Exhibit 99.1
AT THE COMPANY ON THE WEB
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Thomas G. Smith www.forestcity.net
Executive Vice President,
Chief Financial Officer
216-621-6060
Thomas T. Kmiecik
Assistant Treasurer
216-621-6060
FOR IMMEDIATE RELEASE
FOREST CITY REPORTS SECOND-QUARTER AND YEAR-TO-DATE RESULTS
CLEVELAND - SEPTEMBER 12, 2003 - FOREST CITY ENTERPRISES, INC. (NYSE: FCEA AND
FCEB) today announced net earnings, revenues and EBDT for the second fiscal
quarter and the six months ended July 31, 2003.
Net earnings for the fiscal 2003 second quarter were $6.6 million, or $0.13 per
share, compared with $12.7 million, or $0.25 per share, for the fiscal 2002
second quarter. Net earnings for the six months ended July 31, 2003 were $21.4
million, or $0.42 per share, compared with $22.8 million, or $0.45 per share,
for the six months ended July 31, 2002. The decline in net earnings was
primarily attributable to a one-time expense of $7.5 million (after-tax) related
to the Company's public offering of senior notes completed during the second
fiscal quarter of 2003.
Second-quarter consolidated revenues increased 6.4 percent to $252.1 million
compared with $237.0 million in the prior year's second quarter. Consolidated
revenues for the six months ended July 31, 2003 increased 10.6 percent to $496.0
million compared with $448.3 million for the six months ended July 31, 2002.
EBDT (Earnings Before Depreciation, Amortization and Deferred Taxes) for the
second fiscal quarter was $50.3 million, or $0.99 per share, compared with last
year's second-quarter EBDT of $43.6 million or $0.87 per share. EBDT for the six
months ended July 31, 2003 was $101.7 million, or $2.02 per share, compared with
last year's $83.5 million, or $1.66 per share.
"EBDT results have been driven by growth in total Net Operating Income (NOI)
with a more modest increase in total (property) interest expense resulting from
significantly lower interest rates," said Charles A. Ratner, president and chief
executive officer of Forest City Enterprises.
"This NOI growth is attributable primarily to the new properties added to our
portfolio in 2002 and the first half of 2003. Additionally, the timing of
certain transactions, including the recognition of residential note income and
retail outlot sales, generated income that we don't anticipate will recur in the
second half of 2003. The impact of these transactions together with a favorable
variance in current taxes over the first half of last year more than offset the
one-time costs related to our public offering of senior notes. Results from our
Land Development Group are slightly below the same period last year due to
non-recurring sales to retailers in 2002. Single-family residential sales at
both Stapleton and Central Station remain strong and according to plan.
"Although our total NOI continues to grow, our comparable operating properties
are struggling to maintain equilibrium. Comparable property NOI -- that is to
say, NOI from properties opened and operated in both 2003 and 2002 -- was down
in the first half of 2003 - 2.8 percent (based on the pro-rata consolidation
method of accounting -- see attached Exhibit, which also includes Comparable
Property NOI on the full consolidation method). Our retail portfolio was up 2.1
percent, offices were flat at -0.3 percent, and residential (-5.3 percent) and
hotels (-33.5 percent) were down - as expected. Occupancies have held stable
since year-end with retail at 91 percent, office at 92 percent, and residential
at 91 percent."
Comparable NOI is a non-Generally Accepted Accounting Principle (GAAP) financial
measure that is provided to supplement information presented in the Company's
Form 10-Q. We believe comparable NOI is useful to our investors because it
measures the performance of the same properties on a period-to-period basis. See
attached Exhibits for a reconciliation of NOI to net earnings, the most
comparable financial measure calculated in accordance with GAAP.
EBDT is a non-GAAP measure that is provided here as a supplement to net earnings
and net earnings per share prepared in accordance with GAAP. The Company
believes net earnings is the most comparable GAAP measure to EBDT. A
reconciliation of EBDT to net earnings is provided in the financial highlights
table section of this news release. While property dispositions, acquisitions or
other factors can impact net earnings in the short term, the Company believes
EBDT gives a more consistent view of Forest City's overall financial performance
from quarter to quarter and year to year.
PUBLIC DEBT OFFERING
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As previously mentioned, the Company incurred a one-time expense of $7.5
million, after-tax, related to its recent public offering of senior notes in the
second fiscal quarter of 2003. In May, the Company took advantage of favorable
conditions in the corporate bond market by issuing $300 million of 7.625 percent
senior notes, due June 1, 2015.
After payment of $8.1 million for offering costs, in June 2003, the Company used
$208.5 million of the proceeds to redeem all of its outstanding 8.5 percent
senior notes due in 2008. The remainder of the proceeds, $83 million, were used
to repay $73 million outstanding under the revolving portion of the Company's
long-term credit facility and for general working capital purposes. Forest City
was able to extend the maturity of its
corporate debt while lowering the interest rate, significantly enhancing its
financial flexibility and improving liquidity.
QUARTERLY PORTFOLIO AND DEVELOPMENT PIPELINE HIGHLIGHTS
- -------------------------------------------------------
NEW YORK CITY
During the second quarter, Forest City completed NINE METROTECH CENTER SOUTH, a
19-story, 650,000 square foot office building that is part of the 16-acre
MetroTech Center corporate campus in downtown Brooklyn. Nine MetroTech Center
South is the first commercial office building developed in New York City since
the September 2001 terrorist attacks. The building opened to its primary tenant
- -- Empire Blue Cross and Blue Shield, one of the largest health insurers in New
York State -- just 20 months after groundbreaking. The project was completed on
budget, financed with long-term fixed-rate debt within two weeks of opening, and
is currently 90 percent leased.
Construction continues on TWELVE METROTECH CENTER, a 32-story, 1.1-million-
square-foot office building in Brooklyn, that will be the future home of the
local court system and state and city agencies. It is scheduled to open in 2005.
Forest City also reported progress at other projects in Brooklyn: BROOKLYN
COMMONS, a 150,000-square-foot specialty retail center, due to open this fall
and ATLANTIC TERMINAL, which includes 400,000 square feet of office space and
373,000 square feet of retail, which are under construction and scheduled to
open in 2004.
In Manhattan, the 146,000-square-foot HARLEM CENTER office building is under
construction and due to open in early 2004; 126,000 square feet of retail space
at Harlem Center opened during the third quarter of 2002. Forest City is also
continuing the development of the NEW YORK TIMES HEADQUARTERS building in
Manhattan.
The Company recently secured financing on three retail projects in the New York
City metropolitan area - WOODBRIDGE CROSSING, HARLEM CENTER, AND BROOKLYN
COMMONS - with long-term fixed-rate mortgages, taking advantage of the low
interest rate environment.
CAMBRIDGE, MASSACHUSETTS
During the second fiscal quarter, Forest City completed and opened 40 LANDSDOWNE
STREET, a 100-percent leased, 215,000-square-foot biotechnology research and
office facility located at University Park at MIT, one of the nation's largest
biotechnology office parks. 40 Landsdowne Street is home to existing University
Park at MIT biotechnology tenant Millennium Pharmaceuticals.
University Park at MIT includes more than 1.5 million square feet of
biotechnology office/lab space, 277 residential units, 2,700 parking spaces, and
a 210-room hotel and executive conference center. Forest City will start
construction this year on two additional residential buildings, totaling 254
units, on the two remaining undeveloped parcels at this mixed-use project.
RICHMOND, VIRGINIA
Earlier this month, Forest City opened SHORT PUMP TOWN CENTER, a $185 million
(which is the total cost of the project, which the Company has accounted for on
the equity method - see attached Exhibit), 1.2-million-square-foot, open-air
regional lifestyle center. Short Pump opened 90 percent leased and includes more
than 120 stores and restaurants, 40 percent of which are new to the Richmond
area. Short Pump is anchored by Nordstrom, Lord & Taylor (opening 2004),
Hecht's, Dillard's and Dick's Sporting Goods.
The two-level center is a pedestrian-friendly retail and entertainment
destination with canopied walkways, open courtyards, landscaped gardens, three
fountains, a community meeting facility available to the public, and a food
court. The western Richmond metropolitan area is a fast-growing residential
market with some of the highest incomes in the region. The Company has already
obtained a long-term, fixed-rate mortgage commitment for this project, which is
expected to close in the third fiscal quarter of 2003.
During the second fiscal quarter of 2003, Forest City opened the
CONSOLIDATED-CAROLINA loft-style apartment community at its RIVER LOFTS AT
TOBACCO ROW redevelopment in Richmond, Virginia. The redeveloped
Consolidated-Carolina features 158 new one- and two-bedroom loft apartments and
represents the second phase of Forest City's redevelopment of Tobacco Row. Phase
one of the development, the American Cigar Company building, was completed in
2000 with 171 units. American Cigar is 90 percent leased and
Consolidated-Carolina, which has been open for four months, is currently 44
percent leased; testimony to this strong and growing market's receptivity to
this unique restored historic landmark product.
River Lofts at Tobacco Row will continue to provide further growth opportunities
for Forest City. The Company controls three more warehouse buildings and two
development sites, which are expected to represent another 300 plus units upon
completion. Each of these Tobacco Row projects will utilize federal and state
historic tax credits and tax-exempt financing, which drives down the cost of
capital and drives up equity returns.
DENVER - STAPLETON
During the first half of fiscal 2003, Forest City achieved significant
milestones at STAPLETON, the redevelopment of Denver's former airport into one
of the premier urban infill communities in the nation.
Stapleton continues to experience strong demand for single-family lots. As of
the end of the second fiscal quarter, Forest City had sold 936 lots to
homebuilders, who had sold 762 homes to homebuyers. More than 500 families are
now living at Stapleton and by the end of the year, there are expected to be as
many as 800 families living there.
Progress continues at EAST 29TH AVENUE TOWN CENTER, the first of several
pedestrian-friendly town centers being built at Stapleton. A 58,000-square-foot
grocery store opened in the town center in July, and another 16 national and
local retailers are prepared to open beginning in the fall.
Stapleton's first residential neighborhood now includes a new Denver public
schools campus, where school started on August 18. The campus features a
traditional elementary school and an expeditionary learning school. Stapleton is
also targeted to be the home of the Denver School of Science and Technology, a
charter public high school that will provide specialized programming for young
people who are preparing for careers in new technologies.
CALIFORNIA
California continues to be an important core market for Forest City. Projects
under construction include SUBWAY TERMINAL and METROPOLITAN LOFTS in Los
Angeles; VICTORIA GARDENS in Rancho Cucamonga; and 835 MARKET STREET in San
Francisco.
During the second quarter, Forest City continued the redevelopment of the
historic Subway Terminal in downtown Los Angeles. Forest City's plans for the
historic preservation and adaptive re-use of the building include transforming
the upper floors, formerly a 12-story office building, into 277 loft-style
apartments. Metropolitan Lofts, also in Los Angeles, is an eight-story, 264-unit
loft-style project under construction in the growing South Park neighborhood.
Both of these projects will be financed with tax-exempt bonds, and Subway
Terminal will benefit from the use of federal and state historic tax credits.
Victoria Gardens is a 1.3 million-square-foot, open-air retail and entertainment
center currently under construction in Rancho Cucamonga, California. Like Short
Pump, Victoria Gardens will meet consumer demand for an outdoor-oriented,
multi-purpose retail, dining, entertainment and cultural venue. The anchor
tenants will be Macy's, Robinson-May, JC Penney and the Rancho Cucamonga
Cultural Arts Center.
All three projects - Subway Terminal, Met Lofts and Victoria Gardens - are due
to open in fiscal 2004.
Forest City will start construction on 835 MARKET STREET in San Francisco in the
third fiscal quarter of this year. 835 Market Street will inter-connect at five
levels to the existing/neighboring San Francisco Centre. The combined project
will feature the second-largest Bloomingdale's and Nordstrom department stores
in the country, a state-of-the-art theater complex and more than 200 specialty
stores. 835 Market Street is scheduled to open in 2006.
INVESTMENT STRATEGY
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The portfolio and development pipeline highlights described above reflect Forest
City's consistent strategy of investment in core markets. The Company continues
to identify opportunities where we can invest at returns greater than the cost
of our capital. In the first half of fiscal 2003, eight properties were opened
representing $277.4 million based on the full consolidation method of accounting
and $291.7 million of cost at the Company's share (see attached Exhibit for a
comparison of this non-GAAP measure to GAAP cost), with an expected stabilized
weighted average cash on cost return of 10.9 percent. The Company calculates
cash on cost return by dividing expected stabilized NOI by cost, for which there
is no comparable GAAP financial measure. These returns, when combined with the
Company's exceptional project financing expertise, allows it to generate
significant spreads, resulting in growth in profitability and value from its
portfolio.
While it is clear that the multifamily business is currently soft, the Company
continues to profitably grow its residential portfolio. All of the residential
opportunities described above have been financed with tax-exempt financing, and
the adaptive re-use properties obtain historic tax credits to further lower the
cost of capital, enabling Forest City to continue to generate attractive
spreads. As described below, Forest City has procured financing for many of its
new properties with long-term fixed-rate debt at attractive rates, further
enhancing the investment spread.
FINANCING SUMMARY
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Forest City has been aggressively taking advantage of current interest rates and
attractive debt markets for its project financings, with primary emphasis on
fixed-rate nonrecourse mortgages. During the first half of fiscal 2003, Forest
City closed on transactions totaling $474.5 million in nonrecourse mortgage
financings, including $324.3 million in refinancings, $56.4 million in
extensions, $2.3 million in acquisitions and $91.5 million for new development
projects. Year-to-date, Forest City has closed, or committed to, 12 fixed-rate
financings at a weighted average interest rate of 5.86 percent, demonstrating
the Company's success at "locking-in" attractive rates.
At July 31, 2003, the Company's weighted average cost of mortgage debt decreased
to 5.95 percent from 6.34 percent at July 31, 2002, primarily due to the general
decrease in variable interest rates. Variable-rate mortgage debt, which
represented 26 percent of the Company's total nonrecourse mortgage debt,
decreased from 4.50 percent at July 31, 2002 to 3.51 percent at July 31, 2003.
Fixed-rate mortgage debt decreased from 7.14 percent at July 31, 2002 to 6.82
percent at July 31, 2003.
OUTLOOK
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"We are on track to deliver our 24th consecutive year of EBDT growth," Ratner
said. "At this time, it is clear to us that 2003 is, and will continue to be, a
challenging year. Nonetheless, we are confident that our current portfolio, our
new project openings and development pipeline will enable us to continue to grow
shareholder value.
"Consistent with our strategic plan, we are operating with the highest level of
liquidity in our history, and as a result, we are able to continue to invest in
our properties and grow our business. At this time, we are comfortable with the
consensus estimate range for fiscal 2003 EBDT per share of $4.05 to $4.15."
CORPORATE DESCRIPTION
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Forest City Enterprises, Inc. is a $5.3 billion NYSE-listed real estate company
headquartered in Cleveland, Ohio. The Company is principally engaged in the
ownership, development, acquisition and management of commercial and residential
real estate throughout the United States. The Company's portfolio includes
interests in retail centers, apartment communities, office buildings and hotels
in 21 states and the District of Columbia.
DEFINITION OF EBDT
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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. The Company believes
that EBDT provides additional information about its operations, and along with
net earnings, is necessary to understand its ongoing financial health. While
property dispositions, acquisitions or other factors can impact net earnings in
the short term, the Company believes EBDT is useful to investors because it
gives a more consistent view of Forest City's overall financial performance from
quarter to quarter and year to year. EBDT is similar to Funds From Operations
(FFO), a measure of performance used by publicly traded real estate investment
trusts (REITs), but may not be directly comparable to similarly titled measures
reported by other companies. Forest City encourages readers of its financial
information to focus on EBDT, along with net earnings, to provide a complete and
accurate picture of the Company's operating results.
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.
SAFE HARBOR LANGUAGE
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Statements made in this news release that state the Company or management's
intentions, hopes, beliefs, expectations or predictions of the future are
forward-looking statements. It
is important to note that the Company's actual results could differ materially
from those projected in such forward-looking statements. Additional information
concerning factors that could cause actual results to differ materially from
those in the forward-looking statements include, but are not limited to, real
estate development and investment risks, economic conditions in the Company's
target markets, reliance on major tenants, the impact of terrorist acts, the
Company's substantial leverage and the ability to service debt, guarantees under
the Company's credit facility, changes in interest rates, continued availability
of tax-exempt government financing, the sustainability of substantial operations
at the subsidiary level, significant geographic concentration, illiquidity of
real estate investments, dependence on rental income from real property,
conflicts of interest, competition, potential liability from syndicated
properties, effects of uninsured loss, environmental liabilities, partnership
risks, 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
Report on Form 10-K for the year ended January 31, 2003.
# # #
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
FOR THE PERIODS ENDED JULY 31, 2003 AND 2002
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
JULY 31, INCREASE (DECREASE)
--------------------------- -----------------------
2003 2002 AMOUNT PERCENT
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OPERATING RESULTS:
Earnings from continuing operations $ 6,603 $ 12,592 $ (5,989)
Discontinued operations, net of tax and minority interest (1) - 91 (91)
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Net earnings $ 6,603 $ 12,683 $ (6,080)
=========================== ============
Earnings Before Depreciation, Amortization and Deferred
Taxes (EBDT) (2) $ 50,250 $ 43,597 $ 6,653 15.3%
=========================== ============
RECONCILIATION OF NET EARNINGS TO EARNINGS BEFORE DEPRECIATION,
AMORTIZATION AND DEFERRED TAXES (EBDT) (2):
Net Earnings $ 6,603 $ 12,683 $ (6,080)
Depreciation and amortization - Real Estate Groups (5) 32,704 28,518 4,186
Depreciation and amortization - equity method investments (3) 121 119 2
Deferred income tax expense - Real Estate Groups (7) 8,978 2,719 6,259
Deferred income tax expense (benefit) on early extinguishment
of debt (6) (7) - - -
Deferred income tax benefit - Non-Real Estate Groups: (7)
Loss on disposition of other investments (179) - (179)
Current income tax expense on non-operating earnings: (7)
Gain on disposition of other investments - - -
Gain on disposition included in discontinued operations - - -
Straight-line rent adjustment (4) (827) (442) (385)
Provision for decline in real estate, net of minority interest 2,397 - 2,397
Loss on disposition of other investments 453 - 453
Discontinued operations: (1)
Gain on disposition of operating properties - - -
Minority interest - - -
Loss on early extinguishment of debt, net of tax (6) - - -
--------------------------- ------------
Earnings Before Depreciation, Amortization and Deferred
Taxes (EBDT) (2) $ 50,250 $ 43,597 $ 6,653 15.3%
=========================== ============
DILUTED EARNINGS PER COMMON SHARE:
Earnings from continuing operations $ 0.13 $ 0.25 $ (0.12)
Discontinued operations, net of tax and minority interest (1) - - -
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Net earnings $ 0.13 $ 0.25 $ (0.12)
=========================== ============
Earnings Before Depreciation, Amortization and Deferred
Taxes (EBDT) (2) $ 0.99 $ 0.87 $ 0.12 13.8%
=========================== ============
Operating earnings, net of tax $ 0.26 $ 0.29 $ (0.03)
Provision for decline in real estate, net of tax (0.03) - (0.03)
Loss on disposition of other investments, net of tax (0.01) - (0.01)
Minority interest (0.09) (0.04) (0.05)
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Net earnings $ 0.13 $ 0.25 $ (0.12)
=========================== ============
Weighted average diluted shares outstanding 50,565,353 50,219,445 345,908
=========================== ============
SIX MONTHS ENDED
JULY 31, INCREASE (DECREASE)
---------------------------- ------------------------
2003 2002 AMOUNT PERCENT
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OPERATING RESULTS:
Earnings from continuing operations $ 21,414 $ 21,802 $ (388)
Discontinued operations, net of tax and minority interest (1) (19) 1,017 (1,036)
---------------------------- -----------
Net earnings $ 21,395 $ 22,819 $ (1,424)
============================ ===========
Earnings Before Depreciation, Amortization and Deferred
Taxes (EBDT) (2) $ 101,685 $ 83,473 $ 18,212 21.8%
============================ ===========
RECONCILIATION OF NET EARNINGS TO EARNINGS BEFORE DEPRECIATION,
AMORTIZATION AND DEFERRED TAXES (EBDT) (2):
Net Earnings $ 21,395 $ 22,819 $ (1,424)
Depreciation and amortization - Real Estate Groups (5) 63,992 56,013 7,979
Depreciation and amortization - equity method investments (3) 247 238 9
Deferred income tax expense - Real Estate Groups (7) 14,283 2,518 11,765
Deferred income tax expense (benefit) on early extinguishment
of debt (6) (7) - 150 (150)
Deferred income tax benefit - Non-Real Estate Groups: (7)
Loss on disposition of other investments (179) (46) (133)
Current income tax expense on non-operating earnings: (7)
Gain on disposition of other investments 9 - 9
Gain on disposition included in discontinued operations 1,729 2,566 (837)
Straight-line rent adjustment (4) (2,531) (1,131) (1,400)
Provision for decline in real estate, net of minority interest 2,397 - 2,397
Loss on disposition of other investments 431 116 315
Discontinued operations: (1)
Gain on disposition of operating properties (411) - (411)
Minority interest 323 - 323
Loss on early extinguishment of debt, net of tax (6) - 230 (230)
---------------------------- -----------
Earnings Before Depreciation, Amortization and Deferred
Taxes (EBDT) (2) $ 101,685 $ 83,473 $ 18,212 21.8%
============================ ===========
DILUTED EARNINGS PER COMMON SHARE:
Earnings from continuing operations $ 0.42 $ 0.43 $ (0.01)
Discontinued operations, net of tax and minority interest (1) - 0.02 (0.02)
---------------------------- -----------
Net earnings $ 0.42 $ 0.45 $ (0.03)
============================ ===========
Earnings Before Depreciation, Amortization and Deferred
Taxes (EBDT) (2) $ 2.02 $ 1.66 $ 0.36 21.7%
============================ ===========
Operating earnings, net of tax $ 0.60 $ 0.48 $ 0.12
Provision for decline in real estate, net of tax (0.03) - (0.03)
Loss on disposition of other investments, net of tax - - -
Minority interest (0.15) (0.03) (0.12)
---------------------------- -----------
Net earnings $ 0.42 $ 0.45 $ (0.03)
============================ ===========
Weighted average diluted shares outstanding 50,407,754 50,210,009 197,745
============================ ===========
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
FOR THE PERIODS ENDED JULY 31, 2003 AND 2002
(IN THOUSANDS)
THREE MONTHS ENDED
JULY 31, INCREASE (DECREASE)
------------------------------ --------------------------
2003 2002 AMOUNT PERCENT
------------------------------ --------------
Operating Earnings and Reconciliation to Net Earnings:
Revenues
Commercial Group $ 160,416 $ 146,132 $ 14,284
Residential Group 48,464 38,613 9,851
Land Development Group 16,060 28,667 (12,607)
Lumber Trading Group 26,980 23,337 3,643
Corporate Activities 172 219 (47)
------------------------------ --------------
Total Revenues 252,092 236,968 15,124 6.4%
Operating expenses (142,445) (142,023) (422)
Interest expense (6) (47,740) (45,382) (2,358)
Loss from early extinguishment of debt (10,718) - (10,718)
Depreciation and amortization (5) (30,941) (27,740) (3,201)
Revenues from discontinued operations (1) - 2,937 (2,937)
Expenses from discontinued operations (1) - (3,009) 3,009
------------------------------ --------------
Operating earnings 20,248 21,751 (1,503)
------------------------------ --------------
Income tax expense (7) (5,905) (7,022) 1,117
Income tax benefit from discontinued operations (1) - 73 (73)
Income tax expense (benefit) on non-operating earnings
items (see below) (1,127) - (1,127)
------------------------------ --------------
Operating earnings, net of tax 13,216 14,802 (1,586)
------------------------------ --------------
Provision for decline in real estate (2,728) - (2,728)
Loss on disposition of other investments (453) - (453)
Gain on disposition of operating properties included in
discontinued operations (1) - - -
Income tax (expense) benefit on non-operating earnings: (7)
Provision for decline in real estate, net of minority interest 948 - 948
Loss on disposition of other investments 179 - 179
Gain on disposition of operating properties included in
discontinued operations - - -
------------------------------ --------------
Income tax (expense) benefit on non-operating earnings (see above) 1,127 - 1,127
------------------------------ --------------
Minority interest in continuing operations (4,559) (2,209) (2,350)
Minority interest in discontinued operations: (1)
Operating earnings - 90 (90)
Gain on disposition - - -
------------------------------ --------------
- 90 (90)
------------------------------ --------------
Minority interest (4,559) (2,119) (2,440)
------------------------------ --------------
Net earnings $ 6,603 $ 12,683 $ (6,080)
============================== ==============
SIX MONTHS ENDED
JULY 31, INCREASE (DECREASE)
------------------------------- ---------------------------
2003 2002 AMOUNT PERCENT
------------------------------- ----------------
Operating Earnings and Reconciliation to Net Earnings:
Revenues
Commercial Group $ 323,830 $ 277,930 $ 45,900
Residential Group 95,393 76,308 19,085
Land Development Group 29,589 44,032 (14,443)
Lumber Trading Group 46,881 49,600 (2,719)
Corporate Activities 300 469 (169)
------------------------------- ----------------
Total Revenues 495,993 448,339 47,654 10.6%
Operating expenses (284,972) (267,975) (16,997)
Interest expense (6) (92,392) (88,135) (4,257)
Loss from early extinguishment of debt (10,718) (380) (10,338)
Depreciation and amortization (5) (60,758) (54,368) (6,390)
Revenues from discontinued operations (1) 1,289 6,497 (5,208)
Expenses from discontinued operations (1) (1,513) (5,797) 4,284
------------------------------- ----------------
Operating earnings 46,929 38,181 8,748
------------------------------- ----------------
Income tax expense (7) (15,481) (13,709) (1,772)
Income tax benefit from discontinued operations (1) 12 165 (153)
Income tax expense (benefit) on non-operating earnings
items (see below) (1,083) (46) (1,037)
------------------------------- ----------------
Operating earnings, net of tax 30,377 24,591 5,786
------------------------------- ----------------
Provision for decline in real estate (2,728) - (2,728)
Loss on disposition of other investments (431) (116) (315)
Gain on disposition of operating properties included in
discontinued operations (1) 411 - 411
Income tax (expense) benefit on non-operating earnings: (7)
Provision for decline in real estate, net of minority interest 948 - 948
Loss on disposition of other investments 170 46 124
Gain on disposition of operating properties included in
discontinued operations (35) - (35)
------------------------------- ----------------
Income tax (expense) benefit on non-operating earnings (see above) 1,083 46 1,037
------------------------------- ----------------
Minority interest in continuing operations (7,099) (1,854) (5,245)
Minority interest in discontinued operations: (1)
Operating earnings 105 152 (47)
Gain on disposition (323) - (323)
------------------------------- ----------------
(218) 152 (370)
------------------------------- ----------------
Minority interest (7,317) (1,702) (5,615)
------------------------------- ----------------
Net earnings $ 21,395 $ 22,819 $ (1,424)
=============================== ================
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
FOR THE PERIODS ENDED JULY 31, 2003 AND 2002
(IN THOUSANDS)
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) 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
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. However, early extinguishment of debt is excluded
from EBDT through the year ended January 31, 2003. Beginning February
1, 2003, early extinguishment of debt will be 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 July 31, Six Months Ended July 31,
---------------------------------- --------------------------------
2003 2002 2003 2002
---------------------------------- --------------------------------
Full Consolidation $ 30,941 $ 27,740 $ 60,758 $ 54,368
Non-Real Estate Groups (993) (1,055) (1,921) (2,109)
---------------------------------- --------------------------------
Real Estate Groups Full Consolidation 29,948 26,685 58,837 52,259
Real Estate Groups related to minority interest (4,749) (4,594) (9,138) (8,935)
Real Estate Groups equity method 7,505 6,099 14,236 12,034
Discontinued operations - 328 57 655
---------------------------------- --------------------------------
Real Estate Groups Pro-Rata Consolidation $ 32,704 $ 28,518 $ 63,992 $ 56,013
================================== ================================
6) The Company has adopted the provisions of Statement of Financial Accounting
Standards 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)
================================== ================================
FOREST CITY ENTERPRISES, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
FOR THE PERIODS ENDED JULY 31, 2003 AND 2002
(IN THOUSANDS)
Three Months Ended July 31, Six Months Ended July 31,
------------------------------ -------------------------------
2003 2002 2003 2002
------------------------------ -------------------------------
7) The following table provides detail of Income Tax Expense
(Benefit):
(A) Continuing operations
Current $ 1,140 $ 3,877 $ 3,953 $ 8,388
Deferred 5,892 3,145 12,646 5,517
------------------------------ -------------------------------
7,032 7,022 16,599 13,905
------------------------------ -------------------------------
(B) Provision for decline in real estate
Current - - - -
Deferred (948) - (948) -
------------------------------ -------------------------------
(948) - (948) -
------------------------------ -------------------------------
(C) Loss on disposition of other investments
Current - - 9 -
Deferred - Non-Real Estate Groups (179) - (179) (46)
------------------------------ -------------------------------
(179) - (170) (46)
------------------------------ -------------------------------
(D) Deferred taxes on early extinguishment of debt - - - (150)
------------------------------ -------------------------------
Subtotal (A) (B) (C) (D)
Current 1,140 3,877 3,962 8,388
Deferred 4,765 3,145 11,519 5,321
------------------------------ -------------------------------
Income tax expense 5,905 7,022 15,481 13,709
------------------------------ -------------------------------
(E) Discontinued operations
Operating earnings
Current - (92) (97) (203)
Deferred - 19 50 38
------------------------------ -------------------------------
- (73) (47) (165)
Gain (loss) on disposition of operating properties
Current - - 1,729 2,566
Deferred - - (1,694) (2,566)
------------------------------ -------------------------------
- - 35 -
------------------------------ -------------------------------
- (73) (12) (165)
------------------------------ -------------------------------
Grand Total (A) (B) (C) (D) (E)
Current 1,140 3,785 5,594 10,751
Deferred 4,765 3,164 9,875 2,793
------------------------------ -------------------------------
$ 5,905 $ 6,949 $ 15,469 $ 13,544
============================== ===============================
Recap of Grand Total:
Real Estate Groups
Current 3,233 5,444 10,120 13,670
Deferred 8,978 2,719 14,283 2,518
------------------------------ -------------------------------
12,211 8,163 24,403 16,188
Non-Real Estate Groups
Current (2,093) (1,659) (4,526) (2,919)
Deferred (4,213) 445 (4,408) 275
------------------------------ -------------------------------
(6,306) (1,214) (8,934) (2,644)
------------------------------ -------------------------------
Grand Total $ 5,905 $ 6,949 $ 15,469 $ 13,544
============================== ===============================
EXHIBITS TO EARNINGS RELEASE
- Development Pipeline
- Net Operating Income
- Reconciliation of Net Operating Income to Net Earnings
DEVELOPMENT PIPELINE [FORESTCITY ENTERPRISES, INC. LOGO]
- --------------------------------------------------------------------------------
2002 OPENINGS / ACQUISITIONS (24)
Date Cost at Full Cost at FCE Sq. ft./
Dev.(D) Opened/ Consolidation Total Cost Economic Share No. of
Property Location Acq.(A) Acquired FCE % (GAAP) (a) at 100% (Non-GAAP) (b) Units
- -----------------------------------------------------------------------------------------------------------------------------------
(in millions)
---------------------------------------
Retail Centers:
Station Square - Bessemer Court Pittsburgh, PA D Q2-02 100.0 $ 13.8 $ 13.8 $ 13.8 52,000
Quebec Square Denver, CO D Q2-02 90.0 26.7 26.7 24.0 691,000
Promenade in Temecula Expansion Temecula, CA D Q3-02 75.0 19.2 19.2 14.4 249,000
Woodbridge Crossing Woodbridge, NJ D Q3-02 70.0 19.9 19.9 13.9 284,000
Harlem Center Manhattan, NY D Q3-02 52.5 35.2 35.2 18.5 126,000
Market at Tobacco Row Richmond, VA D Q3-02 100.0 6.7 6.7 6.7 43,000
Galleria at Sunset Expansion(c) Henderson, NV D Q3-02 60.0 0.0 17.1 10.3 121,000
---------------------------------------------------
121.5 138.6 101.6 1,566,000
-------------------------------------==============
Office:
88 Sidney St. Cambridge, MA D Q2-02 100.0 46.6 46.6 46.6 145,000
35 Landsdowne St. Cambridge, MA D Q2-02 100.0 55.4 55.4 55.4 202,000
---------------------------------------------------
102.0 102.0 102.0 347,000
-------------------------------------==============
Residential:
Westwood Reserve(c) Tampa, FL A Q1-02 50.0 0.0 23.4 11.7 340
Chancellor Park(d) Philadelphia, PA A Q1-02 100.0 28.5 28.5 28.5 135
Heritage San Diego, CA D Q1-02 100.0 51.8 51.8 51.8 230
Residences at University Park(c) Cambridge, MA D Q1-02 100.0 0.0 40.1 40.1 135
The Landings of Brentwood Nashville, TN A Q2-02 100.0 47.2 47.2 47.2 724
FAH Acquisitions(7) Various A Q2/Q3-02 Various 34.5 52.5 39.3 1,415
Southfield White Marsh, MD A Q4-02 100.0 23.6 23.6 23.6 212
Eaton Ridge(c)(e)(f) Sagamore Hills, OH D 2002-04 50.0 0.0 18.2 9.1 260
Newport Landing(c)(e)(f) Coventry, OH D 2002-05 50.0 0.0 18.9 9.5 336
---------------------------------------------------
185.6 304.2 260.8 3,787
-------------------------------------==============
Total 2002 Openings / Acquisitions(b)(g) $ 409.1 $ 544.8 $ 464.4
=====================================
- -----------------------------------------------------------------------------------------------------------------------------------
Opened in
Residential Units Phased-In(c)(e): 2002/Total
Arbor Glen Twinsburg, OH D 2001-06 50.0 $ 0.0 $ 20.0 $ 10.0 0/288
Parkwood Village Brunswick, OH D 2001-02 50.0 0.0 11.2 5.6 108/204
Settler's Landing at Greentree Streetsboro, OH D 2001-05 50.0 0.0 27.7 13.9 122/408
---------------------------------------------------
Total 2002 Openings / Acquisitions(b)(h) $ 0.0 $ 58.9 $ 29.5 230/900
===================================================
- -----------------------------------------------------------------------------------------------------------------------------------
See attached footnotes.
DEVELOPMENT PIPELINE [FORESTCITY ENTERPRISES, INC. LOGO]
- --------------------------------------------------------------------------------
JULY 31, 2003
2003 Openings / Acquisitions (8) Date Cost at Full Cost at FCE Sq. ft./
Dev. (D) Opened / Consolidation Total Cost Economic Share No. of
Property Location Acq. (A) Acquired FCE % (GAAP) (a) at 100% (Non-GAAP) (b) Units
- ----------------------------------------------------------------------------------------------------------------------------------
(in millions)
-------------------------------------
Office:
Nine MetroTech Center South Brooklyn, NY D Q2-03 75.0 $ 176.9 $ 176.9 $ 132.7 653,000
40 Landsdowne Street Cambridge, MA D Q2-03 100.0 62.4 62.4 62.4 215,000
-------------------------------------------------------
239.3 239.3 195.1 868,000
-------------------------------------==================
Residential:
Plymouth Square (FAH) Detroit, MI A Q1-03 100.0 10.5 10.5 10.5 280
Parmatown Woods (FAH) Parma Hts., OH A Q1-03 100.0 4.3 4.3 4.3 201
Worth Street (c) Manhattan, NY D Q1-03 35.0 0.0 116.6 40.8 329
Colonial Grand (c) Tampa, FL A Q1-03 50.0 0.0 14.0 7.0 176
Colony Place (c) Fort Myers, FL A Q1-03 50.0 0.0 21.4 10.7 300
Consolidated Carolina Richmond, VA D Q2-03 100.0 23.3 23.3 23.3 158
-------------------------------------------------------
38.1 190.1 96.6 1,444
-------------------------------------==================
Total 2003 Openings / Acquisitions (b) (i) $ 277.4 $ 429.4 $ 291.7
=====================================
- ----------------------------------------------------------------------------------------------------------------------------------
Residential Units Phased-In (c) (e): Opened in '03/Total
-------------------
Settler's Landing at Greentree Streetsboro, OH D 2001-05 50.0 $ 0.0 $ 27.8 $ 13.9 56 / 408
Arbor Glen Twinsburg, OH D 2001-06 50.0 0.0 20.0 10.0 48 / 288
Eaton Ridge Sagamore Hills, OH D 2002-04 50.0 0.0 18.2 9.1 12 / 260
Newport Landing Coventry, OH D 2002-05 50.0 0.0 18.0 9.0 48 / 336
-------------------------------------------------------
Total (b) (j) $ 0.0 $ 84.0 $ 42.0 164 / 1,292
=======================================================
- ----------------------------------------------------------------------------------------------------------------------------------
See attached footnotes.
DEVELOPMENT PIPELINE [FORESTCITY ENTERPRISES, INC. LOGO]
- --------------------------------------------------------------------------------
JULY 31, 2003
2003 Under Construction (11) Cost at Full Cost at FCE
Anticipated Consolidation Total Cost Economic Share
Property Location Opening FCE % (GAAP) (a) at 100% (Non-GAAP) (b)
- --------------------------------------------------------------------------------------------------------------------------
(in millions)
------------------------------------------
Retail Centers:
Short Pump Town Center (c) Richmond, VA Q3-03 50.0 $ 0.0 $ 185.4 $ 92.7
Brooklyn Commons Brooklyn, NY Q4-03 70.0 20.1 20.1 14.1
Atlantic Terminal Brooklyn, NY Q1-04 70.0 84.9 84.9 59.4
Victoria Gardens Rancho Cucamonga, CA Q3-04 80.0 190.5 190.5 152.4
------------------------------------------
295.5 480.9 318.6
------------------------------------------
Office:
Harlem Center Office Manhattan, NY Q1-04 52.5 36.8 36.8 19.3
Atlantic Terminal Office Brooklyn, NY Q2-04 70.0 107.0 107.0 74.9
Twelve MetroTech Center Brooklyn, NY Q2-05 80.0 43.5 43.5 34.8
------------------------------------------
187.3 187.3 129.0
------------------------------------------
Residential:
East 29th Avenue Town Center Denver, CO Q4-03 90.0 45.6 45.6 41.0
Stone Gate at Bellefair (c) (d) Ryebrook, NY Q1-04 40.0 0.0 58.0 23.2
Emerald Palms II Miami, FL Q2-04 100.0 8.9 8.9 8.9
Metropolitan Lofts (c) Los Angeles, CA Q4-04 50.0 0.0 57.8 28.9
------------------------------------------
54.5 170.3 102.0
------------------------------------------
Total 2003 Under Construction (b) (m) $ 537.3 $ 838.5 $ 549.6
==========================================
- --------------------------------------------------------------------------------------------------------------------------
Residential phased-in units under construction (c) (e):
Settler's Landing at Greentree Streetsboro, OH 2001-05 50.0 $ 0.0 $ 27.8 $ 13.9
Arbor Glen Twinsburg, OH 2001-06 50.0 0.0 20.0 10.0
Eaton Ridge Sagamore Hills, OH 2002-04 50.0 0.0 18.2 9.1
Newport Landing Coventry, OH 2002-05 50.0 0.0 18.0 9.0
------------------------------------------
Total (b) (j) $ 0.0 $ 84.0 $ 42.0
- --------------------------------------------------------------------------------------------------------------------------
JULY 31, 2003
2003 Under Construction (11) Sq. ft./ Pre-
No. of Leased
Property Units (Wtd. Avg.)
- -------------------------------------------------------------------------------------------
Retail Centers:
Short Pump Town Center (c) 1,161,000 90%
Brooklyn Commons 151,000 100%
Atlantic Terminal 373,000 83%
Victoria Gardens 1,355,000 49%
--------------
3,040,000 75%
==============
Office:
Harlem Center Office 146,000 100%
Atlantic Terminal Office 399,000 80%
Twelve MetroTech Center 177,000 (k) 0%
--------------
722,000 65%
==============
Residential:
East 29th Avenue Town Center 144 (l)
Stone Gate at Bellefair (c) (d) 166
Emerald Palms II 86
Metropolitan Lofts (c) 264
--------------
660
==============
Total 2003 Under Construction (b) (m)
- ------------------------------------------------------------------------------
Residential phased-in units under construction (c) (e): Under Const./ Total
---------------------
Settler's Landing at Greentree 128 / 408
Arbor Glen 144 / 288
Eaton Ridge 132 / 260
Newport Landing 168 / 336
---------------------
Total (b) (j) 572 / 1,292
=====================
- ------------------------------------------------------------------------------
See attached footnotes.
DEVELOPMENT PIPELINE [FORESTCITY ENTERPRISES, INC. LOGO]
- --------------------------------------------------------------------------------
FOOTNOTES
- ---------
(a) Amounts are presented on the full consolidation method of accounting,
a GAAP measure. Under full consolidation, costs are reported as
consolidated at 100 percent if deemed under the Company's control or
on the equity method of accounting if the Company is deemed to not
have control.
(b) Cost at FCE Economic Share represents Forest City's share of cost,
based on the Company's pro-rata ownership of each property (a Non-GAAP
measure). The Company presents certain financial amounts under the
pro-rata consolidation method as management believes that this method
more accurately reflects the manner in which the Company operates its
business, and is therefore, more meaningful to investors. The Company
publicly discloses and discusses its performance using this method of
consolidation to compliment its GAAP disclosures.
(c) Reported under the equity method of accounting. This method represents
a GAAP measure for investments in which the Company is deemed to not
have control.
(d) Supported-living property.
(e) Phased-in openings. Costs are representative of the total project.
(f) Of the total units shown, 116 and 120 units were opened in 2002 for
Eaton Ridge and Newport Landing, respectively.
(g) The difference between the full consolidation amount (GAAP) of $409.1
million of cost to Forest City's economic share (a non-GAAP measure)
of $464.4 million of cost consists of a reduction to full
consolidation for minority interest of $30.6 million of cost and the
addition of Forest City's share of cost for unconsolidated investments
of $85.9 million.
(h) The difference between the full consolidation amount (GAAP) of $0.0
million of cost to Forest City's economic share (a non-GAAP measure)
of $29.5 million of cost consists of Forest City's share of cost for
unconsolidated investments of $29.5 million.
(i) The difference between the full consolidation amount (GAAP) of $277.4
million of cost to Forest City's economic share (a non-GAAP measure)
of $291.7 million of cost consists of a reduction to full
consolidation for minority interest of $44.2 million of cost and the
addition of Forest City's share of cost for unconsolidated investments
of $58.5 million.
(j) The difference between the full consolidation amount (GAAP) of $0.0
million of cost to Forest City's economic share (a non-GAAP measure)
of $42.0 million of cost consists of Forest City's share of cost for
unconsolidated investments of $42.0 million.
(k) Represents the Company's portion of this 1.1 million square-foot
office condominium.
(l) Project also includes 145,000 total square feet (54,000 sq ft
owned/managed by FCE) of retail and 40,000 square feet of office
space.
(m) The difference between the full consolidation amount (GAAP) of $537.3
million of cost to Forest City's economic share (a non-GAAP measure)
of $549.6 million of cost consists of a reduction to full
consolidation for minority interest of $132.5 million of cost and the
addition of Forest City's share of cost for unconsolidated investments
of $144.8 million.
NET OPERATING INCOME (In Thousands)
----------------------------------------------------------------------------------------------------
Six Months Ended July 31, 2003 Six Months Ended July 31, 2002
------------------------------------------------------------ ---------------------------------------
Plus Plus
Unconsol- Plus Unconsol-
Full Less idated Discont- Pro-Rata Full Less idated
Consol- Minority Investments inued Consol- Consol- Minority Investments
idation Interest at Pro-Rata Operations idation idation Interest at Pro-Rata
------------------------------------------------------------ ---------------------------------------
COMMERCIAL GROUP
RETAIL
Comparable 54,648 8,425 10,658 - 56,881 53,988 7,997 9,693
- ----------------------------------------------------------------------------------------- ---------------------------------------
Total 65,820 11,709 10,658 - 64,769 57,781 9,137 9,693
OFFICE BUILDINGS
Comparable 60,025 10,859 2,191 - 51,357 59,987 10,708 2,231
- ----------------------------------------------------------------------------------------- ---------------------------------------
Total 76,319 13,684 2,191 - 64,826 67,176 13,321 2,231
HOTELS
Comparable 4,873 427 1,275 - 5,721 8,577 1,273 1,302
- ----------------------------------------------------------------------------------------- ---------------------------------------
Total 12,701 4,033 1,275 - 9,943 11,775 2,582 1,302
OTHER 6,385 550 2,108 - 7,943 (2,338) 469 68
TOTAL COMMERCIAL GROUP
Comparable 119,546 19,711 14,124 - 113,959 122,552 19,978 13,226
- ----------------------------------------------------------------------------------------- ---------------------------------------
Total 161,225 29,976 16,232 - 147,481 134,394 25,509 13,294
RESIDENTIAL GROUP
Comparable 41,914 265 7,943 - 49,592 44,725 274 7,925
- ----------------------------------------------------------------------------------------- ---------------------------------------
Total 55,805 886 11,726 (62) 66,583 43,758 501 9,142
TOTAL REAL ESTATE GROUPS
Comparable 161,460 19,976 22,067 - 163,551 167,277 20,252 21,151
- ----------------------------------------------------------------------------------------- ---------------------------------------
Total 217,030 30,862 27,958 (62) 214,064 178,152 26,010 22,436
LAND DEVELOPMENT GROUP 14,402 1,118 501 - 13,785 19,425 1,224 1,100
LUMBER TRADING GROUP 1,998 - - - 1,998 1,476 - -
CORPORATE GROUP (12,378) - - - (12,378) (9,630) - -
- ----------------------------------------------------------------------------------------- ---------------------------------------
GRAND TOTAL 221,052 31,980 28,459 (62) 217,469 189,423 27,234 23,536
========================================================================================= =======================================
NET OPERATING INCOME (In Thousands)
-----------------------------------------------
Six Months
Ended July 31, 2002 % Change
------------------------ ----------------------
Plus Plus
Discont- Pro-Rata Full Pro-Rata
inued Consol- Consol- Consol-
Operations idation idation idation
------------------------ ----------------------
COMMERCIAL GROUP
RETAIL
Comparable - 55,684 1.2% 2.1%
- -----------------------------------------------------
Total 1,943 60,280
OFFICE BUILDINGS
Comparable - 51,510 0.1% (0.3%)
- -----------------------------------------------------
Total - 56,086
HOTELS
Comparable - 8,606 (43.2%) (33.5%)
- -----------------------------------------------------
Total - 10,495
OTHER - (2,739)
TOTAL COMMERCIAL GROUP
Comparable - 115,800 (2.5%) (1.6%)
- -----------------------------------------------------
Total 1,943 124,122
RESIDENTIAL GROUP
Comparable - 52,376 (6.3%) (5.3%)
- -----------------------------------------------------
Total 359 52,758
TOTAL REAL ESTATE GROUPS
Comparable - 168,176 (3.5%) (2.8%)
- -----------------------------------------------------
Total 2,302 176,880
LAND DEVELOPMENT GROUP - 19,301
LUMBER TRADING GROUP - 1,476
CORPORATE GROUP - (9,630)
- -----------------------------------------------------
GRAND TOTAL 2,302 188,027
=====================================================
RECONCILIATION OF NET OPERATING INCOME TO NET EARNINGS:
SIX MONTHS ENDED JULY 31, 2003
-----------------------------------------------------------
PLUS
UNCONSOL- PLUS
FULL LESS IDATED DISCONT- PRO-RATA
CONSOL- MINORITY INVESTMENTS INUED CONSOL-
IDATION INTEREST AT PRO-RATA OPERATIONS IDATION
-----------------------------------------------------------
Revenues $ 495,993 $ 77,019 $ 112,685 $ 687 $ 532,346
Exclude straight-line rent adjustment (1) (4,782) - - - (4,782)
Add back equity method depreciation expense (see below) 14,483 - (14,236) - 247
-----------------------------------------------------------
ADJUSTED REVENUES 505,694 77,019 98,449 687 527,811
Operating expenses 284,972 45,039 69,910 749 310,592
Add back depreciation and amortization for non-Real Estate Groups (a) 1,921 - 80 - 2,001
Exclude straight-line rent adjustment (2) (2,251) - - - (2,251)
-----------------------------------------------------------
ADJUSTED OPERATING EXPENSES 284,642 45,039 69,990 749 310,342
-----------------------------------------------------------
Net operating income 221,052 31,980 28,459 (62) 217,469
Interest expense (92,392) (15,510) (28,459) - (105,341)
Loss (gain) on early extinguishment of debt (10,718) 98 - - (10,816)
Provision for decline in real estate (2,728) (331) - - (2,397)
Depreciation and amortization (a) (58,837) (9,138) (14,236) (57) (63,992)
Straight-line rent adjustment (1) + (2) 2,531 - - - 2,531
Equity method depreciation expense (see above) (14,483) - 14,236 - (247)
(Loss) gain on disposition of other investments (431) - - 88 (343)
-----------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 43,994 7,099 - (31) 36,864
Income tax (provision) benefit (15,481) - - 12 (15,469)
-----------------------------------------------------------
EARNINGS BEFORE MINORITY INTEREST AND DISCONTINUED OPERATIONS 28,513 7,099 - (19) 21,395
Minority interest (7,099) (7,099) - - -
-----------------------------------------------------------
EARNINGS FROM CONTINUING OPERATIONS 21,414 - - (19) 21,395
Discontinued operations, net of tax and minority interest:
(Loss) earnings from operations (72) - - 72 -
Gain on disposition of operating properties 53 - - (53) -
-----------------------------------------------------------
(19) - - 19 -
-----------------------------------------------------------
NET EARNINGS $ 21,395 $ - $ - $ - $ 21,395
===========================================================
(a) Depreciation and amortization per above $ 58,837 $ 9,138 $ 14,236 $ 57 $ 63,992
Depreciation and amortization - Non-Real Estate Groups 1,921 - 80 - 2,001
-----------------------------------------------------------
Total depreciation and amortization $ 60,758 $ 9,138 $ 14,316 $ 57 $ 65,993
===========================================================
SIX MONTHS ENDED JULY 31, 2002
----------------------------------------------------------
PLUS
UNCONSOL- PLUS
FULL LESS IDATED DISCONT- PRO-RATA
CONSOL- MINORITY INVESTMENTS INUED CONSOL-
IDATION INTEREST AT PRO-RATA OPERATIONS IDATION
----------------------------------------------------------
Revenues $ 448,339 $ 61,886 $ 88,842 $ 5,091 $ 480,386
Exclude straight-line rent adjustment (1) (4,565) - - (27) (4,592)
Add back equity method depreciation expense (see below) 12,272 - (12,034) - 238
-----------------------------------------------------------
ADJUSTED REVENUES 456,046 61,886 76,808 5,064 476,032
Operating expenses 267,975 34,652 53,199 2,762 289,284
Add back depreciation and amortization for non-Real Estate Groups (a) 2,109 - 73 - 2,182
Exclude straight-line rent adjustment (2) (3,461) - - - (3,461)
-----------------------------------------------------------
ADJUSTED OPERATING EXPENSES 266,623 34,652 53,272 2,762 288,005
-----------------------------------------------------------
Net operating income 189,423 27,234 23,536 2,302 188,027
Interest expense (88,135) (16,445) (23,536) (822) (96,048)
Loss (gain) on early extinguishment of debt (380) - - - (380)
Provision for decline in real estate - - - - -
Depreciation and amortization (a) (52,259) (8,935) (12,034) (655) (56,013)
Straight-line rent adjustment (1) + (2) 1,104 - - 27 1,131
Equity method depreciation expense (see above) (12,272) - 12,034 - (238)
(Loss) gain on disposition of other investments (116) - - - (116)
-----------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 37,365 1,854 - 852 36,363
Income tax (provision) benefit (13,709) - - 165 (13,544)
-----------------------------------------------------------
EARNINGS BEFORE MINORITY INTEREST AND DISCONTINUED OPERATIONS 23,656 1,854 - 1,017 22,819
Minority interest (1,854) (1,854) - - -
-----------------------------------------------------------
EARNINGS FROM CONTINUING OPERATIONS 21,802 - - 1,017 22,819
Discontinued operations, net of tax and minority interest:
(Loss) earnings from operations 1,017 - - (1,017) -
Gain on disposition of operating properties - - - - -
-----------------------------------------------------------
1,017 - - (1,017) -
-----------------------------------------------------------
NET EARNINGS $ 22,819 $ - $ - $ - $ 22,819
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(a) Depreciation and amortization per above $ 52,259 $ 8,935 $ 12,034 $ 655 $ 56,013
Depreciation and amortization - Non-Real Estate Groups 2,109 - 73 - 2,182
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Total depreciation and amortization $ 54,368 $ 8,935 $ 12,107 $ 655 $ 58,195
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