<PAGE> 1
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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 September 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 or other jurisdiction (IRS Employer Indentification
of incorporation or organization) Number)
100 Bush Street, Suite 1250, San Francisco, California 94104
(Address of Principal Executive Offices)
(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 November 13, 1995:
3,763,193 shares of $.10 par value Common Stock
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<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
I N D E X
<TABLE>
Page
----
PART I FINANCIAL INFORMATION
<S> <C>
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
2
</TABLE>
<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>
September 30, December 31,
1995 1994
---- ----
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 2,019 $ 2,975
Marketable securities 603 1,883
Receivables 178 144
Mortgage loans 1,502 886
Real estate rental property, net of depreciation 2,433 2,471
Real estate inventory held for current sale
and land held for future development 11,346 11,169
Other real estate 132 879
Other assets 423 39
-------- --------
TOTAL ASSETS $ 18,636 $ 20,446
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Payables and accrued liabilities $ 2,737 $ 4,572
Subordinated debentures, unmatured 817 817
Deferred income taxes 16 432
-------- --------
Total liabilities 3,570 5,821
-------- --------
Stockholders' equity:
Common stock, $.10 par value
Authorized - 10,000,000 shares
Issued and outstanding -
3,781,093 and 3,758,393 shares 378 376
Capital surplus 17,352 17,344
Deficit (2,682) (3,114)
Net unrealized gains from marketable equity securities 18 19
-------- --------
Total stockholders' equity 15,066 14,625
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 18,636 $ 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 Nine Months Ended
September 30, September 30,
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Real estate sales $ 1,303 $ 639 $ 2,599 $ 2,327
Real estate leasing income and
mortgage loan interest 84 157 258 477
Interest 38 75 140 248
Other 4 (1) 10 32
-------- -------- -------- --------
1,429 870 3,007 3,084
Costs and Expenses:
Cost of real estate sold 1,019 120 1,430 419
Interest on subordinated debentures 15 14 43 62
Depreciation 12 12 38 38
Operating 4 29 156 60
General and administrative 299 316 900 955
-------- -------- ------- --------
1,349 491 2,567 1,534
Gross profit 80 379 440 1,550
Losses from securities -- (40) (8) (42)
-------- -------- -------- --------
Net income $ 80 $ 339 $ 432 $ 1,508
-------- -------- -------- --------
-------- -------- -------- --------
Net income per share $ .02 $ .09 $ .11 $ .38
-------- -------- -------- --------
-------- -------- -------- --------
</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>
Nine Months Ended
September 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 (3) (4)
--------- --------
End of period $ 378 $ 377
--------- --------
--------- --------
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 (151) (165)
Purchase of stock option (12) --
--------- --------
End of period $17,352 $17,383
--------- --------
--------- --------
Deficit:
Beginning of period $(3,114) $(4,722)
Net income 432 1,508
--------- --------
End of period $(2,682) $(3,214)
--------- --------
--------- --------
Net Unrealized Gains From
Marketable Equity Securities:
Beginning of period $ 19 $ --
Valuation allowance (1) --
--------- ---------
End of period $ 18 $ --
--------- ---------
--------- ---------
</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>
Nine Months Ended
September 30,
-----------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 432 $ 1,508
Adjustments to reconcile net income to net cash provided or used
by operating activities:
Gains from sales of real estate (1,169) (1,908)
Losses from securities 8 42
Net cash proceeds from sales of real estate 1,295 1,409
Real estate development costs (833) (945)
Reimbursement of real estate development costs 682 853
Changes in certain assets and liabilities:
Decrease (increase) in receivables (34) 108
Decrease in payables and accrued liabilities (368) (439)
Decrease in deferred income taxes (416) --
Other, net (369) 354
-------- --------
Total adjustments to net income (1,204) (526)
-------- --------
Net cash provided (used) by operating activities (772) 982
Cash flows from investing activities:
Proceeds from sales and maturities of marketable securities 1,481 5,895
Purchases of marketable securities (208) (4,430)
-------- --------
Net cash provided by investing activities 1,273 1,465
Cash flows from financing activities:
Reductions in subordinated debentures (1,293) (7,338)
Purchases of the Company's common stock (154) (169)
Other (10) --
-------- ---------
Net cash used by financing activities (1,457) (7,507)
-------- ---------
Net decrease in cash and cash equivalents (956) (5,060)
Cash and cash equivalents at beginning of period 2,975 9,840
-------- ---------
Cash and cash equivalents at end of period $ 2,019 $ 4,780
-------- ---------
-------- ---------
Supplemental disclosures of cash flow information:
Cash paid during the period for interest (net of amount capitalized) $ 29 $ 191
-------- --------
-------- --------
Non cash operating activities:
Mortgage note received as a portion of the proceeds
due from the sale of real estate:
Face value of note $ 680 $ --
Discount (48) --
-------- --------
Carrying value of note $ 632 $ --
-------- --------
-------- --------
</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 the amendment, as subsequently
further amended, IDEA Courier vacated portions of the building from time to
time and the lease terminated in its entirety, and IDEA Courier vacated the
property, on October 31, 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 September 30, 1995, such real estate assets consisted primarily of
approximately 1,019 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 September 30, 1995, the Company had net operating loss carryforwards of
approximately $12,700,000 for financial reporting purposes. Due to timing
differences, at September 30, 1995, the Company had available for federal
income tax purposes unused operating and capital loss carryforwards of
approximately $12,400,000.
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 primarily
in the open market. During the nine months ended September 30, 1995, the
Company purchased 28,300 shares of its common stock for an aggregate amount
of $154,000. During the nine months ended September 30, 1994, the Company
purchased 42,660 shares of its common stock for an aggregate amount of
$169,000.
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 $80,000 and $432,000 in the three months and nine months ended
September 30, 1995 included gains of $311,000 and $1,198,000, respectively,
from sales of property within the Company's Meadow Pointe project near Tampa,
Florida. In the three months and nine months ended September 30, 1994, net
income was $339,000 and $1,508,000 and included gains of $519,000 and
$1,908,000, respectively, from sales of Meadow Pointe property. Sales of
developed residential lots during the nine months ended September 30, 1995,
were 30% and 19% 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% in each
of the three month and nine month periods ended September 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 $150,000 which it did not incur in prior years, and most of
which costs it does not expect to incur after 1995. Of these costs, $124,000
were included in operating expenses during the nine months ended September
30, 1995, and accounted for the increase in operating expenses from the year
earlier period.
Interest and dividends from investments accounted for $38,000 and $140,000
of revenues in the three months and nine months ended September 30, 1995,
respectively, and $75,000 and $248,000 in the comparable periods in 1994.
The decline in investment revenue in 1995 was due to a reduction in the funds
available for investment.
In addition to Meadow Pointe residential lot sales activity, real estate
revenue in the three months ended September 30, 1995, included revenue of
$804,000 from the one-time sale of a commercial building and underlying
property in Edina, Minnesota. The cost of real estate sold attributable to
the Edina property was $831,000, which included a $48,000 discount of
the $680,000 note received in the transaction. Results for the nine months
ended September 30, 1995 also included aggregate revenue and cost of $216,000
and $205,000, respectively, for lots in a residential development adjacent to
Meadow Pointe and a model home within the Meadow Pointe project. There were
no such revenues or costs in the comparable periods of 1994.
10
<PAGE>
Interest expense on subordinated debentures for the nine months ended
September 30, 1995 was $43,000. During the same period in 1994, such
interest expense was $185,000, which included capitalized interest of
$123,000. The decrease was entirely attributable to a reduction in the
amount of the Company's unmatured subordinated debentures.
General and administrative expenses in the three months and nine months
ended September 30, 1995, were, respectively, $17,000 and $55,000 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 nine months ended September 30, 1995 and 1994, were $94,000 and
$119,000, respectively, 16% 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 nine months ended September 30, 1995, cash, cash equivalents and
marketable securities decreased by $2,236,000. This decrease was due
principally to redemptions of the Company's subordinated debentures,
aggregating $1,293,000, 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 September 30, 1995, the Company held $2,622,000 in cash, cash equivalents
and marketable securities as compared to $3,570,000 for all short-term and
long-term liabilities. From time to time the Company purchases shares of its
common stock primarily 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
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).
11
<PAGE>
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. In October 1995 the
Meadow Pointe II Community Development District (the "District"), which
encompasses approximately 822 acres in the eastern portion of Meadow Pointe,
issued $16,090,000 of such bonds. Immediately following the issuance of the
bonds, a wholly owned subsidiary of the Company sold to the District 381 acres
within the area encompassed by the District for $3,185,000, all of which was
paid in cash. The acquired land will be used by the District for roads, ponds,
conservation areas and neighborhood parks. The Company's budget currently
anticipates the future issuance of approximately $19,400,000 of additional
bonds by the District. The proceeds of such bonds are expected to be used to
acquire additional 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)
Date: November 13, 1995 /s/ John M. Price
-----------------------------
John M. Price
Senior Vice President,
Secretary, Treasurer and
General Counsel
(Duly Authorized Officer)
Date: November 13, 1995 /s/ S. Douglas Post
------------------------------
S. Douglas Post
Vice President and Controller
(Principal Accounting Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 2,019
<SECURITIES> 603
<RECEIVABLES> 178
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,636
<CURRENT-LIABILITIES> 0
<BONDS> 817
<COMMON> 378
0
0
<OTHER-SE> 14,688
<TOTAL-LIABILITY-AND-EQUITY> 18,636
<SALES> 2,599
<TOTAL-REVENUES> 3,007
<CGS> 1,430
<TOTAL-COSTS> 1,430
<OTHER-EXPENSES> 1,094
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43
<INCOME-PRETAX> 432
<INCOME-TAX> 0
<INCOME-CONTINUING> 432
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 432
<EPS-PRIMARY> .11
<EPS-DILUTED> 0
</TABLE>
<PAGE>
[DESCRIPTION] EXHIBIT 11
EXHIBIT 11 TO FORM 10-Q
BF ENTERPRISES, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $ 80 $ 339 $ 432 $ 1,508
------ ------ ------ -------
------ ------ ------ -------
Weighted average number of
shares outstanding:
Common stock 3,791 3,775 3,795 3,788
Common stock equivalents -
stock options 251 159 244 160
------ ------ ------ ------
4,042 3,934 4,039 3,948
------ ------ ------ ------
------ ------ ------ ------
Net income per share -
based on weighted average number
of shares of common stock
and common stock equivalents $ .02 $ .09 $ .11 $ .38
------ ------ ------ ------
------ ------ ------ ------
(A) A computation of fully diluted per share amounts has been omitted since there
was no dilution during the periods reported.
</TABLE>
14
