<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transaction period from_________ to ___________
------------------
Commission file number 0-15932
BF ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3038456
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
(415) 989-6580
(Registrant's Telephone Number)
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 August 11, 1995:
3,794,593 shares of $.10 par value Common Stock
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BF ENTERPRISES, INC. AND SUBSIDIARIES
I N D E X
<TABLE>
Page
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<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
- Consolidated statements of financial position.....................3
- Consolidated statements of operations.............................4
- Consolidated statements of stockholders' equity...................5
- Consolidated statements of cash flows.............................6
- Notes to financial statements.....................................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................10
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...................................13
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
BF ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---- ----
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 1,997 $ 2,975
Marketable securities 642 1,883
Receivables 180 144
Mortgage loans 876 886
Real estate rental property, net of depreciation 2,446 2,471
Real estate inventory held for current sale
and land held for future development 11,414 11,169
Other real estate 920 879
Other assets 439 39
-------- --------
TOTAL ASSETS $ 18,914 $ 20,446
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Payables and accrued liabilities $ 2,966 $ 4,572
Subordinated debentures, unmatured 817 817
Deferred income taxes 16 432
-------- --------
Total liabilities 3,799 5,821
-------- --------
Stockholders' equity:
Common stock, $.10 par value
Authorized - 10,000,000 shares
Issued and outstanding -
3,794,593 and 3,758,393 shares 380 376
Capital surplus 17,440 17,344
Deficit (2,762) (3,114)
Net unrealized gains from marketable equity securities 57 19
-------- ------
Total stockholders' equity 15,115 14,625
------- ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 18,914 $ 20,446
-------- --------
-------- --------
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
3
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Real estate sales $ 510 $ 823 $ 1,296 $ 1,688
Real estate leasing income and
mortgage loan interest 87 160 174 320
Interest 42 90 102 173
Other 3 33 6 33
------ ------ ------ ------
642 1,106 1,578 2,214
Costs and Expenses:
Cost of real estate sold 98 146 411 299
Interest on subordinated debentures 14 23 28 48
Depreciation 13 13 26 26
Operating 144 20 152 31
General and administrative 311 324 601 639
------ ----- ----- -----
580 526 1,218 1,043
Gross profit 62 580 360 1,171
Losses from securities (8) -- (8) (2)
------ ------ ------ ------
Net income $ 54 $ 580 $ 352 $1,169
------ ------ ------ ------
------ ------ ------ ------
Net income per share $ .01 $ .15 $ .09 $ .30
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
4
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------
1995 1994
---- ----
<S> <C> <C>
Common stock:
Beginning of period $ 376 $ 381
Restricted stock grant - par value 4 --
Exercise of stock options - par value 1 --
Purchases of common stock - par value (1) (3)
------ ------
End of period $ 380 $ 378
------ ------
------ ------
Capital surplus:
Beginning of period $17,344 $17,548
Restricted stock grant - excess over par value 170 --
Exercise of stock options - excess over par value 1 --
Purchases of common stock - excess over par value (63) (100)
Purchase of stock option (12) --
------- -------
End of period $17,440 $17,448
------- -------
------- -------
Deficit:
Beginning of period $(3,114) $(4,722)
Net income 352 1,169
End of period $(2,762) $(3,553)
------- -------
------- -------
Net Unrealized Gains From
Marketable Equity Securities:
Beginning of period $ 19 $ --
Valuation allowance 38 --
------- -------
End of period $ 57 $ --
------- -------
------- -------
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
5
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 352 $ 1,169
Adjustments to reconcile net income to net
cash provided or used by operating activities:
Gains from sales of real estate (885) (1,389)
Losses from securities 8 2
Net cash proceeds from sales of real estate 802 1,028
Real estate development costs (654) (897)
Reimbursement of real estate development costs 491 442
Changes in certain assets and liabilities:
Decrease (increase) in receivables (36) (96)
Decrease in payables and accrued liabilities (401) (434)
Decrease in deferred income taxes (416) --
Other, net (407) 110
Total adjustments to net income (1,498) (1,234)
------- -------
Net cash used by operating activities (1,146) (65)
Cash flows from investing activities:
Proceeds from sales and maturities of marketable securities 1,481 3,223
Purchases of marketable securities (208) (4,430)
------- -------
Net cash provided (used) by investing activities 1,273 (1,207)
Cash flows from financing activities:
Reductions in subordinated debentures (1,031) (5,750)
Purchases of the Company's common stock (64) (103)
Other (10) --
------ -------
Net cash used by financing activities (1,105) (5,853)
------ -------
Net decrease in cash and cash equivalents (978) (7,125)
Cash and cash equivalents at beginning of period 2,975 9,840
------ -------
Cash and cash equivalents at end of period $ 1,997 $ 2,715
------- -------
------- -------
Supplemental disclosures of cash flow information:
Cash paid during the period for interest (net of
amount capitalized) $ 28 $ 177
------- -------
------- -------
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
6
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note A - Interim Financial Information
The accompanying consolidated financial statements of BF Enterprises, Inc.
(the "Company") and its subsidiaries have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC") and, in
management's opinion, include all adjustments necessary for a fair
presentation for the interim period reported. Certain information and note
disclosures normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to SEC rules or regulations. It is suggested that these
financial statements be read in conjunction with the financial statements and
the notes thereto included in the Company's Form 10-K for the year ended
December 31, 1994.
Note B - Real Estate Rental Property
Real estate rental property is an office and manufacturing building and
underlying 16 acres of land in Tempe, Arizona. In January 1995, the Company
executed a lease amendment with the original tenant of this property, IDEA
Courier Incorporated, under the terms of which IDEA Courier is to vacate
portions of the building from time to time during the first six months of
1995, with the lease terminating in its entirety in 1995. In March 1995, the
Company entered into a new 10-year net lease with Bank One, Arizona, NA, a
subsidiary of Banc One Corporation, as the tenant of the entire property.
That lease became effective March 1, 1995, and provides for the phased
occupancy and rental of space by Bank One during 1995, with rental of the
entire premises commencing January 1, 1996. Effective March 1, 1995, Bank
One also assumed and took assignment of the amended lease with IDEA Courier
and indemnified the Company against any claims arising out of that lease from
that date. As a result of the new lease, the contractual rental revenues are
now projected at $349,000 in 1995, $1,452,000 in 1996, $1,628,000 in 1997,
$1,707,200 in 1998, $1,826,000 in 1999 and $10,023,200 for the subsequent
five year period.
In May 1995, IDEA Courier filed a complaint with an Arizona superior court
naming the Company and Bank One as defendants, claiming, among other things,
that actions by the defendants resulted in unreasonable interference with the
plaintiff's use of its leased premises. In July 1995, the parties agreed to a
settlement of the lawsuit and, pursuant to a stipulation by the parties, the
court dismissed IDEA Courier's complaint with prejudice. Under the terms of
the settlement, the Company's projected rental revenue for 1995, after
payment of costs associated with the settlement, will not be materially
affected, and there will be no impact on future rental revenue.
7
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note C - Real Estate Inventory Held for Current Sale and Land
Held for Future Development
At June 30, 1995, such real estate assets consisted primarily of
approximately 1,033 acres of land in a master-planned, mixed-use project
known as Meadow Pointe near Tampa,
Florida. The Company carries its Meadow Pointe project and all other real
estate properties held for sale, investment or development at the lower of
cost or estimated net realizable value, which is the estimated sales proceeds
of the property less costs to complete the project and holding and
disposition costs as applicable. All such properties are currently carried
at cost. The Company capitalizes costs directly associated with the Meadow
Pointe project, including certain project related employee compensation
costs.
Note D - Income Taxes
The Company is currently engaged in a dispute with the California Franchise
Tax Board (the "FTB") arising from the FTB's assessment for income taxes for
the year ended December 31, 1981. The assessment arose out of the FTB's
contention that a loss attributable to the 1981 acquisition by the Company's
predecessor of a warrant for the purchase of its common stock should have
been treated for tax purposes as a business deduction rather than a non-
business deduction. The Company appealed the FTB's assessment to the
California State Board of Equalization, which denied the appeal in July 1994.
In March 1995, the Company made a $650,000 payment to the FTB, the amount of
the assessment and accrued interest, and subsequently filed a request for
refund in the full amount of its payment. If the Company's request for
refund is denied, the Company intends to bring an action for the refund in a
California superior court.
At June 30, 1995, the Company had net operating loss carryforwards of
approximately $12,500,000 for financial reporting purposes. Due to timing
differences, at June 30, 1995, the Company had available for federal income
tax purposes unused operating and capital loss carryforwards of approximately
$12,100,000.
8
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note E - Stockholders' Equity
From time to time, the Company purchases shares of its common stock in the
open market. During the six months ended June 30, 1995, the Company
purchased 12,300 shares of its common stock for an aggregate amount of
$64,000. During the six months ended June 30, 1994, the Company purchased
26,160 shares of its common stock for an aggregate amount of $103,000.
In January 1995, five officers of the Company were issued an aggregate of
41,000 shares of restricted stock pursuant to the Company's 1993 Long-Term
Equity Incentive Plan. The market value of these shares at the date of issue
was $174,000.
9
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Results of Operations
- ---------------------
Net income of $54,000 and $352,000 in the three months and six months ended
June 30, 1995 included gains of $412,000 and $887,000, respectively, from sales
of property within the Company's Meadow Pointe project near Tampa, Florida. In
the three months and six months ended June 30, 1994, net income was $580,000 and
$1,169,000 and included gains of $677,000 and $1,389,000, respectively, from
sales of Meadow Pointe property. Sales of developed residential lots during the
six months ended June 30, 1995, were 38% and 22% less than in the same periods
of 1994 and 1993, respectively. For the remainder of 1995 such sales may remain
below the levels set during the two previous years depending upon, among other
things, the strength of the general economy in the Tampa area, residential
mortgage interest rates, competitive residential developments serving the same
group of home buyers and other factors related to the local Tampa real estate
market.
Real estate leasing income and mortgage loan interest decreased 46% both in
the three months and six months ended June 30, 1995 as compared to the same
periods of 1994 primarily as a result of an amendment of the original lease, and
the execution of a new lease, of the Company's Tempe, Arizona property. Due to
these changes, annual rental income from the Tempe property is expected to
decrease from $505,000 in 1994 to $349,000 in 1995 (see Note B of Notes to
Financial Statements). In addition, the Company expects to incur costs during
1995 for property taxes, insurance and certain other operating expenses related
to the lease of the Tempe property of approximately $160,000 which it did not
incur in prior years, and most of which costs it does not expect to incur after
1995. Of these costs, $135,000 were included in operating expenses during the
three months and six months ended June 30, 1995, and accounted for most of the
increase in operating expenses from the year earlier periods.
Interest and dividends from investments accounted for $42,000 and $102,000 of
revenues in the three months and six months ended June 30, 1995, respectively,
and $90,000 and $173,000 in the comparable periods in 1994. The decline in
investment revenue in 1995 was due to a reduction in the amount of funds
available for investment.
The cost of real estate sold in the six months ended June 30, 1995, included
the cost of lots in a residential development adjacent to Meadow Pointe and the
cost of a model home within the Meadow Pointe project, in the aggregate amount
of $205,000. There were no such costs in the six months ended June 30, 1994.
10
<PAGE>
Interest expense on subordinated debentures for the three months and six
months ended June 30, 1995, was $14,000 and $28,000, respectively. For the same
periods in 1994, this expense was $23,000 and $48,000. The decrease was
entirely attributable to a reduction in the amount of the Company's unmatured
subordinated debentures. Interest expense in the 1994 three month and six
months periods was net of capitalized interest of $48,000 and $123,000,
respectively.
General and administrative expenses in the three months and six months ended
June 30, 1995, were, respectively, $13,000 and $38,000 lower than in the
comparable periods in 1994, due principally to lower employee compensation and
benefits expenses and a reduction in office rental expense. The Company reduced
its headquarters office space in the 1995 period. Employee compensation
expenses capitalized against Tampa, Florida real estate in the six months ended
June 30, 1995 and 1994, were $71,000 and $80,000, respectively, 18% and 19%,
respectively, of total compensation for such periods. The Company capitalizes
a portion of the compensation of certain employees who devote a significant
portion of their time to the Meadow Pointe project.
Liquidity and Capital Resources
- -------------------------------
During the six months ended June 30, 1995, cash, cash equivalents and
marketable securities decreased by $2,219,000. This decrease was due
principally to redemptions of the Company's subordinated debentures,
aggregating $1,031,000, and to a $650,000 payment to the California Franchise
Tax Board (the "FTB") in the amount of the FTB's assessment for income taxes for
the year ended December 31, 1981, together with accrued interest (see Note D of
Notes to Financial Statements).
At June 30, 1995, the Company held $2,639,000 in cash, cash equivalents and
marketable securities as compared to $3,799,000 for all short-term and long-term
liabilities. From time to time the Company purchases shares of its common stock
in the open market (see Note E of Notes to Financial Statements).
The Company expects that its net rental income from its Tempe building, which
had been $505,000 annually under the original lease with IDEA Courier
Incorporated, will be reduced to about $349,000 for 1995. Beginning in 1996,
however, when the new lessee, Bank One, Arizona, NA, will be paying rent on the
entire building, the net rental is projected to increase substantially, and over
the 10-year term of the lease is projected to aggregate approximately
$17,000,000. In May 1995, IDEA Courier filed a complaint with an Arizona
superior court naming the Company and Bank One as defendants, claiming, among
other things, that actions by the defendants resulted in unreasonable
interference with the plaintiff's use of its leased premises. In July 1995,
the parties agreed to a settlement of the lawsuit and, pursuant to a
stipulation by the parties,the court dismissed IDEA Courier's complaint with
11
<PAGE>
prejudice. Under the terms of the settlement, the Company's projected rental
revenue for 1995, after payment of costs associated with the settlement, will
not be materially affected, and there will be no impact on future rental
revenue (see Note B of Notes to Financial Statements).
The Company's business plan calls for substantial expenditures during the next
several years relating to the planned development of Meadow Pointe. Since
February 1992, the Meadow Pointe Community Development District, encompassing
approximately 902 acres in the western portion of Meadow Pointe, has issued
$38,400,000 of its capital improvement revenue bonds. The Company's budget
currently anticipates the future issuance of approximately $42,000,000 of
additional bonds by the Meadow Pointe II Community Development District, which
encompasses approximately 822 acres in the eastern portion of Meadow Pointe.
The proceeds of such bonds have been and are expected to be used to acquire
property and construct infrastructure improvements necessary for the development
and sale of residential lots, and multifamily and commercial parcels, in Meadow
Pointe. There can be no assurance that any additional bonds will be issued.
The Company intends to pay for its budgeted expenditures at Meadow Pointe and
its other operating expenses (including those related to debenture payments)
with (i) cash generated from sales of property within Meadow Pointe, rental from
its Tempe building and its other operations and (ii) cash and cash equivalents
on hand. There can be no assurance that the Company will generate sufficient
cash or have sufficient cash and cash equivalents on hand to cover such
expenditures. Moreover, there can be no assurance that the amounts currently
budgeted will be sufficient to develop the long-term Meadow Pointe project.
It is the Company's policy to review each of its real estate assets
periodically to determine whether it is in the Company's long-term interest to
hold or sell any of those assets.
12
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit
Number
------
11 Statement re computation of per share earnings.
(b) Reports on Form 8-K.
The registrant did not file any reports on Form 8-K during the period
covered by this report.
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.
BF ENTERPRISES, INC.
(Registrant)
JOHN M. PRICE
Date: August 11, 1995 -------------------------
/s/ John M. Price
John M. Price
Senior Vice President,
Secretary, Treasurer and
General Counsel
(Duly Authorized Officer)
S. DOUGLAS POST
Date: August 11, 1995 --------------------------
/s/ S. Douglas Post
S. Douglas Post
Vice President and Controller
(Principal Accounting Officer)
13
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 1,997
<SECURITIES> 642
<RECEIVABLES> 180
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,914
<CURRENT-LIABILITIES> 0
<BONDS> 817
<COMMON> 380
0
0
<OTHER-SE> 14,735
<TOTAL-LIABILITY-AND-EQUITY> 18,914
<SALES> 1,296
<TOTAL-REVENUES> 1,578
<CGS> 411
<TOTAL-COSTS> 411
<OTHER-EXPENSES> 779
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28
<INCOME-PRETAX> 352
<INCOME-TAX> 0
<INCOME-CONTINUING> 352
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 352
<EPS-PRIMARY> .09
<EPS-DILUTED> 0
</TABLE>
