Segment Information | 11. Segment Information The Company’s segments are based on the Company’s method of internal reporting which classifies its operations by both geographic area and property type. The Company’s segments by geographic area are Boston, New York, San Francisco and Washington, DC. Segments by property type include: Class A Office, Office/Technical, Residential and Hotel. Asset information by segment is not reported because the Company does not use this measure to assess performance. Therefore, depreciation and amortization expense is not allocated among segments. Interest and other income, development and management services income, general and administrative expenses, transaction costs, interest expense, depreciation and amortization expense, gains (losses) from investments in securities, income from unconsolidated joint ventures, gains on sales of real estate, noncontrolling interests and preferred dividends are not included in Net Operating Income as internal reporting addresses these items on a corporate level. Net Operating Income is not a measure of operating results or cash flows from operating activities as measured by accounting principles generally accepted in the United States of America, and it is not indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity. All companies may not calculate Net Operating Income in the same manner. The Company considers Net Operating Income to be an appropriate supplemental measure to net income because it helps both investors and management to understand the core operations of the Company’s properties. The Company's management also uses Net Operating Income to evaluate regional property level performance and to make decisions about resource allocations. Further, the Company believes Net Operating Income is useful to investors as a performance measure because, when compared across periods, Net Operating Income reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unleveraged basis, providing perspectives not immediately apparent from net income attributable to Boston Properties, Inc. common shareholders. Information by geographic area and property type (dollars in thousands): For the three months ended June 30, 2015 : Boston New York San Francisco Washington, DC Total Rental Revenue: Class A Office $ 174,894 $ 246,432 $ 68,781 $ 91,489 $ 581,596 Office/Technical 6,042 — 5,554 2,953 14,549 Residential 1,131 — — 2,680 3,811 Hotel 13,403 — — — 13,403 Total 195,470 246,432 74,335 97,122 613,359 % of Grand Totals 31.87 % 40.18 % 12.12 % 15.83 % 100.00 % Rental Expenses: Class A Office 67,874 85,661 23,416 32,180 209,131 Office/Technical 1,779 — 999 1,024 3,802 Residential 511 — — 1,020 1,531 Hotel 8,495 — — — 8,495 Total 78,659 85,661 24,415 34,224 222,959 % of Grand Totals 35.28 % 38.42 % 10.95 % 15.35 % 100.00 % Net operating income $ 116,811 $ 160,771 $ 49,920 $ 62,898 $ 390,400 % of Grand Totals 29.92 % 41.18 % 12.79 % 16.11 % 100.00 % For the three months ended June 30, 2014 : Boston New York San Francisco Washington, DC Total Rental Revenue: Class A Office $ 173,128 $ 223,899 $ 57,450 $ 94,222 $ 548,699 Office/Technical 5,912 — 6,341 3,671 15,924 Residential 1,089 — — 5,209 6,298 Hotel 12,367 — — — 12,367 Total 192,496 223,899 63,791 103,102 583,288 % of Grand Totals 33.00 % 38.39 % 10.94 % 17.67 % 100.00 % Rental Expenses: Class A Office 65,818 74,962 21,282 32,481 194,543 Office/Technical 1,736 — 1,308 1,123 4,167 Residential 544 — — 3,392 3,936 Hotel 7,315 — — — 7,315 Total 75,413 74,962 22,590 36,996 209,961 % of Grand Totals 35.92 % 35.70 % 10.76 % 17.62 % 100.00 % Net operating income $ 117,083 $ 148,937 $ 41,201 $ 66,106 $ 373,327 % of Grand Totals 31.36 % 39.89 % 11.04 % 17.71 % 100.00 % For the six months ended June 30, 2015 : Boston New York San Washington, Total Rental Revenue: Class A Office $ 344,801 $ 499,530 $ 135,033 $ 184,620 $ 1,163,984 Office/Technical 12,162 — 11,213 5,995 29,370 Residential 2,309 — — 8,356 10,665 Hotel 22,488 — — — 22,488 Total 381,760 499,530 146,246 198,971 1,226,507 % of Grand Totals 31.13 % 40.73 % 11.92 % 16.22 % 100.00 % Rental Expenses: Class A Office 142,339 170,722 45,325 64,460 422,846 Office/Technical 3,765 — 1,911 2,215 7,891 Residential 1,020 — — 4,057 5,077 Hotel 16,071 — — — 16,071 Total 163,195 170,722 47,236 70,732 451,885 % of Grand Totals 36.12 % 37.78 % 10.45 % 15.65 % 100.00 % Net operating income $ 218,565 $ 328,808 $ 99,010 $ 128,239 $ 774,622 % of Grand Totals 28.22 % 42.45 % 12.78 % 16.55 % 100.00 % For the six months ended June 30, 2014 : Boston New York San Washington, Total Rental Revenue: Class A Office $ 344,070 $ 441,207 $ 112,058 $ 191,270 $ 1,088,605 Office/Technical 11,732 — 12,558 7,331 31,621 Residential 2,252 — — 9,728 11,980 Hotel 20,560 — — — 20,560 Total 378,614 441,207 124,616 208,329 1,152,766 % of Grand Totals 32.84 % 38.28 % 10.81 % 18.07 % 100.00 % Rental Expenses: Class A Office 137,216 149,333 40,595 65,920 393,064 Office/Technical 3,425 — 2,522 2,325 8,272 Residential 992 — — 6,706 7,698 Hotel 14,112 — — — 14,112 Total 155,745 149,333 43,117 74,951 423,146 % of Grand Totals 36.81 % 35.29 % 10.19 % 17.71 % 100.00 % Net operating income $ 222,869 $ 291,874 $ 81,499 $ 133,378 $ 729,620 % of Grand Totals 30.55 % 40.00 % 11.17 % 18.28 % 100.00 % The following is a reconciliation of Net Operating Income to net income attributable to Boston Properties, Inc. common shareholders: Three months ended Six months ended June 30, 2015 2014 2015 2014 (in thousands) Net Operating Income $ 390,400 $ 373,327 $ 774,622 $ 729,620 Add: Development and management services income 4,862 6,506 10,190 11,722 Income from unconsolidated joint ventures 3,078 2,834 17,912 5,650 Interest and other income 1,293 2,109 2,700 3,420 Gains (losses) from investments in securities (24 ) 662 369 948 Gains on sales of real estate — — 95,084 — Less: General and administrative expense 22,284 23,271 51,075 53,176 Transaction costs 208 661 535 1,098 Depreciation and amortization expense 167,844 154,628 322,067 308,898 Interest expense 108,534 110,977 217,291 224,531 Noncontrolling interests in property partnerships 9,264 7,553 24,472 11,907 Noncontrolling interest—redeemable preferred units of the Operating Partnership 3 320 6 939 Noncontrolling interest—common units of the Operating Partnership 9,394 8,883 29,530 15,010 Preferred dividends 2,618 2,618 5,207 5,207 Net income attributable to Boston Properties, Inc. common shareholders $ 79,460 $ 76,527 $ 250,694 $ 130,594 |