SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 10-QSB
(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, 1998, 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 small business issuer 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)
Issuer's telephone number, including area code (415) 989-6580
------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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, 1998:
3,643,993 shares of $.10 par value Common Stock
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
I N D E X
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Page
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PART I FINANCIAL INFORMATION
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 ..................................11
PART II OTHER INFORMATION
Item 1. Legal Proceedings...........................................13
Item 6. Exhibits and Reports on Form 8-K ...........................13
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,
1998 1997
---- ----
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 3,301 $ 4,038
Marketable securities 723 280
Receivables 60 89
Real estate rental property, net of depreciation 2,293 2,318
Real estate inventory held for current sale
and land held for future development 15,151 13,657
Lease contract receivable 610 599
Deferred tax assets 108 46
Other assets 813 815
-------- --------
TOTAL ASSETS $ 23,059 $ 21,842
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Payables and accrued liabilities $ 1,600 $ 1,531
Subordinated debentures, unmatured 719 719
------- --------
Total liabilities 2,319 2,250
------- --------
Stockholders' equity:
Common stock, $.10 par value
Authorized - 10,000,000 shares
Issued and outstanding -
3,645,793 and 3,670,193 shares 365 367
Capital surplus 16,412 16,614
Retained earnings 3,815 2,547
Net unrealized gains from marketable equity securities 148 64
------- --------
Total stockholders' equity 20,740 19,592
------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 23,059 $ 21,842
-------- --------
-------- --------
</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,
----------------- ---------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Real estate sales $ 969 $ 875 $1,619 $1,870
Real estate rental income 460 463 921 920
Interest and dividends 56 73 112 137
Other -- 2 -- 8
----- ----- ----- -----
1,485 1,413 2,652 2,935
----- ----- -----
Costs and Expenses:
Cost of real estate sold 199 200 349 452
Depreciation and amortization 25 25 49 49
Interest on subordinated debentures 12 14 25 28
General and administrative 506 458 961 845
----- ----- ----- -----
742 697 1,384 1,374
----- ----- -----
Income before income taxes 743 716 1,268 1,561
Provision for income taxes -- -- -- --
----- ----- ----- -----
Net income $ 743 $ 716 $1,268 $1,561
----- ----- ----- -----
----- ----- ----- -----
Net income per share:
Basic $ .20 $ .19 $ .35 $ .42
----- ----- ----- -----
----- ----- ----- -----
Diluted $ .18 $ .17 $ .31 $ .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>
Six Months Ended
June 30,
----------------
1998 1997
---- ----
<S> <C> <C>
Common stock:
Beginning of period $ 367 $ 373
Purchases of common stock - par value (2) (3)
------ ------
End of period $ 365 $ 370
------ ------
------ ------
Capital surplus:
Beginning of period $ 16,614 $17,078
Purchases of common stock - excess over par value (202) (225)
------ ------
End of period $ 16,412 $16,853
------ ------
------ ------
Retained earnings (deficit):
Beginning of period $ 2,547 $ (532)
Net income 1,268 1,561
------ ------
End of period $ 3,815 $ 1,029
------ ------
------ ------
Net unrealized gains from marketable equity securities:
Beginning of period $ 64 $ 36
Gain during period 84 14
------ ------
End of period $ 148 $ 50
------ ------
------ ------
Accumulated comprehensive income (loss):
Beginning of period $ 2,611 $ (496)
------ ------
Net income 1,139 1,561
Unrealized gains from marketable
equity securities 84 14
------ ------
Comprehensive income for period 1,223 1,575
------ ------
End of period $ 3,834 $ 1,079
------ ------
------ ------
</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,
----------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,268 $ 1,561
Adjustments to reconcile net income to net cash provided
by operating activities:
Gains from sales of real estate (1,270) (1,418)
Net cash proceeds from sales of real estate 924 1,174
Real estate development costs (1,485) (725)
Reimbursement of real estate development costs 337 542
Changes in certain assets and liabilities:
Decrease in receivables 29 (19)
Increase in lease contract receivable (11) (111)
Increase in payables and accrued liabilities 157 73
Other, net (35) (140)
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Total adjustments to net income (1,354) (624)
------- -------
Net cash provided by (used by) operating activities (86) 937
Cash flows from investing activities:
Purchases of marketable securities (359) (113)
------- -------
Net cash used by investing activities (359) (113)
Cash flows from financing activities:
Reductions in subordinated debentures (88) (121)
Purchases of the Company's common stock (204) (228)
------- -------
Net cash used by financing activities (292) (349)
------- -------
Net increase (decrease) in cash and cash equivalents (737) 475
Cash and cash equivalents at beginning of period 4,038 5,098
------- -------
Cash and cash equivalents at end of period $ 3,301 $ 5,573
------- -------
------- -------
Supplemental disclosures of cash flow information:
Cash paid during the period for interest (net of amount capitalized) $ 25 $ 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-KSB for the year ended December 31, 1997 and in the
Company's Form 10-Q for the quarterly period ended June 30, 1998.
Note B - New Accounting Pronouncement
In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130).
SFAS 130 requires the reporting of income in a format that includes income from
operations added to unrealized gains or losses from investments in marketable
securities, which are accounted for as a separate component of stockholders'
equity. Comprehensive income has been presented in the accompanying
Consolidated Statements of Stockholders' Equity.
Note C - Earnings Per Share
In March 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards 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. Diluted earnings per share give effect to
such dilutive securities. The Company adopted the disclosure requirements of
7
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SFAS 128 in the fourth quarter of 1997. Earnings per share data for the periods
reported have been computed as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $ 743 $ 716 $1,268 $1,561
----- ----- ----- -----
----- ----- ----- -----
Weighted average number of
shares outstanding:
Common stock 3,651 3,700 3,658 3,707
Common stock equivalents -
stock options (1) 407 387 409 356
----- ----- ----- -----
4,058 4,087 4,067 4,063
----- ----- ----- -----
----- ----- ----- -----
Net income per share:
Basic - based on weighted average
number of shares of common stock $ .20 $ .19 $ .35 $ .42
----- ----- ----- -----
----- ----- ----- -----
outstanding
Diluted - based on weighted average
number of shares of common stock
and common stock equivalents outstanding $ .18 $ .17 $ .31 $ .38
----- ----- ----- -----
----- ----- ----- -----
<FN>
(1) Computation is based on the treasury stock method using the average
market price.
</FN>
</TABLE>
Note D - 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 net 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
8
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
entire premises commencing January 1, 1996. At December 31, 1997, contractual
rental revenues from the lease with Bank One are projected as follows:
1998 $ 1,707,200
1999 1,826,000
2000 1,848,000
2001 1,936,000
2002 1,953,600
2003 and after 4,285,600
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 E - 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 476 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 $15,023,000 at June 30, 1998 and $13,529,000 at
December 31, 1997, which the Company believes was less than their fair value.
9
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
It is the Company's policy to review and update its projections on the Meadow
Pointe project on a regular basis. Periodic cumulative adjustments to cost of
sales are made to reflect the results of these reviews. As a result, gross
margins and related percentages, derived on a period to period basis, may not
be directly comparable.
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, 1998, the Company
purchased 24,400 shares of its common stock for an aggregate amount of $204,000.
During the six months ended June 30, 1998, the Company purchased 35,000 shares
of its common stock for an aggregate amount of $228,000.
10
<PAGE>
Item 2. Management's Discussion and Analysis of
----------------------------------------
Financial Condition and Results of Operations.
---------------------------------------------
Results of Operations
- ---------------------
Net income of $743,000 and $1,268,000 in the three months and six months
ended June 30, 1998, included gains of $770,000 and $1,270,000 from sales of
property within the Company's Meadow Pointe project near Tampa, Florida. In the
three months and six months ended June 30, 1997, net income was $716,000 and
$1,561,000 and included gains of $675,000 and $1,418,000, respectively, from
sales of Meadow Pointe property. The Company sold 146 developed residential
lots at Meadow Pointe during the six months ended June 30, 1998, which
represented a 2% decrease from the same period of 1997.
Meadow Pointe sales results for the six month 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 1998 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 $56,000 and $112,000 of
revenues in the three months and six months ended June 30, 1998, respectively,
and $73,000 and $137,000 in comparable periods in 1997. The decline in
investment revenue in 1997 was due to a reduction in the amount of funds
available for investment.
General and administrative expenses in the three months and six months ended
June 30, 1998 were, respectively, $48,000 and $116,000 higher than in the
comparable periods in 1997, due principally to higher employee compensation and
benefits expenses and higher than anticipated legal fees.
Liquidity and Capital Resources
- -------------------------------
At June 30, 1998, the Company held $4,024,000 in cash, cash equivalents and
marketable securities, as compared to $2,319,000 for all short-term and
long-term liabilities.
11
<PAGE>
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 through the
issuance of capital improvement revenue bonds by a community development
district, cash generated from operations, cash and cash equivalents on hand and
bank borrowings.
During the period February 1992 through March 1997, the two community
development districts encompassing the Meadow Pointe project issued
approximately $60,700,000 of capital improvement revenue bonds. Presently one
of those districts is considering the issuance and sale of between $10,000,000
and $15,000,000 of such bonds to provide financing for infrastructure
improvements in the remaining parcels of that district.
The statements in this Report on Form 10-QSB regarding Meadow Pointe
property sales, financing of Meadow Pointe expenditures and any other statements
which are not historical facts are forward looking statements. Such statements
involve risks and uncertainties, including, but not limited to, competition,
general economic conditions, ability to manage and continue growth and other
factors detailed in the Company's filings with the Securities and Exchange
Commission. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual outcomes may vary
materially from those indicated.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
In March 1998, an action was commenced in the Pasco County, Florida
Circuit Court against a subsidiary of the Company and others
relating to the Meadow Pointe development. The Amended Complaint
alleges that certain individuals who purchased homes assumed that a
homeowners association had been established for the development.
Plaintiffs seek money damages from all defendants named in the
Amended Complaint, except for the Company's subsidiary. The only
relief sought against the Company's subsidiary is an injunction
compelling the subsidiary to operate and maintain architectural
control at Meadow Pointe.
On July 2, 1998, the Court granted the subsidiary's motion to sever
and denied the subsidiary's motion to dismiss. Accordingly, on
July 13, 1998, plaintiffs filed a Severed Complaint against the
Company's subsidiary, which seeks injunctive relief and declaratory
relief, but no damages.
In addition to seeking an injunction as described above,
plaintiffs' Severed Complaint seeks a declaration concerning the
rights and powers of the recently established voluntary homeowners
association for Meadow Pointe, to which the Company's subsidiary
had assigned certain of its rights pursuant to Declarations of
Restrictions recorded in the public records of Pasco County,
Florida. The Company believes that it has meritorious defenses
to the claims made against its subsidiary, and it intends to
vigorously contest the action.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits: None
(b) Reports on Form 8-K.
The registrant did not file any reports on Form 8-K
during the period covered by this report.
13
<PAGE>
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: July 30, 1998 /s/ Brian P. Burns
-------------------------------
Brian P. Burns
Chairman of the Board, President
and Chief Executive Officer
(Duly Authorized Officer)
Date: July 30, 1998 /s/ S. Douglas Post
--------------------------------
S. Douglas Post
Vice President, Controller, Treasurer,
Chief Accounting Officer and Assistant
Secretary
(Principal Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Jun-30-1998
<CASH> 3,301
<SECURITIES> 723
<RECEIVABLES> 60
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,059
<CURRENT-LIABILITIES> 0
<BONDS> 719
0
0
<COMMON> 365
<OTHER-SE> 20,375
<TOTAL-LIABILITY-AND-EQUITY> 23,059
<SALES> 1,619
<TOTAL-REVENUES> 2,652
<CGS> 349
<TOTAL-COSTS> 349
<OTHER-EXPENSES> 1,010
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25
<INCOME-PRETAX> 1,268
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,268
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,268
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
