FORM 10-Q
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 April 30, 1998
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.)
1100 Terminal Tower
50 Public Square Cleveland, Ohio 44113
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code 216-621-6060
(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 May 31, 1998
Class A Common Stock, $.33 1/3 par value 9,605,436 shares
Class B Common Stock, $.33 1/3 par value 5,383,840 shares
<PAGE>
FOREST CITY ENTERPRISES, INC.
Index
Page No.
Part I. Financial Information:
Item 1. Financial Statements
Forest City Enterprises, Inc. and Subsidiaries
Consolidated Balance Sheets - April 30, 1998
(Unaudited) and January 31, 1998 3
Consolidated Statements of Earnings and Retained
Earnings (Unaudited) - Three Months
Ended April 30, 1998 and 1997 4
Consolidated Statements of Cash Flows (Unaudited) 5 - 6
Three Months Ended April 30, 1998 and 1997
Notes to Consolidated Financial Statements
(Unaudited) 7 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 19
Part II. Other Information
Item I. Legal Proceedings 20
Item 6. Exhibits and Reports on Form 8-K 20 - 27
Signatures 28
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
<TABLE>
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
April 30,1998 January 31, 1998
---------------- ----------------
(Unaudited)
(dollars in thousands, except per share data)
<S> <C> <C>
ASSETS
Real Estate
Completed rental properties $ 2,439,661 $ 2,409,545
Projects under development 301,208 251,416
Land held for development or sale 48,793 43,599
------------- -------------
2,789,662 2,704,560
Less accumulated depreciation (463,378) (448,634)
------------- -------------
Total Real Estate 2,326,284 2,255,926
Cash 73,887 54,854
Notes and accounts receivable, net 187,614 191,719
Inventories 58,110 58,696
Investments in and advances to affiliates 237,550 202,409
Other assets 198,167 199,749
------------- -------------
$ 3,081,612 $ 2,963,353
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage debt, nonrecourse $ 2,056,245 $ 2,018,931
Accounts payable and accrued expenses 338,512 361,398
Notes payable 40,564 34,819
Long-term debt - 114,000
8.5% Senior notes 200,000 -
Deferred income taxes 122,285 117,723
Deferred profit 34,602 34,537
------------- -------------
Total Liabilities 2,792,208 2,681,408
------------- -------------
SHAREHOLDERS' EQUITY
Preferred stock - convertible, without par value;
5,000,000 shares authorized:no shares issued. - -
Common stock - $.33 1/3 par value
Class A, 48,000,000 shares authorized, 9,919,086 and
9,906,686 shares issued, 9,605,436 and 9,593,036
outstanding, respectively. 3,301 3,301
Class B, convertible, 18,000,000 shares authorized,
5,522,890 and 5,535,290 shares issued, 5,383,840
and 5,396,240 outstanding, respectively. 1,844 1,844
------------- --------------
5,145 5,145
Additional paid-in capital 119,421 119,421
Retained earnings 176,323 168,864
-------------- --------------
300,889 293,430
Less treasury stock, at cost: 313,650 Class A
and 139,050 Class B shares. (11,485) (11,485)
------------- --------------
Total Shareholders' Equity 289,404 281,945
------------- --------------
$ 3,081,612 $ 2,963,353
============= ==============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED)
<CAPTION>
Three Months Ended April 30,
------------------------------
1998 1997
---------- ----------
(dollars in thousands, except per share data)
<S> <C> <C>
Revenues $ 148,623 $ 151,068
----------- -----------
Operating expenses 87,236 83,520
Interest expense 36,747 33,109
Depreciation and amortization 21,428 17,542
---------- ----------
145,411 134,171
---------- -----------
Gain (loss) on disposition of properties 11,447 (35,505)
---------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES 14,659 (18,608)
---------- -----------
INCOME TAX EXPENSE (BENEFIT)
Current 1,551 (2,704)
Deferred 4,600 (4,640)
---------- -----------
6,151 (7,344)
---------- -----------
NET EARNINGS BEFORE EXTRAORDINARY GAIN 8,508 (11,264)
Extraordinary gain, net of tax - 11,045
---------- -----------
NET EARNINGS (LOSS) 8,508 (219)
Retained earnings at beginning of period 168,864 152,077
Dividends on common stock - $.07 per share
in 1998 and $.06 per share in 1997 (1,049) (904)
----------- -----------
Retained earnings at end of period $ 176,323 $ 150,954
=========== ===========
BASIC EARNINGS PER COMMON SHARE
Weighted average common shares outstanding 14,989,276 13,111,976
=========== ===========
Net earnings (loss) before extraordinary gain,
net of tax $ 0.57 $ (0.86)
Extraordinary gain, net of tax - 0.84
----------- -----------
NET EARNINGS (LOSS) $ 0.57 $ (0.02)
=========== ===========
DILUTED EARNINGS PER COMMON SHARE
Weighted average common shares outstanding 15,080,176 13,123,518
=========== ===========
Net earnings (loss) before extraordinary gain,
net of tax $ 0.56 $ (0.86)
Extraordinary gain, net of tax - 0.84
----------- -----------
NET EARNINGS (LOSS) $ 0.56 $ (0.02)
=========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
FOREST CITY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended April 30,
-----------------------------
1998 1997
----------- ------------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Rents and other revenues received $ 145,113 $ 150,079
Proceeds from land sales 4,974 3,134
Land development expenditures (9,663) (2,233)
Operating expenditures (102,776) (107,135)
Interest paid (38,419) (39,279)
------------ -----------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (771) 4,566
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (100,564) (50,234)
Proceeds from disposition of assets 31,622 -
Investments in and advances to affiliates (35,141) (4,958)
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES (104,083) (55,192)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of senior notes 200,000 -
Payments of senior notes issuance costs (5,335) -
Increase in nonrecourse mortgage and long-term debt 177,327 45,945
Principal payments on nonrecourse mortgage debt
on real estate (140,014) (14,306)
Payments on long-term debt (114,000) (2,500)
Increase in notes payable 6,613 8,788
Payments on notes payable (867) (9,542)
Decrease in restricted cash 6,830 3,600
Payment of deferred financing costs (5,618) (1,176)
Dividends paid to shareholders (1,049) (787)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 123,887 30,022
---------- -----------
NET INCREASE (DECREASE) IN CASH 19,033 (20,604)
CASH AT BEGINNING OF PERIOD 54,854 41,302
---------- -----------
CASH AT END OF PERIOD $ 73,887 $ 20,698
========== ===========
</TABLE>
<PAGE>
<TABLE>
FOREST CITY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended April 30,
------------------------------
1998 1997
------------ -------------
(in thousands)
<S> <C> <C>
RECONCILIATION OF NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
NET EARNINGS (LOSS) $ 8,508 $ (219)
Depreciation 15,225 14,620
Amortization 6,203 2,922
Deferred income taxes 4,562 449
(Gain) loss on disposition of properties (11,447) 35,505
Extraordinary gain - (18,272)
Increase in land held for development or sale (5,194) (3,357)
Decrease in notes and accounts receivable 4,105 9,177
Decrease in inventories 586 1,905
Increase in other assets (498) (2,408)
Decrease in accounts payable and accrued expenses (22,886) (35,724)
Increase (decrease)in deferred profit 65 (32)
---------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ (771) $ 4,566
========== ===========
</TABLE>
Supplemental Non-Cash Disclosure:
The following items represent the effect of non-cash transactions for 1997:
* Increase in interest in Skylight Office Tower
* Disposition of interest in Toscana
* Reduction of interest in MIT Phase II
<TABLE>
<S> <C> <C>
Operating Activities
Notes and accounts receivable $ - $ (7,035)
Other assets - (121)
Accounts payable and accrued expenses - (6,071)
---------- -----------
Total effect on operating activities $ - $ (13,227)
========== ===========
Investing Activities
Additions to completed rental property $ - $ (3,498)
Dispositions of completed rental property - 53,546
Investments in and advances to affiliates - 4,131
---------- -----------
Total effect on investing activities $ - $ 54,179
========== ===========
Financing Activities
Assumption of non-recourse mortgage debt $ - $ 3,350
Reduction of non-recourse mortgage debt - (44,833)
Notes payable - 531
---------- -----------
Total effect on financing activities $ - $ (40,952)
========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. SENIOR NOTES
On March 16, 1998, the Company issued $200,000,000 of 8.50% Senior Notes,
due March 15, 2008, in a public offering. Proceeds were used to repay
$114,000,000 of its term loan and revolving credit loans. The remaining
proceeds will be used to finance projects currently under development and
to pursue new real estate opportunities. Accrued interest is payable on
March 15 and September 15 of each year. The Senior Notes are unsecured
senior obligations of the Company, however, they are subordinated to all
existing and future indebtedness and other liabilities of the Company's
subsidiaries, including the $222,500,000 revolving credit facility. The
indenture contains covenants providing, among other things, limitations on
the incurrence of additional debt and payment of dividends.
The Senior Notes may be redeemed by the Company, in whole or in part, at
any time on or after March 15, 2003 at redemption prices beginning at
104.25% for the year beginning March 15, 2003 and systematically reduced to
100% in the years thereafter. The Company may also redeem up to 33% of the
original principal amount prior to March 15, 2001 from proceeds of one or
more common stock public offerings at a redemption price of 108.50%.
B. STOCK SPLIT
On June 9, 1998, the Board of Directors declared a two-for-one stock split
of the Company's Class A and Class B common stock payable July 16, 1998 to
shareholders of record on July 1, 1998. Had the stock split occurred at the
beginning of the periods presented in the accompanying Consolidated
Statements of Earnings and Retained Earnings, the earnings per common share
would have been:
Three Months
Ended April 30,
-----------------
1998 1997
------ ------
Basic $.28 $(.01)
Diluted $.28 $(.01)
C. DIVIDENDS
The Board of Directors declared regular quarterly cash dividends on both
Class A and Class B common shares as follows:
Amount
Date Date of Payment Per Share
Declared Record Date (Pre-Split)
-------- ------- ------- -----------
March 18, 1998 June 1, 1998 June 15, 1998 $.07
June 9, 1998 September 1, 1998 September 15, 1998 $.08
D. AUTHORIZED SHARES
On June 9, 1998, the shareholders approved an amendment to the Company's
Articles of Incorporation to increase the Company's authorized shares to:
a) 96,000,000 shares Class A common stock from 48,000,000 shares; and b)
36,000,000 shares of Class B common stock from 18,000,000 shares.
E. STOCK OPTION PLAN
On June 9, 1998, the shareholders approved an amendment to the 1994 Stock
Option Plan to increase the number of shares authorized to be issued under
the Plan from 375,000 shares to 1,125,000 shares (pre-split).
F. NEW ACCOUNTING STANDARDS
In June 1997, FASB issued SFAS 131 "Disclosures about Segments of an
Enterprise and Related Information", which is effective for periods
beginning after December 15, 1997. This statement provides guidance on the
determination of reporting segments and requires interim financial
statement disclosure. The Company does not anticipate that significant
changes to the segment information historically provided in its annual
financial statements will occur as a result of the adoption of SFAS 131 in
its 10K for the year ending January 31, 1999.
In May 1997, FASB issued Statement of Position 97-1 "Accounting by
Participating Mortgage Loan Borrowers". The Company has adopted the
provisions of this Statement in this 10Q for the quarter ended April 30,
1998 and such adoption does not have a material impact on the Company's
financial statements.
<PAGE>
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 months ended April 30, 1998 are not necessarily indicative of results of
operations which may be expected for the full year.
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations of Forest City Enterprises, Inc. should be read in
conjunction with the financial statements and the footnotes thereto contained in
the January 31, 1998 annual report ("Form 10-K").
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
_______________________________________________________________________
GENERAL
The Company develops, acquires, owns and manages commercial and residential real
estate properties in 21 states and the District of Columbia. The Company owns a
portfolio that is diversified both geographically and by property types and
operates through four principal business groups: Commercial Group, Residential
Group, Land Group and Lumber Trading Group.
The Company uses an additional measure, along with net earnings, to report its
operating results. This measure, referred to as Earnings Before Depreciation,
Amortization and Deferred Taxes ("EBDT"), is not a measure of operating results
or cash flows from operations as defined by generally accepted accounting
principles. However, the Company believes that EBDT provides additional
information about its operations and, along with net earnings, is necessary to
understand its operating results. The Company's view is that EBDT is also an
indicator of the Company's ability to generate cash to meet its funding
requirements. EBDT is defined and discussed in detail under "Results of
Operations - EBDT."
EBDT for the first quarter of 1998 was $24,595,000, or $1.63 per share, compared
to $28,447,000 for the first quarter of 1997. Excluding $6,991,000 related to
the litigation settlement for Toscana, a 563-unit apartment complex in Irvine,
California (see "-Other Transactions - Sale of Toscana"), EBDT for the first
quarter of 1997 is $21,456,000, or $1.63 per share. EBDT grew 14.6% in the first
quarter of 1998 over the comparable period of 1997 when the Toscana litigation
settlement is excluded. EBDT per share of common stock remained constant for the
first quarter of 1998 compared to the first quarter of 1997, reflecting the sale
of 1,955,000 shares of Class A common stock in May 1997. The increase in EBDT is
primarily attributable to the opening of an office building and new retail
properties in the New York City area and the acquisition of additional interests
in two Commercial properties.
RESULTS OF OPERATIONS
The Company reports its results of operations by each of its four principal
business groups as it believes it provides the most meaningful understanding of
the Company's financial performance.
The major components of EBDT are Revenues, Operating Expenses and Interest
Expense, each of which is discussed below. Net Operating Income ("NOI") is
defined as Revenues less Operating Expenses. See the information in the table
"Earnings before Depreciation, Amortization and Deferred Taxes" at the end of
this Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Net Operating Income from Real Estate Operations - NOI from the combined
Commercial Group and Residential Group for the first quarter of 1998 was
$60,069,000 compared to $63,606,000 for the first quarter of 1997. NOI in 1997
was affected by the non-recurring $15,000,000 Toscana litigation settlement
income. Adjusting for this item, NOI increased by 23.6%.
COMMERCIAL GROUP
REVENUES. Revenues of the Commercial Group increased $10,432,000, or 13.9%,
to $85,404,000 in the first quarter of 1998 from $74,972,000 in the first
quarter of 1997 . This increase is primarily the result of property openings in
the New York City area during 1997, including Nine MetroTech office building in
Brooklyn, New York ($1,333,000), Gun Hill Road retail center in Bronx, New York
($230,000) and two retail properties in Queens, New York, Northern Boulevard
($812,000) and Grand Avenue ($554,000). Richmond Avenue retail center in Staten
Island, New York opened during the first quarter of 1998 and generated
additional revenues of $228,000, and Atlantic Center, a shopping center which
opened in 1996 in Brooklyn, New York, realized a $513,000 increase in revenues
over the first quarter of 1997. In addition, the Company's increased ownership
in two properties resulted in increases to revenues: Antelope Valley Mall in
Palmdale, California from 40% in 1997 to 78% in 1998 ($747,000) and Station
Square in Pittsburgh, Pennsylvania from 25% to 100% ($1,534,000). Showcase, an
entertainment retail property in Las Vegas, Nevada realized increased revenues
of $527,000 from the opening of additional tenants during 1997. In addition, the
Commercial Group recorded $373,000 in increased revenues from the Ritz-Carlton
Hotel in Cleveland, Ohio, $659,000 from sales of peripheral land adjacent to
three of the Company's regional mall sites and approximately $2,700,000 from
increased revenues from its existing properties.
OPERATING AND INTEREST EXPENSES. During the first quarter of 1998,
operating expenses for the Commercial Group increased $1,228,000, or 3.1%, to
$40,469,000 from $39,241,000 in the first quarter of 1997. The increase in
operating expenses was attributable primarily to costs associated with the
opening of Nine MetroTech ($437,000) and new retail properties ($395,000) and
costs associated with increased occupancy at the Ritz-Carlton Hotel ($292,000).
In addition, operating expenses increased due to the acquisitions of increased
ownership shares of Antelope Valley Mall ($374,000) and Station Square
($1,265,000). These increases were partially offset by decreases in operating
expenses of $465,000 and $401,000 for the shopping center and office portfolios,
respectively, due to decreased energy costs, collection of a litigation
settlement for recovery of $204,000 of prior year expenses and savings of
$234,000 due to the elimination of the lease obligations on two buildings which
formerly housed Handy Andy stores, a tenant which went bankrupt in 1996.
Interest expense for the first quarter of 1998 increased by $425,000, or
1.9% over the first quarter of 1997. The increase is attributable primarily to
the opening of new properties and the acquisitions of additional interests in
Antelope Valley Mall and Station Square.
RESIDENTIAL GROUP
REVENUES. Revenues for the Residential Group decreased by $12,087,000 in
the first quarter of 1998 to $31,264,000 from $43,351,000 in the first quarter
of 1997. Excluding the $15,000,000 in proceeds from the Toscana litigation
settlement received in 1997 (see "Sale of Toscana" below), first quarter 1998
revenues increased $2,913,000, or 10.3%, over the comparable period of 1997.
This increase was primarily attributable to the 1997 acquisitions of Museum
Towers in Philadelphia, Pennsylvania ($894,000), Whitehall Terrace in Kent, Ohio
($326,000) and Colony Woods in Bellevue, Washington ($148,000). In addition,
revenues increased $297,000 over the first quarter of last year from the
expansion of 294 units during 1997 to three apartment communities in Cleveland,
Ohio. Revenues of the existing operating portfolio of the Residential Group
increased approximately $900,000 and development and syndication fees increased
approximately $400,000 during the first quarter of 1998 compared to the first
quarter of 1997.
OPERATING AND INTEREST EXPENSES. Operating expenses for the Residential
Group for the first quarter of 1998 increased by $654,000, or 4.2%, to
$16,130,000 from $15,476,000 in the first quarter of 1997. The increase in
operating expenses is attributable primarily to the 1997 acquisitions of Museum
Towers ($322,000), Colony Woods ($397,000) and Whitehall Terrace ($146,000),
partially offset by a decrease in operating expenses of the apartment portfolio
due to the implementation of operating efficiencies.
Interest expense for the first quarter of 1998 increased by $678,000, or
10.6%, to $7,100,000 from $6,422,000 in the first quarter of 1997. The increase
in interest expense is primarily the result of the acquisitions of three
apartment communities, Museum Towers, Colony Woods and Whitehall Terrace.
LAND GROUP
REVENUES. Revenues for the Land Group increased by $2,411,000, or 94.9%, to
$4,952,000 in the first quarter of 1998 from $2,541,000 in the first quarter of
1997. Sales of land and related earnings vary from period to period, depending
on management's decisions regarding the disposition of significant land
holdings.
OPERATING AND INTEREST EXPENSES. Operating expenses and interest expense
increased by $1,950,000 and $833,000 (or 77.3% and 65.7%), respectively, in the
first quarter of 1998 to $4,474,000 and $2,100,000, respectively, from
$2,524,000 and $1,267,000, respectively, in the first quarter of 1997. The
fluctuation in operating expenses primarily reflects the sales volume in each
year. The increase in interest expense was due primarily to an increased level
of interest-bearing debt.
LUMBER TRADING GROUP
REVENUES. Revenues of the Lumber Trading Group decreased by $3,273,000, or
11.1%, to $26,330,000 in the first quarter of 1998 from $29,603,000 in the first
quarter of 1997. The decrease was due primarily to a reduced level of trading
activity in 1998 compared to 1997 ($2,945,000) and a decrease in volume at
Forest City/Babin, a wholesaler of major appliances, cabinets and hardware to
housing contractors ($328,000).
OPERATING AND INTEREST EXPENSES. Operating expenses in the Lumber Trading
Group decreased in the first quarter of 1998 by $1,841,000, or 7.1% to
$24,206,000 from $26,047,000 in the first quarter of 1997. This decrease
reflected the fluctuation in variable expenses due to decreased trading sales
volume. Interest expense for the first quarter of 1998 increased by $111,000, or
9.2% to $1,316,000 from $1,205,000 in the first quarter of 1997.
CORPORATE ACTIVITIES
REVENUES. Revenues of the Corporate Activities increased $72,000, or 12.0%,
in the first quarter of 1998 to $673,000 from $601,000 in the first quarter of
1997. Corporate Activities revenues consists primarily of interest income on
investments made by the Company and vary from year to year depending on interest
rates and the amount of loans outstanding.
OPERATING AND INTEREST EXPENSES. Operating expenses of Corporate Activities
increased $1,767,000, or 188.1%, in the first quarter of 1998 to $2,706,000 from
$939,000 in the first quarter of 1997. These increases represent general
corporate expenses. Interest expense increased $1,591,000, or 88.4% in the first
quarter of 1998 to $3,390,000 from $1,799,000 in the first quarter of 1997.
Corporate Activities interest expense consists primarily of interest expense on
the 8.50% Senior Notes (issued on March 16, 1998) and the FCRPC Credit Facility
that has not been allocated to a principal business group (see -"Financial
Condition and Liquidity"). Beginning in the fourth quarter of 1997, capitalized
interest on development projects, which was previously reported as Corporate
Activities, is reported by the principal business group developing the project.
Prior years' interest expense for Corporate Activities, Commercial Group and
Residential Group have been restated to reflect this presentation.
OTHER TRANSACTIONS
GAIN (LOSS) ON DISPOSITION OF PROPERTIES - Gain (loss) on disposition of
properties totaled a gain of $6,920,000 in the first quarter of 1998 compared to
a loss of $21,462 in the first quarter of 1997. During the first quarter of
1998, the Company sold its interests in San Vicente, an office building in
Brentwood, California and Courtyard, a strip shopping center in Flint, Michigan.
The Company recognized pre-tax gains on disposition of $10,809,000 on San
Vicente and $638,000 on Courtyard. During 1997, the Company recorded a loss on
disposition of Toscana of $35,505,000 ($21,464,000 after tax - see "Sale of
Toscana").
EXTRAORDINARY GAIN - Extraordinary gain, net of tax, totaled $-0- and
$11,045,000, in the first quarter of 1998 and 1997, respectively. The 1997
extraordinary gain represented pre-tax earnings of $18,272,000 for the
extinguishment of nonrecourse debt and related accrued interest of Toscana (see
"- Sale of Toscana").
SALE OF TOSCANA - During February 1997, the Company sold Toscana, a 563-unit
apartment complex in Irvine, California, back to the original land owner and
settled litigation related to the property. As a result, during the first
quarter of 1997 the Company recorded operating income of $9,157,000, after tax,
a loss on disposition of property of $21,462,000, after tax, and an
extraordinary gain of $11,045,000, after tax, related to the extinguishment of a
portion of the property's nonrecourse mortgage debt. Proceeds from the
litigation settlement resulted in EBDT of $6,991,000 for the year ended January
31, 1998. The net result of these transactions to the Company is after-tax loss
of $1,260,000.
INCOME TAXES - Income tax expense (benefit) for the first quarter of 1998 and
1997 totaled $6,151,000 and ($7,344,000), respectively. At January 31, 1998, the
Company had a tax net operating loss carryforward ("NOL") of $89,903,000
(generated primarily over time in the ordinary course of business from the
significant impact of depreciation expense from real estate properties on the
Company's net earnings) which will expire in the years ending January 31, 2005
through January 31, 2011 and general business credits carryovers of $3,205,000
which will expire in the years ending January 31, 2003 through January 31, 2011.
The Company's policy is to utilize its NOL before it expires and will consider a
variety of strategies to implement that policy.
NET EARNINGS - In the first quarter of 1998, the Company's net earnings grew to
$8,508,000, or $.56 per share of common stock, from a net loss of $219,000, or
$.02 per share of common stock, in the first quarter of 1997.
EBDT - Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDT") is
defined as net earnings from operations before depreciation, amortization and
deferred taxes on income, and excludes provision for decline in real estate,
gain (loss) on disposition of properties and extraordinary gain. The Company
excludes depreciation and amortization expense related to real estate operations
from EBDT because they are non-cash items and the Company believes the values of
its properties, in general, have appreciated, over time, in excess of their
original cost. Deferred income taxes from real estate operations are excluded
because they are a non-cash item. Payment of income taxes has not been
significant and is not expected to be significant in the foreseeable future. The
provision for decline in real estate is excluded from EBDT because it is a
non-cash item that varies from year to year based on factors unrelated to the
Company's overall financial performance. The Company excludes gain (loss) on the
disposition of properties from EBDT because it develops and acquires properties
for long-term investment, not short-term trading gains. As a result, the Company
views dispositions of properties other than commercial outlots or land held by
the Land Group as nonrecurring items. Extraordinary gains are generally the
result of the restructuring of nonrecourse debt obligations and are not
considered to be a component of the Company's operating results.
FINANCIAL CONDITION AND LIQUIDITY
On March 16, 1998, the Company sold $200,000,000 in 8.50% senior notes due March
15, 2008 in a public offering. Proceeds from the sale of these notes were
initially used to repay $114,000,000 outstanding under the FCRPC Credit
Agreement (defined below) with the remainder to be used to finance projects
currently under development and to pursue new real estate opportunities that
arise from current favorable market conditions.
On December 10, 1997, and as amended on January 20, 1998 and March 6, 1998, the
Company replaced its $37,500,000 term loan due July 1, 2001 and its $80,000,000
revolving credit facility with a Forest City Rental Properties Corporation
("FCRPC", a significant subsidiary of the Company) Credit Agreement. The FCRPC
Credit Agreement with a group of nine banks is a $225,000,000 revolving credit
facility maturing December 10, 2000, unless extended, and provides for a
quarterly reduction of $2,500,000 commencing April 1, 1998 and allows for up to
$30,000,000 in outstanding letters of credit, which reduces the revolving credit
available to the Company. As of April 30, 1998, the Company had $-0- recourse
debt outstanding under the FCRPC Credit Agreement.
The FCRPC Credit Agreement provides, among other things, for 1) interest rates
ranging from 1/4% to 3/4% over the prime rate or 2% to 2-1/2% over the London
Interbank Offered Rate ("LIBOR"); 2) maintenance of debt service coverage ratio,
specified level of net worth and cash flow (as defined) and 3) restriction on
dividend payments. The Company has purchased LIBOR interest rate caps for the
debt under the FCRPC credit agreement in the amount of $25,000,000 at 6.5% for
1998 and $45,000,000 at 7.5% for 1999.
The Company believes that its sources of liquidity and capital are adequate. The
Company's principal sources of funds are cash provided by operations, the
Revolving Credit Facility and refinancings of existing properties. The Company's
principal use of funds are the financing of new developments, capital
expenditures and payments on non-recourse mortgage debt on real estate.
The Lumber Trading Group is financed separately from the rest of the Company's
principal business groups, and the financing obligations of Lumber Trading Group
are not recourse to the Company. Accordingly, the liquidity of Lumber Trading
Group is discussed separately below under "Lumber Trading Group Liquidity."
MORTGAGE REFINANCINGS
During the quarter ended April 30, 1998, the Company completed $318,000,000 in
financings, including $176,000,000 in refinancings, $114,000,000 for new
development projects and $28,000,000 in acquisition mortgages. The Company is
pursuing the refinancing of its nonrecourse mortgage debt which matures within
the next 12 months. In addition, the Company is attempting to extend the
maturities and/or refinance the nonrecourse debt that is coming due in 1999 and
2000, generally pursuing long-term fixed rate debt to take advantage of the
recent low interest rate levels.
INTEREST RATE EXPOSURE
At April 30, 1998, the composition of nonrecourse mortgage debt is as follows:
Amount Rate (1)
------ --------
(in thousands)
Fixed $1,276,785 7.83%
Variable -
Swapped (2) 270,991 7.97%
Adjustable 281,437 7.28%
Tax-Exempt 150,909 5.39%
UDAG and other subsidized loans (fixed) 76,123 2.47%
----------
$2,056,245 7.40%
==========
(1) The weighted average interest rates shown above include both the base
index and the lender margin.
(2) Interest rates swaps have an average term of
1.9 years as of April 30, 1998.
With respect to taxable variable-rate debt, the Company generally attempts to
obtain interest rate protection for such debt with a maturity in excess of one
year. In addition, the Company has purchased interest rate cap protection for
its variable-rate debt portfolio in the amount of $293,675,000, $394,503,000 and
$366,751,000 for the fiscal years ending January 31, 1999, 2000 and 2001,
respectively. The Company generally does not hedge tax-exempt debt because,
since 1990, the base rate of this type of financing has averaged only 3.80% and
has never exceeded 7.90%.
At April 30, 1998, a 100 basis point increase in taxable interest rates would
increase the annual pre-tax interest cost of the Company's taxable variable-rate
debt by approximately $2,800,000. Although tax-exempt rates generally increase
in an amount that is smaller than corresponding changes in taxable interest
rates, a 100 basis point increase in tax-exempt interest rates would increase
the annual pre-tax interest cost of the Company's tax-exempt variable-rate debt
by approximately $1,500,000.
LUMBER TRADING GROUP LIQUIDITY
The Lumber Trading Group is separately financed with two lines of credit and an
accounts receivable sale program. These credit facilities are without recourse
to the Company.
At April 30, 1998 Lumber Trading Group's two lines of credit totaled a
$47,000,000 commitment, with an additional $10,000,000 available for up to 90
days through May 31, 1998. These credit lines are secured by the assets of the
Lumber Trading Group and are used by the Trading Group to finance its working
capital needs. At April 30, 1998, the approximately $41,000,000 was available
under these facilities. In June 1998, the lines of credit will be increased by
$10,000,000 to $57,000,000, with an additional $10,000,000 available for up to
90 days through June 30, 1999.
The Lumber Trading Group also has sold an undivided ownership interest in a pool
of accounts receivable of up to a maximum of $90,000,000 and uses this program
to finance its working capital needs. At April 30, 1998, $77,000,000 had been
sold under this accounts receivable program.
The Company believes that the amounts available under these credit facilities,
together with the accounts receivable sale program, will be sufficient to meet
the Lumber Trading Group's liquidity needs.
CASH FLOWS
Net cash (used) provided by operating activities was ($771,000) and $4,566,000
for the quarters ended April 30, 1998 and 1997, respectively. The decrease in
net cash provided by operating activities in 1997 from 1996 is primarily the
result of receipt of $10,000,000 in litigation settlement proceeds in the first
quarter of 1997 which did not recur in 1998, a reduction of $5,072,000 in
collections on notes and accounts receivable primarily from the Lumber Trading
Group, an increase of $1,837,000 in expenditures for land held for development
and an increase in lumber inventories of $1,319,000. These decreases were
partially offset by a $12,838,000 reduction in payment of accounts payable and
accrued expenses primarily from Lumber Trading Group.
Net cash used in investing activities totaled $104,083,000 and $55,192,000 for
the quarters ended April 30, 1998 and 1997, respectively. Capital expenditures,
other than development and acquisition activities, totaled $8,481,000 during the
first quarter of 1998 (including both recurring and investment capital
expenditures) and were financed primarily from cash on hand at the beginning of
the year. During the first quarter of 1998, net cash used in investing
activities reflected the Company's use of $92,083,000 of funds for acquisition
and development activities, which were financed with approximately $33,200,000
in new mortgage indebtedness and proceeds from the issuance of senior notes. In
addition, $31,622,000 was collected in proceeds from the sales of the Company's
interest in San Vicente ($27,244,000) and Courtyard ($4,378,000) and $35,141,000
was used for investments in and advances to affiliates, and includes investments
in The Grand, a syndicated project in North Bethesda, Maryland ($3,615,000) and
The Enclave ($10,212,000) and 101 San Fernando ($19,312,000), both syndicated
projects in San Jose, California. Net cash used in investing activities for the
quarter ended April 30, 1997 included $10,685,000 in capital expenditures other
than development and acquisition activities (including both recurring and
investment capital expenditures) and were financed primarily with cash on hand
at the beginning of the year and cash provided by operations. In addition, the
first quarter of 1997 reflected the use of $39,549,000 of funds for development
and acquisition activities, which were financed with $21,012,000 in new mortgage
indebtedness and borrowings under FCRPC Credit Agreement.
Net cash provided by financing activities totaled $123,887,000 and $30,022,000
in the quarters ended April 30, 1998 and 1997, respectively. Net proceeds from
the issuance of senior notes in March 1998 were $194,665,000, which were
initially used to repay $114,000,000 outstanding under the FCRPC Credit
Agreement. The Company's refinancing of mortgage indebtedness is discussed above
in "Mortgages Refinancings" and borrowings under new mortgage indebtedness for
acquisition and development activities is included in the preceding paragraph
discussing net cash used in investing activities. In addition, net cash provided
by financing activities in the first quarter of 1998 reflected a $6,457,000
increase in net borrowings under Lumber Trading Group's lines of credit, a
reduction of $6,830,000 in restricted cash related to the financing of The
Enclave apartment project in San Jose, California, payment of deferred financing
costs of $5,618,000 and payment of $1,049,000 of dividends. During the first
quarter of 1997, cash provided by financing activities included $8,392,000 in
net borrowings on Lumber Trading Group's lines of credit, the release of
$3,600,000 in restricted cash related to the Atlantic Center retail project in
Brooklyn, New York, repayment of a $6,365,000 note payable relating to the
purchase of the Company's additional 33-1/3% interest in the Pittsburgh Mall,
and payment of $787,000 of dividends.
SHELF REGISTRATION
On December 3, 1997, the Company filed a shelf registration statement with the
Securities and Exchange Commission for the potential offering on a delayed basis
of up to $250,000,000 in debt or equity securities. This registration is in
addition to the shelf registration filed March 4, 1997 of up to $250,000,000 in
debt or equity securities. The Company has sold approximately $82,000,000
through an equity offering completed on May 20, 1997, $200,000,000 through a
debt offering completed on March 16, 1998 and currently the Company has
available on the second shelf registration statement approximately $218,000,000
of debt, equity or any combination thereof.
STOCK SPLIT, CAPITALIZATION AND DIVIDENDS
The Board of Directors has approved a two-for-one stock split of both the
Company's Class A and Class B Common Stock, effective July 16, 1998 to
shareholders of record at the close of business on July 1, 1998. The stock split
will be effected as a stock dividend.
On June 9, 1998, the Board of Directors voted to increase the 1998 quarterly
dividend, adjusted for the two-for-one stock split, to $.04 per share on both
Class A and Class B, representing a 14.3% annual increase in the previous
quarterly dividend.
The first 1998 quarterly dividend of $.07 per share (on a pre-split basis) on
shares of both Class A and Class B Common Stock was paid on March 16, 1998 to
shareholders of record at the close of business on March 2, 1998. The second
1998 quarterly dividend of $.07 per share (on a pre-split basis) on shares of
both Class A and Class B Common Stock will be paid on June 15, 1998 to
shareholders of record at the close of business on June 1, 1998. The third 1998
quarterly dividend of $.04 per share (post-split) on shares of both Class A and
Class B Common Stock will be paid on September 15, 1998 to shareholders of
record at the close of business on September 1, 1998.
On June 9, 1998, the shareholders approved an amendment to the Company's
Articles of Incorporation to increase the Company's capitalization to a)
96,000,000 shares of Class A Common Stock from 48,000,000 shares and b)
36,000,000 shares of Class B Common Stock from 18,000,000 shares. The 5,000,000
Preferred shares remained unchanged.
YEAR 2000
Management has undertaken a program to prepare the Company's financial and
operating computer systems and ancillary applications for the year 2000. All
necessary software modifications are expected to occur in a timely manner at a
cost which is not expected to be material.
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
This 10Q, together with other statements and information publicly disseminated
by the Company, contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements reflect
management's current views with respect to financial results related to future
events and are based on assumptions and expectations which may not be realized
and are inherently subject to risks and uncertainties, many of which cannot be
predicted with accuracy and some of which might not even be anticipated. Future
events and actual results, financial or otherwise, may differ from the results
discussed in the forward-looking statements. Risks and other factors that might
cause differences, some of which could be material, include, but are not limited
to, the effect of economic and market conditions on a nation-wide basis as well
as regionally in areas where the Company has a geographic concentration of
properties; failure to consummate financing arrangements; development risks,
including lack of satisfactory financing, construction and lease-up delays and
cost overruns; the level and volatility of interest rates; financial stability
of tenants within the retail industry, which may be impacted by competition and
consumer spending; the rate of revenue increases versus expenses increases; the
cyclical nature of the lumber wholesaling business; as well as other risks
listed from time to time in the Company's reports filed with the Securities and
Exchange Commission. The Company has no obligation to revise or update any
forward-looking statements as a result of future events or new information.
Readers are cautioned not to place undue reliance on such forward-looking
statements.
<PAGE>
<TABLE>
FOREST CITY ENTERPRISES, INC.
EARNINGS BEFORE DEPRECIATION, AMORTIZATION AND DEFERRED TAXES
FOR THE QUARTERS ENDED APRIL 30, 1998 AND 1997
(IN THOUSANDS)
<CAPTION>
Commercial Group Residential Group Land Group
-------------------- -------------------- ---------------------
1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 85,404 $ 74,972 $ 31,264 $ 43,351 $ 4,952 $ 2,541
Operating expenses,
including depreciation
and amortization for non-
real estate Groups 40,469 39,241 16,130 15,476 4,474 2,524
Interest expense 22,841 22,416 7,100 6,422 2,100 1,267
Income tax provision 1,276 64 507 6,793 (640) (490)
--------- --------- --------- --------- ---------- ----------
64,586 61,721 23,737 28,691 5,934 3,301
--------- --------- --------- --------- ---------- ----------
Earnings before
depreciation, amortization
and deferred taxes
(EBDT) $ 20,818 $ 13,251 $ 7,527 $14,660 $ (982) $ (760)
========= ========= ========= ========= ========== ==========
Lumber Trading Group Corporate Activities Total
-------------------- -------------------- ---------------------
1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- ---------- ----------
Revenues $ 26,330 $ 29,603 $ 673 $ 601 $ 148,623 $ 151,068
Operating expenses,
including depreciation
and amortization for non-
real estate groups 24,206 26,047 2,706 939 87,985 84,227
Interest expense 1,316 1,205 3,390 1,799 36,747 33,109
Income tax provision 415 1,045 (2,262) (2,127) (704) 5,285
--------- --------- --------- --------- ---------- ----------
25,937 28,297 3,834 611 124,028 122,621
--------- --------- --------- --------- ---------- ----------
Earnings before
depreciation, amortization
and deferred tax
(EBDT) $ 393 $ 1,306 ($3,161) ($ 10) $ 24,595 $ 28,447
========= ========= ========= ========= ========== ==========
Reconciliation to net earnings:
Earnings before depreciation,
amortization and deferred taxes (EBDT) $ 24,595 $ 28,447
Depreciation and amortization - real estate Groups (20,679) (16,835)
Deferred taxes - real estate Groups (2,328) (1,414)
Provision for decline in real estate, net of tax 0 0
Gain on disposition of properties, net of tax 6,920 (21,462)
Extraordinary gain, net of tax 0 11,045
---------- ----------
Net earnings $ 8,508 $ (219)
========== ==========
</TABLE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
An action was filed in August 1997 against Forest City Trading Group, Inc.
(a wholly-owned subsidiary of the Company) and 10 of its subsidiaries, all of
which are in the business of trading lumber. The complaint alleges improper
calculation and underpayment of commissions and other related claims. Plaintiffs
purport to represent a class of 300 to 500 traders who are current and former
employees of Forest City Trading Group, Inc. and its 10 subsidiaries. Plaintiffs
have not moved for class certification as of this date and no class has been
certified. The Company believes that any exposure will be limited to Forest City
Trading Group, Inc. and its subsidiaries. The Company intends to defend the suit
vigorously and the litigation is not expected to have a material adverse effect
upon the financial condition, results of operations or cash flows of the
Company.
The Company, through subsidiaries, owns a 14.6% interest in the Seven Hills
development, located in Henderson, Nevada, which is owned by the Silver Canyon
Partnership and is being developed in conjunction with a golf course. In August,
1997, a class-action lawsuit was filed by the current homeowners in Seven Hills
against the Silver Canyon Partnership, the golf course developers, and other
entities, including the Company. In addition, separate lawsuits were filed by
some of the production homebuilding companies at Seven Hills, against some of
the same parties, not including the Company. Each of these lawsuits seek a
commitment for public play on the golf course, as well as damages, The Silver
Canyon Partnership, the Company and its subsidiaries are responding to each of
these suits, and are attempting to reach an appropriate resolution with all
parties involved. Sales efforts are continuing at the Seven Hills development,
and because these events are recent, it is not yet possible to determine the
extent of any impact on the Partnership's financial performance. The Company
believes it has meritorious defenses to these claims and intends to defend
against them vigorously. The Company believes that any exposure will be limited
to the Silver Canyon Partnership and is not expected to have a material adverse
effect upon the financial condition, results of operations or cash flows of the
Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 - Amended Articles of Incorporation adopted as of October 11, 1983,
incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q
for the quarter ended October 31, 1983 (File No. 1-4372).
3.2 - Code of Regulations as amended June 14, 1994, incorporated by
reference to Exhibit 3.2 to the Company's Form 10-K for the fiscal
year ended January 31, 1997 (File No.1-4372).
3.3 - Certificate of Amendment by Shareholders to the Articles of
Incorporation of Forest City Enterprises, Inc. dated June 24, 1997,
incorporated by reference to Exhibit 4.14 to the Company's
Registration Statement on Form S-3 (Registration No. 333-41437).
4.1 - Form of Senior Subordinated Indenture between the Company and
National City Bank, as Trustee thereunder, incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement on Form S-3
(Registration No.333-22695).
4.2 - Form of Junior Subordinated Indenture between the Company and
National City Bank, as Trustee thereunder, incorporated by reference
to Exhibit 4.2 to the Company's Registration Statement on Form S-3
(Registration No.333-22695).
4.3 - Form of Senior Subordinated Indenture between the Company and The
Bank of New York, as Trustee thereunder, incorporated by reference to
Exhibit 4.22 to the Company's Registration Statement on Form S-3
(Registration No.333-41437).
10.1 - Credit Agreement, dated as of December 10, 1997, by and among Forest
City Rental Properties Corporation, the banks named therein, KeyBank
National Association, as administrative agent, and National City Bank,
as syndication agent, incorporated by reference to Exhibit 10.38 to
the Company's Form 10-Q for the quarter ended October 31, 1997 (File
No.1-4372).
10.2 - Guaranty of Payment of Debt, dated as of December 10, 1997, by and
among Forest City Enterprises, Inc., the banks named therein, KeyBank
National Association, as administrative agent, and National City Bank,
as syndication agent, incorporated by reference to Exhibit 10.39 to
the Company's Form 10-Q for the quarter ended October 31, 1997 (File
No.1-4372).
10.3 - First Amendment to Credit Agreement, dated as of January 20, 1998,
by and among Forest City Rental Properties Corporation, the banks
named therein, KeyBank National Association, as administrative agent,
and National City Bank, as syndication agent, incorporated by
reference to Exhibit 4.19 to the Company's Registration Statement on
Form S-3 (File No. 333-41437).
10.4 - First Amendment to Guaranty of Payment of Debt, dated as of January
20, 1998, by and among Forest City Enterprises, Inc., the banks named
therein, KeyBank National Association, as administrative agent, and
National City Bank, as syndication agent, incorporated by reference to
Exhibit 4.20 to the Company's Registration Statement on Form S-3 (File
No. 333-41437).
10.5 - Letter Agreement, dated as of February 25, 1998, by and among Forest
City Enterprises, Inc., Forest City Rental Properties Corporation, the
banks named therein, KeyBank National Association, as administrative
agent, and National City Bank, as syndication agent, incorporated by
reference to Exhibit 4.21 to the Company's Registration Statement on
Form S-3 (File No.333-41437).
10.6 - Second Amendment to Credit Agreement, dated as of March 6, 1998, by
and among Forest City Rental Properties Corporation, the banks named
therein, KeyBank National Association, as administrative agent, and
National City Bank, as syndication agent, incorporated by reference to
Exhibit 10.1 to the Company's Form 8-K, dated March 6, 1998 (File No.
1-4372).
10.7 - Second Amendment to Guaranty of Payment of Debt, dated as of March
6, 1998, by and among Forest City Enterprises, Inc., the banks named
therein, KeyBank National Association, as administrative agent, and
National City Bank, as syndication agent, incorporated by reference to
Exhibit 10.2 to the Company's Form 8-K, dated March 6, 1998 (File No.
1-4372).
10.8 - Stock Purchase Agreement, dated May 7, 1997, between Forest City
Enterprises, Inc. and Richard Miller, Aaron Miller and Gabrielle
Miller, incorporated by reference to Exhibit 10.34 to the Company's
Form 10-Q for the quarter ended April 30, 1997 (File No. 1-4372).
10.9 - Letter Agreement, dated August 14, 1997, adjusting the interest rate
in the Stock Purchase Agreement, dated May 7, 1997, between Forest
City Enterprises, Inc. and Richard Miller, Aaron Miller and Gabrielle
Miller, incorporated by reference to Exhibit 10.35 to the Company's
Form 10-Q for the quarter ended July 31, 1997 (File No. 1-4372).
10.10- Supplemental Unfunded Deferred Compensation Plan for Executives,
incorporated by reference to Exhibit 10.9 to the Company's Form 10-K
for the year ended January 31, 1997 (File No. 1-4372).
10.11- Deferred Compensation Agreement between Forest City Enterprises,
Inc. and Thomas G. Smith, dated December 27, 1995, incorporated by
reference to Exhibit 10.33 to the Company's Form 10-K for the year
ended January 31, 1997 (File No. 1-4372).
10.12- 1994 Stock Option Plan, including forms of Incentive Stock Option
Agreement and Nonqualified Stock Option Agreement, incorporated by
reference to Exhibit 10.10 to the Company's Form 10-K for the year
ended January 31, 1997 (File No. 1-4372).
10.13- Employment Agreement entered into as of September 25, 1989 by the
Company and Albert B. Ratner, incorporated by reference to Exhibit
10.11 to the Company's Form 10-K for the year ended January 31, 1997
(File No.1-4372).
10.14- First Amendment to Employment Agreement entered into as of December
6, 1996 by the Company and Albert B. Ratner, incorporated by reference
to Exhibit 10.12 to the Company's Form 10-K for the year ended January
31, 1997 (File No. 1-4372).
10.15- Employment Agreement entered into on April 6, 1998, effective as of
February 1, 1997, by the Company and Samuel H. Miller, incorporated by
reference to Exhibit 10.15 to the Company's Form 10-K for the year
ended January 31, 1998 (File No. 1-4372).
10.16- Employment Agreement entered into on April 6, 1998, effective as of
February 1, 1997, by the Company and Charles A. Ratner, incorporated
by reference to Exhibit 10.16 to the 10-K for the year ended January
31, 1998 (File No. 1-4372).
10.17- First Amendment to Employment Agreement (dated April 6, 1998)
entered into as of April 24, 1998 by the Company and Charles A.
Ratner, incorporated by reference to Exhibit 10.17 to the Company's
Form 10-K for the year ended January 31, 1998 (File No. 1-4372).
10.18- First Amendment to Employment Agreement (dated December 6, 1996 and
superseded by Employment Agreement dated April 6, 1998) entered into
as of December 6, 1996 by the Company and Charles A. Ratner,
incorporated by reference to Exhibit 10.18 to the Company's Form 10-K
for the year ended January 31, 1997 (File No.1-4372).
10.19- Employment Agreement entered into on April 6, 1998, effective as of
February 1, 1997, by the Company and James A. Ratner,incorporated by
reference to Exhibit 10.19 to the Company's Form 10-K for the year
ended January 31, 1998 (File No. 1-4372).
10.20- Employment Agreement entered into on April 6, 1998, effective as of
February 1, 1997, by the Company and Ronald A. Ratner, incorporated by
reference to Exhibit 10.20 to the Company's Form 10-K for the year
ended January 31, 1998 (File No. 1-4372).
10.21- Employment Agreement entered into as of September 25, 1989 by the
Company and Nathan P. Shafran, incorporated by reference to Exhibit
10.14 to the Company's Form 10-K for the year ended January 31, 1997
(File No. 1-4372).
10.22- Split Dollar Insurance Agreement and Assignment of Life Insurance
Policy as Collateral between Deborah Ratner Salzberg and Forest City
Enterprises, Inc., insuring the lives of Albert Ratner and Audrey
Ratner, dated June 26, 1996, incorporated by reference to Exhibit
10.19 to the Company's Form 10-K for the year ended January 31, 1997
(File No. 1-4372).
10.23- Split Dollar Insurance Agreement and Assignment of Life Insurance
Policy as Collateral between Brian J. Ratner and Forest City
Enterprises, Inc., insuring the lives of Albert Ratner and Audrey
Ratner, dated June 26, 1996, incorporated by reference to Exhibit
10.20 to the Company's Form 10-K for the year ended January 31, 1997
(File No. 1-4372).
10.24- Letter Supplement to Split Dollar Insurance Agreement and
Assignment of Life Insurance Policy as Collateral between Brian J.
Ratner and Forest City Enterprises, Inc., insuring the lives of Albert
Ratner and Audrey Ratner, effective June 26, 1996, incorporated by
reference to Exhibit 10.21 to the Company's Form 10-K for the year
ended January 31, 1997 (File No.1-4372).
10.25- Letter Supplement to Split Dollar Insurance Agreement and
Assignment of Life Insurance Policy as Collateral between Deborah
Ratner Salzberg and Forest City Enterprises, Inc., insuring the lives
of Albert Ratner and Audrey Ratner, effective June 26, 1996,
incorporated by reference to Exhibit 10.22 to the Company's Form 10-K
for the year ended January 31, 1997 (File No.1-4372).
10.26- Split Dollar Insurance Agreement and Assignment of Life Insurance
Policy as Collateral between Albert B. Ratner and James Ratner,
Trustees under the Charles Ratner 1992 Irrevocable Trust Agreement and
Forest City Enterprises, Inc., insuring the lives of Charles Ratner
and Ilana Horowitz (Ratner), dated November 2, 1996, incorporated by
reference to Exhibit 10.23 to the Company's Form 10-K for the year
ended January 31, 1997 (File No. 1-4372).
10.27- Split Dollar Insurance Agreement and Assignment of Life Insurance
Policy as Collateral between Albert B. Ratner and James Ratner,
Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and
Forest City Enterprises, Inc., insuring the life of Charles Ratner,
dated October 24, 1996, incorporated by reference to Exhibit 10.24 to
the Company's Form 10-K for the year ended January 31, 1997 (File No.
1-4372).
10.28- Split Dollar Insurance Agreement and Assignment of Life Insurance
Policy as Collateral between Albert B. Ratner and James Ratner,
Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and
Forest City Enterprises, Inc., insuring the life of Charles Ratner,
dated October 24, 1996, incorporated by reference to Exhibit 10.25 to
the Company's Form 10-K for the year ended January 31, 1997 (File No.
1-4372).
10.29- Split Dollar Insurance Agreement and Assignment of Life Insurance
Policy as Collateral between Albert B. Ratner and James Ratner,
Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and
Forest City Enterprises, Inc., insuring the life of Charles Ratner,
dated October 24, 1996, incorporated by reference to Exhibit 10.26 to
the Company's Form 10-K for the year ended January 31, 1997 (File No.
1-4372).
10.30- Split Dollar Insurance Agreement and Assignment of Life Insurance
Policy as Collateral between Albert B. Ratner and James Ratner,
Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and
Forest City Enterprises, Inc., insuring the life of Charles Ratner,
dated October 24, 1996, incorporated by reference to Exhibit 10.27 to
the Company's Form 10-K for the year ended January 31, 1997 (File No.
1-4372).
10.31- Split Dollar Insurance Agreement and Assignment of Life Insurance
Policy as Collateral between Albert B. Ratner and James Ratner,
Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and
Forest City Enterprises, Inc., insuring the life of Charles Ratner,
dated October 24, 1996, incorporated by reference to Exhibit 10.28 to
the Company's Form 10-K for the year ended January 31, 1997 (File No.
1-4372).
10.32- Split Dollar Insurance Agreement and Assignment of Life Insurance
Policy as Collateral between Albert B. Ratner and James Ratner,
Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and
Forest City Enterprises, Inc., insuring the life of Charles Ratner,
dated October 24, 1996, incorporated by reference to Exhibit 10.29 to
the Company's Form 10-K for the year ended January 31, 1997 (File No.
1-4372).
10.33- Split Dollar Insurance Agreement and Assignment of Life Insurance
Policy as Collateral between Albert B. Ratner and James Ratner,
Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and
Forest City Enterprises, Inc., insuring the life of Charles Ratner,
dated October 24, 1996, incorporated by reference to Exhibit 10.30 to
the Company's Form 10-K for the year ended January 31, 1997 (File No.
1-4372).
10.34- Split Dollar Insurance Agreement and Assignment of Life Insurance
Policy as Collateral between Albert B. Ratner and James Ratner,
Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and
Forest City Enterprises, Inc., insuring the life of Charles Ratner,
dated October 24, 1996, incorporated by reference to Exhibit 10.31 to
the Company's Form 10-K for the year ended January 31, 1997 (File No.
1-4372).
10.35- Letter Supplement to Split Dollar Insurance Agreement and
Assignment of Life Insurance Policy as Collateral between James Ratner
and Albert Ratner, Trustees under the Charles Ratner 1992 Irrevocable
Trust Agreement and Forest City Enterprises, Inc., insuring the lives
of Charles Ratner and Ilana Ratner, effective November 2, 1996,
incorporated by reference to Exhibit 10.32 to the Company's Form 10-K
for the year ended January 31, 1997 (File No. 1-4372).
* 27 - Financial Data Schedules.
* - Filed herewith.
(b) Reports on Form 8-K:
The Company filed a Form 8-K, dated March 6, 1998, to submit the Second
Amendments to the Credit Agreement and the Guaranty of Payment of Debt.
<PAGE>
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 June 12, 1998 /s/ Thomas G. Smith
Thomas G. Smith, Senior Vice President
and Chief Financial Officer
Date June 12, 1998 /s/ Linda M. Kane
Linda M. Kane, Vice President,
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> APR-30-1998
<CASH> 73887
<SECURITIES> 0
<RECEIVABLES> 195357
<ALLOWANCES> 7743
<INVENTORY> 58110
<CURRENT-ASSETS> 0
<PP&E> 2789662
<DEPRECIATION> 463378
<TOTAL-ASSETS> 3081612
<CURRENT-LIABILITIES> 0
<BONDS> 2256245
<COMMON> 5145
0
0
<OTHER-SE> 295744
<TOTAL-LIABILITY-AND-EQUITY> 3081612
<SALES> 0
<TOTAL-REVENUES> 148623
<CGS> 0
<TOTAL-COSTS> 108664
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36747
<INCOME-PRETAX> 14659
<INCOME-TAX> 6151
<INCOME-CONTINUING> 8508
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8508
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.56
</TABLE>
