<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 July 31, 2000
-------------------------------
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.)
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 September 1, 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
-----
Page No.
--------
Part I. Financial Information:
Item 1. Financial Statements
Forest City Enterprises, Inc. and Subsidiaries
Consolidated Balance Sheets - July 31, 2000
(Unaudited) and January 31, 2000 3
Consolidated Statements of Earnings
(Unaudited) - Three Months and Six Months
Ended July 31, 2000 and 1999 4
Consolidated Statements of Shareholders' Equity
(Unaudited) - Six Months Ended
July 31, 2000 and 1999 5
Consolidated Statements of Cash Flows (Unaudited) -
Six Months Ended July 31, 2000 and 1999 6 - 7
Notes to Consolidated Financial Statements
(Unaudited) 8 - 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13 - 27
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 28 - 31
Part II. Other Information
Item 1. Legal Proceedings 32
Item 6. Exhibits and Reports on Form 8-K 33 - 40
Signatures 41
2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
-----------------------------
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, 2000 January 31, 2000
------------- ----------------
(Unaudited)
(dollars in thousands, except per share data)
<S> <C> <C>
ASSETS
Real Estate
Completed rental properties $ 3,093,978 $ 2,894,890
Projects under development 482,783 478,766
Land held for development or sale 61,284 52,852
----------- -----------
Real Estate, at cost 3,638,045 3,426,508
Less accumulated depreciation (565,889) (547,479)
----------- -----------
Total Real Estate 3,072,156 2,879,029
Cash and equivalents 46,866 97,195
Restricted cash 64,346 76,662
Notes and accounts receivable, net 187,931 226,749
Inventories 44,745 57,444
Investments in and advances to real estate affiliates 313,213 318,308
Other assets 153,805 159,087
----------- -----------
$ 3,883,062 $ 3,814,474
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage debt, nonrecourse $ 2,478,585 $ 2,382,380
Accounts payable and accrued expenses 345,473 409,390
Notes payable 34,167 62,898
Long-term debt 175,500 167,000
8.5% Senior notes 200,000 200,000
Deferred income taxes 166,115 174,661
Deferred profit 36,156 31,639
----------- -----------
Total Liabilities 3,435,996 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,
19,372,856 and 19,372,406 outstanding, respectively 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 113,834 113,764
Retained earnings 325,140 254,063
----------- -----------
449,269 378,122
Less treasury stock, at cost; 573,900 Class A and 278,100 Class B
shares and 574,350 Class A and 278,100 Class B shares, respectively (10,767) (10,773)
Accumulated other comprehensive income 8,564 19,157
----------- -----------
Total Shareholders' Equity 447,066 386,506
----------- -----------
$ 3,883,062 $ 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 July 31, Six Months Ended July 31,
-------------------------- -------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
( in thousands, except per share data)
<S> <C> <C> <C> <C>
REVENUES $ 201,141 $ 198,951 $ 387,759 $ 380,645
--------- --------- --------- ---------
Operating expenses 113,949 126,216 222,035 239,106
Interest expense 48,040 41,099 91,066 80,744
Provision for decline in real estate and other 1,231 - 1,231 -
Depreciation and amortization 22,895 23,367 44,897 43,343
--------- --------- --------- ---------
186,115 190,682 359,229 363,193
--------- --------- --------- ---------
Gain on disposition of properties and other investments 25,821 - 56,542 -
--------- --------- --------- ---------
EARNINGS BEFORE INCOME TAXES 40,847 8,269 85,072 17,452
--------- --------- --------- ---------
INCOME TAX EXPENSE
Current 6,213 2,624 12,306 5,214
Deferred (12,199) 905 (1,616) 2,204
--------- --------- --------- ---------
(5,986) 3,529 10,690 7,418
--------- --------- --------- ---------
NET EARNINGS BEFORE EXTRAORDINARY GAIN 46,833 4,740 74,382 10,034
Extraordinary gain, net of tax - - - 214
--------- --------- --------- ---------
NET EARNINGS $ 46,833 $ 4,740 $ 74,382 $ 10,248
========= ========= ========= =========
BASIC EARNINGS PER COMMON SHARE
Net earnings before extraordinary gain $ 1.56 $ 0.16 $ 2.48 $ 0.33
Extraordinary gain, net of tax - - - 0.01
--------- --------- --------- ---------
NET EARNINGS $ 1.56 $ 0.16 $ 2.48 $ 0.34
========= ========= ========= =========
DILUTED EARNINGS PER COMMON SHARE
Net earnings before extraordinary gain $ 1.55 $ 0.16 $ 2.46 $ 0.33
Extraordinary gain, net of tax - - - 0.01
--------- --------- --------- ---------
NET EARNINGS $ 1.55 $ 0.16 $ 2.46 $ 0.34
========= ========= ========= =========
</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>
SIX MONTHS ENDED JULY 31, 2000
-------------------------------
Balances at January 31, 2000 19,947 $6,649 10,937 $3,646 $113,764 $254,063
Comprehensive income
Net earnings $74,382 74,382
Other comprehensive income, net of tax
Unrealized gain on securities 2,170
Less reclassification adjustment
for gain included in net earnings (12,763)
--------
Total comprehensive income $63,789
--------
Dividends: $.11 per share (3,305)
Amortization of unearned compensation 70
Exercise of stock options
----------------------------------------------------------------
BALANCES AT JULY 31, 2000 19,947 $6,649 10,937 $3,646 $113,834 $325,140
================================================================
SIX MONTHS ENDED JULY 31, 1999
------------------------------
Balances at January 31, 1999 19,905 $6,636 10,979 $3,661 $114,270 $218,967
Comprehensive income
Net earnings $10,248 10,248
Other comprehensive income, net of tax
Unrealized gain on securities 4,115
--------
Total comprehensive income $14,363
=========
Dividends: $.09 per share (2,699)
Conversion of Class B shares
to Class A shares 3 1 (3) (1)
Exercise of stock options 2
Restricted stock granted (605)
Amortization of unearned compensation 23
----------------------------------------------------------------
BALANCES AT JULY 31, 1999 19,908 $6,637 10,976 $3,660 $113,690 $226,516
================================================================
<CAPTION>
Treasury Stock Accumulated Other
----------------- Comprehensive
Shares Amount Income Total
=====================================================
(in thousands, except per share data)
SIX MONTHS ENDED JULY 31, 2000
-------------------------------
Balances at January 31, 2000 852 $ (10,773) $ 19,157 $386,506
Comprehensive income
Net earnings 74,382
Other comprehensive income, net of tax
Unrealized gain on securities 2,170 2,170
Less reclassification adjustment
for gain included in net earnings (12,763) (12,763)
Total comprehensive income
Dividends: $.11 per share (3,305)
Amortization of unearned compensation 70
Exercise of stock options - 6 6
---------------------------------------------------
BALANCES AT JULY 31, 2000 852 $ (10,767) $8,564 $447,066
===================================================
SIX MONTHS ENDED JULY 31, 1999
------------------------------
Balances at January 31, 1999 901 $ (11,426) $ - $332,108
Comprehensive income
Net earnings 10,248
Other comprehensive income, net of tax
Unrealized gain on securities 4,115 4,115
Total comprehensive income
Dividends: $.09 per share (2,699)
Conversion of Class B shares
to Class A shares -
Exercise of stock options (2) 24 26
Restricted stock granted (45) 605 -
Amortization of unearned compensation 23
---------------------------------------------------
BALANCES AT JULY 31, 1999 854 $ (10,797) $ 4,115 $343,821
===================================================
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended July 31,
--------------------------------
2000 1999
============= =============
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Rents and other revenues received $ 411,067 $ 317,462
Proceeds from land sales 18,940 18,185
Land development expenditures (30,652) (26,793)
Operating expenditures (261,867) (212,475)
Interest paid (88,530) (78,380)
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 48,958 17,999
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (297,845) (171,837)
Proceeds from disposition of properties and other investments 131,269 -
Change in investments in and advances to real estate affiliates 4,963 (21,500)
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (161,613) (193,337)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in nonrecourse mortgage and long-term debt 216,492 209,975
Principal payments on nonrecourse mortgage debt on real estate (111,787) (88,014)
Increase in notes payable 9,447 50,390
Payments on notes payable (38,177) (40,507)
Change in restricted cash and book overdrafts (2,190) 23,881
Payment of deferred financing costs (8,461) (2,755)
Sale of treasury stock 6 26
Dividends paid to shareholders (3,004) (2,399)
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 62,326 150,597
------------- -------------
NET DECREASE IN CASH AND EQUIVALENTS (50,329) (24,741)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 97,195 78,629
------------- -------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 46,866 $ 53,888
============= =============
</TABLE>
6
<PAGE> 7
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended July 31,
-------------------------------------
2000 1999
================== =================
(in thousands)
<S> <C> <C>
RECONCILIATION OF NET EARNINGS TO CASH PROVIDED BY OPERATING ACTIVITIES
NET EARNINGS $ 74,382 $ 10,248
Depreciation 37,957 34,562
Amortization 6,940 8,781
Deferred income taxes (1,616) 1,748
Gain on disposition of properties and other investments (56,542) -
Provision for decline in real estate 1,231 -
Extraordinary gain - (353)
Decrease in commercial land included in projects under development 415 12,531
Increase in land held for development or sale (8,432) (9,632)
Decrease (increase) in notes and accounts receivable 38,818 (44,543)
Decrease in inventories 12,699 89
(Increase) decrease in other assets (9,936) 2,807
(Decrease) increase in accounts payable and accrued expenses (51,475) 2,216
Increase (decrease) in deferred profit 4,517 (455)
------------------ -----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 48,958 $ 17,999
================== =================
</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.
During the second quarter of 2000, the Company recorded gains totaling
$25,821,000, or $16,329,000 net of estimated taxes. The Company
recognized a gain of $8,599,000 on the disposition of Tucson Place, a
shopping center in Tucson, Arizona. The Company also recorded gains of
$17,276,000 on the sale of available-for-sale equity securities.
B. Deferred Income Tax Benefit
---------------------------
The Company recorded net deferred income tax benefits of $12,199,000 in
the second quarter of 2000, comprised of net deferred income tax
expense of $10,388,000 incurred in the normal course of business offset
by a deferred income tax benefit of $22,587,000. This benefit
represented a reversal of a portion of a deferred tax liability
recorded in 1994 relating to the cancellation of debt income of Park
Labrea Towers, a residential property which was sold that same year.
The Company reversed a portion of this deferred tax liability and
recognized a deferred tax benefit of $1,002,000 in the first quarter of
2000 and $1,677,000 in the fourth quarter of 1999, for a total reversal
of the original deferred tax liability of $25,266,000.
In certain situations that applied to Park Labrea Towers in 1994, the
Internal Revenue Code allowed for the deferral of cancellation of debt
income. As a result of certain steps taken by the Company in the
respective periods above, it is expected that the deferred income will
never be recognized for tax purposes and, accordingly, the related
deferred tax liability was reversed.
8
<PAGE> 9
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
C. Reversal of Reserve on Note Receivable
--------------------------------------
During the second quarter of 2000, the Company reversed a $10,275,000
reserve, representing a portion of the reserve recorded in 1995 against
a Note Receivable (the Note) from Millender Center (the Project), a
mixed-use residential, retail and hotel project located in downtown
Detroit, Michigan. The Company had previously reversed $3,500,000 of
the reserve in the fourth quarter of 1998, $500,000 in the third
quarter of 1999 and $500,000 in the first quarter of 2000, for a total
reserve reversal of $14,775,000.
The Company owns a 1% general partner interest in the Project and
loaned $14,775,000 to the 99% limited partners in 1985, as evidenced by
the Note. A full reserve against the Note was recorded in 1995 when the
Company determined that collection was doubtful, due to the operating
performance of the Project.
In October 1998, the Project entered into a lease agreement with
General Motors (GM) whereby the Project, except for the apartments, are
being leased by GM through 2010, when it is expected that GM will
exercise a purchase option. This lease arrangement, coupled with the
recent resurgence of downtown Detroit's economy as a result of GM's
relocation of its corporate headquarters to a location adjacent to the
Project and the entry of gaming during the second quarter of 2000, has
significantly improved the operating performance of the Project. The
Company believes that the current and prospective improved performance
of the Project supports its assessment that the Note is now fully
recoverable.
D. Long-Term Debt
--------------
On August 9, 2000, the revolving credit facility was amended to
increase the revolving credit line by $65,000,000 to $265,000,000 and
extend the termination date from December 10, 2001 to March 31, 2003.
The interest spread on revolving loans was increased by .125% to 2.125%
over LIBOR and by .25% to .5% over the prime rate.
9
<PAGE> 10
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
E. 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
September 6, 2000 December 1, 2000 December 15, 2000 $.06
</TABLE>
F. 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
July 31, 2000:
Basic EPS $ 46,833,000 30,031,810 $1.56
Dilutive effect of
stock options - 267,492 (.01)
------------- ---------- -----
Diluted EPS $ 46,833,000 30,299,302 $1.55
============= ========== =====
Six Months Ended
July 31, 2000:
Basic EPS $ 74,382,000 30,031,658 $2.48
Dilutive effect of
stock options - 227,076 (.02)
------------- ---------- -----
Diluted EPS $ 74,382,000 30,258,734 $2.46
============= ========== =====
</TABLE>
10
<PAGE> 11
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
G. 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 effect of the adoption of SFAS 133 on the
Company's financial statements cannot yet be determined since it will
be subject to market conditions in place in 2001 and beyond.
In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting
for Certain Transactions Involving Stock Compensation", which is an
interpretation of APB Opinion No. 25, "Accounting for Stock Issued to
Employees". The Company believes that this interpretation will have no
material effect on its financial statements.
In January 2000, the FASB's Emerging Issues Task Force (EITF) released
Abstract EITF 00-1, which discusses the "Applicability of the Pro Rata
Method of Consolidation to Investments in Certain Partnerships and
Other Unincorporated Joint Ventures". In December 1999, the SEC
released Staff Accounting Bulletin No. 101 that summarizes the staff's
views in applying generally accepted accounting principles to revenue
recognition in financial statements. The Company is currently assessing
what impact, if any, these two releases may have on the Company's
financial statements.
H. 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.
11
<PAGE> 12
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
H Segment Information (continued)
-------------------------------
All amounts, including footnotes, are presented in thousands.
<TABLE>
<CAPTION>
JULY 31, January 31,
2000 2000
------------------------
IDENTIFIABLE ASSETS
------------------------
<S> <C> <C>
Commercial Group................................................. $2,741,855 $2,606,698
Residential Group................................................ 876,789 815,082
Land Group....................................................... 94,685 92,868
Lumber Trading Group............................................. 130,154 208,836
Corporate........................................................ 39,579 90,990
------------------------
Consolidated................................................. $3,883,062 $3,814,474
========================
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 31, SIX MONTHS ENDED JULY 31,
-----------------------------------------------------
2000 1999 2000 1999
-----------------------------------------------------
EXPENDITURES FOR ADDITIONS TO REAL ESTATE
-----------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Group................................................... $ 70,686 $ 73,902 $140,158 $123,875
Residential Group.................................................. 124,817 12,153 158,151 29,284
Land Group......................................................... 6,575 10,495 20,433 25,959
Lumber Trading Group............................................... 652 1,020 1,163 1,846
Corporate.......................................................... 508 1,908 558 2,082
-----------------------------------------------------
Consolidated................................................... $ 203,238 $ 99,478 $320,463 $183,046
=====================================================
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 31, SIX MONTHS ENDED JULY 31,
------------------------------------------------------
2000 1999 2000 1999
------------------------------------------------------
REVENUES
------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Group ................... $131,288 $102,909 $ 243,501 $ 209,935
Residential Group .................. 36,798 38,623 73,662 72,900
Land Group ......................... 6,682 10,433 16,329 16,069
Lumber Trading Group (1) ........... 26,190 46,847 53,941 81,473
Corporate .......................... 183 139 326 268
-------------------------------------------------
Consolidated ................... $201,141 $198,951 $ 387,759 $ 380,645
=================================================
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 31, SIX MONTHS ENDED JULY 31,
-----------------------------------------------------
2000 1999 2000 1999
-----------------------------------------------------
INTEREST EXPENSE
-----------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Group ................... $ 30,335 $ 23,796 $ 56,863 $ 47,851
Residential Group .................. 6,596 7,742 12,626 14,227
Land Group ......................... 1,395 1,893 2,826 4,026
Lumber Trading Group (1) ........... 1,702 1,314 3,277 2,416
Corporate .......................... 8,012 6,354 15,474 12,224
-----------------------------------------------------
Consolidated ................... $ 48,040 $ 41,099 $ 91,066 $ 80,744
=====================================================
</TABLE>
<TABLE>
<CAPTION>
DEPRECIATION AND AMORTIZATION EXPENSE
-------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Group ................... $ 17,948 $ 16,875 $ 35,221 $ 32,045
Residential Group .................. 3,931 5,692 7,775 9,766
Land Group ......................... 91 31 156 56
Lumber Trading Group ............... 588 521 1,169 1,006
Corporate .......................... 337 248 576 470
Provision for decline in real estate
and other .....................
Gain on disposition of properties
and other investments .........
-------------------------------------------------
Consolidated ................... $ 22,895 $ 23,367 $ 44,897 $ 43,343
=================================================
</TABLE>
<TABLE>
<CAPTION>
EARNINGS BEFORE INCOME TAXES (EBIT) (2)
-----------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Group ................... $ 12,045 $ 9,869 $ 26,324 $ 21,688
Residential Group .................. 18,022 6,546 28,867 12,646
Land Group ......................... (1,594) (3,677) (3,863) (6,052)
Lumber Trading Group ............... (363) 5,081 468 7,898
Corporate .......................... (11,853) (9,550) (22,035) (18,728)
Provision for decline in real estate
and other ..................... (1,231) - (1,231) -
Gain on disposition of properties
and other investments ......... 25,821 - 56,542 -
----------------------------------------------------
Consolidated ................... $ 40,847 $ 8,269 $ 85,072 $ 17,452
====================================================
</TABLE>
<TABLE>
<CAPTION>
EARNINGS BEFORE DEPRECIATION, AMORTIZATION
AND DEFERRED TAXES (EBDT)
------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Group................................................... $ 21,509 $ 23,550 $ 45,483 $ 48,008
Residential Group.................................................. 20,204 9,603 32,650 18,467
Land Group......................................................... (964) (2,248) (2,335) (3,708)
Lumber Trading Group............................................... (274) 3,109 153 4,801
Corporate.......................................................... (8,342) (5,035) (13,625) (11,459)
------------------------------------------------------
Consolidated................................................... 32,133 28,979 62,326 56,109
RECONCILIATION TO NET EARNINGS:
Depreciation and amortization - Real Estate Groups................. (21,878) (22,567) (42,995) (41,811)
Deferred taxes - Real Estate Groups................................ (4,445) (1,672) (7,948) (4,264)
Straight-line rent adjustment...................................... 2,851 - 5,254 -
Provision for decline in real estate and other, net of tax......... (744) - (744) -
Gain on disposition of properties and other investments, net of tax 38,916 - 58,489 -
Extraordinary gain, net of tax..................................... - - - 214
------------------------------------------------------
Net earnings................................................... $ 46,833 $ 4,740 $ 74,382 $ 10,248
======================================================
</TABLE>
(1) The Company recognizes the gross margin on lumber brokerage sales as
Revenues. Sales invoiced for the three months ended July 31, 2000 and 1999
were approximately $722,000 and $1,105,000, respectively. Sales invoiced
for the six months July 31, 2000 and 1999 were approximately $1,530,000 and
$1,974,000, respectively.
(2) See Consolidated Statements of Earnings for reconciliation of EBIT to net
earnings.
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<PAGE> 13
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. Results of operations for
the six months ended July 31, 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 second quarter of 2000 grew by 10.9% to $32,133,000
from $28,979,000 in the second quarter of 1999. EBDT for the six months ended
July 31, 2000 grew by 11.1% to $62,326,000 from $56,109,000 for the six months
ended July 31, 1999. The increase in EBDT was the result of improved results
from increasing rental rates in existing properties and the opening or
acquisition of fifteen new properties in the last eighteen months.
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<PAGE> 14
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
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.
NET OPERATING INCOME FROM REAL ESTATE GROUPS - NOI for the combined Commercial
Group and Residential Group ("Real Estate Groups") for the second quarter of
2000 was $86,025,000 compared to $70,520,000 for the second quarter of 1999, a
22% increase. NOI for the Real Estate Groups for the six months ended July 31,
2000 was $162,421,000 compared to $138,223,000 for the six months ended July 31,
1999, a 17.5% increase.
Commercial Group
REVENUES - Revenues for the Commercial Group increased $24,951,000, or 24.2%, to
$127,860,000 in the second quarter of 2000 from $102,909,000 in the second
quarter of 1999. This increase was primarily the result of the openings of new
properties during 1999 and 2000 and increased rental rates in existing
properties. Revenues increased from the openings of The Promenade in Temecula, a
795,000 square-foot regional mall in Temecula, California ($1,858,000), several
openings in the Company's urban retail portfolio in the boroughs of New York
City including Columbia Park Center, 42nd Street, Hunting Park, Court Street,
Forest Avenue, Eastchester, and Kaufman Studios ($4,963,000), improved
operations at The Avenue at Tower City Center in Cleveland, Ohio ($513,000) and
Pavilion in San Jose, California ($810,000), and an expansion at Ballston Common
Mall, a shopping center in Arlington, Virginia ($268,000). Revenues also
increased from the hotel portfolio ($7,829,000) including the newly-opened
Embassy Suites Hotel at Battery Park City and Times Square Hilton, which were
added to the existing portfolio which includes Liberty Center Hotel, Sheraton
Station Square, Ritz Carlton Hotel, and the University Park Hotel at MIT.
Revenues also increased as a result of increased land sales of $6,293,000 in the
second quarter of 2000 as compared to the same period in 1999. The balance of
the increase in revenues in the Commercial Group (approximately $3,600,000) was
generally due to overall improved results of mature properties. These increases
were partially offset by the dispositions of Tucson Place ($260,000) in 2000 and
Rolling Acres ($992,000) in 1999.
Revenues for the Commercial Group increased $27,225,000, or 13.0%, to
$237,160,000 in the first half of 2000 from $209,935,000 in the first half of
1999. This increase was primarily due to the openings of new properties during
1999 and 2000 and increased rental rates in existing properties. Revenues
increased from the openings of The Promenade in Temecula ($3,830,000),
Millennium ($1,050,000), several openings in the Company's urban retail
portfolio in the boroughs of New York City including Columbia Park Center, 42nd
Street, Hunting Park, Court Street, Forest Avenue, Eastchester, and Kaufman
Studios ($9,772,000),
14
<PAGE> 15
improved operations at The Avenue at Tower City Center ($1,471,000) and Pavilion
($1,506,000), and an expansion at Ballston Common Mall ($747,000). Revenues also
increased from the hotel portfolio ($8,040,000) including the newly opened
Embassy Suites Hotel at Battery Park City and Times Square Hilton, which were
added to the existing portfolio which includes Liberty Center Hotel, Sheraton
Station Square, Ritz Carlton Hotel, and the University Park Hotel at MIT. The
increases were partially offset by a net decrease in land sales of $1,908,000 in
the first six months of 2000 as compared to the same period in 1999 and the
dispositions of Tucson Place ($185,000) in 2000 and Rolling Acres ($2,075,000)
in 1999. The balance of the increase in revenues in the Commercial Group
(approximately $7,700,000) was generally due to overall improved results of
mature properties.
OPERATING AND INTEREST EXPENSES - Operating expenses for the Commercial Group
increased $18,015,000, or 34.4%, to $70,384,000 in the second quarter of 2000
from $52,369,000 in the second quarter of 1999. This increase was attributable
primarily to costs associated with The Promenade in Temecula ($802,000), and the
New York City urban portfolio ($1,063,000). Operating expenses also increased as
a result of increased revenues at The Avenue at Tower City Center ($568,000),
the hotel portfolio ($6,095,000), and increased land sales in 2000 compared to
1999 ($6,835,000). The balance of the change in operating expenses is a result
of an increase of approximately $3,900,000 in mature properties compared to the
same period in 1999. These increases were partially offset by savings realized
through the dispositions of Tucson Place and Rolling Acres ($656,000). Interest
expense increased by $6,539,000, or 27.5%, to $30,335,000 in the second quarter
of 2000 from $23,796,000 in the second quarter of 1999. This increase was
primarily attributable to 1999 and 2000 additions to the Commercial Group
portfolio.
Operating expenses for the Commercial Group increased $15,656,000, or 14.4%, to
$124,007,000 in the first half of 2000 from $108,351,000 in the first half of
1999. This increase was attributable primarily to costs associated with the
opening of The Promenade in Temecula ($1,594,000), Millennium ($1,325,000), and
the New York City urban portfolio ($3,732,000). Operating expenses also
increased as a result of increased revenues in the hotel portfolio ($7,257,000),
and The Avenue at Tower City Center ($1,213,000). These increases in expenses
were partially offset by the dispositions of Tucson Place and Rolling Acres
($1,315,000). The balance of the change in operating expenses is a result of an
increase of approximately $2,500,000 in mature properties compared to the same
period in 1999. Interest expense increased by $9,012,000, or 18.8%, to
$56,863,000 in the first half of 2000 from $47,851,000 in the first half of
1999. This increase was primarily attributable to 1999 and 2000 additions to the
Commercial Group portfolio.
RESIDENTIAL GROUP
REVENUES - Revenues for the Residential Group decreased by $1,825,000, or 4.7%,
to $36,798,000 in the second quarter of 2000 from $38,623,000 in the second
quarter of 1999. This decrease was primarily attributable to the dispositions in
the first quarter of 2000 of Studio Colony, a 450-unit apartment building in Los
Angeles, California ($1,488,000) and Highlands, a 556-unit apartment building in
Grand Terrace, California ($1,024,000).
15
<PAGE> 16
These decreases were partially offset by an increase as a result of the
acquisition of Mount Vernon Square, a 1,387-unit apartment community in
Alexandria, Virginia ($1,237,000).
Revenues for the Residential Group increased by $762,000, or 1.0%, to
$73,662,000 in the first half of 2000 from $72,900,000 in the first half of
1999. This increase was primarily the result of the collection of a
fully-reserved note receivable from a syndicated senior citizen subsidized
apartment property ($2,159,000), the acquisition of Mount Vernon Square
($1,237,000) and general rental rate and occupancy increases for mature
properties of approximately $1,200,000. These increases were partially offset by
the dispositions in the first quarter of 2000 of Studio Colony ($2,255,000) and
Highlands ($1,838,000).
OPERATING AND INTEREST EXPENSES - Operating expenses for the Residential Group
decreased by $10,394,000, or 55.8%, to $8,249,000 in the second quarter of 2000
from $18,643,000 in the second quarter of 1999. The decrease in operating
expenses was primarily due to a reduction in a reserve for collection of a note
receivable from Millender Center ($10,275,000), and property dispositions of
Studio Colony ($645,000) and Highlands ($454,000). These decreases were
partially offset by the acquisition of Mount Vernon Square ($392,000). Interest
expense decreased by $1,146,000, or 14.8%, to $6,596,000 in the second quarter
of 2000 from $7,742,000 in the second quarter of 1999. This decrease in interest
expense was primarily due to dispositions of Studio Colony and Highlands.
Operating expenses for the Residential Group decreased by $11,867,000, or 32.7%,
to $24,394,000 in the first half of 2000 from $36,261,000 in the first half of
1999. The decrease in operating expenses was primarily due to a reduction in a
reserve for collection of a note receivable from Millender Center ($10,775,000),
property dispositions of Studio Colony ($847,000) and Highlands ($770,000).
These decreases were partially offset by the acquisition of Mount Vernon Square
($392,000). Interest expense decreased by $1,601,000, or 11.3%, to $12,626,000
in the first half of 2000 from $14,227,000 in the first half of 1999. This
decrease in interest expense was primarily due to dispositions of Studio Colony
and Highlands.
Land Group
REVENUES - Revenues for the Land Group decreased by $3,751,000 to $6,682,000 in
the second quarter of 2000 from $10,433,000 in the second quarter of 1999. This
decrease was primarily the result of land sale activity in 1999 at the following
projects that did not recur in 2000: The Cascades, 17-acre commercial
development in Brooklyn, Ohio ($1,269,000); various projects owned by Granite
Development Partners ($1,073,000); Silver Lakes in Fort Lauderdale, Florida
($921,000); Westwood Lakes in Tampa, Florida ($256,000); Greens at Birkdale
Village in Huntersville, North Carolina ($168,000).
Revenues for the Land Group increased by $260,000 to $16,329,000 in the first
half of 2000 from $16,069,000 in the first half of 1999. This increase was
primarily the result of increases at Canterberry Crossing, a 470-acre
residential golf course community in Parker, Colorado ($1,852,000), Westwood
Lakes ($1,318,000), and various projects owned by Granite Development Partners
($1,265,000). These increases were partially offset by decreases in land sale
activity in 1999 at the following projects that did not recur in 2000: The
Cascades ($2,203,000), Greens at Birkdale Village ($1,159,000), and Silver Lakes
16
<PAGE> 17
($588,000). 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 decreased by $5,337,000 for
the second quarter of 2000 to $6,881,000 from $12,218,000 for the second quarter
of 1999. The decrease in operating expenses was due to a decrease in costs
relating to decreased land sales at The Cascades ($987,000), Granite Devlopment
Partners ($2,520,000), Silver Lakes ($856,000), Westwood Lakes ($148,000), and
Greens at Birkdale Village ($326,000).
Operating expenses decreased by $730,000 for the first half of 2000 to
$17,366,000 from $18,096,000 for the first half of 1999. This decrease in
operating expenses for the first half of the year was due to a decrease in costs
relating to decreased land sales at The Cascades ($1,689,000), Greens at
Birkdale Village ($1,060,000), and Silver Lakes ($714,000). These decreases were
partially offset by increases at various projects owned by Granite Development
Partners ($1,260,000), Canterberry Crossing ($1,508,000), and Westwood Lakes
($872,000).
Interest expense decreased by $498,000 in the second quarter of 2000 to
$1,395,000 from $1,893,000 in the second quarter of 1999. Interest expense
decreased by $1,200,000 in the first half of 2000 to $2,826,000 from $4,026,000
in the first half 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 $20,657,000 in the
second quarter of 2000 to $26,190,000 from $46,847,000 in the second quarter of
1999. Revenues for the Lumber Trading Group decreased by $27,532,000 in the
first half of 2000 to $53,941,000 from $81,473,000 in the first half of 1999.
These decreases were primarily due to decreased lumber trading margins and a
decrease in lumber trading volume as a result of declining market conditions.
OPERATING AND INTEREST EXPENSES - Operating expenses for the Lumber Trading
Group decreased by $15,600,000 in the second quarter of 2000 to $24,852,000 from
$40,452,000 in the second quarter of 1999. Operating expenses for the Lumber
Trading Group decreased by $20,962,000 in the first half of 2000 to $50,197,000
from $71,159,000 in the first half of 1999. The decreases in the second quarter
and first half of 2000 reflected lower variable expenses due to decreased
trading margins and volume compared to 1999.
Interest expense increased by $388,000 in the second quarter of 2000 to
$1,702,000 from $1,314,000 in the second quarter of 1999. Interest expense
increased by $861,000 in the first half of 2000 to $3,277,000 from $2,416,000 in
the first half of 1999.
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<PAGE> 18
CORPORATE ACTIVITIES
REVENUES - Corporate Activities' revenues increased $44,000 in the second
quarter of 2000 to $183,000 from $139,000 in the second quarter of 1999.
Corporate Activities' revenues increased $58,000 in the first half of 2000 to
$326,000 from $268,000 in the first half 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 the amount of loans
outstanding.
OPERATING AND INTEREST EXPENSES - Operating expenses for Corporate Activities
increased $690,000 in the second quarter of 2000 to $4,024,000 from $3,334,000
in the second quarter of 1999. Operating expenses for Corporate Activities
increased $116,000 in the first half of 2000 to $6,887,000 from $6,771,000 in
the first half of 1999. These increases represent additional general corporate
expenses. Interest expense increased $1,658,000 in the second quarter of 2000 to
$8,012,000 from $6,354,000 in the second quarter of 1999. Interest expense
increased $3,250,000 in the first half of 2000 to $15,474,000 from $12,224,000
in the first half 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
PROVISION FOR DECLINE IN REAL ESTATE AND OTHER- During the second quarter of
2000, the Company recorded a Provision for Decline in Real Estate and Other of
$1,231,000 ($744,000 net of tax) related to the write-down to estimated net
realizable value of Commercial Group's investment in Canton Centre Mall in
Canton, Ohio.
GAIN ON DISPOSITION OF PROPERTIES AND OTHER INVESTMENTS - Gain on disposition of
properties and other investments for the second quarter of 2000 totaled
$25,821,000. The Company recognized a $8,599,000 gain on the disposition of
Tucson Place, a shopping center in Tucson, Arizona. The Company also recognized
gains totaling $17,276,000 from the sale of available-for-sale equity
securities. No properties or other investments were disposed of during the
second quarter of 1999.
Gain on disposition of properties and other investments for the first half of
2000 totaled $56,542,000. The Company recognized gains on the disposition of two
apartment communities in California: Studio Colony ($26,251,000) and Highlands
($578,000); and Tucson Place ($8,599,000). Additionally, gains of $21,114,000
were recognized from the sale of available-for-sale equity securities. No
properties or other investments were disposed of during the first half of 1999.
EXTRAORDINARY GAIN - There was no extraordinary gain for the first half of 2000.
Extraordinary gain, net of tax, totaled $214,000 for the first half of 1999, all
of which occurred in the first quarter representing extinguishment of $353,000
of non-recourse debt related to Plaza at Robinson Town Centre in Pittsburgh,
Pennsylvania.
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<PAGE> 19
INCOME TAXES - Income tax (benefit) expense for the second quarter of 2000 and
1999 totaled $(5,986,000) and $3,529,000, respectively. Income tax expense for
the first half of 2000 and 1999 totaled $10,690,000 and $7,418,000,
respectively.
The Company recorded net deferred income tax benefits of $12,199,000 in the
second quarter of 2000, comprised of net deferred income tax expense of
$10,388,000 incurred in the normal course of business offset by a deferred
income tax benefit of $22,587,000. This benefit represented a reversal of a
portion of a deferred tax liability recorded in 1994 relating to the
cancellation of debt income of Park Labrea Towers, a residential property which
was sold that same year. The Company reversed a portion of this deferred tax
liability and recognized a deferred tax benefit of $1,002,000 in the first
quarter of 2000 and $1,677,000 in the fourth quarter of 1999, for a total
reversal of the original deferred tax liability of $25,266,000.
In certain situations that applied to Park Labrea Towers in 1994, the Internal
Revenue Code allowed for the deferral of cancellation of debt income. As a
result of certain steps taken by the Company in the respective periods above,
the deferred income will never be recognized for tax purposes and, accordingly,
the related deferred tax liability was reversed.
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 gain, excluding the following items:
i) provision for decline in real estate and other; ii) gain (loss) on
disposition of properties; iii) beginning in 2000, the adjustment to recognize
rental revenues 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 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 recognized 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.
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<PAGE> 20
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 July 31, 2000, the Company had $175,500,000
outstanding under its revolving credit facility. On August 9, 2000, the Company
increased its revolving credit facility to $265,000,000 from $200,000,000 with
ten participating banks. The Company's revolving credit facility matures March
31, 2003, unless extended, and allows for up to a combined amount of $30,000,000
in outstanding letters of credit or surety bonds ($9,974,990 and $17,175,000,
respectively, at July 31, 2000). The outstanding letters of credit reduce the
credit available to the Company. Annually, within 60 days after January 31, the
revolving credit facility may be extended by unanimous consent of the
participating banks. At its maturity date, the outstanding revolving credit
loans, if any, may be converted by the Company to a four-year term loan. The
revolving credit available is reduced quarterly by $2,500,000, beginning October
1, 2000.
The revolving credit facility provides, among other things, for: 1) interest
rates of 2.125% over LIBOR or 1/2% 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. Prior to August 9, 2000, the
revolving credit facility had similar terms and a December 10, 2001 maturity
date.
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."
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<PAGE> 21
MORTGAGE REFINANCINGS
During the six months ended July 31, 2000, the Company completed $265,400,000 in
financings, including $15,800,000 in refinancings, $72,300,000 in acquisitions
and $177,300,000 for new development projects. Additionally, the Company sold
four properties which reduced total mortgage debt by $89,300,000. 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.
INTEREST RATE EXPOSURE
At July 31, 2000, the composition of nonrecourse mortgage debt is as
follows:
Amount Rate(1)
--------------------------------------
(in thousands)
Fixed $ 1,753,221 7.51%
Variable -
Capped (2) 550,609 8.61%
Tax-Exempt 104,903 5.22%
UDAG and other
subsidized loans (fixed) 69,852 2.65%
-------------
$ 2,478,585 7.52%
=============
(1) The weighted average interest rates shown above include both the base
index and the lender margin.
(2) The $550,609 of capped debt is protected with $651,280 of LIBOR caps
as described below.
Debt related to projects under development at July 31, 2000 totals $261,663,000,
out of a total commitment from lenders of $503,915,000. Of this outstanding
debt, $251,355,000 is variable-rate debt and $10,308,000 is fixed-rate debt. The
Company generally borrows funds for development and construction projects with
maturities of two-to-five years utilizing variable-rate financing. Upon opening
and achieving stabilized operations, the Company generally pursues long-term
fixed-rate financing.
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 6.64% and 6.88% LIBOR interest rate caps for its variable-rate
mortgage debt in the amount of $651,280,000 and $543,019,000, respectively, for
the years ending January 31, 2001 and 2002. In August 2000, the Company further
purchased 7.75% LIBOR interest rate caps in the amount of $400,000,000 for the
year ending January 31, 2003. In addition, 3-year LIBOR caps were purchased at
strike rates ranging from 6.75% - 8.00% to protect the portfolio, in the
aggregate amount of $372,854,000 with start dates from July 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 $308,669,000 of
10-year Treasury Options at strike rates ranging from 6.00% - 7.00% with
exercise dates ranging from November 2000 to September 2002, of which
$16,100,000 was purchased in August 2000. Additionally, the Company owns
$22,500,000 of 5-year Treasury Options at a strike rate of 7.00% with an
21
<PAGE> 22
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 3.62% and has never exceeded 7.90%.
At July 31, 2000, a 100 basis point increase in taxable interest rates would
have no effect to the annual pre-tax interest cost of the Company's taxable
variable-rate debt due to the 6.50% aggregate 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
$1,049,000.
Lumber Trading Group Liquidity
Lumber Trading Group is separately financed with two revolving lines of credit
and an asset securitization facility.
At July 31, 2000, Lumber Trading Group's two revolving lines of credit totaled
$87,000,000, expiring June 30, 2001. These credit lines are secured by the
assets of the Lumber Trading Group and are used to finance its working capital
needs. At July 31, 2000, no borrowings were outstanding under these revolving
lines of credit.
In July 1999, Lumber Trading Group renewed their asset securitization facility
for three years to expire July 19, 2002. This securitization facility works
through a consolidated subsidiary of the Lumber Trading Group, a special-purpose
entity, which sells fractional interests in a defined pool of accounts
receivable to a financial institution. This special-purpose entity owns all of
its assets as a separate corporate entity with its own separate creditors that
will be entitled to be satisfied prior to any value in this entity becoming
available to its stakeholders. The underlying agreement accommodates up to
$100,000,000 of such sales and is supported by a liquidity bank agreement. At
July 31, 2000, the Company had received $72,000,000 in net proceeds from this
agreement.
These credit facilities are without recourse to the Company. 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 totaled $48,958,000 and $17,999,000
for the first half of 2000 and 1999, respectively. The increase was a result of
an increase of $93,605,000 in rents and other revenues received, partially
offset by an increase of $49,392,000 in operating expenditures (primarily from a
decrease in accounts payable), an increase of $10,150,000 in interest paid, and
an increase of $3,859,000 in land development expenditures.
Net cash used in investing activities totaled $161,613,000 and $193,337,000 for
the first half of 2000 and 1999, respectively. Capital expenditures, other than
development and acquisition activities, totaled $21,622,000 and $17,283,000
(including both recurring and investment capital expenditures) in the first half
of 2000 and 1999, respectively and were financed with cash on hand at the
beginning of the year. The Company invested $276,210,000 and $154,554,000 in
acquisition and development of real estate projects in the
22
<PAGE> 23
first half of 2000 and 1999, respectively. These expenditures were financed with
cash on hand at the beginning of the year, cash provided by operating
activities, approximately $156,000,000 and $99,000,000 in new mortgage
indebtedness incurred in the first half of 2000 and 1999, respectively,
borrowings under the revolving credit facility and proceeds from the refinancing
of existing properties. The Company invested $21,500,000 in investments in and
advances to affiliates in the first half of 1999 primarily related to New York
City area urban development ($7,605,000) and in several residential properties
accounted for on the equity method ($15,245,000). During the first half of 2000,
$131,269,000 was collected in proceeds from dispositions of two residential
apartment properties, Studio Colony and Highlands, one commercial shopping
center property, Tucson Place, and the sale of available-for-sale equity
securities all of which were partially used to reduce total mortgage debt by
$89,300,000 (see "Mortgage Refinancings").
Net cash provided by financing activities totaled $62,326,000 and $150,597,000
in the first half of 2000 and 1999, respectively. 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 provided by financing activities for the first
half of 2000 also reflected a decrease in restricted cash of $10,483,000
primarily from the release of the collateral deposit held for the acquisition of
Mount Vernon Square. Additionally, net cash used in financing for the first half
of 2000 also reflected a decrease in book overdrafts of $12,673,000
(representing checks issued but not yet paid) and a net decrease of $28,730,000
in notes payable (primarily comprised of a $21,486,000 reduction in borrowings
outstanding against the line of credit in the Lumber Trading Group), payment of
deferred financing costs of $8,461,000 and payment of $3,004,000 of dividends to
shareholders. Net cash provided by financing activities for the first half of
1999 also reflected an increase of $4,607,000 in net borrowings under Lumber
Trading Group's lines of credit, an increase of $5,276,000 in notes payable, a
change in restricted cash and book overdrafts of $23,881,000 and payment of
$2,399,000 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.
23
<PAGE> 24
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. The
third 2000 quarterly dividend of $.06 per share of both Class A and Class B
Common Stock was declared on September 6, 2000 and will be paid on December 15,
2000 to shareholders of record at the close of business on December 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.
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
effect of the adoption of SFAS 133 on the Company's financial statements cannot
yet be determined since it will be subject to market conditions in place in 2001
and beyond.
In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation", which is an interpretation
of APB Opinion No. 25, "Accounting for Stock Issued to Employees". The Company
believes that this interpretation will have no material effect on its financial
statements.
In January 2000, the FASB's Emerging Issues Task Force (EITF) released Abstract
EITF 00-1, which discusses the "Applicability of the Pro Rata Method of
Consolidation to Investments in Certain Partnerships and Other Unincorporated
Joint Ventures". In December 1999, the SEC released Staff Accounting Bulletin
No. 101 that summarizes the staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements. The
Company is currently assessing what impact, if any, these two releases may have
on the Company's financial statements.
24
<PAGE> 25
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.
25
<PAGE> 26
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
EARNINGS BEFORE DEPRECIATION, AMORTIZATION AND DEFERRED TAXES
FOR THE SECOND QUARTER ENDED JULY 31, 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 $131,288 $102,909 $36,798 $38,623 $6,682 $10,433
Exclude straight-line rent adjustment 3,428 - - - - -
--------- -------- -------- -------- --------- --------
Revenues excluding straight-line rent adjustment 127,860 102,909 36,798 38,623 6,682 10,433
Operating expenses,
including depreciation and amortization for
non-real estate Groups 70,961 52,369 8,249 18,643 6,881 12,218
Exclude straight-line rent adjustment 577 - - - - -
--------- -------- -------- -------- --------- --------
Operating expenses excluding straight-line rent adjustment 70,384 52,369 8,249 18,643 6,881 12,218
Interest expense 30,335 23,796 6,596 7,742 1,395 1,893
Income tax provision 5,632 3,194 1,749 2,635 (630) (1,430)
--------- -------- -------- -------- --------- --------
106,351 79,359 16,594 29,020 7,646 12,681
--------- -------- -------- -------- --------- --------
Earnings before depreciation, amortization
and deferred taxes (EBDT) $21,509 $23,550 $20,204 $9,603 ($964) ($2,248)
========= ======== ======== ======== ========= ========
<CAPTION>
Lumber Trading Group Corporate Activities Total
--------------------- -------------------- ---------------------
2000 1999 2000 1999 2000 1999
--------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $26,190 $46,847 $183 $139 $201,141 $198,951
Exclude straight-line rent adjustment - - - - 3,428 -
--------- -------- -------- -------- --------- --------
Revenues excluding straight-line rent adjustment 26,190 46,847 183 139 197,713 198,951
Operating expenses,
including depreciation and amortization for
non-real estate Groups 24,852 40,452 4,024 3,334 114,967 127,016
Exclude straight-line rent adjustment - - - - 577 -
--------- -------- -------- -------- --------- --------
Operating expenses excluding straight-line rent adjustment 24,852 40,452 4,024 3,334 114,390 127,016
Interest expense 1,702 1,314 8,012 6,354 48,040 41,099
Income tax provision (90) 1,972 (3,511) (4,514) 3,150 1,857
--------- -------- -------- -------- --------- --------
26,464 43,738 8,525 5,174 165,580 169,972
--------- -------- -------- -------- --------- --------
Earnings before depreciation, amortization
and deferred taxes (EBDT) ($274) $3,109 ($8,342) ($5,035) $32,133 $28,979
========= ======== ======== ======== ========= ========
Reconciliation to net earnings:
Earnings before depreciation, amortization and deferred taxes (EBDT) $ 32,133 28,979
Depreciation and amortization - Real Estate Groups (21,878) (22,567)
Deferred taxes - Real Estate Groups (4,445) (1,672)
Straight-line rent adjustment 2,851 -
Provision for decline in real estate and other, net of tax (744) -
Gain on disposition of properties and other investments, net of tax 38,916 -
Extraordinary gain, net of tax - -
-------- -------
Net earnings $ 46,833 $ 4,740
======== =======
</TABLE>
26
<PAGE> 27
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
EARNINGS BEFORE DEPRECIATION, AMORTIZATION AND DEFERRED TAXES
FOR THE SIX MONTHS ENDED JULY 31, 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 $243,501 $209,935 $73,662 $72,900 $16,329 $16,069
Exclude straight-line rent adjustment 6,341 - - - - -
--------- -------- -------- -------- --------- ---------
Revenues excluding straight-line rent adjustment 237,160 209,935 73,662 72,900 16,329 16,069
Operating expenses,
including depreciation and amortization for
non-real estate Groups 125,094 108,351 24,394 36,261 17,366 18,096
Exclude straight-line rent adjustment 1,087 - - - - -
--------- -------- -------- -------- --------- ---------
Operating expenses excluding straight-line rent adjustment 124,007 108,351 24,394 36,261 17,366 18,096
Interest expense 56,863 47,851 12,626 14,227 2,826 4,026
Income tax provision 10,807 5,725 3,992 3,945 (1,528) (2,345)
--------- -------- -------- -------- --------- ---------
191,677 161,927 41,012 54,433 18,664 19,777
--------- -------- -------- -------- --------- ---------
Earnings before depreciation, amortization
and deferred taxes (EBDT) $45,483 $48,008 $32,650 $18,467 ($2,335) ($3,708)
========= ======== ======== ======== ========= =========
<CAPTION>
Lumber Trading Group Corporate Activities Total
--------------------- -------------------- ---------------------
2000 1999 2000 1999 2000 1999
--------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $53,941 $81,473 $326 $268 $387,759 $380,645
Exclude straight-line rent adjustment - - - - 6,341 -
--------- -------- -------- -------- --------- ---------
Revenues excluding straight-line rent adjustment 53,941 81,473 326 268 381,418 380,645
Operating expenses,
including depreciation and amortization for
non-real estate Groups 50,197 71,159 6,887 6,771 223,938 240,638
Exclude straight-line rent adjustment - - - - 1,087 -
--------- -------- -------- -------- --------- ---------
Operating expenses excluding straight-line rent adjustment 50,197 71,159 6,887 6,771 222,851 240,638
Interest expense 3,277 2,416 15,474 12,224 91,066 80,744
Income tax provision 314 3,097 (8,410) (7,268) 5,175 3,154
--------- -------- -------- -------- --------- ---------
53,788 76,672 13,951 11,727 319,092 324,536
--------- -------- -------- -------- --------- ---------
Earnings before depreciation, amortization
and deferred taxes (EBDT) $153 $4,801 ($13,625) ($11,459) $62,326 $56,109
========= ======== ======== ======== ========= =========
Reconciliation to net earnings:
Earnings before depreciation, amortization and deferred taxes (EBDT) $62,326 $56,109
Depreciation and amortization - Real Estate Groups (42,995) (41,811)
Deferred taxes - Real Estate Groups (7,948) (4,264)
Straight-line rent adjustment 5,254 -
Provision for decline in real estate and other, net of tax (744) -
Gain on disposition of properties and other investments, net of tax 58,489 -
Extraordinary gain, net of tax - 214
--------- ---------
Net earnings $74,382 $10,248
========= =========
</TABLE>
27
<PAGE> 28
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The Company's primary market risk exposure is interest rate risk. At July 31,
2000, the Company had $831,012,000 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.
Principal
Strike Rate Period Outstanding
----------------------------------------------------------------------------
(in thousands)
7.25% 01/20/00 - 01/19/01 $ 72,270
6.50% 02/01/00 - 01/31/01 579,010
7.50% 07/01/00 - 05/01/03 12,905
6.50% 02/01/01 - 07/31/01 316,282
7.00% 08/01/01 - 01/31/02 298,082
7.00% 02/01/01 - 01/31/02 226,737
7.75% 02/01/02 - 01/31/03 400,000*
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
* Purchased in August 2000
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.
Strike Rate Term Exercise Date Notional
--------------------------------------------------------------------------------
(years) (in thousands)
6.72% 10 11/01/00 $ 25,550
7.00% 10 02/01/01 33,180
6.00% 10 04/10/01 41,252
7.00% 10 05/01/01 38,920
7.00% 10 06/01/01 7,200
6.00% 10 08/10/01 38,677
7.00% 10 11/01/01 9,030
7.00% 10 08/01/02 98,760
6.50% 10 09/03/02 16,100*
7.00% 5 08/01/01 22,500
* Purchased in August 2000
28
<PAGE> 29
At July 31, 2000, the Company had $175,500,000 outstanding under its revolving
credit facility. On August 9, 2000, the Company increased its revolving credit
facility to $265,000,000 from $200,000,000 with ten participating banks. The
increased credit facility bears interest at LIBOR plus 2.125%. The revolving
credit available is reduced quarterly by $2,500,000, beginning October 1, 2000.
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.
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
July 31, 2000 was $2,023,072,000 compared to an estimated fair value of
$1,892,560,000. 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 $1,997,110,000.
The table below provides information about the Company's financial instruments
that are sensitive to changes in interest rates.
29
<PAGE> 30
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
--------------------------------------------------------------------
LONG-TERM DEBT 2000 2001 2002 2003
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
FIXED:
Fixed rate debt(1) $ 175,249,258 $ 84,442,098 $ 103,763,103 $ 89,037,232
Weighted average interest rate 7.58% 8.26% 7.60% 8.19%
UDAG(1) 1,028,081 10,490,505 551,684 173,777
Weighted average interest rate 0.21% 7.99% 7.71% 3.04%
Senior notes - - - -
Weighted average interest rate
-------------- -------------- -------------- --------------
Total Fixed Rate Debt 176,277,339 94,932,603 104,314,787 89,211,009
-------------- -------------- -------------- --------------
VARIABLE:
Variable rate debt(1) 267,031,945 29,191,972 74,527,755 76,963,704
Weighted average interest rate
Tax Exempt(1) 28,400,000 36,503,049 - -
Weighted average interest rate
Revolving Credit Facility - 175,500,000 - -
Weighted average interest rate
-------------- -------------- -------------- --------------
Total Variable Rate Debt 295,431,945 241,195,021 74,527,755 76,963,704
-------------- -------------- -------------- --------------
TOTAL LONG-TERM DEBT $ 471,709,284 $ 336,127,624 $ 178,842,542 $ 166,174,713
============== ============== ============== ==============
<CAPTION>
EXPECTED MATURITY DATE TOTAL FAIR MARKET
-------------------------------- OUTSTANDING VALUE
LONG-TERM DEBT 2004 THEREAFTER 7/31/00 7/31/00
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
FIXED:
Fixed rate debt(1) $ 52,322,119 $1,248,406,920 $1,753,220,730 $1,664,354,108
Weighted average interest rate 7.38% 7.39% 7.51%
UDAG(1) 345,799 57,261,789 69,851,635 42,165,751
Weighted average interest rate 1.64% 1.68% 2.65%
Senior notes - 200,000,000 200,000,000 186,040,000
Weighted average interest rate 8.50% 8.50%
-------------- -------------- -------------- --------------
Total Fixed Rate Debt 52,667,918 1,505,668,709 2,023,072,365 1,892,559,859
-------------- -------------- -------------- --------------
VARIABLE:
Variable rate debt(1) 22,381,579 80,512,226 550,609,181 550,609,181
Weighted average interest rate 8.61%
Tax Exempt(1) - 40,000,000 104,903,049 104,903,049
Weighted average interest rate 5.22%
Revolving Credit Facility - - 175,500,000 175,500,000
Weighted average interest rate 8.63%
-------------- -------------- -------------- --------------
Total Variable Rate Debt 22,381,579 120,512,226 831,012,230 831,012,230
-------------- -------------- -------------- --------------
TOTAL LONG-TERM DEBT $ 75,049,497 $1,626,180,935 $2,854,084,595 $2,723,572,089
============== ============== ============== ==============
</TABLE>
(1) Represents nonrecourse debt.
30
<PAGE> 31
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
---------------------------------------------------------------------
LONG-TERM DEBT 1999 2000 2001 2002
-------------- --------------- -------------- -------------- --------------
FIXED:
<S> <C> <C> <C> <C>
Fixed rate debt(1) $ 140,808,357 $ 95,188,201 $ 80,954,627 $ 61,686,746
Weighted average interest rate 7.40% 8.08% 8.25% 7.66%
UDAG(1) 25,256 1,049,021 10,481,224 541,722
Weighted average interest rate 6.92% 0.35% 7.99% 7.73%
Senior notes - - - -
Weighted average interest rate
--------------- -------------- -------------- --------------
Total Fixed Rate Debt 140,833,613 96,237,222 91,435,851 62,228,468
--------------- -------------- -------------- --------------
VARIABLE:
Variable rate debt(1)(2) 75,267,651 126,848,431 22,891,971 99,755,580
Weighted average interest rate
Tax Exempt(1) - 55,980,001 32,684,748 -
Weighted average interest rate
Revolving Credit Facility - 127,000,000 - -
Weighted average interest rate
--------------- -------------- -------------- --------------
Total Variable Rate Debt 75,267,651 309,828,432 55,576,719 99,755,580
--------------- -------------- -------------- --------------
TOTAL LONG-TERM DEBT $ 216,101,264 $ 406,065,654 $ 147,012,570 $ 161,984,048
=============== ============== ============== ==============
<CAPTION>
EXPECTED MATURITY DATE TOTAL FAIR MARKET
--------------------------------- OUTSTANDING VALUE
LONG-TERM DEBT 2003 THEREAFTER 7/31/99 7/31/99
-------------- --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
FIXED:
Fixed rate debt(1) $ 85,688,438 $1,189,907,777 $1,654,234,146 $1,596,583,670
Weighted average interest rate 8.20% 7.37% 7.51%
UDAG(1) 163,085 57,623,142 69,883,450 42,981,870
Weighted average interest rate 2.78% 1.57% 2.57%
Senior notes - 200,000,000 200,000,000 193,750,000
Weighted average interest rate 8.50% 8.50%
--------------- -------------- -------------- --------------
Total Fixed Rate Debt 85,851,523 1,447,530,919 1,924,117,596 1,833,315,540
--------------- -------------- -------------- --------------
VARIABLE:
Variable rate debt(1)(2) 50,150,167 20,028,711 394,942,511 394,942,511
Weighted average interest rate 7.01%
Tax Exempt(1) - 65,108,000 153,772,749 153,772,749
Weighted average interest rate 4.03%
Revolving Credit Facility - - 127,000,000 127,000,000
Weighted average interest rate 7.18%
--------------- -------------- -------------- --------------
Total Variable Rate Debt 50,150,167 85,136,711 675,715,260 675,715,260
--------------- -------------- -------------- --------------
TOTAL LONG-TERM DEBT $ 136,001,690 $1,532,667,630 $2,599,832,856 $2,509,030,800
============== ============== ============== ==============
</TABLE>
(1) Represents nonrecourse debt.
(2) As of July 31, 1999, $141,393,000 of variable-rate debt has been
hedged via $133,479,000 of 1-year LIBOR contracts and $7,914,000 of
LIBOR-based swaps that have a combined remaining average life of 0.38
years.
31
<PAGE> 32
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.
32
<PAGE> 33
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).
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).
33
<PAGE> 34
Exhibit
Number Description of Document
---------- -----------------------
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).
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).
34
<PAGE> 35
Exhibit
Number Description of Document
------ -----------------------
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 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).
10.17 - 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).
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).
35
<PAGE> 36
Exhibit
Number Description of Document
------ -----------------------
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).
36
<PAGE> 37
Exhibit
Number Description of Document
------ -----------------------
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).
37
<PAGE> 38
Exhibit
Number Description of Document
------ -----------------------
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).
38
<PAGE> 39
Exhibit
Number Description of Document
------ -----------------------
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).
39
<PAGE> 40
Exhibit
Number Description of Document
------ -----------------------
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).
*10.49 - Employment Agreement entered into on May 3, 2000, effective
February 1, 2000, by the Company and James A. Ratner.
*10.50 - Employment Agreement entered into on May 3, 2000, effective
February 1, 2000, by the Company and Ronald A. Ratner.
*10.51 - First Amendment to Amended and Restated Credit Agreement,
dated August 9, 2000, 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.
*10.52 - First Amendment to Amended and Restated Guaranty of Payment
of Debt, dated August 9, 2000, by and among Forest City
Enterprises, Inc., the banks named therein, KeyBank National
Association, as administrative agent, and National City
Bank, as syndication agent.
*27 - Financial Data Schedule.
----------
* - Filed herewith.
(b) Reports on Form 8-K:
None
40
<PAGE> 41
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 September 12, 2000 /s/ Thomas G. Smith
------------------ -----------------------
Thomas G. Smith, Senior Vice President
and Chief Financial Officer
Date September 12, 2000 /s/ Linda M. Kane
------------------ ----------------------------------
Linda M. Kane, Vice President,
Corporate Controller
(Chief Accounting Officer)
41
<PAGE> 42
EXHIBIT INDEX
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).
<PAGE> 43
Exhibit
Number Description of Document
------ -----------------------
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).
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).
<PAGE> 44
Exhibit
Number Description of Document
------ -----------------------
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 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).
10.17 - 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).
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).
<PAGE> 45
Exhibit
Number Description of Document
------ -----------------------
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).
<PAGE> 46
Exhibit
Number Description of Document
--------- ------------------------
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).
<PAGE> 47
Exhibit
Number Description of Document
------ -----------------------
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).
<PAGE> 48
Exhibit
Number Description of Document
------ -----------------------
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).
<PAGE> 49
Exhibit
Number Description of Document
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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).
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).
* 10.49 - Employment Agreement entered into on May 3, 2000,
effective February 1, 2000, by the Company and James
A. Ratner.
* 10.50 - Employment Agreement entered into on May 3, 2000,
effective February 1, 2000, by the Company and Ronald
A. Ratner.
* 10.51 - First Amendment to Amended and Restated Credit
Agreement, dated August 9, 2000, 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.
* 10.52 - First Amendment to Amended and Restated Guaranty of
Payment of Debt, dated August 9, 2000, by and among
Forest City Enterprises, Inc., the banks named
therein, KeyBank National Association, as
administrative agent, and National City Bank, as
syndication agent.
<PAGE> 50
* 27 - Financial Data Schedule.
----------------
* - Filed herewith.
