-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LJ8Y/tMEHZ1/CPxqEOM+TsD5kx4Zs/s1OVMOzwWz6Pa2KmeB5n3rT1bvr02I0eZj ui3mJsETle3hmksAAy5hNw== 0000950152-00-003097.txt : 20000426 0000950152-00-003097.hdr.sgml : 20000426 ACCESSION NUMBER: 0000950152-00-003097 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20000131 FILED AS OF DATE: 20000425 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOREST CITY ENTERPRISES INC CENTRAL INDEX KEY: 0000038067 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 340863886 STATE OF INCORPORATION: OH FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-04372 FILM NUMBER: 608518 BUSINESS ADDRESS: STREET 1: 1100 TERMINAL TOWER STREET 2: 50 PUBLIC SQ CITY: CLEVELAND STATE: OH ZIP: 44113 BUSINESS PHONE: 216-621-6060 MAIL ADDRESS: STREET 1: 1100 TERMINAL TOWER STREET 2: 50 PUBLIC SQUARE CITY: CLEVLAND STATE: OH ZIP: 44113 10-K 1 FOREST CITY ENTERPRISES, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the fiscal year ended January 31, 2000 ------------------------------------------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to ---------------------- ------------------------ Commission file number 1-4372 FOREST CITY ENTERPRISES, INC. ------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 34-0863886 - --------------------------------------- ------------------------------------ (State of incorporation) (I.R.S. Employer Identification No.) Terminal Tower 50 Public Square Suite 1100 Cleveland, Ohio 44113 - --------------------------------------- ------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 216-621-6060 ------------------------------ Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered - -------------------------------------------------------------------------------- Class A Common Stock ($.33 1/3 par value) New York Stock Exchange Class B Common Stock ($.33 1/3 par value) New York Stock Exchange 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] On March 1, 2000 the aggregate market value of the voting stock held by non-affiliates of the registrant amounted to $352,905,871 and $85,244,009 for Class A and Class B common stock, respectively. The number of shares of registrant's common stock outstanding on March 1, 2000 was 19,372,406 and 10,659,096 for Class A and Class B common stock, respectively. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Annual Report to Shareholders for the fiscal year ended January 31, 2000 (1999 Annual Report to Shareholders) are incorporated by reference into Parts I and II of this Form 10-K. Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held June 7, 2000 are incorporated by reference into Part III of this Form 10-K. 2 FOREST CITY ENTERPRISES, INC. ANNUAL REPORT ON FORM 10-K JANUARY 31, 2000 TABLE OF CONTENTS
Page ---- PART I Item 1. Business 2 Item 2. Properties 5 Item 3. Legal Proceedings 5 Item 4. Submission of Matters to a Vote of Security Holders 6 Item 4A. Executive Officers of the Registrant 6 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 8 Item 6. Selected Financial Data 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 8 Item 8. Financial Statements and Supplementary Data 12 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 12 PART III Item 10. Directors and Executive Officers of the Registrant 13 Item 11. Executive Compensation 13 Item 12. Security Ownership of Certain Beneficial Owners and Management 13 Item 13. Certain Relationships and Related Transactions 13 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 14 Signatures 25
1 3 PART I Item 1. Business - ---------------- Founded 80 years ago and publicly traded since 1960, Forest City Enterprises, Inc. (with its Subsidiaries, the "Company" or "Forest City") owns, develops, acquires and manages commercial and residential real estate projects in 21 states and the District of Columbia. At January 31, 2000, the Company had $3.8 billion in consolidated assets, of which approximately $3.4 billion was invested in real estate, at cost. The Company is organized into four principal business groups: * The Commercial Group, which develops, owns, acquires and operates shopping centers, office buildings and mixed-use projects including hotels. * The Residential Group, which develops, acquires, owns and operates the Company's multi-family properties. * The Land Group, which owns and develops raw land into master planned communities and other residential developments for resale. * The Lumber Trading Group, which operates the Company's lumber wholesaling business. Each group operates autonomously and both the Commercial Group and the Residential Group have separate development, acquisition, leasing, property and financial management functions. As a result, each of these groups is able to perform all of the tasks necessary to develop and maintain a property from selecting a project site to financing the project to managing the completed project. The Company's "Corporate" Activities relate to general corporate items. Commercial Group - ---------------- The Company has developed retail projects for more than 50 years and office, mixed-use and hotel projects for more than 30 years. Today, the Commercial Group owns a diverse portfolio in both urban and suburban locations in 12 states. The Commercial Group targets densely populated locations where it uses its expertise to develop complex projects, often employing public/private partnerships. As of January 31, 2000, the Commercial Group owned interests in 69 completed projects, including 38 retail properties, 24 office properties and seven hotels. The Company opened its first strip shopping center in 1948, and its first enclosed regional mall in 1962. Since then, it has developed urban retail centers, entertainment based centers, community centers and power centers focused on "big box" retailing (collectively, "Specialty Retail Centers"), as well as regional malls. As of January 31, 2000, the Commercial Group's existing shopping center portfolio consisted of 13 regional malls with a total Gross Leasable Area (GLA) of 4.0 million square feet and 25 Specialty Retail Centers with a total GLA of 4.5 million square feet. Malls are generally developed in collaboration with anchor stores that usually own their own facilities as integral parts of the mall structure and environment and which do not generate significant direct payments to the Company. In contrast, anchor stores at specialty retail and power centers generally are tenants under long-term leases which contribute significant rental payments to the Company. 2 4 Item 1. Business (continued) - ---------------------------- While the Company continues to develop regional malls in strong markets, the Company recently has pioneered the concept of bringing "big box" retailing to urban locations previously ignored by major retailers. With high population densities and disposable income levels at or near those of the suburbs, urban development is proving to be economically advantageous for the Company, for the tenants who realize high sales per square foot and for the cities, which benefit from the new jobs created in the urban locations. At January 31, 2000, the Company's operating portfolio of office/mixed-use and hotel projects consists of 24 office buildings containing 7.2 million square feet, including mixed-use projects with an aggregate of 259,000 gross leasable square feet of retail space and seven hotels with 2,029 rooms. In its office development activities, Forest City is primarily a build-to-suit developer which works with tenants to meet their highly specialized requirements. The Company's office development has focused primarily on mixed-use projects in urban developments, often built in conjunction with hotels and shopping centers or as part of a major office campus. As a result of this focus on new urban developments, 50% of the Company's office buildings were built within the last nine years and are concentrated in five urban developments located in Brooklyn, New York, Cleveland, Ohio, Cambridge, Massachusetts, Pittsburgh, Pennsylvania and San Jose, California. Residential Group - ----------------- The Company's Residential Group develops, acquires, owns, leases and manages residential rental property in 17 states and the District of Columbia. The Company has been engaged in apartment community development for over 50 years beginning in northeast Ohio and gradually expanding nationally. Its portfolio includes mature middle-market apartments in geographically attractive suburbs, newer and higher end apartments in unique urban locations and newer apartments in the suburbs. The Residential Group, which focuses on large apartment complexes, does not develop or operate single-family housing or condominium projects. At January 31, 2000, the Residential Group's operating portfolio consists of 32,596 units in 108 properties in which Forest City has an ownership interest, including 6,735 units of syndicated senior citizen subsidized housing in 40 buildings that the Company manages and in which it owns a residual interest. Land Group - ---------- The Company has been in the land business since the 1930's. The Land Group acquires and sells both raw land and developed lots to residential, commercial and industrial customers. The Land Group projects attract national, regional and local builders. The Land Group develops raw land into master planned communities, mixed-use and other residential developments and currently owns more than 5,100 acres of undeveloped land for this purpose. The Company currently has land development projects in eight states. Historically, the Land Group's activities focused on land development projects in northeast Ohio. Over time, the Group's activities expanded to larger, more complex projects, and regional expansion into western New York State. In the last ten years, the Group has extended its activities on a national basis, first in Arizona, and more recently in North Carolina, Florida, Nevada and Colorado. In addition to the sales activities of the Land Group, the Company also sells land acquired by its Commercial Group and Residential Group adjacent to their respective projects. Proceeds from such land sales are included in the revenues of such Groups. 3 5 Item 1. Business (continued) - ---------------------------- Lumber Trading Group - -------------------- The Company's original business was selling lumber to homebuilders. The Company expanded this business in 1969 through its acquisition of Forest City Trading Group, Inc., which is a lumber wholesaler to customers in all 50 states and all Canadian provinces. Through ten strategically located trading offices in the United States and Canada, employing over 350 traders, Forest City sold the equivalent of eight billion board feet of lumber in 1999, with a gross sales volume of nearly $3.7 billion, making the Company one of the largest lumber wholesalers in North America. The Lumber Trading Group currently has offices in six states and Vancouver, British Columbia. The Company opens offices in response to the changing demands of the lumber industry. The Lumber Trading Group's core business is supplying lumber for new home construction and to the repair and remodeling markets. Approximately 65% of the Lumber Trading Group's sales for 1999 involve back-to-back trades in which the Company brings together a buyer and seller for an immediate purchase and sale. The balance of transactions are trades in which the Company takes a short-term ownership position and is at risk for lumber market fluctuations. This risk, however, is reduced by the implementation of our lumber hedging strategy. Competition - ----------- The real estate industry is highly competitive in all major markets. With regard to the Commercial and Residential Groups, there are numerous other developers, managers and owners of commercial and residential real estate that compete with the Company nationally, regionally and/or locally in seeking management and leasing revenues, land for development, properties for acquisition and disposition and tenants for properties, some of whom may have greater financial resources than the Company. There can be no assurance that the Company will successfully compete for new projects or have the ability to react to competitive pressures on existing projects caused by factors such as declining occupancy rates or rental rates. In addition, tenants at the Company's retail properties face continued competition in attracting customers from retailers at other shopping centers, catalogue companies, warehouse stores, large discounters, outlet malls, the Internet, wholesale clubs and direct mail and telemarketers. The existence of competing developers, managers and owners and competition to the Company's tenants could have a material adverse effect on the Company's ability to lease space in its properties and on the rents charged or concessions granted, could materially and adversely affect the Company's results of operations and cash flows and could affect the realizable value of assets upon sale. With regard to the Lumber Trading Group, the lumber wholesaling business is highly competitive. Competitors in the lumber brokerage business include numerous brokers and in-house sales departments of lumber manufacturers, many of which are larger and have greater resources than the Company. Forest City was incorporated in Ohio in 1960 as a successor to a business started in 1921. Number of Employees - ------------------- The Company had 3,967 employees as of January 31, 2000, of which 3,072 were full-time and 895 were part-time. Segments of Business - -------------------- Financial information about industry segments required by this item is incorporated by reference to Note L "Segment Information" which appears on page 38 of the 1999 Annual Report to Shareholders. 4 6 Item 2. Properties - ------------------ The Corporate headquarters of Forest City Enterprises, Inc. is located in Cleveland, Ohio and is owned by the Company. Regional offices are located in New York, Los Angeles, Boston, Tucson, Washington, D. C., Denver and San Francisco. Forest City Trading Group, Inc. maintains its headquarters in Portland, Oregon with 13 administrative and sales offices and one processing plant located in 8 states and one sales office in Canada. The "Forest City Rental Properties Corporation Portfolio of Real Estate," presented on pages 22 through 25 of the 1999 Annual Report to Shareholders, lists the shopping centers, office buildings, hotels and apartments in which Forest City Rental Properties Corporation has an interest and is incorporated herein by reference. Item 3. Legal Proceedings - ------------------------- On September 21, 1999, a complaint was filed in state court in Los Angeles County against Forest City Enterprises, Inc., Forest City California Residential Development, Inc., and Forest City Residential West, Inc. Plaintiffs are 63 construction workers who claim to have been exposed to asbestos and mold and mildew while engaged in renovation work at a construction site in Washington ("the Washington claims"). Three of the plaintiffs also claim to have been exposed to lead paint and asbestos at a construction site in California ("the California claims"). Plaintiffs seek damages for unspecified personal injuries, lost income, and diminished earning capacity and also seek punitive and treble damages. Defendants filed a motion to dismiss or stay the Washington claims on the grounds that Washington was a more appropriate forum in which to hear these claims. On February 25, 2000, the Superior Court for the County of Los Angeles granted defendants' motion and severed the Washington claims from the California claims and stayed the Washington claims so that they can be tried in Washington, which the Court found to be the more appropriate forum. The Company will continue the defense of the California claims in the State of California court system. An action was filed in August 1997 against Forest City Trading Group, Inc. (a wholly-owned subsidiary of the Company) and 10 of its subsidiaries, all of which are in the business of trading lumber. The complaint alleged improper calculation and underpayment of commissions and other related claims. On September 11, 1998 Plaintiffs filed a Motion for Class Certification. On December 8, 1998 the court posted an order denying class certification. On April 5, 1999 the original four Plaintiffs filed a notice of dismissal of this lawsuit without prejudice in state court. On April 16, 1999, the case was re-filed in Federal court against Forest City Trading Group, Inc. and four of its subsidiaries. On November 30, 1999, the U.S. District Court for the District of Oregon dismissed the federal claims with prejudice and the state law claims without prejudice. The time to appeal has expired. There will be no further report on this case if no new developments take place. The Company, through its subsidiaries, owns a 14.6% interest in the Seven Hills housing development located in Henderson, Nevada, which is owned by the Silver Canyon Partnership ("Silver Canyon") and is being developed next to a golf course. In August 1997, a class-action lawsuit was filed by the current homeowners in Seven Hills against the Silver Canyon Partnership, the golf course developers and other entities, including the Company. In addition, separate lawsuits were filed by some of the production home-building companies at Seven Hills against some of the same parties, including the Company. Each of these lawsuits sought a commitment for public play on the golf course, as well as damages and, in October 1998, the court granted play rights. In February 1999, the owner of the golf course filed a cross-claim against the Silver Canyon Partnership and the Company. Silver Canyon has since settled with the Plaintiff homeowners and with certain of Silver Canyon's insurance carriers and the Company has been released. In addition, Silver Canyon has reached settlement agreements with the owner of the golf course and with one of the production home builders which are expected to be executed in the near future. These settlements include a release of the Company. The Company was dismissed as a defendant in the other two lawsuits filed by the production builders, and subsequent to the dismissal of the Company, Silver Canyon reached settlement in principle in connection with one of the production home builder lawsuits. The remaining lawsuit is set for trial in June 2000 against Silver Canyon. Silver Canyon believes it has meritorious defenses and intends to vigorously defend the lawsuit. 5 7 Item 4. Submission of Matters to a Vote of Security Holders - ----------------------------------------------------------- No matters were submitted to a vote of security holders during the fourth quarter. Item 4 (A). Executive Officers of the Registrant - ------------------------------------------------ The following list is included as an unnumbered Item in Part I of this Report in lieu of being included in the Proxy Statement for the Annual Meeting of Shareholders to be held on June 7, 2000. The names, ages and positions held by the executive officers of the Company are presented in the following list. Each individual has been appointed to serve for the period which ends with the Annual Meeting of Shareholders scheduled for June 7, 2000.
Date Name and Position(s) Held Appointed Age - ------------------------- --------- --- Albert B. Ratner Co-Chairman of the Board of Directors of the Company since June 1995, Vice Chairman of the Board of the Company from June 1993 to June 1995, Chief Executive Officer prior to July 1995 and President prior to July 1993. 6-13-95 72 Samuel H. Miller Co-Chairman of the Board of Directors of the Company since June 1995, Chairman of the Board of the Company from June 1993 to June 1995 and Vice Chairman of the Board, Chief Operating Officer of the Company prior to June 1993, Treasurer of the Company since December 1992. 6-13-95 78 Charles A. Ratner President of the Company since June 1993, Chief Executive Officer of the Company since June 1995, Chief Operating Officer from June 1993 to June 1995 and Executive Vice President prior to June 1993, Director. 6-13-95 58 James A. Ratner Executive Vice President, Director, Officer of various subsidiary corporations. 3-09-88 55 Ronald A. Ratner Executive Vice President, Director, Officer of various subsidiary corporations. 3-09-88 53 Thomas G. Smith Senior Vice President, Chief Financial Officer, Secretary, Officer of various subsidiary corporations. 9-03-85 59 William M. Warren Senior Vice President, General Counsel and Assistant Secretary. 5-16-72 71
6 8 Item 4 (A). Executive Officers of the Registrant (continued) - -------------------------------------------------------------
Date Name and Position(s) Held Appointed Age - ------------------------- --------- --- Brian J. Ratner Senior Vice President--East Coast Development since January 1997, Vice President--Urban Entertainment from June 1995 to December 1996, Vice President from May 1994 to June 1995 and an officer of various subsidiaries. 1-01-97 42 Linda M. Kane Vice President and Corporate Controller since April 1995, Asset Manager--Commercial Group from July 1992 to April 1995 and Financial Manager--Residential Group from October 1990 to July 1992. 4-01-95 42
Note: Charles A. Ratner, James A. Ratner and Ronald A. Ratner are brothers. Albert B. Ratner is the father of Brian J. Ratner and Deborah Ratner Salzberg and is first cousin to Charles A. Ratner, James A. Ratner and Ronald A. Ratner. 7 9 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters - ----------------------------------------------------------------------------- Information required by this item is incorporated by reference to "Quarterly Consolidated Financial Data (Unaudited)" which appears on page 44 of the 1999 Annual Report to Shareholders. Item 6. Selected Financial Data - ------------------------------- The information required by this item is incorporated by reference to "Selected Financial Data" on page 26 of the 1999 Annual Report to Shareholders. Item 7. Management's Discussion and Analysis of Financial Condition and Results - ------------------------------------------------------------------------------- of Operations ------------- The information required by this item is incorporated by reference to "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 45 through 53 of the 1999 Annual Report to Shareholders. Item 7 (A). Quantitative and Qualitative Disclosures About Market Risk - ---------------------------------------------------------------------- The Company's primary market risk exposure is interest rate risk. At January 31, 2000, the Company had approximately $915,000,000 of variable-rate debt outstanding. Additionally, the Company has interest rate risk associated with fixed-rate debt at maturity. To reduce the effects of significant increases in interest rates on the interest (expense) payable with respect to the Company's variable-rate debt, the Company makes use of interest rate exchange agreements, including interest rate caps and swaps, to manage interest rate risk. The Company had purchased London Interbank Offered Rate ("LIBOR") interest rate caps as follows. Strike Principal Rate Period Outstanding - ----- ------------------ ------------- (in thousands) 6.50% 02/01/00 - 01/31/01 $584,330 6.50% 02/01/01 - 07/31/01 315,358 7.00% 08/01/01 - 01/31/02 297,158 7.00% 02/01/01 - 01/31/02 257,351 6.75% 09/01/00 - 08/31/03 79,929 8.00%* 06/01/01 - 06/01/04 8,960 8.00%* 11/01/01 - 10/31/04 115,460 8.00%* 08/01/02 - 07/31/05 21,700 8.00%* 02/01/03 - 01/31/06 133,900 * Three-year 8.00% LIBOR caps were purchased in February and March 2000. 8 10 Item 7 (A). Quantitative and Qualitative Disclosures About Market Risk - ---------------------------------------------------------------------- (continued) ----------- The Company intends to convert a significant portion of its committed variable-rate debt to fixed-rate debt. To offset the effect of upward fluctuations in future interest rates, the Company has purchased Treasury Options as follows: Strike Rate Term Exercise Date Notional - ----------- ---- ------------- -------- (years) (in thousands) 6.76% 10 11/01/00 $45,700 7.00% 10 02/01/01 33,180 6.00% 10 04/10/01 41,252 7.00%* 10 05/01/01 38,920 6.00% 10 08/10/01 38,677 7.00%* 10 11/01/01 9,030 7.00%* 10 08/01/02 98,760 7.00% 5 08/01/01 43,010 * Ten-year 7.00% Treasury Options were purchased in February 2000. These options protect the Company from increases in Treasury Rates above the strike price through the exercise date outlined in the table. At January 31, 2000, the Company had $167,000,000 outstanding under its $225,000,000 revolving credit facility, which bears interest at LIBOR plus 2% or 1/4% above prime. The Company has purchased a 6.50% LIBOR interest rate cap for 2000 and an average 6.75% LIBOR interest rate cap for 2001 at notional amounts of $100,620,000 and $83,280,000, respectively. At January 31, 2000, the Company estimated that a 100 basis point decrease in market interest rates would have changed the fair value of fixed-rate debt at that date of $1,555,987,000 to a liability of approximately $1,654,475,000. The sensitivity to changes in interest rates of the Company's fixed-rate debt was determined with a valuation model based upon changes that measure the net present value of such obligation which arise from the hypothetical estimate as discussed above. The Company intends to monitor and manage interest costs on its variable-rate debt portfolio and may enter into swap positions based on market fluctuations. The following table provides information about the Company's financial instruments that are sensitive to changes in interest rates. 9 11
EXPECTED MATURITY DATE -------------------------------------------------------------------- LONG-TERM DEBT 2000 2001 2002 2003 - ---------------------------------- -------------- -------------- -------------- -------------- FIXED: Fixed rate debt (1) 67,930,592 81,160,031 44,400,735 86,509,644 Weighted average interest rate 8.11% 8.25% 7.51% 8.24% UDAG (1) 1,049,610 10,481,224 541,722 163,085 Weighted average interest rate 0.35% 7.99% 7.73% 2.78% Senior notes -- -- -- -- Weighted average interest rate -------------- -------------- -------------- -------------- Total Fixed Rate Debt 68,980,202 91,641,255 44,942,457 86,672,729 -------------- -------------- -------------- -------------- VARIABLE: Variable rate debt (1) (2) 347,609,980 34,141,905 119,367,166 68,992,986 Weighted average interest rate Tax Exempt (1) 55,570,001 32,208,500 -- -- Weighted average interest rate Revolving Credit Facility -- 167,000,000 -- -- Weighted average interest rate -------------- -------------- -------------- -------------- Total Variable Rate Debt 403,179,981 233,350,405 119,367,166 68,992,986 -------------- -------------- -------------- -------------- TOTAL LONG-TERM DEBT $ 472,160,183 $ 324,991,660 $ 164,309,623 $ 155,665,715 ============== ============== ============== ============== EXPECTED MATURITY DATE -------------------------------------------------------------- TOTAL FAIR MARKET OUTSTANDING VALUE LONG-TERM DEBT 2004 THEREAFTER 1/31/00 1/31/00 -------------- -------------- -------------- -------------- FIXED: Fixed rate debt (1) 53,424,682 1,231,194,549 1,564,620,233 1,333,084,420 Weighted average interest rate 7.40% 7.40% 7.52% UDAG (1) 334,290 57,288,853 69,858,784 39,902,100 Weighted average interest rate 1.45% 1.58% 2.57% Senior notes -- 200,000,000 200,000,000 183,000,000 Weighted average interest rate 8.50% 8.50% -------------- -------------- -------------- -------------- Total Fixed Rate Debt 53,758,972 1,488,483,402 1,834,479,017 1,555,986,520 -------------- -------------- -------------- -------------- VARIABLE: Variable rate debt (1) (2) 17,646,808 7,685,100 595,443,945 595,443,945 Weighted average interest rate 7.72% Tax Exempt (1) -- 64,679,000 152,457,501 152,457,501 Weighted average interest rate 4.10% Revolving Credit Facility -- -- 167,000,000 167,000,000 Weighted average interest rate 7.88% -------------- -------------- -------------- -------------- Total Variable Rate Debt 17,646,808 72,364,100 914,901,446 914,901,446 -------------- -------------- -------------- -------------- TOTAL LONG-TERM DEBT $ 71,405,780 $1,560,847,502 $2,749,380,463 $2,470,887,966 ============== ============== ============== ============== (1) Represents nonrecourse debt. (2) As of January 31, 2000, $198,792,000 of variable-rate debt has been hedged via LIBOR-based swaps that have a remaining average life of 0.97 years.
10 12
EXPECTED MATURITY DATE -------------------------------------------------------------------- Long-Term Debt 1999 2000 2001 2002 - ---------------------------------- -------------- -------------- -------------- -------------- FIXED: Fixed rate debt (1) 161,922,344 93,540,672 82,559,907 55,709,175 Weighted average interest rate 7.60% 8.10% 8.27% 7.66% UDAG (1) 49,561 1,033,055 10,481,224 541,722 Weighted average interest rate 6.96% 0.35% 7.99% 7.73% Senior notes -- -- -- -- Weighted average interest rate -------------- -------------- -------------- -------------- Total Fixed Rate Debt 161,971,905 94,573,727 93,041,131 56,250,897 -------------- -------------- -------------- -------------- VARIABLE: Variable rate debt (1) (2) 86,303,633 121,648,500 17,302,492 89,540,811 Weighted average interest rate Tax Exempt (1) 1,175,000 55,980,001 32,156,689 -- Weighted average interest rate Revolving Credit Facility -- 105,000,000 -- -- Weighted average interest rate -------------- -------------- -------------- -------------- Total Variable Rate Debt 87,478,633 282,628,501 49,459,181 89,540,811 -------------- -------------- -------------- -------------- TOTAL LONG-TERM DEBT $ 249,450,538 $ 377,202,228 $ 142,500,312 $ 145,791,708 ============== ============== ============== ============== EXPECTED MATURITY DATE -------------------------------------------------------------------- Total Fair Market Outstanding Value Long-Term Debt 2003 Thereafter 1/31/99 1/31/99 - ---------------------------------- -------------- -------------- -------------- -------------- FIXED: Fixed rate debt (1) 85,395,730 1,096,603,124 1,575,730,952 1,590,449,430 Weighted average interest rate 8.32% 7.44% 7.59% UDAG (1) 163,085 57,489,122 69,757,769 44,871,490 Weighted average interest rate 2.78% 1.57% 2.57% Senior notes -- 200,000,000 200,000,000 201,000,000 Weighted average interest rate 8.50% 8.50% -------------- -------------- -------------- -------------- Total Fixed Rate Debt 85,558,815 1,354,092,246 1,845,488,721 1,836,320,920 -------------- -------------- -------------- -------------- VARIABLE: Variable rate debt (1) (2) 33,814,478 25,354,127 373,964,041 373,964,041 Weighted average interest rate 7.09% Tax Exempt (1) -- 65,107,999 154,419,689 154,419,689 Weighted average interest rate 3.66% Revolving Credit Facility -- -- 105,000,000 105,000,000 Weighted average interest rate 7.13% -------------- -------------- -------------- -------------- Total Variable Rate Debt 33,814,478 90,462,126 633,383,730 633,383,730 -------------- -------------- -------------- -------------- TOTAL LONG-TERM DEBT $ 119,373,293 $1,444,554,372 $2,478,872,451 $2,469,704,650 ============== ============== ============== ============== (1) Represents nonrecourse debt. (2) As of January 31, 1999, $219,003,000 of variable-rate debt has been hedged via $133,479,000 of 1-year LIBOR contracts and $85,524,000 of LIBOR-based swaps that have a combined remaining average life of 0.65 years.
11 13 Item 8. Financial Statements and Supplementary Data - --------------------------------------------------- The financial statements and supplementary data required by this item are incorporated by reference to "Report of Independent Accountants," "Consolidated Financial Statements," "Notes to Consolidated Financial Statements" and "Quarterly Consolidated Financial Data (Unaudited)" located on pages 27 through 44 of the 1999 Annual Report to Shareholders. Financial Statement Schedule II, "Valuation and Qualifying Accounts" and Schedule III, "Real Estate and Accumulated Depreciation" are included in Part IV, Item 14(d). Item 9. Changes In and Disagreements With Accountants on Accounting and - ----------------------------------------------------------------------- Financial Disclosure -------------------- None. 12 14 PART III Item 10. Directors and Executive Officers of the Registrant - ----------------------------------------------------------- (a) Identification of Directors is contained in a definitive proxy statement which the registrant anticipates will be filed by April 28, 2000 and is incorporated herein by reference. (b) Pursuant to General Instruction G of Form 10-K and Item 401(b) of Regulation S-K, Executive Officers of the Registrant are reported in Part I of this Form 10-K. (c) The disclosure of delinquent filers, if any, under Section 16(a) of the Securities Exchange Act of 1934 is contained in a definitive proxy statement which the registrant anticipates will be filed by April 28, 2000 and is incorporated herein by reference. Item 11. Executive Compensation; Item 12. Security Ownership of Certain - ----------------------------------------------------------------------- Beneficial Owners and Management; and Item 13. Certain Relationships and Related - -------------------------------------------------------------------------------- Transactions - ------------ Information required under these sections is contained in a definitive proxy statement which the registrant anticipates will be filed by April 28, 2000 and is incorporated herein by reference. 13 15 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K - ------------------------------------------------------------------------- (a) List of documents filed as part of this report. 1. The following financial statements and supplementary data included in the 1999 Annual Report to Shareholders are incorporated by reference in Part II, Item 8. Report of Independent Accountants Consolidated Balance Sheets - January 31, 2000 and 1999 Consolidated Statements of Earnings for the three years ended January 31, 2000 Consolidated Statements of Shareholders' Equity for the three years ended January 31, 2000 Consolidated Statements of Cash Flows for the three years ended January 31, 2000 Notes to Consolidated Financial Statements Quarterly Consolidated Financial Data (Unaudited) Individual financial statements of 50% or less owned persons accounted for by the equity method have been omitted because such 50% or less owned persons considered in the aggregate as a single subsidiary would not constitute a significant subsidiary. 2. Financial statement schedules required by Part II, Item 8 are included in Part IV, Item 14(d):
Page No. Schedule II - Valuation and Qualifying Accounts for the years ended January 31, 2000, 1999 and 1998 22 Schedule III - Real Estate and Accumulated Depreciation at January 31, 2000 with reconciliations for the years ended January 31, 2000, 1999 and 1998 23-24
The report of the independent accountants with respect to the above listed financial statement schedules appears on page 21. Schedules other than those listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown in the consolidated financial statements or notes thereto. Columns omitted from schedules filed have been omitted because the information is not applicable. 3. Exhibits - see (c) below. (b) Reports on Form 8-K filed during the three months ended January 31, 2000: None. (c) Exhibits. Exhibit Number Description of Document ------ ----------------------- 3.1 - Amended Articles of Incorporation adopted as of October 11, 1983, incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q for the quarter ended October 31, 1983 (File No. 1-4372). 3.2 - Code of Regulations as amended June 14, 1994, incorporated by reference to Exhibit 3.2 to the Company's Form 10-K for the fiscal year ended January 31, 1997 (File No.1-4372). 14 16 Exhibit Number Description of Document ------ ----------------------- 3.3 - Certificate of Amendment by Shareholders to the Articles of Incorporation of Forest City Enterprises, Inc. dated June 24, 1997, incorporated by reference to Exhibit 4.14 to the Company's Registration Statement on Form S-3 (Registration No. 333-41437). 3.4 - Certificate of Amendment by Shareholders to the Articles of Incorporation of Forest City Enterprises, Inc. dated June 16, 1998, incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-8 (Registration No. 333-61925). 4.1 - Form of Senior Subordinated Indenture between the Company and National City Bank, as Trustee thereunder, incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-3 (Registration No. 333-22695). 4.2 - Form of Junior Subordinated Indenture between the Company and National City Bank, as Trustee thereunder, incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Registration No. 333-22695). 4.3 - Form of Senior Subordinated Indenture between the Company and The Bank of New York, as Trustee thereunder, incorporated by reference to Exhibit 4.22 to the Company's Registration Statement on Form S-3 (Registration No. 333-41437). 10.1 - Credit Agreement, dated as of December 10, 1997, by and among Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 10.38 to the Company's Form 10-Q for the quarter ended October 31, 1997 (File No. 1-4372) 10.2 - Guaranty of Payment of Debt, dated as of December 10, 1997, by and among Forest City Enterprises, Inc., the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 10.39 the Company's Form 10-Q for the quarter ended October 31, 1997 (File No. 1-4372) 10.3 - First Amendment to Credit Agreement, dated as of January 20, 1998, by and among Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 4.19 to the Company's Registration Statement on Form S-3 (File No. 333-41437). 10.4 - First Amendment to Guaranty of Payment of Debt, dated as of the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 4.20 to the Company's Registration Statement on Form S-3 (File No. 333-41437). 10.5 - Letter Agreement, dated as of February 25, 1998, by and among Forest City Enterprises, Inc., Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 4.21 to the Company's Registration Statement on Form S-3 (File No. 333-41437). 15 17 Exhibit Number Description of Document ------ ----------------------- 10.6 - Second Amendment to Credit Agreement, dated as of March 6, 1998, by and among Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, dated March 6, 1998 (File No. 1-4372). 10.7 - Second Amendment to Guaranty of Payment of Debt, dated as of March 6, 1998, by and among Forest City Enterprises, Inc., the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 10.2 to the Company's Form 8-K, dated March 6, 1998 (File No. 1-4372). 10.8 - Stock Purchase Agreement, dated May 7, 1997, between Forest City Enterprises, Inc. and Richard Miller, Aaron Miller and Gabrielle Miller, incorporated by reference to Exhibit 10.34 to the Company's Form 10-Q for the quarter ended April 30, 1997 (File No. 1-4372). 10.9 - Letter Agreement, dated August 14, 1997, adjusting the interest rate in the Stock Purchase Agreement, dated May 7, 1997, between Forest City Enterprises, Inc. and Richard Miller, Aaron Miller and Gabrielle Miller, incorporated by reference to Exhibit 10.35 to the Company's Form 10-Q for the quarter ended July 31, 1997 (File No. 1-4372). 10.10 - Supplemental Unfunded Deferred Compensation Plan for Executives, incorporated by reference to Exhibit 10.9 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.11 - Deferred Compensation Agreement between Forest City Enterprises, Inc. and Thomas G. Smith, dated December 27, 1995, incorporated by reference to Exhibit 10.33 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.12 - 1994 Stock Option Plan, including forms of Incentive Stock Option Agreement and Nonqualified Stock Option Agreement, incorporated by reference to Exhibit 10.10 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.13 - Employment Agreement entered into on April 6, 1998, effective as of February 1, 1997, by the Company and Charles A. Ratner, incorporated by reference to Exhibit 10.16 to the Form 10-K for the year ended January 31, 1998 (File No.1-4372). 10.14 - First Amendment to Employment Agreement (dated April 6, 1998) entered into as of April 24, 1998 by the Company and Charles A. Ratner, incorporated by reference to Exhibit 10.17 to the Company's Form 10-K for the year ended January 31, 1998 (File No. 1-4372). 10.15 - Employment Agreement entered into on April 6, 1998, effective as of February 1, 1997, by the Company and James A. Ratner, incorporated by reference to Exhibit 10.19 to the Company's Form 10-K for the year ended January 31, 1998 (File No. 1-4372). 10.16 - Employment Agreement entered into on April 6, 1998, effective as of February 1, 1997, by the Company and Ronald A. Ratner, incorporated by reference to exhibit 10.20 to the Company's Form 10-K for the year ended January 31, 1998 (File No. 1-4372). 16 18 Exhibit Number Description of Document ------ ----------------------- 10.17 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Deborah Ratner Salzberg and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner, dated June 26, 1996, incorporated by reference to Exhibit 10.19 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.18 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Brian J. Ratner and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner, dated June 26, 1996, incorporated by reference to Exhibit 10.20 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.19 - Letter Supplement to Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Brian J. Ratner and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner, effective June 26, 1996, incorporated by reference to Exhibit 10.21 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.20 - Letter Supplement to Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Deborah Ratner Salzberg and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner, effective June 26, 1996, incorporated by reference to Exhibit 10.22 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.21 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1992 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the lives of Charles Ratner and Ilana Horowitz (Ratner), dated November 2, 1996, incorporated by reference to Exhibit 10.23 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.22 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.24 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.23 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.25 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.24 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.26 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.25 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.27 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 17 19 Exhibit Number Description of Document ------ ----------------------- 10.26 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.28 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.27 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.29 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.28 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.30 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.29 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.31 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.30 - Letter Supplement to Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between James Ratner and Albert Ratner, Trustees under the Charles Ratner 1992 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the lives of Charles Ratner and Ilana Ratner, effective November 2, 1996, incorporated by reference to Exhibit 10.32 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.31 - First Amendment to the 1994 Stock Option Plan dated as of June 9, 1998, incorporated by reference to Exhibit 4.7 to the Company's Registration Statement on Form S-8 (Registration No. 333-61925). 10.32 - First Amendment to the forms of Incentive Stock Option Agreement and Nonqualified Stock Option Agreement, incorporated by reference to Exhibit 4.8 to the Company's Registration Statement on Form S-8 (Registration No.333-61925). 10.33 - Amended and Restated form of Stock Option Agreement, effective as of July 16, 1998, incorporated by reference to Exhibit 10.38 to the Company's Form 10-Q for the quarter ended October 31, 1998 (File No. 1-4372). 10.34 - Third Amendment to Credit Agreement, dated as of January 29, 1999, by and among Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent incorporation by reference to Exhibit 20.1 to the Company's Form 8-K, dated January 29, 1999 (File No. 1-4372). 18 20 Exhibit Number Description of Document ------ ----------------------- 10.35 - Third Amendment to Guaranty of Payment of Debt, dated as of January 29, 1999, by and among Forest City Enterprises, Inc., the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 20.2 to the Company's Form 8-K, dated January 29, 1999 (File No. 1-4372). 10.36 - Subordination Agreement, dated as of January 29, 1999, by and among Forest City Enterprises, Inc., St. Paul Fire and Marine Insurance Company, St. Paul Mercury Insurance Company, St. Paul Guardian Insurance Company, Seaboard Surety Company, Economy Fire & Casualty Company, Asset Guaranty Insurance Company, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 20.3 to the Company's Form 8-K, dated January 29, 1999 (File No. 1-4372). 10.37 - Dividend Reinvestment and Stock Purchase Plan, incorporated by reference to Exhibit 10.42 to the Company's Form 10-K for the year ended January 31, 1999 (File No. 1-4372). 10.38 - Deferred Compensation Plan for Executives, effective as of January 1, 1999, incorporated by reference to Exhibit 10.43 to the Company's Form 10-K for the year ended January 31, 1999 (File No. 1-4372). 10.39 - Deferred Compensation Plan for Nonemployee Directors, effective as of January 1, 1999, incorporated by reference to Exhibit 10.44 to the Company's Form 10-K for the year ended January 31, 1999 (File No. 1-4372). 10.40 - Amended and Restated Credit Agreement, dated as of June 25, 1999, by and among Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 20.1 to the Company's Form 8-K, dated June 25, 1999 (File No. 1-4372). 10.41 - Amended and Restated Guaranty of Payment of Debt, dated as of June 25, 1999, by and among Forest City Enterprises, Inc., the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 20.2 to the Company's Form 8-K, dated June 25, 1999 (File No. 1-4372). 10.42 - Employment Agreement entered into on May 31, 1999, effective January 1, 1999, by the Company and Albert B. Ratner, incorporated by reference to Exhibit 10.47 to the Company's Form 10-Q for the quarter ended July 31,1999. (File No. 1-4372). 10.43 - Employment Agreement entered into on May 31, 1999, effective January 1, 1999, by the Company and Samuel H. Miller, incorporated by reference to Exhibit 10.48 to the Company's Form 10-Q for the quarter ended July 31, 1999. (File No. 1-4372). 10.44 - Agreement (re death benefits) entered into on May 31, 1999, by the Company and Thomas G. Smith, incorporated by reference to Exhibit 10.49 to the Company's Form 10-Q for the quarter ended October 31, 1999 (File No. 1-4372). *10.45 - First Amendment to Employment Agreement effective as of February 28, 2000 between Forest City Enterprises, Inc. and Albert B. Ratner. 19 21 Exhibit Number Description of Document ------ ----------------------- *10.46 - First Amendment to Employment Agreement entered into February 28, 2000 by and between Forest City Enterprises, Inc. and Ronald A.Ratner. *10.47 - First Amendment to Employment Agreement entered into February 28, 2000 by and between Forest City Enterprises, Inc. and James A.Ratner. *10.48 - Second Amendment to Employment Agreement entered into February 28, 2000 by and between Forest City Enterprises, Inc. and Charles A.Ratner. *13 - 1999 Annual Report to Shareholders. *21 - Subsidiaries of the Registrant. *23 - Consent of PricewaterhouseCoopers LLP regarding Forms S-3 (Registration No. 333-22695 and 333-41437) and Forms S-8 (Registration No. 33-65054, 33-65058 and 333-61925). *24 - Powers of attorney. *27 - Financial Data Schedule. - ---------- * - Filed herewith. 20 22 Report of Independent Accountants on Financial Statement Schedules To the Shareholders and the Board of Directors Of Forest City Enterprises, Inc. Our audits of the consolidated financial statements referred to in our report dated March 11, 2000 appearing on page 27 of the 1999 Annual Report to Shareholders of Forest City Enterprises, Inc. and Subsidiaries (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedules listed in Item 14(a)(2) of this Form 10-K. In our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PricewaterhouseCoopers LLP Cleveland, Ohio March 11, 2000 21 23 FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions Balance at Charged to Balance at Beginning Costs and End of Description of Period Expenses Deductions Period - ----------- --------- -------- ---------- ------ (in thousands) Allowance for doubtful accounts Year Ended January 31, 2000 $ 7,488 $ 2,958 $ 1,913(A) $ 8,533 ------- ------- ------- ------- Year Ended January 31, 1999 $ 8,169 $ 4,017 $ 4,698(A) $ 7,488 ------- ------- ------- ------- Year Ended January 31, 1998 $ 4,994 $ 4,794 $ 1,619(A) $ 8,169 ------- ------- ------- ------- (A) Uncollectible accounts written off. Reserve for Project write-off's Year Ended January 31, 2000 $11,842 $ 8,977(B) $13,579(C) $ 7,240 ------- ---------- ------- ------- Year Ended January 31, 1999 $ 9,551 $ 2,291(B) $ 0 $11,842 ------- ---------- ------- ------- Year Ended January 31, 1998 $ 9,491 $ 60(B) $ 0 $ 9,551 ------- ---------- ------- -------
(B) Additions charged to costs and expenses were recorded net of abandoned development projects written off of $7,477, $7,305 and $6,774 for the years ended January 31, 2000, 1999 and 1998, respectively. (C) Included in this amount is $6,102 of allowances related to property sold and Land Group investments. 22 24 FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Gross amount at which carried Initial cost Cost capitalized at close of to Company subsequent January 31, 2000 Amount of --------------------- to acquisition --------------------------------- Encumbrance Buildings ------------------ Buildings At January 31, and Carrying and Description of Property 2000 Land Improvements Improvements costs Land Improvements Total - ----------------------- ------------- ------ ------------ ------------ ----- -------- ------------ ---------- (A) (A) (A) (A) (B) (B) (A) (B) (in thousands) Apartments: Miscellaneous investments $ 525,759 $ 59,341 $ 477,797 $ 65,869 $ 41,618 $ 69,985 $ 574,640 $ 644,625 Shopping Centers: Miscellaneous investment 877,317 77,947 781,850 195,576 57,792 100,845 1,012,320 1,113,165 Office Buildings: Miscellaneous investments 834,692 13,598 866,861 146,779 85,285 22,664 1,089,859 1,112,523 Leasehold improvements and other equipment: Miscellaneous investments - - 24,577 - - - 24,577 24,577 Under Construction: Miscellaneous investments 118,287 61,297 417,469 - - 61,297 417,469 478,766 Undeveloped Land: Miscellaneous investments 26,325 52,852 - - - 52,852 - 52,852 ---------- -------- ---------- -------- -------- -------- ---------- ----------- Total $2,382,380 $265,035 $2,568,554 $408,224 $184,695 $307,643 $3,118,865 $ 3,426,508 ========== ======== ========== ======== ======== ======== ========== =========== Range of lives (in years) on which depreciation in Accumulated latest income depreciation statement is computed at January 31, Date of Date --------------------- Description of Property 2000 construction acquired Bldg Improvements ------------ ------------ -------- ---- ------------- (C) Apartments: Miscellaneous investments $ 137,789 Various - Various Various Shopping Centers: Miscellaneous investment 172,153 Various - Various Various Office Buildings: Miscellaneous investments 222,665 Various - Various Various Leasehold improvements and other equipment: Miscellaneous investments 14,872 - Various Various Various Under Construction: Miscellaneous investments - Undeveloped Land: Miscellaneous investments - --------- Total $ 547,479 =========
(A) The aggregate cost at January 31, 2000 for federal income tax purposes was $3,202,022. For (B) and (C) refer to the following page: (Continued) 23 25 FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
For the Years Ended January 31, 2000 1999 1998 ----------- ----------- ----------- (in thousands) (B) Reconciliations of total real estate carrying value are as follows: Balance at beginning of period $ 3,087,498 $ 2,704,560 $ 2,520,179 Additions during period - Improvements 405,269 327,471 205,051 Other acquisitions - 156,879 90,438 ----------- ----------- ----------- 405,269 484,350 295,489 ----------- ----------- ----------- Deductions during period - Cost of real estate sold (66,259) (101,412) (111,108) ----------- ----------- ----------- Balance at end of period $ 3,426,508 $ 3,087,498 $ 2,704,560 =========== =========== =========== (C) Reconciliations of accumulated depreciation are as follows: Balance at beginning of period $ 491,293 $ 448,634 $ 399,830 Additions during period - Charged to profit or loss 70,615 61,908 56,923 Deductions during period - Retirement and sales (14,429) (19,249) (8,119) ----------- ----------- ----------- Balance at end of period $ 547,479 $ 491,293 $ 448,634 =========== =========== ===========
24 26 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. FOREST CITY ENTERPRISES, INC. ----------------------------- (Registrant) DATE: April 25, 2000 BY: /s/ Charles A. Ratner ----------------- ---------------------------------- (Charles A. Ratner, President and Chief Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- * Co-Chairman of the Board and Director April 25, 2000 - ---------------------------------------- (Albert B. Ratner) * Co-Chairman of the Board, Treasurer April 25, 2000 - ---------------------------------------- and Director (Samuel H. Miller) /s/ Charles A. Ratner President, Chief Executive Officer April 25, 2000 - ----------------------------------------- and Director (Principal Executive Officer) (Charles A. Ratner) Senior Vice President, Chief April 25, 2000 /s/ Thomas G. Smith Financial Officer and Secretary - ----------------------------------------- (Principal Financial Officer) (Thomas G. Smith) /s/ Linda M. Kane Vice President and Corporate Controller April 25, 2000 - ------------------------------------------ (Principal Accounting Officer) (Linda M. Kane) * Executive Vice President and Director April 25, 2000 - ----------------------------------------- (James A. Ratner) * Executive Vice President and Director April 25, 2000 - ---------------------------------------- (Ronald A. Ratner) * Senior Vice President and Director April 25, 2000 - ---------------------------------------- (Brian J. Ratner) * Director April 25, 2000 - ---------------------------------------- (Deborah Ratner Salzberg)
25 27
Signature Title Date --------- ----- ---- * Director April 25, 2000 - ---------------------------------------- (Michael P. Esposito, Jr.) * Director April 25, 2000 - ---------------------------------------- (Scott S. Cowen) * Director April 25, 2000 - ---------------------------------------- (Jerry V. Jarrett) * Director April 25, 2000 - ---------------------------------------- (Joan K. Shafran) * Director April 25, 2000 - ---------------------------------------- (Louis Stokes) * Director April 25, 2000 - ---------------------------------------- (Stan Ross)
The Registrant plans to furnish security holders a copy of the Annual Report and Proxy material by May 5, 2000. * The undersigned, pursuant to a Power of Attorney executed by each of the Directors and Officers identified above and filed with the Securities and Exchange Commission, by signing his name hereto, does hereby sign and execute this Form 10-K on behalf of each of the persons noted above, in the capacities indicated. By: /s/ Charles A. Ratner April 25, 2000 - ---------------------------------------------------- (Charles A. Ratner, Attorney-in-Fact) 26 28 EXHIBIT INDEX ------------- Exhibit Number Description of Document ------ ----------------------- 3.1 - Amended Articles of Incorporation adopted as of October 11, 1983, incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q for the quarter ended October 31, 1983 (File No. 1-4372). 3.2 - Code of Regulations as amended June 14, 1994, incorporated by reference to Exhibit 3.2 to the Company's Form 10-K for the fiscal year ended January 31, 1997 (File No.1-4372). 3.3 - Certificate of Amendment by Shareholders to the Articles of Incorporation of Forest City Enterprises, Inc. dated June 24, 1997, incorporated by reference to Exhibit 4.14 to the Company's Registration Statement on Form S-3 (Registration No. 333-41437). 3.4 - Certificate of Amendment by Shareholders to the Articles of Incorporation of Forest City Enterprises, Inc. dated June 16, 1998, incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-8 (Registration No. 333-61925). 4.1 - Form of Senior Subordinated Indenture between the Company and National City Bank, as Trustee thereunder, incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-3 (Registration No. 333-22695). 4.2 - Form of Junior Subordinated Indenture between the Company and National City Bank, as Trustee thereunder, incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3 (Registration No. 333-22695). 4.3 - Form of Senior Subordinated Indenture between the Company and The Bank of New York, as Trustee thereunder, incorporated by reference to Exhibit 4.22 to the Company's Registration Statement on Form S-3 (Registration No. 333-41437). 10.1 - Credit Agreement, dated as of December 10, 1997, by and among Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 10.38 to the Company's Form 10-Q for the quarter ended October 31, 1997 (File No. 1-4372) 10.2 - Guaranty of Payment of Debt, dated as of December 10, 1997, by and among Forest City Enterprises, Inc., the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 10.39 the Company's Form 10-Q for the quarter ended October 31, 1997 (File No. 1-4372) 10.3 - First Amendment to Credit Agreement, dated as of January 20, 1998, by and among Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 4.19 to the Company's Registration Statement on Form S-3 (File No. 333-41437). 29 Exhibit Number Description of Document ------ ----------------------- 10.4 - First Amendment to Guaranty of Payment of Debt, dated as of the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 4.20 to the Company's Registration Statement on Form S-3 (File No. 333-41437). 10.5 - Letter Agreement, dated as of February 25, 1998, by and among Forest City Enterprises, Inc., Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 4.21 to the Company's Registration Statement on Form S-3 (File No. 333-41437). 10.6 - Second Amendment to Credit Agreement, dated as of March 6, 1998, by and among Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 10.1 to the Company's Form 8-K, dated March 6, 1998 (File No. 1-4372). 10.7 - Second Amendment to Guaranty of Payment of Debt, dated as of March 6, 1998, by and among Forest City Enterprises, Inc., the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 10.2 to the Company's Form 8-K, dated March 6, 1998 (File No. 1-4372). 10.8 - Stock Purchase Agreement, dated May 7, 1997, between Forest City Enterprises, Inc. and Richard Miller, Aaron Miller and Gabrielle Miller, incorporated by reference to Exhibit 10.34 to the Company's Form 10-Q for the quarter ended April 30, 1997 (File No. 1-4372). 10.9 - Letter Agreement, dated August 14, 1997, adjusting the interest rate in the Stock Purchase Agreement, dated May 7, 1997, between Forest City Enterprises, Inc. and Richard Miller, Aaron Miller and Gabrielle Miller, incorporated by reference to Exhibit 10.35 to the Company's Form 10-Q for the quarter ended July 31, 1997 (File No. 1-4372). 10.10 - Supplemental Unfunded Deferred Compensation Plan for Executives, incorporated by reference to Exhibit 10.9 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.11 - Deferred Compensation Agreement between Forest City Enterprises, Inc. and Thomas G. Smith, dated December 27, 1995, incorporated by reference to Exhibit 10.33 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.12 - 1994 Stock Option Plan, including forms of Incentive Stock Option Agreement and Nonqualified Stock Option Agreement, incorporated by reference to Exhibit 10.10 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 30 Exhibit Number Description of Document ------ ----------------------- 10.13 - Employment Agreement entered into on April 6, 1998, effective as of February 1, 1997, by the Company and Charles A. Ratner, incorporated by reference to Exhibit 10.16 to the Form 10-K for the year ended January 31, 1998 (File No.1-4372). 10.14 - First Amendment to Employment Agreement (dated April 6, 1998) entered into as of April 24, 1998 by the Company and Charles A. Ratner, incorporated by reference to Exhibit 10.17 to the Company's Form 10-K for the year ended January 31, 1998 (File No. 1-4372). 10.15 - Employment Agreement entered into on April 6, 1998, effective as of February 1, 1997, by the Company and James A. Ratner, incorporated by reference to Exhibit 10.19 to the Company's Form 10-K for the year ended January 31, 1998 (File No. 1-4372). 10.16 - Employment Agreement entered into on April 6, 1998, effective as of February 1, 1997, by the Company and Ronald A. Ratner, incorporated by reference to exhibit 10.20 to the Company's Form 10-K for the year ended January 31, 1998 (File No. 1-4372). 10.17 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Deborah Ratner Salzberg and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner, dated June 26, 1996, incorporated by reference to Exhibit 10.19 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.18 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Brian J. Ratner and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner, dated June 26, 1996, incorporated by reference to Exhibit 10.20 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.19 - Letter Supplement to Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Brian J. Ratner and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner, effective June 26, 1996, incorporated by reference to Exhibit 10.21 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.20 - Letter Supplement to Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Deborah Ratner Salzberg and Forest City Enterprises, Inc., insuring the lives of Albert Ratner and Audrey Ratner, effective June 26, 1996, incorporated by reference to Exhibit 10.22 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.21 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1992 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the lives of Charles Ratner and Ilana Horowitz (Ratner), dated November 2, 1996, incorporated by reference to Exhibit 10.23 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 31 Exhibit Number Description of Document ------ ----------------------- 10.22 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.24 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.23 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.25 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.24 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.26 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.25 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.27 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.26 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Max Ratner 1988 Grandchildren's Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.28 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.27 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.29 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.28 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.30 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 32 Exhibit Number Description of Document ------ ----------------------- 10.29 - Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between Albert B. Ratner and James Ratner, Trustees under the Charles Ratner 1989 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the life of Charles Ratner, dated October 24, 1996, incorporated by reference to Exhibit 10.31 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.30 - Letter Supplement to Split Dollar Insurance Agreement and Assignment of Life Insurance Policy as Collateral between James Ratner and Albert Ratner, Trustees under the Charles Ratner 1992 Irrevocable Trust Agreement and Forest City Enterprises, Inc., insuring the lives of Charles Ratner and Ilana Ratner, effective November 2, 1996, incorporated by reference to Exhibit 10.32 to the Company's Form 10-K for the year ended January 31, 1997 (File No. 1-4372). 10.31 - First Amendment to the 1994 Stock Option Plan dated as of June 9, 1998, incorporated by reference to Exhibit 4.7 to the Company's Registration Statement on Form S-8 (Registration No. 333-61925). 10.32 - First Amendment to the forms of Incentive Stock Option Agreement and Nonqualified Stock Option Agreement, incorporated by reference to Exhibit 4.8 to the Company's Registration Statement on Form S-8 (Registration No.333-61925). 10.33 - Amended and Restated form of Stock Option Agreement, effective as of July 16, 1998, incorporated by reference to Exhibit 10.38 to the Company's Form 10-Q for the quarter ended October 31, 1998 (File No. 1-4372). 10.34 - Third Amendment to Credit Agreement, dated as of January 29, 1999, by and among Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent incorporation by reference to Exhibit 20.1 to the Company's Form 8-K, dated January 29, 1999 (File No. 1-4372). 10.35 - Third Amendment to Guaranty of Payment of Debt, dated as of January 29, 1999, by and among Forest City Enterprises, Inc., the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 20.2 to the Company's Form 8-K, dated January 29, 1999 (File No. 1-4372) 10.36 - Subordination Agreement, dated as of January 29, 1999, by and among Forest City Enterprises, Inc., St. Paul Fire and Marine Insurance Company, St. Paul Mercury Insurance Company, St. Paul Guardian Insurance Company, Seaboard Surety Company, Economy Fire & Casualty Company, Asset Guaranty Insurance Company, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 20.3 to the Company's Form 8-K, dated January 29, 1999 (File No. 1-4372). 10.37 - Dividend Reinvestment and Stock Purchase Plan, incorporated by reference to Exhibit 10.42 to the Company's Form 10-K for the year ended January 31, 1999 (File No. 1-4372). 33 Exhibit Number Description of Document ------ ----------------------- 10.38 - Deferred Compensation Plan for Executives, effective as of January 1, 1999, incorporated by reference to Exhibit 10.43 to the Company's Form 10-K for the year ended January 31, 1999 (File No. 1-4372). 10.39 - Deferred Compensation Plan for Nonemployee Directors, effective as of January 1, 1999, incorporated by reference to Exhibit 10.44 to the Company's Form 10-K for the year ended January 31, 1999 (File No. 1-4372). 10.40 - Amended and Restated Credit Agreement, dated as of June 25, 1999, by and among Forest City Rental Properties Corporation, the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 20.1 to the Company's Form 8-K, dated June 25, 1999 (File No. 1-4372). 10.41 - Amended and Restated Guaranty of Payment of Debt, dated as of June 25, 1999, by and among Forest City Enterprises, Inc., the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent, incorporated by reference to Exhibit 20.2 to the Company's Form 8-K, dated June 25, 1999 (File No. 1-4372). 10.42 - Employment Agreement entered into on May 31, 1999, effective January 1, 1999, by the Company and Albert B. Ratner, incorporated by reference to Exhibit 10.47 to the Company's Form 10-Q for the quarter ended July 31,1999. (File No. 1-4372). 10.43 - Employment Agreement entered into on May 31, 1999, effective January 1, 1999, by the Company and Samuel H. Miller, incorporated by reference to Exhibit 10.48 to the Company's Form 10-Q for the quarter ended July 31, 1999. (File No. 1-4372). 10.44 - Agreement (re death benefits) entered into on May 31, 1999, by the Company and Thomas G. Smith, incorporated by reference to Exhibit 10.49 to the Company's Form 10-Q for the quarter ended October 31, 1999 (File No. 1-4372). * 10.45 - First Amendment to Employment Agreement effective as of February 28, 2000 between Forest City Enterprises, Inc. and Albert B. Ratner. * 10.46 - First Amendment to Employment Agreement entered into February 28, 2000 by and between Forest City Enterprises, Inc. and Ronald A.Ratner. * 10.47 - First Amendment to Employment Agreement entered into February 28, 2000 by and between Forest City Enterprises, Inc. and James A.Ratner. * 10.48 - Second Amendment to Employment Agreement entered into February 28, 2000 by and between Forest City Enterprises, Inc. and Charles A.Ratner. 34 Exhibit Number Description of Document ------ ----------------------- * 13 - 1999 Annual Report to Shareholders. * 21 - Subsidiaries of the Registrant. * 23 - Consent of PricewaterhouseCoopers LLP regarding Forms S-3 (Registration No. 333-22695 and 333-41437) and Forms S-8 (Registration No. 33-65054, 33-65058 and 333-61925). * 24 - Powers of attorney. * 27 - Financial Data Schedules. ____________________ * - Filed herewith. (b) Reports on Form 8-K: None. EX-10.45 2 EXHIBIT 10.45 1 Exhibit 10.45 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------------- THIS FIRST AMENDMENT MADE AND ENTERED INTO at Cleveland, Ohio effective as of this 28th day of February, 2000, by and between FOREST CITY ENTERPRISES, INC. the "Company" and ALBERT B. RATNER the "Employee" to an Agreement between said parties dated May 31, 1999. WHEREAS, the Board of Directors of the Company have authorized the Company to purchase a "Split Dollar" Insurance Policy on the life of the Employee. NOW, THEREFORE, it is agreed that: 1. The Employment Agreement dated May 31, 1999 is amended to provide that the Company purchase a FIVE MILLION AND 00/100 DOLLAR ($5,000,000.00) "Split Dollar" Insurance Policy on the life of the Employee in accordance with the terms of a Split Dollar Insurance Agreement And Assignment Of Life Insurance Policy As Collateral dated 26th day of June, 1996 between the Company and the Employee. 2. In all other respects the Employment Agreement dated May 31, 1999 is in full force and in effect except as amended hereby. IN WITNESS WHEREOF, the parties hereto have set their hands the day and year first above written. FOREST CITY ENTERPRISES, INC. By: Thomas G. Smith, Secretary ------------------------------- ALBERT B. RATNER, Employee ------------------------------ EX-10.46 3 EXHIBIT 10.46 1 Exhibit 10.46 FIRST AMENDMENT TO AGREEMENT DATED APRIL 6, 1998 ------------------------------------------------ THIS AGREEMENT MADE AND ENTERED INTO at Cleveland, Ohio this 28th day of February, 2000, by and between FOREST CITY ENTERPRISES, INC., an Ohio corporation, of Terminal Tower, 50 Public Square, Suite 1100, Cleveland, Ohio, 44113-2267, hereinafter referred to as "Company", and RONALD A. RATNER, of 17300 Parkland Drive Shaker Heights, Ohio 44120, hereinafter referred to as "Employee". WHEREAS, the Company desires to grant to the Employee a benefit to his Estate upon his death, and WHEREAS, the Compensation Committee of this Company has recommended such benefit to be paid to his Estate, and NOW THEREFORE, it is agreed that in consideration of the Employee working for the Company, it is agreed that: In consideration of his employment, if the Employee dies while in the employ of the Company, the Company agrees to pay to the beneficiaries of the Employee as stipulated in his Will, or designated by written notice to the Company from the Employee during his lifetime, or designated by operation of law if the Employee dies intestate, an amount equal to one hundred percent (100%) of the salary paid to the Employee for the last calendar year prior to the death, for a period of five (5) years following the decease of said Employee; said sum to be payable in quarterly installments to said beneficiaries of said deceased Employee. The parties hereto have set their hands the day and year first above written. FOREST CITY ENTERPRISES, INC. By: Charles A. Ratner, President -------------------------------- And: Thomas G. Smith, Secretary -------------------------------- RONALD A. RATNER, Employee -------------------------------- EX-10.47 4 EXHIBIT 10.47 1 Exhibit 10.47 FIRST AMENDMENT TO AGREEMENT DATED APRIL 6, 1998 ------------------------------------------------ THIS AGREEMENT MADE AND ENTERED INTO at Cleveland, Ohio this 28th day of February, 2000, by and between FOREST CITY ENTERPRISES, INC., an Ohio corporation, of Terminal Tower, 50 Public Square, Suite 1100, Cleveland, Ohio, 44113-2267, hereinafter referred to as "Company", and JAMES A. RATNER of 19750 Shaker Boulevard, Shaker Heights, OH 44122, hereinafter referred to as "Employee". WHEREAS, the Company desires to grant to the Employee a benefit to his Estate upon his death, and WHEREAS, the Compensation Committee of this Company has recommended such benefit to be paid to his Estate, and NOW THEREFORE, it is agreed that in consideration of the Employee working for the Company, it is agreed that: In consideration of his employment, if the Employee dies while in the employ of the Company, the Company agrees to pay to the beneficiaries of the Employee as stipulated in his Will, or designated by written notice to the Company from the Employee during his lifetime, or designated by operation of law if the Employee dies intestate, an amount equal to one hundred percent (100%) of the salary paid to the Employee for the last calendar year prior to the death, for a period of five (5) years following the decease of said Employee; said sum to be payable in quarterly installments to said beneficiaries of said deceased Employee. The parties hereto have set their hands the day and year first above written. FOREST CITY ENTERPRISES, INC. By: Charles A. Ratner, President -------------------------------- And: Thomas G. Smith, Secretary ------------------------------- JAMES A. RATNER, Employee ------------------------- EX-10.48 5 EXHIBIT 10.48 1 Exhibit 10.48 SECOND AMENDMENT TO AGREEMENT DATED APRIL 6, 1998 ------------------------------------------------- THIS AGREEMENT MADE AND ENTERED INTO at Cleveland, Ohio this 28th day of February, 2000, by and between FOREST CITY ENTERPRISES, INC., an Ohio corporation, of Terminal Tower, 50 Public Square, Suite 1100, Cleveland, Ohio, 44113-2267, hereinafter referred to as "Company", and CHARLES A. RATNER of 16980 South Park, Cleveland, Ohio 44120, hereinafter referred to as "Employee". WHEREAS, the Company desires to grant to the Employee a benefit to his Estate upon his death, and WHEREAS, the Compensation Committee of this Company has recommended such benefit to be paid to his Estate, and NOW THEREFORE, it is agreed that in consideration of the Employee working for the Company, it is agreed that: In consideration of his employment, if the Employee dies while in the employ of the Company, the Company agrees to pay to the beneficiaries of the Employee as stipulated in his Will, or designated by written notice to the Company from the Employee during his lifetime, or designated by operation of law if the Employee dies intestate, an amount equal to one hundred percent (100%) of the salary paid to the Employee for the last calendar year prior to the death, for a period of five (5) years following the decease of said Employee; said sum to be payable in quarterly installments to said beneficiaries of said deceased Employee. The parties hereto have set their hands the day and year first above written. FOREST CITY ENTERPRISES, INC. By: Albert B. Ratner, Vice Chairman ----------------------------------- of the Board And: Thomas G. Smith, Secretary ------------------------------- CHARLES A. RATNER, Employee --------------------------- EX-13 6 EXHIBIT 13 1 Exhibit 13 SELECTED FINANCIAL DATA Forest City Enterprises, Inc. and Subsidiaries
For the Years Ended January 31, - ------------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 =============================================================================================================================== (in thousands,except per share data) OPERATING RESULTS: Revenues ...................................... $ 793,071 $ 696,649 $ 632,669 $ 610,449 $ 529,433 ============================================================================= Operating earnings, net of tax(1) ............. $ 35,600 $ 19,963 $ 24,539 $ 6,986 $ 13,490 Provision for decline in real estate and other, net of tax ................................ (3,060) - - (7,413) (6,073) Gain (loss) on disposition of properties, net of tax .................................... 7,990 18,444 (23,356) 9,598 (478) ----------------------------------------------------------------------------- Net earnings before extraordinary gain ........ 40,530 38,407 1,183 9,171 6,939 Extraordinary gain, net of tax ................ 272 16,343 19,356 2,900 1,847 ----------------------------------------------------------------------------- Net earnings .................................. $ 40,802 $ 54,750 $ 20,539 $ 12,071 $ 8,786 ============================================================================= Earnings before depreciation,amortization and deferred taxes (EBDT) (1)(6)(7) ............ $ 132,639 $ 117,854 $ 106,910 $ 90,404 $ 82,021 ============================================================================= DILUTED EARNINGS PER COMMON SHARE Net earnings before extraordinary gain ..... $ 1.34 $ 1.27 $ 0.04 $ 0.35 $ 0.26 Extraordinary gain, net of tax ............. 0.01 0.54 0.67 0.11 0.07 ----------------------------------------------------------------------------- Net earnings ............................... $ 1.35 $ 1.81 $ 0.71 $ 0.46 $ 0.33 ============================================================================= EBDT (1)(6)(7) ............................. $ 4.40 $ 3.91 $ 3.69 $ 3.43 $ 3.04 ============================================================================= Cash dividends declared Class A and Class B ... $ 0.190 $ 0.155 $ 0.125 $ 0.137 $ 0.083 ============================================================================= January 31, - ------------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 =============================================================================================================================== (in thousands) FINANCIAL POSITION: Consolidated assets ........................... $ 3,814,474 $ 3,437,110 $ 2,963,353 $ 2,760,673 $ 2,642,756 Real estate portfolio, at cost ................ $ 3,426,508 $ 3,087,498 $ 2,704,560 $ 2,520,179 $ 2,425,083 Long-term debt, primarily nonrecourse mortgages $ 2,749,380 $ 2,478,872 $ 2,132,931 $ 1,991,428 $ 1,940,059 - ------------------------------------------------------------------------------------------------------------------------------- FOREST CITY RENTAL PROPERTIES CORPORATION REAL ESTATE ACTIVITY(2) Real estate -- end of year Completed rental properties ................ $ 2,870,313 $ 2,605,048 $ 2,390,969 $ 2,227,859 $ 2,085,284 Projects under development ................. 478,766 412,072 251,416 215,960 246,240 ----------------------------------------------------------------------------- Real estate, at cost ..................... 3,349,079 3,017,120 2,642,385 2,443,819 2,331,524 Less accumulated depreciation .............. (532,607) (477,253) (436,377) (387,733) (338,216) ----------------------------------------------------------------------------- Total real estate ........................ $ 2,816,472 $ 2,539,867 $ 2,206,008 $ 2,056,086 $ 1,993,308 ============================================================================= REAL ESTATE ACTIVITY DURING THE YEAR Completed rental properties Capital additions ........................ $ 295,681 $ 127,065 $ 166,740 $ 160,690 $ 89,028 Acquisitions ............................. -- 156,879 90,438 22,264 28,587 Dispositions ............................. (30,416)(3) (69,865)(4) (94,068)(5) (40,379) (27,960) ----------------------------------------------------------------------------- 265,265 214,079 163,110 142,575 89,655 ----------------------------------------------------------------------------- Projects under development New development .......................... 324,553 243,106 154,746 98,403 58,798 Transferred to completed rental properties (257,859) (82,450) (119,290) (128,683) (43,360) ----------------------------------------------------------------------------- 66,694 160,656 35,456 (30,280) 15,438 ----------------------------------------------------------------------------- Increase in real estate, at cost ............... $ 331,959 $ 374,735 $ 198,566 $ 112,295 $ 105,093 =============================================================================
(1) Excludes the provision for decline in real estate and other and gain (loss) on disposition of properties,net of tax. (2) The table includes only the real estate activity for Forest City Rental Properties Corporation. (3) Primarily reflects the disposition of Rolling Acres Mall, a 1,014,000 square foot mall in Akron, Ohio. (4) Primarily reflects the dispositions of Summit Park Mall, Trolley Plaza and San Vicente office building. Summit Park contains 695,000 square feet located in Wheatfield, New York. Trolley Plaza is a 351-unit apartment complex in Detroit, Michigan. San Vicente contains 469,000 square feet in Brentwood, California. (5) Reflects the sale of Toscana, a residential complex containing 563 units in Irvine, California. (6) Earnings before depreciation, amortization and deferred taxes consists of net earnings before extraordinary gain, excluding the provision for decline in real estate and other and gain (loss) on disposition of properties, net of tax, before deducting the noncash charges from Forest City Rental Properties Corporation for depreciation,amortization and deferred income taxes. (7) Includes $6,991,000 or $0.24 per share, for the year ended January 31, 1998 related to the litigation settlement and sale of Toscana. 26 2 Forest City Enterprises, Inc. and Subsidiaries MANAGEMENT'S REPORT The management of Forest City Enterprises, Inc. is responsible for the accompanying consolidated financial statements. These statements have been prepared by the Company in accordance with generally accepted accounting principles and include amounts based on judgments of management. The financial information contained elsewhere in this annual report conforms with that in the consolidated financial statements. The Company maintains a system of internal accounting control which provides reasonable assurance in all material respects that the assets are safeguarded and transactions are executed in accordance with management's authorization and accurately recorded in the Company's books and records. The concept of reasonable assurance recognizes that limitations exist in any system of internal accounting control based upon the premise that the cost of such controls should not exceed the benefits derived. The Audit Committee, composed of four members of the Board of Directors who are not employees of the Company, meets regularly with representatives of management, the independent accountants and the Company's internal auditors to monitor the functioning of the accounting and control systems and to review the results of the auditing activities. The Audit Committee recommends the independent accountants to be appointed by the Board of Directors for approval by the shareholders. The Committee reviews the scope of the audit and the fee arrangements. The independent accountants conduct an objective, independent examination of the consolidated financial statements. The Audit Committee reviews results of the audit effort with the independent accountants. The Audit Committee also meets with the independent accountants and the internal auditors without management present to ensure that they have open access to the Audit Committee. REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors Forest City Enterprises, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, shareholders' equity and cash flows present fairly, in all material respects, the financial position of Forest City Enterprises, Inc. and its Subsidiaries (the Company) at January 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended January 31, 2000, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP Cleveland, Ohio March 11, 2000 27 3 CONSOLIDATED BALANCE SHEETS Forest City Enterprises, Inc. and Subsidiaries
January 31, - --------------------------------------------------------------------------------------------------------------------- 2000 1999 ===================================================================================================================== (dollars in thousands,except per share data) ASSETS Real Estate Completed rental properties ................................................. $ 2,894,890 $ 2,625,589 Projects under development .................................................. 478,766 412,072 Land held for development or sale ........................................... 52,852 49,837 ------------------------- Real Estate, at cost ..................................................... 3,426,508 3,087,498 Less accumulated depreciation ............................................... (547,479) (491,293) ------------------------- Total Real Estate ........................................................ 2,879,029 2,596,205 Cash and equivalents .......................................................... 97,195 78,629 Restricted cash ............................................................... 76,662 51,994 Notes and accounts receivable, net ............................................ 226,749 229,714 Inventories ................................................................... 57,444 47,299 Investments in and advances to real estate affiliates ......................... 318,308 299,599 Other assets .................................................................. 159,087 133,670 ------------------------- $ 3,814,474 $ 3,437,110 ========================= LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Mortgage debt, nonrecourse .................................................... $ 2,382,380 $ 2,173,872 Accounts payable and accrued expenses ......................................... 409,390 398,499 Notes payable ................................................................. 62,898 43,929 Long-term debt ................................................................ 167,000 105,000 8.5% Senior notes ............................................................. 200,000 200,000 Deferred income taxes ......................................................... 174,661 150,150 Deferred profit ............................................................... 31,639 33,552 ------------------------- Total Liabilities ........................................................ 3,427,968 3,105,002 ========================= SHAREHOLDERS' EQUITY Preferred stock -- convertible, without par value 5,000,000 shares authorized; no shares issued ............................... - - Common stock -- $.33 1/3 par value Class A, 96,000,000 shares authorized; 19,946,756 and 19,904,556 shares issued, 19,372,406 and 19,281,606 outstanding, respectively ......... 6,649 6,636 Class B, convertible, 36,000,000 shares authorized; 10,937,196 and 10,979,396 shares issued, 10,659,096 and 10,701,296 outstanding, respectively 3,646 3,661 ------------------------- 10,295 10,297 Additional paid-in capital .................................................... 113,764 114,270 Retained earnings ............................................................. 254,063 218,967 ------------------------- 378,122 343,534 Less treasury stock, at cost; 2000: 574,350 Class A and 278,100 Class B shares 1999: 622,950 Class A and 278,100 Class B shares ............................ (10,773) (11,426) Accumulated other comprehensive income ........................................ 19,157 - ------------------------- Total Shareholders' Equity .................................................. 386,506 332,108 ------------------------- $ 3,814,474 $ 3,437,110 =========================
The accompanying notes are an integral part of these consolidated financial statements. 28 4 CONSOLIDATED STATEMENTS OF EARNINGS Forest City Enterprises, Inc. and Subsidiaries
For the Years Ended January 31, - ----------------------------------------------------------------------------------------- 2000 1999 1998 ========================================================================================= (in thousands,except per share data) REVENUES ..................................... $ 793,071 $ 696,649 $ 632,669 -------------------------------------- Operating expenses ........................... 486,009 424,097 379,531 Interest expense ............................. 159,719 149,960 136,322 Provision for decline in real estate and other 5,062 - - Depreciation and amortization ................ 88,144 87,068 74,793 -------------------------------------- 738,934 661,125 590,646 -------------------------------------- Gain (loss) on disposition of properties ..... 10,712 30,557 (38,638) -------------------------------------- EARNINGS BEFORE INCOME TAXES ................. 64,849 66,081 3,385 -------------------------------------- INCOME TAX EXPENSE (BENEFIT) Current ..................................... 12,257 (86) (1,478) Deferred .................................... 12,062 27,760 3,680 -------------------------------------- 24,319 27,674 2,202 -------------------------------------- NET EARNINGS BEFORE EXTRAORDINARY GAIN ....... 40,530 38,407 1,183 Extraordinary gain, net of tax ............... 272 16,343 19,356 -------------------------------------- NET EARNINGS ................................. $ 40,802 $ 54,750 $ 20,539 ====================================== BASIC EARNINGS PER COMMON SHARE Net earnings before extraordinary gain ...... $ 1.35 $ 1.28 $ .04 Extraordinary gain, net of tax .............. .01 .55 .67 -------------------------------------- NET EARNINGS ................................. $ 1.36 $ 1.83 $ .71 ====================================== DILUTED EARNINGS PER COMMON SHARE Net earnings before extraordinary gain ...... $ 1.34 $ 1.27 $ .04 Extraordinary gain, net of tax .............. .01 .54 .67 -------------------------------------- NET EARNINGS ................................. $ 1.35 $ 1.81 $ .71 ======================================
The accompanying notes are an integral part of these consolidated financial statements. 29 5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Forest City Enterprises, Inc. and Subsidiaries Common Stock --------------------------------------- Class A Class B Additional Comprehensive --------------------------------------- Paid-In Retained Income Shares Amount Shares Amount Capital Earnings ================================================================================================================= (in thousands, except per share data) BALANCES AT JANUARY 31,1997.......... 15,863 $ 5,290 11,111 $3,705 $ 39,496 $152,077 Net earnings........................ $20,539 20,539 ======= Dividends: $.03 per share (three quarters)... (2,703) $.035 per share (one quarter)..... (1,049) Issuance of Class A common shares in public offering......... 3,910 1,302 74,774 Conversion of Class B to Class A shares............................. 40 14 (40) (14) Purchase of treasury stock ---------------------------------------------------------------- BALANCES AT JANUARY 31, 1998......... 19,813 6,606 11,071 3,691 114,270 168,864 Net earnings........................ $54,750 54,750 ======= Dividends: $.035 per share (one quarter)..... (1,049) $.04 per share (three quarters)... (3,598) Conversion of Class B to Class A shares............................. 92 30 (92) (30) Exercise of stock options........... ---------------------------------------------------------------- BALANCES AT JANUARY 31, 1999........ 19,905 6,636 10,979 3,661 114,270 218,967 Comprehensive income: Net earnings...................... $40,802 40,802 Other comprehensive income, net of tax Unrealized gain on securities... 19,157 ------- Total comprehensive income $59,959 ======= Dividends: $.04 per share (one quarter)..... (1,199) $.05 per share (three quarters).. (4,507) Conversion of Class B to Class A shares............................ 42 14 (42) (14) Exercise of stock options.......... 4 Restricted stock issued............ (605) Amortization of unearned compensation..................... 93 Rounding adjustments............... (1) (1) 2 ---------------------------------------------------------------- BALANCES AT JANUARY 31, 2000........ 19,947 $6,649 10,937 $3,646 $113,764 $254,063 ================================================================ The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Forest City Enterprises, Inc. and Subsidiaries Accumulated Treasury Stock Other ---------------- Comprehensive Shares Amount Income Total =============================================================================== (in thousands, except per share data) BALANCES AT JANUARY 31, 1997.......... 749 $ (8,590) $ - $191,978 Net earnings......................... 20,539 Dividends: $.03 per share (three quarters).... (2,703) $.035 per share (one quarter)...... (1,049) Issuance of Class A common shares in public offering 76,076 Conversion of Class B to Class A shares.............................. - Purchase of treasury stock........... 156 (2,896) (2,896) ----------------------------------------- BALANCES AT JANUARY 31, 1998.......... 905 (11,486) - 281,945 Net earnings......................... 54,750 Dividends: $.035 per share (one quarter)...... (1,049) $.04 per share (three quarters).... (3,598) Conversion of Class B to Class A shares.............................. - Exercise of stock options............ (4) 60 60 ----------------------------------------- BALANCES AT JANUARY 31, 1999 901 (11,426) - 332,108 Comprehensive income: Net earnings....................... 40,802 Other comprehensive income, net of tax Unrealized gain on securities.... 19,157 19,157 Total comprehensive income Dividends: $.04 per share (one quarter)....... (1,199) $.05 per share (three quarters).... (4,507) Conversion of Class B to Class A shares.............................. - Exercise of stock options............ (4) 48 52 Restricted stock issued.............. (45) 605 - Amortization of unearned compensation....................... 93 Rounding adjustments................. - ----------------------------------------- BALANCES AT JANUARY 31, 2000.......... 852 $(10,773) $19,157 $386,506 ========================================= The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS Forest City Enterprises, Inc. and Subsidiaries For the Years Ended January 31, - -------------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 ================================================================================================================================ (in thousands) RECONCILIATION OF NET EARNINGS TO CASH PROVIDED BY OPERATING ACTIVITIES NET EARNINGS........................................................... $ 40,802 $ 54,750 $ 20,539 Depreciation......................................................... 70,615 61,908 56,923 Amortization......................................................... 17,529 25,160 17,870 Deferred income taxes................................................ 11,978 32,427 2,071 (Gain) loss on disposition of properties............................. (10,712) (30,557) 38,638 Provision for decline in real estate and other....................... 5,062 - - Extraordinary gain................................................... (450) (27,036) (22,174) Decrease in commercial land held for sale............................ 15,226 19,627 11,364 (Increase) decrease in land held for development or sale............. (3,015) (6,571) 396 Decrease (increase) in notes and accounts receivable................. 2,867 (38,560) 10,019 (Increase) decrease in inventories................................... (10,145) 11,397 (9,927) Increase in other assets............................................. (5,397) (13,794) (27,168) (Decrease)increase in accounts payable and accrued expenses.......... (5,658) 25,353 (12,704) Decrease in deferred profit.......................................... (1,913) (985) (1,218) --------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES.......................... $126,789 $113,119 $ 84,629 ===================================================
6 CONSOLIDATED STATEMENTS OF CASH FLOWS Forest City Enterprises, Inc. and Subsidiaries
For the Years Ended January 31, - -------------------------------------------------------------------------------------------------- 2000 1999 1998 ================================================================================================== (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Rents and other revenues received ................. $ 756,917 $ 604,363 $ 587,851 Proceeds from land sales .......................... 37,108 50,035 46,619 Land development expenditures ..................... (37,632) (45,784) (32,670) Operating expenditures ............................ (469,695) (349,909) (383,172) Interest paid ..................................... (159,909) (145,586) (133,999) -------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES ....... 126,789 113,119 84,629 -------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures .............................. (384,137) (460,343) (254,195) Proceeds from disposition of properties ........... - 33,345 - Investments in and advances to affiliates ......... (23,717) (99,326) (33,737) -------------------------------------- NET CASH USED IN INVESTING ACTIVITIES ........... (407,854) (526,324) (287,932) -------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of senior notes ............ - 200,000 - Payment of senior notes issuance costs ............ - (6,297) - Increase in nonrecourse mortgage and long-term debt 491,855 704,722 385,807 Principal payments on nonrecourse mortgage debt ... (193,599) (370,970) (102,518) Payments on long-term debt ........................ - (114,000) (109,000) Increase in notes payable ......................... 92,758 50,491 48,574 Payments on notes payable ......................... (73,789) (41,381) (57,407) Change in restricted cash and book overdrafts ..... (6,226) 35,417 (6,149) Payment of deferred financing costs ............... (6,021) (16,565) (12,142) Sale of common stock, net ......................... - - 76,076 Sale (purchase) of treasury stock ................. 52 60 (2,896) Dividends paid to shareholders .................... (5,399) (4,497) (3,490) -------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES ...... 299,631 436,980 216,855 -------------------------------------- NET INCREASE IN CASH AND EQUIVALENTS ................ 18,566 23,775 13,552 CASH AND EQUIVALENTS AT BEGINNING OF YEAR ........... 78,629 54,854 41,302 -------------------------------------- CASH AND EQUIVALENTS AT END OF YEAR ................. $ 97,195 $ 78,629 $ 54,854 ====================================== SUPPLEMENTAL NON-CASH DISCLOSURE:
The schedule below represents the effect of the following non-cash transactions for the years ended January 31: 2000 - Disposition of interest in Rolling Acres Mall 1999 - Disposition of interest in Summit Park Mall and Trolley Plaza 1998 - Increase in interest in Skylight Office Tower, Antelope Valley Mall and Station Square - Disposition of interest in Toscana - Reduction of interest in MIT Phase II - Exchange of Woodridge Operating Activities Land held for development or sale ................. $ - $ - $ 3,022 Notes and accounts receivable ..................... 98 565 (5,072) Other assets ...................................... 1,112 1,138 (1,125) Accounts payable and accrued expenses ............. (155) 2,760 (3,470) Deferred taxes .................................... - - 164 ---------------------------------------- Total effect on operating activities ........... $ 1,055 $ 4,463 $ (6,481) ======================================== Investing Activities Additions to completed rental properties .......... $ - $ - $ (45,272) Disposition of completed rental properties ........ 25,693 42,312 53,547 Investments in and advances to affiliates ......... - - 4,131 ---------------------------------------- Total effect on investing activities ............ $ 25,693 $ 42,312 $ 12,406 ======================================== Financing Activities Assumption of nonrecourse debt .................... $ - $ - $ 38,375 Disposition of nonrecourse mortgage debt .......... (26,748) (46,775) (48,988) Notes payable ..................................... - - 4,688 ---------------------------------------- Total effect on financing activities ............ $ (26,748) $ (46,775) $ (5,925) ========================================
The accompanying notes are an integral part of these consolidated financial statements. 31 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Forest City Enterprises, Inc. is a major, vertically integrated national real estate company with four principal business groups. The COMMERCIAL GROUP owns, develops, acquires and operates shopping centers, office buildings and mixed-use projects including hotels. The RESIDENTIAL GROUP develops or acquires, owns and operates the Company's multi-family properties. REAL ESTATE GROUPS are the combined Commercial and Residential Groups. The LAND GROUP owns and develops raw land into master planned communities and other residential developments for resale. The LUMBER TRADING GROUP operates the Company's lumber wholesaling business. Forest City Enterprises, Inc. owns approximately $3.4 billion of properties at cost in 21 states and Washington, D.C. The Company's executive offices are in Cleveland, Ohio. Regional offices are located in New York, Los Angeles, Boston, Tucson, Washington, D.C., San Francisco and Denver. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Forest City Enterprises, Inc. and all wholly-owned subsidiaries ("Company"). The Company also includes its proportionate share of the assets, liabilities and results of operations of its real estate partnerships, joint ventures and majority-owned corporations. These entities are included as of their respective fiscal year-ends (generally December 31). All significant intercompany accounts and transactions between consolidated entities have been eliminated. Entities which the Company does not control are accounted for on the equity method. Undistributed earnings of such entities are included in retained earnings, with no significant amounts at January 31, 2000. The Company is required to make estimates and assumptions when preparing its financial statements and accompanying notes in conformity with generally accepted accounting principles. Actual results could differ from those estimates. The Company does not necessarily own or hold any direct or indirect ownership interest in the various real estate assets consolidated in its financial statements but generally holds this ownership through its direct or indirect subsidiaries, except for certain parcels of land held for development or sale. Effective February 1, 1999, the Company adopted Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities", which requires start-up costs and organizational costs to be expensed as incurred. The adoption of this accounting principle had no material effect on earnings and financial position of the Company. Certain prior years' amounts in the accompanying financial statements have been reclassified to conform to the current year's presentation. FISCAL YEAR The years 1999, 1998 and 1997 refer to the fiscal years ended January 31, 2000, 1999 and 1998, respectively. LAND OPERATIONS Land held for development or sale is stated at the lower of carrying amount or fair market value less cost to sell. RECOGNITION OF REVENUE AND PROFIT REAL ESTATE SALES - The Company follows the provisions of Statement of Financial Accounting Standards (SFAS) 66, "Accounting for Sales of Real Estate" for reporting the disposition of properties. LEASING OPERATIONS - The Company enters into leases with tenants in its rental properties. The lease terms of tenants occupying space in the shopping centers and office buildings range from 1 to 25 years, excluding leases with anchor tenants. Leases with most shopping center tenants provide for percentage rents when the tenants' sales volumes exceed stated amounts. Minimum and percentage rent revenues are recognized when due from tenants. The Company is also reimbursed for certain expenses related to operating its commercial properties. LUMBER BROKERAGE - The Company recognizes the gross margin on these sales as revenue. Sales invoiced for the years 1999, 1998 and 1997 were approximately $3,712,000,000, $2,979,000,000 and $2,940,000,000, respectively. CONSTRUCTION - Revenue and profit on long-term fixed-price contracts are reflected under the percentage-of-completion method. On reimbursable cost-plus fee contracts, revenues are recorded in the amount of the accrued reimbursable costs plus proportionate fees at the time the costs are incurred. OTHER COMPREHENSIVE INCOME - Net unrealized gain on securities, net of tax, is included in Other Comprehensive Income and represents the difference between the market value of investments in unaffiliated companies that are available for sale at the balance sheet date and the Company's cost. RECOGNITION OF COSTS AND EXPENSES Operating expenses primarily represent the recognition of operating costs, administrative expenses and taxes other than income taxes. For financial reporting purposes, interest and real estate taxes during development and construction are capitalized as a part of the project cost. Depreciation is generally computed on a straight-line method over the estimated useful asset lives. The estimated useful lives of buildings range from 20 to 50 years. Major improvements and tenant improvements are capitalized and expensed through depreciation charges. Repairs, maintenance and minor improvements are expensed as incurred. Costs and accumulated depreciation applicable to assets retired or sold are eliminated from the respective accounts and any resulting gains or losses are reported in the Consolidated Statements of Earnings. The Company periodically reviews its properties to determine if its carrying costs will be recovered from future operating cash flows. In cases where the Company does not expect to recover its carrying costs, an impairment loss is recorded as a provision for decline in real estate. 32 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CASH AND EQUIVALENTS The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates market value. The Company maintains operating cash and reserve for replacement balances in financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000. RESTRICTED CASH Restricted cash represents deposits with mortgage lenders for taxes and insurance, security deposits, capital replacement, improvement and operating reserves, bond funds and development and construction escrows. INVENTORIES The lumber brokerage inventories are stated at the lower of cost or market. Inventory cost is determined by specific identification and average cost methods. OTHER ASSETS Included in other assets are costs incurred in connection with obtaining financing which are deferred and amortized over the life of the related debt. Costs incurred in connection with leasing space to tenants are also included in other assets and are deferred and amortized using the straight-line method over the lives of the related leases. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company estimates the fair value of its debt instruments by discounting future cash payments at interest rates that the Company believes approximates the current market. The carrying amount of the Company's total fixed-rate debt at January 31, 2000 was $1,834,000,000 compared to an estimated fair value of $1,556,000,000. The Company estimates the fair value of its hedging instruments based on interest rate market pricing models. At January 31, 2000, the carrying amount of the Company's hedging instruments was $9,169,000 compared to an estimated fair value of $16,489,000. INTEREST RATE PROTECTION AGREEMENTS The Company maintains a practice of hedging its variable interest rate risk by purchasing LIBOR-based interest rate caps and Treasury options. The LIBOR caps have typical durations ranging from one to three years while the Treasury options are for periods of five to 10 years. The Company also enters into interest rate swap agreements for hedging purposes for periods of one to five years. The principal risk to the Company through its interest rate hedging strategy is the potential inability of the financial institution from which the interest rate protection was purchased to cover all of its obligations. To mitigate this exposure, the Company purchases its interest rate protection from either the institution that holds the debt or from institutions with a minimum A credit rating. The cost of interest rate protection is capitalized in other assets in the Consolidated Balance Sheets and amortized over the benefit period as interest expense in the Consolidated Statements of Earnings. INCOME TAXES Deferred tax assets and liabilities reflect the tax consequences on future years of differences between the tax and financial statement basis of assets and liabilities at year-end. The Company has recognized the benefits of its tax loss carryforward and general business tax credits which it expects to use as a reduction of the deferred tax expense. STOCK-BASED COMPENSATION The Company follows Accounting Principles Board Opinion (APBO) 25, "Accounting for Stock Issued to Employees", and related Interpretations to account for stock-based compensation. As such, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of grant over the amount the employee is required to pay for the stock. CAPITAL STOCK Class B common stock is convertible into Class A common stock on a share-for-share basis. The 5,000,000 authorized shares of preferred stock without par value, none of which have been issued, are convertible into Class A common stock. Class A common shareholders elect 25% of the members of the Board of Directors and Class B common shareholders elect the remaining directors annually. The Company currently has 13 directors. EARNINGS PER SHARE Basic earnings per share are computed by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilutive effect of the Company's stock option plan by adjusting the denominator using the treasury stock method. The sum of the four quarters' earnings per share may not equal the annual earnings per share due to the weighting of stock and option activity occurring during the year. All earnings per share disclosures appearing in these financial statements were computed assuming dilution unless otherwise indicated. NEW ACCOUNTING STANDARDS In June 1999, the Financial Accounting Standards Board (FASB) issued SFAS 137, which defers the effective date of SFAS 133, "Accounting for Derivative Instruments and Hedging Activities", to all fiscal quarters of fiscal years beginning after June 15, 2000. Therefore, the Company plans to implement SFAS 133 for the fiscal quarters in its fiscal year ending January 31, 2002. The adoption of SFAS 133 is not expected to have a material effect on the financial position or results of operations of the Company. 33 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES B. REAL ESTATE AND RELATED NONRECOURSE MORTGAGE DEBT The components of real estate cost and related nonrecourse mortgage debt are presented below.
January 31, 2000 - ---------------------------------------------------------------------------------------------------------- Less Accumulated Nonrecourse Total Cost Depreciation Net Cost Mortgage Debt ========================================================================================================== (in thousands) Completed rental properties Residential ............................. $ 644,625 $ 137,789 $ 506,836 $ 525,759 Commercial Shopping centers ...................... 1,113,165 172,153 941,012 877,317 Office and other buildings ............ 1,112,523 222,665 889,858 834,692 Corporate and other equipment ........... 24,577 14,872 9,705 - ------------------------------------------------------- 2,894,890 547,479 2,347,411 2,237,768 ------------------------------------------------------- Projects under development Residential ............................. 103,767 - 103,767 8,499 Commercial Shopping centers ...................... 184,593 - 184,593 40,407 Office and other buildings ............ 190,406 - 190,406 69,381 ------------------------------------------------------- 478,766 - 478,766 118,287 ------------------------------------------------------- Land held for development or sale .......... 52,852 - 52,852 26,325 ------------------------------------------------------- $3,426,508 $ 547,479 $2,879,029 $2,382,380 =======================================================
C. NOTES AND ACCOUNTS RECEIVABLE, NET January 31, - -------------------------------------------------------------------------------- 2000 1999 ================================================================================ (in thousands) Lumber brokerage ................. $ 144,364 $ 166,400 Real estate sales ................ 24,051 18,688 Syndication activities ........... 17,362 13,604 Receivable from tenants .......... 16,300 15,802 Other receivables ................ 33,205 22,708 --------------------------------- 235,282 237,202 Allowance for doubtful accounts ...................... (8,533) (7,488) --------------------------------- $ 226,749 $ 229,714 ================================= Notes receivable at January 31, 2000 of $47,054,000, included in the table above, are collectible primarily over five years, with $9,640,000 being due within one year. The weighted average interest rate on notes receivable at January 31, 2000 and 1999 was 8.55% and 8.08%, respectively. In July 1999, the Lumber Trading Group entered into a three-year agreement under which it is selling an undivided interest in a pool of accounts receivable up to a maximum of $102,000,000. At January 31, 2000, the Company had received $55,000,000 in net proceeds under this agreement. The program is nonrecourse to the Company and the Company bears no risk as to the collectability of the accounts receivable. D. INVESTMENTS IN AND ADVANCES TO REAL ESTATE AFFILIATES Included in Investments in and Advances to Real Estate Affiliates is $85,000,000 for Residential Group's interest in 21 limited partnerships where the Company acts as managing general partner. The Company records its share of net income (loss) based on the partnership agreements. Following is summarized financial information for these apartment projects.
(in thousands) January 31, 2000 - -------------------------------------------------------------------------------- Balance Sheet: Completed rental properties ................................. $ 544,000 Projects under development .................................. 61,000 Accumulated depreciation .................................... (77,000) Other assets ................................................ 22,000 --------- Total Assets .............................................. $ 550,000 ========= Mortgage debt, nonrecourse .................................. $ 440,000 Advances from general partner ............................... 36,000 Other liabilities ........................................... 44,000 Partners' equity ............................................ 30,000 --------- Total Liabilities and Partners' Equity $ 550,000 ========= YEAR ENDED JANUARY 31, 2000 - -------------------------------------------------------------------------------- Operations: Revenues .................................................... $ 66,000 Operating expenses .......................................... (35,000) Interest expense ............................................ (22,000) Depreciation and amortization ............................... (14,000) --------- Net Loss .................................................. $ (5,000) ========= Company's share (Net Income) .............................. $ 2,600 =========
Following is a reconciliation of interest in the underlying net assets to the Company's carrying value. Partners' equity, as above ..................................... $ 30,000 Deficit equity of other partners ............................... 19,000 --------- Company's investment in limited partnerships ................... 49,000 Advances to limited partnerships, as above ..................... 36,000 --------- Residential Group's share (included in Investments in and Advances to Real Estate Affiliates) .......................... $ 85,000 =========
34 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES E. OTHER ASSETS January 31, - -------------------------------------------------------------------------------- 2000 1999 ================================================================================ (in thousands) Unamortized costs, net ................. $ 85,853 $ 96,571 Prepaid expenses and other ............. 73,234 37,099 ---------------------------- $159,087 $133,670 ============================ F. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Included in accounts payable and accrued expenses at January 31, 2000 and 1999 are book overdrafts of approximately $85,506,000 and $66,060,000, respectively. The overdrafts are a result of the Company's cash management program and represent checks issued but not yet presented to a bank for collection. G. NOTES PAYABLE The components of notes payable, which represent indebtedness whose original maturity dates are within one year of issuance, are as follows. January 31, - -------------------------------------------------------------------------------- 2000 1999 ================================================================================ (in thousands) Payable to Banks ......................... $21,486 $17,275 Other ......................... 41,412 26,654 --------------------------- $62,898 $43,929 =========================== Notes payable to banks reflects borrowings on the Lumber Trading Group's $87,000,000 bank lines of credit. The bank lines of credit allow for up to $5,000,000 in outstanding letters of credit ($1,404,000 of which were outstanding at January 31, 2000) which reduce the credit available to the Lumber Trading Group. Borrowings under these bank lines of credit, which are nonrecourse to the Company, are collateralized by all the assets of the Lumber Trading Group, bear interest at the lender's prime rate or 2.25% over LIBOR, and have a fee of 1/5% per annum on the unused portion of the available commitment. These bank lines of credit are subject to review and extension annually. Other notes payable relate to improvements and construction funded by tenants, property and liability insurance premium financing and advances from affiliates and partnerships. The weighted average interest rate on notes payable was 8.15% and 8.14% at January 31, 2000 and 1999, respectively. Interest incurred on notes payable was $6,199,000 in 1999, $7,331,000 in 1998 and $6,068,000 in 1997. Interest paid on notes payable was $5,901,000 in 1999, $5,664,000 in 1998 and $6,407,000 in 1997. H. MORTGAGE DEBT, NONRECOURSE Mortgage debt, which is collateralized by completed rental properties, projects under development and certain undeveloped land, is as follows. January 31, - -------------------------------------------------------------------------------- 2000 1999 ================================================================================ (dollars in thousands) Rate(1) Rate(1) ------- ------- Fixed .................. $1,564,620 7.52% $1,575,731 7.59% Variable - Swapped(2) ........... 198,792 7.44% 219,003 7.23% Capped(3) ............ 396,652 7.86% 154,960 6.90% Tax-Exempt ........... 152,457 4.10% 154,420 3.66% UDAG and other subsidized loans ................ 69,859 2.57% 69,758 2.57% ---------- ---------- $2,382,380 7.21% $2,173,872 7.07% ========== ========== (1) The weighted average interest rates shown above include both the base index and the lender margin. (2) The $198,792 of LIBOR-based swapped debt has a combined remaining average life of 0.97 years as of January 31, 2000. (3) The $396,652 of capped debt is protected by $584,330 in LIBOR caps as described below. These caps protect the current debt outstanding as well as the anticipated increase in debt outstanding for projects currently under development or anticipated to be under development during fiscal year 2000. Debt related to projects under development at January 31, 2000 totals $118,287,000 out of a total commitment from lenders of $231,951,000. Of this outstanding debt, $112,120,000 is variable-rate debt and $6,167,000 is fixed-rate debt. The Company generally borrows funds for development and construction projects with maturities of two to five years utilizing variable-rate financing. Upon opening and achieving stabilized operations, the Company generally pursues long-term fixed-rate financing. The Company has purchased London Interbank Offered Rate ("LIBOR") interest rate caps as follows. Principal Strike Rate Period Outstanding ================================================================================ (in thousands) 6.50% 02/01/00 - 01/31/01 $ 584,330 6.50% 02/01/01 - 07/31/01 315,358 7.00% 08/01/01 - 01/31/02 297,158 7.00% 02/01/01 - 01/31/02 257,351 6.75% 09/01/00 - 08/31/03 79,929 8.00%* 06/01/01 - 06/01/04 8,960 8.00%* 11/01/01 - 10/31/04 115,460 8.00%* 08/01/02 - 07/31/05 21,700 8.00%* 02/01/03 - 01/31/06 133,900 *Three-year 8.00% LIBOR caps were purchased in February and March 2000. - -------------------------------------------------------------------------------- 35 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES H. MORTGAGE DEBT, NONRECOURSE (CONTINUED) The interest rate caps and swaps discussed above were purchased to mitigate short-term variable interest rate risk. The Company intends to convert a significant portion of its committed variable-rate debt to fixed-rate debt. In order to protect against significant increases in interest rates, the Company has purchased Treasury Options for the development portfolio as follows. Strike Rate Term Exercise Date Notional ================================================================================ (years) (in thousands) 6.76% 10 11/01/00 $45,700 7.00% 10 02/01/01 33,180 6.00% 10 04/10/01 41,252 7.00%* 10 05/01/01 38,920 6.00% 10 08/10/01 38,677 7.00%* 10 11/01/01 9,030 7.00%* 10 08/01/02 98,760 7.00% 5 08/01/01 43,010 * Ten-year 7.00% Treasury Options were purchased in February 2000. - -------------------------------------------------------------------------------- The Urban Development Action Grants (UDAG) and other subsidized loans bear interest at rates, which are below prevailing commercial lending rates and are granted to the Company by government agencies as an inducement to develop real estate in targeted areas. A right to participate by the local government in the future cash flows of the project is generally a condition of these loans. Participation in annual cash flows generated from operations is recognized as an expense in the period earned. Participation in appreciation resulting from a sale or refinancing is capitalized as additional basis and amortized. Mortgage debt maturities for the next five years ending January 31 are as follows: 2001, $472,160,000; 2002, $157,991,000; 2003, $164,309,000; 2004, $155,666,000; and 2005, $71,406,000. The Company is engaged in discussions with its current lenders and is actively pursuing new lenders to extend and refinance maturing mortgage debt. As of January 31, 2000, $127,846,000 of debt with upcoming maturities has refinancing commitments in place and $326,356,000 has extension options available. Interest incurred on mortgage debt was $152,784,000 in 1999, $144,890,000 in 1998 and $138,546,000 in 1997. Interest paid on mortgage debt was $154,185,000 in 1999, $148,959,000 in 1998 and $136,799,000 in 1997. I. LONG-TERM DEBT At January 31, 2000 and 1999, the Company had $167,000,000 and $105,000,000, respectively, outstanding under its $225,000,000 revolving credit facility. The revolving credit facility matures December 10, 2001, unless extended, and allows for up to a combined amount of $30,000,000 in outstanding letters of credit and surety bonds ($9,245,000 and $19,882,000, respectively, were outstanding at January 31, 2000). The outstanding letters of credit reduce the credit available to the Company. Annually, within 60 days after January 31, the revolving credit facility may be extended by one year by unanimous consent of the nine participating banks. At its maturity date, the outstanding revolving credit loans, if any, may be converted by the Company into a four-year term loan. The revolving credit available is reduced quarterly by $2,500,000, which began April 1, 1998. At January 31, 2000, the revolving credit line was $205,000,000. The revolving credit agreement provides, among other things, for 1) interest rates of 2% over LIBOR or 1/4% over the prime rate; 2) maintenance of debt service coverage ratios and specified levels of net worth and cash flow (as defined); and 3) restriction on dividend payments. At January 31, 2000, retained earnings of $8,494,000 were available for payment of dividends. The Company has purchased a 6.50% LIBOR interest rate cap for 2000 and an average 6.75% LIBOR interest rate cap for 2001 at notional amounts of $100,620,000 and $83,280,000, respectively. Interest incurred on long-term debt was $10,897,000 in 1999, $6,317,000 in 1998 and $7,811,000 in 1997. Interest paid on long-term debt was $9,984,000 in 1999, $6,010,000 in 1998 and $6,896,000 in 1997. J. SENIOR NOTES On March 16, 1998, the Company issued $200,000,000 of 8.50% senior notes, due March 15, 2008, in a public offering. Net proceeds in the amount of $195,500,000 were contributed to the capital of Forest City Rental Properties Corporation, a wholly-owned subsidiary, and were then used to repay $114,000,000 of its term loan and revolving credit loans. The remaining proceeds were used to finance acquisitions and development of real estate projects. Accrued interest is payable semiannually on March 15 and September 15. The senior notes are unsecured senior obligations of the Company, however, they are subordinated to all existing and future indebtedness and other liabilities of the Company's subsidiaries, including the revolving credit facility. The indenture contains covenants providing, among other things, limitations on incurring additional debt and payment of dividends. The dividend limitation is not as restrictive as that imposed by the Company's revolving credit facility (Note I). The senior notes may be redeemed by the Company, in whole or in part, at any time on or after March 15, 2003 at redemption prices beginning at 104.25% for the year beginning March 15, 2003 and systematically reduced to 100% in the years thereafter. The Company may also redeem up to 33% of the original principal amount prior to March 15, 2001 from proceeds of one or more common stock public offerings at a redemption price of 108.50%. Interest incurred on the senior notes was $17,000,000 in 1999, $14,922,000 in 1998 and $1,781,000 in 1997. Interest paid was $17,000,000 in 1999, $8,453,000 in 1998 and $1,781,000 in 1997. Interest incurred and paid in 1997 was for the purchase of a treasury option to fix the interest rate on the senior notes. The option was not exercised and its cost was expensed in 1997. 36 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES J. SENIOR NOTES (CONTINUED) CONSOLIDATED INTEREST Total interest incurred on all forms of indebtedness (included in Notes G,H, I and J) was $186,880,000 in 1999, $173,460,000 in 1998 and $154,206,000 in 1997 of which $27,161,000, $23,500,000 and $17,884,000 was capitalized, respectively. Interest paid on all forms of indebtedness was $187,070,000 in 1999, $169,086,000 in 1998 and $151,883,000 in 1997. K. INCOME TAXES The income tax provision (benefit) consists of the following components. For the Years Ended January 31, - -------------------------------------------------------------------------------- 2000 1999 1998 ================================================================================ (in thousands) Current Federal ..................... $ 8,620 $ (570) $ (2,706) Foreign ..................... 446 409 330 State ....................... 3,191 75 898 ---------------------------------------- 12,257 (86) (1,478) ---------------------------------------- Deferred Federal ..................... 10,796 21,996 4,301 Foreign ..................... 28 16 32 State ....................... 1,238 5,748 (653) ---------------------------------------- 12,062 27,760 3,680 ---------------------------------------- Total provision ................ $ 24,319 $ 27,674 $ 2,202 ======================================== The effective tax rate for income taxes varies from the federal statutory rate of 35% for 1999, 1998 and 1997 due to the following items. For the Years Ended January 31, - -------------------------------------------------------------------------------- 2000 1999 1998 ================================================================================ (in thousands) Statement earnings before income taxes ......... $ 64,849 $ 66,081 $ 3,385 ========================================= Income taxes computed at the statutory rate .......... $ 22,697 $ 23,129 $ 1,185 Increase (decrease) in tax resulting from: State taxes, net of federal benefit ........... 3,016 3,452 83 Contribution carryover ...... (201) 1,113 1,032 Adjustment of prior estimated taxes ........... 64 (116) (134) Valuation allowance ......... (423) 165 - Other items ................. (834) (69) 36 ---------------------------------------- Total provision ................ $ 24,319 $ 27,674 $ 2,202 ========================================= An analysis of the deferred tax provision is as follows. For the Years Ended January 31, - -------------------------------------------------------------------------------- 2000 1999 1998 ================================================================================ (in thousands) Excess of tax over statement depreciation and amortization ............ $ 3,738 $ 4,356 $ 2,194 Allowance for doubtful accounts deducted for statement purposes .......... 2 (389) (585) Costs on land and rental properties under development expensed for tax purposes ............ 3,055 5,688 100 Revenues and expenses recognized in different periods for tax and statement purposes .......... (538) 11,986 3,843 Development fees deferred for statement purposes ...... -- -- (395) Provision for decline in real estate and other ....... (1,772) -- -- Deferred state taxes, net of federal benefit .......... 1,188 3,019 (530) Interest on construction advances deferred for statement purposes .......... 736 975 (1,207) Utilization and (benefits) of tax loss carryforward recognized against deferred taxes .............. 15,577 5,423 (1,509) Deferred compensation .......... 228 (106) 1,703 Valuation allowance ............ (423) 165 -- Alternative minimum tax credits ..................... (9,729) (3,357) 66 ---------------------------------------- Deferred provision ............. $ 12,062 $ 27,760 $ 3,680 ======================================== The types of differences that gave rise to significant portions of the deferred income tax liability are presented in the following table. January 31, ------------------------------------------------------- Temporary Differences Deferred Tax ======================================================= 2000 1999 2000 1999 ================================================================================ (in thousands) Depreciation ......... $ 244,378 $ 244,697 $ 96,652 $ 96,778 Capitalized costs .... 229,349 201,992 90,708 79,888 Net operating losses.. (41,513) (76,433) (14,530) (26,938) Federal tax credits... - - (23,263) (14,165) Comprehensive income.. 31,690 - 12,533 - Other ................ 18,916 19,614 12,561 14,587 ------------------------------------------------------- $ 482,820 $ 389,870 $ 174,661 $ 150,150 ======================================================= Income taxes paid totaled $7,176,000, $3,740,000 and $6,247,000 in 1999, 1998 and 1997, respectively. At January 31, 2000, the Company had a net operating loss carryforward for tax purposes of $41,513,000 which will expire in the years ending January 31, 2007 through January 31, 2011 and general business credits carryovers of $1,526,000 which will expire in the years ending January 31, 2004 through January 31, 2014. The Company's deferred tax liability at January 31, 2000 is comprised of deferred liabilities of $308,330,000, deferred assets of $137,870,000 and a valuation allowance related to state taxes and general business credits of $4,201,000. 37 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES L. SEGMENT INFORMATION Principal business groups are determined by the type of customer served or the product sold. The COMMERCIAL GROUP owns, develops, acquires and operates shopping centers, office buildings and mixed-use projects, including hotels. The RESIDENTIAL GROUP develops or acquires and operates the Company's multi-family properties. Real Estate Groups are the combined Commercial and Residential Groups. The LAND GROUP owns and develops raw land into master planned communities and other residential developments for resale to users principally in Arizona, Colorado, Florida, Nevada, New York, North Carolina and Ohio. The LUMBER TRADING GROUP operates the Company's lumber wholesaling business. CORPORATE includes interest on corporate borrowings and general administrative expenses. The Company uses an additional measure, along with net earnings, to report its operating results. This measure, referred to as Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDT"), is not a measure of operating results or cash flows from operations as defined by generally accepted accounting principles. However, the Company believes that EBDT provides additional information about its operations and, along with net earnings, is necessary to understand its operating results. The Company's view is that EBDT is also an indicator of the Company's ability to generate cash to meet its funding requirements. EBDT is defined as net earnings from operations before depreciation, amortization and deferred taxes on income and excludes provision for decline in real estate and other, gain (loss) on disposition of properties and extraordinary items. The following tables summarize selected financial data for the Commercial, Residential, Land and Lumber Trading Groups and Corporate. All amounts, including footnotes, are presented in thousands.
January 31, For the Years Ended January 31, - --------------------------------------------------------------------------------------------------------------------------- Expenditures for Additions to Identifiable Assets Real Estate - --------------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 2000 1999 1998 =========================================================================================================================== Commercial Group ..................................... $2,606,698 $2,330,624 $1,956,418 $280,782 $369,342 $234,766 Residential Group .................................... 815,082 722,160 646,574 81,593 75,258 57,868 Land Group ........................................... 92,868 100,501 87,909 34,907 41,706 30,397 Lumber Trading Group ................................. 208,836 218,551 199,602 3,899 2,301 2,254 Corporate ............................................ 90,990 65,274 72,850 2,476 426 931 ------------------------------------------------------------------- Consolidated ...................................... $3,814,474 $3,437,110 $2,963,353 $403,657 $489,033 $326,216 =================================================================== For the Years Ended January 31, --------------------------------------------------------------------------------------------------- Depreciation & Amortization Revenues Interest Expense Expense --------------------------------------------------------------------------------------------------- 2000 1999 1998 2000 1999 1998 2000 1999 1998 =================================================================================================== Commercial Group ...... $442,992 $380,264 $330,117 $94,356 $ 91,291 $ 87,035 $ 66,848 $ 65,527 $56,996 Residential Group ..... 158,768 139,003 135,253 26,447 27,342 28,884 17,808 18,128 14,682 Land Group ............ 41,356 52,611 44,614 7,370 6,814 5,575 240 562 740 Lumber Trading Group(1) 149,357 123,325 122,169 5,288 5,262 5,254 2,125 2,045 2,202 Corporate ............. 598 1,446 516 26,258 19,251 9,574 1,123 806 173 --------------------------------------------------------------------------------------------------- Consolidated ....... $793,071 $696,649 $632,669 $159,719 $ 149,960 $ 136,322 $ 88,144 $ 87,068 $74,793 =================================================================================================== Earnings Before Earnings Before Depreciation, Income Taxes Amortization & Deferred (EBIT)(2) Taxes (EBDT) ------------------------------------------------------------------- Commercial Group ..................................... $ 50,589 $ 27,480 $ 18,979 $105,877 $94,027 $73,773 Residential Group .................................... 40,472 27,285 28,153 46,411 38,614 31,985 Land Group ........................................... (5,746) 5,265 5,184 (3,489) 3,186 3,326 Lumber Trading Group ................................. 12,258 6,066 9,242 7,070 3,227 5,199 Corporate ............................................ (38,374) (30,572) (19,535) (23,230) (21,200) (7,373) Provision for decline in real estate and other(3) .... (5,062) - - - - - Gain (loss) on disposition of properties ............. 10,712 30,557 (38,638) - - - ------------------------------------------------------------------- Consolidated ...................................... $ 64,849 $ 66,081 $ 3,385 132,639 117,854 106,910 ================================= Reconciliation of EBDT to net earnings: Depreciation and amortization - Real Estate Groups ....................................... (84,586) (83,655) (71,678) Deferred taxes - Real Estate Groups ...................................................... (12,453) (14,236) (10,693) Provision for decline in real estate and other, net of tax ............................... (3,060) - - Gain (loss) on disposition of properties, net of tax ..................................... 7,990 18,444 (23,356) Extraordinary gain, net of tax ........................................................... 272 16,343 19,356 -------------------------------- Net earnings ............................................................................. $ 40,802 $54,750 $20,539 ================================
(1) The Company recognizes the gross margin on lumber brokerage sales as Revenues. Sales invoiced for the years ended January 31, 2000, 1999 and 1998 were approximately $3,712,000, $2,979,000 and $2,940,000, respectively. (2) See Consolidated Statements of Earnings on page 29 for reconciliation of EBIT to net earnings. (3) Represents the write-down to the estimated net realizable value of the Land Group's investment in Granite Development Partners, L.P. 38 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES M. LEASES THE COMPANY AS LESSOR The following summarizes the minimum future rental income to be received on noncancelable operating leases of commercial properties that generally extend for periods of more than one year. Minimum Future For the Years Ending January 31, Rentals ================================================================================ (in thousands) 2001 .............................................................. $ 210,514 2002 .............................................................. 200,965 2003 .............................................................. 192,254 2004 .............................................................. 182,010 2005 .............................................................. 163,087 Later years ....................................................... 1,182,948 ---------- $2,131,778 ========== Most of the commercial leases include provisions for reimbursements of other charges including real estate taxes and operating costs. Total reimbursements amounted to $75,954,000, $67,659,000 and $63,479,000 in 1999, 1998 and 1997, respectively. THE COMPANY AS LESSEE The Company is a lessee under various operating leasing arrangements for real property and equipment having terms expiring through 2095, excluding optional renewal periods. Minimum fixed rental payments under long-term leases (over one year) in effect at January 31, 2000 are as follows. Minimum Lease For the Years Ending January 31, Payments ================================================================================ (in thousands) 2001 .............................................................. $12,977 2002 .............................................................. 12,358 2003 .............................................................. 11,365 2004 .............................................................. 11,129 2005 .............................................................. 10,498 Later years ....................................................... 339,566 -------- $397,893 ======== Rent expense was $13,361,000, $10,267,000 and $10,273,000 for 1999, 1998 and 1997, respectively. N. CONTINGENT LIABILITIES As of January 31, 2000, the Company has guaranteed loans of $1,400,000, letters of credit outstanding of $10,649,000 and surety bonds outstanding of $19,882,000. The Company customarily guarantees lien-free completion of its construction. Upon completion the guarantees are released. For certain limited partnerships in which the Company is a general partner, it guarantees the funding of operating deficits of newly-opened apartment projects for periods averaging five years. The Company is also involved in certain claims and litigation related to its operations. Based upon the facts known at this time, management is of the opinion that the ultimate outcome of all such claims and litigation will not have a material adverse effect on the financial condition, results of operations or cash flows of the Company. 39 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES O. STOCK-BASED COMPENSATION Class A fixed options in the form of either incentive stock options or non-qualified stock options may be awarded under the 1994 Stock Option Plan ("Plan") to key employees and non-employee members of the Company's Board of Directors. The maximum number of options that may be awarded under the Plan was increased to 2,250,000 by shareholder approval in June 1998. The maximum award to a person during any calendar year is 75,000 and the maximum term of an option is 10 years. The exercise price of all options equal the fair market value of the stock on the date of grant, except, if incentive stock options are granted to someone who owns more than 10% of the total combined voting power of all classes of stock of the Company, then the exercise price will be 110% of the fair market value of the stock on the date of grant and the term of the option will be five years. The Plan is administered by the Compensation Committee of the Board of Directors. The Company granted 377,800 options in 1999 and 390,800 in 1998. All options granted under the Plan to date have been for a term of 10 years and vest over two to four years. The Company applies APBO 25 and related Interpretations in accounting for its Plan. The "intrinsic value" on the grant dates have been zero, thus no compensation costs have been recognized for the Plan. Had compensation costs been determined in accordance with SFAS 123 "Accounting for Stock-Based Compensation", net earnings and earnings per share would have been reduced to the pro forma amounts indicated below. For the Years Ended January 31, - -------------------------------------------------------------------------------- 2000 1999 1998 ================================================================================ Net earnings (in thousands) As reported ............ $ 40,802 $ 54,750 $ 20,539 Pro forma .............. $ 38,502 $ 53,150 $ 19,974 Basic earnings per share As reported ............ $ 1.36 $ 1.83 $ .71 Pro forma .............. $ 1.28 $ 1.77 $ .69 Diluted earnings per share As reported ............ $ 1.35 $ 1.81 $ .71 Pro forma .............. $ 1.29 $ 1.77 $ .69 The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for the grants in 1999 and 1998, respectively: dividend yield of .6% and .5%; expected volatility of 36.8% and 38.0%; risk-free interest rate of 5.2% and 5.7%; expected life of 8.7 years in both years; and turnover of 2.0% and 3.0%. A summary of stock option activity is presented below.
For the Years Ended January 31, - -------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Options Exercise Price Options Exercise Price Options Exercise Price ==================================================================================================================== Outstanding at beginning of year ....... 723,950 $21.86 354,600 $14.38 361,800 $14.38 Granted ................................ 377,800 $22.42 390,800 $28.50 - $ - Exercised .............................. (3,600) $14.38 (4,350) $14.38 - $ - Forfeited .............................. (17,825) $22.81 (17,100) $20.32 (7,200) $14.38 --------- ------- ------- Outstanding at end of year ............. 1,080,325 $22.06 723,950 $21.86 354,600 $14.38 ========= ======= ======= Options exercisable at end of year ..... 163,275 $14.38 82,500 $14.38 - $ - Number of shares available for granting of options at end of year .. 1,161,725 1,521,700 395,400 Weighted average fair value of options granted during the year ..... $ 11.29 $ 15.12 $ -
The following table summarizes information about fixed stock options outstanding at January 31, 2000.
Options Outstanding Options Exercisable -------------------------------------------------------- --------------------------------------- Range of Number Weighted Average Weighted Number Weighted Exercise Outstanding at Remaining Average Exercisable at Average Prices January 31, 2000 Contractual Life Exercise Prices January 31, 2000 Exercise Prices ======================================================================================================================= $ 14.38 331,125 6.6 years $ 14.38 163,275 $14.38 $ 22.38 369,200 9.2 years $ 22.38 - $ - $25.65 - $28.50 380,000 8.1 years $ 28.46 - $ -
40 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES O. STOCK-BASED COMPENSATION (CONTINUED) During 1999 the Compensation Committee granted 45,000 shares of restricted Class A common stock to key employees. The restricted shares were awarded out of treasury stock, having a cost basis of $605,000, with rights to vote the shares and receive dividends while being subject to restrictions on disposition and transferability and risk of forfeiture. The shares become nonforfeitable over a period of four years. In accordance with APBO 25, the market value on the date of grant of $1,114,000 was initially recorded as unearned compensation to be charged to expense over the respective vesting periods. The unearned compensation is a reduction of Additional Paid-In Capital in the accompanying consolidated financial statements. At January 31, 2000, unearned compensation amounted to $1,021,000. P. CAPITAL STOCK The Company paid a two-for-one common stock split on July 16, 1998 and a three-for-two common stock split on February 17, 1997. Both stock splits were effected as stock dividends. The stock splits were given retroactive effect to the beginning of the earliest period presented in the accompanying Consolidated Balance Sheets and Consolidated Statements of Shareholders' Equity. All share and per share data included in this annual report, including stock option plan information, have been restated to reflect the stock splits. On May 20, 1997, the Company sold to the public 3,910,000 (1,955,000 pre-split) shares of Class A common stock for $21.00 ($42.00 pre-split) per share. In June 1997 and June 1998 the shareholders approved amendments to the Company's Articles of Incorporation to increase the Company's authorized shares of stock. Class A common shares were increased from 16,000,000 to 48,000,000 shares in 1997 and to 96,000,000 shares in 1998. Class B common shares were increased from 6,000,000 to 18,000,000 shares in 1997 and to 36,000,000 shares in 1998. Preferred shares were increased from 1,000,000 to 5,000,000 shares in 1997. During 1999 and 1998, 3,600 and 4,350 shares, respectively, of Class A common stock were issued out of treasury stock upon the exercise of stock options (See Note O). Q. EARNINGS PER SHARE The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for "net earnings before extraordinary gain". Weighted Net Earnings Average Before Common Extraordinary Shares Per Gain Outstanding Common (Numerator) (Denominator) Share ================================================================================ (in thousands) Year ended January 31, 2000 Basic earnings per share ............. $40,530 30,016,323 $1.35 Effect of dilutive securities-stock options .............. - 136,734 (.01) ------- ---------- ----- Diluted earnings per share ............. $40,530 30,153,057 $1.34 ======= ========== ===== Year ended January 31, 1999 Basic earnings per share ............. $38,407 29,980,200 $1.28 Effect of dilutive securities -stock options ............. - 193,730 (.01) ------- ---------- ----- Diluted earnings per share ............. $38,407 30,173,930 $1.27 ======= ========== ===== Year ended January 31, 1998 Basic earnings per share ............. $ 1,183 28,905,920 $ .04 Effect of dilutive securities-stock options ............ - 57,760 - ------- ---------- ----- Diluted earnings per share ............. $ 1,183 28,963,680 $ .04 ======= ========== ===== R. SUMMARIZED FINANCIAL INFORMATION Forest City Rental Properties Corporation ("Rental Properties") is a wholly-owned subsidiary engaged in the development, acquisition and management of real estate projects, including apartment complexes, regional malls and shopping centers, hotels, office buildings and mixed-use facilities. Consolidated balance sheets and statements of earnings for Rental Properties and its subsidiaries follows. 41 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES R. SUMMARIZED FINANCIAL INFORMATION (CONTINUED) FOREST CITY RENTAL PROPERTIES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
January 31, - ----------------------------------------------------------------------------------------------- 2000 1999 =============================================================================================== (in thousands) ASSETS Real Estate Completed rental properties ...................... $ 2,870,313 $ 2,605,048 Projects under development ....................... 478,766 412,072 -------------------------------- 3,349,079 3,017,120 Less accumulated depreciation .................... (532,607) (477,253) -------------------------------- Total Real Estate .............................. 2,816,472 2,539,867 Cash and equivalents ................................ 25,320 33,158 Restricted cash ..................................... 75,689 50,926 Notes and accounts receivable, net .................. 63,971 47,757 Investments in and advances to real estate affiliates 297,745 266,405 Other assets ........................................ 141,541 115,425 -------------------------------- $ 3,420,738 $ 3,053,538 -------------------------------- LIABILITIES AND SHAREHOLDER'S EQUITY LIABILITIES Mortgage debt, nonrecourse .......................... $ 2,356,055 $ 2,148,996 Accounts payable and accrued expenses ............... 236,472 192,552 Notes payable ....................................... 34,454 21,783 Long-term debt ...................................... 167,000 105,000 Deferred income taxes ............................... 199,791 168,863 Deferred profit ..................................... 28,646 30,090 -------------------------------- Total Liabilities ................................ 3,022,418 2,667,284 -------------------------------- SHAREHOLDER'S EQUITY Common stock and additional paid-in capital ......... 200,878 200,878 Retained earnings 178,285 185,376 -------------------------------- 379,163 386,254 Accumulated other comprehensive income .............. 19,157 - -------------------------------- Total Shareholder's Equity ....................... 398,320 386,254 -------------------------------- $ 3,420,738 $ 3,053,538 ================================
FOREST CITY RENTAL PROPERTIES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS
For the Years Ended January 31, - ----------------------------------------------------------------------------------------------- 2000 1999 1998 =============================================================================================== (in thousands) Revenues ............................... $ 601,760 $ 519,282 $ 465,370 ---------------------------------------------- Operating expenses ..................... 306,614 264,496 229,856 Interest expense ....................... 147,061 137,556 123,713 Depreciation and amortization .......... 84,586 83,655 71,678 ---------------------------------------------- 538,261 485,707 425,247 ---------------------------------------------- Gain (loss) on disposition of properties 10,712 30,890 (35,505) ---------------------------------------------- Earnings before income taxes ........... 74,211 64,465 4,618 ---------------------------------------------- Income tax expense (benefit) Current ............................. 12,446 (705) (2,437) Deferred ............................ 15,139 26,389 6,455 ---------------------------------------------- 27,585 25,684 4,018 ---------------------------------------------- Net earnings before extraordinary gain . 46,626 38,781 600 Extraordinary gain, net of tax ......... 272 16,343 19,356 ---------------------------------------------- Net earnings ........................... $ 46,898 $ 55,124 $ 19,956 ==============================================
42 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES S. GAIN(LOSS) ON DISPOSITION OF PROPERTIES, EXTRAORDINARY GAIN AND PROVISION FOR DECLINE IN REAL ESTATE AND OTHER GAIN (LOSS) ON DISPOSITION OF PROPERTIES - Gain (loss) on disposition of properties totaled a gain of $10,712,000, a gain of $30,557,000 and a loss of $38,638,000 in 1999, 1998 and 1997, respectively. During 1999, the Company recorded a gain on the disposition of properties ($10,712,000 or $7,990,000 after tax) primarily resulting from the disposition of its interest in Rolling Acres Mall in Akron, Ohio through a tax-free exchange. During 1998, the Company recognized a gain on the disposition of its interests in Summit Park Mall ($13,897,000 or $8,401,000 after tax), a regional shopping center in suburban Buffalo, New York; San Vicente ($10,403,000 or $6,289,000 after tax), an office building in Brentwood, California; and Trolley Plaza ($4,941,000 or $2,987,000 after tax), an apartment community in downtown Detroit, Michigan. The dispositions of Summit Park, San Vicente and Trolley Plaza were all structured as tax-free exchanges. Also in 1998, the Company reported gains on the sale of Courtyard ($622,000 or $376,000 after tax), a strip shopping center in Flint, Michigan and the Company's 20% interests in three apartment buildings in Houston, Texas ($1,027,000 or $593,000 after tax). During 1997, the Company sold its interest in Woodridge, a land development project in suburban Chicago, Illinois ($3,133,000 loss or $1,892,000 after tax loss) and recorded a loss on disposition of Toscana ($35,505,000 or $21,464,000 after tax). PROVISION FOR DECLINE IN REAL ESTATE AND OTHER - During 1999, the Company recorded a Provision for Decline in Real Estate and Other of $5,062,000 ($3,060,000 net of tax) related to the write-down to estimated net realizable value of the Land Group's investment in Granite Development Partners L.P. (Granite). The Company owns a 43.75% interest in Granite as the result of capital contribution of land, which was classified as Investments In and Advances to Affiliates on the Company's Consolidated Balance Sheets. Granite owns an interest in several raw land developments held for resale, the most significant of which is a one-third interest in Seven Hills in Henderson, Nevada. The Company has been informed by one of its partners (the project manager) of cost overruns that will, in turn, reduce the anticipated sales margins of the Seven Hills project. The revised projection of costs to complete the project indicates that the Company may not recover its capital investment in Granite. EXTRAORDINARY GAIN - Extraordinary gain, net of tax, totaled $272,000, $16,343,000 and $19,356,000 in 1999, 1998 and 1997, respectively, representing extinguishment of nonrecourse debt and related accrued interest. Extraordinary gain for 1999 represents extinguishment of $450,000 ($272,000 after tax) of non-recourse debt related to Plaza at Robinson Town Centre in Pittsburgh, Pennsylvania. The 1998 extraordinary gain represents extinguishment of nonrecourse debt related to Terminal Tower ($13,947,000 or $8,431,000 after tax) and Skylight Office Tower ($3,619,000 or $2,188,000 after tax), both located in Cleveland, Ohio; Courtland ($7,381,000 or $4,462,000 after tax), a regional mall in Flint, Michigan; One Franklintown ($1,350,000 or $816,000 after tax), an apartment complex in Philadelphia, Pennsylvania; Boot Ranch ($187,000 or $113,000 after tax), an apartment property in Tampa, Florida; and Trolley Plaza ($552,000 or $333,000 after tax). In 1997, the properties which recorded extraordinary gain on extinguishment of nonrecourse debt were Toscana ($18,081,000 or $16,884,000 after tax); Halle Office Building in Cleveland, Ohio ($3,569,000 or $2,156,000 after tax); and San Vicente ($524,000 or $316,000 after tax). SALE OF TOSCANA - During February 1997, the Company sold Toscana, a 563-unit apartment complex in Irvine, California, back to the original land owner and settled litigation related to the property. As a result, the Company recorded operating income of $9,146,000, after tax, a loss on disposition of property of $21,464,000, after tax, and an extraordinary gain of $16,884,000, after tax, related to the extinguishment of a portion of the property's nonrecourse mortgage debt. The net result of these transactions to the Company was after-tax income of $4,566,000. During 1999, the Company received $4,500,000, pre-tax, in final settlement of the Toscana litigation, which is included in operating income. T. RECENT DEVELOPMENTS During the first quarter of 2000, the Company disposed of two apartment complexes, Highlands and Studio Colony with a total of 1,006 units, and recorded a pre-tax gain on disposition of properties of approximately $26,500,000. 43 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Quarter Ended - ------------------------------------------------------------------------------------------------------------------- Jan. 31, Oct. 31, July 31, Apr. 30, 2000 1999 1999 1999 =================================================================================================================== (in thousands, except per share data) Revenues ...................................... $224,259 $188,167 $198,951 $181,694 Earnings before income taxes .................. $ 35,150 $ 12,247 $ 8,269 $ 9,183 Net earnings before extraordinary gain(1) ..... $ 23,463 $ 7,033 $ 4,740 $ 5,294 Net earnings .................................. $ 23,521 $ 7,033 $ 4,740 $ 5,508 BASIC EARNINGS PER SHARE Net earnings before extraordinary gain(1)(2) $ .78 $ .23 $ .16 $ .17 Net earnings(2) ............................ $ .78 $ .23 $ .16 $ .18 DILUTED EARNINGS PER SHARE Net earnings before extraordinary gain(1)(2) $ .78 $ .23 $ .16 $ .17 Net earnings(2) ............................ $ .78 $ .23 $ .16 $ .18 Dividends declared per common share(3) Quarterly dividend Class A ................................. $ .05 $ .05 $ .05 $ .04 Class B ....................................... $ .05 $ .05 $ .05 $ .04 Market price range of common stock Class A High .................................. $ 28.25 $ 26.50 $ 28.75 $ 25.88 Low ................................... $ 23.82 $ 21.88 $ 24.75 $ 19.88 Class B High .................................. $ 31.44 $ 27.50 $ 28.63 $ 26.00 Low ................................... $ 27.07 $ 25.00 $ 25.00 $ 20.69 Quarter Ended - --------------------------------------------------------------------------------------------------------------------------- Jan. 31, Oct. 31, July 31, Apr. 30, 1999 1998 1998 1998 - --------------------------------------------------------------------------------------------------------------------------- (in thousands, except per share data) Revenues ...................................... $205,417 $176,902 $165,707 $148,623 Earnings before income taxes .................. $ 15,083 $ 9,487 $ 26,852 $ 14,659 Net earnings before extraordinary gain(1) ..... $ 8,895 $ 5,168 $ 15,836 $ 8,508 Net earnings .................................. $ 14,286 $ 15,786 $ 16,170 $ 8,508 Basic earnings per share Net earnings before extraordinary gain(1)(2) $ .30 $ .17 $ .53 $ .28 Net earnings(2) ............................ $ .48 $ .53 $ .54 $ .28 Diluted earnings per share Net earnings before extraordinary gain(1)(2) $ .29 $ .17 $ .53 $ .28 Net earnings(2) ............................ $ .47 $ .52 $ .54 $ .28 Dividends declared per common share(3) Quarterly dividend Class A ................................. $ .04 $ .04 $ .04 $ .035 Class B ................................. $ .04 $ .04 $ .04 $ .035 Market price range of common stock Class A High .................................. $ 26.63 $ 28.88 $ 30.63 $ 29.88 Low ................................... $ 21.63 $ 17.75 $ 28.13 $ 26.66 Class B High .................................. $ 26.38 $ 29.63 $ 30.13 $ 29.66 Low ................................... $ 22.44 $ 18.00 $ 28.13 $ 27.00
Both classes of common stock are traded on the New York Stock Exchange under the symbols FCEA and FCEB. As of March 1, 2000, the number of registered holders of Class A and Class B common stock were 826 and 619, respectively. (1) Excludes the extraordinary gain, net of tax of $272 ($.01 basic and diluted per share) and $16,343 ($.55 basic and $.54 diluted per share) in fiscal 1999 and 1998, respectively. These items are explained in Note S in the Notes to Consolidated Financial Statements. (2) The sum of quarterly earnings per share may not equal annual earnings per share due to the weighting of stock and option activity during the year. (3) Future dividends will depend upon such factors as earnings, capital requirements and financial condition of the Company. Retained earnings of $8,494 was available for payment of dividends as of January 31, 2000, under the restrictions contained in the revolving credit agreement with a group of banks. 44 20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES GENERAL The Company develops, acquires, owns and manages commercial and residential real estate properties in 21 states and the District of Columbia. The Company owns a portfolio that is diversified both geographically and by property types and operates through four principal business groups: Commercial Group, Residential Group, Land Group and Lumber Trading Group. The Company uses an additional measure, along with net earnings, to report its operating results. This measure, referred to as Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDT"), is not a measure of operating results or cash flows from operations as defined by generally accepted accounting principles. However, the Company believes that EBDT provides additional information about its operations and, along with net earnings, is necessary to understand its operating results. The Company's view is that EBDT is also an indicator of the Company's ability to generate cash to meet its funding requirements. EBDT is defined and discussed in detail under "Results of Operations - EBDT." The Company's EBDT for 1999 grew by 12.5% to $132,639,000 from $117,854,000. The increase in EBDT is primarily attributable to improved results from existing properties and from seven new projects and additions to three residential projects that opened in 1999, and a full year of operations for the 16 properties that opened in 1998. RESULTS OF OPERATIONS The Company reports its results of operations by each of its four principal business groups as it believes it provides the most meaningful understanding of the Company's financial performance. The major components of EBDT are Revenues, Operating Expenses and Interest Expense, each of which is discussed below. Net Operating Income ("NOI") is defined as Revenues less Operating Expenses. See the information in the table "Three Year Summary of Earnings before Depreciation, Amortization and Deferred Taxes" at the end of this Management's Discussion and Analysis of Financial Condition and Results of Operations. NET OPERATING INCOME FROM REAL ESTATE GROUPS - NOI from the combined Commercial Group and Residential Group ("Real Estate Groups") for 1999 was $296,521,000 compared to $257,053,000 in 1998, a 15.4% increase. Comparable NOI (NOI for properties in operation throughout both years) for Real Estate Groups increased 4.9% from 1998 to 1999 and 6.5% from 1997 to 1998. Including the expected NOI for the twelve months following stabilization for the properties that were opened, expanded, acquired or disposed in 1999, NOI for Real Estate Groups would be approximately $317,000,000 for 1999. COMMERCIAL GROUP REVENUES - Revenues for the Commercial Group increased $62,728,000, or 16.5%, to $442,992,000 in 1999 from $380,264,000 in 1998. This increase is primarily the result of the openings of Millennium ($11,496,000) an office building at University Park at MIT in Cambridge, Massachusetts which opened in February 1999, Phase Two of University Park at MIT ($1,029,000) a mixed use facility which opened during the second quarter of 1998, the 210-room MIT Hotel ($4,358,000), and The Promenade in Temecula ($2,175,000), a 795,000 square-foot regional mall in Temecula, California. The 1998 acquisitions of the 292-room Sheraton Hotel at Station Square in Pittsburgh, Pennsylvania increased revenues by $4,866,000, the 324,000-square-foot Fairmont Plaza by $6,221,000, and the adjacent 249,000-square-foot Pavilion retail center in San Jose, California by $1,555,000. Revenues also increased as a result of improved operations at Liberty Center in Pittsburgh, Pennsylvania ($1,832,000), The Avenue at Tower City Center in Cleveland, Ohio ($5,545,000), the Ritz-Carlton Hotel in Cleveland, Ohio ($1,233,000), the Tuscon Mall ($1,948,000) in Tuscon, Arizona, and openings in the Company's urban retail portfolio in New York City ($4,669,000) including Columbia Park, Kaufman Studios and 1131 Bay Street. These increases were partially offset by a decrease in revenues due to the 1998 disposition of Summit Park Mall ($2,229,000). The Commercial Group also recorded additional land sales of $11,276,000 in 1999 compared to 1998. The remainder of the increase (approximately $6,500,000) was due to improved operations as a result of rental rate and occupancy increases. The Commercial Group recognizes rental revenues when due from its tenants. If the Commercial Group had recognized rental revenue using the straight-line method in 1999, additional revenues of approximately $4,400,000, and approximately $2,600,000 in net earnings after tax, would have been reported for the year. The cumulative effect at January 31, 2000 on retained earnings, had rental revenues been recorded using the straight-line method, would be an increase of approximately $29,000,000. Revenues for the Commercial Group increased $50,147,000, or 15.2%, to $380,264,000 in 1998 from $330,117,000 in 1997. This increase is primarily the result of property openings and acquisitions. During 1998, Forest City acquired the 292-room Sheraton Hotel at Station Square in Pittsburgh, Pennsylvania and the 324,000-square-foot Fairmont Plaza office building and adjacent 249,000-square-foot Pavilion retail center in San Jose, California, which increased revenues over the prior year by $13,616,000, $5,919,000 and $1,574,000, respectively. Phase Two of University Park at MIT in Cambridge, Massachusetts opened during the second quarter of 1998. This mixed-use facility, owned in partnership with MIT, consists of 169,000 square feet of office and retail space, a 210-room hotel and a 960- space parking facility and generated revenues of $4,246,000 in 1998. Richmond Avenue, a retail center in Staten Island, New York, also opened in 1998 and generated revenues of $1,535,000. Revenues increased from the openings of properties in the New York City area during 1997 including Nine MetroTech office building in Brooklyn, New York ($4,400,000) and two retail properties in Queens, New York, Northern Boulevard ($3,701,000) and Grand Avenue ($1,735,000). In addition, the Company's increased ownership in two properties during 1997 resulted in increases to revenues: Antelope Valley Mall in Palmdale, California increased from 40% to 78% ($3,131,000) and Station Square in Pittsburgh, Pennsylvania increased from 25% to 100% ($5,278,000). These increases were partially offset by decreases in revenues due to the disposition of the Company's interest in three commercial properties in 1998: the 469,000-square-foot San Vicente office building in Brentwood, California ($3,390,000), the 695,000-square-foot Summit Park Mall in Wheatfield, New York ($3,554,000) and the Courtyard strip shopping center in Flint, Michigan ($581,000). The Commercial Group also recorded an increase in land sales 45 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES of $5,388,000 over 1997. The balance of the increase in revenues within the Commercial Group (approximately $7,000,000) was generally due to improved operations. OPERATING AND INTEREST EXPENSES - During 1999, operating expenses for the Commercial Group increased $35,232,000, or 18.0%, to $231,198,000 from $195,966,000 in 1998. This increase was attributable primarily to costs associated with the 1999 openings of Millennium ($3,136,000), Promenade in Temecula ($586,000); the 1998 openings of Phase Two at MIT ($534,000) and University Park Hotel at MIT ($2,877,000); and the 1998 acquisitions of Sheraton Hotel at Station Square ($2,674,000), Fairmont Plaza ($1,860,000) and Pavilion ($88,000). Operating expenses also increased at Liberty Center ($1,266,000), Ritz-Carlton Hotel ($1,160,000), and The Avenue at Tower City ($4,129,000) as a result of increased revenues, and also as a result of 1998 and 1999 openings in the urban New York City retail portfolio ($1,242,000). In addition, development expenses increased $1,941,000 over 1998, incremental costs associated with increased land sales were $5,916,000 compared to last year, and operating expenses for mature properties increased approximately $5,000,000. Interest expense for 1999 increased by $3,065,000, or 3.4%, to $94,356,000 from $91,291,000 for 1998. The increase in interest expense is primarily attributable to the 1999 additions to the Commercial Group portfolio discussed above, and a full year of interest for 1998 openings. During 1998, operating expenses for the Commercial Group increased $28,859,000, or 17.3%, to $195,966,000 from $167,107,000 in 1997. The increase in operating expenses was attributable primarily to costs associated with the 1998 acquisitions of the Sheraton Hotel at Station Square ($9,403,000), Fairmont Plaza ($2,137,000) and Pavilion ($901,000) as well as 1998 openings of Phase Two of University Park at MIT ($3,056,000) and Richmond Avenue ($222,000) and 1997 openings of Nine MetroTech ($1,605,000), Northern Boulevard ($1,374,000) and Grand Avenue ($274,000). In addition, operating expenses increased due to increased ownership in 1997 in Antelope Valley Mall ($1,303,000) and Station Square ($4,060,000) and additional costs associated with increased land sales ($7,181,000). These increases were partially offset by decreases in operating expenses of $3,972,000 resulting from 1998 dispositions. Interest expense increased by $4,256,000 in 1998, or 4.9%, to $91,291,000 from $87,035,000 in 1997. The increase in interest expense was primarily attributable to the 1998 openings and acquisitions discussed above, a full year of interest for 1997 openings and increased ownership in two properties in 1997, also discussed above. NET OPERATING INCOME - Commercial Group NOI for 1999 was $211,794,000 compared to $184,298,000 in 1998, a 14.9% increase. NOI increased 4.9% from 1998 to 1999 and 6.2% from 1997 to 1998 for Commercial Group properties in operation throughout both years. Including the expected NOI for the twelve months after stabilization for the Commercial Group properties that were opened or acquired in 1999, NOI would be approximately $230,000,000 for 1999. RESIDENTIAL GROUP REVENUES - Revenues for the Residential Group increased by $19,765,000, or 14.2%, in 1999 to $158,768,000 from $139,003,000 in 1998. This increase was primarily attributable to proceeds from the Toscana litigation settlement ($4,500,000), the recognition of development and other fees ($5,722,000) on several projects including: The Grand, a 546-unit luxury high-rise apartment building in North Bethesda, Maryland which opened in February 1999; The Drake, a 288-unit high-rise building in Philadelphia, Pennsylvania; The Enclave, a 637-unit apartment complex in San Jose, California which opened in early 1998; and 101 San Fernando, a 323-unit apartment complex also in San Jose, California, a full year of operations for the 1998 acquisitions of the 534-unit Woodlake Apartments in Silver Spring, Maryland ($2,663,000), an additional 20% ownership in Studio Colony, a 450-unit apartment building in Los Angeles, California ($934,000) and a 50% interest in the 342-unit complex Coppertree (formerly Park Plaza) in Mayfield Heights, Ohio ($520,000). In addition, revenues increased at Bayside Village, an 862-unit complex in San Francisco, California ($770,000), the Company's Senior Housing properties in New York, New Jersey, and Maryland ($1,182,000), an increase in units in three Cleveland properties ($796,000) and as a result of lease-up of the 396-unit complex at Colony Woods in Bellevue, Washington ($1,872,000). These increases were partially offset by a decrease due to the sale in the second quarter of 1998 of Trolley Plaza, a 351-unit apartment community in Detroit, Michigan ($1,504,000). The balance of the increase in revenues ($2,300,000) within the Residential Group was generally due to improved operations. Revenues for the Residential Group increased by $3,750,000, or 2.8%, in 1998 to $139,003,000 from $135,253,000 in 1997. Excluding the $15,000,000 in proceeds from the Toscana litigation settlement received in 1997 (see "- Other Transactions - Sale of Toscana" below), revenues for 1998 increased $18,750,000, or 15.6% over 1997. This increase was primarily attributable to the sale of the mortgage servicing division of Forest City Capital Corporation ($1,329,000) and the recognition of development and other fees on several projects ($3,843,000). Revenues also increased as a result of 1998 acquisitions of the 534-unit Woodlake Apartments in Silver Spring, Maryland ($2,229,000), a 50% interest in the 342-unit Park Plaza in Mayfield Heights, Ohio ($786,000) and an additional 20% interest in the 450-unit Studio Colony apartment community in Los Angeles, California ($1,599,000) as well as a full year of operations for the 1997 acquisitions of Whitehall Terrace, a 188-unit apartment building in Kent, Ohio ($1,059,000), Colony Woods, a 396-unit garden apartment complex in Bellevue, Washington ($1,357,000) and Museum Towers, a 286-unit high-rise apartment building in Philadelphia, Pennsylvania ($774,000). In addition, revenues increased $1,100,000 over 1997 from the addition of 386 units during 1998 to three apartment communities in Cleveland, Ohio and income relating to syndicated partnerships ($2,970,000) and interest on advances made on behalf of the Company's partner in Trowbridge and Museum Towers ($978,000). These increases are partially offset by the decrease in revenues as the result of the 1998 disposition of Trolley Plaza in Detroit, Michigan ($1,297,000). The balance of the increase in revenues (approximately $2,000,000) within the Residential Group was generally due to improved operations as a result of increased rental rates and occupancy. OPERATING AND INTEREST EXPENSES - Operating expenses for the Residential Group increased by $7,793,000, or 11.8%, in 1999, to $74,041,000 from $66,248,000 in 1998. The increase in operating expenses was primarily due to the reduction in a reserve for collection of a note receivable in 1998 from Millender Center ($3,000,000), additional costs 46 22 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES associated with the generation of increased development fees ($999,000), increased operating expenses for mature properties (approximately $2,000,000), increased expenses due to lease-up at Colony Woods ($353,000) and the three Cleveland properties ($316,000), and the 1998 acquisitions of Woodlake Apartments ($1,356,000) and Coppertree (formerly Park Plaza) ($355,000). These increases were partially offset by a decrease due to the sale in 1998 of Trolley Plaza ($1,135,000). Interest expense decreased by $895,000 in 1999, or 3.3%, to $26,447,000 from $27,342,000 in 1998. This decrease is primarily the result of an increase in capitalized interest on funded development projects. Operating expenses for the Residential Group increased by $2,715,000, or 4.3%, in 1998, to $66,248,000 from $63,533,000 in 1997. The increase in operating expenses was primarily due to the 1998 acquisition of Woodlake ($1,048,000) and 1997 acquisitions of Colony Woods ($790,000), Whitehall Terrace ($436,000) and Museum Towers ($772,000). In addition, operating expenses increased $471,000 over the prior year due to the addition of 386 units at three apartment communities in Cleveland, Ohio and $986,000 in additional costs associated with the generation of increased development fees. This increase was partially offset by a decrease in expenses relating to the sale of Trolley Plaza ($647,000) and 1997 development expenses which did not recur in 1998 ($1,147,000). Interest expense decreased by $1,542,000 in 1998, or 5.3%, to $27,342,000 from $28,884,000 in 1997. This decrease is primarily the result of the disposition of Trolley Plaza. NET OPERATING INCOME - Residential Group NOI for 1999 was $84,727,000, compared to $72,755,000 in 1998, a 16.5% increase. NOI increased 5.0% from 1998 to 1999 for Residential Group properties in operation throughout both years, and 7.2% from 1997 to 1998. Including the expected NOI for the twelve months after stabilization for Residential Group properties that were opened, expanded or acquired in 1999, NOI would be approximately $87,000,000 for 1999. LAND GROUP During 1999, the Company was informed by the project manager/partner of costs that would be incurred in excess of budget to complete Seven Hills, a 1,300-acre planned-unit development project in Henderson, Nevada. The Company owns a 14.57% interest in Seven Hills through its investment in Granite (see "Other Transactions - Provision for Decline in Real Estate and Other). As a result of this deterioration in Seven Hills' margins, the Company entered into an agreement (Agreement) during 1999 with the project manager/partner to restructure the partnership agreement and reposition the project. In accordance with the Agreement, the Company has agreed to forgo its fee and interest income to which it was entitled in order to preserve cash flow available to meet the project's obligations. REVENUES - Revenues for the Land Group decreased by $11,255,000 to $41,356,000 in 1999 from $52,611,000 in 1998. This decrease is a result of forgiveness of interest income relating to Granite ($4,001,000) discussed above and decreased revenues at: various other projects owned by Granite (approximately $4,000,000); Greens at Birkdale Village, a 220-acre mixed use community in Huntersville, North Carolina ($2,791,000); Chestnut Lakes, an 85-acre planned-unit development in North Ridgeville, Ohio ($3,151,000); and Eaton Estate, 22-acre apartment and cluster site in Sagamore Hills, Ohio ($848,000). Revenues also decreased approximately $10,000,000 in 1999 compared to 1998 as a result of a cumulative adjustment to properly reflect the Company's share of the revenues of Seven Hills pursuant to the Agreement discussed above. These decreases were partially offset by increases in revenues at Westwood Lakes, 475-acres, 657 lots located in Tampa, Florida ($5,960,000); Silver Lakes, 2,400 acres, 5,108 units in Fort Lauderdale, Florida ($2,724,000); and Canterberry Crossing, a new 470-acre residential golf course community in Parker, Colorado ($4,649,000). Revenues for the Land Group increased by $7,997,000 to $52,611,000 in 1998 from $44,614,000 in 1997. This increase is a result of increased land sales at Seven Hills ($2,038,000) and The Greens at Birkdale Village ($5,049,000). Sales of land and related gross margins vary from period to period, depending on management's decisions regarding the disposition of significant land holdings. OPERATING AND INTEREST EXPENSES - Operating expenses decreased by $800,000 in 1999 to $39,732,000 from $40,532,000 in 1998. This decrease is primarily the result of a decrease in costs related to lower sales volume at various projects owned by Granite ($1,666,000), Greens at Birkdale Village ($2,372,000), Chestnut Lakes ($2,575,000) and Eaton Estate ($696,000). Operating expenses also decreased approximately $3,500,000 in 1999 compared to 1998 as a result of a cumulative adjustment to properly reflect the Company's share of the revenues of Seven Hills pursuant to the Agreement discussed above. These decreases were partially offset by increases in operating expenses related to increased sales volume at Westwood Lakes ($4,157,000), Seven Hills ($3,500,000), Silver Lakes ($2,903,000) and Canterberry Crossing ($4,155,000). Operating expenses also decreased for 1999 by $4,729,000 due to certain valuation allowances relating to Land Group investments. These accruals are reviewed periodically and adjusted to reflect management's estimated value of the Land Group's portfolio. Operating expenses increased by $6,677,000 in 1998 to $40,532,000 from $33,855,000 in 1997. The fluctuation in operating expenses primarily reflects costs associated with land sales volume in each period. Interest expense increased by $556,000 in 1999 to $7,370,000 from $6,814,000 in 1998. Interest expense increased by $1,239,000 in 1998 to $6,814,000 from $5,575,000 in 1997. Interest expense varies from year to year depending on the level of interest-bearing debt within the Land Group. LUMBER TRADING GROUP REVENUES - Revenues for the Lumber Trading Group increased by $26,032,000 in 1999 to $149,357,000 from $123,325,000 in 1998. The increase was due primarily to increased lumber trading margins of $26,159,000 for 1999 compared to 1998. Revenues for the Lumber Trading Group increased by $1,156,000 in 1998 to $123,325,000 from $122,169,000 in 1997. The increase was due primarily to increased lumber trading margins in 1998 compared to 1997 ($8,065,000) which was partially offset by a decrease due to the sale of a facsimile line of business in 1997 ($5,615,000) and a decrease in volume at Forest City/Babin, a wholesaler of major appliances, cabinets and hardware to housing contractors ($936,000). OPERATING AND INTEREST EXPENSES - Operating expenses 47 23 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES for the Lumber Trading Group increased by $19,813,000 in 1999 to $131,811,000 from $111,998,000 in 1998. The increase reflected higher variable expenses due to increased lumber trading margins compared to 1998. Interest expense increased $26,000 in 1999 to $5,288,000 from $5,262,000 in 1998. Operating expenses for the Lumber Trading Group increased by $4,325,000 in 1998 to $111,998,000 from $107,673,000 in 1997. This increase reflected higher variable expenses due to increased trading margins compared to 1997 ($7,572,000) that was partially offset by a decrease due to the sale of a facsimile line of business in 1997 ($3,356,000) and a decrease in operating expenses at Forest City/Babin ($857,000). Interest expense increased by $8,000 in 1998 to $5,262,000 from $5,254,000 in 1997. CORPORATE ACTIVITIES REVENUES - Corporate Activities' revenues decreased $848,000 in 1999 to $598,000 from $1,446,000 in 1998 and increased $930,000 in 1998 to $1,446,000 from $516,000 in 1997. Corporate Activities' revenues consist primarily of interest income from investments made by the Company and vary from year to year depending on interest rates and the amount of loans outstanding. OPERATING AND INTEREST EXPENSES Operating expenses for Corporate Activities increased $20,000 in 1999 to $12,786,000 from $12,766,000 in 1998 and increased $2,288,000 in 1998 to $12,766,000 from $10,478,000 in 1997. The increase in 1999 represents additional facilities expense. The increase in 1998 represents general corporate expenses including amortization of costs associated with the 1998 public offering of Senior Notes (see "Financial Condition and Liquidity"). Interest expense increased $7,007,000 in 1999 to $26,258,000 from $19,251,000 in 1998 and increased $9,677,000 in 1998 to $19,251,000 from $9,574,000 in 1997. Corporate Activities' interest expense consists primarily of interest expense on the 8.50% Senior Notes (issued on March 16, 1998) and the Revolving Credit Agreement that has not been allocated to a principal business group (see "Financial Condition and Liquidity"). OTHER TRANSACTIONS PROVISION FOR DECLINE IN REAL ESTATE AND OTHER - During 1999, the Company recorded a Provision for Decline in Real Estate and Other of $5,062,000 ($3,060,000 net of tax) related to the write-down to estimated net realizable value of the Land Group's investment in Granite Development Partners L.P. (Granite). The Company owns a 43.75% interest in Granite as a result of capital contribution of land, which was classified as Investments In and Advances to Real Estate Affiliates on the Company's Consolidated Balance Sheets. Granite owns an interest in several raw land developments held for resale, the most significant of which is a one-third interest in Seven Hills in Henderson, Nevada. The Company has been informed by one of it's partners (the project manager) of cost overruns that will, in turn, reduce the anticipated sales margins of the Seven Hills project. The revised projection of costs to complete the project indicates that the Company may not recover its capital investment in Granite. GAIN (LOSS) ON DISPOSITION OF PROPERTIES - Gain (loss) on disposition of properties totaled a gain of $10,712,000, a gain of $30,557,000, and a loss of $38,638,000 in 1999, 1998 and 1997, respectively. During 1999, the Company recognized a gain on the disposition of properties ($10,712,000 or $7,990,000 after tax) primarily resulting from the disposition of its interest in Rolling Acres Mall in Akron, Ohio through a tax-free exchange. During 1998, the Company recognized a gain on the disposition of its interests in Summit Park Mall ($13,897,000 or $8,401,000 after tax), a regional shopping center in suburban Buffalo, New York; San Vicente ($10,403,000 or $6,289,000 after tax), an office building in Brentwood, California; and Trolley Plaza ($4,941,000 or $2,987,000 after tax), an apartment community in downtown Detroit, Michigan. The dispositions of Summit Park, San Vicente and Trolley Plaza were all structured as tax-free exchanges. Also in 1998, the Company reported gains on the sale of Courtyard ($622,000 or $376,000 after tax), a strip shopping center in Flint, Michigan and the Company's 20% interests in three apartment buildings in Houston, Texas ($1,027,000 or $593,000 after tax). During 1997, the Company sold its interest in Woodridge, a land development project in suburban Chicago, Illinois ($3,133,000 pre-tax loss or $1,892,000 after tax loss) and recorded a loss on disposition of Toscana ($35,505,000 pre-tax or $21,464,000 after tax). EXTRAORDINARY GAIN - Extraordinary gain, net of tax, totaled $272,000, $16,343,000, and $19,356,000 in 1999, 1998, and 1997, respectively, representing extinguishment of nonrecourse debt and related accrued interest. The 1999 extraordinary gain was the result of the extinguishment of $450,000 of non-recourse debt related to Plaza at Robinson Town Centre in Pittsburgh, Pennsylvania. The 1998 extraordinary gain recorded represents extinguishment of nonrecourse debt related to Terminal Tower ($13,947,000 or $8,431,000 after tax) and Skylight Office Tower ($3,619,000 or $2,188,000 after tax) both located in Cleveland, Ohio; Courtland ($7,381,000 or $4,462,000 after tax), a regional mall in Flint, Michigan; One Franklintown ($1,350,000 or $816,000 after tax), an apartment complex in Philadelphia, Pennsylvania; Boot Ranch ($187,000 or $113,000 after tax), an apartment property in Tampa, Florida; and Trolley Plaza ($552,000 or $333,000 after tax). In 1997, the properties that recorded extraordinary gain on extinguishment of nonrecourse debt were Toscana ($18,081,000, or $16,884,000 after tax); Halle Office Building in Cleveland, Ohio ($3,569,000 or $2,156,000 after tax); and San Vicente ($524,000 or $316,000 after tax). SALE OF TOSCANA - During February 1997, the Company sold Toscana, a 563-unit apartment complex in Irvine, California, back to the original land owner and settled litigation related to the property. As a result, the Company recorded operating income of $9,146,000, after tax, a loss on disposition of property of $21,464,000, after tax, and an extraordinary gain of $16,884,000, after tax, related to the extinguishment of a portion of the property's nonrecourse mortgage debt. The net result of these transactions to the Company is after-tax income of $4,566,000. During 1999, the Company received $4,500,000, pre-tax, in final settlement of the Toscana litigation, which is included in 1999 Revenues of the Residential Group. INCOME TAXES - Income tax expense totaled $24,319,000, $27,674,000, and $2,202,000 in 1999, 1998 and 1997, respectively. At January 31, 2000, the Company had a net operating loss ("NOL") carryforward for tax purposes of $41,513,000 (generated primarily over time in the ordinary course of business from the significant impact of depreciation 48 24 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES expense from real estate properties on the Company's net earnings) which will expire in the years ending January 31, 2007 through January 31, 2011 and general business credits carryovers of $1,526,000 which will expire in the years ending January 31, 2004 through January 31, 2014. The Company's policy is to utilize its NOL before it expires and to evaluate its future tax position while considering a variety of tax-saving strategies. NET EARNINGS - In 1999, the Company's net earnings decreased to $40,802,000, or $1.35 per share of common stock, from $54,750,000, or $1.81 per share of common stock in 1998. EBDT - Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDT") is defined as net earnings from operations before depreciation, amortization and deferred taxes on income, and excludes provision for decline in real estate and other, gain (loss) on disposition of properties and extraordinary items. The Company excludes depreciation and amortization expense related to real estate operations from EBDT because they are non-cash items and the Company believes the values of its properties, in general, have appreciated, over time, in excess of their original cost. Deferred income taxes from real estate operations are excluded because they are a non-cash item. The provision for decline in real estate and other is excluded from EBDT because it is a non-cash item that varies from year to year that, in management's opinion, is considered to be non-recurring in nature and outside the principal operations of the Company. The Company excludes gain (loss) on the disposition of properties from EBDT because it develops and acquires properties for long-term investment, not short-term trading gains. As a result, the Company views dispositions of properties other than commercial outlots or land held by the Land Group as nonrecurring items. Extraordinary items are generally the result of the restructuring of nonrecourse debt obligations and are not considered to be a component of the Company's operating results. FINANCIAL CONDITION AND LIQUIDITY The Company believes that its sources of liquidity and capital are adequate. The Company's principal sources of funds are cash provided by operations, the revolving credit facility and refinancings of existing properties. The Company's principal use of funds are the financing of development and acquisitions of real estate projects, capital expenditures for its existing portfolio and payments on nonrecourse mortgage debt on real estate. REVOLVING CREDIT FACILITY - At January 31, 2000 and 1999, the Company had $167,000,000 and $105,000,000, respectively, outstanding under its $225,000,000 revolving credit facility. The revolving credit facility matures December 10, 2001, unless extended, and allows for up to a combined amount of $30,000,000 in outstanding letters of credit and surety bonds ($9,245,000 and $19,882,000, respectively, were outstanding at January 31, 2000). The outstanding letters of credit reduce the credit available to the Company. Annually, within 60 days of January 31, the revolving credit facility may be extended by one year by unanimous consent of the nine participating banks. At its maturity date, the outstanding revolving credit loans, if any, may be converted by the Company into a four-year term loan. The revolving credit available is reduced quarterly by $2,500,000, which began April 1, 1998. At January 31, 2000, the revolving credit line was $205,000,000. The revolving credit agreement provides, among other things, for 1) interest rates of 2% over LIBOR or 1/4% over the prime rate; 2) maintenance of debt service coverage ratios and specified levels of net worth and cash flow (as defined); and 3) restriction on dividend payments. At January 31, 2000, retained earnings of $8,494,000 were available for payment of dividends. The Company has purchased a 6.50% LIBOR interest rate cap for 2000 and an average 6.75% LIBOR interest rate cap for 2001 at notional amounts of $100,620,000 and $83,280,000, respectively. SENIOR NOTES - On March 16, 1998, the Company issued $200,000,000 in 8.50% senior notes due March 15, 2008 in a public offering. Accrued interest on the senior notes is payable semiannually on March 15 and September 15. The senior notes are unsecured senior obligations of the Company, however, they are subordinated to all existing and future indebtedness and other liabilities of the Company's subsidiaries, including borrowings under the revolving credit facility. The indenture contains covenants providing, among other things, limitations on incurring additional debt and payment of dividends. LUMBER TRADING GROUP - Lumber Trading Group is financed separately from the rest of the Company's principal business groups. The financing obligations of Lumber Trading Group are without recourse to the Company. Accordingly, the liquidity of Lumber Trading Group is discussed separately below under "Lumber Trading Group Liquidity." MORTGAGE REFINANCINGS During the year ended January 31, 2000, the Company completed approximately $701,000,000 in financings, including $255,000,000 in refinancings, $146,000,000 for new development projects and $300,000,000 in loan extensions. The Company is actively working to extend the maturities and/or refinance the nonrecourse debt that is coming due in 2000 and 2001, generally pursuing long-term fixed rate debt. INTEREST RATE EXPOSURE At January 31, 2000, the composition of nonrecourse mortgage debt was as follows: Amount Rate(1) ============================= (in thousands) Fixed .................................... $1,564,620 7.52% Variable - Swapped(2) ............................ 198,792 7.44% Capped(3) ............................. 396,652 7.86% Tax-Exempt ............................ 152,457 4.10% UDAG and other subsidized loans (fixed) ................ 69,859 2.57% ---------- $2,382,380 7.21% ========== (1) The weighted average interest rates shown above include both the base index and the lender margin. (2) The $198,792 of LIBOR-based swapped debt had a combined remaining average life of 0.97 years as of January 31, 2000. (3) The $396,652 of capped debt is protected by $584,330 in LIBOR caps as described below. These caps protect the current debt outstanding as well as the anticipated increase in debt outstanding for projects currently under development or anticipated to be under development during fiscal year 2000. 49 25 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES With respect to taxable variable-rate debt, the Company generally attempts to obtain interest rate protection for such debt with a maturity in excess of one year. The Company has purchased 6.50% and an average 6.86% LIBOR interest rate caps for its variable-rate mortgage debt in the amount of $584,330,000 and an average $563,609,000, respectively, for the years ending January 31, 2001 and 2002. In addition, 3-year LIBOR caps were purchased at strike rates ranging from 6.75% - 8.00% to protect the development portfolio, in the aggregate amount of $359,949,000 with start dates from September 2000 through February 2003. The Company intends to convert a significant portion of its committed variable-rate debt to fixed-rate debt. In order to mitigate upward fluctuations in interest rates, the Company has entered into Treasury Options. The Company owns $305,519,000 of 10-year Treasury Options at strike rates ranging from 6.00% - 7.00% with exercise dates ranging from November 2000 to August 2002. Additionally, the Company owns $43,010,000 of 5-year Treasury Options at a strike rate of 7.00% with an exercise date of August 2001. The Company generally does not hedge tax-exempt debt because, since 1990, the base rate of this type of financing has averaged only 3.60% and has never exceeded 7.90%. At January 31, 2000, a 100 basis point increase in taxable interest rates would increase the annual pre-tax interest cost of the Company's taxable variable-rate debt by approximately $2,400,000. This effect is lessened due to the 6.50% LIBOR caps in place for fiscal year 2000. Although tax-exempt rates generally increase in an amount that is smaller than corresponding changes in taxable interest rates, a 100 basis point increase in tax-exempt interest rates would increase the annual pre-tax interest cost of the Company's tax-exempt variable-rate debt by approximately $1,500,000. LUMBER TRADING GROUP LIQUIDITY Lumber Trading Group is separately financed with two revolving lines of credit and a nonrecourse accounts receivable sale program. These credit facilities are without recourse to the Company. At January 31, 2000, Lumber Trading Group's two lines of credit totaled an $87,000,000 commitment expiring June 30, 2000. These credit lines are secured by the assets of the Lumber Trading Group and are used to finance its working capital needs. At January 31, 2000, $21,486,000 was outstanding under these facilities. In July 1999, Lumber Trading Group entered into a three-year agreement under which it is selling an undivided interest in a pool of accounts receivable up to a maximum of $102,000,000. At January 31, 2000, the Company had received $55,000,000 in net proceeds from this agreement. The program is nonrecourse to the Company and the Company bears no risk as to the collectibility of the accounts receivable. The Company believes that the amounts available under these credit facilities, together with the accounts receivable sale program, will be sufficient to meet Lumber Trading Group's liquidity needs. CASH FLOWS Net cash provided by operating activities was $126,789,000, $113,119,000, and $84,629,000 for 1999, 1998 and 1997, respectively. The increase in net cash provided by operating activities in 1999 from 1998 is the result of an increase of $152,554,000 in rents and other revenues received principally comprised of an increase in consolidated revenues of $ 96,422,000 and a decrease in notes and accounts receivable of $41,427,000 (resulting from a decrease of $2,867,000 in 1999 versus an increase of $38,560,000 in 1998) primarily from Lumber Trading Group, and a decrease of $8,152,000 in land development expenditures. These increases were partially offset by a $119,786,000 increase in expenditures for operating expenses (due to an increase of $62,217,000 in operating expenses, an increase in accounts payable of $31,011,000 and an increase in Lumber Trading Group's inventory of $21,542,000), an increase of $14,323,000 in interest paid, and a decrease of $12,927,000 in proceeds from land sales. The increase in net cash provided by operating activities in 1998 from 1997 is the result of an increase of $16,512,000 in rents and other revenues received principally comprised of an increase in consolidated revenues of $63,980,000, net of an increase in notes and accounts receivable of $48,579,000 (resulting from an increase of $38,560,000 in 1998 versus a decrease of $10,019,000 in 1997) primarily from Lumber Trading Group, an increase of $3,416,000 in proceeds from land sales and a $33,263,000 decrease in expenditures for operating expenses primarily due to an increase in accounts payable in Lumber Trading Group. These increases were partially offset by an increase of $13,114,000 in land development expenditures and an increase of $11,587,000 in interest paid. Net cash used in investing activities totaled $407,854,000, $526,324,000 and $287,932,000 for 1999, 1998 and 1997, respectively. Capital expenditures, other than development and acquisition activities, totaled $37,822,000, $44,615,000, and $39,421,000 (including both recurring and investment capital expenditures) in 1999, 1998, and 1997, respectively, and were financed with cash provided from operating activities. The Company invested $346,315,000, $ 415,728,000, and $203,410,000 in acquisition and development of real estate projects in 1999, 1998, and 1997, respectively. These expenditures were financed with approximately $194,000,000, $203,000,000, and $181,000,000 in new mortgage indebtedness incurred in 1999, 1998, and 1997, respectively, cash provided from operations and borrowings under the revolving credit facility. In 1999, 1998, and 1997, $-0-, $33,345,000, and $-0- was collected in proceeds from the disposition of real estate properties. The Company invested $23,717,000, $99,326,000, and $33,737,000 in investments in and advances to affiliates in 1999, 1998, and 1997, respectively. The 1999 investments were primarily in the following syndicated Residential Group projects: The Grand ($15,200,000), a 546-unit luxury high-rise apartment building in North Bethesda, Maryland that opened in February 1999; Grand Lowry Lofts ($9,600,000), 261 units under construction in Denver, Colorado; and Philip Morris at Tobacco Row ($10,300,000), a 171-unit apartment renovation project in Richmond, Virginia. In addition, investments of $10,000,000 were made during 1999 on behalf of the Company's partner for New York City area urban development projects. During 1999, a return on investment of $23,270,000 was received on 101 San Fernando in San Jose, California. The 1998 investments were primarily in the following syndicated Residential Group projects: 101 San Fernando ($31,100,000) in San Jose, California; The Enclave ($16,300,000), another development in San Jose that opened in phases during 1997 and 1998; 50 26 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES The Grand ($7,800,000); Philip Morris at Tobacco Row ($4,900,000), and The Drake ($5,200,000), a redevelopment project in Philadelphia, Pennsylvania. In addition, investments were made during 1998 on behalf of the Company's partner for the following projects: $11,772,000 for New York City area urban development; $5,181,000 for the Promenade regional mall in Temecula, California, $5,400,000 for The Mall at Robinson Town Centre project under development; and $6,000,000 in Land Group joint ventures. In 1997, the Company invested primarily in The Grand, The Mall at Robinson Town Centre and the New York City urban retail program. Net cash provided by financing activities totaled $299,631,000, $436,980,000, and $216,855,000 in 1999, 1998, and 1997, respectively. The Company's refinancing of mortgage indebtedness is discussed above in "Mortgage Refinancings" and borrowings under new mortgage indebtedness for acquisition and development activities is included in the preceding paragraph discussing net cash used in investing activities. Net cash provided by financing activities for 1999 reflected an increase of $25,672,000 in restricted cash related to the financing of Millennium ($8,676,000), an office building at University Park at MIT in Cambridge, Massachusetts, and a good faith deposit on Residential property to be acquired in the year 2000 ($11,514,000), net of an increase in book overdrafts of $19,446,000 (representing checks issued but not yet paid). In addition, the Company reported a net increase of $18,969,000 in notes payable primarily from two New York City hotels under construction payable to the hotel management company, payment of deferred financing costs of $6,021,000 and payment of $5,399,000 of dividends. Net cash provided by financing activities for 1998 reflected a reduction of $26,579,000 in restricted cash primarily related to the financing of The Enclave apartment project in San Jose, California and the sale of the mortgage servicing division of Forest City Capital Corp. Net proceeds from the issuance of senior notes in March 1998 of $193,703,000, which were initially used to repay $114,000,000 of long-term debt, and an increase in book overdrafts of $8,838,000 (representing checks issued but not yet paid). In addition, the Company reported a net increase of $9,110,000 in notes payable primarily from the 101 San Fernando residential development project, payment of deferred financing costs of $16,565,000 and payment of $4,497,000 of dividends. During 1997, cash provided by financing activities included proceeds from the sale of common stock of $76,076,000, the release of $3,600,000 in restricted cash related to the Atlantic Center retail project in Brooklyn, New York, a reduction in book overdrafts of $9,749,000, repayment of a $6,365,000 note payable relating to the purchase of the Company's additional 33-1/3% interest in the The Mall at Robinson Town Centre, payment of deferred financing costs of $12,142,000, purchase of treasury stock for $2,896,000 and payment of $3,490,000 of dividends. RECENT DEVELOPMENTS During the first quarter of 2000, the Company disposed of two apartment complexes, Highlands and Studio Colony with a total of 1,006 units, and recorded a pre-tax gain on disposition of properties of approximately $26,500,000. SHELF REGISTRATION On December 3, 1997, the Company filed a shelf registration statement with the Securities and Exchange Commission for the potential offering on a delayed basis of up to $250,000,000 in debt or equity securities. This registration was in addition to the shelf registration filed on March 4, 1997 of up to $250,000,000 in debt or equity securities. The Company has sold approximately $82,000,000 through a common equity offering completed on May 20, 1997 and $200,000,000 through a debt offering completed on March 16, 1998. The Company currently has available approximately $218,000,000 on the second shelf registration statement of debt, equity or any combination thereof. DIVIDENDS On June 8, 1999, the Board of Directors voted to increase the 1999 quarterly dividend to $.05 per share on both Class A and Class B Common Stock, representing a 25% annual increase in the previous quarterly dividend. The first, second, third and fourth 1999 quarterly dividends of $.04, $.05, $.05 and $.05, respectively, per share on shares of both Class A and Class B Common Stock were paid June 15, 1999, September 15, 1999, December 15, 1999 and March 15, 2000, respectively. The first 2000 quarterly dividend of $.05 per share on both Class A and Class B Common Stock was declared on March 10, 2000 and will be paid on June 15, 2000 to share-holders of record at the close of business on June 1, 2000. LEGAL PROCEEDINGS On September 21, 1999, a complaint was filed in state court in Los Angeles County against Forest City Enterprises, Inc., Forest City California Residential Development, Inc., and Forest City Residential West, Inc. Plaintiffs are 63 construction workers who claim to have been exposed to asbestos and mold and mildew while engaged in renovation work at a construction site in Washington ("the Washington claims"). Three of the plaintiffs also claim to have been exposed to lead paint and asbestos at a construction site in California ("the California claims"). Plaintiffs seek damages for unspecified personal injuries, lost income, and diminished earning capacity and also seek punitive and treble damages. Defendants filed a motion to dismiss or stay the Washington claims on the grounds that Washington was a more appropriate forum in which to hear these claims. On February 25, 2000, the Superior Court for the County of Los Angeles granted defendants' motion and severed the Washington claims from the California claims and stayed the Washington claims so that they can be tried in Washington, which the Court found to be the more appropriate forum. The Company will continue the defense of the California claims in the State of California court system. An action was filed in August 1997 against Forest City Trading Group, Inc. (a wholly-owned subsidiary of the Company) and 10 of its subsidiaries, all of which are in the business of trading lumber. The complaint alleged improper calculation and underpayment of commissions and other related claims. On September 11, 1998 Plaintiffs filed a Motion for Class Certification. On December 8, 1998 the court posted an order denying class certification. On April 5, 1999 the original four Plaintiffs filed a notice of dismissal of this lawsuit without prejudice in state court. On April 16, 1999, 51 27 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES the case was re-filed in Federal court against Forest City Trading Group, Inc. and four of its subsidiaries. On November 30, 1999, the U.S. District Court for the District of Oregon dismissed the federal claims with prejudice and the state law claims without prejudice. The time to appeal has expired. There will be no further report on this case if no new developments take place. The Company, through its subsidiaries, owns a 14.6% interest in the Seven Hills housing development located in Henderson, Nevada, which is owned by the Silver Canyon Partnership ("Silver Canyon") and is being developed next to a golf course. In August 1997, a class-action lawsuit was filed by the current homeowners in Seven Hills against the Silver Canyon Partnership, the golf course developers and other entities, including the Company. In addition, separate lawsuits were filed by some of the production home-building companies at Seven Hills against some of the same parties, including the Company. Each of these lawsuits sought a commitment for public play on the golf course, as well as damages and, in October 1998, the court granted play rights. In February 1999, the owner of the golf course filed a cross-claim against the Silver Canyon Partnership and the Company. Silver Canyon has since settled with the Plaintiff homeowners and with certain of Silver Canyon's insurance carriers and the Company has been released. In addition, Silver Canyon has reached settlement agreements with the owner of the golf course and with one of the production home-builders which are expected to be executed in the near future. These settlements include a release of the Company. The Company was dismissed as a defendant in the other two lawsuits filed by the production builders, and subsequent to the dismissal of the Company, Silver Canyon reached settlement in principle in connection with one of the production home builder lawsuits. The remaining lawsuit is set for trial in June 2000 against Silver Canyon. Silver Canyon believes it has meritorious defenses and intends to vigorously defend the lawsuit. NEW ACCOUNTING STANDARDS In the first quarter of 1999, the Company adopted SOP 98-5, "Reporting on the Costs of Start-up Activities." This statement requires that start-up costs and organization costs be expensed as incurred. The adoption of this accounting principle had no material effect on earnings or financial position. In June 1999, the Financial Accounting Standards Board (FASB) issued SFAS 137, which defers the effective date of SFAS 133, "Accounting for Derivative Instruments and Hedging Activities", to all fiscal quarters of fiscal years beginning after June 15, 2000. Therefore, the Company plans to implement SFAS 133 for the fiscal quarters in its fiscal year ending January 31, 2002. The adoption of SFAS 133 is not expected to have a material effect on the financial position or results of operations of the Company. YEAR 2000 The Company has completed its program to prepare its financial and operating computer systems and embedded applications for the Year 2000. The Company did not experience any significant malfunctions or errors. Based on operations since January 1, 2000, the Company does not expect any significant impact to its ongoing business as a result of the "Year 2000 issue." No problems were detected through the leap year processing. The Company is currently not aware of any significant Year 2000 or similar problems that have arisen for its partners, vendors, suppliers and tenants. For business reasons unrelated to the Year 2000, the Company's computer systems have been moved from the mainframe environment to a distributed environment. Major processing systems were replaced with Year 2000-compliant software. The project costs was approximately $4 million. The Company had identified concerns related to hardware, software and embedded systems and developed a contingency plan to respond to each concern. The Company had appropriate personnel, and outside contractors, on site starting on the evening of December 31, 1999 and the ensuing weekend. The Company completed the Year 2000 tasks and notified senior management of the program completion. None of the systems that related to the safety of the properties' tenants or customers were affected. The property sites have well defined emergency plans in place, and these would have been activated if necessary. Similar to other companies, Forest City was highly dependent upon systems in the public sector, such as utilities, mail, government agencies and transportation systems. The Company did not experience any failure in these areas. The Year 2000 plan was aimed at identifying and correcting all issues upon which Forest City had direct control or indirect control through its vendors and business partners. The Company successfully completed its Year 2000 program with minimal effect on operations. INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS This annual report, together with other statements and information publicly disseminated by the Company, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements reflect management's current views with respect to financial results related to future events and are based on assumptions and expectations which may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial or otherwise, may differ from the results discussed in the forward-looking statements. Risks and other factors that might cause differences, some of which could be material, include, but are not limited to, the effect of economic and market conditions on a nationwide basis as well as regionally in areas where the Company has a geographic concentration of properties; failure to consummate financing arrangements; development risks, including lack of satisfactory financing, construction and lease-up delays and cost overruns; the level and volatility of interest rates; financial stability of tenants within the retail industry, which may be impacted by competition and consumer spending; the rate of revenue increases versus expenses increases; the cyclical nature of the lumber wholesaling business; as well as other risks listed from time to time in the Company's reports filed with the Securities and Exchange Commission. The Company has no obligation to revise or update any forward-looking statements as a result of future events or new information. Readers are cautioned not to place undue reliance on such forward-looking statements. 52 28 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES THREE YEAR SUMMARY OF EARNINGS BEFORE DEPRECIATION, AMORTIZATION AND DEFERRED TAXES (in thousands)
Commercial Group Residential Group --------------------------------------------------------------------------- 1999 1998 1997 1999 1998 1997 ============================================================================================================================= Revenues ..................................... $ 442,992 $ 380,264 $ 330,117 $ 158,768 $ 139,003 $ 135,253 Operating expenses, including depreciation and amortization for non-Real Estate Groups 231,198 195,966 167,107 74,041 66,248 63,533 Interest expense ............................. 94,356 91,291 87,035 26,447 27,342 28,884 Income tax provision (benefit) ............... 11,561 (1,020) 2,202 11,869 6,799 10,851 --------------------------------------------------------------------------- 337,115 286,237 256,344 112,357 100,389 103,268 --------------------------------------------------------------------------- Earnings before depreciation, amortization and deferred taxes (EBDT) ..................... $ 105,877 $ 94,027 $ 73,773 $ 46,411 $ 38,614 $ 31,985 =========================================================================== Land Group Lumber Trading Group --------------------------------------------------------------------------- 1999 1998 1997 1999 1998 1997 ============================================================================================================================= Revenues ..................................... $ 41,356 $ 52,611 $ 44,614 $ 149,357 $ 123,325 $ 122,169 Operating expenses, including depreciation and amortization for non-Real Estate Groups 39,732 40,532 33,855 131,811 111,998 107,673 Interest expense ............................. 7,370 6,814 5,575 5,288 5,262 5,254 Income tax provision (benefit) ............... (2,257) 2,079 1,858 5,188 2,838 4,043 --------------------------------------------------------------------------- 44,845 49,425 41,288 142,287 120,098 116,970 --------------------------------------------------------------------------- Earnings before depreciation, amortization and deferred taxes (EBDT) ..................... $ (3,489) $ 3,186 $ 3,326 $ 7,070 $ 3,227 $ 5,199 =========================================================================== Corporate Activities Total --------------------------------------------------------------------------- 1999 1998 1997 1999 1998 1997 ============================================================================================================================= Revenues ..................................... $ 598 $ 1,446 $ 516 $ 793,071 $ 696,649 $ 632,669 Operating expenses, including depreciation and amortization for non-Real Estate Groups 12,786 12,766 10,478 489,568 427,510 382,646 Interest expense ............................. 26,258 19,251 9,574 159,719 149,960 136,322 Income tax provision (benefit) ............... (15,216) (9,371) (12,163) 11,145 1,325 6,791 --------------------------------------------------------------------------- 23,828 22,646 7,889 660,432 578,795 525,759 --------------------------------------------------------------------------- Earnings before depreciation, amortization and deferred taxes (EBDT) ..................... $ (23,230) $ (21,200) $ (7,373) $ 132,639 $ 117,854 $ 106,910 =========================================================================== RECONCILIATION TO NET EARNINGS: Earnings before depreciation, amortization and deferred taxes (EBDT) ........... $ 132,639 $ 117,854 $ 106,910 Depreciation and amortization - Real Estate Groups ............................. (84,586) (83,655) (71,678) Deferred taxes - Real Estate Groups ............................................ (12,453) (14,236) (10,693) Provision for decline in real estate and other, net of tax ..................... (3,060) - - Gain (loss) on disposition of properties, net of tax ........................... 7,990 18,444 (23,356) Extraordinary gain, net of tax ................................................. 272 16,343 19,356 ----------------------------------- Net earnings ................................................................... $ 40,802 $ 54,750 $ 20,539 ===================================
53 EX-21 7 EXHIBIT 21 1 Parents and Subsidiaries Exhibit 21 - -------------------------- ----------- The voting securities of the subsidiaries below are in each case owned by Forest City Enterprises, Inc. except where a subsidiary's name is indented, in which case that subsidiary's voting securities are owned by the next preceding subsidiary whose name is not so indented.
Percentage of Voting Securities Owned By State of Name of Subsidiary Immediate Parent Incorporation ------------------ ---------------- ------------- Forest City Rental Properties Corporation 100 Ohio Forest City Commercial Group, Inc. 100 Ohio Central Station Limited Partnership 100 Illinois Temecula Power Center LLC 100 Ohio Forest City Residential Group, Inc. 100 Ohio Forest City Trading Group, Inc. 100 Oregon Sunrise Development Company 100 Ohio Sunrise Land Company 100 Ohio FC Granite, Inc. 100 Ohio
EX-23 8 EXHIBIT 23 1 Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in Registration Statements on Form S-8 (File Nos. 33-65058, 33-65054 and 333-61925) and in the Prospectus constituting part of the Registration Statements on Form S-3 (File Nos. 333-22695 and 333-41437) of Forest City Enterprises, Inc. and subsidiaries of our report dated March 11, 2000, on our audits of the consolidated financial statements and financial statement schedules of Forest City Enterprises, Inc. and subsidiaries as of January 31, 2000 and 1999, and for the years ended January 31, 2000, 1999, and 1998, which reports are included in this Annual Report on Form 10-K. We also consent to the reference to our firm under the caption "Experts" in the Prospectus constituting part of the Registration Statements filed on Form S-3. PricewaterhouseCoopers LLP Cleveland, Ohio April 24, 2000 EX-24 9 EXHIBIT 24 1 Exhibit 24(a) DIRECTOR AND OFFICER OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director and Officer of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner or Thomas G. Smith, with full power of substitution and resubstitution, as attorneys or attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 2000, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney and any such substitute. EXECUTED as of April 18, 2000. Signature: s/ Samuel H. Miller Printed Name: Samuel H. Miller Title: Director, Officer, Treasurer, Co-Chairman of the Board 2 Exhibit 24(b) DIRECTOR AND OFFICER OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director and Officer of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner or Thomas G. Smith, with full power of substitution and resubstitution, as attorneys or attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 2000, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney and any such substitute. EXECUTED as of April 18, 2000. Signature: s/ Albert B. Ratner Printed Name: Albert B. Ratner Title: Director, Officer, Co-Chairman of the Board 3 Exhibit 24(c) DIRECTOR AND OFFICER OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director and Officer of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner or Thomas G. Smith, with full power of substitution and resubstitution, as attorneys or attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 2000, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney and any such substitute. EXECUTED as of April 20, 2000. Signature: s/ Brian J. Ratner Printed Name: Brian J. Ratner Title: Director, Officer, Sr. Vice President, Development 4 Exhibit 24(d) DIRECTOR AND OFFICER OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director and Officer of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner or Thomas G. Smith, with full power of substitution and resubstitution, as attorneys or attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 2000, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney and any such substitute. EXECUTED as of April 18, 2000. Signature: s/ Charles A. Ratner Printed Name: Charles A. Ratner Title: Director, Chief Executive Officer, President 5 Exhibit 24(e) DIRECTOR AND OFFICER OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director and Officer of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner or Thomas G. Smith, with full power of substitution and resubstitution, as attorneys or attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 2000, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney and any such substitute. EXECUTED as of April 18, 2000. Signature: s/ James A. Ratner Printed Name: James A. Ratner Title: Director, Officer, Executive Vice President 6 Exhibit 24(f) DIRECTOR AND OFFICER OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director and Officer of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner or Thomas G. Smith, with full power of substitution and resubstitution, as attorneys or attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 2000, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney and any such substitute. EXECUTED as of April 19, 2000. Signature: s/ Ronald A. Ratner Printed Name: Ronald A. Ratner Title: Director, Officer, Executive Vice President 7 Exhibit 24 (g) DIRECTOR OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner or Thomas G. Smith, with full power of substitution and resubstitution, as attorneys or attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 2000, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of April 19, 2000. Signature: s/ Scott S. Cowen Printed Name: Scott S. Cowen Title: Director 8 Exhibit 24(h) DIRECTOR OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner or Thomas G. Smith, with full power of substitution and resubstitution, as attorneys or attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 2000, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of April 24, 2000. Signature: s/ Michael P. Esposito, Jr. Printed Name: Michael P. Esposito, Jr. Title: Director 9 Exhibit 24 (i) DIRECTOR OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner or Thomas G. Smith, with full power of substitution and resubstitution, as attorneys or attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 2000, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of April 18, 2000. Signature: s/ Jerry V. Jarrett Printed Name: Jerry V. Jarrett Title: Director 10 Exhibit 24(j) DIRECTOR OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner or Thomas G. Smith, with full power of substitution and resubstitution, as attorneys or attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 2000, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of April 18, 2000. Signature: s/ Stan Ross Printed Name: Stan Ross Title: Director 11 Exhibit 24(k) DIRECTOR OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner or Thomas G. Smith, with full power of substitution and resubstitution, as attorneys or attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 2000, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of April 20, 2000. Signature: s/ Deborah Ratner-Salzberg Printed Name: Deborah Ratner-Salzberg Title: Director 12 Exhibit 24(l) DIRECTOR OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner or Thomas G. Smith, with full power of substitution and resubstitution, as attorneys or attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 2000, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of April 18, 2000. Signature: s/ Joan K. Shafran Printed Name: Joan K. Shafran Title: Director 13 Exhibit 24(m) DIRECTOR OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Director of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner or Thomas G. Smith, with full power of substitution and resubstitution, as attorneys or attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 2000, and any and all amendments thereto, to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of April 18, 2000. Signature: s/ Louis Stokes Printed Name: Louis Stokes Title: Director 14 Exhibit 24(n) OFFICER OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Officer of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner or Thomas G. Smith, with full power of substitution and resubstitution, as attorneys or attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 2000, and any and all amendments thereto to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of April 19, 2000 Signature: s/ Linda M. Kane Printed Name: Linda M. Kane Title: Vice President, Corporate Controller 15 Exhibit 24 (o) OFFICER OF FOREST CITY ENTERPRISES, INC. FORM 10-K POWER OF ATTORNEY The undersigned Officer of Forest City Enterprises, Inc., an Ohio corporation (the "Corporation"), hereby constitutes and appoints Charles A. Ratner or Thomas G. Smith, with full power of substitution and resubstitution, as attorneys or attorney of the undersigned, for him or her and in his or her name, place and stead, to sign and file under the Securities Exchange Act of 1934 an Annual Report on Form 10-K for the fiscal year ended January 31, 2000, and any and all amendments thereto to be filed with the Securities and Exchange Commission pertaining to such filing, with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, hereby ratifying and approving the act of said attorney. EXECUTED as of April 18, 2000 Signature: s/ Thomas G. Smith Printed Name: Thomas G. Smith Title: Chief Financial Officer, Senior Vice President, Secretary EX-27 10 EXHIBIT 27
5 1,000 YEAR JAN-31-2000 FEB-01-1999 JAN-31-2000 97,195 0 235,282 8,533 57,444 0 3,426,508 547,479 3,814,474 0 2,749,380 0 0 10,295 367,827 3,814,474 0 793,071 0 574,153 0 0 159,719 64,849 24,319 40,530 0 272 0 40,802 1.36 1.35
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