SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 1997, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to __________________
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Commission file number 0-15932
BF ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3038456
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
100 Bush Street
Suite 1250
San Francisco, California 94104
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 989-6580
------------------------------------
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 July 30, 1997:
3,697,293 shares of $.10 par value Common Stock
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
I N D E X
PART I FINANCIAL INFORMATION
Page
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Item 1. Financial Statements
- Consolidated statements of financial position...........3
- Consolidated statements of income.......................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 .........................12
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,
1997 1996
---- ----
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 5,573 $ 5,098
Marketable securities 167 40
Receivables 138 119
Mortgage loans -- 100
Real estate rental property, net of depreciation 2,344 2,369
Real estate inventory held for current sale
and land held for future development 11,965 11,311
Lease contract receivable 474 363
Other assets 539 501
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TOTAL ASSETS $ 21,200 $ 19,901
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-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Payables and accrued liabilities $ 2,097 $ 2,141
Subordinated debentures, unmatured 801 805
-------- --------
Total liabilities 2,898 2,946
-------- --------
Stockholders' equity:
Common stock, $.10 par value
Authorized - 10,000,000 shares
Issued and outstanding -
3,698,893 and 3,733,893 shares 370 373
Capital surplus 16,853 17,078
Retained earnings (deficit) 1,029 (532)
Net unrealized gains from marketable equity securities 50 36
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Total stockholders' equity 18,302 16,955
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 21,200 $ 19,901
------- --------
------- --------
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
3
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Real estate sales $ 875 $ 751 $ 1,870 $ 1,257
Real estate rental income 463 454 920 908
Interest and dividends 73 67 137 136
Other 2 5 8 10
----- ----- ----- -----
1,413 1,277 2,935 2,311
----- ----- ----- -----
Costs and Expenses:
Cost of real estate sold 200 276 452 400
Depreciation and amortization 25 24 49 50
Interest on subordinated debentures 14 16 28 30
General and administrative 458 358 845 711
----- ----- ----- -----
697 674 1,374 1,191
----- ----- ----- -----
Income before income taxes 716 603 1,561 1,120
Provision for income taxes -- -- -- --
----- ----- ----- -----
Net income $ 716 $ 603 $ 1,561 $1,120
----- ----- ----- ------
----- ----- ----- ------
Net income per share $ .17 $ .15 $ .38 $ .28
----- ------ ------ ------
----- ------ ------ ------
</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,
---------------
1997 1996
---- ----
<S> <C> <C>
Common stock:
Beginning of period $ 373 $ 375
Purchases of common stock - par value (3) --
------ ------
End of period $ 370 $ 375
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------ ------
Capital surplus:
Beginning of period $17,078 $17,208
Purchases of common stock - excess over par value (225) (27)
------ ------
End of period $16,853 $17,181
------ ------
------ ------
Retained earnings (deficit):
Beginning of period $ (532) $(2,669)
Net income 1,561 1,120
------ ------
End of period $ 1,029 $(1,549)
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------ ------
Net unrealized gains (losses) from marketable equity securities:
Beginning of period $ 36 $ (47)
Gain during period 14 40
------ ------
End of period $ 50 $ (7)
------ -------
------ -------
</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,
----------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,561 $ 1,120
Adjustments to reconcile net income to net cash provided or used
by operating activities:
Gains from sales of real estate (1,418) (857)
Net cash proceeds from sales of real estate 1,174 851
Real estate development costs (725) (523)
Reimbursement of real estate development costs 542 165
Changes in certain assets and liabilities:
Decrease (increase) in receivables (19) 14
Increase in lease contract receivable (111) (181)
Increase (decrease) in payables and accrued liabilities 73 (346)
Other, net (140) (219)
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Total adjustments to net income (624) (1,096)
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Net cash provided by operating activities 937 24
Cash flows from investing activities:
Purchases of marketable securities (113) --
----- -----
Net cash used by investing activities (113) --
Cash flows from financing activities:
Reductions in subordinated debentures (121) (282)
Purchases of the Company's common stock (228) (27)
----- ------
Net cash used by financing activities (349) (309)
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Net increase (decrease) in cash and cash equivalents 475 (285)
Cash and cash equivalents at beginning of period 5,098 4,668
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Cash and cash equivalents at end of period $ 5,573 $ 4,383
----- ------
----- ------
Supplemental disclosures of cash flow information:
Cash paid during the period for interest (net of amount capitalized) $ 28 $ 28
------ ------
------ ------
</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,
1996
Note B - New Accounting Pronouncement
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting No. 128, "Earnings Per Share" (SFAS 128). SFAS 128
requires the disclosure of basic earnings per share and modifies existing
guidance for computing fully diluted earnings per share. Under the new
standard, basic earnings per share is computed as earnings divided by weighted
average shares, excluding the dilutive effects of stock options and other
potentially dilutive securities. The effective date of SFAS 128 is December 15,
1997 and early adoption is not permitted. The Company intends to adopt SFAS 128
during the three months and year endedDecember 31, 1997. Had the provisions of
SFAS 128 been applied to the Company's results of operations for the three
months ended June 30, 1997 and 1996, the Company's basic earnings per share
would have been $.19 and $.16 per share, respectively, and its diluted earnings
per share would have been $.17 and $.15 per share, respectively. For the six
months ended June 30, 1997 and 1996, the Company's basic earnings per share
would have been $.42 and $.30 per share, respectively, and its diluted earnings
per share would have been $.38 and $.28 per share, respectively.
7
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note C - Real Estate Rental Property
Real estate rental property is an office building and 16 acres of land in Tempe,
Arizona. In 1995, the Company entered into a 10-year lease with Bank One,
Arizona, NA, a subsidiary of Banc One Corporation. The lease provided for the
phased occupancy and rental of space by Bank One during 1995, with rental of the
entire premises commencing January 1, 1996. At December 31, 1996, contractual
rental revenues from the lease with Bank One are projected as follows:
1997 $ 1,628,000
1998 1,707,200
1999 1,826,000
2000 1,848,000
2001 1,936,000
2002 and after 6,239,200
On January 1, 1996, as required by generally accepted accounting principles, the
Company began amortizing on a straight-line basis (1) income from the new lease
with Bank One, resulting in annual real estate leasing income of $1,815,000 for
the period ending February 28, 2005, and (2) a related $423,000 lease
commission, with annual amortization expense of $46,000 over the same period.
Note D - Real Estate Inventory Held for Current Sale and Land
Held for Future Development
Real estate inventory held for current sale and land held for future development
consists primarily of approximately 537 acres in the Company's master-planned,
mixed use development known as Meadow Pointe near Tampa, Florida. The parcels
within this project are in various stages of development. Parcels on which the
Company has completed substantially all of its development activities are
considered to be held for current sale. Parcels on which development is not yet
complete are considered to be held for future development. These assets were
carried at a cost of $11,965,000 at June 30, 1997 and $11,311,000 at
December 31, 1996, which the Company believes was less than their fair value.
8
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note E - Income Taxes
In February 1996, the Company's predecessor, on behalf of the Company, filed a
complaint against the California Franchise Tax Board (the "FTB") for a refund
of assessed income taxes and accrued interest for the year ended December 31,
1981. The suit arises out of the FTB's assessment for 1981 taxes, based on its
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 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 payment to the FTB of the assessment and accrued interest and filed a
request for refund in the full amount of that payment. The Company's request
for refund was denied and the action described above was filed. On May 30,
1997, the Court granted the FTB's motion for summary judgment and dismissed the
Company's action. The Company intends to appeal the judgment. The amount the
Company paid to the FTB, after reimbursement by the Company's predecessor of
the related federal and state income tax benefits, was approximately $400,000.
At June 30, 1997, the Company had available for federal income tax purposes
unused operating loss carry forwards of approximately $10,400,000.
Note F- Stockholders' Equity
From time to time the Company purchases shares of its common stock, primarily in
the open market. During the six months ended June 30, 1997, the Company
purchased 35,000 shares of its common stock for an aggregate amount of $228,000.
During the six months ended June 30, 1996, the Company purchased 5,200 shares
of its common stock for an aggregate amount of $27,000.
9
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
----------------------------------------------
Results of Operations
- ---------------------
Net income of $716,000 and $1,561,000, respectively, in the three months and
six months ended June 30, 1997, included gains of $675,000 and $1,418,000 from
sales of property within the Company's Meadow Pointe project near Tampa,
Florida. In the three months and six months ended June 30, 1996, net income was
$603,000 and $1,120,000 and included gains of $475,000 and $857,000,
respectively, from sales of Meadow Pointe property. The Company sold 149
developed residential lots at Meadow Pointe during the six months ended June 30,
1997, which represented a 6% increase over the same period of 1996.
Meadow Pointe sales results for the six months ended June 30, 1997 included
aggregate revenue and cost of $274,000 and $166,000, respectively, for a
two-acre church site, a one-acre day care center site and a model home. There
were no such revenues or costs in the comparable 1996 period.
The Company's reported gains from property sales at Meadow Pointe are based
in part upon estimates of the total revenues and costs to be derived by the
Company over the life of the project. The Company periodically reviews these
estimates and makes cumulative adjustments to reflect any revised estimates.
Property sales at Meadow Pointe are dependent 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.
Interest and dividends from investments accounted for $73,000 and $137,000
of revenues in the three months and six months ended June 30, 1997,
respectively, and $67,000 and $136,000 in the comparable periods in 1996. The
increase in 1997 was due to an increase in the amount of funds available for
investment.
General and administrative expenses in the three months and six months ended
June 30, 1997 were, respectively, $100,000 and $134,000 higher than in the
comparable periods in 1996, due principally to higher employee compensation
and benefits expenses and professional fees.
10
<PAGE>
Liquidity and Capital Resources
- --------------------------------
At June 30, 1997, the Company held $5,740,000 in cash, cash equivalents and
marketable securities as compared to $2,898,000 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 F 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. The
Company anticipates that these expenditures will be financed primarily through
the issuance of capital improvement revenue bonds by a community development
district, cash generated from operations and cash and cash equivalents on hand.
11
<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: August 5, 1997 /s/ John M. Price
-------------------------
John M. Price
Senior Vice President,
Secretary, Treasurer and
General Counsel
(Duly Authorized Officer)
Date: August 5, 1997 /s/ S. Douglas Post
--------------------------
S. Douglas Post
Vice President and Controller
(Principal Accounting Officer)
12
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 Six Months Ended
June 30, June 30,
----------------- ----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $ 716 $ 603 $ 1,561 $1,120
----- ----- ------ -----
----- ----- ------ -----
Weighted average number of
shares outstanding:
Common stock 3,700 3,749 3,707 3,751
Common stock equivalents -
stock options 387 292 356 269
----- ----- ----- -----
4,087 4,041 4,063 4,020
----- ----- ----- -----
----- ----- ----- -----
Net income per share -
based on weighted average number
of shares of common stock
and common stock equivalents $ .17 $ .15 $ .38 $ .28
----- ----- ----- -----
----- ----- ----- -----
<FN>
(A) A computation of fully diluted per share amounts has been omitted since
there was no significant dilution during the periods reported.
</FN>
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-Mos
<PERIOD-END> Jun-30-1997
<FISCAL-YEAR-END> Dec-31-1997
<CASH> 5,573
<SECURITIES> 167
<RECEIVABLES> 138
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 21,200
<CURRENT-LIABILITIES> 0
<BONDS> 801
0
0
<COMMON> 370
<OTHER-SE> 17,932
<TOTAL-LIABILITY-AND-EQUITY> 21,200
<SALES> 1,870
<TOTAL-REVENUES> 2,935
<CGS> 452
<TOTAL-COSTS> 452
<OTHER-EXPENSES> 894
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28
<INCOME-PRETAX> 1,561
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,561
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,561
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
