
approximately $916,000 and a net gain of approximately $221,000 was recognized
during the quarter ended March 31, 1997.
The Company's ownership in BBC decreased from 41.52% to 40.59% of all
outstanding BBC common stock at March 31, 1997, upon the sale of 87,875 shares
of BBC's Class A common stock by the Company during January 1997 and changes in
BBC's outstanding common stock. At March 31, 1997, the Company's ownership of
BBC Class A and B common stock was approximately 34% and 45%, respectively.
In March 1997, BBC formed BBC Capital Trust I ("BBC Capital"). BBC Capital is a
statutory business trust which exists for the purpose of issuing the Preferred
Securities ("Preferred Securities") and investing the proceeds thereof in Junior
Subordinated Debentures of BBC. In a public offering in April 1997, BBC Capital
issued 2.6 million shares of Preferred Securities haveing a liquidation value of
approximately $75 million. Holders of Preferred Securities will be entitled to
receive a preferential cumulative cash distribution at a fixed annual percentage
of the liquidation amount (9.5%). BBC Capital's sole asset will be the BBC
Junior Subordinated Debentures which will bear interest at the same rate as the
Preferred Securities and have a stated maturity of 30 years from the date of
issuance.
In February 1997, the Board of Directors of BBC declared a five for four common
stock dividend effected in the form of a stock split, payable in Class A Common
Stock to BBC Class A and Class B common shareholders of record on February 17,
1997. The Stock dividend was payable in Class A Common Stock regardless of the
Class of shares held. Where appropriate, amounts throughout this report have
been adjusted to reflect the stock split.
3. SECURITIES AVAILABLE FOR SALE
Included in securities available for sale at March 31, 1997 and December 31,
1996 was approximately $2.4 million and $6.8 million of U.S. Treasury Bills and
other investments, respectively. Market value at March 31, 1997 and December 31,
1996 approximates book value.
4. CONSOLIDATED STATEMENTS OF CASH FLOWS
Other non-cash financing and investing activities and other supplemental cash
flow items for the three months ended March 31, 1997 and 1996 were as follows
(in thousands):
March 31,
----------
1997 1996
====== ======
Change in stockholders' equity resulting
from the Company's proportionate share
of BBC's net unrealized appreciation
(depreciation) on debt securities
available for sale,
less related deferred income taxes (947) (1,803)
====== ======
Transfers from escrow accounts to reflect
payments on the redeemed debenture liability 9,352 275
====== ======
Effect of issuance of BBC's common stock
by BBC to shareholders other than BFC - 1,192
====== ======
Net effect of other BBC capital transactions (130) -
====== ======
Net gain associated with the settlements
of the Exchange litigation, net of income taxes 117 749
====== ======
Loss on disposition of mortgage
notes and investment, net - 232
====== ======
BBC's dividends on common stock
declared and not received 227 241
====== ======
Increase in equity for the tax effect related to
the exercise of employee stock options 64 -
====== ======
Interest paid on borrowings 589 643
====== ======
Conversion of mortgage receivable to an
equity interest in an affiliated partnership 184 -
====== ======
5. REAL ESTATE
On October 29, 1996, a balloon payment of approximately $9.4 million was due on
the mortgage note that is 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.
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 has an interest in a limited
partnership that entitles it to receive approximately 5% of any future profits
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.
The property is currently being marketed for sale and serves as partial
collateral for an $8.08 million loan to the Company from an unaffiliated lender.
6. NEW ACCOUNTING STANDARD
Financial Accounting Standards Board Statement No. 128, Earnings per Share ("FAS
128") was issued in February 1997. This statement simplifies the standards for
computing earnings per share ("EPS") and is effective for financial statements
issued for periods ending after December 15, 1997. FAS 128 requires restatement
of all prior-period EPS data presented. FAS 128 requires dual presentation of
basic and diluted EPS on the face of the income statement with a reconciliation
of the numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation. Basic EPS excludes dilution and
is computed by dividing net income by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if options or warrants to issue common stock were exercised.
Implementation of FAS 128 will impact disclosure of EPS and will not have a
material impact on BFC's Statement of Operations or Statement of Financial
Condition.
<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 40.59% 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").
Results of Operations
For the quarter ended March 31, 1997, the Company reported net income of
approximately $2.3 million or $.96 primary and fully diluted income per common
and common equivalent share as compared to net income of approximately $3.8
million or $1.71 primary and $1.70 fully diluted income per common and common
equivalent share for the comparable period in 1996. Operations for the quarter
ended March 31, 1997 included an extraordinary gain of approximately $117,000 or
$.05 primary and fully diluted income per common and common equivalent share.
Operations for the quarter ended March 31, 1996 included an extraordinary gain
of approximately $749,000 or $.33 primary and fully diluted income per common
and common equivalent share. The 1997 and 1996 extraordinary gains were
attributable to changes in the estimate of the amount of the settlement
liability associated with the exchange litigation.
The decrease in revenues of approximately $8.6 million for the three months
ended March 31, 1997, as compared to the comparable period in 1996 was primarily
due to a decrease in sale of real estate of approximately $9.6 million, interest
on mortgage notes and related receivables of approximately $40,000 and earnings
on real estate rental operations, net of approximately $75,000. This decrease in
revenues was partially offset by the sale of BBC Class A common stock of
approximately $916,000 and other income, net of approximately $113,000. 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 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.
Interest on mortgage notes and related receivables decreased for the three
months ended March 31, 1997, as compared to the same period in 1996 primarily
due to the satisfaction of a loan in 1996 and reductions in the amount of
mortgage note receivables from affiliated limited partnerships held by the
Company.
Earnings on real estate rental operations, net, decreased for the three months
ended March 31, 1997, as compared to the same period 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.
In January 1997, the Company sold 87,875 shares of BankAtlantic Bancorp, Inc.
Class A common stock, net proceeds received from the sale amounted to
approximately $916,000 and a net gain of approximately $221,000 was recognized
in connection with the transaction during the quarter ended March 31, 1997.
Other income, net increased for the three months ended March 31, 1997 as
compared with the same period in 1996 primarily due to proceeds received
relating to a loan from an affiliate which was written-off in prior years.
The decrease in cost and expenses of approximately $6.0 million for the three
months ended March 31, 1997, as compared to same period in 1996 was primarily
due to: (i) decreases in 1997 in interest on exchange debentures of
approximately $73,000, (ii) a decrease in interest on mortgage payable and other
borrowings of approximately $129,000, (iii) the inclusion of the cost of sale of
real estate of approximately $6.4 million and (iv) the inclusion of the loss on
disposition of mortgage notes and investments, net of approximately $232,000 in
1996 results. This decrease was offset by increases in (i) cost of sale of BBC
common stock of approximately $699,000, (ii) decreases in employee compensation
and benefits of approximately $64,000 and (iii) general and administrative, net,
of approximately $60,000.
Interest on exchange debentures decreased for the three months ended March 31,
1997 as compared to the same period in 1996 as a result of the accrual of
interest on the delayed funding of the 1989 Exchange settlement liability.
Interest on mortgage payables and other borrowings decreased for three months
ended March 31, 1997 as compared to the same period in 1996 primarily due to the
sale of a 50% interest in a property acquired in the 1989 Exchange (See note 5.)
and a reduction in borrowings.
In March 1996, the Company recorded a loss on the disposition of mortgage notes
and investment, net, of approximately $232,000 in connection with the
disposition of three mortgage notes and an investment due from affiliated
limited partnerships. During 1996, the limited partnerships were liquidated.
Employee compensation and benefits increased for the three months ended March
31, 1997, as compared to the same period in 1996 primarily due to bonus accruals
and an increase in salary levels.
General and administrative, net, increased for the three months ended March 31,
1997 as compared to the same period in 1996 primarily due to an increase in
legal and professional and consulting fees associated with the ABC litigation.
BBC's net income applicable to common shareholders for the three months ended
March 31, 1997 and 1996, was $6.3 million and $4.7 million, respectively. The
Company's equity in BBC's net income for the three months ended March 31, 1997
and 1996, was $2.8 million and $2.3 million, 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 40.59% of all outstanding BBC common stock at
March 31, 1997, upon the sale of 87,875 shares of BBC's Class A common stock and
changes in BBC's outstanding common stock. At March 31, 1997, the Company's
ownership in BBC Class A and B common stock was approximately 34% and 45%,
respectively.
Financial Condition
BFC's total assets at March 31, 1997 and at December 31, 1996 were $89.7 million
and $98.8 million, respectively. The majority of the difference at March 31,
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 acquired in debenture exchanges, net and (iv) escrow for redeemed
debenture liability. These decreases were offset in part by increases in
investment in BBC and real estate joint venture.
Securities available for sale decreased due to the funding of the 1989 Exchange
settlement escrow account of approximately $5.1 million and the funding of the
Kugler litigation settlement of approximately $1.0 million. This increase was
partially offset by net proceeds of approximately $916,000 received in
connection with the sale of 87,875 shares of BBC's Class A common stock.
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 is reducing 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 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 due to the payment of the
outstanding balance of a broker line of credit of approximately $131,000 and
principal payments of other loans according to their terms.
Other liabilities decreased primarily due to the payment of approximately $1.0
million in connection with the Kugler litigation escrow account.
Investment in BBC increased by $816,000 due to an increase in equity in earnings
of BBC of approximately $2.8 million, reduced by the common stock dividends of
approximately $0.2 million declared in 1997, the net effect of other BBC capital
transactions of approximately $130,000, the change in BBC's net unrealized
appreciation (depreciation) on debt securities available for sale, net of
deferred income taxes of approximately $0.9 million and the sale of 87,875
shares of BBC Class A common stock having a book value of approximately $0.7
million.
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 1996
Annual Report. In connection with the above 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 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, a net gain of
approximately $117,000 was recognized for the three months ended March 31, 1997
relating to Class Members No Longer Owning Debentures (as defined).
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") for $14.5 million and placed a $500,000 deposit in connection
therewith. The acquisition was expected to close during 1996, however, because
of disagreements with the owner the contract was canceled and the deposit was
returned in February 1997.
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 million
included in other liabilities with respect to this matter. Such accrual will be
adjusted 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)
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)
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 normal operating expenses, but it is not anticipated that
it will make current payments of interest on the Exchange debentures until such
time as the identity of holders in due course have been determined with
reasonable certainty.
As previously indicated, the Company holds approximately 40.59% of all BBC's
outstanding common stock. Presently, BBC's primary use of funds during the three
month period ended March 31, 1997 is the payment of cash dividends to common
stockholders, interest expense on its outstanding subordinated debentures,
purchase of $6.3 million of trading account securities and funding a $6.5
million commercial loan. The commercial loan was a loan participation from
BankAtlantic. It is anticipated that funds for payment of these items will be
obtained from BankAtlantic. Additionally, the ultimate repayment by BBC of its
outstanding Debentures may be dependent upon dividends from BankAtlantic,
refinancing of the debt or raising additional equity capital by BBC. BBC has
paid a regular quarterly dividend since its formation and management of BBC
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.
In March 1997, BBC formed BBC Capital Trust I ("BBC Capital"). BBC Capital is a
statutory business trust which exists for the purpose of issuing the Preferred
Securities ("Preferred Securities") and investing the proceeds thereof in Junior
Subordinated Debentures of BBC. In a public offering in April 1997, BBC Capital
issued 2.6 million shares of Preferred Securities having a liquidation value of
approximately $75 million. Holders of Preferred Securities will be entitled to
receive a preferential cumulative cash distribution at a fixed annual percentage
of the liquidation amount (9.5%). BBC Capital's sole asset will be the BBC
Junior Subordinated Debentures which will bear interest at the same rate as the
Preferred Securities and have a stated maturity of 30 years from date of
issuance
At March 31, 1997, BankAtlantic's core, Tier 1 risk-based and total risk-based
capital ratios were 6.49%, 9.86% and 11.12%, respectively. Based on these
capital ratios, BankAtlantic meets the definition of a well capitalized
institution.
In January 1997, the Company sold 87,875 shares of BBC Class A common stock. Net
proceeds received from the sale amounted to approximately $916,000 and a net
gain of approximately $221,000 was recognized in connection with the sale during
the quarter ended March 31, 1997.
Cash Flows
A summary of the Company's consolidated cash flows is as follows (in thousands):
Three months ended
March 31,
---------
Net cash provided (used) by: 1997 1996
---- ----
Operating activities $ (5,956) (575)
Investing activities 5,687 1,268
Financing activities (238) (1,261)
------ ------
Decrease in cash and cash equivalents $ (507) (568)
====== ======
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 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. 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 three months ended March 31,
1997 were proceeds from the sale of real estate, sale of BBC Class A common
stock, principal reduction on loans, 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.
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 can
be no assurance that the forward-looking information contained in this report
will, in fact, occur.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Kugler, et.al., (formerly Martha Hess, et. al.), v. I.R.E. Real Estate Income
Fund, et al. In the Appellate Court of Illinois, First District, and related
cases, App. No. 90-107. On or about May 20, 1988, an individual investor filed
the above referenced action against two individual defendants, who allegedly
sold securities without being registered as securities brokers in Illinois, two
corporations organized and controlled by such individuals, and against
approximately sixteen publicly offered limited partnerships, including two
partnerships that the Company acquired the assets and liabilities of in the 1991
Exchange transaction, (the "predecessor partnerships") interests in which were
sold by the individual and corporate broker defendants. Plaintiff alleged that
the sale of limited partnership interests in the predecessor partnerships (among
other affiliated and unaffiliated partnerships) by persons and corporations not
registered as securities brokers under the Illinois Securities Act constitutes a
violation of such Act, and that the Plaintiff, and all others who purchased
securities through the individual or corporate defendants, should be permitted
to rescind their purchases and recover their principal plus 10% interest per
year, less any amounts received. The predecessor partnerships' securities were
properly registered in Illinois and the basis of the action related solely to
the alleged failure of the Broker Dealer to be properly registered. In October
1996 the matter was resolved and the Company placed approximately $3.7 million
in escrow to fund the rescission of sales and in March 1997, approximately $1.0
million was placed in escrow for plaintiffs attorneys' fees. On April 30, 1997,
the Courts approved the Kugler settlement.
Short vs. Eden United, Inc., et al. in the Marion County Superior Court, State
of Indiana. Civil Division Case No. S382 0011. 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 1996 Annual Report.) In April 1997, the Company paid approximately
$783,000 and received a release and satisfaction of judgment. At December 31,
1996, the Company had an accrual of approximately $3 million included in other
liabilities with respect to this matter. Such accrual will be adjusted during
the quarter ended June 30, 1997.
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 March 31, 1997.
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: May 9, 1997 By: /s/ Glen R. Gilbert
------------------------
Glen R. Gilbert, Senior Vice President
and Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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