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 September 30, 2000, 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 November 2, 2000:
3,434,839 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 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>
September 30, December 31,
2000 1999
------------ -----------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 5,132 $ 3,575
Marketable securities, at market value 1,234 815
Receivables 64 223
Real estate rental property, net of depreciation 2,178 2,216
Real estate inventory held for current sale
and land held for future development 15,801 17,034
Lease contract receivable 622 652
Investment in partnership 768 83
Deferred tax assets 155 153
Other assets 332 389
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TOTAL ASSETS $ 26,286 $ 25,140
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-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Payables and accrued liabilities $ 656 $ 981
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Stockholders' equity:
Common stock, $.10 par value
Authorized - 10,000,000 shares
Issued and outstanding -
3,445,939 and 3,450,599 shares 345 345
Capital surplus 14,344 14,376
Retained earnings 10,520 9,215
Other accumulated comprehensive income 421 223
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Total stockholders' equity 25,630 24,159
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 26,286 $ 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 Nine Months Ended
September 30, September 30,
------------------- --------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Real estate sales $ 631 $ 1,007 $ 1,450 $ 2,862
Real estate rental income 456 460 1,370 1,381
Interest and dividends 80 64 201 164
Other 4 11 64 51
----- ----- ----- -----
1,171 1,542 3,085 4,458
----- ----- ----- -----
Costs and Expenses:
Cost of real estate sold 161 165 383 601
Depreciation and amortization 24 24 72 72
Interest on subordinated debentures -- 12 -- 37
General and administrative 411 485 1,325 1,427
----- ----- ----- -----
596 686 1,780 2,137
----- ----- ----- -----
Income before income taxes 575 856 1,305 2,321
Benefit for income taxes -- -- -- (656)
----- ----- ----- ------
Net income $ 575 $ 856 $1,305 $2,977
----- ----- ------ ------
----- ----- ------ ------
Net income per share:
Basic $ .17 $ .24 $ .38 $ .84
------ ------ ------ ------
------ ------ ------ ------
Diluted $ .15 $ .22 $ .35 $ .76
------ ------ ------ ------
------ ------ ------ ------
Average shares used in computing basic
net income per share 3,446 3,496 3,447 3 ,526
Average shares and equivalents used in
computing diluted net income per share 3,764 3,828 3,759 3,891
</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,
------------------
2000 1999
---- -----
<S> <C> <C>
Common stock:
Beginning of period $ 345 $ 358
Purchases of common stock - par value -- (23)
Exercise of stock options - par value -- 12
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End of period $ 345 $ 347
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------ -------
Capital surplus:
Beginning of period $14,376 $15,887
Purchases of common stock - excess over par value (32) (1,724)
Exercise of stock options - excess over par value -- 376
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End of period $14,344 $14,539
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------ ------
Retained earnings:
Beginning of period $ 9,215 $ 5,376
Net income 1,305 2,977
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End of period $10,520 $ 8,353
------ ------
------ ------
Other accumulated comprehensive income:
Beginning of period $ 223 $ 137
Unrealized gains from marketable equity securities 198 100
------ ------
End of period $ 421 $ 237
------ ------
------ ------
Accumulated comprehensive income:
Accumulated comprehensive income:
Beginning of period $ 9,438 $ 5,513
------ ------
Net income $ 1,305 $ 2,977
Unrealized gains from marketable equity securities during period 198 100
------ ------
Comprehensive income for period 1,503 3,077
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End of period $10,941 $ 8,590
------ ------
------ ------
</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
-------------
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,305 $ 2,977
Adjustments to reconcile net income to net cash provided
by operating activities:
Gains from sales of real estate (1,067) (2,261)
Net cash proceeds from sales of real estate 1,643 1,804
Real estate development costs (460) (1,621)
Reimbursement of real estate development costs 1,117 2,140
Changes in certain assets and liabilities:
Decrease (increase) in receivables 159 (53)
Decrease in lease contract receivable 30 3
Decrease in payables and accrued liabilities (228) (83)
Increase in deferred tax assets (2) (57)
Other, net 93 20
----- -----
Total adjustments to net income 1,285 (108)
----- -----
Net cash provided by operating activities 2,590 2,869
Cash flows from investing activities:
Purchases of marketable securities (224) --
Investment in partnership (685) --
Return of capital invested in limited liability company -- 300
Other 5 --
----- -----
Net cash provided (used) by investing activities (904) 300
Cash flows from financing activities:
Reductions in subordinated debentures (97) (577)
Purchases of the Company's common stock (32) (1,747)
Proceeds from exercise of stock options -- 388
----- ------
Net cash used by financing activities (129) (1,936)
----- ------
Net increase in cash and cash equivalents 1,557 1,233
Cash and cash equivalents at beginning of period 3,575 3,347
----- -----
Cash and cash equivalents at end of period $ 5,132 $ 4,580
----- -----
----- -----
Supplemental disclosures of cash flow information:
Cash paid during the period for
interest (net of amount capitalized) $ -- $ 37
----- -----
----- -----
</TABLE>
The accompanying notes are an
integral part of these consolidated 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 September 30, 1999.
Note B - Earnings Per Share
Earnings per share data for the periods reported have been computed as follows
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- --------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $ 575 $ 856 $1,305 $2,977
----- ------ ----- -----
----- ------ ----- -----
Weighted average number of shares outstanding:
Common stock 3,446 3,496 3,447 3,526
Common stock equivalents -
stock options 318 332 312 365
----- ----- ----- -----
3,764 3,828 3,759 3,891
----- ----- ----- -----
Net income per share:
Basic - based on weighted average number
of shares of common stock outstanding $ .17 $ .24 $ .38 $ .84
----- ----- ----- -----
----- ----- ----- -----
Diluted - based on weighted average number
of shares of common stock and common stock
equivalents outstanding $ .15 $ .22 $ .35 $ .76
----- ----- ----- -----
----- ----- ----- -----
</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 286 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 $15,801,000 at September 30, 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.
8
<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 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. It is expected that the project will contain approximately
3,000 residential lots together with certain retail, commercial and
non-residential uses. The infrastructure construction should begin in 2001.
MPELLC has agreed to loan the partnership up to an aggregate of $1,000,000 of
cash and/or a letter of credit for development expenses. Advances of $768,000
and $83,000 had been made on the loan at September 30, 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.
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
9
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 nine months ended September 30, 2000, the Company
purchased 4,660 shares of its common stock for an aggregate amount of $32,000.
During the nine months ended September 30, 1999, the Company purchased 224,500
shares of its common stock for an aggregate amount of $1,747,000.
In April 1999 an officer of the Company exercised options for the purchase of
36,000 shares of the Company's common stock. The Company received proceeds of
$109,000 from the exercise of these options. In August 1999 two trusts, of which
the widow of a former officer is a trustee, exercised options for the purchase
of an aggregate of 83,500 shares of the Company's common stock. The Company
received proceeds of $279,000 from the exercise of these options.
10
<PAGE>
Item 2. Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations.
---------------------------------------------
Results of Operations
---------------------
Net income of $575,000 and $1,305,000 in the three months and nine
months ended September 30, 2000, included gains of $470,000 and $1,067,000,
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,
1999, net income of $856,000 and $2,977,000 included gains of $842,000 and
$2,261,000, respectively, from sales of Meadow Pointe property and, in the nine
month 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 assessment (see Note F of Notes to Financial
Statements). The Company's reported gains and losses 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 reviews
these estimates quarterly and makes cumulative adjustments to reflect any
revised estimates. Cumulative adjustments resulting from changes in estimates of
sales revenue and related timing, interest rates and other factors affecting the
project budget, were made during the first half of 2000. These adjustments,
reflecting changes occurring during this period, resulted in aggregate
reductions in revenue and costs that reduced net income by $935,000 in the nine
months ended September 30, 2000. No such adjustments were recorded in the three
months ended September 30, 2000. Cumulative adjustments made in the third
quarter of 1999, based on revised project estimates, increased net income by
$127,000 in the three months and nine months ended September 30, 1999. As a
result of recording cumulative changes when identified, gross margins and
related margin percentages, derived on a period to period basis, may not be
directly comparable.
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. The
Company sold, respectively, 76 and 264 developed lots at Meadow Pointe during
the three months and nine months ended September 30, 2000 which represented,
respectively, decreases of 36% and 23% from the number of lots sold in the same
periods of 1999. During the 2000 periods, construction activities and related
sales were hampered by delays in obtaining permits from government agencies for
development of the remaining residential parcels.
Interest and dividends from investments accounted for $80,000 and
$201,000 of revenues in the three months and nine months ended September 30,
2000, respectively, and $64,000 and $164,000 in comparable periods in 1999. The
increase in the 2000 periods was due to higher interest rates and an increase in
the amount of funds available for investment.
11
<PAGE>
Interest expense for the three months and nine months ended September
30, 1999 was $12,000 and $37,000, respectively. There was no interest expense
for the comparable 2000 periods due to the maturity of the Company's Floating
Rate Subordinated Debentures on December 31, 1999.
General and administrative expenses in the three months and nine months
ended September 30, 2000 were, respectively, $74,000 and $102,000 lower than in
the comparable periods in 1999, due principally to a decrease in legal fees and
compensation for executive officers.
Liquidity and Capital Resources
-------------------------------
At September 30, 2000, the Company held $6,366,000 in cash, cash
equivalents and marketable securities, as compared to $656,000 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).
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. Bonds in the principal amount of approximately $33,000,000 remained
outstanding at September 30, 2000. The proceeds of such financing 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.
As described in Note E of Notes to Financial Statements, the Company's
subsidiary Meadow Pointe East, LLC 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
anticipated that two community development districts encompassing the Wesley
Chapel Lakes project will be formed. The districts may, from time to time,
issue capital improvement revenue bonds to finance infrastructure construction.
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 Company and its representatives may from time to time make written
or oral forward-looking statements with respect to long-term goals of the
Company, including statements contained in the Company's filings with the
Securities and Exchange Commission and in its reports to stockholders.
12
<PAGE>
The words or phrases "will likely result," "are expected to," "will
continue," "is anticipated," "estimate," "project" or similar expressions
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements, which
speak only as of the date made, 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.
The Company specifically declines to undertake any obligation to
publicly revise any forward-looking statements that have been made to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.
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 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.
13
<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.
14
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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, 2000 /s/ Brian P. Burns
------------------------------
Brian P. Burns
Chairman of the Board, President
and Chief Executive Officer
(Duly Authorized Officer)
Date: November 13, 2000 /s/ S. Douglas Post
-----------------------------
S. Douglas Post
Vice President and Treasurer
(Principal Accounting Officer)
15
