CLEVELAND, Sept. 4 OH-ForestCity-earns
CLEVELAND, Sept. 4 /PRNewswire-FirstCall/ -- Forest City Enterprises, Inc.
(NYSE: FCEA and FCEB) today announced revenues, net earnings and EBDT for the
second quarter and six months ended July 31, 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20080515/FRSTCTYLOGO )
EBDT (Earnings Before Depreciation, Amortization and Deferred Taxes) for
the second quarter was $88.3 million, or $0.82 per share, a 24.2 percent
increase on a per share basis compared with last year's second-quarter EBDT of
$71.2 million, or $0.66 per share. EBDT for the six months ended July 31, 2008
was $104.3 million, or $0.97 per share, compared with last year's $105.7
million, or $0.98 per share.
EBDT results for both the quarter and six months were driven by solid
operating performance in the Company's commercial and residential segments,
which increased pre-tax EBDT by $27.7 million for the six months ended July
31, 2008 compared to the prior year, including $16.4 million from military
family housing. Both the quarterly and year-to-date results were negatively
impacted by reporting a larger share of losses for the NBA Nets basketball
team compared with the prior year, decreasing pre-tax EBDT by $16.5 million
($11.0 million after tax) for the first half of 2008. The six-month EBDT
results were negatively impacted by increased development project write-offs
of $21.1 million ($12.9 million after tax) primarily due to the first quarter
write-off of Summit at Lehigh Valley, a Commercial development project with a
housing component located in Allentown, Pennsylvania.
The fiscal second-quarter net loss was $8.3 million, or $(0.08) per share,
compared with net earnings of $67.8 million, or $0.63 per share, in the prior
year. Net loss for the six months was $48.6 million, or $(0.47) per share,
compared with net earnings of $50.6 million, or $0.48 per share, in 2007. In
addition to being impacted by the factors affecting EBDT, the net earnings
variance was primarily due to significant gains recognized in the prior year
from the sale of the Company's supported-living portfolio, with no comparable
asset sales in 2008.
Second-quarter 2008 consolidated revenues were $330.2 million compared
with $287.6 million last year. First-half 2008 revenues were $637.9 million
compared with $556.0 million for the six months ended July 31, 2007.
EBDT and EBDT per share are non-Generally Accepted Accounting Principles
(GAAP) measures. A reconciliation of net earnings (the most directly
comparable GAAP measure to EBDT) to EBDT is provided in the Financial
Highlights table in this news release.
Discussion of Results
Charles A. Ratner, president and chief executive officer of Forest City
Enterprises, said "We are pleased with our second-quarter results and with the
performance of our new property openings and mature portfolio. The progress
in the quarter has brought year-to-date results in line with last year, in
spite of a large first-quarter development project write off, and demonstrates
the solid foundation for the business represented by our core rental property
portfolio. In addition, our military family housing business contributed
solidly to our results, both in the second quarter and for the first six
months."
NOI, Occupancies and Rent
Overall comparable property net operating income (NOI) increased 1.3
percent during the second quarter compared with the same period a year ago.
The retail portfolio was up 4.5 percent, while the office portfolio was down
1.5 percent. In residential, comparable property NOI in the Company's
traditional multifamily apartment communities increased 3.0 percent, but was
offset by softness in the supported-living portion of the business, resulting
in an NOI increase of 0.6 percent for the total residential portfolio compared
with the second quarter of 2007. Comparable property NOI, defined as NOI
from properties operated in both 2008 and 2007, is a non-GAAP financial
measure, and is based on the pro-rata consolidation method, also a non-GAAP
financial measure. Included in this release is a schedule that presents
comparable property NOI on the full consolidation method.
In addition, overall second-quarter 2008 NOI results included $8.3 million
of lease-cancellation fee income related to one of the Company's New York
office properties, while overall second-quarter 2007 NOI included $10.1
million from the sale of a supported-living residential development property.
At July 31, 2008, comparable retail occupancies were 92.5 percent compared
with 92.9 percent at July 31, 2007, and regional mall sales averaged $451 per
square foot. Comparable office occupancies increased to 92.7 percent compared
with 89.9 percent last year. Comparable average occupancies for the first half
of the year in the residential business were 92.5 percent compared with 93.9
percent last year. Comparable residential net rental income was down modestly
to 90.0 percent, compared with 91.5 percent in the same period in 2007.
Land Development
Commenting on results for the land business, Ratner said, "Our land
development business has not been a significant factor in year-to-date results
and continues to reflect the general nationwide softness in that segment of
our industry. We see no indications of an overall improvement in the near
term. Despite this ongoing softness, our inventory of land in quality markets
means we are well-positioned to capitalize when a broader recovery occurs,
just as we have during past real estate cycles. In addition, we continue to
view current market conditions as a potential opportunity to selectively
acquire additional land for future development in good markets and at
attractive prices."
Debt Maturities
"Given the continued stress in the credit markets, we have placed even
greater emphasis on monitoring and managing upcoming maturities, and we're
pleased with our progress to date," said Ratner.
Forest City began its fiscal 2008 with scheduled maturities for the year
of $903 million at the Company's pro-rata share ($842 million at full
consolidation). At the end of the second quarter, total remaining 2008
maturities were $253 million at the Company's pro-rata share ($179 million at
full consolidation), of which more than 70 percent have been addressed to date
through closed loans, scheduled amortization, committed refinancings or
available extensions. As of July 31, 2008, the Company's total scheduled
maturities for 2009 were $901 million at the Company's pro-rata share ($734
million at full consolidation), of which more than 50 percent have already
been addressed to date, either through closed loans, scheduled amortization or
available extensions.
Nets
The overall operating loss for the Nets as a stand-alone business is
comparable to the prior year. The Company's reported share of the loss is
higher because it advanced capital to fund the team's operating losses on
behalf of both Forest City and certain non-funding partners. While these
advances receive preferential capital treatment, the Company reports losses,
including significant non-cash losses resulting from amortization, in excess
of its legal ownership of approximately 23 percent.
Milestones
Current and Anticipated Openings
Through the first half of 2008, Forest City has opened five projects and
acquired one, representing $553.5 million of cost at the Company's pro-rata
share and $466.6 million at full consolidation.
During the first half, the Company opened Orchard Town Center, a 980,000-
square-foot open-air lifestyle center in Westminster, Colorado, and 855 North
Wolfe Street a 278,000-square-foot office building at the Science + Technology
Park at Johns Hopkins in Baltimore. In addition, three residential properties
were opened: the 131-unit Lucky Strike Building at the Company's Tobacco Row
adaptive reuse apartment community in Richmond, Virginia; the 366-unit
Mercantile Place on Main redevelopment in Dallas; and the first phases of the
665-unit Uptown Apartments in center city Oakland. Uptown Apartments is the
first LEED (Leadership in Energy and Environmental Design) Silver-Certified
multifamily housing property in Oakland.
Two large retail projects that are currently under construction are
scheduled to open in the third quarter of 2008. White Oak Village, an 800,000-
square-foot lifestyle/power center near Richmond, is 89 percent pre-leased and
will feature anchors JCPenney, Lowe's, Target and Sam's Club. In Tampa, Shops
at Wiregrass, a 646,000-square-foot open-air lifestyle center, is currently 78
percent pre-leased. Dillard's and Macy's will join previously opened JCPenney
in anchoring the project.
At the mixed-use Mesa del Sol in Albuquerque, New Mexico, Forest City
expects to open a 210,000-square-foot operations center for a unit of Fidelity
Investments, and a 74,000-square-foot town center during the second half of
the year. Grading for the first residential neighborhood has begun with lot
sales anticipated to begin in summer 2009. To date, the Company has
purchased approximately 3,100 acres of land for this project and has a total
of approximately 1 million square feet of space built and occupied, under
construction, or under contract. Upon full build-out, the 9,000-acre Mesa del
Sol is expected to include up to 16 million square feet of commercial space
and 37,500 residential units.
Development Pipeline Highlights
A schedule of the Company's project openings and acquisitions, and the
pipeline of projects under construction, is included in this news release. The
schedule includes comparable project costs on both a full consolidation and
pro-rata share basis. Described below are several of the Company's projects
under construction or under development.
Projects Under Construction
At the end of the second quarter, Forest City's pipeline included 13
projects under construction, representing a total cost of $2.3 billion at the
Company's pro-rata share ($2.2 billion on a full consolidation basis).
In addition to the two retail centers scheduled to open later this year,
Forest City has three new retail centers currently under construction,
including the 1.2-million-square-foot Ridge Hill in Yonkers, New York; the
517,000-square-foot East River Plaza in Manhattan; and the 466,000-square-foot
Village at Gulfstream in Hallandale, Florida.
In Washington D.C., construction began earlier in the year on the first
two office buildings, totaling 628,000 square feet, at the Waterfront Station
redevelopment in Southwest Washington, D.C. Approximately 543,000 square feet
of space in the buildings is pre-leased to the District of Columbia for
government offices.
In the residential portfolio, the Company closed on $167 million in
financing and began construction on the 365-unit 80 DeKalb Avenue apartment
community, the Company's first residential tower in Brooklyn. In Manhattan,
construction is underway on the 904-unit Beekman, with anticipated completion
in 2011. In addition to market-rate rental units, Beekman will feature a K-8
public school, an ambulatory center for New York Downtown Hospital, and
community-oriented retail space. North of Boston, construction continues on
the 305-unit Haverhill adaptive reuse apartment community. All three of these
projects, as well as the three residential projects opened during the first
half of the year, utilize some form of tax-advantaged financing. Such
financing lowers the Company's total cost of capital on these projects and
enhances their long-term value.
Projects Under Development
At the end of the second quarter, Forest City had more than 15 projects
under development, representing more than $900 million of cost on a full
consolidation basis and at the Company's share. Among the projects under
development and scheduled to begin construction during the next year are four
projects totaling approximately $250 million of cost on a full consolidation
basis and at the Company's pro-rata share.
At The Yards, in Washington, D.C., the Company has begun construction on
the 170-unit Pattern Shop Lofts apartment community and expects to begin later
this year on the 44,000-square-foot Boilermaker retail project. These two
projects are the first vertical components of this $1.7 billion development
that is expected to include up to 2,800 residential units, 1.8 million square
feet of office space, and 400,000 square feet of retail and dining space - all
located in the neighborhood of the Washington Nationals baseball park.
On the West Coast, construction at Presidio, a 161-unit apartment
community that is part of the historic former military base - now a major
urban national park - at the foot of the Golden Gate Bridge in San Francisco,
is expected to begin in late 2008. This adaptive re-use of a former public
health service hospital, together with the recently opened Uptown Apartments
in Oakland, join a number of other properties that are part of a growing
presence for Forest City in the Bay Area.
Commenting on the Company's development activities, Ratner said, "The
start of construction at Waterfront Station and The Yards in Washington, D.C.,
represents the first fruit of a five-to-six year effort by our Washington,
D.C. team, and reflects not only the long-term nature of these types of
complex projects, but also the Company's proven ability to bring them through
our pipeline successfully and to create value - even in challenging times -
for Forest City, for our shareholders and for the communities in which we
operate.
"Similarly, the opening of the first phase of the Uptown Apartments in
Oakland and continuing construction at The Presidio in San Francisco, reflect
our long-term effort to grow strategically in attractive markets, particularly
in urban areas with high barriers to entry, and with opportunities for
additional future development for the Company.
"While we are proud of these recent accomplishments, we are acutely aware
that development is looked upon with a great deal of skepticism by many
investors, given current market conditions. We continue to believe strongly
in development as a core strength and primary lever to add value over the long
term, but we have pulled back from a number of projects in our pipeline,
eliminating some and slowing others. We have raised our risk-adjusted return
requirements to ensure that we pursue only those projects with the opportunity
to create significant value, even in this volatile environment."
Financing Activity
During the first six months of 2008, Forest City closed on transactions
totaling $1.7 billion in nonrecourse mortgage financings, including $562.0
million in refinancings, $949.1 million in development projects, and $254.6
million in loan extensions and additional fundings.
As of July 31, 2008, the Company's weighted average cost of mortgage debt
decreased to 5.50 percent from 6.04 percent at July 31, 2007, primarily due to
a decrease in variable interest rates. Fixed-rate mortgage debt, including
variable debt that is effectively fixed through interest rate swaps,
represented 75.1 percent of the Company's total nonrecourse mortgage debt, and
decreased from 6.13 percent at July 31, 2007 to 6.07 percent at July 31, 2008.
Variable-rate mortgage debt decreased from 5.77 percent at July 31, 2007 to
3.78 percent at July 31, 2008.
Ratner said, "We're gratified by our ongoing success in accessing non-
recourse financing to fund development and strategic acquisitions. The hard
work of our finance teams, our track record and long-term relationships with
lenders, combined with a focus on high-quality projects in good markets,
continue to serve us well."
Outlook
"To date in 2008, we have good reason to be pleased with the performance
of our core portfolio and, longer term, we remain committed to development as
the primary engine for future, additional value creation. Clearly, however,
these are times that demand a more cautious approach to our business. The
economy in general, and the real estate market in particular, remain highly
stressed. Credit, while available, remains tight and more challenging and
expensive to obtain. And at present, there are few, if any, signs of a
turnaround in the foreseeable future.
"In response to this reality, we have and will continue to adapt to
changes in the marketplace. This includes placing a high premium on
maintaining liquidity, applying stringent requirements on new development,
strategically capitalizing on opportunities presented by market dislocations
and distress, and managing our operations to an even higher standard of
efficiency.
"Our existing pipeline includes a number of long-term, multiphase projects
such as Mesa del Sol in Albuquerque, Stapleton in Denver, and Waterfront
Station and The Yards in Washington, DC. These types of projects are a
hallmark of Forest City, and they provide a reservoir of ongoing development
and value-creation opportunities. By selectively bringing additional
opportunities through our pipeline, and effectively managing our mature
portfolio to maximize its contribution, we will continue to create long-term
value and ensure future growth, in spite of the challenges of the current
marketplace."
Corporate Description
Forest City Enterprises, Inc. is a $10.9 billion NYSE-listed national real
estate company. The Company is principally engaged in the ownership,
development, management and acquisition of commercial and residential real
estate and land throughout the United States.
Supplemental Package
Please refer to the Investor Relations section of the Company's website at
www.forestcity.net for a Supplemental Package, which the Company will also
furnish to the Securities and Exchange Commission on Form 8-K. This
Supplemental Package includes operating and financial information for the
quarter ended July 31, 2008, with reconciliations of non-GAAP financial
measures, such as EBDT, comparable NOI and pro-rata financial statements, to
their most directly comparable GAAP financial measures.
EBDT
The Company uses an additional measure, along with net earnings, to report
its operating results. This non-GAAP 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 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
core operations and, along with net earnings, is necessary to understand its
operating results. EBDT is used by the chief operating decision maker and
management in assessing operating performance and to consider capital
requirements and allocation of resources by segment and on a consolidated
basis. The Company believes EBDT is important to investors because it provides
another method for the investor to measure its long-term operating
performance, as net earnings can vary from year to year due to property
dispositions, acquisitions and other factors that have a short-term impact.
EBDT is defined as net earnings excluding the following items: i) gain
(loss) on disposition of rental properties, divisions and other investments
(net of tax); ii) the adjustment to recognize rental revenues and rental
expense using the straight-line method; iii) non-cash charges for real estate
depreciation, amortization, amortization of mortgage procurement costs and
deferred income taxes; iv) preferred payment which is classified as minority
interest expense on the Company's Consolidated Statement of Operations; v)
provision for decline in real estate (net of tax); vi) extraordinary items
(net of tax); and vii) cumulative effect of change in accounting principle
(net of tax). Unlike the real estate segments, EBDT for the Nets segment
equals net earnings.
EBDT is reconciled to net earnings, the most comparable financial measure
calculated in accordance with GAAP, in the table titled Financial Highlights
below and in the Company's Supplemental Package, which the Company will also
furnish to the SEC on Form 8-K. 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 it believes the values of its properties, in general, have
appreciated over time in excess of their original cost. Deferred taxes from
real estate operations, which are the result of timing differences of certain
net expense items deducted in a future year for federal income tax purposes,
are excluded until the year in which they are reflected in the Company's
current tax provision. The provision for decline in real estate is excluded
from EBDT because it varies from year to year based on factors unrelated to
the Company's overall financial performance and is related to the ultimate
gain on dispositions of operating properties. The Company's EBDT may not be
directly comparable to similarly-titled measures reported by other companies.
Pro-Rata Consolidation Method
This press release contains certain financial measures prepared in
accordance with GAAP under the full consolidation accounting method and
certain financial measures prepared in accordance with the pro-rata
consolidation method (non-GAAP). The Company presents certain financial
amounts under the pro-rata method because it believes this information is
useful to investors as this method reflects the manner in which the Company
operates its business. In line with industry practice, the Company has made a
large number of investments in which its economic ownership is less than 100
percent as a means of procuring opportunities and sharing risk. Under the pro-
rata consolidation method, the Company presents its investments proportionate
to its economic share of ownership. Under GAAP, the full consolidation method
is used to report partnership assets and liabilities consolidated at 100
percent if deemed to be under its control or if the Company is deemed to be
the primary beneficiary of the variable interest entities, even if its
ownership is not 100 percent. The Company provides reconciliations from the
full consolidation method to the pro-rata consolidation method in the exhibits
below and throughout its Supplemental Package, which the Company will also
furnish to the SEC on Form 8-K.
Safe Harbor Language
Statements made in this news release that state the Company's or
management's intentions, hopes, beliefs, expectations or predictions of the
future are forward-looking statements. The Company's actual results could
differ materially from those expressed or implied in such forward-looking
statements due to various risks, uncertainties and other factors. Risks and
factors that could cause actual results to differ materially from those in the
forward-looking statements include, but are not limited to, general real
estate development and investment risks including lack of satisfactory
financing, construction and lease-up delays and cost overruns, dependence on
rental income from real property, reliance on major tenants, the effect of
economic and market conditions on a nationwide basis as well as in our primary
markets, vacancies in our properties, downturns in the housing market,
competition, illiquidity of real estate investments, bankruptcy or defaults of
tenants, department store consolidations, international activities, the impact
of terrorist acts, risks associated with an investment in and operation of a
professional sports team, conflicts of interests, our substantial debt
leverage and the ability to obtain and service debt, the impact of
restrictions imposed by our credit facility, the level and volatility of
interest rates, the continued availability of tax-exempt government financing,
effects of uninsured or underinsured losses, environmental liabilities, risks
associated with developing and managing properties in partnership with others,
the ability to maintain effective internal controls, compliance with
governmental regulations, changes in market conditions, litigation risks, and
other risk factors as disclosed from time to time in the Company's SEC
filings, including but not limited to, the Company's annual and quarterly
reports.
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Six Months Ended July 31, 2008 and 2007
(dollars in thousands, except per share data)
Three Months Ended,Increase
July 31,(Decrease)
------------------------ ----------------
2008 2007 Amount Percent
======================== ================
Operating Results:
Earnings (loss) from continuing
operations$(13,596) $4,189 $(17,785)
Discontinued operations, net of
tax and minority interest (1)5,284 63,586 (58,302)
------------------------ ----------------
Net Earnings (loss) $(8,312) $67,775 $(76,087)
======================== ================
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT) (2) $88,343 $71,206 $17,137 24.1%
======================== ================
Reconciliation of Net Earnings
to Earnings Before
Depreciation, Amortization and
Deferred Taxes (EBDT)(2):
Net Earnings (loss) $(8,312) $67,775 $(76,087)
Depreciation and amortization
- Real Estate Groups (7) 73,593 62,49011,103
Amortization of mortgage
procurement costs - Real
Estate Groups (7) 3,4483,538 (90)
Deferred income tax expense -
Real Estate Groups (8)16,121 33,397 (17,276)
Deferred income tax expense
(benefit) - Non-Real Estate
Groups: (8)
Gain on disposition of
other investments -(57) 57
Current income tax expense on
non-operating earnings: (8)
Gain on disposition of
other investments -224 (224)
Gain on disposition
included in
discontinued
operations - 8,088(8,088)
Gain on disposition of
equity method rental
properties 707 - 707
Straight-line rent adjustment (3) 4,248 (3,470)7,718
Preference payment (6) 931 936(5)
Preferred return on disposition 2085,034(4,826)
Provision for decline in real
estate 365 - 365
Provision for decline in real
estate of equity method rental
properties 5,661 - 5,661
Gain on disposition of equity
method rental properties -- -
Gain on disposition of other
investments- (431) 431
Discontinued operations: (1)
Gain on disposition of
rental properties (8,627)(106,318) 97,691
------------------------ ----------------
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT) (2) $88,343 $71,206 $17,137 24.1%
======================== ================
Diluted Earnings per Common
Share:
Earnings (loss) from continuing
operations $(0.13) $0.04$(0.17)
Discontinued operations, net of
tax and minority interest (1)$0.05 0.59 (0.54)
------------------------ ----------------
Net earnings (loss) (5) $(0.08) $0.63$(0.71)
======================== ================
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT) (2) (4) $0.82$0.66 $0.16 24.2%
======================== ================
Operating earnings (loss), net
of tax (a non-GAAP financial
measure)$(0.04) $0.05$(0.09)
Provision for decline in real
estate, net of tax (0.04) - (0.04)
Gain on disposition of rental
properties and other
investments, net of tax 0.05 0.63 (0.58)
Minority interest (0.05) (0.05) -
------------------------ ----------------
Net earnings (loss) (5) $(0.08) $0.63$(0.71)
======================== ================
Basic weighted average shares
outstanding (4)102,682,825 102,239,962 442,863
======================== ================
Diluted weighted average shares
outstanding (4)107,196,491 107,780,304 (583,813)
======================== ================
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Six Months Ended July 31, 2008 and 2007
(dollars in thousands, except per share data)
Six Months Ended Increase
July 31,(Decrease)
------------------------ ----------------
2008 2007 Amount Percent
======================== ================
Operating Results:
Earnings (loss) from continuing
operations$(53,944)$(13,480) $(40,464)
Discontinued operations, net of
tax and minority interest (1)5,363 64,074 (58,711)
------------------------ ----------------
Net Earnings (loss)$(48,581) $50,594 $(99,175)
======================== ================
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT) (2) $104,297 $105,735 $(1,438) (1.4%)
======================== ================
Reconciliation of Net Earnings
to Earnings Before
Depreciation, Amortization and
Deferred Taxes (EBDT) (2):
Net Earnings (loss) $(48,581) $50,594 $(99,175)
Depreciation and amortization
- Real Estate Groups (7) 144,358 126,99917,359
Amortization of mortgage
procurement costs - Real
Estate Groups (7) 6,7916,457 334
Deferred income tax expense -
Real Estate Groups (8) 788 23,037 (22,249)
Deferred income tax expense
(benefit) - Non-Real Estate
Groups: (8)
Gain on disposition of
other investments 58 (57) 115
Current income tax expense on
non-operating earnings: (8)
Gain on disposition of
other investments -224 (224)
Gain on disposition
included in
discontinued
operations - 8,088(8,088)
Gain on disposition of
equity method rental
properties 1,339 - 1,339
Straight-line rent adjustment (3) 1,101 (7,620)8,721
Preference payment (6)1,8671,83433
Preferred return on disposition 2085,034(4,826)
Provision for decline in real
estate 365 - 365
Provision for decline in real
estate of equity method rental
properties 5,661 - 5,661
Gain on disposition of equity
method rental properties (881) (2,106)1,225
Gain on disposition of other
investments (150)(431) 281
Discontinued operations: (1)
Gain on disposition of
rental properties (8,627)(106,318) 97,691
------------------------ ----------------
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT) (2) $104,297 $105,735 $(1,438) (1.4%)
======================== ================
Diluted Earnings per Common
Share:
Earnings (loss) from continuing
operations $(0.52) $(0.13) $(0.39)
Discontinued operations, net of
tax and minority interest (1) 0.05 0.61 (0.56)
------------------------ ----------------
Net earnings (loss) (5) $(0.47) $0.48$(0.95)
======================== ================
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT) (2) (4) $0.97$0.98$(0.01) (1.0%)
======================== ================
Operating earnings (loss), net
of tax (a non-GAAP financial
measure)$(0.43) $(0.05) $(0.38)
Provision for decline in real
estate, net of tax (0.04) - (0.04)
Gain on disposition of rental
properties and other
investments, net of tax 0.06 0.65 (0.59)
Minority interest (0.06) (0.07) 0.01
------------------------ ----------------
Net earnings (loss) (5) $(0.47) $0.53$(1.00)
======================== ================
Basic weighted average shares
outstanding (4)102,648,700 102,117,423 531,277
======================== ================
Diluted weighted average shares
outstanding (4)107,213,800 107,725,238 (511,438)
======================== ================
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Six Months Ended July 31, 2008 and 2007
(dollars in thousands)
Three Months Ended,Increase
July 31, (Decrease)
--------------------- ---------------
2008 2007 Amount Percent
===================== ===============
Operating Earnings (a non-GAAP
financial measure) and Reconciliation
to Net Earnings:
Revenues from real estate operations
Commercial Group $248,040 $210,726 $37,314
Residential Group 75,04062,25412,786
Land Development Group 7,15914,606(7,447)
Corporate Activities- - -
--------------------- ---------------
Total Revenues 330,239 287,58642,653 14.8%
Operating expenses (186,090) (177,186) (8,904)
Interest expense(82,350) (72,708) (9,642)
Early extinguishment of debt(52) (1,640)1,588
Amortization of mortgage procurement
costs (7) (3,169) (2,839) (330)
Depreciation and amortization (7) (70,228) (55,741) (14,487)
Interest and other income12,88723,423 (10,536)
Equity in earnings of unconsolidated
entities(5,577)7,773 (13,350)
Provision for decline in real estate
of equity method rental properties 5,661 - 5,661
Gain on disposition of equity method
rental properties- - -
Preferred Return on Disposition 208 5,034(4,826)
Revenues and interest income from
discontinued operations (1)19312,509 (12,316)
Deferred income tax expense
(benefit) - Non-Real Estate Groups:
(8) (209) (15,201) 14,992
--------------------- ---------------
Operating earnings (loss) (a non-GAAP
financial measure) 1,51311,010(9,497)
--------------------- ---------------
Income tax expense (8) (3,723) 609(4,332)
Income tax expense from discontinued
operations (1) (8) (3,327) (40,040) 36,713
Income tax expense on non-operating
earnings items (see below) 92539,303 (38,378)
--------------------- ---------------
Operating earnings (loss), net of tax
(a non-GAAP financial measure) (4,612) 10,882 (15,494)
--------------------- ---------------
Provision for decline in real estate (365)- (365)
Provision for decline in real estate
of equity method rental properties (5,661)-(5,661)
Gain on disposition of equity method
rental properties- - -
Preferred Return on Disposition(208) (5,034)4,826
Gain on disposition of other
investments - 431 (431)
Gain on disposition of rental
properties included in discontinued
operations (1) 8,627 106,318 (97,691)
Income tax benefit (expense) on non-
operating earnings: (8)
Provision for decline in real
estate141 - 141
Provision for decline in real
estate of equity method rental
properties 2,187 - 2,187
Gain on disposition of other
investments - (167) 167
Gain on disposition of equity
method rental properties 80 1,945(1,865)
Gain on disposition of rental
properties included in
discontinued operations(3,333) (41,081) 37,748
--------------------- ---------------
Income tax expense on non-operating
earnings (see above) (925) (39,303) 38,378
--------------------- ---------------
Minority interest in continuing
operations (5,168) (5,519) 351
Minority interest in discontinued
operations: (1)
Operating earnings - - -
Gain on disposition of rental
properties - - -
--------------------- ---------------
- - -
--------------------- ---------------
Minority interest(5,168) (5,519) 351
--------------------- ---------------
Net earnings (loss) $(8,312) $67,775 $(76,087)
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Six Months Ended July 31, 2008 and 2007
(dollars in thousands)
Six Months Ended Increase
July 31, (Decrease)
--------------------- ---------------
2008 2007 Amount Percent
===================== ===============
Operating Earnings (a non-GAAP
financial measure) and
Reconciliation to Net Earnings:
Revenues from real estate operations
Commercial Group $470,307 $413,753 $56,554
Residential Group 153,997 116,85937,138
Land Development Group 13,58125,339 (11,758)
Corporate Activities - - -
--------------------- ---------------
Total Revenues 637,885 555,95181,934 14.7%
Operating expenses (393,766) (345,778) (47,988)
Interest expense (165,721) (149,507) (16,214)
Early extinguishment of debt (5,231) (4,184) (1,047)
Amortization of mortgage procurement
costs (7) (6,107) (5,403) (704)
Depreciation and amortization (7)(136,847) (115,528) (21,319)
Interest and other income 21,28834,822 (13,534)
Equity in earnings of unconsolidated
entities (15,224)9,134 (24,358)
Provision for decline in real estate
of equity method rental properties 5,661 - 5,661
Gain on disposition of equity method
rental properties (881) (2,106)1,225
Preferred Return on Disposition 208 5,034(4,826)
Revenues and interest income from
discontinued operations (1) 74124,808 (24,067)
Deferred income tax expense
(benefit) - Non-Real Estate
Groups: (8) (628) (26,704) 26,076
--------------------- ---------------
Operating earnings (loss) (a non-
GAAP financial measure) (58,622) (19,461) (39,161)
--------------------- ---------------
Income tax expense (8) 15,85614,649 1,207
Income tax expense from discontinued
operations (1) (8)(3,377) (40,348) 36,971
Income tax expense on non-operating
earnings items (see below) 1,32340,117 (38,794)
--------------------- ---------------
Operating earnings (loss), net of
tax (a non-GAAP financial measure) (44,820) (5,043) (39,777)
--------------------- ---------------
Provision for decline in real estate (365)- (365)
Provision for decline in real estate
of equity method rental properties(5,661)-(5,661)
Gain on disposition of equity method
rental properties881 2,106(1,225)
Preferred Return on Disposition (208) (5,034)4,826
Gain on disposition of other
investments 150 431 (281)
Gain on disposition of rental
properties included in discontinued
operations (1) 8,627 106,318 (97,691)
Income tax benefit (expense) on non-
operating earnings: (8)
Provision for decline in real
estate 141 - 141
Provision for decline in real
estate of equity method rental
properties2,187 - 2,187
Gain on disposition of other
investments (58) (167) 109
Gain on disposition of equity
method rental properties (260)1,131(1,391)
Gain on disposition of rental
properties included in
discontinued operations (3,333) (41,081) 37,748
--------------------- ---------------
Income tax expense on non-operating
earnings (see above) (1,323) (40,117) 38,794
--------------------- ---------------
Minority interest in continuing
operations(5,862) (8,067)2,205
Minority interest in discontinued
operations: (1)
Operating earnings - - -
Gain on disposition of rental
properties- - -
--------------------- ---------------
- - -
--------------------- ---------------
Minority interest (5,862) (8,067)2,205
--------------------- ---------------
Net earnings (loss) $(48,581) $50,594 $(99,175)
===================== ===============
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Six Months Ended July 31, 2008 and 2007
(in thousands)
1) 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 are held for sale are reported as
discontinued operations.
2) 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 as defined by generally accepted
accounting principles 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 as net earnings excluding the following items: i) gain
(loss) on disposition of operating properties, divisions and other
investments (net of tax); ii) the adjustment to recognize rental
revenues and rental expense using the straight-line method; iii) non-
cash charges for real estate depreciation, amortization (including
amortization of mortgage procurement costs) and deferred income taxes;
iv) preferred payment classified as minority interest expense on the
Company's Consolidated Statement of Earnings; v) provision for decline
in real estate (net of tax); vi) extraordinary items (net of tax); and
vii) cumulative effect of change in accounting principle (net of tax).
See our discussion of EBDT in the news release.
3) 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.
4) For the three and six months ended July 31, 2008, the effect of
4,513,666 and 4,565,100 shares respectively of dilutive securities were
not included in the computation of diluted earnings per share because
their effect is anti-dilutive to the loss from continuing operations.
(Since these shares are dilutive for the computation of EBDT per share
for the three and six months ended July 31, 2008, diluted weighted
average shares outstanding were used to arrive at $0.82/share and
$0.97/share, respectively.)
For the six months ended July 31, 2007, the effect of 5,607,815 shares
of dilutive securities were not included in the computation of diluted
earnings per share because their effect is anti-dilutive to the loss
from continuing operations. (Since these shares are dilutive for the
computation of EBDT per share for the six months ended July 31, 2007,
diluted weighted average shares outstanding were used to arrive at
$0.98/share.)
5) For the six months ended July 31, 2007, $1,292,000 of net earnings is
allocated to participating securities under EITF 03-6 "Participating
Securities and the Two-Class Method under FASB 128". As a result, the
net earnings for purposes of calculating basic and diluted EPS is
$49,302,000.
6) The preference payment represents the respective period's share of the
annual preferred payment in connection with the issuance of Class A
Common Units in exchange for Bruce C. Ratner's minority interests in
the Forest City Ratner Company portfolio.
7) The following table provides detail of depreciation and amortization
and amortization of mortgage procurement costs. The Company's Real
Estate Groups are 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.
Depreciation and Depreciation and
Amortization Amortization
------------------ -----------------
Three Months Ended Six Months Ended
July 31, July 31,
------------------ -----------------
2008 2007 2008 2007
================== =================
Full Consolidation $70,228 $55,741 $136,847 $115,528
Non-Real Estate (3,502) (2,022) (6,821) (4,019)
------------------ -----------------
Real Estate Groups Full
Consolidation 66,726 53,719 130,026 111,509
Real Estate Groups related to
minority interest (1,548) (1,138) (2,531) (3,825)
Real Estate Groups Equity
Method 8,3258,98816,76817,381
Real Estate Groups Discontinued
Operations 90 92195 1,934
------------------ -----------------
Real Estate Groups Pro-Rata
Consolidation $73,593 $62,490 $144,358 $126,999
================== =================
Amortization ofAmortization of
Mortgage Mortgage
Procurement Costs Procurement Costs
------------------ -----------------
Three Months Ended Six Months Ended
July 31, July 31,
------------------ -----------------
2008 2007 2008 2007
================== =================
Full Consolidation $3,169 $2,839$6,107$5,403
Non-Real Estate -- - -
------------------ -----------------
Real Estate Groups Full
Consolidation3,1692,839 6,107 5,403
Real Estate Groups related to
minority interest (117)(261) (269) (421)
Real Estate Groups Equity
Method 396 926 942 1,406
Real Estate Groups Discontinued
Operations - 341169
------------------ -----------------
Real Estate Groups Pro-Rata
Consolidation $3,448 $3,538$6,791$6,457
================== =================
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Six Months Ended July 31, 2008 and 2007
(in thousands)
Three Months Ended Six Months Ended
July 31, July 31,
------------------- -------------------
2008 2007 2008 2007
=================== ===================
8) The following table provides (in thousands) (in thousands)
detail of Income Tax Expense
(Benefit):
(A) Operating earnings
Current $(11,434) $1,547 $(11,511) $(145)
Deferred 17,565 (378) (2,335) (13,540)
------------------- -------------------
6,1311,169 (13,846) (13,685)
------------------- -------------------
(B) Provision for decline in
real estate
Deferred (141) - (141) -
Deferred - Equity
method investment (2,187) -(2,187) -
------------------- -------------------
Subtotal(2,328) -(2,328) -
------------------- -------------------
(C) Gain on disposition of
other investments
Current - Non-Real
Estate Groups - 224 - 224
Deferred - Non-Real
Estate Groups - (57) 58 (57)
------------------- -------------------
- 16758 167
------------------- -------------------
(D) Gain on disposition of
equity method rental
properties
Current707- 1,339-
Deferred (787) (1,945) (1,079) (1,131)
------------------- -------------------
(80) (1,945) 260 (1,131)
------------------- -------------------
Subtotal (A) (B) (C) (D)
Current(10,727) 1,771 (10,172) 79
Deferred14,450 (2,380) (5,684) (14,728)
------------------- -------------------
Income tax expense 3,723 (609) (15,856) (14,649)
------------------- -------------------
(E) Discontinued operations
Operating earnings
Current (1,055) (2,406) (1,119) (2,348)
Deferred 1,0491,365 1,1631,615
------------------- -------------------
(6) (1,041) 44 (733)
------------------- -------------------
Gain on disposition of
rental properties
Current -8,088 -8,088
Deferred 3,333 32,993 3,333 32,993
------------------- -------------------
3,333 41,081 3,333 41,081
------------------- -------------------
3,327 40,040 3,377 40,348
------------------- -------------------
Grand Total (A) (B) (C)
(D) (E)
Current(11,782) 7,453 (11,291) 5,819
Deferred18,832 31,978(1,188) 19,880
------------------- -------------------
$7,050 $39,431 $(12,479) $25,699
------------------- -------------------
Recap of Grand Total:
Real Estate Groups
Current 7,671 10,72810,072 12,974
Deferred16,121 33,397 788 23,037
------------------- -------------------
23,792 44,12510,860 36,011
Non-Real Estate Groups
Current(19,453) (3,275) (21,363) (7,155)
Deferred 2,711 (1,419) (1,976) (3,157)
------------------- -------------------
(16,742) (4,694) (23,339) (10,312)
------------------- -------------------
Grand Total$7,050 $39,431 $(12,479) $25,699
=================== ===================
SOURCE Forest City Enterprises, Inc.
