FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended October 31, 1995
Commission file number 1-4372
FOREST CITY ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Ohio 34-0863886
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10800 Brookpark Road Cleveland, Ohio 44130
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 216-267-1200
None
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at December 13, 1995
----- --------------------------------
Class A Common Stock, $.33 1/3 par value 5,265,327 shares
Class B Common Stock, $.33 1/3 par value 3,726,287 shares
FOREST CITY ENTERPRISES, INC.
INDEX
Page No.
Part I. Financial Information:
Item 1. Financial Statements
Forest City Enterprises, Inc. and Subsidiaries:
Consolidated Balance Sheets - October 31, 1995
(Unaudited) and January 31, 1995 3-4
Consolidated Statements of Earnings and Retained
Earnings (Unaudited) - Three and Nine Months Ended
October 31, 1995 and 1994 5
Consolidated Statements of Cash Flows (Unaudited) -
Nine Months Ended October 31, 1995 and 1994 6
Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Part II. Other Information:
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
PART I - FINANCIAL INFORMATION
- ------------------------------
<TABLE>
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
October 31, 1995 January 31, 1995
---------------- ----------------
(Unaudited)
(in thousands)
<S> <C> <C>
ASSETS
Real Estate
Completed rental properties $2,072,348 $2,011,168
Projects under development 273,513 230,802
Land held for development or sale 85,934 80,166
---------- ----------
2,431,795 2,322,136
Less accumulated depreciation (337,612) (303,012)
---------- ----------
Total Real Estate 2,094,183 2,019,124
Cash 22,350 46,478
Notes and accounts receivable, net of allowance
for doubtful accounts of $6,168 and $4,208,
respectively 182,933 197,602
Inventories and construction contracts
in progress 32,904 38,949
Investments in and advances to affiliates 140,566 139,318
Other assets 150,297 143,263
---------- ----------
$2,623,233 $2,584,734
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage debt, nonrecourse $1,820,035 $1,769,270
Accounts payable and accrued expenses 365,592 375,350
Notes payable 12,969 22,340
Long-term debt 117,368 112,647
Deferred income taxes 94,402 93,650
Deferred profit 31,219 25,917
---------- ----------
TOTAL LIABILITIES 2,441,585 2,399,174
---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock - convertible, without par
value; 1,000,000 shares authorized;
no shares issued - -
Common stock, $.33 1/3 par value
Class A, 16,000,000 shares authorized;
5,254,327 and 5,146,226 shares outstanding,
respectively 1,751 1,715
Class B, convertible, 6,000,000 shares
authorized; 3,737,287 and 3,845,388 shares
outstanding, respectively 1,246 1,282
---------- ----------
2,997 2,997
Additional paid-in capital 45,511 45,511
Retained earnings 133,140 137,052
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 181,648 185,560
---------- ----------
$2,623,233 $2,584,734
========== ==========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
------------------- --------------------
1995 1994 1995 1994
-------- -------- -------- --------
(dollars in thousands, except
per share data)
<S> <C> <C> <C> <C>
Sales and operating revenues $120,989 $127,951 $347,369 $370,380
Interest and other income 5,410 4,475 11,421 12,025
-------- -------- -------- --------
Total revenues 126,399 132,426 358,790 382,405
Operating expenses 74,560 84,449 217,855 244,487
Interest expense 33,488 32,558 96,168 93,255
Depreciation and amortization 16,645 16,063 48,336 48,498
-------- -------- -------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY GAIN 1,706 (644) (3,569) (3,835)
-------- -------- -------- --------
INCOME TAXES
Current 133 554 398 16
Deferred 972 (598) (456) (576)
-------- -------- -------- --------
1,105 (44) (58) (560)
-------- -------- -------- --------
NET EARNINGS (LOSS) BEFORE
EXTRAORDINARY GAIN 601 (600) (3,511) (3,275)
Extraordinary gain, net of tax - 567 1,847 3,920
-------- -------- -------- --------
NET EARNINGS (LOSS) 601 (33) (1,664) 645
Retained earnings at beginning of period 134,787 97,612 137,052 96,934
Dividends on common stock (2,248) (1,798) (2,248) (1,798)
-------- -------- -------- --------
Retained earnings at end of period $133,140 $ 95,781 $133,140 $ 95,781
======== ======== ======== ========
PER COMMON SHARE
Net earnings (loss) before
extraordinary gain $ .07 $ (.06) $ (.39) $ (.36)
Extraordinary gain, net of tax - .06 .21 .43
-------- -------- -------- --------
Net earnings (loss) $ .07 $ - $ (.18) $ .07
======== ======== ======== ========
Weighted average
common shares outstanding 8,991,614 8,991,614 8,991,614 8,991,614
========= ========= ========= =========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended October 31,
-----------------------------
1995 1994
-------- --------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) $ (1,664) $ 645
Depreciation and amortization 48,336 48,498
Deferred income taxes 752 (576)
Accrued interest of a rental property
not payable until future years - 8,935
Extraordinary gain (3,055) (6,646)
Increase in land held for
development or sale (5,768) (4,490)
Decrease in notes and
accounts receivable, net 14,669 895
Decrease in inventories and
construction contracts in progress 6,045 26,252
(Increase) in other assets (17,643) (7,070)
Increase (decrease) in accounts payable
and accrued expenses (8,951) 1,148
Increase in deferred profit 5,302 671
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 38,023 68,262
-------- --------
INVESTING ACTIVITIES
Capital expenditures (107,018) (76,067)
(Increase) in investments
in and advances to affiliates (1,248) (21,296)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (108,266) (97,363)
-------- --------
FINANCING ACTIVITIES
Increase in mortgage and long-term debt 96,179 81,935
Payments on long-term debt (8,793) (14,769)
Principal payments on mortgage debt
on real estate (31,900) (24,633)
Payments on notes payable (9,371) (21,739)
NET CASH PROVIDED BY -------- --------
FINANCING ACTIVITIES 46,115 20,794
-------- --------
NET (DECREASE) IN CASH (24,128) (8,307)
CASH AT BEGINNING OF PERIOD 46,478 21,798
-------- --------
CASH AT END OF PERIOD $ 22,350 $ 13,491
======== ========
See notes to consolidated financial statements.
</TABLE>
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. During the second quarter, the Company recorded an extraordinary gain, net
of tax, of $1,847,000, resulting from debt extinguishment of a commercial
property.
B. On September 7, 1995, the Board of Directors declared a cash dividend of
$.25 per share on shares of both Class A and Class B common stock for
fiscal year 1995. The dividends are payable December 15, 1995 to
shareholders of record at the close of business on December 1, 1995.
C. Effective September 12, 1995, the Company's revolving credit agreement
was amended to increase its available credit by $10,000,000 to
$80,000,000.
PART I - FINANCIAL INFORMATION (CONTINUED)
The enclosed financial statements have been prepared on a basis consistent
with accounting principles applied in the prior periods and reflect all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results of operations for the periods presented. All such
adjustments were of a normal recurring nature. Results of operations for the
three and nine months ended October 31, 1995 and 1994 are not necessarily
indicative of results of operations which may be expected for the full year.
The following discussion and analysis of business segments of Forest City
Enterprises, Inc. and all majority-owned subsidiaries ("Company") should be read
in conjunction with the financial statements and the footnotes thereto contained
in the January 31, 1995 annual report ("Form 10-K").
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
Earnings Before Depreciation and Deferred Taxes from Operations ("EBDT") were
$18,614,000 for the quarter ended October 31, 1995 compared to $20,003,000 for
the third quarter of fiscal 1994. EBDT for the nine months ended October 31,
1995 was $46,664,000 versus $59,460,000 for the first nine months of 1994. EBDT
consists of net earnings before gain on disposition of properties and the
provision for the decline in real estate plus noncash charges from real estate
operations of depreciation and amortization and deferred income taxes. The
decrease in EBDT is primarily the result of the increase in interest rates on
variable rate debt as compared to the same period for 1994. However, the
Company expects that interest rates will have a smaller effect on the results
for the remainder of the year and therefore, the comparative EBDT is expected to
improve in the fourth quarter of 1995. Also included in EBDT is $2,110,000 for
the three months ended October 31, 1994 and $8,935,000 for the nine months ended
October 31, 1994 of accrued interest on mortgage notes of Park LaBrea Towers,
which was sold during the fourth quarter of 1994. EBDT for the three months and
nine months ended October 31, 1995 contain no such accrued interest.
Consolidated sales and operating revenues were $120,989,000 for the three
months ended October 31, 1995 versus $127,951,000 for the quarter ended October
31, 1994. Consolidated sales and operating revenues were $347,369,000 for the
nine months ended October 31, 1995 versus $370,380,000 for the comparable period
in 1994. The decline in revenues is primarily due to the sale of Park LaBrea
Towers in the fourth quarter of 1994.
Net earnings from operations was $601,000 for the quarter ended
October 31, 1995 versus a net loss from operations of $600,000 for the quarter
ended October 31, 1994. The net loss from operations for the nine months ended
October 31, 1995 and 1994 was $3,511,000 and $3,275,000, respectively.
No extraordinary gain was recorded for the third quarter of 1995, while an
extraordinary gain, net of tax, of $567,000 was recorded during the quarter
ended October 31, 1994. The extraordinary gain, net of tax, for the nine months
ended October 31, 1995 was $1,847,000, as compared to the extraordinary gain,
net of tax, of $3,920,000 for the nine months ended October 31, 1994. These
gains resulted from debt extinguishment of commercial property.
INVESTMENT REAL ESTATE - FOREST CITY RENTAL PROPERTIES CORPORATION
The Company conducts the development and management of its real estate portfolio
through Forest City Rental Properties Corporation. Sales and operating revenues
were $92,650,000 for the quarter ended October 31, 1995 versus $96,757,000 for
the third quarter of 1994. Sales and operating revenues for the nine months
ended October 31, 1995 were $267,468,000 versus $285,632,000 for the first nine
months of 1994. The decrease in revenues is primarily attributable to Park
LaBrea Towers being sold in the last quarter of 1994.
The net loss from operations for the quarter ended October 31, 1995 was
$461,000 compared to $1,277,000 for the three months ended October 31, 1994.
The reduction in net loss is due to the operating loss incurred by Park LaBrea
Towers in 1994 not recurring in 1995 due to its sale in the fourth quarter of
1994, net of the effect of the increase in interest rates since the second
quarter of 1994. The net loss from operations for the nine months ended
October 31, 1995 was $1,876,000 versus $697,000 for the comparable period in
1994. The decrease in earnings is the result of the increase in interest rates
during the nine months ended October 31, 1995 over the same period for 1994, net
of the 1994 operating loss of Park LaBrea Towers not recurring in 1995.
LAND DIVISION
The sales of residential, commercial and industrial land were $5,173,000 for the
third quarter of 1995 versus $10,738,000 for the comparable period in 1994.
Revenues for the nine months ended October 31, 1995 were $18,181,000 versus
$29,093,000 for the first nine months of 1994. The pre-tax loss was $477,000
for the three months ended October 31, 1995 versus a pre-tax loss of $94,000 for
the third quarter of 1994. The pre-tax loss for the nine months ended
October 31, 1995 was $3,325,000 versus a pre-tax loss of $1,215,000 for the
first nine months of 1994. Sales of land and related earnings vary from period
to period, depending upon management's decisions regarding the disposition of
significant land holdings.
RESIDENTIAL DEVELOPMENT DIVISION
Revenues for the three months ended October 31, 1995 were $1,456,000 versus
$433,000 for the third quarter of 1994. Revenues for the nine months ended
October 31, 1995 were $2,313,000 versus $1,528,000 for the comparable period of
1994. Pre-tax earnings were $1,457,000 for the quarter ended October 31, 1995
compared to $1,976,000 for the third quarter of 1994. Pre-tax earnings were
$2,209,000 and $2,097,000 for the nine months ended October 31, 1995 and 1994,
respectively. The majority of the efforts of this division are now directed
toward acquiring completed real estate at favorable prices for the Company's
portfolio and continuing to oversee the operations of properties syndicated in
prior years.
WHOLESALE LUMBER DIVISION
Forest City Trading Group's revenues were $21,710,000 for the three months ended
October 31, 1995 compared to revenues of $20,023,000 for the third quarter of
1994. Revenues for the nine months ended October 31, 1995 and 1994 were
$59,407,000 and $54,127,000, respectively. Pre-tax earnings from this division,
including earnings from the Company's building materials business which are
accounted for on the equity method, were $1,784,000 for the third quarter of
1995 versus $1,813,000 for the same period in 1994. Pre-tax earnings were
$4,107,000 and $1,554,000 for the nine months ended October 31, 1995 and 1994
respectively.
FINANCIAL CONDITION AND LIQUIDITY
Net cash provided by operating activities totaled $38,023,000 for the nine
months ended October 31, 1995, a decrease of $30,239,000 from net cash provided
of $68,262,000 in the first nine months of 1994. The decrease in cash provided
by operating activities is primarily due to: 1) a decrease in inventories at
the Company's lumber brokerage subsidiary in 1994 as compared to the first nine
months of 1995; 2) an increase in other assets in 1995 primarily resulting from
the increase in ownership of a commercial property; partially offset by 3) a
decrease in the Company's lumber brokerage subsidiary's accounts receivable sold
in the first nine months of 1994 as compared to the same period in 1995.
Net cash used in investing activities was $108,266,000 and $97,363,000 for the
nine months ended October 31, 1995 and 1994, respectively. Net cash provided by
financing activities was $46,115,000 and $20,794,000 for the nine months ended
October 31, 1995 and 1994, respectively. The change in the increase in
investments in and advances to affiliates in 1995 as compared to 1994 resulted
from the Land Division's funding of development activity of Granite Development
Partners, L.P., a self-liquidating limited partnership in 1994. Payments on
notes payable in the period ended October 31, 1994 was greater than the same
period in 1995 due to a decrease in inventories at the Company's lumber
brokerage subsidiary in 1994 and its corresponding decrease in funds borrowed.
In the first nine months of 1995, the Company increased its ownership of the
Liberty Center, which increased capital expenditures and mortgage debt.
At October 31, 1995, the Company's wholly-owned real estate subsidiary,
Forest City Rental Properties Corporation, had a total of $113,500,000
outstanding under its term loan and revolving credit agreement. The Company is
required to make quarterly principal payments of $2,500,000 under the term loan.
During the third quarter of 1995, the Company's revolving credit agreement was
amended to increase the amount available by $10,000,000 to $80,000,000.
The Company's mortgage debt, all of which is nonrecourse, totaled
$1,820,035,000 at October 31, 1995. The Company has followed a policy of
obtaining debt which is nonrecourse to the Company. However, the Company does
guarantee the completion of the initial construction of certain projects. During
1995, certain loans matured which were either extended or refinanced. Just as we
have been able to refinance our debt that has matured in the past, we expect to
either extend the maturing dates of our loans as they come due or refinance the
projects.
The Company's lumber brokerage subsidiary has a three-year agreement
maturing July 15, 1996 under which it is selling an undivided ownership interest
in a pool of accounts receivable up to a maximum of $90,000,000. The Company
also has a bank line of credit of $40,000,000 with the right to borrow an
additional $10,000,000 for up to 90 days through May 31, 1996. At October 31,
1995, $5,150,000 was borrowed under this line of credit.
The sources of liquidity of the Company and its subsidiaries are unused
bank lines, cash flow from operations, refinancing of rental properties with
larger mortgages and sales of real estate. The sources of funds will continue
to be used principally for the development of additional real estate projects,
the acquisition of existing real estate and the repayment of recourse debt.
Forest City Rental Properties Corporation generally mortgages its
properties on an intermediate- to long-term nonrecourse basis with maturities of
five years and higher. It has financed most of its development and construction
projects with shorter- to intermediate-term bank loans bearing floating rates of
interest. When the financing terms are favorable, the Company securitizes its
nonrecourse debt on longer-term bases as well as obtains fixed rate mortgage
debt for certain properties.
The Company has a substantial amount of variable-rate debt that has
enabled it to benefit from historically low interest rates. However, interest
rates have risen over the past year. With variable-rate debt in excess of
$1 billion, the current level of interest rates and any future rate increases
will have an impact on cash flow in 1995. We have purchased interest rate
protection on the vast majority of the portfolio through the first half of 1996,
and we will continue to purchase interest rate protection and fix rates as we
deem appropriate.
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
- -------------------------
The Company is involved in various claims and lawsuits incidental to its
business. The Company's General Counsel is of the opinion that none of these
claims and lawsuits will have a material adverse effect on the Company.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
No. 10.3 - First Amendment to Credit Agreement, dated as of
September 12, 1995, among Forest City Rental Properties
Corporation, the banks named therein and Society National Bank,
as Agent.
No. 10.4 - First Amendment to Guaranty of Payment of Debt,
dated as of September 12, 1995, among Forest City Enterprises, Inc.,
the banks named therein and Society National Bank, as Agent.
(b) Reports on Form 8-K filed for the three months ended October 31, 1995
- none.
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.
FOREST CITY ENTERPRISES, INC.
(Registrant)
Date December 15, 1995 /s/ Thomas G. Smith
Thomas G. Smith, Senior Vice President
and Chief Financial Officer
Date December 15, 1995 /s/ Linda M. Kane
Linda M. Kane, Vice President,
Corporate Controller
Exhibits Filed Electronically
The following exhibits are included in this electronic filing and are located
after this index.
Exhibit No. 10.3 - First Amendment to Credit Agreement, dated as of
September 12, 1995, among Forest City Rental Properties Corporation,
the banks named therein and Society National Bank, as Agent.
Exhibit No. 10.4 - First Amendment to Guaranty of Payment of Debt,
dated as of September 12, 1995, among Forest City Enterprises, Inc.,
the banks named therein and Society National Bank, as Agent.
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT is
made and entered into as of this 12th day of September,
1995 by and among FOREST CITY RENTAL PROPERTIES
CORPORATION, an Ohio corporation ("Borrower"), NATIONAL
CITY BANK, THE HUNTINGTON NATIONAL BANK, COMERICA BANK,
FIRST NATIONAL BANK OF OHIO, and SOCIETY NATIONAL BANK
(collectively the "Banks" and individually a "Bank"), and
SOCIETY NATIONAL BANK, as Agent for the Banks (the
"Agent").
W I T N E S S E T H:
WHEREAS, Borrower, the Banks, and the Agent
entered into a certain Credit Agreement dated as of July
25, 1994 (the "Credit Agreement"); and
WHEREAS, Borrower, the Banks, and the Agent
desire to make certain amendments to the Credit Agreement
on the terms and conditions herein set forth;
NOW, THEREFORE, it is mutually agreed as
follows:
1. AMENDMENTS.
(a) Section 3.02(a) of the Credit Agreement
is hereby amended to read as follows:
SECTION 3.02. REVOLVING LOAN COMMITMENTS.
(a) As used in this Agreement, the "Revolving Loan
Commitment" of each Bank at any time means the several
obligations of each Bank to advance, subject to the terms
and conditions set forth herein, up to the amount of the
Revolving Loan Maximum set forth for such Bank on Exhibit A
hereto on a Pro rata basis.
(b) The original Exhibit A to the Credit
Agreement shall be superseded and replaced by Exhibit A to
this First Amendment to Credit Agreement, attached hereto.
(c) Section 7.19(iv) of the Credit
Agreement is hereby amended to read as follows:
(iv) guarantee(s) by Borrower not permitted
under the provisions of Subsections (i) through (iii),
inclusive, and/or (v) through (ix), inclusive, of this
Section 7.19 of up to an aggregate principal amount of
indebtedness not at any time exceeding an amount equal to
(A) Four Million Five Hundred Thousand Dollars ($4,500,000)
minus (B) all amounts subject to guarantee(s) permitted by
Section 9.12(f) of the Guaranty; provided, that no debt
service guarantees shall be permitted under this Section
7.19(iv) unless, and only so long as, amounts of
indebtedness to which any debt service guarantees apply
together with the amounts of indebtedness guaranteed by any
other guarantees not permitted by the provisions of
Subsections (i) through (iii), inclusive, and/or (v)
through (ix), inclusive, of this Section 7.19, do not at
any time exceed the amount then permitted to be guaranteed
under this Section 7.19 (iv), and that Borrower shall
provide a written report to each of the Banks within sixty
(60) days after the end of each quarter-annual fiscal
period of Borrower identifying each guarantee of Borrower
then outstanding that is not permitted by the provisions of
Subsections (i) through (iii), inclusive, and/or (v)
through (ix), inclusive, of this Section 7.19;
(d) Section 7.19(vii) of the Credit
Agreement is hereby amended to read as follows:
(vii) any guarantee by Borrower of letters
of credit (other than letters issued under Section 3.06 of
this Credit Agreement) issued on or after the first
anniversary of the Closing Date by any banking institution
on behalf of Forest City Residential Development, Inc. or
Parent, or any obligation of Borrower as an applicant under
standby letters of credit so long as (a) the aggregate
amount of all such outstanding guarantees, plus (b) the
aggregate face amount of all such outstanding letters of
credit issued on behalf of Borrower, plus (c) the aggregate
face amount of all such outstanding letters of credit
issued on behalf of or guaranteed by Parent, plus (d) the
aggregate face amount of all letters of credit permitted
under Section 9.12(g) of Parent's Guaranty of Payment of
Debt issued in connection with this Agreement do not exceed
Ten Million Dollars ($10,000,000); provided, that (1)
Borrower shall not be permitted to guarantee any letter of
credit having a face amount in excess of Five Million
Dollars ($5,000,000) and (2) Borrower shall provide a
written report to each of the Banks within sixty (60) days
after the end of each quarter-annual fiscal period of
Borrower identifying each guarantee of Borrower of any
letter of credit then outstanding;
(e) Section 7.20 of the Credit Agreement is
hereby amended to read as follows:
SECTION 7.20. GROSS CASH FLOW. Borrower
will not suffer or permit (a) its net earnings (loss),
excluding the gain on disposition of properties and the
provision for decline in real estate, before deducting the
noncash charges from rental properties for depreciation and
amortization, deferred income taxes and accrued interest on
mortgage notes of a rental property which is not payable
until future years, plus (b) its corporate interest expense
and pass thru debt reimbursement of New York principal
payments (its "Gross Cash Flow") for any year to be less
than the sum of (i) one hundred fifty percent (150%) until
the Termination Date and one hundred twenty-five percent
(125%) after the Termination Date of the aggregate amount
of all payments of principal and interest of the Notes due
in such year, plus (ii) one hundred percent (100%) of the
aggregate amount of principal payments made in such year on
all loans secured by real estate mortgages (other than any
final principal payment on any loan secured by real estate
and the RMS loan).
2. DEFINITIONS. Terms used in this First
Amendment to Credit Agreement that are defined in the
Credit Agreement shall have the respective meanings
ascribed to them in the Credit Agreement.
3. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to the Agent and each of
the Banks that all of the representations and warranties of
the Borrower set forth in Article VIII of the Credit
Agreement are true and correct on and as of the date hereof
and that no Event of Default or Possible Default exists on
such date.
4. NO WAIVER. The execution and delivery
of this First Amendment of Credit Agreement by the Agent
and the Banks shall not constitute a waiver or release of
any obligation or liability of the Borrower under the
Credit Agreement as in effect prior to the effectiveness of
this First Amendment of Credit Agreement or as amended
hereby or waive or release any Event of Default or Possible
Default existing at any time.
5. CONDITIONS TO EFFECTIVENESS. The
amendments to the Credit Agreement herein provided for
shall become effective upon the satisfaction of all of the
following conditions:
(a) The Borrower shall have paid to the
Agent for the Pro rata benefit of the Banks a fee of
$50,000 in respect of the increase in the Commitments
herein provided for;
(b) The Parent shall have executed and
delivered to the Agent and the Banks a First Amendment to
Guaranty of Payment of Debt in form and substance
satisfactory to the Agent, the Banks, and their respective
counsel;
(c) New Revolving Loan Notes in the
respective principal amounts of the Revolving Loan Maximum
for each Bank shall have been duly executed and delivered
by the Borrower to each of the Banks; and
(d) The Agent and the Banks shall have
received such opinions of counsel to the Borrower and the
Parent, certified copies of resolutions of the boards of
directors of the Borrower and the Parent, and such other
documents as shall be required by the Agent, the Banks, or
their respective counsel to evidence and confirm the due
authorization, execution, and delivery of this First
Amendment to Credit Agreement and the new Revolving Loan
Notes by the Borrower and of the First Amendment to
Guaranty of Payment of Debt by the Parent.
6. CONFIRMATION OF CREDIT AGREEMENT. The
Borrower, the Agent, and the Banks hereby confirm that the
Credit Agreement is in full force and effect on the date
hereof, and that, upon the amendments herein provided
becoming effective, the Credit Agreement will continue in
full force and effect in accordance with its terms, as
hereby amended.
IN WITNESS WHEREOF, the parties hereto, each
by an officer thereunto duly authorized, have caused this
First Amendment to Credit Agreement to be executed and
delivered as of the date first above written.
FOREST CITY RENTAL PROPERTIES CORPORATION
By: /s/ Thomas G. Smith
Thomas G. Smith
Title: Assistant Secretary
NATIONAL CITY BANK
By: /s/ Anthony J. Dimare
Anthony J. Dimare
Title: Vice President
THE HUNTINGTON NATIONAL BANK
By: /s/ James R. Logan
James R. Logan
Title: Senior Vice President
COMERICA BANK
By: /s/ John D. Price, III
John D. Price, III
Title: Assistant Vice President
FIRST NATIONAL BANK OF OHIO
By: /s/ John F. Neumann
John F. Neumann
Title: Vice President
SOCIETY NATIONAL BANK
Individually and as Agent
By: /s/ David F. Cerni
David F. Cerni
Title: Vice President
<TABLE>
EXHIBIT A
<CAPTION>
Name Maximum Amount Percentage Revolving Loan Maximum
<S> <C> <C> <C>
Society National Bank $52,500,000 37.5 $30,000,000
National City Bank 27,500,000 19.6 15,710,000
The Huntington
National Bank 20,000,000 14.3 11,430,000
Comerica Bank 20,000,000 14.3 11,430,000
First National Bank
of Ohio 20,000,000 14.3 11,430,000
</TABLE>
CONSENT OF GUARANTOR
FOREST CITY ENTERPRISES, INC., an Ohio corporation
and Guarantor under that certain Guaranty of Payment of Debt issued
on or about July 25, 1994 to and in favor of Society National Bank,
National City Bank, The Huntington National Bank, Comerica Bank,
and First National Bank of Ohio in respect of, inter alia., the
indebtedness of FOREST CITY RENTAL PROPERTIES CORPORATION under the
Credit Agreement referenced in the foregoing First Amendment to
Credit Agreement, hereby acknowledges that it consents to the
foregoing First Amendment of Credit Agreement and confirms and
agrees that its Guaranty of Payment of Debt is and shall remain in
full force and effect with respect to the Credit Agreement as in
effect prior to, and from and after, the amendment thereof pursuant
to the foregoing First Amendment to Credit Agreement.
FOREST CITY ENTERPRISES, INC.
By: /s/ Thomas G. Smith
Thomas G. Smith
Title: Senior V.P. - CFO & Secretary
FIRST AMENDMENT TO GUARANTY OF PAYMENT OF DEBT
THIS FIRST AMENDMENT TO GUARANTY OF PAYMENT
OF DEBT is made and entered into as of this 12th day of
September, 1995 by and among FOREST CITY ENTERPRISES, INC.,
an Ohio corporation ("Parent"), NATIONAL CITY BANK, THE
HUNTINGTON NATIONAL BANK, COMERICA BANK, FIRST NATIONAL
BANK OF OHIO, and SOCIETY NATIONAL BANK (collectively the
"Banks" and individually a "Bank"), and SOCIETY NATIONAL
BANK, as Agent for the Banks (the "Agent").
W I T N E S S E T H:
WHEREAS, Forest City Rental Properties
Corporation ("Borrower"), the Banks, and the Agent entered
into a certain Credit Agreement dated as of July 25, 1994
(the "Credit Agreement");
WHEREAS, the Banks required, as a condition
to entering into the Credit Agreement, that Parent execute
and deliver to the Agent and the Banks a certain Guaranty
of Payment of Debt dated July 25, 1994 (the "Guaranty") and
Parent agreed to and did execute and deliver the Guaranty
to the Agent and the Banks; and
WHEREAS, Borrower, Parent, the Banks, and
the Agent desire to make certain amendments to the Credit
Agreement and, concurrently therewith, to make certain
amendments to the Guaranty;
NOW, THEREFORE, it is mutually agreed as
follows:
1. AMENDMENTS.
(a) Section 9.8 of the Guaranty is hereby
amended to read as follows:
9.8. CASH FLOW. Borrower and Guarantor
will not suffer or permit their Cash Flow to
fall below (a) Fifty-Two Million Five
Hundred Thousand Dollars ($52,500,000) for
their fiscal year ending January 31, 1996,
(b) for their fiscal year ending January 31,
1997, the greater of (i) the sum of Fifty-
Two Million Five Hundred Thousand Dollars
($52,500,000) plus fifty percent (50%) of
the amount, if any, by which their Cash Flow
in their fiscal year ending January 1, 1996
exceeded Fifty-Two Million Five Hundred
Thousand Dollars ($52,500,000) and (ii)
Fifty-Five Million Dollars ($55,000,000),
and (c) with respect to each of their fiscal
years ending after January 31, 1997, the sum
of (i) Fifty-Five Million Dollars
($55,000,000), plus (ii) the cumulative sum
of amounts equal to fifty percent (50%) of
the amount, if any, by which their Cash Flow
in each fiscal year (commencing with their
fiscal year ending January 31, 1998) exceeds
their Cash Flow in the immediately preceding
fiscal year.
(b) Section 9.12(f) of the Guaranty is
hereby amended to read as follows:
(f) any other guaranty by Guarantor,
provided that Guarantor's aggregate personal
liability in respect of all those other
guarantees and all indebtedness for borrowed
money (other than any loan permitted by
clauses (a) through (c), both inclusive, of
Section 9.10 hereof) does not exceed, and
after making the guaranty in question would
not exceed, Four Million Five Hundred
Thousand Dollars ($4,500,000)
(c) Section 9.14 of the Guaranty is hereby
amended to read as follows:
9.14. NET WORTH; ADJUSTED NET WORTH.
(a) Guarantor will not suffer or permit
its Net Worth (determined on a consolidated
basis) at any time to fall below One Hundred
Fifty-Five Million Dollars ($155,000,000)
increased on a cumulative basis by twenty-
five per cent (25%) of Guarantor's Net
Earnings (before Dividends) in each fiscal
year beginning after January 31, 1996.
(b) Guarantor will not suffer or permit its
Net Worth (determined on a consolidated
basis) plus Guarantor's accumulated
depreciation, plus deferred taxes, at any
time to fall below Four Hundred Seventy-Five
Million Dollars ($475,000,000).
2. DEFINITIONS. Terms used in this First
Amendment to Guaranty of Payment of Debt that are defined
in the Guaranty or the Credit Agreement shall have the
respective meanings ascribed to them in the Guaranty or the
Credit Agreement, as the case may be.
3. REPRESENTATIONS AND WARRANTIES. Parent
represents and warrants to the Agent and each of the Banks
that all of the representations and warranties of the
Parent set forth in Section 7 of the Guaranty are true and
correct on and as of the date hereof and that no Event of
Default or Possible Default exists on such date.
4. NO WAIVER. The acceptance, execution
and/or delivery of this First Amendment to Guaranty of
Payment of Debt by the Agent and the Banks shall not
constitute a waiver or release of any obligation or
liability of the Parent under the Guaranty as in effect
prior to the effectiveness of this First Amendment to
Guaranty of Payment of Debt or as amended hereby or waive
or release any Event of Default or Possible Default
existing at any time.
5. CONDITIONS TO EFFECTIVENESS. The
amendments to the Guaranty herein provided for shall become
effective upon the satisfaction of all of the following
conditions:
(a) The Borrower shall have paid to the
Agent for the Pro rata benefit of the Banks a fee of
$50,000 in respect of the increase in the Commitments
provided for in the First Amendment to Credit Agreement
executed contemporaneously herewith;
(b) The Borrower shall have executed and
delivered to the Agent and the Banks a First Amendment to
Credit Agreement (the "First Amendment to Credit
Agreement") in form and substance satisfactory to the
Agent, the Banks, and their respective counsel;
(c) New Revolving Loan Notes in the
respective principal amounts of the Revolving Loan Maximum
for each Bank shall have been duly executed and delivered
by the Borrower to each of the Banks;
(d) The Agent and the Banks shall have
received such opinions of counsel to the Borrower and the
Parent, certified copies of resolutions of the boards of
directors of the Borrower and the Parent, and such other
documents as shall be required by the Agent, the Banks, or
their respective counsel to evidence and confirm the due
authorization, execution, and delivery of the First
Amendment to Credit Agreement and the new Revolving Loan
Notes by the Borrower and of this First Amendment to
Guaranty of Payment of Debt by the Parent; and
(e) No Event of Default or Possible Default
shall exist.
6. CONFIRMATION OF GUARANTY. The Parent
hereby confirms that the Guaranty is in full force and
effect on the date hereof, and that, upon the amendments
herein provided becoming effective, the Guaranty will
continue in full force and effect in accordance with its
terms, as hereby amended. Parent expressly acknowledges
that the First Amendment to Credit Agreement provides,
among other things, for an increase of $10,000,000 in the
maximum aggregate principal amount of Revolving Loans
available under the terms thereof to Borrower, and agrees
that the obligations of the Parent under the Guaranty shall
include such additional Debt as may be incurred by Borrower
from time to time on account of such increase.
IN WITNESS WHEREOF, the parties hereto, each
by an officer thereunto duly authorized, have caused this
First Amendment to Guaranty of Payment of Debt to be
executed and delivered as of the date first above written.
FOREST CITY ENTERPRISES, INC.
By: /s/ Thomas G. Smith
Thomas G. Smith
Title: Senior V.P. - CFO & Secretary
NATIONAL CITY BANK
By: /s/ Anthony J. Dimare
Anthony J. Dimare
Title: Vice President
THE HUNTINGTON NATIONAL BANK
By: /s/ James R. Logan
James R. Logan
Title: Senior Vice President
COMERICA BANK
By: /s/ John D. Price, III
John D. Price, III
Title: Assistant Vice President
FIRST NATIONAL BANK OF OHIO
By: /s/ John F. Neumann
John F. Neumann
Title: Vice President
SOCIETY NATIONAL BANK
Individually and as Agent
By: /s/ David F. Cerni
David F. Cerni
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> OCT-31-1995
<CASH> 22350
<SECURITIES> 0
<RECEIVABLES> 189101
<ALLOWANCES> 6168
<INVENTORY> 32904
<CURRENT-ASSETS> 0
<PP&E> 2431795
<DEPRECIATION> 337612
<TOTAL-ASSETS> 2623233
<CURRENT-LIABILITIES> 0
<BONDS> 1937403
<COMMON> 2997
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 178651
<SALES> 0
<TOTAL-REVENUES> 347369
<CGS> 0
<TOTAL-COSTS> 266191
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96168
<INCOME-PRETAX> (3569)
<INCOME-TAX> (58)
<INCOME-CONTINUING> (3511)
<DISCONTINUED> 0
<EXTRAORDINARY> 1847
<CHANGES> 0
<NET-INCOME> (1664)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> 0
</TABLE>
