FOREST CITY ENTERPRISES INC - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2003

Commission file number 1-4372

FOREST CITY ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)

Ohio

34-0863886

(State or other jurisdiction of
incorporation or organization)

(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

(Former name, former address and former fiscal year, if changed since last report).

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES X NO

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding at June 4, 2003

Class A Common Stock, $.33 1/3 par value		36,038,968 shares

Class B Common Stock, $.33 1/3 par value		13,791,692 shares

TABLE OF CONTENTS


	Item 1. Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II — OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security-Holders
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
CERTIFICATION
CERTIFICATION
Exhibit 10.40
Exhibit 10.41
Exhibit 99.1 Section 906 Certification

FOREST CITY ENTERPRISES, INC.

Table of Contents


			Page No.

PART I. FINANCIAL INFORMATION

	Item 1. Financial Statements Forest City Enterprises, Inc. and Subsidiaries

		Consolidated Balance Sheets — April 30, 2003 (Unaudited) and January 31, 2003		2

		Consolidated Statements of Earnings (Unaudited) — Three Months Ended April 30, 2003 and 2002		3

		Consolidated Statements of Comprehensive Income (Unaudited) — Three Months Ended April 30, 2003 and 2002		4

		Consolidated Statements of Shareholders’ Equity (Unaudited) — Three Months Ended April 30, 2003 and 2002		4

		Consolidated Statements of Cash Flows (Unaudited) - Three Months Ended April 30, 2003 and 2002		5-6

		Notes to Consolidated Financial Statements (Unaudited)		7-21

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22-45

	Item 3. Quantitative and Qualitative Disclosures about Market Risk			46-48

	Item 4. Controls and Procedures			49

PART II. OTHER INFORMATION

	Item 1. Legal Proceedings			49

	Item 4. Submission of Matters to a Vote of Security-Holders			50

	Item 6. Exhibits and Reports on Form 8-K			51-56

Signatures				57

Section 302 Certifications				58-59

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets


					April 30, 2003			January 31, 2003

					(Unaudited)
					*(in thousands)*

Assets
Real Estate
		Completed rental properties			$	3,870,332		$	3,866,625
		Projects under development				643,609			572,476
		Land held for development or sale				37,109			35,036

			Total Real Estate			4,551,050			4,474,137
		Less accumulated depreciation				(633,429	)		(615,653	)

				Real Estate, net		3,917,621			3,858,484
Cash and equivalents						73,628			122,356
Restricted cash						128,018			127,046
Notes and accounts receivable, net						277,510			286,652
Inventories						37,711			38,638
Investments in and advances to real estate affiliates						487,174			489,205
Other assets						148,341			154,828

			Total Assets		$	5,070,003		$	5,077,209

Liabilities and Shareholders’ Equity
Liabilities
Mortgage debt, nonrecourse					$	3,037,326		$	3,016,107
Notes payable						75,181			79,484
Long-term credit facility						148,000			135,250
Senior and subordinated debt						220,400			220,400
Accounts payable and accrued expenses						532,190			585,042
Deferred income taxes						260,235			255,888

			Total Liabilities			4,273,332			4,292,171
Minority interest						78,842			79,066

Commitments and Contingencies
Company-Obligated Trust Preferred Securities						—			—

Shareholders’ Equity
Preferred stock — 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; 36,158,786 and 35,678,086 shares issued, 36,030,768 and 35,525,067 outstanding, respectively					12,053			11,892
	Class B, convertible, 36,000,000 shares authorized; 14,067,042 and 14,547,742 shares issued, 13,799,892 and 14,130,592 outstanding, respectively					4,689			4,850

						16,742			16,742
Additional paid-in capital						231,732			232,029
Retained earnings						482,161			470,348

						730,635			719,119
Less treasury stock, at cost; 128,018 Class A and 267,150 Class B shares and 153,019 Class A and 417,150 Class B shares, respectively						(2,918	)		(4,425	)
Accumulated other comprehensive loss						(9,888	)		(8,722	)

	Total Shareholders’ Equity					717,829			705,972

			Total Liabilities and Shareholders’ Equity		$	5,070,003		$	5,077,209

See notes to consolidated financial statements.

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings (Unaudited)


			Three Months Ended April 30,

			2003			2002

			*(in thousands, except per share data)*
Revenues
		Rental properties	$	214,157		$	174,914
		Lumber trading		19,901			26,263
		Equity in earnings of unconsolidated real estate entities		9,843			10,194

				243,901			211,371

Expenses
		Operating expenses		142,527			125,952
		Interest expense		44,652			43,133
		Depreciation and amortization		29,817			26,628

				216,996			195,713

Gain (loss) on disposition of other investments				22			(116	)

Earnings before income taxes				26,927			15,542

Income tax expense
		Current		2,822			4,511
		Deferred		6,754			2,176

				9,576			6,687

Earnings before minority interest and discontinued operations				17,351			8,855
Minority interest				(2,540	)		355

Earnings from continuing operations				14,811			9,210

Discontinued operations, net of tax and minority interest
		(Loss) earnings from operations		(72	)		926
		Gain on disposition of operating properties		53			-

				(19	)		926

Net earnings			$	14,792		$	10,136

Basic earnings per common share
	Earnings from continuing operations		$	.30		$	.18
	Earnings from discontinued operations, net of tax and minority interest			—			.02

	Net earnings		$	.30		$	.20

Diluted earnings per common share
	Earnings from continuing operations		$	.29		$	.18
	Earnings from discontinued operations, net of tax and minority interest			—			.02

	Net earnings		$	.29		$	.20

See notes to consolidated financial statements.

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)


			Three Months Ended April 30,

			2003			2002

			*(in thousands)*
Net earnings			$	14,792		$	10,136

Other comprehensive loss, net of tax:
	Unrealized gains (losses) on investments in securities:
		Unrealized gain (loss) on securities		30			(408	)
		Reclassification adjustment for gain included in net earnings		(13	)		—
	Unrealized derivative gains and losses:
		Change in unrealized gains and losses on interest rate contracts, net of minority interest		(1,183	)		405

Other comprehensive loss, net of tax				(1,166	)		(3	)

Comprehensive income			$	13,626		$	10,133

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
(Unaudited)


		Common Stock

		Class A				Class B							Additional					Treasury Stock						Accumulated Other
												Paid-In			Retained									Comprehensive
		Shares		Amount		Shares			Amount			Capital			Earnings			Shares			Amount			Income (Loss)			Total

												*(in thousands)*
Three Months Ended April 30, 2003 Balances at January 31, 2003			35,678	$	11,892		14,548		$	4,850		$	232,029		$	470,348			570		$	(4,425	)	$	(8,722	)	$	705,972
	Net earnings															14,792												14,792
	Other comprehensive loss, net of tax																								(1,166	)		(1,166	)
	Dividends $.06 per share															(2,979	)											(2,979	)
	Conversion of Class B to Class A shares		481		161		(481	)		(161	)																	—
	Exercise of stock options												480						(62	)		494						974
	Restricted stock issued												(1,013	)					(113	)		1,013						—
	Amortization of unearned compensation												236															236

	Balances at April 30, 2003		36,159	$	12,053		14,067		$	4,689		$	231,732		$	482,161			395		$	(2,918	)	$	(9,888	)	$	717,829

Three Months Ended April 30, 2002 Balances at January 31, 2002			35,101	$	11,700		15,125		$	5,042		$	228,263		$	432,939			762		$	(6,140	)	$	(9,291	)	$	662,513
	Net earnings															10,136												10,136
	Other comprehensive loss, net of tax																								(3	)		(3	)
	Dividends $.05 per share															(2,479	)											(2,479	)
	Conversion of Class B to Class A shares		379		126		(379	)		(126	)																	—
	Exercise of stock options												883						(114	)		1,026						1,909
	Amortization of unearned compensation												330															330

	Balances at April 30, 2002		35,480	$	11,826		14,746		$	4,916		$	229,476		$	440,596			648		$	(5,114	)	$	(9,294	)	$	672,406

See notes to consolidated financial statements.

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)


				Three Months Ended April 30,

				2003			2002

				*(in thousands)*
Cash Flows from Operating Activities
	Rents and other revenues received			$	233,290		$	193,208
	Cash distributions from unconsolidated entities				4,240			4,396
	Proceeds from land sales				11,076			15,404
	Land development expenditures				(12,075	)		(15,259	)
	Operating expenditures				(171,115	)		(148,993	)
	Interest paid				(48,630	)		(47,551	)

			Net cash provided by operating activities		16,786			1,205

Cash Flows from Investing Activities
	Capital expenditures				(106,592	)		(160,297	)
	Proceeds from disposition of other investments				54			—
	Changes in investments in and advances to real estate affiliates				7,722			3,060

			Net cash used in investing activities		(98,816	)		(157,237	)

Cash Flows from Financing Activities
	Increase in nonrecourse mortgage debt and long-term credit facility				108,259			239,844
	Principal payments on nonrecourse mortgage debt				(54,726	)		(23,235	)
	Payments on long-term credit facility				(6,250	)		(78,000	)
	Increase in notes payable				4,828			10,887
	Payments on notes payable				(9,131	)		(2,050	)
	Change in restricted cash and book overdrafts				(3,272	)		(3,995	)
	Payment of deferred financing costs				(1,418	)		(2,981	)
	Exercise of stock options				974			1,909
	Dividends paid to shareholders				(2,980	)		(2,474	)
	(Decrease) increase in minority interest				(2,982	)		4,664

		Net cash provided by financing activities			33,302			144,569

Net decrease in cash and equivalents					(48,728	)		(11,463	)
Cash and equivalents at beginning of period					122,356			50,054

Cash and equivalents at end of period				$	73,628		$	38,591

See notes to consolidated financial statements.

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
(Unaudited)


				Three Months Ended April 30

				2003			2002

				*(in thousands)*
Reconciliation of Net Earnings to Cash Provided by Operating Activities
Net Earnings				$	14,792		$	10,136
	Discontinued operations:
		Minority interest			218			(62	)
		Depreciation			—			382
		Amortization			106			26
		Gain on disposition of operating properties			(411	)		—
	Minority interest				2,540			(355	)
	Depreciation				25,037			22,050
	Amortization				4,780			4,578
	Equity in earnings of unconsolidated entities				(9,843	)		(10,194	)
	Cash distributions from unconsolidated entities				4,240			4,396
	Deferred income taxes				5,110			(371	)
	(Gain) loss on disposition of other investments				(22	)		116
	Early extinguishment of debt				—			380
	Decrease in land included in projects under development				13,887			1,891
	Decrease in land included in completed rental properties				—			220
	Increase in land held for development or sale				(2,073	)		(8,140	)
	Decrease in notes and accounts receivable, net				9,249			6,724
	Decrease (increase) in inventories				927			(8,447	)
	Decrease in other assets				144			3,814
	Decrease in accounts payable and accrued expenses				(51,895	)		(25,939	)

		Net cash provided by operating activities		$	16,786		$	1,205

Supplemental Non-Cash Disclosures:
The schedule below represents the effect of the following non-cash transactions
for the three months ended April 30:
		2003 • Increase in ownership interest in Station Square Disposition of interest in Trowbridge
		2002 • None
Operating Activities
		Notes and accounts receivable, net		$	(106	)	$	—
		Other assets			(1,705	)		—
		Accounts payable and accrued expenses			4,111			—

			Total effect on operating activities	$	2,300		$	—

Investing Activities
		Disposition of completed rental properties		$	11,014		$	—

Financing Activities
		Repayment of mortgage debt, nonrecourse		$	(13,314	)	$	—

See notes to consolidated financial statements.

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

A. Accounting Policies

Accounting for Derivative Instruments and Hedging Activities

During the three months ended April 30, 2003 and 2002, the Company recorded approximately $106,000 and $170,000 as interest expense in the Consolidated Statements of Earnings, which represented the total ineffectiveness of all cash flow hedges. The amount of hedge ineffectiveness relating to hedges designated and qualifying as fair value hedges was not material. The amount of net derivative losses reclassified into earnings from other comprehensive income as a result of forecasted transactions that did not occur by the end of the originally specified time period or within an additional two-month period of time thereafter was $0 and $680,000 for the three months ended April 30, 2003 and 2002, respectively. As of April 30, 2003, the Company expects that within the next twelve months it will reclassify amounts recorded in accumulated other comprehensive income into earnings as interest expense associated with the effectiveness of cash flow hedges of approximately $2,275,000, net of tax.

At April 30 and January 31, 2003, LIBOR interest rate caps were reported at their fair value of approximately $377,000 and $753,000, respectively, in the Consolidated Balance Sheet as Other Assets. The fair value of interest rate swap agreements at April 30 and January 31, 2003 is an unrealized loss of $6,048,000 and $4,340,000, respectively, and is included in Accounts Payable and Accrued Expenses in the Consolidated Balance Sheet.

Stock-Based Compensation

In March 2003, the Company granted 659,200 Class A fixed stock options to key employees and non-employee members of the Board of Directors. The options have a term of 10 years, vest over two to four years and have an exercise price of $31.00. The exercise price was equal to the market price of the underlying stock on the date of grant resulting in no intrinsic value and no compensation expense under APBO No. 25.

The Company also granted 112,500 shares of restricted Class A common stock to key employees. The restricted shares were awarded out of treasury stock, having a cost basis of $1,012,500, 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. The market value on the date of grant of $3,487,500 was recorded as unearned compensation to be charged to expense over the respective vesting periods. The unearned compensation of this award along with previously issued restricted stock is reported as an offset of Additional Paid-In Capital in the accompanying consolidated financial statements. At April 30, 2003, the unamortized unearned compensation relating to all restricted stock amounted to $5,877,655.

Stock based compensation costs, net of tax, relating to restricted stock awards were charged to net earnings in the amount of $143,000 and $200,000, respectively, during the three months ended April 30, 2003 and 2002. While these amounts were computed under APBO No. 25, they are equal to the fair value based amounts as computed under SFAS No. 123 “Accounting for Stock-Based Compensation.” The following table illustrates the effect on net earnings per share if the Company had also applied the fair value recognition provisions of SFAS No. 123 to stock options.

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

A. Accounting Policies (continued)

Stock-Based Compensation (continued)


		Three months ended April 30,

		2003			2002

Net earnings (in thousands)
	As reported	$	14,792		$	10,136
	Deduct stock-based employee compensation expense for stock options determined under the fair value based method, net of related tax effect		(641	)		(644	)

	Pro forma	$	14,151		$	9,492

Basic earnings per share
	As reported	$	.30		$	.20
	Pro forma	$	.28		$	.19
Diluted earnings per share
	As reported	$	.29		$	.20
	Pro forma	$	.28		$	.19

New Accounting Standards

In December 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 148 “Accounting for Stock-Based Compensation — Transition and Disclosure” (SFAS No. 148). This statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 “Accounting for Stock-Based Compensation” to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation is effective for the Company for the fiscal year ended January 31, 2004. The new requirements for interim disclosure is effective for the quarter ended April 30, 2003. The Company will continue to apply APBO No. 25 “Accounting for Stock Issued to Employees” and related interpretations in accounting for its stock-based employee compensation and does not expect SFAS No. 148 to have a material impact on the Company’s financial position, results of operations or cash flows.

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

A. Accounting Policies (continued)

New Accounting Standards (continued)

the impact of this interpretation and believes it is reasonably possible the Company is the primary beneficiary on many of its equity method investments and will be required to fully consolidate these investments as variable interest entities beginning in the quarter ending October 31, 2003. The Company has not yet determined the maximum potential loss related to the implementation of this new standard. The financial position and results of operations for the Company’s equity method investments are presented in Note I — Investments In and Advances to Affiliates on pages 19-20 of this Form 10-Q.

In April 2003, the FASB issued SFAS No. 149 “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (SFAS No. 149). This statement amends and clarifies financial accounting and reporting for derivative instruments and for hedging activities under FAS 133, “Accounting for Derivative Instruments and Hedging Activities.” This statement is effective for certain contracts entered into or modified after June 30, 2003 and for certain hedging relationships designated after June 30, 2003. The Company does not expect this statement to have a material impact on the Company’s financial position, results of operations or cash flows.

In March 2003, the Emerging Issues Task Force (EITF) issued EITF No. 00-21 “Accounting for Revenue Arrangements with Multiple Deliverables” (EITF No. 00-21). This issue addresses certain aspects of accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. This issue is effective for revenue arrangements entered into by the Company subsequent to January 31, 2004. The Company does not expect this statement to have an immediate material impact on the Company’s financial position, results of operations or cash flows.

In May 2003, the FASB issued SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (SFAS No. 150). This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This statement requires that an issuer classify a financial instrument that is within its scope as a liability, many of these instruments were previously classified as equity. The statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise shall be effective August 1, 2003 for the Company. The Company does not expect this statement to have an immediate material impact on the Company’s financial position, results of operations or cash flows.

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

B. Financial Statement Presentation

The Company presents certain financial amounts under the pro-rata consolidation method (a non-GAAP measure) as management believes that it more accurately reflects the manner in which it operates its business. The Company publicly discloses and discusses its performance using this method of consolidation to compliment its GAAP disclosures. The information in the tables below present amounts for both full consolidation and pro-rata consolidation, providing a reconciliation of the difference between the two methods. Under the pro-rata consolidation method, the Company presents its partnership investments proportionate to its share of ownership for each line item of its consolidated financial statements. Under full consolidation, partnership assets and liabilities are reported as consolidated at 100 percent if deemed under the Company’s control, or on the equity method of accounting if the Company does not have control.

Consolidated Balance Sheet — April 30, 2003

Plus

Unconsolidated

Less Minority

Investments at

Pro-Rata

Full Consolidation

Interest

Pro-Rata

Consolidation

(in thousands)

Assets

Real Estate

Completed rental properties

3,870,332

628,475

920,724

4,162,581

Projects under development

643,609

84,995

106,810

665,424

Land held for development or sale

37,109

—

41,588

78,697

Total Real Estate

4,551,050

713,470

1,069,122

4,906,702

Less accumulated depreciation

(633,429

)

(96,262

)

(199,995

)

(737,162

)

Real Estate, net

3,917,621

617,208

869,127

4,169,540

Cash and equivalents

73,628

11,825

21,654

83,457

Restricted cash

128,018

24,608

24,702

128,112

Notes and accounts receivable, net

277,510

32,566

13,404

258,348

Inventories

37,711

—

37,711

Investments in and advances to real estate affiliates

487,174

—

(58,209

)

428,965

Other assets

148,341

22,714

35,751

161,378

Total Assets

5,070,003

708,921

906,429

5,267,511

Liabilities and Shareholders’ Equity

Liabilities

Mortgage debt, nonrecourse

3,037,326

533,256

851,375

3,355,445

Notes payable

75,181

16,049

3,469

62,601

Long-term credit facility

148,000

—

148,000

Senior and subordinated debt

220,400

—

220,400

Accounts payable and accrued expenses

532,190

80,774

51,585

503,001

Deferred income taxes

260,235

—

260,235

Total Liabilities

4,273,332

630,079

906,429

4,549,682

Minority interest

78,842

—

Total Shareholders’ Equity

717,829

—

717,829

Total Liabilities and Shareholders’ Equity

5,070,003

708,921

906,429

5,267,511

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

B. Financial Statement Presentation (continued)

Consolidated Statement of Earnings — Three Months Ended April 30, 2003

Plus

Unconsolidated

Plus

Full

Less Minority

Investments at

Discontinued

Pro-Rata

Consolidation

Interest

Pro-Rata

Operations

Consolidation

(in thousands)

Revenues

Rental properties

214,157

38,635

59,281

687

235,490

Lumber trading

19,901

—

19,901

Equity in earnings of unconsolidated real estate entities

9,843

)

(5,343

)

—

4,503

243,901

38,632

53,938

687

259,894

Expenses

Operating expenses

142,527

24,104

33,060

749

152,232

Interest expense

44,652

7,599

14,096

—

51,149

Depreciation and amortization

29,817

4,389

6,782

32,267

216,996

36,092

53,938

806

235,648

Gain on disposition of other investments

—

110

Earnings before income taxes

26,927

2,540

—

(31

)

24,356

Income tax expense

Current

2,822

—

1,632

4,454

Deferred

6,754

—

(1,644

)

5,110

9,576

—

(12

)

9,564

Earnings before minority interest and discontinued operations

17,351

2,540

—

(19

)

14,792

Minority interest

(2,540

)

(2,540

)

—

Earnings from continuing operations

14,811

—

(19

)

14,792

Discontinued operations, net of tax and minority interest
Loss from operations

(72

)

—

Gain on disposition of operating properties

—

(53

)

—

(19

)

—

Net earnings

14,792

—

14,792

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

B. Financial Statement Presentation (continued)

Consolidated Statement of Earnings — Three Months Ended April 30, 2002


								Plus
								Unconsolidated			Plus
		Full			Less Minority			Investments at			Discontinued			Pro-Rata
		Consolidation			Interest			Pro-Rata			Operations			Consolidation

		*(in thousands)*
Revenues
	Rental properties	$	174,914		$	28,151		$	50,524		$	2,849		$	200,136
	Lumber trading		26,263			—			—			—			26,263
	Equity in earnings of unconsolidated real estate entities		10,194			—			(5,942	)		—			4,252

			211,371			28,151			44,582			2,849			230,651

Expenses
	Operating expenses		125,952			16,040			26,973			1,290			138,175
	Interest expense		43,133			8,125			11,635			398			47,041
	Depreciation and amortization		26,628			4,341			5,974			327			28,588

			195,713			28,506			44,582			2,015			213,804

Loss on disposition of other investments			(116	)		—			—			—			(116	)
Earnings before income taxes			15,542			(355	)		—			834			16,731

Income tax expense
	Current		4,511			—			—			2,455			6,966
	Deferred		2,176			—			—			(2,547	)		(371	)

			6,687			—			—			(92	)		6,595

Earnings before minority interest and discontinued operations			8,855			(355	)		—			926			10,136
Minority interest			355			355			—			—			—

Earnings from continuing operations			9,210			—			—			926			10,136

Discontinued operations, net of tax and minority interest
	Earnings from operations		926			—			—			(926	)		—

Net earnings		$	10,136		$	—		$	—		$	—		$	10,136

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

B. Financial Statement Presentation (continued)

Consolidated Statement of Cash Flows — Three Months Ended April 30, 2003

Plus

Unconsolidated

Full

Less Minority

Investments at

Pro-Rata

Consolidation

Interest

Pro-Rata

Consolidation

(in thousands)

Cash Flows from Operating Activities

Rents and other revenues received

233,290

36,443

58,670

255,517

Cash distributions from unconsolidated entities

4,240

—

(4,240

)

Proceeds from land sales

11,076

1,011

7,626

17,691

Land development expenditures

(12,075

)

(847

)

(3,370

)

(14,598

)

Operating expenditures

(171,115

)

(20,701

)

(24,257

)

(174,671

)

Interest paid

(48,630

)

(7,353

)

(14,097

)

(55,374

)

Net cash provided by operating activities

16,786

8,553

20,332

28,565

Cash Flows from Investing Activities

Capital expenditures

(106,592

)

(19,418

)

(31,536

)

(118,710

)

Proceeds from disposition of other investments

—

Change in investments in and advances to real estate affiliates

7,722

—

(5,316

)

2,406

Net cash used in investing activities

(98,816

)

(19,418

)

(36,852

)

(116,250

)

Cash Flows from Financing Activities

Increase in nonrecourse mortgage debt and long-term credit facility

108,259

16,085

24,926

117,100

Principal payments on nonrecourse mortgage debt

(54,726

)

(2,987

)

(14,996

)

(66,735

)

Payments on long-term credit facility

(6,250

)

—

(6,250

)

Increase in notes payable

4,828

)

101

4,930

Payments on notes payable

(9,131

)

(511

)

(2,718

)

(11,338

)

Change in restricted cash and book overdrafts

(3,272

)

(48

)

2,859

(365

)

Payment of deferred financing costs

(1,418

)

(29

)

(1,715

)

(3,104

)

Exercise of stock options

974

—

974

Dividends paid to shareholders

(2,980

)

—

(2,980

)

Decrease in minority interest

(2,982

)

(2,982

)

—

Net cash provided by financing activities

33,302

9,527

8,457

32,232

Net decrease in cash and equivalents

(48,728

)

(1,338

)

(8,063

)

(55,453

)

Cash and equivalents at beginning of period

122,356

13,163

29,717

138,910

Cash and equivalents at end of period

73,628

11,825

21,654

83,457

Reconciliation of Net Earnings to Cash Provided by Operating Activities

Net Earnings

14,792

—

14,792

Discontinued operations:

Minority interest

218

—

Amortization

106

—

Gain on disposition of operating properties

(411

)

(323

)

—

(88

)

Minority interest

2,540

—

Depreciation

25,037

3,388

5,846

27,495

Amortization

4,780

1,001

936

4,715

Equity in earnings of unconsolidated entities

(9,843

)

5,343

(4,503

)

Cash distributions from unconsolidated entities

4,240

—

(4,240

)

Deferred income taxes

5,110

—

5,110

Gain on disposition of other investments

(22

)

—

(22

)

Decrease in land included in projects under development

13,887

4,940

5,576

14,523

Increase in land held for development or sale

(2,073

)

—

(2,117

)

(4,190

)

Decrease (increase) in notes and accounts receivable, net

9,249

(977

)

6,779

17,005

Decrease in inventories

927

—

927

Decrease (increase) in other assets

144

(2,829

)

(1,015

)

1,958

(Decrease) increase in accounts payable and accrued expenses

(51,895

)

543

3,224

(49,214

)

Net cash provided by operating activities

16,786

8,553

20,332

28,565

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

B. Financial Statement Presentation (continued)

Consolidated Statement of Cash Flows — Three Months Ended April 30, 2002


									Plus
									Unconsolidated
			Full			Less Minority			Investments at				Pro-Rata
			Consolidation			Interest			Pro-Rata			Consolidation

						(in thousands)
Cash Flows from Operating Activities
	Rents and other revenues received		$	193,208		$	24,282		$	52,228			$	221,154
	Cash distributions from unconsolidated entities			4,396			—			(4,396	)			—
	Proceeds from land sales			15,404			1,054			3,358				17,708
	Land development expenditures			(15,259	)		(517	)		(4,847	)			(19,589	)
	Operating expenditures			(148,993	)		(9,528	)		(26,655	)			(166,120	)
	Interest paid			(47,551	)		(7,974	)		(10,883	)			(50,460	)

		Net cash provided by operating activities		1,205			7,317			8,805				2,693

Cash Flows from Investing Activities
	Capital expenditures			(160,297	)		(7,559	)		(32,751	)			(185,489	)
	Change in investments in and advances to real estate affiliates			3,060			—			(9,435	)			(6,375	)

		Net cash used in investing activities		(157,237	)		(7,559	)		(42,186	)			(191,864	)

Cash Flows from Financing Activities
	Increase in nonrecourse mortgage debt and long-term credit facility			239,844			3,222			25,875				262,497
	Principal payments on nonrecourse mortgage debt			(23,235	)		(3,225	)		(4,394	)			(24,404	)
	Payments on long-term credit facility			(78,000	)		—			—				(78,000	)
	Increase in notes payable			10,887			10			2,776				13,653
	Payments on notes payable			(2,050	)		—			(3,267	)			(5,317	)
	Change in restricted cash and book overdrafts			(3,995	)		(1,748	)		2,503				256
	Payment of deferred financing costs			(2,981	)		(260	)		(1,358	)			(4,079	)
	Exercise of stock options			1,909			—			—				1,909
	Dividends paid to shareholders			(2,474	)		—			—				(2,474	)
	Increase in minority interest			4,664			4,664			—				—

		Net cash provided by financing activities		144,569			2,663			22,135				164,041

Net (decrease) increase in cash and equivalents				(11,463	)		2,421			(11,246	)			(25,130	)
Cash and equivalents at beginning of period				50,054			5,030			34,862				79,886

Cash and equivalents at end of period			$	38,591		$	7,451		$	23,616			$	54,756

Reconciliation of Net Earnings to Cash Provided by Operating Activities
Net Earnings			$	10,136		$	—		$	—			$	10,136
	Discontinued operations:
		Minority interest		(62	)		(62	)		—				—
		Depreciation		382			79			—				303
		Amortization		26			2			—				24
	Minority interest			(355	)		(355	)		—				—
	Depreciation			22,050			3,385			5,175				23,840
	Amortization			4,578			957			799				4,420
	Equity in earnings of unconsolidated entities			(10,194	)		—			5,942				(4,252	)
	Cash distributions from unconsolidated entities			4,396			—			(4,396	)			—
	Deferred income taxes			(371	)		—			—				(371	)
	Loss on disposition of other investments			116			—			—				116
	Early extinguishment of debt			380			—			—				380
	Decrease in land included in projects under development			1,891			18			1,752				3,625
	Decrease in land included in completed rental properties			220			48			—				172
	(Increase) decrease in land held for development or sale			(8,140	)		156			(2,733	)			(11,029	)
	Decrease (increase) in notes and accounts receivable, net			6,724			(2,532	)		4,629				13,885
	Increase in inventories			(8,447	)		—			—				(8,447	)
	Decrease (increase) in other assets			3,814			(1,588	)		781				6,183
	(Decrease) increase in accounts payable and accrued expenses			(25,939	)		7,209			(3,144	)			(36,292	)

		Net cash provided by operating activities	$	1,205		$	7,317		$	8,805			$	2,693

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

C. Discontinued Operations

The Company adopted the provisions of Statement of Financial Accounting Standard (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” effective February 1, 2002. This standard addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company also retains the basic provisions for presenting discontinued operations in the income statement but broadened the scope to include a component of an entity rather than a segment of business. Pursuant to the definition of a component of an entity in SFAS No. 144, assuming no significant continuing involvement, all earnings of properties which have been sold or held for sale are reported as discontinued operations. The Company considers assets held for sale when the transaction has been approved by the appropriate level of management and there are no contingencies related to the sale that may prevent the transaction from closing. In most transactions, these contingencies are not satisfied until the actual closing of the transaction and, accordingly, the property is not identified as held for sale until the closing actually occurs. However, each potential transaction is evaluated based on its separate facts and circumstances.

For the three months ended April 30, 2003 and 2002, Trowbridge, a supported-living community located in Southfield, Michigan, was included in discontinued operations. Trowbridge has 305 units and its deed was accepted by its lender in lieu of foreclosure in April of 2003. Trowbridge was previously included in the Residential Group. For the three months ended April 30, 2002, two properties were also included in discontinued operations: Bay Street and Courtland Center. Bay Street, a 16,000 square foot retail center located in Staten Island, New York and Courtland Center, a 458,000 square foot retail center located in Flint, Michigan, were also sold during the fourth quarter of fiscal 2002. Bay Street and Courtland Center were both previously included in the Commercial Group. The assets and liabilities and operating results relating to disposed assets are as follows.


		April 30,		January 31,

		2003		2003

		*(in thousands)*
Assets
	Real estate, net	$	—	$	20,004
	Other assets		188		1,021

		$	188	$	21,025

Liabilities
	Mortgage debt, nonrecourse	$	—	$	20,822
	Other liabilities		202		574

		$	202	$	21,396


		Three Months Ended April 30,

		2003			2002

		*(in thousands)*
Revenues		$	1,289		$	3,560

Expenses
	Operating expenses		1,407			1,797
	Interest expense		—			583
	Depreciation and amortization		106			408

			1,513			2,788

Gain on disposition of operating properties			411			—

Earnings before income taxes			187			772
Income tax expense
	Current		1,632			2,455
	Deferred		(1,644	)		(2,547	)

			(12	)		(92	)

Earnings before minority interest			199			864
Minority interest			(218	)		62

Net (loss) earnings from discontinued operations		$	(19	)	$	926

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

D. Gain (Loss) on Disposition of Operating Properties and Other Investments

The following table summarizes the gain (loss) on disposition of operating properties and other investments for the three months ended April 30, 2003 and 2002.


									Plus
									Unconsolidated
			Full			Less Minority			Investments at		Pro-Rata
Three Months Ended April 30,			Consolidation			Interest			Pro-Rata		Consolidation

2003
Continuing Operations
	Available-for-sale equity securities		$	22		$	-		$	-	$	22
Discontinued operations
		Trowbridge		538			343			—		195
		Other		(127	)		(20	)		—		(107	)

				411			323			—		88

		Total	$	433		$	323		$	-	$	110

2002
Continuing operations
		Available-for-sale equity securities	$	(116	)	$	-		$	—	$	(116	)

E. Reclassification

Certain items in the consolidated financial statements for 2002 have been reclassified to conform to the 2003 presentation. In particular, the Company adopted the provisions of SFAS No. 145, “Recission of FASB Statement No. 4, 44 and 64, Amendment of FASB Statement No.13 on Technical Corrections” (SFAS No. 145), which requires gains or losses from early extinguishment of debt to be classified in operating income or loss. The Company previously recorded gains or losses from early extinguishment of debt as extraordinary items, net of tax, in its Statements of Earnings. For the three months ended April 30, 2002, the Company has reclassified $380,000 ($230,000, net of tax) of early extinguishment of debt from extraordinary loss to interest expense to conform to the new guidance.

F. Dividends

The Board of Directors declared regular quarterly cash dividends on both Class A and Class B common shares as follows:


Date	Date of	Payment	Amount
Declared	Record	Date	Per Share

March 12, 2003	June 2, 2003	June 16, 2003	$	.06
June 11, 2003 *	September 2, 2003	September 15, 2003	$	.09

On June 11, 2003, the Company’s Board of Directors declared an increased quarterly cash dividend of $.09 (annual rate of $.36) per share for both Class A and B common stock. This 50 percent increase over the previous quarter’s dividend rate is in response to recent tax law changes which lowered the maximum tax rate on dividends to 15 percent, and provides additional liquidity to the Company’s shareholders.

* As this dividend was declared after April 30, 2003 it is not reflected in the consolidated financial statements.

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

G. Earnings per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share (EPS) computations for “earnings from continuing operations.”


				Weighted
		Earnings From		Average Common		Per
		Continuing Operations		Shares Outstanding		Common
		(Numerator)		(Denominator)		Share

		*(in thousands)*
Three Months Ended
April 30, 2003:
	Basic EPS	$	14,811		49,732,717	$	0.30
	Effect of dilutive securities — stock options		—		515,661		(0.01	)

	Diluted EPS	$	14,811		50,248,378	$	0.29

April 30, 2002:
	Basic EPS	$	9,210		49,509,417	$	0.18
	Effect of dilutive securities — stock options		—		690,180		—

	Diluted EPS	$	9,210		50,199,597	$	0.18

H. Reduction of Reserves On Notes Receivable

The Company, through its Residential Group, is the 1% general partner in 25 Federally Subsidized housing projects owned by syndicated partnerships. Upon formation of these partnerships approximately 20 years ago, the Company received interest-bearing notes receivable as consideration for development and other fee services. At their inception, these notes were fully reserved as their collection was doubtful based on the limited cash flows generated by the properties pursuant to their government subsidy contracts. Likewise, a reserve for the related accrued interest was established each year.

During the years ended January 31, 2003 and 2002, 20 of these properties completed a series of events that led to the reduction of a portion of these reserves. The first event was the modification or expiration of the Government contracts that now allow for market rate apartment rentals, which provide a significant increase in expected future cash flows. This, in turn, increased the appraised values of these properties and in some instances, resulted in a settlement with the limited partners to obtain their ownership share of these properties in exchange for the balance of the notes and related accrued interest. As a result, the Company determined that the collection of a portion of these notes receivable and related accrued interest is now probable. For the three months ended April 30, 2003 and 2002, reductions of $230,000 and $3,050,000, respectively, are included in revenue in the Consolidated Statements of Earnings. The Company will continue to review the level of reserves against these notes receivable in relation to events that could change expected future cash flows from these properties.

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

H. Reduction of Reserves On Notes Receivable (continued)

Millender Center — The Company owns a 1% interest in Millender Center (the “Project”), a mixed-use apartment, retail and hotel project located in downtown Detroit, Michigan, and loaned $14,775,000 to the 99% limited partners in 1985, as evidenced by a note. A full reserve against the note and accrued interest was recorded in 1995 when the Company determined that collection was doubtful due to the operating performance of the Project at that time.

In October 1998, the Project entered into a lease agreement with General Motors (“GM”) whereby the Project, except for the apartments, is leased to GM through 2010, when it is expected that GM will exercise a purchase option. This lease arrangement, coupled with the resurgence of downtown Detroit’s economy as a result of GM’s relocation of its corporate headquarters to a location adjacent to the Project and the entry of gaming has significantly improved the operating performance of the Project. At the same time, the note was restructured with the limited partners to extend the term from December 31, 2000 to December 31, 2022. The Company believes that the current and anticipated improved performance of the Project supports its assessment that the principal of the note is now fully collectible.

During the three months ended April 30, 2003 the Company reduced $5,633,000 of the reserve recorded against interest receivable from Millender Center. There was no reduction of this reserve for the quarter ended April 30, 2002. The reduction of this reserve was primarily the result of increased cash flow projections due to the extension of the project’s tax advantaged bonds. The recorded balance of the note was $20,917,000 and $15,642,000 at April 30, 2003 and 2002, respectively. As of April 30, 2003, a $5,382,000 reserve against the principle portion of this note remains.

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

I. Investments in and Advances to Real Estate Affiliates

Included in Investments in and Advances to Real Estate Affiliates are unconsolidated investments in entities which the Company does not control and which are accounted for on the equity method. Summarized combined financial information for these investments, along with the Company’s pro-rata share (a non-GAAP measure — See Note B), is as follows.


			Combined (100%)						Pro-Rata Share

			April 30,			January 31,			April 30,			January 31,
			2003			2003			2003			2003

			(in thousands)
Balance Sheet:
	Completed rental properties		$	2,503,743		$	2,384,920		$	920,724		$	875,282
	Projects under development			229,129			307,566			106,810			132,265
	Land held for development or sale			88,995			85,663			41,588			39,471
	Investments in and advances to real estate affiliates — syndicated residential partnerships ⁽¹⁾			—			—			89,632			86,057
	Accumulated depreciation			(497,938	)		(484,845	)		(199,995	)		(195,301	)
	Other assets			248,707			278,024			95,511			112,324

		Total Assets	$	2,572,636		$	2,571,328		$	1,054,270		$	1,050,098

	Mortgage debt, nonrecourse		$	2,245,880		$	2,226,384		$	851,375		$	845,161
	Advances from general partner			18,355			18,355			—			—
	Other liabilities			167,601			166,286			55,054			56,457
	Partners’ equity			140,800			160,303			147,841			148,480

		Total Liabilities and Partners’ Equity	$	2,572,636		$	2,571,328		$	1,054,270		$	1,050,098


				Three Months Ended April 30,

				2003			2002			2003			2002

Operations:
	Revenues		$	141,825		$	126,614		$	59,281		$	50,524
	Equity in earnings of unconsolidated real estate entities on a pro-rata basis			—			—			4,503			4,252
	Operating expenses			(77,252	)		(65,621	)		(33,060	)		(26,973	)
	Interest expense			(34,534	)		(29,769	)		(14,096	)		(12,015	)
	Depreciation and amortization			(18,368	)		(15,905	)		(6,782	)		(5,974	)

		Net earnings (pre-tax)	$	11,671		$	15,319		$	9,846		$	9,814

Following is a reconciliation of partners’ equity to the Company’s carrying value in the accompanying Consolidated Balance Sheets:


	April 30,		January 31,
	2003		2003

Partners’ equity, as above	$	140,800	$	160,303
Equity of other partners		11,314		30,178

Company’s investment in partnerships		129,486		130,125
Advances to partnerships, as above		18,355		18,355
Advances to other real estate affiliates		339,333		340,725

Investments in and Advances to Real Estate Affiliates	$	487,174	$	489,205

(1) The Company is a general partner in several syndicated residential partnerships which are accounted for on the equity method under both full consolidation and pro-rata consolidation. Summarized Balance Sheet information at the Company’s economic share is as follows:


Total Assets	$	540,044	$	531,585
Total Liabilities	$	450,412	$	445,528
Partner’s Equity	$	89,632	$	86,057

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

I. Investments in and Advances to Real Estate Affiliates (continued)

As is customary within the real estate industry, the Company invests in certain real estate projects through partnerships. The Company provides funding for certain of its partners’ equity contributions. The most significant partnership for which the Company provides funding relates to Forest City Ratner Companies, representing the Commercial Group’s New York City operations. The Company’s partner is the President and Chief Executive Officer of Forest City Ratner Companies and is the first cousin to four executive officers of the Company. At April 30, 2003 and January 31, 2003, amounts advanced for real estate projects on behalf of this partner collateralized by this partnership interest were $101,607,000 and $98,264,000, respectively, of the $339,333,000 and $340,725,000 presented above for “Advances to other real estate affiliates.” These advances entitle the Company to a preferred return on and of the outstanding balances, which are payable from cash flows of each respective property.

J. Recent Developments

The Company guaranteed the principal and interest on $19,000,000 of municipal bonds issued in May 2003 by an unrelated third party in connection with the Company’s investment in the redevelopment of Stapleton, a former airport in Denver, Colorado. The Company has a 90% ownership interest in Stapleton which is fully consolidated in the Company’s financial statements. The bonds bear interest at 7.875%, require semi-annual interest payments and mature on December 1, 2032. The Company will assess its obligation under this guarantee pursuant to the provisions of FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. In addition, the Company plans to provide a similar guarantee relating to an additional $10,000,000 in municipal bonds expected to be drawn in the next six to eighteen months depending upon the status of the development at Stapleton.

In May 2003, the Company issued $300,000,000 of 7.625% senior notes, due June 1, 2015, under its shelf registration statement. Accrued interest is payable semi-annually beginning December 1, 2003. $208,500,000 of the proceeds from this offering will be used to redeem all of the outstanding 8.5% senior notes originally due in 2008 at a redemption price equal to 104.25% in June 2003. The remainder of the proceeds were used for offering costs, to repay $73,000,000 outstanding under the revolving portion of the Company’s long-term credit facility and for general working capital purposes.

FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

K. Segment Information

The following tables summarize financial data for the Commercial, Residential, Land Development and Lumber Trading Groups and Corporate. All amounts, including footnotes, are presented in thousands.


						Three Months Ended April 30,

		April 30,		January 31,
		2003		2003		2003			2002

						Expenditures for Additions
		Identifiable Assets				to Real Estate





Commercial Group		$	3,668,810	$	3,628,251	$	62,340			110,965




Residential Group			1,012,674		990,192		37,068			48,508




Land Development Group			208,851		193,899		6,357			8,718




Lumber Trading Group			133,358		149,236		60			283




Corporate			46,310		115,631		83			197

		$	5,070,003	$	5,077,209	$	105,908		$	168,671


		Three Months Ended April 30,

		2003		2002		2003			2002

		Revenues				Interest Expense





Commercial Group		$	163,414	$	131,798	$	30,747			31,071




Residential Group			46,929		37,695		7,104			5,546




Land Development Group			13,529		15,365		449			64




Lumber Trading Group (1)			19,901		26,263		651			636




Corporate			128		250		5,701			5,816

		$	243,901	$	211,371	$	44,652		$	43,133


		Depreciation and				Earnings Before
		Amortization Expense				Income Taxes (EBIT) (2)





Commercial Group		$	23,149	$	21,720	$	19,414			7,477




Residential Group			5,719		3,726		13,659			11,020




Land Development Group			59		155		5,104			6,564




Lumber Trading Group			465		535		(484	)		1,186




Corporate			425		492		(10,788	)		(10,589	)




Gain (loss) on disposition of other investments			—		—		22			(116	)

		$	29,817	$	26,628	$	26,927			15,542


						Earnings Before
						Depreciation, Amortization
						and Deferred Taxes (EBDT) (3)


Commercial Group						$	38,186			25,926




Residential Group							19,561			15,325




Land Development Group							2,559			3,268




Lumber Trading Group							(348	)		664




Corporate							(8,558	)		(6,559	)




Discontinued Operations							35			1,252

Consolidated EBDT							51,435			39,876




Reconciliation of EBDT to net earnings: (5)




Depreciation and amortization — Real Estate Groups							(31,357	)		(27,287	)




Deferred taxes— Real Estate Groups							(6,949	)		(2,496	)




Straight-line rent adjustment							1,704			669




Early extinguishment of debt, net of tax							—			(230	)




Gain (loss) on disposition of other investments, net of tax							13			(70	)




Discontinued operations not included in EBDT, net of tax and minority interest: (4)




	Depreciation and amortization						(57	)		(327	)




	Deferred taxes						(50	)		(19	)




	Straight-line rent adjustment						—			20




	Gain on disposition of operating properties						53			—

Net earnings						$	14,792			10,136

(1)		The Company recognizes the gross margin on lumber brokerage sales as Revenues. Sales invoiced for the three months ended April 30, 2003 and 2002 were $534,071 and $688,896, respectively.

(2)		See Consolidated Statements of Earnings on page 3 for reconciliation of EBIT to net earnings.

(3)		Early extinguishment of debt, which was formerly reported as an extraordinary item, is now reported as interest expense. However, early extinguishment will be excluded from EBDT for the year ended January 31, 2003. Beginning February 1, 2003, early extinguishment of debt will be included in EBDT.

(4)		See Note C — Discontinued Operations on page 15 for more information.

(5)		See page 39 through page 45 of this filing for additional information regarding the reconciliation of EBDT to net earnings.

The enclosed financial statements have been prepared on a basis consistent with accounting principles applied in the prior periods and reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the periods presented. Results of operations for the three months ended April 30, 2003 are not necessarily indicative of results of operations which may be expected for the full year.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of Forest City Enterprises, Inc. should be read in conjunction with the financial statements and the footnotes thereto contained in the annual report on Form 10-K for the year ended January 31, 2003.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

GENERAL

The Company principally engages in the ownership, development, management and acquisition of commercial and residential real estate throughout the United States. The Company consists of four Strategic Business Units. The Commercial Group, the Company’s largest business unit, owns, develops, acquires and operates regional malls, specialty/urban retail centers, office buildings, hotels and mixed-use projects. New York City operations through the Company’s partnership with Forest City Ratner Companies are part of the Commercial Group. The Residential Group owns, develops, acquires and operates residential rental property, including upscale and middle-market apartments, adaptive re-use developments and supported-living facilities. Real Estate Groups are the combined Commercial and Residential Groups. The Land Development Group acquires and sells both land and developed lots to residential, commercial and industrial customers. It also owns and develops land into master-planned communities and mixed-use projects. The Lumber Trading Group, a wholesaler, sells lumber to customers in all 50 states and Canadian provinces. The Company has more than $5.0 billion of assets in 21 states and the District of Columbia. Core markets include New York City, Denver, Boston, Washington D.C. and California. The Corporate headquarters of the Company is in Cleveland, Ohio.

RESULTS OF OPERATIONS

The Company reports its results of operations by each of its four strategic business units as it believes it provides the most meaningful understanding of the Company’s financial performance.

Net Earnings — Net Earnings for the Company for the three months ended April 30, 2003 were $14,792,000 versus $10,136,000 for the three months ended April 30, 2002. The fluctuation is primarily attributable to improved operating results in the Company’s Real Estate Group (see discussion for Commercial and Residential Groups below).

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 (GAAP) and may not be directly comparable to similarly-titled measures reported by other companies. The Company believes that EBDT provides additional information about its operations and, along with net earnings, is necessary to understand its operating results. EBDT is defined and discussed in detail under “Results of Operations — EBDT”.

The Company’s EBDT for the three months ended April 30, 2003 grew by 29.0% to $51,435,000 from $39,876,000. This increase over the prior year is primarily attributable to new property EBDT generated from 24 project openings and acquisitions that occurred during 2002 and the addition of five residential communities during the three months ended April 30, 2003. In addition, the Company also experienced increased outlot sales, lower abandoned development project write-offs, and increased reversals of reserves on notes receivable.

Net Operating Income from Real Estate Groups — 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. Under the full consolidation method, which is in accordance with GAAP, NOI from the combined Commercial Group and Residential Group (“Real Estate Groups”) for the three months ended April 30, 2003 was $104,946,000 compared to $85,944,000 for the three months ended April 30, 2002, a 22.1% increase.

Under the pro-rata consolidation method, NOI from the Real Estate Groups for the three months ended April 30, 2003 was $104,671,000 compared to $86,962,000 for the three months ended April 30, 2002, a 20.4% increase.

The information in the section entitled “Summary of Earnings before Depreciation, Amortization and Deferred Taxes” on pages 39 to 45 at the end of this Management’s Discussion and Analysis of Financial Condition and Results of Operations presents amounts for both full consolidation and pro-rata consolidation, providing a reconciliation of the difference between the two methods, as well as a reconciliation from EBDT to net earnings.

All amounts discussed in the narrative below are based on the full consolidation method unless otherwise noted.

Commercial Group

The following table presents the significant increases in revenues and operating expenses incurred by the Commercial Group for newly opened properties for the three months ended April 30, 2003 compared to the same period in the prior year (dollars in thousands):


		Quarter/
		Year							Operating
Property	Location	Opened		Sq. Ft.		Revenues			Expenses

Retail Centers:
Woodbridge Crossing	Woodbridge, NJ		Q3 - 2002		284,000	$	86		$	372
Harlem Center	Manhattan, NY		Q3 - 2002		126,000		1,167			173
Promenade in Temecula Expansion	Temecula, CA		Q3 - 2002		249,000		726			282
Galleria at Sunset Expansion	Henderson, NV		Q2 - 2002		121,000		295	*		N/A
Station Square — Bessemer Court	Pittsburgh, PA		Q2 - 2002		52,000		311			165
Quebec Square	Denver, CO		Q2 - 2002		691,000		484			284
Office Buildings:
88 Sidney St	Cambridge, MA		Q2 - 2002		145,000		1,896			277
35 Landsdowne	Cambridge, MA		Q2 - 2002		202,000		2,327			400

*Total*						$	7,292		$	1,953

* Revenues represent the change from prior year of the Company’s share of net earnings.

N/A — not applicable — property recorded under equity method of accounting.

Revenues — Revenues for the Commercial Group increased by $31,616,000 or 24.0% for the three months ended April 30, 2003 over the same period in the prior year. Revenues, adjusted for straight-line rent and equity method depreciation, for the Commercial Group for the three months ended April 30, 2003 increased $31,313,000 or 23.4% over the same period in the prior year. This increase is primarily the result of $7,292,000 from the opening of new properties as noted in the table above, $19,463,000 from increased commercial land sales and an increase of $4,129,000 in the Company’s hotel portfolio primarily due to the re-opening of the Embassy Suites Hotel in Manhattan, New York which was closed through May 2002, after the terrorist attacks on September 11, 2001. These increases were partially offset by dispositions in the fourth quarter of 2002 of two specialty retail centers, Bay Street and Courtland Center, totaling $2,148,000. Bay Street was a 16,000 square foot retail center located in Staten Island, New York and Courtland Center was a 458,000 square foot retail center located in Flint, Michigan. The balance of the remaining increase in revenues in the Commercial Group of approximately $2,600,000 was generally due to fluctuations in operations at mature properties.

Operating and Interest Expenses — Operating expenses for the Commercial Group increased $18,574,000 or 26.0% for the three months ended April 30, 2003 over the same period in the prior year. Operating expenses, excluding straight-line rent adjustments on ground rent, for the Commercial Group increased $18,747,000 or 26.6% for the three months ended April 30, 2003 over the same period in the prior year. The increase in operating expenses was attributable primarily to costs associated with the opening of new properties of $1,953,000 as noted in the table above, $16,214,000 relating to commercial land sales and greater operating costs of $4,494,000 at the Company’s hotel portfolio primarily due to the re-opening of the Embassy Suites Hotel in Manhattan, New York which was closed through May 2002 after the terrorist attacks on September 11, 2001. These increases were partially offset by $747,000 relating to dispositions in the fourth quarter of 2002 of two specialty retail centers, Bay Street and Courtland Center and a reversal of project write-off reserves of $1,674,000 during the first quarter of 2003. The balance of the decrease in operating expenses of $1,500,000 was generally due to fluctuations in operating costs at mature properties.

Interest expense decreased during the three months ended April 30, 2003 for the Commercial Group by $323,000 or 1.0% over the same period in the prior year. The decrease is primarily attributable to the reduction in interest rates combined with recent property dispositions.

Residential Group
The following table presents the significant increases (decreases) in revenues and operating expenses reported by the Residential Group for newly opened or acquired properties for the three months ended April 30, 2003 compared to the same period in the prior year (dollars in thousands):


		Quarter
		Opened/		No.					Operating
Property	Location	Acquired		of Units		Revenues			Expenses

Consolidated
Parmatown Woods ^(a)	Parma Hts., OH		Q1 - 2003		201	$	272		$	238
Plymouth Square ^(a)	Detroit, MI		Q1 - 2003		280		714			304
Southfield ^(a)	White Marsh, MD		Q4 - 2002		212		543			200
Carl D. Perkins ^(a)	Pikeville, KY		Q3 - 2002		150		294			150
Landings of Brentwood ^(a)	Nashville, TN		Q2 - 2002		724		1,633			696
Autumn Ridge ^(a)	Sterling Hts., MI		Q2 - 2002		251		594			(7	)
Tower 43 ^(a)	Kent, OH		Q2 - 2002		101		174			164
Cambridge Towers^(a)	Detroit, MI		Q2 - 2002		250		636			259
Coraopolis Towers ^(a)	Coraopolis, PA		Q2 - 2002		200		389			204
Donora Towers ^(a)	Donora, PA		Q2 - 2002		103		201			137
Heritage	San Diego, CA		Q1 - 2002		230		743			198
Chancellor Park ^(a)	Philadelphia, PA		Q1 - 2002		135		306			(41	)
Unconsolidated *
Worth Street	Manhattan, NY		Q1 - 2003		330		169			N/A
St. Mary’s Villa ^(a)	Newark, NJ		Q2 - 2002		360		(16	)		N/A
Residences at University Park	Cambridge, MA		Q1 - 2002		135		(88	)		N/A
Westwood Reserve ^(a)	Tampa, FL		Q1 - 2002		340		(22	)		N/A
Parkwood Village (b)	Brunswick, OH		Q2 - 2001		204		89			N/A

*Total*						$	6,631		$	2,502

* Revenues represent the change from prior year of the Company’s share of net earnings (loss).

N/A — not applicable — property recorded under equity method of accounting.

(a) Acquired property.

(b) Phased opening.

Revenues — Revenues for the Residential Group increased $9,234,000 or 24.5% for the three months ended April 30, 2003 over the same period in the prior year. Revenues, adjusted for equity method depreciation, for the Residential Group increased by $9,478,000, or 23.7% during the three months ended April 30, 2003 over the same period in the prior year. These increases were primarily the result of acquisitions made and properties opened during 2002 and 2003 totaling $6,631,000 as noted in the table above. Revenues also increased by $2,813,000 as a result of the reversal of reserves for notes receivable and related accrued interest from certain syndicated properties. The remaining increase in revenue of approximately $35,000 was generally due to overall improved results of mature properties.

Operating and Interest Expenses — Operating expenses for the Residential Group increased by $3,042,000 or 17.5% during the three months ended April 30, 2003 compared to the same period in the prior year. These increases were primarily the result of the acquisitions made and properties opened during 2003 and 2002 totaling $2,502,000 as noted in the table above. The remaining increase of approximately $540,000 was generally due to increased operating costs of mature properties.

Interest expense for the Residential Group for the three months ended April 30, 2003 increased by $1,558,000 or 28.1%, compared to the same period in the prior year. The increase in interest expense is primarily the result of acquisitions made and properties opened during 2003 and 2002.

Land Development Group
Revenues — Sales of land and related gross margins vary from period to period depending on market conditions relating to the disposition of significant land holdings. Revenues for the Land Development Group decreased by $1,836,000 during the three months ended April 30, 2003 compared to the same period in the prior year. This decrease is primarily the result of decreases in land sales of $1,841,000 at two major land development projects: Waterbury in North Ridgeville, Ohio and Central Station in Chicago, Illinois combined with several smaller sales decreases. These decreases were offset by increases of $1,314,000 primarily at two major land development projects: New Haven in Barberton, Ohio and Stapleton in Denver, Colorado and several smaller sales increases at various land development projects. In addition, revenue decreased by $1,309,000 as a result of the sale in 2002 of land options at Paseo del Este in El Paso, Texas, which did not recur in 2003.

Operating and Interest Expenses — The fluctuation in Land Development Group operating expenses primarily reflects costs associated with land sales volume in each period. Operating expenses decreased by $652,000 during the three months ended April 30, 2003 compared to the same period in the prior year. This decrease is primarily due to decreased combined expenses of $1,108,000 primarily at three land development projects, Central Station, Waterbury and Stapleton along with several smaller expense decreases at various land development projects. These decreases were offset by increases of $456,000 primarily at New Haven along with several smaller expense increases at various land development projects.

Interest expense for the Land Development Group increased by $385,000 during the three months ended April 30, 2003 compared to the same period in the prior year. Interest expense varies from year to year depending on the level of interest-bearing debt within the Land Development Group.

Lumber Trading Group
Revenues — Revenues for the Lumber Trading Group decreased by $6,362,000 during the three months ended April 30, 2003 compared to the same period in the prior year. The decrease was due to decreased volume and an extreme downward movement of commodity lumber prices. The downward movement was the result of an oversupply situation.

Operating and Interest Expenses — Operating expense for the Lumber Trading Group decreased by $4,708,000 during the three months ended April 30, 2003 compared to the same period in the prior year. This decrease was primarily due to lower variable expenses, principally traders’ commissions, resulting from the decreased revenue explained above.

Interest expense increased $15,000 for the three months ended April 30, 2003 compared to the same period in the prior year due to minimal increases in the borrowing level and the interest rates.

Corporate Activities
Revenues — Corporate Activities’ revenues decreased $122,000 during the three months ended April 30, 2003 compared to the same period in the prior year. Corporate Activities’ revenues consist primarily of interest income from investments and loans made by the Company and vary from year to year depending on interest rates and the amounts of loans outstanding.

Operating and Interest Expenses — Operating expenses for Corporate Activities increased $193,000 during the three months ended April 30, 2003 compared to the same period in the prior year. The increase in operating expenses was the result of increases in general corporate expenses. Interest expense decreased $115,000 during the three months ended April 30, 2003 compared to the same period in the prior year as a result of decreased borrowings and reduced variable interest rates. Corporate Activities’ interest expense consists primarily of interest expense on the Company’s 8.50% Senior Notes and long-term credit facility that have not been allocated to a strategic business unit (see “Financial Condition and Liquidity”).

Depreciation and Amortization
Depreciation and amortization increased $3,189,000 for the three months ended April 30, 2003 compared to the same period in the prior year. This increase is primarily the result of acquisitions made and new properties opened, offset by property dispositions and properties reclassified as discontinued operations.

Discontinued Operations
The Company adopted the provisions of Statement of Financial Accounting Standard (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” effective February 1, 2002. This standard addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company also retains the basic provisions for presenting discontinued operations in the income statement but broadened the scope to include a component of an entity rather than a segment of business. Pursuant to the definition of a component of an entity in SFAS No. 144, assuming no significant continuing involvement, all earnings of properties which have been sold or held for sale are reported as discontinued operations. The Company considers assets held for sale when the transaction has been approved by the appropriate level of management and there are no contingencies related to the sale that may prevent the transaction from closing. In most transactions, these contingencies are not satisfied until the actual closing of the transaction and, accordingly, the property is not identified as held for sale until the closing actually occurs. However, each potential transaction is evaluated based on its separate facts and circumstances.

For the three months ended April 30, 2003, Trowbridge, a supported-living community located in Southfield, Michigan, was included in discontinued operations. Trowbridge has 305 units and its deed was accepted by its lender in lieu of foreclosure in April of 2003. Trowbridge was previously included in the Residential Group.


		April 30,		January 31,
		2003		2003

		(in thousands)
Assets
	Real estate, net	$	—	$	20,004
	Other assets		188		1,021

		$	188	$	21,025

Liabilities
	Mortgage debt, nonrecourse	$	—	$	20,822
	Other liabilities		202		574

		$	202	$	21,396


		Three Months Ended April 30,

		2003			2002

		(in thousands)
Revenues		$	1,289		$	3,560

Expenses
	Operating expenses		1,407			1,797
	Interest expense		—			583
	Depreciation and amortization		106			408

			1,513			2,788

Gain on disposition of operating properties			411			—

Earnings before income taxes			187			772
Income tax expense
	Current		1,632			2,455
	Deferred		(1,644	)		(2,547	)

			(12	)		(92	)

Earnings before minority interest			199			864
Minority interest			218			(62	)

Net (loss) earnings from discontinued operations		$	(19	)	$	926

Gain (Loss) on Disposition of Operating Properties and Other Investments — The following table summarizes the gain (loss) on disposition of operating properties and other investments for the three months ended April 30, 2003 and 2002.


									Plus
									Unconsolidated
			Full			Less Minority			Investments at		Pro-Rata
Three Months Ended April 30,			Consolidation			Interest			Pro-Rata		Consolidation

2003
Continuing Operations
		Available-for-sale equity securities	$	22		$	—		$	—	$	22
Discontinued operations
		Trowbridge		538			343			—		195
		Other		(127	)		(20	)		—		(107	)

				411			323			—		88

		Total	$	433		$	323		$	—	$	110

2002
Continuing operations
	Available-for-sale equity securities		$	(116	)	$	—		$	—	$	(116	)

Income Taxes — Income tax expense for the three months ended April 30, 2003 and 2002 totaled $9,576,000 and $6,687,000 respectively. At January 31, 2003, the Company had a tax loss carryforward of $10,873,000 that will expire in the year ending January 31, 2022, General Business Credit carryovers of $7,581,000 that will expire in the years ending January 31, 2004 through January 31, 2023, and an Alternative Minimum Tax credit carryforward of $33,445,000.

EBDT — EBDT is defined as net earnings excluding the following items: i) gain (loss) on disposition of operating properties and other investments (net of tax); ii) the adjustment to recognize rental revenues and rental expense using the straight-line method; iii) noncash charges from Forest City Rental Properties Corporation, a wholly-owned subsidiary of Forest City Enterprises, Inc., for depreciation, amortization and deferred income taxes; iv) provision for decline in real estate (net of tax); v) extraordinary items (net of tax); and vi) cumulative effect of change in accounting principle (net of tax). Early extinguishment of debt is now reported in operating earnings instead of extraordinary items. However, early extinguishment of debt is excluded from EBDT through the year ended January 31, 2003. Beginning February 1, 2003, early extinguishment of debt is included in EBDT.

The adjustment to recognize rental revenues and rental expenses on the straight-line method is excluded because it is management’s opinion that rental revenues and expenses should be recognized when due from the tenants or due to the landlord. The Company excludes depreciation and amortization expense related to real estate operations from EBDT because they are noncash 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 noncash items. The provision for decline in real estate is excluded from EBDT because it is a noncash item that varies from year to year based on factors unrelated to the Company’s overall financial performance and is related to the ultimate gain or loss on dispositions of operating properties. The Company’s EBDT may not be directly comparable to similarly-titled measures reported by other companies. See the reconciliation of EBDT to net earnings on page 39 of this filing.

FINANCIAL CONDITION AND LIQUIDITY

The Company believes that its sources of liquidity and capital are adequate to meet its funding obligations. The Company’s principal sources of funds are cash provided by operations, the long-term credit facility and refinancings and dispositions of mature 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, payments on nonrecourse mortgage debt on real estate and payments on the long-term credit facility.

Long-Term Credit Facility — At April 30, 2003, the Company had $148,000,000 outstanding under its $350,000,000 long-term credit facility which became effective March 5, 2002. The revolving portion of this balance, $73,000,000, was repaid in full in May 2003 from proceeds from a public debt offering. The credit facility includes a $100,000,000 term loan with an outstanding balance of $75,000,000 as of April 30, 2003 and a $250,000,000 revolving line of credit, both of which mature in March 2006 and allow for up to a combined amount of $40,000,000 in outstanding letters of credit or surety bonds ($26,082,000 in letters of credit outstanding and $-0- surety bonds at April 30, 2003). Quarterly principal payments of $6,250,000 on the new term loan commenced July 1, 2002.

The long-term credit facility provides, among other things, for: 1) at the Company’s election, interest rates of 2.125% over LIBOR or 1/2% over the prime rate except for the last $50,000,000 of borrowings in the case of the revolving loans which is based on 2.75% over LIBOR or 3/4% over the prime rate; 2) maintenance of debt service coverage ratios and specified levels of net worth and cash flow (as defined in the credit facility); and 3) restrictions on dividend payments and stock repurchases.

In order to mitigate the short-term variable interest rate risk on its long-term credit facility, the Company has entered into LIBOR interest rate swaps and purchased LIBOR interest rate caps. Swaps are in effect through January 31, 2004 which effectively fixed the LIBOR base rate at 1.78% for a notional amount of $56,250,000 beginning February 1, 2003, and effectively fix the LIBOR base rate at 1.77% for a notional amount of $75,000,000 beginning December 1, 2002. LIBOR interest rate caps were purchased for the period beginning February 1, 2003 through August 1, 2004. These caps vary in notional amount from $69,921,000 to $147,882,000 over the period and carry strike rates from 4.0% to 5.5%.

Lumber Trading Group — The Lumber Trading Group is financed separately from the rest of the Company’s strategic business units. 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 Financings

The Company is actively working to extend the maturities and/or refinance the nonrecourse debt that is coming due in 2003 and 2004, generally pursuing long-term fixed-rate debt for its stabilized properties. During the three months ended April 30, 2003, the Company completed the following financings:


Purpose of Financing

(in thousands)
Refinancings	$	42,249
Development projects (commitment)		91,500
Loan extensions		28,400

	$	162,149

Reduction of mortgage debt due to property dispositions	$	25,933

For maturing debt, the Company continues to seek long-term fixed-rate debt for those project loans which mature within the next 12 months as well as for those projects which will begin operation within the next 12 months. For construction loans, the Company generally pursues floating-rate financings with maturities ranging from two to five years.

Interest Rate Exposure

At April 30, 2003, the composition of nonrecourse mortgage debt was as follows:


		Amount		Rate⁽¹⁾

		(in thousands)
Fixed		$	2,014,190		7.16	%
Variable
	Taxable⁽²⁾		842,617		3.98	%
	Tax-Exempt		105,000		2.47	%
UDAG			75,519		2.01	%

		$	3,037,326		5.99	%

(1)		Reflects weighted average interest rate including both the base index and lender margin.

(2)		Taxable variable-rate debt of $842,617 is protected with LIBOR swaps and caps described below. These LIBOR-based hedges protect current debt outstanding as well as the anticipated increase in debt outstanding for projects currently under development or anticipated to be under development during the year ending January 31, 2004.

Debt related to projects under development at April 30, 2003 totals $244,099,000, out of a total commitment from lenders of $570,656,000. Of this outstanding debt, $188,099,000 is taxable variable-rate debt, $52,000,000 is tax-exempt variable-rate debt, and $4,000,000 is taxable fixed-rate debt.

To mitigate short-term variable interest rate risk, the Company has purchased London Interbank Offered Rate (“LIBOR”) interest rate hedges for its mortgage debt portfolio as follows:


	Caps					Swaps⁽¹⁾

			Average					Average
Period Covered	Amount		Rate			Amount		Rate

	(dollars in thousands)
05/01/03 - 02/01/04	$	914,061		6.68	%	$	310,619		2.32	%
02/01/04 - 02/01/05		341,771		7.20	%		305,728		2.68	%
02/01/05 - 02/01/06		227,256		7.83	%		70,528		4.13	%
02/01/06 - 02/01/07		90,953		7.58	%		69,183		4.13	%

(1)

Swaps include long-term LIBOR contracts that have an average maturity greater than six months.

The Company generally does not hedge tax-exempt debt because, since 1990, the base rate of this type of financing has averaged 3.33% and has not exceeded 7.90%.

Including properties accounted for under the equity method, a 100 basis point increase in taxable interest rates would increase the annual pre-tax interest cost for the next 12 months of the Company’s taxable variable-rate debt by approximately $5,200,000 at April 30, 2003. This increase is net of the protection provided by the interest rate swaps and long-term LIBOR contracts in place as of April 30, 2003. 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 rates would increase the annual pre-tax interest cost for the next 12 months of the Company’s tax-exempt variable-rate debt by approximately $4,000,000 at April 30, 2003.

Lumber Trading Group Liquidity

Lumber Trading Group is separately financed with a revolving line of credit which totaled $80,000,000 at April 30, 2003 and an asset securitization facility. The bank line of credit allows for up to $5,000,000 in outstanding letters of credit (none outstanding at April 30, 2003), which reduce the credit available to the Lumber Trading Group by the amount of the letters of credit used. Borrowings under the bank line 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 LIBOR plus an applicable margin ranging from 1.375% to 1.75%, and have a fee of 0.2% to 0.4% per year on the unused portion of the available commitment. The LIBOR loan margin and unused commitment fee are based on a quarterly interest coverage ratio. The bank line of credit is subject to review and extension annually, and expires on June 30, 2003. At April 30, 2003, $6,704,000 was outstanding under this revolving line of credit.

The Lumber Trading Group has entered into a three-year agreement, expiring in July 2005 under which it is selling an undivided interest in a pool of receivables up to a maximum of $102,000,000 to a large financial institution (the “Financial Institution”). This agreement includes required bank liquidity support which is renewed annually. The next renewal date is June 16, 2003. The Company bears no risk regarding the collectability of the accounts receivable once sold, and cannot modify the pool of receivables. At April 30, 2003 the Financial Institution held an interest of $50,000,000 in the pool of receivables. Sales of accounts receivable have averaged $47,000,000 per month during the three months ended April 30, 2003.

To protect against risks associated with the variable interest rates on current and future borrowings on the liquidity banking agreement supporting the facility through which the pools of receivables are sold, the Lumber Trading Group entered into an interest rate swap with a notional amount of $20,000,000. The swap fixes the LIBOR interest rate at 4.28% and is effective through January 31, 2005.

These credit facilities are without recourse to the Company. The Company believes that the amount available under these credit facilities will be sufficient to meet the Lumber Trading Group’s liquidity needs.

Cash Flows

Net cash provided by operating activities was $16,786,000 for the three months ended April 30, 2003 and $1,205,000 for the three months ended April 30, 2002. This increase in net cash provided by operating activities of $15,581,000 is the result of the following (in thousands):


Increase in operating revenue		$	32,881
Decrease in accounts receivable, Lumber Trading Group			15,170
Increase in accounts receivable for construction fee billings in Commercial Group			(6,350	)
Other			(1,619	)

	Increase in rents and other revenues received				$	40,082
Decrease in cash distributions from unconsolidated entities						(156	)
Decrease in proceeds from land sales						(4,328	)
Decrease in land development expenditures						3,184
Increase in operating expenses			(16,575	)
Decrease in accounts payable and accrued expenses			(5,547	)

	Increase in operating expenditures					(22,122	)
Increase in interest paid						(1,079	)

	Increase in cash provided by operations				$	15,581

Net cash used in investing activities was $98,816,000 for the three months ended April 30, 2003 and $157,237,000 for the three months ended April 30, 2002. The net cash used in investing activities consists of the following:


		Three Months Ended April 30,

		2003			2002

		(in thousands)
Capital expenditures*		$	(106,592	)	$	(160,297	)
Disposition of other investments			54			—
Return on investment in and advances to real estate affiliates			7,722			3,060

	Total	$	(98,816	)	$	(157,237	)

* Capital expenditures were financed as follows:

Cash provided from operating activities		$	16,786		$	1,205
New nonrecourse mortgage indebtedness			53,000			153,000
Borrowings under the long-term credit facility			19,000			—
Cash on hand at the beginning of the year			17,806			6,092

	Total	$	106,592		$	160,297

Net cash provided by financing activities totaled $33,302,000 for the three months ended April 30, 2003 and $144,569,000 for the three months ended April 30, 2002. The Company’s refinancing of mortgage indebtedness is discussed above in “Mortgage Financings” and borrowings under new mortgage indebtedness to fund capital expenditures is discussed above in “Net Cash Used in Investing Activities”. Net cash used in financing activities also reflected the following:


	Three Months Ended April 30,

	2003			2002

	(in thousands)
Borrowings on long-term credit facility	$	19,000		$	154,000
Quarterly repayments of new term loan, beginning in July 2002		(6,250	)		—
Repayment of borrowings under the long-term credit facility from proceeds of new $100,000,000 term loan		—			(78,000	)
Net (decrease) increase in notes payable (primarily due to (repayments) borrowings under Lumber Trading Group’s line of credit)		(4,303	)		8,837
Decrease (increase) in restricted cash (2003: primarily from Consolidated Carolina, an apartment building under construction in Richmond, Virginia)		3,400			(373	)
Decrease in book overdrafts, representing checks issued but not yet paid		(6,672	)		(3,622	)
Payment of deferred financing costs		(1,418	)		(2,981	)
Proceeds from the exercise of stock options		974			1,909
Payment of dividends		(2,980	)		(2,474	)
(Decrease) increase in minority interest		(2,982	)		4,664

SHELF REGISTRATION

The Company, along with its wholly-owned subsidiaries Forest City Enterprises Capital Trust I and Forest City Enterprises Capital Trust II, filed an amended shelf registration statement with the Securities and Exchange Commission (SEC) on May 24, 2002. This registration statement amends the registration statement previously filed with the SEC in December 1997. This registration statement is intended to provide Forest City flexibility to raise funds from the offering of Class A common stock, preferred stock, depositary shares and a variety of debt securities, warrants and other securities. At April 30, 2003 an aggregate of $842,180,000 was available under this shelf registration. In May 2003, the Company issued $300,000,000 of 7.625% senior notes bringing the current availability to $542,180,000.

INCREASED DIVIDENDS

The first 2003 quarterly dividend of $.06 per share on both Class A and Class B Common Stock was declared March 12, 2003 and will be paid on June 16, 2003 to shareholders of record at the close of business on June 2, 2003. The second 2003 quarterly dividend of $.09 (representing a 50% increase over the previous quarter’s dividend) per share on shares of both Class A and Class B Common Stock was declared June 11, 2003 and will be paid September 15, 2003 to shareholders of record at the close of business on September 2, 2003. This 50 percent increase over the previous quarter’s dividend rate is in response to recent tax law changes which lowered the maximum tax rate on dividends to 15 percent, and provides additional liquidity to the Company’s shareholders.

LEGAL PROCEEDINGS

The Company is involved in various claims and lawsuits incidental to its business, and management and legal counsel are of the opinion that these claims and lawsuits will not have a material adverse effect on the Company’s financial statements.

NEW ACCOUNTING STANDARDS

In December 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 148 “Accounting for Stock-Based Compensation - Transition and Disclosure” (SFAS No. 148). This statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 “Accounting for Stock-Based Compensation” to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation is effective for the Company for the fiscal year ended January 31, 2004. The new requirements for interim disclosure is effective for the quarter ended April 30, 2003. The Company will continue to apply APBO No. 25 “Accounting for Stock Issued to Employees” and related interpretations in accounting for its stock-based employee compensation and does not expect SFAS No. 148 to have a material impact on the Company’s financial position, results of operations or cash flows.

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities.” The objective of this interpretation is to provide guidance on how to identify a variable interest entity (VIE) and determine when the assets, liabilities, non-controlling interests and results of operations of a VIE are to be included in the consolidated financial statements. A company that holds a variable interest in an entity will consolidate the entity if the company’s interest in the VIE is such that the company will absorb a majority of the VIE’s expected losses and/or receive a majority of the entity’s expected residual returns, if they occur. FIN No. 46 also requires additional disclosures by primary beneficiaries and other significant variable interest holders. The disclosure provisions of this Interpretation became effective upon issuance. The consolidation requirements of this Interpretation apply immediately to variable interest entities created after January 31, 2003 and to existing variable interest entities in the first year or interim period beginning after June 15, 2003. The Company is in the process of assessing the impact of this interpretation and believes it is reasonably possible the Company is the primary beneficiary on many of its equity method investments and will be required to fully consolidate these investments as variable interest entities beginning in the quarter ending October 31, 2003. The Company has not yet determined the maximum potential loss related to the implementation of this new standard. The financial position and results of operations for the Company’s equity method investments are presented in Note I - Investments In and Advances to Affiliates on pages 19-20 of this Form 10-Q.

In April 2003, the FASB issued SFAS No. 149 “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (SFAS No. 149). This statement amends and clarifies financial accounting and reporting for derivative instruments and for hedging activities under FAS 133, “Accounting for Derivative Instruments and Hedging Activities”. This statement is effective for certain contracts entered into or modified after June 30, 2003 and for certain hedging relationships designated after June 30, 2003. The Company does not expect this statement to have a material impact on the Company’s financial position, results of operations or cash flows.

RECENT DEVELOPMENTS

The Company guaranteed the principal and interest on $19,000,000 of municipal bonds issued in May 2003 by an unrelated third party in connection with the Company’s investment in the redevelopment of Stapleton, a former airport in Denver, Colorado. The Company has a 90% ownership interest in Stapleton which is fully consolidated in the Company’s financial statements. The bonds bear interest at 7.875%, require semi-annual interest payments and mature on December 1, 2032. The Company will assess its obligation under this guarantee pursuant to the provisions of FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. In addition, the Company plans to provide a similar guarantee relating to an additional $10,000,000 in municipal bonds expected to be drawn in the next six to eighteen months depending upon the status of the development at Stapleton.

In May 2003, the Company issued $300,000,000 of 7.625% senior notes, due June 1, 2015, under its shelf registration statement. Accrued interest is payable semi-annually beginning December 1, 2003. $208,500,000 of the proceeds from this offering will be used to redeem all of the outstanding 8.5% senior notes originally due in 2008 at a redemption price equal to 104.25% in June 2003. The remainder of the proceeds were used for offering costs, to repay $73,000,000 outstanding under the revolving portion of the Company’s long-term credit facility and for general working capital purposes.

INFORMATION RELATED TO FORWARD-LOOKING STATEMENTS

This Form 10-Q, 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. Risk factors discussed on pages 5-12 of the Company’s Form 10-K at January 31, 2003 and other factors that might cause differences, some of which could be material, include, but are not limited to, real estate development and investment risks including lack of satisfactory financing, construction and lease-up delays and cost overruns, 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, reliance on major tenants, the impact of terrorist acts, the Company’s substantial leverage and the ability to obtain and service debt, guarantees under the Company’s credit facility, the level and volatility of interest rates, continued availability of tax-exempt government financing, the sustainability of substantial operations at the subsidiary level, illiquidity of real estate investments, dependence on rental income from real property, conflicts of interest, financial stability of tenants within the retail industry, which may be impacted by competition and consumer spending, potential liability from syndicated properties, effects of uninsured loss, environmental liabilities, partnership risks, litigation risks, the rate revenue increases versus the rate of expense 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, other than imposed by law, as a result of future events or new information. Readers are cautioned not to place undue reliance on such forward-looking statements.

(THIS PAGE INTENTIONALLY LEFT BLANK)

SUMMARY OF EARNINGS BEFORE DEPRECIATION, AMORTIZATION AND DEFERRED TAXES (EBDT)

Management analyzes its properties using the pro-rata consolidation method because it provides operating data at the Company’s ownership share and the Company publicly discloses and discusses its performance using this method of consolidation to compliment its GAAP disclosures. The information in the tables below present amounts for both full consolidation and pro-rata consolidation, providing a reconciliation of the difference between the two methods, as well as a reconciliation from EBDT to Net Earnings. Under the pro-rata consolidation method, the Company presents its partnership investments proportionate to its share of ownership for each line item of its consolidated financial statements. Under full consolidation, partnership assets and liabilities are reported as consolidated at 100 percent if deemed under the Company’s control, or on the equity method of accounting if the Company does not have control.

Reconciliation of Net Earnings to Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) ⁽²⁾


		Three Months Ended April 30,

		2003			2002

Net Earnings		$	14,792		$	10,136
Depreciation and amortization — Real Estate Groups ⁽⁵⁾			31,288			27,495
Depreciation and amortization — equity method investments ⁽³⁾			126			119
Deferred tax expense (benefit) — Real Estate Groups ⁽⁷⁾			5,305			(201	)
Deferred income tax benefit on early extinguishment of debt ⁽⁶⁾⁽⁷⁾			—			150
Deferred income tax benefit — Non-Real Estate Groups:⁽⁷⁾ Loss on disposition of other investments			—			(46	)
Current income tax expense on non-operating earnings: ⁽⁷⁾ Gain on disposition of other investments			9			—
Gain on disposition included in discontinued operations			1,729			2,566
Straight-line rent adjustment ⁽⁴⁾			(1,704	)		(689	)
(Gain) loss on disposition of other investments			(22	)		116
Discontinued operations: ⁽¹⁾ Gain on disposition of operating properties			(411	)		—
	Minority interest		323			—
Loss on early extinguishment of debt, net of tax ⁽⁶⁾			—			230

Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT)		$	51,435		$	39,876

1) The Company adopted the provisions of Statement of Financial Accounting Standard (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” effective February 1, 2002. Pursuant to the definition of a component of an entity of SFAS No. 144, assuming no significant continuing involvement, all earnings of properties which have been sold or held for sale are reported as discontinued operations.

2) EBDT is defined as net earnings excluding the following items: i) gain (loss) on disposition of operating properties and other investments (net of tax); ii) the adjustment to recognize rental revenues and rental expense using the straight-line method; iii) noncash charges from Forest City Rental Properties Corporation, a wholly-owned subsidiary of Forest City Enterprises, Inc., for depreciation, amortization and deferred income taxes; iv) provision for decline in real estate (net of tax); v) extraordinary items (net of tax); and vi) cumulative effect of change in accounting principle (net of tax). Early extinguishment of debt is now reported in operating earnings instead of extraordinary items. However, early extinguishment of debt is excluded from EBDT through the year ended January 31, 2003. Beginning February 1, 2003, early extinguishment of debt is included in EBDT.

3) Amount represents depreciation expense for certain syndicated properties accounted for on the equity method of accounting under both full consolidation and pro-rata consolidation. See Note E — Investments In and Advances to Affiliates for further discussion of these syndicated properties on Form 10-K for the year ended January 31, 2003.

4) Effective for the year ended January 31, 2001, the Company recognizes minimum rents on a straight-line basis over the term of the related lease pursuant to the provision of SFAS No. 13, “Accounting for Leases.” The straight-line rent adjustment is recorded as an increase or decrease to revenue from Forest City Rental Properties Corporation, a wholly-owned subsidiary of Forest City Enterprises, Inc., with the applicable offset to either accounts receivable or accounts payable, as appropriate.

5) The following table provides detail of Depreciation and Amortization. The Company’s Real Estate Groups are owned by Forest City Rental Properties Corporation, a wholly-owned subsidiary engaged in the ownership, development, acquisition and management of real estate projects, including apartment complexes, regional malls and retail centers, hotels, office buildings and mixed-use facilities, as well as large land development projects.


	Three Months Ended April 30,

	2003			2002

Full Consolidation	$	29,817		$	26,628
Non-Real Estate Groups		(928	)		(1,054	)

Real Estate Groups Full Consolidation		28,889			25,574
Real Estate Groups related to minority interest		(4,389	)		(4,341	)
Real Estate Groups equity method		6,731			5,935
Discontinued operations		57			327

Real Estate Groups Pro-Rata Consolidation	$	31,288		$	27,495

6) The Company has adopted the provisions of Statement of Financial Accounting Standard No. 145, “Rescission of FASB Statement No. 4, 44 and 64, Amendment of FASB Statement No. 13 on Technical Corrections” (SFAS No. 145) which requires gains or losses from early extinguishment of debt to be classified in operating earnings. The Company previously reported gains or losses from early extinguishment of debt as extraordinary item, net of tax, in its Consolidated Statements of Earnings as follows:


Loss on early extinguishment of debt reclassified to continuing operations	$	—	$	(380	)
Deferred income tax benefit		—		(150	)

Loss on early extinguishment of debt, net of tax	$	—	$	(230	)

7) The following table provides detail of Income Tax Expense (Benefit):


		Three Months Ended April 30,

		2003			2002

(A)	Continuing operations
	Current	$	2,813		$	4,511
	Deferred		6,754			2,372

			9,567			6,883

(B)	(Loss) gain on disposition of other investments
	Current		9			—
	Deferred — Non-Real Estate Groups		—			(46	)

			9			(46	)

(C)	Deferred tax benefit on early extinguishment of debt
	Subtotal (A)(B)(C)
	Current		2,822			4,511
	Deferred		6,754			2,176

	Income tax expense		9,576			6,687

(D)	Discontinued operations
	Operating earnings
	Current		(97	)		(111	)
	Deferred		50			19

			(47	)		(92	)
	Gain on disposition of operating properties
	Current		1,729			2,566
	Deferred		(1,694	)		(2,566	)

			35			—

			(12	)		(92	)

	Grand Total (A)(B)(C)(D)
	Current		4,454			6,966
	Deferred		5,110			(371	)

		$	9,564		$	6,595

	Recap of Grand Total:
	Real Estate Groups
	Current	$	6,887		$	8,226
	Deferred		5,305			(201	)

			12,192			8,025

	Non-Real Estate Groups
	Current		(2,433	)		(1,260	)
	Deferred		(195	)		(170	)

			(2,628	)		(1,430	)

	Grand Total	$	9,564		$	6,595

Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) — Three Months Ended April 30, 2003 (in thousands)


	Commercial Group 2003

						Plus
				Less		Unconsolidated			Plus
	Full			Minority		Investments at				Discontinued		Pro-Rata
	Consolidation			Interest		Pro-Rata				Operations		Consolidation

Revenues	$	163,414		$	35,851	$	33,680			$	—	$	161,243
Exclude straight-line rent adjustment		(2,670	)		—		—				—		(2,670	)
Add back equity method depreciation expense		4,238			—		(4,238	)			—		—

Adjusted revenues		164,982			35,851		29,442				—		158,573
Operating expenses, including depreciation and amortization for non-Real Estate Groups		90,104			22,380		21,318				—		89,042
Exclude straight-line rent adjustment		(966	)		—		—				—		(966	)

Adjusted operating expenses		89,138			22,380		21,318				—		88,076
Interest expense		30,747			7,329		8,124				—		31,542
Income tax provision (benefit)		769			—		—				—		769
Minority interest in earnings before depreciation and amortization		6,142			6,142		—				—		—

Total deductions		126,796			35,851		29,442				—		120,387
Add: EBDT from discontinued operations		—			—		—				—		—

Earnings before depreciation, amortization and deferred taxes (EBDT)	$	38,186		$	—	$	—			$	—	$	38,186

[Additional columns below]

[Continued from above table, first column(s) repeated]

Residential Group 2003

Plus

Less Unconsolidated Plus

Full Minority Investments at Discontinued Pro-Rata

Consolidation Interest Pro-Rata Operations Consolidation

Revenues
$ 46,929 $ 1,624 $ 19,099 $ 687 $ 65,091

Exclude straight-line rent adjustment
— — — — —

Add back equity method depreciation expense
2,619 — (2,493 ) — 126

Adjusted revenues
49,548 1,624 16,606 687 65,217

Operating expenses, including depreciation and amortization for non-Real Estate Groups
20,446 1,137 10,985 749 31,043

Exclude straight-line rent adjustment
— — — — —

Adjusted operating expenses
20,446 1,137 10,985 749 31,043

Interest expense
7,104 270 5,621 — 12,455

Income tax provision (benefit)
2,220 — — (97 ) 2,123

Minority interest in earnings before depreciation and amortization
217 217 — — —

Total deductions
29,987 1,624 16,606 652 45,621

Add: EBDT from discontinued operations
35 — — (35 ) —

Earnings before depreciation, amortization and deferred taxes (EBDT)
$ 19,596 $ — $ — $ — $ 19,596


	Land Development Group 2003

					Plus
			Less		Unconsolidated		Plus
	Full		Minority		Investments at			Discontinued		Pro-Rata
	Consolidation		Interest		Pro-Rata			Operations		Consolidation

Revenues	$	13,529	$	1,157	$	1,159		$	—	$	13,531
Operating expenses, including depreciation and amortization for non-Real Estate Groups		7,956		587		808			—		8,177
Interest expense		449		—		351			—		800
Income tax provision (benefit)		1,995		—		—			—		1,995
Minority interest in earnings before depreciation and amortization		570		570		—			—		—

Total deductions		10,970		1,157		1,159			—		10,972

Earnings before depreciation, amortization and deferred taxes (EBDT)	$	2,559	$	—	$	—		$	—	$	2,559

[Additional columns below]

[Continued from above table, first column(s) repeated]

Lumber Trading Group 2003

Plus

Less Unconsolidated Plus

Full Minority Investments at Discontinued Pro-Rata

Consolidation Interest Pro-Rata Operations Consolidation

Revenues
$ 19,901 $ — $ — $ — $ 19,901

Operating expenses, including depreciation and amortization for non-Real Estate Groups
19,734 — — — 19,734

Interest expense
651 — — — 651

Income tax provision (benefit)
(136 ) — — — (136 )

Minority interest in earnings before depreciation and amortization
— — — — —

Total deductions
20,249 — — — 20,249

Earnings before depreciation, amortization and deferred taxes (EBDT)
$ (348 ) $ — $ — $ — $ (348 )

Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) — Three Months Ended April 30, 2003 (in thousands) continued


	Corporate Activities 2003

						Plus
				Less		Unconsolidated		Plus
	Full			Minority		Investments at		Discontinued		Pro-Rata
	Consolidation			Interest		Pro-Rata		Operations		Consolidation

Revenues	$	128		$	—	$	—	$	—	$	128
Exclude straight-line rent adjustment		—			—		—		—		—
Add back equity method depreciation expense		—			—		—		—		—

Adjusted revenues		128			—		—		—		128
Operating expenses, including depreciation and amortization for non-Real Estate Groups		5,215			—		—		—		5,215
Exclude straight-line rent adjustment		—			—		—		—		—

Adjusted operating expenses		5,215			—		—		—		5,215
Interest expense		5,701			—		—		—		5,701
Income tax (benefit) provision		(2,230	)		—		—		—		(2,230	)
Minority interest in earnings before depreciation and amortization		—			—		—		—		—

Total deductions		8,686			—		—		—		8,686
Add: EBDT from discontinued operations		—			—		—		—		—

Earnings before depreciation, amortization and deferred taxes (EBDT)	$	(8,558	)	$	—	$	—	$	—	$	(8,558	)

[Additional columns below]

[Continued from above table, first column(s) repeated]

Total 2003

Plus

Less Unconsolidated Plus

Full Minority Investments at Discontinued Pro-Rata

Consolidation Interest Pro-Rata Operations Consolidation

Revenues
$ 243,901 $ 38,632 $ 53,938 $ 687 $ 259,894

Exclude straight-line rent adjustment
(2,670 ) — — — (2,670 )

Add back equity method depreciation expense
6,857 — (6,731 ) — 126

Adjusted revenues
248,088 38,632 47,207 687 257,350

Operating expenses, including depreciation and amortization for non-Real Estate Groups
143,455 24,104 33,111 749 153,211

Exclude straight-line rent adjustment
(966 ) — — — (966 )

Adjusted operating expenses
142,489 24,104 33,111 749 152,245

Interest expense
44,652 7,599 14,096 — 51,149

Income tax (benefit) provision
2,618 — — (97 ) 2,521

Minority interest in earnings before depreciation and amortization
6,929 6,929 — — —

Total deductions
196,688 38,632 47,207 652 205,915

Add: EBDT from discontinued operations
35 — — (35 ) —

Earnings before depreciation, amortization and deferred taxes (EBDT)
$ 51,435 $ — $ — $ — $ 51,435


Reconciliation to net earnings:
Earnings before depreciation, amortization and deferred taxes (EBDT)			$	51,435		$	—	$	—	$	—		$	51,435
Depreciation and amortization — Real Estate Groups				(31,357	)		—		—		(57	)		(31,414	)
Deferred taxes — Real Estate Groups				(6,949	)		—		—		(50	)		(6,999	)
Straight-line rent adjustment				1,704			—		—		—			1,704
Loss on disposition of operating properties and other investments, net of tax				13			—		—		53			66
	Discontinued operations, net of tax and minority interest: ^(a)
	Depreciation and amortization			(57	)		—		—		57			—
		Deferred taxes		(50	)		—		—		50			—
		Gain on disposition of operating properties		53			—		—		(53	)		—

Net earnings			$	14,792		$	—	$	—	$	—		$	14,792

(a)

The Company adopted the provisions of Statement of Financial Accounting Standard (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” effective February 1, 2002. Pursuant to the definition of a component of an entity of SFAS No. 144, assuming no significant continuing involvement, all earnings of properties which have been sold or held for sale are reported as discontinued operations.

Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) — Three Months Ended April 30, 2002 (in thousands)


	Commercial Group 2002

						Plus
				Less		Unconsolidated			Plus
	Full			Minority		Investments at			Discontinued			Pro-Rata
	Consolidation			Interest		Pro-Rata			Operations			Consolidation

Revenues	$	131,798		$	25,953	$	25,443		$	2,102		$	133,390
Exclude straight-line rent adjustment		(1,808	)		—		—			(20	)		(1,828	)
Add back equity method depreciation expense		3,679			—		(3,679	)		—			—

Adjusted revenues		133,669			25,953		21,764			2,082			131,562
Operating expenses, including depreciation and amortization for non-Real Estate Groups		71,530			14,515		15,092			729			72,836
Exclude straight-line rent adjustment		(1,139	)		—		—			—			(1,139	)

Adjusted operating expenses		70,391			14,515		15,092			729			71,697
Interest expense		31,071			7,944		6,672			197			29,996
Exclude early extinguishment of debt ^(a)		—			—		—			—			—

Adjusted interest expense		31,071			7,944		6,672			197			29,996
Income tax provision (benefit)		2,787			—		—			(26	)		2,761
Exclude tax on early extinguishment of debt ^(a)		—			—		—			—			—

Adjusted income tax provision		2,787			—		—			(26	)		2,761
Minority interest in earnings before depreciation and amortization		3,494			3,494		—			—			—

Total deductions		107,743			25,953		21,764			900			104,454
Add: EBDT from discontinued operations		1,182			—		—			(1,182	)		—

Earnings before depreciation, amortization and deferred taxes (EBDT)	$	27,108		$	—	$	—		$	—		$	27,108

[Additional columns below]

[Continued from above table, first column(s) repeated]

Residential Group 2002

Plus

Less Unconsolidated Plus

Full Minority Investments at Discontinued Pro-Rata

Consolidation Interest Pro-Rata Operations Consolidation

Revenues
$ 37,695 $ 1,109 $ 16,147 $ 747 $ 53,480

Exclude straight-line rent adjustment
— — — — —

Add back equity method depreciation expense
2,375 — (2,256 ) — 119

Adjusted revenues
40,070 1,109 13,891 747 53,599

Operating expenses, including depreciation and amortization for non-Real Estate Groups
17,404 900 9,437 561 26,502

Exclude straight-line rent adjustment
— — — — —

Adjusted operating expenses
17,404 900 9,437 561 26,502

Interest expense
5,546 181 4,454 201 10,020

Exclude early extinguishment of debt ^(a)
(380 ) — — — (380 )

Adjusted interest expense
5,166 181 4,454 201 9,640

Income tax provision (benefit)
1,997 — — (85 ) 1,912

Exclude tax on early extinguishment of debt ^(a)
150 — — — 150

Adjusted income tax provision
2,147 — — (85 ) 2,062

Minority interest in earnings before depreciation and amortization
28 28 — — —

Total deductions
24,745 1,109 13,891 677 38,204

Add: EBDT from discontinued operations
70 — — (70 ) —

Earnings before depreciation, amortization and deferred taxes (EBDT)
$ 15,395 $ — $ — $ — $ 15,395


	Land Development Group 2002

					Plus
			Less		Unconsolidated		Plus
	Full		Minority		Investments at		Discontinued		Pro-Rata
	Consolidation		Interest		Pro-Rata		Operations		Consolidation

Revenues	$	15,365	$	1,089	$	2,992	$	—	$	17,268
Operating expenses, including depreciation and amortization for non-Real Estate Groups		8,608		625		2,483		—		10,466
Interest expense		64		—		509		—		573
Income tax provision		2,961		—		—		—		2,961
Minority interest in earnings before depreciation and amortization		464		464		—		—		—

Total deductions		12,097		1,089		2,992		—		14,000

Earnings before depreciation, amortization and deferred taxes (EBDT)	$	3,268	$	—	$	—	$	—	$	3,268

[Additional columns below]

[Continued from above table, first column(s) repeated]

Lumber Trading Group 2002

Plus

Less Unconsolidated Plus

Full Minority Investments at Discontinued Pro-Rata

Consolidation Interest Pro-Rata Operations Consolidation

Revenues
$ 26,263 $ — $ — $ — $ 26,263

Operating expenses, including depreciation and amortization for non-Real Estate Groups
24,442 — — — 24,442

Interest expense
636 — — — 636

Income tax provision
521 — — — 521

Minority interest in earnings before depreciation and amortization
— — — — —

Total deductions
25,599 — — — 25,599

Earnings before depreciation, amortization and deferred taxes (EBDT)
$ 664 $ — $ — $ — $ 664

Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) — Three
Months Ended April 30, 2002 (in thousands) continued


	Corporate Activities 2002

						Plus
				Less		Unconsolidated		Plus
	Full			Minority		Investments at		Discontinued		Pro-Rata
	Consolidation			Interest		Pro-Rata		Operations		Consolidation

Revenues	$	250		$	—	$	—	$	—	$	250
Exclude straight-line rent adjustment		—			—		—		—		—
Add back equity method depreciation expense		—			—		—		—		—

Adjusted revenues		250			—		—		—		250
Operating expenses, including depreciation and amortization for non-Real Estate Groups		5,022			—		—		—		5,022
Exclude straight-line rent adjustment		—			—		—		—		—

Adjusted operating expenses		5,022			—		—		—		5,022
Interest expense		5,816			—		—		—		5,816
Exclude early extinguishment of debt (a)		—			—		—		—		—

Adjusted interest expense		5,816			—		—		—		5,816
Income tax (benefit) provision		(4,029	)		—		—		—		(4,029	)
Exclude tax on early extinguishment of debt (a)		—			—		—		—		—

Adjusted income tax (benefit) provision		(4,029	)		—		—		—		(4,029	)
Minority interest in earnings before depreciation and amortization		—			—		—		—		—

Total deductions		6,809			—		—		—		6,809
Add: EBDT from discontinued operations		—			—		—		—		—

Earnings before depreciation, amortization and deferred taxes (EBDT)	$	(6,559	)	$	—	$	—	$	—	$	(6,559	)

[Additional columns below]

[Continued from above table, first column(s) repeated]

Total 2002

Plus

Less Unconsolidated Plus

Full Minority Investments at Discontinued Pro-Rata

Consolidation Interest Pro-Rata Operations Consolidation

Revenues
$ 211,371 $ 28,151 $ 44,582 $ 2,849 $ 230,651

Exclude straight-line rent adjustment
(1,808 ) — — (20 ) (1,828 )

Add back equity method depreciation expense
6,054 — (5,935 ) — 119

Adjusted revenues
215,617 28,151 38,647 2,829 228,942

Operating expenses, including depreciation and amortization for non-Real Estate Groups
127,006 16,040 27,012 1,290 139,268

Exclude straight-line rent adjustment
(1,139 ) — — — (1,139 )

Adjusted operating expenses
125,867 16,040 27,012 1,290 138,129

Interest expense
43,133 8,125 11,635 398 47,041

Exclude early extinguishment of debt (a)
(380 ) — — — (380 )

Adjusted interest expense
42,753 8,125 11,635 398 46,661

Income tax (benefit) provision
4,237 — — (111 ) 4,126

Exclude tax on early extinguishment of debt (a)
150 — — — 150

Adjusted income tax (benefit) provision
4,387 — — (111 ) 4,276

Minority interest in earnings before depreciation and amortization
3,986 3,986 — — —

Total deductions
176,993 28,151 38,647 1,577 189,066

Add: EBDT from discontinued operations
1,252 — — (1,252 ) —

Earnings before depreciation, amortization and deferred taxes (EBDT)
$ 39,876 $ — $ — $ — $ 39,876


Reconciliation to net earnings:
Earnings before depreciation, amortization and deferred taxes (EBDT)			$	39,876		$	—	$	—	$	—		$	39,876
Depreciation and amortization — Real Estate Groups				(27,287	)		—		—		(327	)		(27,614	)
Deferred taxes — Real Estate Groups				(2,496	)		—		—		(19	)		(2,515	)
Straight-line rent adjustment				669			—		—		20			689
Loss on early extinguishment of debt, net of tax ^(a)				(230	)		—		—		—			(230	)
Loss on disposition of operating properties and other investments, net of tax				(70	)		—		—		—			(70	)
	Discontinued operations, net of tax and minority interest: ^(b) Depreciation and amortization			(327	)		—		—		327			—
		Deferred taxes		(19	)		—		—		19			—
		Straight-line rent adjustment		20			—		—		(20	)		—

Net earnings			$	10,136		$	—	$	—	$	—		$	10,136

(a)		Early extinguishment of debt, which was formerly reported as an extraordinary item, is now reported as interest expense. However, early extinguishment of debt will be excluded from EBDT through the year ended January 31, 2003. Beginning February 1, 2003, early extinguishment of debt will be included in EBDT.

(a)		The Company adopted the provisions of Statement of Financial Accounting Standard (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” effective February 1, 2002. Pursuant to the definition of a component of an entity of SFAS No. 144, assuming no significant continuing involvement, all earnings of properties which have been sold or held for sale are reported as discontinued operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s primary market risk exposure is interest rate risk. At April 30, 2003, the Company had $1,095,617,000 of variable-rate debt outstanding. This is inclusive of the $148,000,000 outstanding under its long-term credit facility. Upon opening and achieving stabilized operations, the Company generally pursues long-term fixed-rate nonrecourse financing for its rental properties. Additionally, when the properties’fixed-rate debt matures, the maturing amounts are subject to interest rate risk.

To mitigate short-term variable interest rate risk, the Company has purchased London Interbank Offered Rate (LIBOR) interest rate caps and swaps as follows.


	Caps					Swaps ⁽¹⁾

Coverage	Amount		Average Rate			Amount		Average Rate

	(dollars in thousands)
05/01/03 - 02/01/04	$	983,982		6.59	%	$	441,869		2.16	%
02/01/04 - 02/01/05		489,653		6.54	%		305,728		2.68	%
02/01/05 - 02/01/06		227,256		7.83	%		70,528		4.13	%
02/01/06 - 02/01/07		90,953		7.58	%		69,183		4.13	%

(1) Swaps include long-term LIBOR contracts that have an average maturity greater than six months.

The Company estimates the fair value of its debt instruments by discounting future cash payments at interest rates that approximate the current market. Based on these parameters, the carrying amount of the Company’s total fixed-rate debt at April 30, 2003 was $2,310,109,000 compared to an estimated fair value of $2,366,085,000. The Company estimates that a 100 basis point decrease in market interest rates would change the fair value of this fixed-rate debt to approximately $2,468,220,000 at April 30, 2003.

The Company estimates the fair value of its hedging instruments based on interest rate market pricing models. At April 30, 2003, LIBOR interest rate caps and Treasury Options were reported at their fair value of approximately $377,000 in the Consolidated Balance Sheet as Other Assets. The fair value of interest rate swap agreements at April 30, 2003 is an unrealized loss of $6,048,000 and is included in Accounts Payable and Accrued Expenses in the Consolidated Balance Sheet.

The following tables provide information about the Company’s financial instruments that are sensitive to changes in interest rates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk (continued)

April 30, 2003


		Expected Maturity Date

Long-Term Debt		2003			2004			2005			2006			2007			Thereafter

					(dollars in thousands)
Fixed:
	Fixed rate debt	$	45,771		$	51,233		$	125,833		$	411,655		$	124,625		$	1,255,073
	Weighted average interest rate		7.07	%		7.10	%		7.24	%		6.59	%		7.26	%		7.33	%
	UDAG		4,499			415			10,929			8,106			457			51,113
	Weighted average interest rate		3.77	%		0.61	%		3.87	%		0.03	%		0.64	%		1.79	%
	Senior & Subordinated Debt ⁽¹⁾		200,000	⁽²⁾		—			—			—			—			20,400
	Weighted average interest rate		8.50	%														8.25	%

Total Fixed Rate Debt			250,270			51,648			136,762			419,761			125,082			1,326,586

Variable:
	Variable rate debt		410,345			205,094			38,866			5,965			24,821			157,526
	Weighted average interest rate
	Tax Exempt		16,660			36,340			21,000			—			—			31,000
	Weighted average interest rate
	Credit Facility ⁽¹⁾		18,750			25,000			25,000			79,250			—			—
	Weighted average interest rate

Total Variable Rate Debt			445,755			266,434			84,866			85,215			24,821			188,526

Total Long-Term Debt		$	696,025		$	318,082		$	221,628		$	504,976		$	149,903		$	1,515,112


		Total			Fair Market
		Outstanding			Value
		4/30/03			4/30/03

Fixed:
	Fixed rate debt	$	2,014,190		$	2,085,001
	Weighted average interest rate		7.16	%
	UDAG		75,519			51,219
	Weighted average interest rate		2.01	%
	Senior & Subordinated Debt ⁽¹⁾		220,400			229,865
	Weighted average interest rate		8.48	%

Total Fixed Rate Debt			2,310,109			2,366,085

Variable:
	Variable rate debt		842,617			842,617
	Weighted average interest rate		3.98	%
	Tax Exempt		105,000			105,000
	Weighted average interest rate		2.47	%
	Credit Facility ⁽¹⁾		148,000			148,000
	Weighted average interest rate		3.89	%

Total Variable Rate Debt			1,095,617			1,095,617

Total Long-Term Debt		$	3,405,726		$	3,461,702

(1)		Represents recourse debt.

(2)		Original maturity date was 2008. These senior notes will be redeemed in full June 2003 from proceeds of a new $300,000 7.625% senior notes public offering which closed May 2003.

Item 3. Quantitative and Qualitative Disclosures About Market Risk (continued)

April 30, 2002


		Expected Maturity Date

Long-Term Debt		2002			2003			2004			2005			2006			Thereafter

					*(dollars in thousands)*
Fixed:
	Fixed rate debt	$	63,297		$	59,341		$	47,267		$	131,755		$	391,931		$	1,164,098
	Weighted average interest rate		7.60	%		7.21	%		7.20	%		7.34	%		6.64	%		7.56	%

	UDAG		132			2,200			415			10,929			8,106			47,571
	Weighted average interest rate		0.02	%		3.38	%		0.61	%		3.87	%		0.03	%		1.93	%

	Senior & Subordinated Debt ⁽¹⁾		—			—			—			—			—			220,400
	Weighted average interest rate																	8.48	%

Total Fixed Rate Debt			63,429			61,541			47,682			142,684			400,037			1,432,069

Variable:
	Variable rate debt		225,500			296,128			46,606			1,396			1,495			100,820
	Weighted average interest rate

	Tax Exempt		76,000			660			7,940			—			—			—
	Weighted average interest rate

	Credit Facility ⁽¹⁾		18,750			25,000			25,000			25,000			36,250			—
	Weighted average interest rate

Total Variable Rate Debt			320,250			321,788			79,546			26,396			37,745			100,820

Total Long-Term Debt		$	383,679		$	383,329		$	127,228		$	169,080		$	437,782		$	1,532,889


		Total			Fair Market
		Outstanding			Value
		4/30/02			4/30/02

Fixed:
	Fixed rate debt	$	1,857,689		$	1,890,330
	Weighted average interest rate		7.33	%

	UDAG		69,353			43,346
	Weighted average interest rate		2.05	%

	Senior & Subordinated Debt ⁽¹⁾		220,400			220,418
	Weighted average interest rate		8.48	%

Total Fixed Rate Debt			2,147,442			2,154,094

Variable:
	Variable rate debt		671,945			671,945
	Weighted average interest rate		5.05	%

	Tax Exempt		84,600			84,600
	Weighted average interest rate		2.53	%

	Credit Facility ⁽¹⁾		130,000			130,000
	Weighted average interest rate		5.50	%

Total Variable Rate Debt			886,545			886,545

Total Long-Term Debt		$	3,033,987		$	3,040,639

(1) Represents recourse debt.

Item 4. Controls and Procedures

a) Evaluation of disclosure controls and procedures. The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective.

b) Changes in internal controls. Subsequent to the date of the evaluation, there have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security-Holders

On June 11, 2003, the Company held its annual meeting of shareholders. At that meeting, the shareholders elected four directors by holders of Class A Common Stock and nine directors by holders of Class B Common Stock, each to hold office until the next shareholder meeting and until his or her successor is elected; approved the amendment of the 1994 Stock Option Plan to increase the number of shares to be issued; and ratified PricewaterhouseCoopers LLP as independent auditors for the Company for the fiscal year ending January 31, 2004.

It was reported that 32,466,657 shares of Class A Common Stock representing 32,466,657 votes and 13,438,335 shares of Class B Common Stock representing 134,383,350 votes were represented in person and by proxy and that these shares represented a quorum. The votes cast for the aforementioned matters were as follows:


							Abstentions
							and/or
							Broker
			For		Against		Non-votes

(1	)	Election of the following nominated directors by Class A shareholders
				31,680,447				786,210
		Michael P. Esposito, Jr.
		Joan K. Shafran
		Louis Stokes
		Stan Ross

(2	)	Election of the following nominated directors by Class B shareholders
				134,267,930				115,410
		Albert B. Ratner
		Samuel H. Miller
		Charles A. Ratner
		James A. Ratner
		Jerry V. Jarrett
		Ronald A. Ratner
		Scott S. Cowen
		Brian J. Ratner
		Deborah Ratner Salzberg

(3	)	Approval of the amendment of the 1994 Stock Option Plan to increase the number of shares to be issued to 5,875,000
				146,209,989		7,565,557		24,137

(4	)	Ratification of independent auditors PricewaterhouseCoopers LLP
				166,515,966		300,969		33,072

Item 6. Exhibits and Reports on Form 8-K

(a) 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).

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 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).

4.4	- -	7.625% Senior Note Indenture, dated as of May 19, 2003, between Forest City Enterprises, Inc., as issuer, and The Bank of New York, as trustee, incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K, filed on May 20, 2003 (File No. 1-4372).

4.5	- -	Form of 7.625% Senior Notes due 2015, incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K, filed on May 20, 2003 (File No. 1-4372).

+10.1	- -	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).


Exhibit
Number		Description of Document


+10.2	- -	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).

+10.3	- -	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).

+10.4	- -	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).

+10.5	- -	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).

+10.6	- -	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).

+10.7	- -	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).

+10.8	- -	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).


Exhibit
Number		Description of Document


+10.9	- -	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).

+10.10	- -	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).

+10.11	- -	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).

+10.12	- -	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).

+10.13	- -	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).

+10.14	- -	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).

+10.15	- -	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).


Exhibit
Number		Description of Document


+10.16	- -	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).

+10.17	- -	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).

+10.18	- -	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).

+10.19	- -	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).

+10.20	- -	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).

+10.21	- -	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).

+10.22	- -	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).

+10.23	- -	First Amendment to the Deferred Compensation Plan for Nonemployee Directors, effective October 1, 1999, incorporated by reference to Exhibit 4.6 to the Company’s Registration Statement on Form S-8 (Registration No. 333-38912).

+10.24	- -	Second Amendment to the Deferred Compensation Plan for Nonemployee Directors, effective March 10, 2000, incorporated by reference to Exhibit 4.7 to the Company’s Registration Statement on Form S-8 (Registration No. 333-38912).

+10.25	- -	Employment Agreement entered into on August 28, 2002, effective February 3, 2002, by the Company and Charles A. Ratner, incorporated by reference to Exhibit 10.25 to the Company’s Form 10-Q for the quarter ended July 31, 2002 (File No. 1-4372).

10.26	- -	intentionally omitted.

10.27	- -	intentionally omitted.


Exhibit
Number		Description of Document


+10.28	- -	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).

+10.29	- -	First Amendment to Employment Agreement effective as of February 28, 2000 between Forest City Enterprises, Inc. and Albert B. Ratner, incorporated by reference to Exhibit 10.45 to the Company’s Form 10-K for the year ended January 31, 2000 (File No. 1-4372).

+10.30	- -	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).

+10.31	- -	Employment Agreement entered into on August 28, 2002, effective February 3, 2002, by the Company and James A. Ratner, incorporated by reference to Exhibit 10.31 to the Company’s Form 10-Q for the quarter ended July 31, 2002 (File No. 1-4372).

+10.32	- -	Employment Agreement entered into on August 28, 2002, effective February 3, 2002, by the Company and Ronald A. Ratner, incorporated by reference to Exhibit 10.32 to the Company’s Form 10-Q for the quarter ended July 31, 2002 (File No. 1-4372).

+10.33	- -	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).

+10.34	- -	Employment Agreement (re death benefits) entered into on May 31, 1999, by the Company and Thomas G. Smith dated December 27, 1995, 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).

+10.35	- -	Summary of Forest City Enterprises, Inc. Management Incentive Plan as adopted in 1997, incorporated by reference to Exhibit 10.51 to the Company’s Form 10-Q for the quarter ended July 31, 2001 (File No. 1-4372).

+10.36	- -	Summary of Forest City Enterprises, Inc. Long-Term Performance Plan as adopted in 2000, incorporated by reference to Exhibit 10.52 to the Company’s Form 10-Q for the quarter ended July 31, 2001 (File No. 1-4372).


Exhibit
Number		Description of Document

10.37	- -	Credit Agreement, dated as of March 5, 2002, 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 5, 2002 (File No. 1-4372).

10.38	- -	Guaranty of Payment of Debt, dated as of March 5, 2002, 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 5, 2002 (File No 1-4372).

+10.39	- -	Form of Restricted Stock Agreement between Forest City Enterprises,Inc. and the grantee, incorporated by reference to Exhibit 10.39 to the Company’s Form 10-K for the year ended January 31, 2003 (File No. 1-4372).

*10.40	- -	First Amendment to Credit Agreement, dated as of May 9, 2003, 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.

*10.41	- -	First Amendment to Guaranty of Payment of Debt, dated as of May 9, 2003, by and among Forest City Enterprises, Inc., the banks named therein, KeyBank National Association, as administrative agent, and National City Bank, as syndication agent.

+10.42	- -	1994 Stock Option Plan, as Amended, incorporated by reference to Exhibit A to the Forest City Enterprises, Inc. Proxy Statement for its Annual Meeting of Shareholders held on June 11, 2003.

*99.1	- -	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

+		Management contract or compensatory arrangement.

*		Filed herewith.

b. Reports on Form 8-K.

On February 5, 2003, the Company filed a current report on Form 8-K to report that, on February 5, 2003, the Company sent a notice to its directors and executive officers informing them that the Forest City Savings Plan and Trust (the “401(k) Plan”) is changing its administrator and that, as a result of that change, there was a blackout period from February 20, 2003 through March 31, 2003. (This blackout period was lifted on March 17, 2003)

On April 10, 2003, the Company furnished a current report on Form 8-K dated April 10, 2003 to report that in connection with the filing of Form 10-K for the year ended January 31, 2003, the Chief Executive Officer and the Chief Financial Officer of the Company furnished certifications to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		FOREST CITY ENTERPRISES, INC.
		(Registrant)

Date June 12, 2003		/S/ THOMAS G. SMITH Thomas G. Smith Executive Vice President, Chief Financial Officer and Secretary (Principal Financial Officer)

Date June 12, 2003		/S/ LINDA M. KANE Linda M. Kane Senior Vice President and Corporate Controller (Principal Accounting Officer)

CERTIFICATION

I, Charles A. Ratner, certify that:

(1) I have reviewed this quarterly report for the three months ended April 30, 2003 on Form 10-Q of Forest City Enterprises, Inc. (“Registrant”);

(2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;

(4) The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

(a) Designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; and

(b) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”);

(c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; and

(5) The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant’s auditors and the audit committee of the Registrant's board of directors (or persons fulfilling the equivalent function):

(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant’s ability to record, process, summarize and report financial data and have identified for the Registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls; and

(6) The Registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: June 12, 2003

		/s/ CHARLES A. RATNER Name: Charles A. Ratner Title: President and Chief Executive Officer

CERTIFICATION

I, Thomas G. Smith, certify that:


Date: June 12, 2003

		/s/ THOMAS G. SMITH Name: Thomas G. Smith Title: Executive Vice President, Chief Financial Officer and Secretary

I.		Investments in and Advances to Real Estate Affiliates

		Included in Investments in and Advances to Real Estate Affiliates are unconsolidated investments in entities which the Company does not control and which are accounted for on the equity method. Summarized combined financial information for these investments, along with the Company’s pro-rata share (a non-GAAP measure — See Note B), is as follows.

I.		Investments in and Advances to Real Estate Affiliates (continued)

		As is customary within the real estate industry, the Company invests in certain real estate projects through partnerships. The Company provides funding for certain of its partners’ equity contributions. The most significant partnership for which the Company provides funding relates to Forest City Ratner Companies, representing the Commercial Group’s New York City operations. The Company’s partner is the President and Chief Executive Officer of Forest City Ratner Companies and is the first cousin to four executive officers of the Company. At April 30, 2003 and January 31, 2003, amounts advanced for real estate projects on behalf of this partner collateralized by this partnership interest were $101,607,000 and $98,264,000, respectively, of the $339,333,000 and $340,725,000 presented above for “Advances to other real estate affiliates.” These advances entitle the Company to a preferred return on and of the outstanding balances, which are payable from cash flows of each respective property.

J.		Recent Developments

		The Company guaranteed the principal and interest on $19,000,000 of municipal bonds issued in May 2003 by an unrelated third party in connection with the Company’s investment in the redevelopment of Stapleton, a former airport in Denver, Colorado. The Company has a 90% ownership interest in Stapleton which is fully consolidated in the Company’s financial statements. The bonds bear interest at 7.875%, require semi-annual interest payments and mature on December 1, 2032. The Company will assess its obligation under this guarantee pursuant to the provisions of FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. In addition, the Company plans to provide a similar guarantee relating to an additional $10,000,000 in municipal bonds expected to be drawn in the next six to eighteen months depending upon the status of the development at Stapleton.

		In May 2003, the Company issued $300,000,000 of 7.625% senior notes, due June 1, 2015, under its shelf registration statement. Accrued interest is payable semi-annually beginning December 1, 2003. $208,500,000 of the proceeds from this offering will be used to redeem all of the outstanding 8.5% senior notes originally due in 2008 at a redemption price equal to 104.25% in June 2003. The remainder of the proceeds were used for offering costs, to repay $73,000,000 outstanding under the revolving portion of the Company’s long-term credit facility and for general working capital purposes.

K.		Segment Information

		The following tables summarize financial data for the Commercial, Residential, Land Development and Lumber Trading Groups and Corporate. All amounts, including footnotes, are presented in thousands.

*		Revenues represent the change from prior year of the Company’s share of net earnings.
N/A — not applicable — property recorded under equity method of accounting.

*		Revenues represent the change from prior year of the Company’s share of net earnings (loss).
N/A — not applicable — property recorded under equity method of accounting.
(a)		Acquired property.
(b)		Phased opening.

1)		The Company adopted the provisions of Statement of Financial Accounting Standard (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” effective February 1, 2002. Pursuant to the definition of a component of an entity of SFAS No. 144, assuming no significant continuing involvement, all earnings of properties which have been sold or held for sale are reported as discontinued operations.

2)		EBDT is defined as net earnings excluding the following items: i) gain (loss) on disposition of operating properties and other investments (net of tax); ii) the adjustment to recognize rental revenues and rental expense using the straight-line method; iii) noncash charges from Forest City Rental Properties Corporation, a wholly-owned subsidiary of Forest City Enterprises, Inc., for depreciation, amortization and deferred income taxes; iv) provision for decline in real estate (net of tax); v) extraordinary items (net of tax); and vi) cumulative effect of change in accounting principle (net of tax). Early extinguishment of debt is now reported in operating earnings instead of extraordinary items. However, early extinguishment of debt is excluded from EBDT through the year ended January 31, 2003. Beginning February 1, 2003, early extinguishment of debt is included in EBDT.

3)		Amount represents depreciation expense for certain syndicated properties accounted for on the equity method of accounting under both full consolidation and pro-rata consolidation. See Note E — Investments In and Advances to Affiliates for further discussion of these syndicated properties on Form 10-K for the year ended January 31, 2003.

4)		Effective for the year ended January 31, 2001, the Company recognizes minimum rents on a straight-line basis over the term of the related lease pursuant to the provision of SFAS No. 13, “Accounting for Leases.” The straight-line rent adjustment is recorded as an increase or decrease to revenue from Forest City Rental Properties Corporation, a wholly-owned subsidiary of Forest City Enterprises, Inc., with the applicable offset to either accounts receivable or accounts payable, as appropriate.

5)		The following table provides detail of Depreciation and Amortization. The Company’s Real Estate Groups are owned by Forest City Rental Properties Corporation, a wholly-owned subsidiary engaged in the ownership, development, acquisition and management of real estate projects, including apartment complexes, regional malls and retail centers, hotels, office buildings and mixed-use facilities, as well as large land development projects.


	Residential Group 2003

					Plus
			Less		Unconsolidated			Plus
	Full		Minority		Investments at			Discontinued			Pro-Rata
	Consolidation		Interest		Pro-Rata			Operations			Consolidation

Revenues	$	46,929	$	1,624	$	19,099		$	687		$	65,091
Exclude straight-line rent adjustment		—		—		—			—			—
Add back equity method depreciation expense		2,619		—		(2,493	)		—			126

Adjusted revenues		49,548		1,624		16,606			687			65,217
Operating expenses, including depreciation and amortization for non-Real Estate Groups		20,446		1,137		10,985			749			31,043
Exclude straight-line rent adjustment		—		—		—			—			—

Adjusted operating expenses		20,446		1,137		10,985			749			31,043
Interest expense		7,104		270		5,621			—			12,455
Income tax provision (benefit)		2,220		—		—			(97	)		2,123
Minority interest in earnings before depreciation and amortization		217		217		—			—			—

Total deductions		29,987		1,624		16,606			652			45,621
Add: EBDT from discontinued operations		35		—		—			(35	)		—

Earnings before depreciation, amortization and deferred taxes (EBDT)	$	19,596	$	—	$	—		$	—		$	19,596


	Lumber Trading Group 2003

						Plus
				Less		Unconsolidated		Plus
	Full			Minority		Investments at		Discontinued		Pro-Rata
	Consolidation			Interest		Pro-Rata		Operations		Consolidation

Revenues	$	19,901		$	—	$	—	$	—	$	19,901
Operating expenses, including depreciation and amortization for non-Real Estate Groups		19,734			—		—		—		19,734
Interest expense		651			—		—		—		651
Income tax provision (benefit)		(136	)		—		—		—		(136	)
Minority interest in earnings before depreciation and amortization		—			—		—		—		—

Total deductions		20,249			—		—		—		20,249

Earnings before depreciation, amortization and deferred taxes (EBDT)	$	(348	)	$	—	$	—	$	—	$	(348	)


	Total 2003

						Plus
				Less		Unconsolidated			Plus
	Full			Minority		Investments at			Discontinued			Pro-Rata
	Consolidation			Interest		Pro-Rata			Operations			Consolidation

Revenues	$	243,901		$	38,632	$	53,938		$	687		$	259,894
Exclude straight-line rent adjustment		(2,670	)		—		—			—			(2,670	)
Add back equity method depreciation expense		6,857			—		(6,731	)		—			126

Adjusted revenues		248,088			38,632		47,207			687			257,350
Operating expenses, including depreciation and amortization for non-Real Estate Groups		143,455			24,104		33,111			749			153,211
Exclude straight-line rent adjustment		(966	)		—		—			—			(966	)

Adjusted operating expenses		142,489			24,104		33,111			749			152,245
Interest expense		44,652			7,599		14,096			—			51,149
Income tax (benefit) provision		2,618			—		—			(97	)		2,521
Minority interest in earnings before depreciation and amortization		6,929			6,929		—			—			—

Total deductions		196,688			38,632		47,207			652			205,915
Add: EBDT from discontinued operations		35			—		—			(35	)		—

Earnings before depreciation, amortization and deferred taxes (EBDT)	$	51,435		$	—	$	—		$	—		$	51,435


	Residential Group 2002

						Plus
				Less		Unconsolidated			Plus
	Full			Minority		Investments at			Discontinued			Pro-Rata
	Consolidation			Interest		Pro-Rata			Operations			Consolidation

Revenues	$	37,695		$	1,109	$	16,147		$	747		$	53,480
Exclude straight-line rent adjustment		—			—		—			—			—
Add back equity method depreciation expense		2,375			—		(2,256	)		—			119

Adjusted revenues		40,070			1,109		13,891			747			53,599
Operating expenses, including depreciation and amortization for non-Real Estate Groups		17,404			900		9,437			561			26,502
Exclude straight-line rent adjustment		—			—		—			—			—

Adjusted operating expenses		17,404			900		9,437			561			26,502
Interest expense		5,546			181		4,454			201			10,020
Exclude early extinguishment of debt ^(a)		(380	)		—		—			—			(380	)

Adjusted interest expense		5,166			181		4,454			201			9,640
Income tax provision (benefit)		1,997			—		—			(85	)		1,912
Exclude tax on early extinguishment of debt ^(a)		150			—		—			—			150

Adjusted income tax provision		2,147			—		—			(85	)		2,062
Minority interest in earnings before depreciation and amortization		28			28		—			—			—

Total deductions		24,745			1,109		13,891			677			38,204
Add: EBDT from discontinued operations		70			—		—			(70	)		—

Earnings before depreciation, amortization and deferred taxes (EBDT)	$	15,395		$	—	$	—		$	—		$	15,395


	Lumber Trading Group 2002

					Plus
			Less		Unconsolidated		Plus
	Full		Minority		Investments at		Discontinued		Pro-Rata
	Consolidation		Interest		Pro-Rata		Operations		Consolidation

Revenues	$	26,263	$	—	$	—	$	—	$	26,263
Operating expenses, including depreciation and amortization for non-Real Estate Groups		24,442		—		—		—		24,442
Interest expense		636		—		—		—		636
Income tax provision		521		—		—		—		521
Minority interest in earnings before depreciation and amortization		—		—		—		—		—

Total deductions		25,599		—		—		—		25,599

Earnings before depreciation, amortization and deferred taxes (EBDT)	$	664	$	—	$	—	$	—	$	664


	Total 2002

						Plus
				Less		Unconsolidated			Plus
	Full			Minority		Investments at			Discontinued			Pro-Rata
	Consolidation			Interest		Pro-Rata			Operations			Consolidation

Revenues	$	211,371		$	28,151	$	44,582		$	2,849		$	230,651
Exclude straight-line rent adjustment		(1,808	)		—		—			(20	)		(1,828	)
Add back equity method depreciation expense		6,054			—		(5,935	)		—			119

Adjusted revenues		215,617			28,151		38,647			2,829			228,942
Operating expenses, including depreciation and amortization for non-Real Estate Groups		127,006			16,040		27,012			1,290			139,268
Exclude straight-line rent adjustment		(1,139	)		—		—			—			(1,139	)

Adjusted operating expenses		125,867			16,040		27,012			1,290			138,129
Interest expense		43,133			8,125		11,635			398			47,041
Exclude early extinguishment of debt (a)		(380	)		—		—			—			(380	)

Adjusted interest expense		42,753			8,125		11,635			398			46,661
Income tax (benefit) provision		4,237			—		—			(111	)		4,126
Exclude tax on early extinguishment of debt (a)		150			—		—			—			150

Adjusted income tax (benefit) provision		4,387			—		—			(111	)		4,276
Minority interest in earnings before depreciation and amortization		3,986			3,986		—			—			—

Total deductions		176,993			28,151		38,647			1,577			189,066
Add: EBDT from discontinued operations		1,252			—		—			(1,252	)		—

Earnings before depreciation, amortization and deferred taxes (EBDT)	$	39,876		$	—	$	—		$	—		$	39,876

	a)		Evaluation of disclosure controls and procedures. The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures. Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective.

	b)		Changes in internal controls. Subsequent to the date of the evaluation, there have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls.

b.		Reports on Form 8-K.

		On February 5, 2003, the Company filed a current report on Form 8-K to report that, on February 5, 2003, the Company sent a notice to its directors and executive officers informing them that the Forest City Savings Plan and Trust (the “401(k) Plan”) is changing its administrator and that, as a result of that change, there was a blackout period from February 20, 2003 through March 31, 2003. (This blackout period was lifted on March 17, 2003)

		On April 10, 2003, the Company furnished a current report on Form 8-K dated April 10, 2003 to report that in connection with the filing of Form 10-K for the year ended January 31, 2003, the Chief Executive Officer and the Chief Financial Officer of the Company furnished certifications to the Securities and Exchange Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1)		I have reviewed this quarterly report for the three months ended April 30, 2003 on Form 10-Q of Forest City Enterprises, Inc. (“Registrant”);

(2)		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3)		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;

(4)		The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

	(a)		Designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; and

	(b)		Evaluated the effectiveness of the Registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”);

	(c)		Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; and

	(a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant’s ability to record, process, summarize and report financial data and have identified for the Registrant’s auditors any material weaknesses in internal controls; and

	(b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls; and