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 March 31, 2000, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to __________________
------------------------------------
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 May 1, 2000:
3,446,019 shares of $.10 par value Common Stock
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
I N D E X
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
- Consolidated balance sheets ..............................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 ...........................................14
Item 6. Exhibits and Reports on Form 8-K ............................14
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
BF ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---- ----
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 3,787 $ 3,575
Marketable securities, at market value 1,115 815
Receivables 269 223
Real estate rental property, net of depreciation 2,203 2,216
Real estate inventory held for current sale
and land held for future development 16,777 17,034
Lease contract receivable 638 652
Investment in partnership 351 83
Deferred tax assets 155 153
Other assets 383 389
--------- --------
TOTAL ASSETS $ 25,678 $ 25,140
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Payables and accrued liabilities $ 703 $ 981
-------- --------
Stockholders' equity:
Common stock, $.10 par value
Authorized - 10,000,000 shares
Issued and outstanding -
3,447,919 and 3,450,599 shares 345 345
Capital surplus 14,358 14,376
Retained earnings 9,845 9,215
Other accumulated comprehensive income 427 223
-------- --------
Total stockholders' equity 24,975 24,159
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,678 $ 25,140
======== ========
</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,
-----------------------
2000 1999
---- ----
<S> <C> <C>
Revenues:
Real estate sales $ 801 $ 739
Real estate rental income 457 461
Interest and dividends 54 46
Other 9 32
------ -------
1,321 1,278
------ -------
Costs and Expenses:
Cost of real estate sold 197 185
Depreciation and amortization 24 24
Interest on subordinated debentures -- 12
General and administrative 470 481
------ ------
691 702
------ ------
Income before income taxes 630 576
Benefit for state income taxes -- (656)
------ -------
Net income $ 630 $ 1,232
====== =======
Net income per share:
Basic $ .18 $ .34
====== =======
Diluted $ .17 $ .31
====== =======
Average shares used in computing basic
net income per share 3,448 3,572
Average shares and equivalents used in computing
diluted net income per share 3,739 3,970
</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,
-----------------------
2000 1999
---- ----
<S> <C> <C>
Common stock:
Balance at beginning of period $ 345 $ 358
Purchases of common stock - par value - (3)
-------- -------
Balance at end of period $ 345 $ 355
======== =======
Capital surplus:
Balance at beginning of period $ 14,376 $ 15,887
Purchases of common stock - excess over par value (18) (213)
--------- --------
Balance at end of period $ 14,358 $ 15,674
======== ========
Retained earnings:
Balance at beginning of period $ 9,215 $ 5,376
Net income 630 1,232
------- -------
Balance at end of period $ 9,845 $ 6,608
======= =======
Other accumulated comprehensive income:
Balance at beginning of period $ 223 $ 137
Unrealized gains from marketable equity securities during period 204 25
------- -------
Balance at end of period $ 427 $ 162
======= =======
Accumulated comprehensive income:
Balance at beginning of period $ 9,438 $ 5,513
------- -------
Net income $ 630 $ 1,232
Unrealized gains from marketable equity securities during period 204 25
-------- -------
Comprehensive income for period $ 834 $ 1,257
-------- -------
Balance at end of period $ 10,272 $ 6,770
======== =======
</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,
--------------------
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 630 $ 1,232
Adjustments to reconcile net income to net cash provided
by operating activities:
Gains from sales of real estate (604) (554)
Net cash proceeds from sales of real estate 686 496
Real estate development costs (282) (392)
Reimbursement of real estate development costs 457 770
Changes in certain assets and liabilities:
Increase in state income tax refund receivable -- (656)
Decrease (increase) in other receivables (46) 40
Decrease (increase) in lease contract receivable 14 (14)
Decrease in payables and accrued liabilities (201) (56)
Other, net 15 11
--------- ---------
Total adjustments to net income 39 (355)
--------- ---------
Net cash provided by operating activities 669 877
Cash flows from investing activities:
Purchases of marketable securities (99) --
Investment in partnership (268) --
Other 5 --
---------- ---------
Net cash used by investing activities (362) --
Cash flows from financing activities:
Reductions in subordinated debentures (77) (107)
Purchases of the Company's common stock (18) (216)
--------- ---------
Net cash used by financing activities (95) (323)
--------- ---------
Net increase in cash and cash equivalents 212 554
Cash and cash equivalents at beginning of period 3,575 3,347
--------- ---------
Cash and cash equivalents at end of period $ 3,787 $ 3,901
========= =========
</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, 1999 and in the
Company's Form 10-QSB for the quarterly period ended March 31, 1999.
Note B - Earnings Per Share
Earnings per share data for the periods reported have been computed as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
2000 1999
---- ----
<S> <C> <C>
Net Income $ 630 $ 1,232
===== =======
Weighted average number of shares outstanding:
Common stock 3,448 3,572
Common stock equivalents -
stock options (1) 291 398
----- -----
3,739 3,970
===== =====
Net income per share:
Basic - based on weighted average number
of shares of common stock outstanding $ .18 $ .34
===== =====
Diluted - based on weighted average number
of shares of common stock and common stock
equivalents outstanding $ .17 $ .31
===== =====
</TABLE>
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 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, 1999, contractual
rental revenues from the lease with Bank One are projected as follows:
2000 1,848,000
2001 1,936,000
2002 1,953,600
2003 1,975,600
2004 1,980,000
2005 (two months) 330,000
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 317 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 $16,777,000 at March 31, 2000 and $17,034,000 at
December 31, 1999. The Company believes that the current fair value of these
assets is greater than their carrying value.
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 E - Investment in Partnership
In October 1999, the Company formed a new subsidiary, Meadow Pointe East, LLC
("MPELLC") to act as one of two general partners in a partnership to develop a
2,000 acre tract of land adjacent to Meadow Pointe, tentatively identified as
Wesley Chapel Lakes. The Company has, through MPELLC, agreed to loan the
partnership up to $1,000,000 of cash and/or a letter of credit for development
expenses. Advances of $351,000 and $83,000 had been made on the loan at March
31, 2000 and December 31, 1999, respectively. This investment and all related
loans will be accounted for as an equity method investment with no income
recognized until profits are generated by the partnership. MPELLC is entitled to
interest on the loan, at a rate of 1% over the Wells Fargo Bank prime rate, plus
50% of the general partnership's profits derived primarily from the sale of
residential lots. The Wesley Chapel Lakes project is structured to provide for
the sale of improved lots directly from the current landowner to homebuilders.
Neither the Company nor its subsidiaries will be obligated to fund improvements
in excess of the loan to the partnership or will be subject to a requirement to
acquire any lots from the current owner.
<PAGE>
Note F - Benefit for State 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 arose 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 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. The
Company's request for refund was denied and the action described above was
filed. In May 1997, the Court granted the FTB's motion for summary judgement
and dismissed the Company's action. The Company filed an appeal of the
judgement with a California Court of Appeal. In late 1998, the Appellate Court
unanimously upheld the Company's position. The Appellate Court ordered
reimbursement to the Company of the entire amount originally paid to the FTB,
plus interest to the date of reimbursement.
Reimbursement of $926,000 was received from the FTB in April 1999. In the three
months ended March 31, 1999, the Company recorded a state income tax benefit of
$656,000, after deduction of related federal and state income taxes of $270,000
that are the liability of the Company's predecessor.
Note G - 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, 2000, the Company
purchased 2,680 shares of its common stock for an aggregate amount of $18,000.
During the three months ended March 31, 1999, the Company purchased 27,750
shares of its common stock for an aggregate amount of $216,000.
9
<PAGE>
Item 2. Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations
----------------------------------------------
Results of Operations
- ---------------------
Net income of $630,000 and $1,232,000 in the three months ended March 31,
2000 and 1999, respectively, included gains of $604,000 and $554,000 from sales
of property within the Company's Meadow Pointe project near Tampa, Florida, and,
in the 1999 period, included a $656,000 benefit for state income taxes deriving
from the Company's successful suit against the California Franchise Tax Board
for reimbursement of a 1981 tax assessment (see Note F of Notes to Financial
Statements). The Company sold 111 developed lots at Meadow Pointe during the
three months ended March 31, 2000, which represented a 6% increase from the
number of lots sold during the same period of 1999.
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 $54,000 and $46,000 of
revenues in the three months ended March 31, 2000 and 1999, respectively. The
increase in 2000 was due to higher interest rates and an increase in the amount
of funds available for investment.
Interest expense for the three months ended March 31, 1999 was $12,000. There
was no interest expense for the comparable 2000 period due to the maturity of
the Company's Floating Rate Subordinated Debentures on December 31, 1999.
General and administrative expenses in the three months ended March 31, 2000
were $11,000 lower than in the comparable period in 1999, due principally to a
decrease in legal fees.
Liquidity and Capital Resources
- -------------------------------
At March 31, 2000, the Company held $4,902,000 in cash, cash equivalents and
marketable securities, as compared to $703,000 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 G of Notes to Financial Statements).
10
<PAGE>
The Company's business plan calls for substantial expenditures during the
next several years relating to the planned development of Meadow Pointe. During
the period February 1992 through May 2000, two community development districts
encompassing the Meadow Pointe project issued approximately $79,600,000 of
capital improvement revenue bonds, including $4,660,000 in May 2000. The
proceeds of such financings have been and are expected to be used to construct
infrastructure improvements necessary for the development and sale of lots, and
multifamily parcels, in Meadow Pointe. Neither district anticipates the need for
any additional financing.
The Company's subsidiary Meadow Pointe East, LLC ("MPELLC") was formed in
October 1999, as a partner in a general partnership, to develop a 2,000 acre
tract of land adjacent to the Meadow Pointe property, tentatively identified as
Wesley Chapel Lakes. It is expected that the project will contain approximately
3,000 lots together with certain retail, commercial and non- residential uses.
The infrastructure construction should begin in the third quarter of 2000. It is
anticipated that two community development districts encompassing the Wesley
Chapel Lakes project will be formed. The districts may, from time to time, issue
special assessment bonds to finance infrastructure construction. Under the
general partnership agreement, MPELLC will be entitled to receive 50% of the
general partnership's profits derived primarily from the sale of the lots. The
cost of the land will be paid to the owner of the 2,000 acres as finished lots
are sold to homebuilders. MPELLC has agreed to loan the partnership up to
$1,000,000 of cash and/or a letter of credit for development expenses.
The Company intends to pay for its future expenditures at Meadow Pointe and
Wesley Chapel Lakes and its other operating expenses with (i) cash generated
from sales of property within Meadow Pointe, Wesley Chapel Lakes 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.
The statements in this Report on Form 10-KSB regarding Meadow Pointe and
Wesley Chapel Lakes property sales, financing of Meadow Pointe and Wesley Chapel
Lakes 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.
Qualitative and Quantitative Disclosures About Market Risk
- ----------------------------------------------------------
The Company holds certain cash equivalents and marketable securities for
non-trading purposes which are sensitive to changes in market value. The Company
does not believe that changes in the market value of these financial instruments
11
<PAGE>
will have a material impact, either favorable or unfavorable, on its financial
position or results of operations. The Company has not in the past engaged in
transactions requiring the use of derivative financial instruments either for
hedging or speculative purposes, and has no plans to do so in the future.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The Company is not a party to any material legal proceedings.
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: May 12, 2000 /s/ Brian P. Burns
------------------
Brian P. Burns
Chairman of the Board, President
and Chief Executive Officer
(Duly Authorized Officer)
Date: May 12, 2000 /s/ S. Douglas Post
-------------------
S. Douglas Post
Vice President and Treasurer
(Principal Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-END> Mar-31-2000
<CASH> 3,787
<SECURITIES> 1,115
<RECEIVABLES> 269
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,678
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 345
<OTHER-SE> 24,630
<TOTAL-LIABILITY-AND-EQUITY> 25,678
<SALES> 801
<TOTAL-REVENUES> 1,321
<CGS> 197
<TOTAL-COSTS> 197
<OTHER-EXPENSES> 494
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 630
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 630
<EPS-BASIC> .18
<EPS-DILUTED> .17
</TABLE>
