SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 March 31, 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
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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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of May 6, 1998:
3,653,993 shares of $.10 par value Common Stock
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
I N D E X
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>
March 31, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 3,948 $ 4,038
Marketable securities 628 280
Receivables 87 89
Real estate rental property, net of depreciation 2,306 2,318
Real estate inventory held for current sale
and land held for future development 13,883 13,657
Lease contract receivable 490 599
Other assets 901 861
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TOTAL ASSETS $ 22,243 $ 21,842
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Payables and accrued liabilities $ 1,471 $ 1,531
Subordinated debentures, unmatured 719 719
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Total liabilities 2,190 2,250
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Stockholders' equity:
Common stock, $.10 par value
Authorized - 10,000,000 shares
Issued and outstanding -
3,654,893 and 3,670,193 shares 365 367
Capital surplus 16,487 16,614
Retained earnings 3,072 2,547
Net unrealized gains from marketable equity securities 129 64
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Total stockholders' equity 20,053 19,592
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 22,243 $ 21,842
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</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
March 31,
------------------
1998 1997
---- ----
<S> <C> <C>
Revenues:
Real estate sales $ 650 $ 995
Real estate rental income 461 457
Interest and dividends 56 64
Other -- 6
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1,167 1,522
Costs and Expenses:
Cost of real estate sold 150 252
Depreciation and amortization 24 24
Interest on subordinated debentures 13 14
General and administrative 455 387
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642 677
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Income before income taxes 525 845
Provision for income taxes -- --
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Net income $ 525 $ 845
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Net income per share:
Basic $ .14 $ .23
Diluted $ .13 $ .21
</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>
Three Months Ended
March 31,
------------------
1998 1997
---- ----
<S> <C> <C>
Common stock:
Beginning of period $ 367 $ 373
Purchases of common stock - par value (2) (3)
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End of period $ 365 $ 370
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Capital surplus:
Beginning of period $ 16,614 $17,078
Purchases of common stock - excess over par value (127) (193)
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End of period $ 16,487 $16,885
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Retained earnings (deficit):
Beginning of period $ 2,547 $ (532)
Net income 525 845
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End of period $ 3,072 $ 313
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Net unrealized gains from
marketable equity securities:
Beginning of period $ 64 $ 36
Gain during period 65 --
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End of period $ 129 $ 36
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Accumulated comprehensive income (loss):
Beginning of period $ 2,611 $ (496)
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Net income $ 525 $ 845
Unrealized gains from marketable equity securities 65 --
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Comprehensive income for period $ 590 $ 845
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End of period $ 3,201 $ 349
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</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>
Three Months Ended
March 31,
-------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 525 $ 845
Adjustments to reconcile net income to net cash provided
by operating activities:
Gains from sales of real estate (500) (743)
Net cash proceeds from sales of real estate 416 583
Real estate development costs (297) (293)
Reimbursement of real estate development costs 155 311
Changes in certain assets and liabilities:
Decrease in receivables 2 35
Decrease (increase) in lease contract receivable 109 (118)
Increase (decrease) in payables and accrued liabilities 12 (8)
Other, net (28) 50
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Total adjustments to net income (131) (183)
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Net cash provided by operating activities 394 662
Cash flows from investing activities:
Purchases of marketable securities (283) (113)
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Net cash used by investing activities (283) (113)
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Cash flows from financing activities:
Reductions in subordinated debentures (72) (73)
Purchases of the Company's common stock (129) (196)
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Net cash used by financing activities (201) (269)
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Net increase (decrease) in cash and cash equivalents (90) 280
Cash and cash equivalents at beginning of period 4,038 5,098
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Cash and cash equivalents at end of period $ 3,948 $ 5,378
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Supplemental disclosures of cash flow information:
Cash paid during the period for interest (net of amount capitalized) $ 13 $ 14
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</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 March 31, 1997.
Note B - New Accounting Pronouncement
During the three months ended March 31, 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
7
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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
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
March 31,
-------------------
1998 1997
---- ----
<S> <C> <C>
Net Income $ 525 $ 845
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Weighted average number of
shares outstanding:
Common stock 3,664 3,718
Common stock equivalents -
stock options (1) 411 320
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4,075 4,038
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Net income per share:
Basic - based on weighted average number
of shares of common stock outstanding $ .14 $ .23
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----- -----
Diluted - based on weighted average number
of shares of common stock and common stock
equivalents outstanding $ .13 $ .21
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<FN>
(1) Computation is based on the treasury stock method using the
average market price.
</FN>
</TABLE>
8
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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
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.
9
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 494 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 $13,755,000 at March 31, 1998 and $13,529,000 at
December 31, 1997, which the Company believes was less than their fair value.
Note F - Stockholders' Equity
From time to time, the Company purchases shares of its common stock, primarily
in the open market. During the three months ended March 31, 1998, the Company
purchased 15,300 shares of its common stock for an aggregate amount of $129,000.
During the three months ended March 31, 1997, the Company purchased 30,000
shares of its common stock for an aggregate amount of $196,000.
10
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Results of Operations
- ---------------------
Net income of $525,000 and $845,000 in the three months ended March 31, 1998
and 1997, respectively, included gains of $500,000 and $743,000 from sales of
property within the Company's Meadow Pointe project near Tampa, Florida. The
Company sold 62 developed residential lots at Meadow Pointe during the three
months ended March 31, 1998, which represented a 22% decrease from the number of
lots sold during the same period of 1997. As noted in the Company's 1997 Annual
Report, heavy rains in the Tampa area during the first few months of 1998
seriously hampered construction activity at Meadow Pointe. This slowed
down the rate of sales of finished lots in the first quarter of 1998, and will
also hold down sales of lots in the second quarter. Also, in the 1997 period,
the Company sold a two-acre church site and a one-acre day care center site at
Meadow Pointe. There were no such sales in the 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 $64,000 of
revenues in the three months ended March 31, 1998 and 1997, respectively. The
decrease in 1998 was due to a decline in the amount of funds available for
investment.
General and administrative expenses in the three months ended March 30, 1998
were $68,000 higher than in the comparable period in 1997, due principally to
higher employee compensation expenses and higher than anticipated legal fees.
Liquidity and Capital Resources
- -------------------------------
At March 31, 1998, the Company held $4,576,000 in cash, cash equivalents and
marketable securities, as compared to $2,190,000 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).
11
<PAGE>
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 bank
borrowings, the issuance of capital improvement revenue bonds by a community
development district, cash generated from operations and cash and cash
equivalents on hand.
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 for an injunction compelling the subsidiary to
operate and maintain architectural control at Meadow Pointe. The
Company has recently filed a motion to dismiss the claims against
it. 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, there unto duly authorized.
BF ENTERPRISES, INC.
(Registrant)
Date: May 15, 1998 /s/ Brian P. Burns
-------------------------------
Brian P. Burns
Chairman of the Board,
President and Chief Executive
Officer
(Duly Authorized Officer)
Date: May 15, 1998 /s/ S. Douglas Post
---------------------------------
S. Douglas Post
Vice President and Treasurer
(Principal Accounting Officer)
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,948
<SECURITIES> 628
<RECEIVABLES> 87
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,243
<CURRENT-LIABILITIES> 0
<BONDS> 719
0
0
<COMMON> 365
<OTHER-SE> 19,688
<TOTAL-LIABILITY-AND-EQUITY> 22,243
<SALES> 650
<TOTAL-REVENUES> 1,167
<CGS> 150
<TOTAL-COSTS> 150
<OTHER-EXPENSES> 629
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13
<INCOME-PRETAX> 525
<INCOME-TAX> 0
<INCOME-CONTINUING> 525
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 525
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
