<PAGE> 1
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, 2000
--------------------------------
Commission file number 1-4372
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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.)
Terminal Tower 50 Public Square
Suite 1100 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 June 6, 2000
----- ----------------------------
Class A Common Stock, $.33 1/3 par value 19,372,856 shares
Class B Common Stock, $.33 1/3 par value 10,659,096 shares
<PAGE> 2
FOREST CITY ENTERPRISES, INC.
Index
-----
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information:
Item 1. Financial Statements
Forest City Enterprises, Inc. and Subsidiaries
Consolidated Balance Sheets - April 30, 2000
(Unaudited) and January 31, 2000 3
Consolidated Statements of Earnings
(Unaudited) - Three Months
Ended April 30, 2000 and 1999 4
Consolidated Statements of Shareholders' Equity
(Unaudited) - Three Months Ended
April 30, 2000 and 1999 5
Consolidated Statements of Cash Flows (Unaudited) -
Three Months Ended April 30, 2000 and 1999 6 - 7
Notes to Consolidated Financial Statements
(Unaudited) 8 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 22
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 23 - 26
Part II. Other Information
Item 1. Legal Proceedings 27
Item 6. Exhibits and Reports on Form 8-K 28 - 35
Signatures 36
</TABLE>
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
-----------------------------
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, 2000 January 31, 2000
-------------- ----------------
(Unaudited)
ASSETS (dollars in thousands, except per share data)
<S> <C> <C>
Real Estate
Completed rental properties $ 2,834,228 $ 2,894,890
Projects under development 568,174 478,766
Land held for development or sale 59,266 52,852
----------- -----------
Real Estate, at cost 3,461,668 3,426,508
Less accumulated depreciation (550,994) (547,479)
----------- -----------
Total Real Estate 2,910,674 2,879,029
Cash and equivalents 36,139 97,195
Restricted cash 100,471 76,662
Notes and accounts receivable, net 201,691 226,749
Inventories 54,803 57,444
Investments in and advances to real estate affiliates 297,058 318,308
Other assets 158,529 159,087
----------- -----------
$ 3,759,365 $ 3,814,474
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage debt, nonrecourse $ 2,379,952 $ 2,382,380
Accounts payable and accrued expenses 343,611 409,390
Notes payable 45,958 62,898
Long-term debt 162,500 167,000
8.5% Senior notes 200,000 200,000
Deferred income taxes 184,498 174,661
Deferred profit 31,399 31,639
----------- -----------
Total Liabilities 3,347,918 3,427,968
----------- -----------
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, 96,000,000 shares authorized, 19,946,756
shares issued, 19,372,406 shares outstanding 6,649 6,649
Class B, convertible, 36,000,000 shares authorized, 10,937,196
shares issued, 10,659,096 shares outstanding 3,646 3,646
----------- -----------
10,295 10,295
Additional paid-in capital 113,799 113,764
Retained earnings 280,110 254,063
----------- -----------
404,204 378,122
Less treasury stock, at cost; 574,350 Class A
and 278,100 Class B shares (10,773) (10,773)
Accumulated other comprehensive income 18,016 19,157
----------- -----------
Total Shareholders' Equity 411,447 386,506
----------- -----------
$ 3,759,365 $ 3,814,474
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended April 30,
----------------------------
2000 1999
---- ----
(in thousands, except per share data)
<S> <C> <C>
REVENUES $186,618 $181,694
-------- --------
Operating expenses 108,086 112,890
Interest expense 43,026 39,645
Depreciation and amortization 22,002 19,976
-------- --------
173,114 172,511
-------- --------
Gain on disposition of properties and other investments 30,721 -
-------- --------
EARNINGS BEFORE INCOME TAXES 44,225 9,183
-------- --------
INCOME TAX EXPENSE
Current 6,093 2,590
Deferred 10,583 1,299
-------- --------
16,676 3,889
-------- --------
NET EARNINGS BEFORE EXTRAORDINARY GAIN 27,549 5,294
Extraordinary gain, net of tax - 214
-------- --------
NET EARNINGS $ 27,549 $ 5,508
======== ========
BASIC EARNINGS PER COMMON SHARE
Net earnings before extraordinary gain $ 0.92 $ 0.17
Extraordinary gain, net of tax - 0.01
-------- --------
NET EARNINGS $ 0.92 $ 0.18
======== ========
DILUTED EARNINGS PER COMMON SHARE
Net earnings before extraordinary gain $ 0.91 $ 0.17
Extraordinary gain, net of tax - $ 0.01
-------- --------
NET EARNINGS $ 0.91 $ 0.18
======== ========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
--------------------------------------
Class A Class B Additional
Comprehensive -------------------------------------- Paid-In Retained
Income Shares Amount Shares Amount Capital Earnings
------------- --------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
QUARTER ENDED APRIL 30, 2000
----------------------------
Balances at January 31, 2000 19,947 $6,649 10,937 $3,646 $113,764 $254,063
Comprehensive income
Net earnings $27,549 27,549
Other comprehensive income, net of tax
Unrealized gain on securities 1,179
Less reclassification adjustment
for gain included in net earnings (2,320)
--------
Total comprehensive income $26,408
========
Dividends $.05 per share (1,502)
Amortization of unearned compensation 35
-----------------------------------------------------------------
BALANCES AT APRIL 30, 2000 19,947 $6,649 10,937 $3,646 $113,799 $280,110
-----------------------------------------------------------------
QUARTER ENDED APRIL 30, 1999
----------------------------
Balances at January 31, 1999 19,905 $6,636 10,979 $3,661 $114,270 $218,967
Comprehensive income
Net earnings $5,508 5,508
Other comprehensive income, net of tax
Unrealized gain on securities 4,390
--------
Total comprehensive income $9,898
========
Dividends: $.04 per share (1,199)
Conversion of Class B shares
to Class A shares 2 1 (2) (1)
Exercise of stock options 3
-----------------------------------------------------------------
BALANCES AT APRIL 30, 1999 19,907 $6,637 10,977 $3,660 $114,273 $223,276
-----------------------------------------------------------------
<CAPTION>
Treasury Stock Accumulated Other
-------------------- Comprehensive
Shares Amount Income Total
--------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
QUARTER ENDED APRIL 30, 2000
----------------------------
Balances at January 31, 2000 852 $(10,773) $19,157 $386,506
Comprehensive income
Net earnings 27,549
Other comprehensive income, net of tax
Unrealized gain on securities 1,179 1,179
Less reclassification adjustment
for gain included in net earnings (2,320) (2,320)
Total comprehensive income
Dividends $.05 per share (1,502)
Amortization of unearned compensation 35
--------------------------------------------------
BALANCES AT APRIL 30, 2000 852 $(10,773) $18,016 $411,447
--------------------------------------------------
QUARTER ENDED APRIL 30, 1999
----------------------------
Balances at January 31, 1999 901 $(11,426) $ - $332,108
Comprehensive income
Net earnings 5,508
Other comprehensive income, net of tax
Unrealized gain on securities 4,390 4,390
Total comprehensive income
Dividends: $.04 per share (1,199)
Conversion of Class B shares
to Class A shares -
Exercise of stock options (1) 18 21
--------------------------------------------------
BALANCES AT APRIL 30, 1999 900 $(11,408) $4,390 $340,828
--------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
FOREST CITY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended April 30,
----------------------------
2000 1999
----------- -----------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Rents and other revenues received $ 199,918 $ 195,937
Proceeds from land sales 11,009 6,616
Land development expenditures (21,211) (15,606)
Operating expenditures (132,052) (121,118)
Interest paid (45,064) (42,399)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 12,600 23,430
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (104,005) (81,328)
Proceeds from disposition of properties and other investments 90,975 --
Change in investments in and advances to real estate affiliates 21,231 (14,362)
--------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 8,201 (95,690)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in nonrecourse mortgage and long-term debt 58,235 137,633
Principal payments on nonrecourse mortgage debt on real estate (60,663) (73,431)
Payments on long-term debt (4,500) --
Increase in notes payable 4,112 19,744
Payments on notes payable (21,052) (21,688)
Change in restricted cash and book overdrafts (52,853) (1,269)
Payment of deferred financing costs (3,634) (916)
Sale of treasury stock -- 21
Dividends paid to shareholders (1,502) (1,199)
--------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (81,857) 58,895
--------- ---------
NET DECREASE IN CASH AND EQUIVALENTS (61,056) (13,365)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 97,195 78,629
--------- ---------
CASH AND EQUIVALENTS AT END OF PERIOD $ 36,139 $ 65,264
========= =========
</TABLE>
6
<PAGE> 7
FOREST CITY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended April 30,
-------------------------------------
2000 1999
------------------ -----------------
(in thousands)
<S> <C> <C>
RECONCILIATION OF NET EARNINGS TO CASH PROVIDED BY OPERATING ACTIVITIES
NET EARNINGS $ 27,549 $ 5,508
Depreciation 18,312 17,257
Amortization 3,690 2,719
Deferred income taxes 10,583 843
Gain on disposition of properties and other investments (30,721) -
Extraordinary gain - (353)
Decrease in commercial land included in projects under development 415 10,126
Increase in land held for development or sale (6,414) (12,008)
Decrease in notes and accounts receivable 25,058 20,985
Decrease (increase) in inventories 2,641 (9,386)
Decrease in other assets 2,257 9,479
Decrease in accounts payable and accrued expenses (40,530) (21,614)
Decrease in deferred profit (240) (126)
------------------ -----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 12,600 $ 23,430
================== =================
</TABLE>
See notes to consolidated financial statements.
7
<PAGE> 8
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. GAIN ON DISPOSITION OF PROPERTIES AND OTHER INVESTMENTS
During the first quarter of 2000, the Company recorded gains on the
disposition of properties and other investments totaling $30,721,000,
or $19,573,000 net of estimated taxes. The Company recognized gains on
the disposition of two apartment communities in California: Studio
Colony ($26,308,000) and Highlands ($575,000). The Studio Colony
disposition was structured as a tax-free exchange. The Company also
recognized gains totaling $3,838,000 from the sale of
available-for-sale equity securities.
B. DIVIDENDS
The Board of Directors declared regular quarterly cash dividends on
both Class A and Class B common shares as follows:
<TABLE>
<CAPTION>
Date Date of Payment Amount
Declared Record Date Per Share
-------- -------- ---------- ---------
<S> <C> <C> <C>
March 10, 2000 June 1, 2000 June 15, 2000 $.05
June 7, 2000 September 1, 2000 September 15, 2000 $.06
</TABLE>
C. EARNINGS PER SHARE
Reconciliations of the numerator and denominator of basic earnings per
share (EPS) with diluted EPS follows:
<TABLE>
<CAPTION>
Net Earnings Net Earnings
Before Weighted Average Before
Extraordinary Gain Shares Outstanding Extraordinary Gain
(Numerator) (Denominator) (Per Share)
----------- ------------- -----------
<S> <C> <C> <C>
Three Months Ended
April 30, 2000:
Basic EPS $ 27,549,000 30,031,502 $0.92
Dilutive effect of
stock options - 180,890 (.01)
------------- ----------- --------
Diluted EPS $ 27,549,000 30,212,392 $0.91
============= =========== ========
Three Months Ended
April 30, 1999:
Basic EPS $ 5,294,000 29,983,626 $0.17
Dilutive effect of
stock options - 178,864 -
------------- ----------- --------
Diluted EPS $ 5,294,000 30,162,490 $0.17
============= =========== ========
</TABLE>
8
<PAGE> 9
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
D. NEW ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board (FASB) issued
SFAS 137, which defers the effective date of SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities", to all fiscal quarters
of fiscal years beginning after June 15, 2000. Therefore, the Company
plans to implement SFAS 133 for the fiscal quarters in its fiscal year
ending January 31, 2002. The adoption of SFAS 133 is not expected to
have a material effect on the financial position or results of
operations of the Company.
E. SEGMENT INFORMATION
Principal business groups are determined by the type of customer served
or the product sold. The Commercial Group owns, develops, acquires and
operates shopping centers, office buildings and mixed-use projects,
including hotels. The Residential Group develops or acquires and
operates the Company's multi-family properties. Real Estate Groups are
the combined Commercial and Residential Groups. The Land Group owns and
develops raw land into master planned communities and other residential
developments for resale to users principally in Arizona, Colorado,
Florida, Nevada, New York, North Carolina and Ohio. The Lumber Trading
Group operates the Company's lumber wholesaling business. Corporate
includes interest income and expense on corporate investments and
borrowings and general administrative expenses.
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 as net earnings before extraordinary gain, excluding the
following items: i) provision for decline in real estate and other; ii)
gain (loss) on disposition of properties and other investments; iii)
the adjustment to recognize rental revenues and rental expenses using
the straight-line method; and iv) noncash charges from Forest City
Rental Properties Corporation for depreciation, amortization and
deferred income taxes.
The following table summarizes selected financial data for the
Commercial, Residential, Land and Lumber Trading Groups and Corporate.
9
<PAGE> 10
E. Segment Information (continued)
-------------------------------
All amounts, including footnotes, are presented in thousands.
<TABLE>
Three Months Ended April 30,
APRIL 30, January 31, ----------------------------
2000 2000 2000 1999
-----------------------------------------------------
Expenditures for Additions
Identifiable Assets to Real Estate
-----------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Group ...................................... $2,667,399 $2,606,698 $ 69,472 $ 49,973
Residential Group ..................................... 793,462 815,082 33,334 17,131
Land Group ............................................ 94,698 92,868 13,858 15,464
Lumber Trading Group .................................. 167,825 208,836 511 826
Corporate ............................................. 35,981 90,990 50 174
-----------------------------------------------------
Consolidated ...................................... $3,759,365 $3,814,474 $117,225 $ 83,568
=====================================================
<CAPTION>
Three Months Ended April 30,
-----------------------------------------------------
2000 1999 2000 1999
-----------------------------------------------------
Revenues Interest Expense
-----------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Group ...................................... $ 112,213 107,026 $ 26,528 $ 24,055
Residential Group ..................................... 36,864 34,277 6,030 6,485
Land Group ............................................ 9,647 5,636 1,431 2,133
Lumber Trading Group (1) .............................. 27,751 34,626 1,575 1,102
Corporate ............................................. 143 129 7,462 5,870
-----------------------------------------------------
Consolidated ...................................... $ 186,618 $181,694 $ 43,026 $ 39,645
=====================================================
<CAPTION>
Depreciation and Earnings Before
Amortization Expense Income Taxes (EBIT)(2)
-----------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Group ...................................... $ 17,273 $ 15,170 $ 14,279 $ 11,819
Residential Group ..................................... 3,844 4,074 10,845 6,100
Land Group ............................................ 65 25 (2,269) (2,375)
Lumber Trading Group .................................. 581 485 831 2,817
Corporate ............................................. 239 222 (10,182) (9,178)
Gain on disposition of properties and other investments - - 30,721 -
-----------------------------------------------------
Consolidated ...................................... $ 22,002 $ 19,976 $ 44,225 $ 9,183
=====================================================
<CAPTION>
Earnings Before
Depreciation,
Amortization and
Deferred Taxes (EBDT)
=======================
<S> <C> <C>
Commercial Group...................................................................... $ 23,974 $ 24,458
Residential Group..................................................................... 12,446 8,864
Land Group............................................................................ (1,371) (1,460)
Lumber Trading Group.................................................................. 427 1,692
Corporate............................................................................. (5,283) (6,424)
-----------------------
Consolidated EBDT................................................................. 30,193 27,130
RECONCILIATION TO NET EARNINGS:
Depreciation and amortization - Real Estate Groups.................................... (21,117) (19,244)
Deferred taxes - Real Estate Groups................................................... (3,503) (2,592)
Straight-line rent adjustment......................................................... 2,403 -
Gain on disposition of properties and other investments, net of tax................... 19,573 -
Extraordinary gain, net of tax........................................................ - 214
-----------------------
Net earnings...................................................................... $ 27,549 $ 5,508
=======================
</TABLE>
(1) The Company recognizes the gross margin on lumber brokerage sales as
Revenues. Sales invoiced for the three months ended April 30, 2000 and
1999 were approximately $808,000 and $869,000, respectively.
(2) See Consolidated Statements of Earnings for reconciliation of EBIT to
net earnings.
10
<PAGE> 11
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, 2000 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, 2000 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".
The Company's EBDT for the first quarter of 2000 grew by 11.3% to $30,193,000
from $27,130,000 for the first quarter of 1999. The increase in EBDT is
primarily attributable to improved results from increasing rental rates and
occupancies in existing properties and the openings of new properties during
1999, including seven new developments and additions to three apartment
projects.
.
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
11
<PAGE> 12
Operating Expenses. See the information in the table entitled "Earnings before
Depreciation, Amortization and Deferred Taxes" at the end of this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
In the first quarter of 2000, the Company recognized rental revenues and rental
expenses using the straight-line method of accounting and will continue to do so
in the future. The effect of the application of this method increased Commercial
Group revenues by $2,913,000 and increased Commercial Group expenses by $510,000
in the first quarter of 2000. These adjustments are excluded for both NOI and
EBDT.
NET OPERATING INCOME FROM REAL ESTATE GROUPS - NOI from the combined Commercial
Group and Residential Group ("Real Estate Groups") for the first quarter of 2000
was $76,396,000 compared to $67,703,000 for the first quarter of 1999, a 12.8%
increase.
Commercial Group
REVENUES - Revenues for the Commercial Group increased $2,274,000, or 2.1%, to
$109,300,000 in the first quarter of 2000 from $107,026,000 in the first quarter
of 1999. The increase is a result of increased rental rates and occupancies in
existing properties and the openings of new properties during 1999. Revenues
increased from the openings of The Promenade in Temecula, a 795,000 square-foot
regional mall in Temecula, California ($1,972,000), Millennium, an office
building at University Park at MIT in Cambridge, Massachusetts ($1,162,000),
several openings in the Company's urban retail portfolio in the boroughs of New
York City including Columbia Park Center, 42nd Street, and Kaufman Studios
($2,613,000) and an expansion at Ballston Common Mall, a shopping center in
Arlington, Virginia ($479,000). Revenues also increased as a result of improved
operations as a result of rental rate and occupancy increases at The Avenue at
Tower City Center in Cleveland, Ohio ($958,000), Fairmont Plaza in San Jose,
California ($696,000), Liberty Center in Pittsburgh, Pennsylvania ($673,000) and
the Ritz-Carlton Hotel in Cleveland, Ohio ($571,000). These increases were
partially offset by a net decrease in land sales of $8,201,000 in the first
quarter of 2000 compared to the same period of 1999, and a reduction of revenue
in 2000 compared to 1999 at Sheraton Station Square, a 292-room hotel in
Pittsburgh, Pennsylvania due to a renovation project that was completed in April
2000 ($1,287,000). The balance of the increase in revenues in the Commercial
Group (approximately $2,600,000) was generally due to overall improved results
of mature properties.
OPERATING AND INTEREST EXPENSES - During the first quarter of 2000, operating
expenses for the Commercial Group decreased $2,359,000, or 4.2%, to $53,623,000
from $55,982,000 in the first quarter of 1999. The decrease in operating
expenses was attributable primarily to decreased costs from a reduction in land
sales in 2000 compared to 1999 ($7,590,000). This decrease was partially offset
by increases in operating expenses associated with the opening of The Promenade
in Temecula ($792,000), Millennium ($1,016,000) and the New York City urban
portfolio ($773,000). Operating expenses also increased as a result of increased
revenues at The Avenue at Tower City Center ($537,000), Liberty Center
($334,000) and the Ritz-Carlton Hotel ($535,000). The balance of the change in
operating expenses is a result of an increase of approximately $1,700,000 for
mature properties compared to the same period in 1999. Interest expense for the
first quarter of 2000 for the Commercial Group increased by
12
<PAGE> 13
$2,473,000 or 10.3%, from $24,055,000 for the first quarter of 1999. The
increase in interest expense is primarily attributable to 1999 additions to the
Commercial Group portfolio.
Residential Group
REVENUES - Revenues for the Residential Group increased by $2,587,000, or 7.5%,
in the first quarter of 2000 to $36,864,000 from $34,277,000 in the first
quarter of 1999. This increase was primarily the result of the $2,159,000
collection of a fully-reserved note receivable from a syndicated senior citizen
subsidized apartment property, interest income on advances made on behalf of the
Company's partners in 101 San Fernando in San Jose, California ($1,039,000) and
general rental rate and occupancy increases for mature properties of
approximately $970,000. These increases were partially offset by the disposition
in the first quarter of 2000 of Studio Colony, a 450-unit apartment building in
Los Angeles, California ($767,000) and Highlands, a 556-unit apartment building
in Grand Terrace, California ($814,000).
OPERATING AND INTEREST EXPENSES - Operating expenses for the Residential Group
decreased by $1,473,000, or 8.4%, in the first quarter of 2000 to $16,145,000
from $17,618,000 in the first quarter of 1999. The decrease in operating
expenses was primarily due to the 2000 property dispositions of Studio Colony
($202,000) and Highlands ($316,000) and a reduction in a reserve for collection
of a note receivable from Millender Center ($500,000). Interest expense for the
first quarter of 2000 decreased by $455,000 or 7.0%, to $6,030,000 from
$6,485,000 for the first quarter of 1999. The decrease in interest expense is
primarily attributable to the disposition of two properties, Studio Colony and
Highlands.
Land Group
REVENUES - Revenues for the Land Group increased by $4,011,000 to $9,647,000 in
the first quarter of 2000 from $5,636,000 for the same period of 1999. This
increase is primarily the result of: various projects owned by Granite
Development Partners L.P. (Granite) ($2,338,000); Westwood Lakes, 657 lots
located on 475 acres in Tampa, Florida ($1,574,000); Canterberry Crossing, a
470-acre residential golf course community in Parker, Colorado ($1,426,000); and
Upland Glen, a 232-unit apartment site in Sheffield Lake, Ohio ($347,000). These
increases were partially offset by decreases in revenues at Greens at Birkdale
Village, a 220-acre mixed use community in Huntersville, North Carolina
($990,000) and The Cascades, a 17-acre commercial development in Brooklyn, Ohio
($935,000). Sales of land and related gross margins vary from period to period,
depending on management's decisions regarding the disposition of significant
land holdings.
OPERATING AND INTEREST EXPENSES - Operating expenses increased by $4,607,000 for
the first quarter of 2000 to $10,485,000 from $5,878,000 for the first quarter
of 1999. The increase in operating expenses is due to an increase in costs
relating to increased land sales at various projects owned by Granite
($3,779,000); Westwood Lakes ($1,009,000); Canterberry Crossing ($1,213,000);
and Upland Glen ($312,000). These increases were partially offset by decreases
at Greens at Birkdale Village ($733,000) and The Cascades ($701,000).
13
<PAGE> 14
Interest expense decreased by $702,000 in the first quarter of 2000 to
$1,431,000 from $2,133,000 in the first quarter of 1999. Interest expense varies
from year to year depending on the level of interest-bearing debt within the
Land Group.
Lumber Trading Group
REVENUES - Revenues for the Lumber Trading Group decreased by $6,875,000 in the
first quarter of 2000 to $27,751,000 from $34,626,000 in the first quarter of
1999. The decrease was due to a decrease in lumber trading sales volumes
($2,811,000), a decrease in lumber trading margins ($2,967,000) and a decrease
in volume at Forest City/Babin, a wholesaler of major appliances, cabinets and
hardware to housing contractors ($738,000).
OPERATING AND INTEREST EXPENSES - Operating expenses for the Lumber Trading
Group decreased by $5,362,000 in the first quarter of 2000 to $25,345,000 from
$30,707,000 in the first quarter of 1999. This decrease is primarily due to
lower variable expenses due to decreased lumber trading volumes compared to
1999. Interest expense increased by $473,000 in the first quarter of 2000 to
$1,575,000 from $1,102,000 in the first quarter of 1999.
Corporate Activities
REVENUES - Corporate Activities' revenues increased $14,000 in the first quarter
of 2000 to $143,000 from $129,000 in the first quarter of 1999. Corporate
Activities' revenues consist primarily of interest income from investments made
by the Company and vary from year to year depending on interest rates and
amounts invested.
OPERATING AND INTEREST EXPENSES - Operating expenses for Corporate Activities
decreased $574,000 in the first quarter of 2000 to $2,863,000 from $3,437,000 in
the first quarter of 1999. This decrease represents a reduction in general
corporate expenses for the first quarter of 2000 compared to the same period in
1999. Interest expense increased $1,592,000 in the first quarter of 2000 to
$7,462,000 from $5,870,000 in the first quarter of 1999. Corporate Activities'
interest expense consists primarily of interest expense on the 8.50% Senior
Notes (issued on March 16, 1998) and the Revolving Credit Agreement that has not
been allocated to a principal business group (see "Financial Condition and
Liquidity").
Other Transactions
GAIN ON DISPOSITION OF PROPERTIES AND OTHER INVESTMENTS -During the first
quarter of 2000, the Company recorded gains on the disposition of properties and
other investments totaling $30,721,000, or $19,573,000 net of estimated taxes.
The Company recognized gains on the disposition of two apartment communities in
California: Studio Colony ($26,308,000) and Highlands ($575,000). The Studio
Colony disposition was structured as a tax-free exchange. The Company also
recognized gains totaling $3,838,000 from the sale of available-for-sale equity
securities. There was no gain (loss) on disposition of properties for the first
quarter of 1999.
EXTRAORDINARY GAIN - There was no extraordinary gain for the first quarter of
2000. Extraordinary gain, net of tax, totaled $214,000 for the first quarter of
1999, representing extinguishment of nonrecourse debt and related accrued
interest.
14
<PAGE> 15
INCOME TAXES - Income tax expense for the three months ended April 30, 2000 and
1999 totaled $16,676,000 and $3,889,000, respectively. At January 31, 2000, the
Company had a net operating loss ("NOL") carryforward for tax purposes of
$41,513,000 (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,
2007 through January 31, 2011 and general business credits carryovers of
$1,526,000 which will expire in the years ending January 31, 2004 through
January 31, 2014. The Company intends to utilize its NOL before it expires and
to evaluate its future tax position while considering a variety of tax-saving
strategies.
EBDT - Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDT")
consists of earnings before extraordinary items, excluding the following items:
i) provision for decline in real estate and other; ii) gain (loss) on
disposition of properties and other investments; iii) the adjustment to
recognize rental revenues and rental expenses using the straight-line method;
and iv) noncash charges from Forest City Rental Properties Corporation for
depreciation, amortization and deferred income taxes. The provision for decline
in real estate and other 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 and other investments 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
land or land held by the Land Group as nonrecurring items. Extraordinary items
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. The
adjustment to recognize rental revenues and rental expenses on the straight-line
method is excluded because it is management's opinion that rental revenues and
expenses should be recognized when due from the tenants or due to the landlord.
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.
FINANCIAL CONDITION AND LIQUIDITY
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 development and acquisitions of real
estate projects, capital expenditures for its existing portfolio and payments on
nonrecourse mortgage debt on real estate.
REVOLVING CREDIT FACILITY - At April 30, 2000, the Company had $162,500,000
outstanding under its $225,000,000 revolving credit facility. The Company's
revolving credit facility matures December 10, 2001, unless extended, and allows
for up to a combined amount of $30,000,000 in outstanding letters of credit or
surety bonds ($9,022,570 and $17,175,000, respectively, at April 30, 2000). The
outstanding letters of credit reduce the credit available to the Company.
Annually, within 60 days of January 31, the revolving credit facility may be
extended by unanimous consent of the nine participating banks. At its maturity
date, the outstanding revolving credit loans, if any, may be converted by the
Company to a four-year
15
<PAGE> 16
term loan. The revolving credit available is reduced quarterly by $2,500,000,
which began April 1, 1998. At April 30, 2000, the revolving credit line was
$202,500,000.
The revolving credit facility provides, among other things, for: 1) interest
rates of 2% over LIBOR or 1/4% over the prime rate; 2) maintenance of debt
service coverage ratios and specified levels of net worth and cash flow (as
defined); and 3) restriction on dividend payments.
The Company has purchased a 6.50% LIBOR interest rate cap for 2000 and an
average 6.75% LIBOR interest rate cap for 2001 at notional amounts of
$100,620,000 and $83,280,000, respectively.
SENIOR NOTES - On March 16, 1998, the Company issued $200,000,000 in 8.50%
senior notes due March 15, 2008 in a public offering. Accrued interest on the
senior notes is payable semiannually on March 15 and September 15. 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 borrowings under the revolving credit
facility. The indenture contains covenants providing, among other things,
limitations on incurring additional debt and payment of dividends.
LUMBER TRADING GROUP - The Lumber Trading Group is financed separately from the
rest of the Company's principal business groups. The financing obligations of
Lumber Trading Group are without recourse to the Company. Accordingly, the
liquidity of Lumber Trading Group is discussed separately below under "Lumber
Trading Group Liquidity."
Mortgage Refinancings
During the three months ended April 30, 2000, the Company completed $36,000,000
in financings, including $11,000,000 in refinancings, and $25,000,000 for new
development projects. Additionally, the Company sold two residential properties
which reduced tax-exempt debt by $52,000,000. The Company continues to seek
long-term fixed rate debt for those project loans which mature within the next
12 months. In addition, the Company is actively seeking permanent financing for
those projects which will begin operations within the next 12 months, generally
pursuing long-term fixed rate loans.
16
<PAGE> 17
Interest Rate Exposure
At April 30, 2000, the composition of nonrecourse mortgage debt is as follows:
Amount Rate(1)
-------------- -------
(in thousands)
Fixed $ 1,574,037 7.53%
Variable -
Swapped(2) 188,737 7.41%
Capped (3) 446,924 8.07%
Tax-Exempt 100,528 5.76%
UDAG and other
subsidized loans (fixed) 69,726 2.65%
-------------
$ 2,379,952 7.40%
=============
(1) The weighted average interest rates shown above include both the base
index and the lender margin.
(2) The variable swapped debt of $188,737 represents LIBOR-based interest
rate swaps that have a weighted average life of 0.76 years.
(3) The $446,924 of capped debt is protected by $585,060 in LIBOR caps as
described below. These caps protect the current debt outstanding as
well as the anticipated increase in debt outstanding for projects
currently under development or anticipated to be under development
during fiscal year 2000.
The Company generally attempts to obtain interest rate protection for the
taxable variable-rate debt with a maturity in excess of one year. The Company
has purchased 6.50% and 6.86% LIBOR interest rate caps for its variable-rate
mortgage debt in the amount of $585,060,000 and $563,609,000, respectively, for
the years ending January 31, 2001 and 2002.
In addition, 3-year LIBOR caps were purchased at strike rates ranging from 6.75%
- 8.00% to protect the development portfolio, in the aggregate amount of
$359,949,000 with start dates from September 2000 through February 2003. The
Company intends to convert a significant portion of its committed variable-rate
debt to fixed-rate debt.
In order to mitigate upward fluctuations in long-term interest rates, the
Company has entered into Treasury Options. The Company owns $305,519,000 of
10-year Treasury Options at strike rates ranging from 6.00% - 7.00% with
exercise dates ranging from November 2000 to August 2002. Additionally, the
Company owns $43,010,000 of 5-year Treasury Options at a strike rate of 7.00%
with an exercise date of August 2001. The Company generally does not hedge
tax-exempt debt because, since 1990, the base rate of this type of financing has
averaged only 3.60% and has never exceeded 7.90%.
At April 30, 2000, 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 $933,000. This effect is lessened due to the 6.50% LIBOR
caps that are in place for fiscal year 2000. 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 $1,000,000.
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<PAGE> 18
Lumber Trading Group Liquidity
The Lumber Trading Group is separately financed with two revolving lines of
credit and a nonrecourse accounts receivable sale program. These credit
facilities are without recourse to the Company.
At April 30, 2000, Lumber Trading Group's two lines of credit totaled a
$87,000,000 commitment expiring June 30, 2000. Lumber Trading Group anticipates
a one year renewal of these facilities. 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, 2000, $8,075,000 was outstanding under
these facilities.
In July 1999, Lumber Trading Group entered into a three-year agreement under
which it is selling an undivided interest in a pool of accounts receivable up to
a maximum of $102,000,000. At April 30, 2000, the Company had received
$82,000,000 in net proceeds from this agreement. The program is nonrecourse to
the Company and the Company bears no risk as to the collectibility of the
accounts receivable.
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 provided by operating activities was $12,600,000 for the first quarter
of 2000 and $23,430,000 for the first quarter of 1999. The decrease in net cash
provided by operating activities is the result of an increase of $10,934,000 in
operating expenditures (primarily from a decrease in accounts payable), an
increase of $5,605,000 in land development expenditures and an increase of
$2,665,000 in interest paid. These decreases were partially offset by an
increase of $4,393,000 in proceeds from land sales and an increase of $3,981,000
in rents and other revenues received.
Net cash provided by investing activities was $8,201,000 for the first quarter
of 2000. Net cash used in investing activities was $95,690,000 for the first
quarter of 1999. Capital expenditures, other than development and acquisition
activities, totaled $9,291,000 and $14,244,000 (including both recurring and
investment capital expenditures) in the first quarter of 2000 and 1999,
respectively, and were financed with cash provided from operating activities.
The Company invested $94,714,000 and $67,084,000 in acquisition and development
of real estate projects in the first quarter of 2000 and 1999, respectively.
These expenditures were financed with approximately $44,000,000 and $36,000,000
in new mortgage indebtedness incurred in the first quarter of 2000 and 1999,
respectively, borrowings under the revolving credit facility in 1999, and in
2000, a reduction of $21,231,000 in investment and advances to real estate
affiliates (primarily from a return on investments in The Grand, a 546-unit
luxury high-rise apartment building in North Bethesda, Maryland), gain on sale
of available-for-sale securities activities and cash on hand at the beginning of
the year. The Company invested $14,362,000 in investments in and advances to
real estate affiliates for the first quarter of 1999 primarily related to New
York City area urban development ($2,419,000) and the following syndicated
residential projects: The Grand ($6,539,000), Philip Morris at Tobacco Row, a
175-unit apartment renovation project
18
<PAGE> 19
currently under construction in Richmond, Virginia ($2,047,000), 101 San
Fernando, a 316-unit apartment complex currently under construction ($1,000,000)
and The Enclave, a 637-unit apartment community which opened in phases during
1998 and 1999 ($929,000), both in San Jose, California. During the first quarter
of 2000, $86,930,000 was collected in proceeds from dispositions of two
residential apartment properties, Studio Colony and Highlands which were used to
reduce tax-exempt debt by $52,000,000 (see "Mortgage Refinancings") and
approximately $34,000,000 was deposited into an escrow account (see next
paragraph on cash used in financing activities).
Net cash used in financing activities totaled $81,857,000 in the first quarter
of 2000. Net cash provided by financing activities totaled $58,895,000 in the
first quarter of 1999. The Company's refinancing of mortgage indebtedness is
discussed above in "Mortgage 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. Net cash
used in financing activities for the first quarter of 2000 also reflected a
decrease in book overdrafts of $25,314,000 (representing checks issued but not
yet paid) and an increase in restricted cash of $27,538,000 primarily as a
result of the establishment of an escrow account for the proceeds from the
disposition of Studio Colony which was structured as a tax-free exchange. The
escrow funds will be used to purchase the replacement property later this year.
Additionally, net cash used in financing was a result of a net decrease of
$16,940,000 in notes payable (primarily in the Lumber Trading Group), payment of
deferred financing costs of $3,634,000 and payment of $1,502,000 of dividends.
Net cash provided by financing activities for the first quarter of 1999 also
reflected a decrease of $16,638,000 in net borrowings under Lumber Trading
Group's lines of credit, an increase of $14,694,000 in notes payable primarily
related to two hotels under construction in New York City, a decrease in
restricted cash and book overdrafts of $1,269,000 and payment of $1,199,000 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 was 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 a common equity offering completed on May 20, 1997 and $200,000,000
through a debt offering completed on March 16, 1998. The Company currently has
available approximately $218,000,000 on the second shelf registration statement
of debt, equity or any combination thereof.
19
<PAGE> 20
INCREASED DIVIDEND
The first 2000 quarterly dividend of $.05 per share on shares of both Class A
and Class B Common Stock was declared on March 10, 2000 and will be paid on June
15, 2000 to shareholders of record at the close of business on June 1, 2000. The
second 2000 quarterly dividend of $.06 (representing a 20% increase over the
previous quarter's dividend) per share on shares of both Class A and Class B
Common Stock was declared on June 7, 2000 and will be paid on September 15, 2000
to shareholders of record at the close of business on September 1, 2000.
LEGAL PROCEEDINGS
On September 21, 1999, a complaint was filed in state court in Los Angeles
County against Forest City Enterprises, Inc., Forest City California Residential
Development, Inc., and Forest City Residential West, Inc. Plaintiffs are 63
construction workers who claim to have been exposed to asbestos and mold and
mildew while engaged in renovation work at a construction site in Washington
("the Washington claims"). Three of the plaintiffs also claim to have been
exposed to lead paint and asbestos at a construction site in California ("the
California claims"). Plaintiffs seek damages for unspecified personal injuries,
lost income, and diminished earning capacity and also seek punitive and treble
damages. Defendants filed a motion to dismiss or stay the Washington claims on
the grounds that Washington was a more appropriate forum in which to hear these
claims. On February 25, 2000, the Superior Court for the County of Los Angeles
granted defendants' motion and severed the Washington claims from the California
claims and stayed the Washington claims so that they can be tried in Washington,
which the Court found to be the more appropriate forum. The Company will
continue the defense of the California claims in the State of California court
system.
The Company, through subsidiaries, owns a 14.6% interest in the Seven Hills
housing development located in Henderson, Nevada, which is owned by the Silver
Canyon Partnership ("Silver Canyon") 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 home-building companies at Seven
Hills against some of the same parties, including the Company. Each of these
lawsuits sought a commitment for public play on the golf course, as well as
damages and, in October, 1998, the court granted play rights. In February, 1999,
the owner of the golf course filed a cross-claim against the Silver Canyon
Partnership and the Company. Silver Canyon has since settled with the Plaintiff
homeowners and with certain of Silver Canyon's insurance carriers and the
Company has been released. In addition, Silver Canyon has reached settlement
agreements with the owner of the golf course and with one of the production
home-builders which are expected to be executed in the near future. These
settlements include a release of the Company. Lawsuits filed by two production
builders are still pending and are set for trial in mid-April. The Company has
been dismissed as a defendant in both of these cases. The Company believes that
Silver Canyon has meritorious defenses to these lawsuits. 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. There will be no further report on this case if no new
developments take place.
20
<PAGE> 21
NEW ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board (FASB) issued SFAS 137,
which defers the effective date of SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities", to all fiscal quarters of fiscal years
beginning after June 15, 2000. Therefore, the Company plans to implement SFAS
133 for the fiscal quarters in its fiscal year ending January 31, 2002. The
adoption of SFAS 133 is not expected to have a material effect on the financial
position or results of operations of the Company.
INFORMATION RELATED TO FORWARD-LOOKING STATEMENTS
This Form 10-Q, 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 nationwide 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 expense 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.
21
<PAGE> 22
FOREST CITY ENTERPRISES, INC.
EARNINGS BEFORE DEPRECIATION, AMORTIZATION AND DEFERRED TAXES
FOR THE THREE MONTHS ENDED APRIL 30, 2000 AND 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
Commercial Group Residential Group Land Group
-------------------- ------------------- ---------------------
2000 1999 2000 1999 2000 1999
--------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 112,213 $ 107,026 $ 36,864 $ 34,277 $ 9,647 $ 5,636
Exclude straight-line rent adjustment 2,913 -
--------- ---------
Revenues excluding straight-line rent adjustment 109,300 107,026
Operating expenses,
including depreciation and amortization for
non-real estate Groups 54,133 55,982 16,145 17,618 10,485 5,878
Exclude straight-line rent adjustment 510 -
--------- ---------
Operating expenses excluding straight-line rent adjustment 53,623 55,982
Interest expense 26,528 24,055 6,030 6,485 1,431 2,133
Income tax provision 5,175 2,531 2,243 1,310 (898) (915)
--------- -------- -------- ------- -------- --------
85,326 82,568 24,418 25,413 11,018 7,096
--------- -------- -------- ------- -------- --------
Earnings before depreciation, amortization
and deferred taxes (EBDT) $ 23,974 $ 24,458 $ 12,446 $ 8,864 ($ 1,371) ($ 1,460)
========= ======== ======== ======= ======== ========
<CAPTION>
Lumber Trading Group Corporate Activities Total
---------------------- -------------------- --------------------
2000 1999 2000 1999 2000 1999
-------- ------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 27,751 $ 34,626 $ 143 $ 129 $ 186,618 $ 181,694
Exclude straight-line rent adjustment 2,913 -
--------- ---------
Revenues excluding straight-line rent adjustment 183,705 181,694
Operating expenses,
including depreciation and amortization for
non-real estate Groups 25,345 30,707 2,863 3,437 108,971 113,622
Exclude straight-line rent adjustment 510 -
--------- ---------
Operating expenses excluding straight-line rent adjustment 108,461 113,622
Interest expense 1,575 1,102 7,462 5,870 43,026 39,645
Income tax provision 404 1,125 (4,899) (2,754) 2,025 1,297
-------- ------- -------- -------- -------- --------
27,324 32,934 5,426 6,553 153,512 154,564
-------- ------- -------- -------- -------- --------
Earnings before depreciation, amortization
and deferred taxes (EBDT) $ 427 $ 1,692 ($ 5,283) ($ 6,424) $ 30,193 $ 27,130
======== ======= ======== ======== ======== ========
Reconciliation to net earnings:
Earnings before depreciation, amortization and deferred taxes (EBDT) $ 30,193 $ 27,130
Depreciation and amortization - Real Estate Groups (21,117) (19,244)
Deferred taxes - Real Estate Groups (3,503) (2,592)
Straight-line rent adjustment 2,403 -
Gain on disposition of properties and other investments, net of tax 19,573 -
Extraordinary gain, net of tax - 214
-------- -------
Net earnings $ 27,549 $ 5,508
======== =======
</TABLE>
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<PAGE> 23
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is interest rate risk. At April 30,
2000, the Company had $898,689,000 of variable-rate debt outstanding.
Additionally, the Company has interest rate risk associated with fixed-rate debt
at maturity.
The Company has purchased London Interbank Offered Rate ("LIBOR") interest rate
caps as follows.
<TABLE>
<CAPTION>
Principal
Strike Rate Period Outstanding
------------ ----------------------- -----------
(in thousands)
<S> <C> <C>
6.50% 02/01/00 - 01/31/01 $ 585,060
6.50% 02/01/01 - 07/31/01 315,358
7.00% 08/01/01 - 01/31/02 297,158
7.00% 02/01/01 - 01/31/02 257,351
6.75% 09/01/00 - 08/31/03 79,929
8.00% 06/01/01 - 06/01/04 8,960
8.00% 11/01/01 - 10/31/04 115,460
8.00% 08/01/02 - 07/31/05 21,700
8.00% 02/01/03 - 01/31/06 133,900
</TABLE>
The interest rate caps and swaps highlighted above were purchased to mitigate
short-term variable interest rate risk. The Company intends to convert a
significant portion of its committed variable-rate debt to fixed-rate debt. In
order to protect against significant increases in long-term interest rates, the
Company has purchased Treasury Options as follows.
<TABLE>
<CAPTION>
Strike Rate Term Exercise Date Notional
------------------------------------------------------------------------------
(years) (in thousands)
<S> <C> <C> <C>
6.76% 10 11/01/00 $ 45,700
7.00% 10 02/01/01 33,180
6.00% 10 04/10/01 41,252
7.00% 10 05/01/01 38,920
6.00% 10 08/10/01 38,677
7.00% 10 11/01/01 9,030
7.00% 10 08/01/02 98,760
7.00% 5 08/01/01 43,010
</TABLE>
At April 30, 2000, the Company had $162,500,000 outstanding under its
$225,000,000 revolving credit facility, which bears interest at LIBOR plus 2% or
1/4 above prime. The revolving credit available is reduced quarterly by
$2,500,000, which began April 1, 1998. At April 30, 2000, the revolving credit
line was $202,500,000. In addition to the LIBOR interest rate caps summarized in
the above table, the Company has hedged this revolving credit facility by
purchasing a 6.50% LIBOR interest rate cap for 2000 and a 6.75% LIBOR interest
rate cap for 2001 at notional amounts of $100,620,000 and $83,280,000,
respectively.
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<PAGE> 24
The Company estimates the fair value of its debt instruments by discounting
future cash payments at interest rates that the Company believes approximate the
current market. The carrying amount of the Company's total fixed-rate debt at
April 30, 2000 was $1,843,763,000 compared to an estimated fair value of
$1,688,878,000. The Company estimates that a 100 basis point decrease in market
interest rates would change the fair value of this fixed-rate debt to a
liability of approximately $1,789,311,000.
The table below provides information about the Company's financial instruments
that are sensitive to changes in interest rates.
24
<PAGE> 25
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
-----------------------------------------------------------------------------------
LONG-TERM DEBT 2000 2001 2002 2003 2004
------------------------------------ ------------ ----------- ----------- ----------- -----------
FIXED:
<S> <C> <C> <C> <C> <C>
Fixed rate debt(1) 61,857,382 82,401,752 45,155,533 87,321,943 54,298,838
Weighted average interest rate 8.17% 8.25% 7.51% 8.24% 7.40%
UDAG(1) 997,337 10,481,224 541,722 163,085 376,936
Weighted average interest rate 0.00% 7.99% 7.73% 2.78% 1.85%
Senior notes - - - - -
Weighted average interest rate
------------- ------------- ------------- ------------- ------------
Total Fixed Rate Debt 62,854,719 92,882,976 45,697,255 87,485,028 54,675,774
------------- ------------- ------------- ------------- ------------
VARIABLE:
Variable rate debt(1)(2) 376,770,236 35,379,819 127,254,549 68,586,760 18,474,369
Weighted average interest rate
Tax Exempt(1) 28,400,000 32,128,292 - - -
Weighted average interest rate
Revolving Credit Facility - 162,500,000 - - -
Weighted average interest rate
------------- ------------- ------------- ------------- ------------
Total Variable Rate Debt 405,170,236 230,008,111 127,254,549 68,586,760 18,474,369
------------- ------------- ------------- ------------- ------------
TOTAL LONG-TERM DEBT $ 468,024,955 $ 322,891,087 $ 172,951,804 $ 156,071,788 $ 73,150,143
============= ============= ============= ============= ============
<CAPTION>
EXPECTED
MATURITY DATE TOTAL FAIR MARKET
-------------- OUTSTANDING VALUE
LONG-TERM DEBT THEREAFTER 4/30/00 4/30/00
------------------------------------ -------------- -------------- ---------------
FIXED:
<S> <C> <C> <C>
Fixed rate debt(1) 1,243,001,636 1,574,037,084 1,466,122,234
Weighted average interest rate 7.40% 7.53%
UDAG(1) 57,165,401 69,725,705 40,816,076
Weighted average interest rate 1.67% 2.65%
Senior notes 200,000,000 200,000,000 181,940,000
Weighted average interest rate 8.50% 8.50%
---------------- --------------- ---------------
Total Fixed Rate Debt 1,500,167,037 1,843,762,789 1,688,878,310
---------------- --------------- ---------------
VARIABLE:
Variable rate debt(1)(2) 9,195,060 635,660,793 635,660,793
Weighted average interest rate 7.88%
Tax Exempt(1) 40,000,000 100,528,292 100,528,292
Weighted average interest rate 5.76%
Revolving Credit Facility - 162,500,000 162,500,000
Weighted average interest rate 8.23%
---------------- --------------- ---------------
Total Variable Rate Debt 49,195,060 898,689,085 898,689,085
---------------- --------------- ---------------
TOTAL LONG-TERM DEBT $ 1,549,362,097 $ 2,742,451,874 $ 2,587,567,395
================ =============== ===============
</TABLE>
(1) Represents nonrecourse debt.
(2) As of April 30, 2000, $188,737,000 of variable-rate debt has been hedged via
LIBOR-based swaps that have a remaining average life of 0.76 years.
25
<PAGE> 26
Item 3. Quantitative and Qualitative Disclosures About Market Risk (continued)
----------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL FAIR MARKET
OUTSTANDING VALUE
LONG-TERM DEBT 4/30/99 4/30/99
---------------------------------------------------- --------------- -------------
<S> <C> <C>
FIXED:
Fixed rate debt(1) 1,647,011,155 1,636,754,420
Weighted average interest rate 7.54%
UDAG(1) 69,761,152 44,342,610
Weighted average interest rate 2.57%
Senior notes 200,000,000 203,000,000
Weighted average interest rate 8.50%
--------------- ---------------
Total Fixed Rate Debt 1,916,772,307 1,884,097,030
--------------- ---------------
VARIABLE:
Variable rate debt(1)(2) 354,480,456 354,480,456
Weighted average interest rate 6.78%
Revolving Credit Facility 117,000,000 117,000,000
Weighted average interest rate 7.07%
Tax Exempt(1) 153,820,875 153,820,875
Weighted average interest rate 4.86%
--------------- ---------------
Total Variable Rate Debt 625,301,331 625,301,331
--------------- ---------------
TOTAL LONG-TERM DEBT $ 2,542,073,638 $ 2,509,398,361
=============== ===============
</TABLE>
(1) Represents nonrecourse debt.
(2) As of April 30, 1999, $148,291,000 of variable-rate debt has been
hedged via $133,479,000 of 1-year LIBOR contracts and $14,812,000 of
LIBOR-based swaps that have a combined average life of 0.60 years.
26
<PAGE> 27
PART II - OTHER INFORMATION
Item l. Legal Proceedings
-------------------------
On September 21, 1999, a complaint was filed in state court in Los Angeles
County against Forest City Enterprises, Inc., Forest City California Residential
Development, Inc., and Forest City Residential West, Inc. Plaintiffs are 63
construction workers who claim to have been exposed to asbestos and mold and
mildew while engaged in renovation work at a construction site in Washington
("the Washington claims"). Three of the plaintiffs also claim to have been
exposed to lead paint and asbestos at a construction site in California ("the
California claims"). Plaintiffs seek damages for unspecified personal injuries,
lost income, and diminished earning capacity and also seek punitive and treble
damages. Defendants filed a motion to dismiss or stay the Washington claims on
the grounds that Washington was a more appropriate forum in which to hear these
claims. On February 25, 2000, the Superior Court for the County of Los Angeles
granted defendants' motion and severed the Washington claims from the California
claims and stayed the Washington claims so that they can be tried in Washington,
which the Court found to be the more appropriate forum. The Company will
continue the defense of the California claims in the State of California court
system.
The Company, through subsidiaries, owns a 14.6% interest in the Seven Hills
housing development located in Henderson, Nevada, which is owned by the Silver
Canyon Partnership ("Silver Canyon") 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 home-building companies at Seven
Hills against some of the same parties, including the Company. Each of these
lawsuits sought a commitment for public play on the golf course, as well as
damages and, in October, 1998, the court granted play rights. In February, 1999,
the owner of the golf course filed a cross-claim against the Silver Canyon
Partnership and the Company. Silver Canyon has since settled with the Plaintiff
homeowners and with certain of Silver Canyon's insurance carriers and the
Company has been released. In addition, Silver Canyon has reached settlement
agreements with the owner of the golf course and with one of the production
home-builders which are expected to be executed in the near future. These
settlements include a release of the Company. Lawsuits filed by two production
builders are still pending and are set for trial in mid-April. The Company has
been dismissed as a defendant in both of these cases. The Company believes that
Silver Canyon has meritorious defenses to these lawsuits. 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. There will be no further report on this case if no new
developments take place.
27
<PAGE> 28
Item 6. Exhibits and Reports on Form 8-K
----------------------------------------
<TABLE>
<CAPTION>
(a) Exhibits
<S> <C> <C>
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).
3.4 - Certificate of Amendment by Shareholders to the Articles of Incorporation of Forest
City Enterprises, Inc. dated June 16, 1998, incorporated by reference to Exhibit 4.3
to the Company's Registration Statement on Form S-8 (Registration No. 333-61925).
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 the Company's Form 10-Q for the quarter ended October 31,
1997 (File No. 1-4372).
</TABLE>
28
<PAGE> 29
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------ -----------------------
<S> <C> <C>
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 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).
10.10 - 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).
</TABLE>
29
<PAGE> 30
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------ -----------------------
<S> <C> <C>
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 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 Form 10-K for the year ended January 31, 1998 (File No.1-4372).
10.14 - 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).
10.15 - 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).
10.16 - 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).
10.17 - 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).
10.18 - 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).
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------ -----------------------
<S> <C> <C>
10.19 - 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).
10.20 - 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).
10.21 - 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).
10.22 - 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).
10.23 - 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).
10.24 - 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).
</TABLE>
31
<PAGE> 32
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------ -----------------------
<S> <C> <C>
10.25 - 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).
10.26 - 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).
10.27 - 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 10.29 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 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).
10.29 - 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).
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------ -----------------------
<S> <C> <C>
10.30 - 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).
10.31 - First Amendment to the 1994 Stock Option Plan dated as of June 9, 1998, incorporated
by reference to Exhibit 4.7 to the Company's Registration Statement on Form S-8
(Registration No. 333-61925).
10.32 - First Amendment to the forms of Incentive Stock Option Agreement and Nonqualified Stock
Option Agreement, incorporated by reference to Exhibit 4.8 to the Company's Registration
Statement on Form S-8 (Registration No.333-61925).
10.33 - Amended and Restated form of Stock Option Agreement, effective as of July 16, 1998,
incorporated by reference to Exhibit 10.38 to the Company's Form 10-Q for the quarter
ended October 31, 1998 (File No. 1-4372).
10.34 - Third Amendment to Credit Agreement, dated as of January 29, 1999, 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
incorporation by reference to Exhibit 20.1 to the Company's Form 8-K, dated
January 29, 1999 (File No. 1-4372).
10.35 - Third Amendment to Guaranty of Payment of Debt, dated as of January 29, 1999, 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 20.2 to the Company's Form 8-K, dated January 29,
1999 (File No. 1-4372).
10.36 - Subordination Agreement, dated as of January 29, 1999, by and among Forest City
Enterprises, Inc., St. Paul Fire and Marine Insurance Company, St. Paul Mercury
Insurance Company, St. Paul Guardian Insurance Company, Seaboard Surety Company,
Economy Fire & Casualty Company, Asset Guaranty Insurance Company, KeyBank National
Association, as administrative agent, and National City Bank, as syndication agent,
incorporated by reference to Exhibit 20.3 to the Company's Form 8-K, dated January 29,
1999 (File No. 1-4372).
</TABLE>
33
<PAGE> 34
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------ -----------------------
<S> <C> <C>
10.37 - Dividend Reinvestment and Stock Purchase Plan, incorporated by reference to Exhibit
10.42 to the Company's Form 10-K for the year ended January 31, 1999 (File No. 1-4372).
10.38 - Deferred Compensation Plan for Executives, effective as of January 1, 1999, incorporated
by reference to Exhibit 10.43 to the Company's Form 10-K for the year ended January 31,
1999 (File No. 1-4372).
10.39 - Deferred Compensation Plan for Nonemployee Directors, effective as of January 1, 1999,
incorporated by reference to Exhibit 10.44 to the Company's Form 10-K for the year ended
January 31, 1999 (File No. 1-4372).
10.40 - Amended and Restated Credit Agreement, dated as of June 25, 1999, 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 20.1 to the Company's Form 8-K, dated June 25, 1999 (File No. 1-4372).
10.41 - Amended and Restated Guaranty of Payment of Debt, dated as of June 25, 1999, 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 20.2 to the Company's Form 8-K, dated June 25, 1999 (File No. 1-4372).
10.42 - Employment Agreement entered into on May 31, 1999, effective January 1, 1999, by the
Company and Albert B. Ratner, incorporated by reference to Exhibit 10.47 to the Company's
Form 10-Q for the quarter ended July 31,1999. (File No. 1-4372).
10.43 - Employment Agreement entered into on May 31, 1999, effective January 1, 1999, by the
Company and Samuel H. Miller, incorporated by reference to Exhibit 10.48 to the
Company's Form 10-Q for the quarter ended July 31, 1999. (File No. 1-4372).
10.44 - Agreement (re death benefits) entered into on May 31, 1999, by the Company and Thomas
G. Smith, incorporated by reference to Exhibit 10.49 to the Company's Form 10-Q for
the quarter ended October 31, 1999 (File No. 1-4372).
10.45 - First Amendment to Employment Agreement effective as of February 28, 2000 between Forest
City Enterprises, Inc. and Albert B. Ratner, incorporated by reference to Exhibit 10.45
to the Company's Form 10-K for the year ended January 31, 2000 (File No. 1-4372).
</TABLE>
34
<PAGE> 35
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------ -----------------------
<S> <C> <C>
10.46 - First Amendment to Employment Agreement entered into February 28, 2000 by and between
Forest City Enterprises, Inc. and Ronald A. Ratner, incorporated by reference to
Exhibit 10.46 to the Company's Form 10-K for the year ended January 31, 2000 (File
No. 1-4372).
10.47 - First Amendment to Employment Agreement entered into February 28, 2000 by and between
Forest City Enterprises, Inc. and James A. Ratner, incorporated by reference to
Exhibit 10.47 to the Company's Form 10-K for the year ended January 31, 2000 (File
No. 1-4372).
10.48 - Second Amendment to Employment Agreement entered into February 28, 2000 by and between
Forest City Enterprises, Inc. and Charles A. Ratner, incorporated by reference to
Exhibit 10.48 to the Company's Form 10-K for the year ended January 31, 2000 (File
No. 1-4372).
* 27 - Financial Data Schedule.
-----------------------
* - Filed herewith.
</TABLE>
(b) Reports on Form 8-K:
None
35
<PAGE> 36
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 14, 2000 /s/ Thomas G. Smith
--------------------------------------------------
Thomas G. Smith, Senior Vice President
and Chief Financial Officer
Date June 14, 2000 /s/ Linda M. Kane
--------------------------------------------------
Linda M. Kane, Vice President,
Corporate Controller
(Chief Accounting Officer)
36
