Exhibit 99.1
Forest City Reports Fiscal 2004 First-Quarter Results
CLEVELAND--(BUSINESS WIRE)--June 8, 2004--Forest City Enterprises, Inc.
(NYSE:FCEA)(NYSE:FCEB)
-- Net earnings of $7.2 million, or $0.14 per share
-- Revenues of $288.6 million, up 25.1 percent
-- EBDT increases 5.9 percent to $1.08 per share
Forest City Enterprises, Inc. (NYSE:FCEA)(NYSE:FCEB) today announced net
earnings, revenues and EBDT for the fiscal first quarter ended April 30, 2004.
The Company reported net earnings of $7.2 million, or $0.14 per share,
compared with $14.8 million, or $0.29 per share, in 2003. The difference was
primarily due to the Company's adoption of Financial Accounting Standards Board
Interpretation Number 46(R) (FIN 46), "Consolidation of Variable Interest
Entities." FIN 46 resulted in the cumulative effect of a change in accounting
principle, net of tax, of $11.3 million and an increase in depreciation expense
for previously unconsolidated entities. FIN 46 charges during the fiscal first
quarter were partially offset by an $11.8 million after-tax gain from the
disposition of a property.
EBDT (Earnings Before Depreciation, Amortization and Deferred Taxes) was
$55.1 million, or $1.08 per share, a 5.9 percent increase on a per share basis
over last year's fiscal first-quarter EBDT of $51.4 million, or $1.02 per share.
Fiscal first-quarter consolidated revenues increased 25.1 percent to $288.6
million compared with $230.8 million a year earlier.
EBDT and EBDT per share are non-Generally Accepted Accounting Principles
(GAAP) measures provided as a supplement to net earnings and net earnings per
share prepared in accordance with GAAP. The Company believes net earnings is the
most directly comparable GAAP measure to EBDT. A reconciliation of net earnings
to EBDT is provided in the Financial Highlights table in this news release. A
more complete discussion of EBDT is included in this news release.
Please refer to the Company's website at www.forestcity.net for a
Supplemental Package furnished to the Securities and Exchange Commission on Form
8-K. This Supplemental Package includes operating and financial information for
the first quarter ended April 30, 2004, with reconciliations of non-GAAP
financial measures to their most directly comparable GAAP financial measures.
Discussion of Results
Charles A. Ratner, president and chief executive officer of Forest City
Enterprises, said, "We completed two openings during the fiscal first quarter
and have 17 projects under construction, seven of which are scheduled to open
later in fiscal 2004. The 13 commercial and residential properties opened or
acquired last year are driving our growth. We are also pleased that our
comparable NOI (a non-GAAP financial measure) continues to improve, led by the
strong performance of our retail portfolio.
"Forest City completed two transactions during the quarter that
significantly enhanced our long-term financial flexibility. In February, we
completed a public debt offering of $100 million of 7.375 percent Senior Notes
due in 2034. In March, we expanded our corporate credit facility to $450
million, which represents a $150 million increase in availability in the
Company's credit line."
A key growth driver of Forest City's EBDT is Net Operating Income (NOI), a
non-GAAP financial measure. Total Real Estate Groups NOI for the fiscal first
quarter grew 4.7 percent, largely due to the openings and acquisitions completed
last year. Comparable property NOI - NOI from properties operated during the
fiscal first quarters of both 2004 and 2003 - was up 0.1 percent in 2004
compared with the prior year. This is the second consecutive quarter of
comparable NOI growth, compared with decreases in the two previous fiscal years
(2003 and 2002).
The retail portfolio comparable NOI was up 2.2 percent, as retail continues
to be the strongest-performing property type for the Company. The office
portfolio was down 0.2 percent. The residential portfolio was down 4.1 percent
because of reduced demand for apartments, driven by limited job growth and the
low interest rate environment (which is spurring new home sales). While office
and residential comparable NOI were below historical levels, overall comparable
NOI compared favorably with current industry trends.
EBDT growth was also driven by a combined $8.5 million increase from the
Land Development and Lumber Trading groups compared with the fiscal first
quarter of 2003. The increase in land sales was primarily due to the timing of
certain transactions and does not reflect an annual trend.
Comparable property NOI, a non-GAAP financial measure, is based on the
pro-rata consolidation method - see attached Exhibit, which also includes
comparable property NOI on the full consolidation method. A more complete
discussion of comparable NOI is included in this news release.
Dispositions
During the fiscal first quarter, the Company disposed of Woodlake, a
residential community in Silver Spring, Maryland, for an $11.8 million after-tax
gain. Subsequent to the end of the quarter, Forest City disposed of two shopping
malls in non-core markets for a total after-tax gain of approximately $18.5
million, at the Company's share of these equity method investments. Disposing of
these assets enables the Company to recycle capital into the development of
additional high-impact projects in Forest City's core markets.
Portfolio and Development Pipeline Highlights
Forest City continued to concentrate on growth in its core markets during
the fiscal first quarter of 2004. These markets include the New York
City/Philadelphia metropolitan area, Boston, Denver, California and the
Washington, D.C./Baltimore metropolitan area, among other high-growth urban
areas. The Company made significant progress at several of its long-term
projects, and announced plans for additional large developments.
Fiscal First-Quarter Openings
Forest City completed two openings during the quarter. At its 4,200-acre
Stapleton mixed-use project in Denver, the Company opened East 29th Avenue Town
Center, the first of several town centers being built in Stapleton's new
neighborhoods. The town center features 82,000 square feet of "main street"
retail, 34,000 square feet of office space, 156 apartment units and a town
green. In New York City, Forest City opened Sterling Glen of Rye Brook, a
165-unit senior supported-living community that is part of a multigenerational
resort-like community in Rye Brook, New York.
Additional Openings Scheduled for Fiscal 2004
Of the 17 projects under construction, seven are due to open later in
fiscal 2004. Projected openings, which total $532 million of cost on a full
consolidation basis and $409.9 million of cost at the Company's share, include
the office and retail components of Atlantic Terminal, Victoria Gardens open-air
regional lifestyle center, Quartermaster Plaza retail development, and a life
sciences research facility at University of Pennsylvania. Project costs at the
Company's share are based on the pro-rata consolidation method - see attached
Exhibit, which also includes comparable project costs on the full consolidation
method.
The Company is nearing completion of construction on the office and retail
components of Atlantic Terminal in downtown Brooklyn. The 10-story,
399,000-square-foot office building is being constructed above a four-story,
373,000-square-foot retail center - both of which will be connected to renovated
railroad and subway stations. The office building, whose anchor tenant is the
Bank of New York, is scheduled to open in the fiscal second quarter. The retail
center, anchored by a Target department store, will open in the fiscal third
quarter. In addition, during the fiscal second quarter, Forest City plans to
open Brooklyn Commons, a 151,000-square-foot specialty retail center where
Lowe's (home improvement retailer) is the primary tenant.
In Southern California, construction continues on Victoria Gardens, a
1.2-million-square-foot open-air regional lifestyle and entertainment center
that will serve as the heart of a new downtown for Rancho Cucamonga. The center,
which is currently 83 percent pre-leased, will include a mixture of nationally
and locally known stores, including JCPenney, Macy's, Robinsons-May and AMC
Theaters. Scheduled to open in fall 2004, Victoria Gardens will also include
restaurants and cafes, as well as offices, housing, and civic and cultural uses.
The Company has two projects under construction, and scheduled to open this
fiscal year, in Philadelphia. The 459,000-square-foot Quartermaster Plaza is
scheduled to open during the fiscal third quarter, with Home Depot and BJ's
Wholesale Club as the anchor tenants. One of the largest new retail developments
to occur in Philadelphia in recent years, the plaza is located on the
historically significant site of a former military supply depot.
In addition, Forest City has under construction a life sciences research
facility at the University of Pennsylvania in Philadelphia. The project marks
Forest City's first biotechnology-related development opportunity outside of the
Boston market. The Company's University Bioscience & Technology Group is acting
as developer for the 123,000-square-foot facility. Forest City has an option to
purchase this project prior to or upon completion.
Additional Projects Under Construction
Commercial/Mixed-Use Projects
Forest City has two additional long-term commercial/mixed-use projects
under construction. During the fiscal first quarter, the Company officially
broke ground on the New York Times headquarters site in Times Square. The Times
will own and occupy 27 floors of the 52-story building. Forest City and its
partner ING Group will own the balance of the space, including a commercial
condominium in the building. Construction is expected to be completed in fiscal
2007.
In San Francisco, Forest City is working with partner Westfield America to
create a 1-million-square-foot retail center that will connect at five levels to
the existing Nordstrom-anchored San Francisco Centre. Scheduled to open in
fiscal 2006, the new San Francisco Centre will also feature Bloomingdale's and
more than 200 specialty stores and boutiques, fine dining,
large-state-of-the-art theater complex, gourmet marketplace, and office space.
Residential Projects
At the end of the fiscal first quarter, Forest City had eight new
residential projects under construction, representing $267 million of cost on a
full consolidation basis and $278.7 million of cost at the Company's share.
Project costs at the Company's share are based on the pro-rata consolidation
method - see attached Exhibit, which also includes comparable project costs on
the full consolidation method.
Two adaptive re-use/historic preservation projects are among the
residential properties under construction. At Ashton Mill, located near
Providence, Rhode Island, Forest City is transforming a Civil War-era cotton
mill into more than 190 one- and two-bedroom apartment units. Subway Terminal, a
former train station and office building in Los Angeles, is being converted into
277 loft-style apartments. For both projects, which are scheduled to open in
fiscal 2005, Forest City is using historic tax credits to maximize the
properties' competitive positions in their respective local residential markets.
Forest City has two apartment buildings under construction at its
University Park at MIT mixed-use project. 23 Sidney Street, which will have 51
loft-style apartments, and 100 Landsdowne Street, a 203-unit high-rise apartment
community, are expected to open in fiscal 2005. Under development since 1985,
the 27-acre University Park at MIT is one of Boston's largest private
biotechnology office parks, with 1.5 million square feet of office and lab
space, 70,000 square feet of retail, 277 residential units, 210 hotel rooms, and
2,700 parking spaces.
Under Development
Forest City has more than 20 projects under development - including several
of the largest and most prestigious projects in Company history. Many projects
currently in the initial stages of development are expected to open between
fiscal 2005 and 2008, thus promoting the Company's future growth. Forest City
announced milestones for several of these projects during the fiscal first
quarter.
The Company announced that its Hawaii Military Communities, LLC subsidiary
has signed a 50-year Partnership Agreement for the ownership, development and
management of Ohana Military Communities in Hawaii. Phase One of the partnership
with the U.S. Navy involves the construction of 910 new homes and the renovation
of 1,040 existing military family homes over the next four years, and the
ongoing operation and maintenance of the properties and residential communities
for the next 50 years.
In addition, Forest City has received a letter of intent from Fannie Mae,
the large mortgage financing company, to lease up to 1.5 million square feet of
office space at Waterfront. The Waterfront site in Washington, D.C. is being
redeveloped by Forest City and its partners to include 1.7 million square feet
of office space, 400,000 square feet of residential units, and 75,000 square
feet of stores and restaurants.
In California, Forest City was chosen to negotiate for the rights to
revitalize and convert the historic Public Health Services Hospital at the
Presidio of San Francisco for residential use. The Company plans to convert the
former United States Marine Hospital into a residential apartment community with
a mix of affordable-housing and market-rate units.
Forest City expects to begin construction later this fiscal year on two
large lifestyle centers - NorthField at Stapleton in Denver and Simi Valley Town
Center in Southern California.
NorthField will be a 1.2-million-square-foot lifestyle, entertainment and
retail center that combines major anchors with "main street retail." It will
feature Bass Pro Outdoor World and an 18-screen, 85,000-square-foot,
state-of-the-art Harkins Theatres megaplex - both firsts in Colorado. Bass Pro
Outdoor World anticipates 4 million visitors each year. Simi Valley Town Center
will include 875,000 square feet of retail space, including Macy's and
Robinsons-May department stores.
Other large, complex projects currently under development include: the
recently announced 44-acre Southeast Federal Center site in Washington, D.C.;
and the mixed-use Brooklyn Atlantic Yards project. Forest City's ability to
continue to identify, compete for, win and deliver such projects is a direct
result of its unique franchise. That franchise is built on the Company's
long-term commitment and extensive mixed-use development experience, which are
essential for growing the portfolio and enhancing shareholder value.
Public Offerings and Financing Summary
Forest City continues to take advantage of the financial markets to
undertake transactions that significantly enhance the Company's long-term
financial flexibility and ability to invest in its future growth. In February
2004, the Company completed a public debt offering of $100 million of 7.375
percent Senior Notes due in 2034. This transaction is in addition to last year's
public offering of $300 million of 7.625 percent Senior Notes due in 2015. In
March 2004, Forest City expanded its corporate credit facility to $450 million,
which represents a $150 million increase in availability in the Company's credit
line.
Forest City is also capitalizing on current interest rates and attractive
debt markets for its project financings, with primary emphasis on locking in
fixed-rate nonrecourse mortgages. During the fiscal first quarter of 2004,
Forest City closed on transactions totaling $221.1 million in nonrecourse
mortgage financings, including $99.5 million for new development projects, $58.0
million in refinancings, $53.5 million in loan extensions, and $10.1 million in
new acquisitions.
At April 30, 2004, the Company's weighted average cost of mortgage debt
decreased to 5.66 percent from 5.99 percent at April 30, 2003, primarily due to
the general decrease in variable interest rates. Variable-rate mortgage debt,
which represented 32 percent of the Company's total nonrecourse mortgage debt,
decreased from 3.81 percent at April 30, 2003 to 3.56 percent at April 30, 2004.
Fixed-rate mortgage debt decreased from 6.97 percent at April 30, 2003 to 6.64
percent at April 30, 2004.
Outlook
Ratner said, "The projects we have opened in recent years continue to drive
our near-term growth, and the more than two dozen projects currently under
construction or development should drive our long-term growth. In the fiscal
2004 third quarter alone, we expect to open three major retail projects -
Atlantic Terminal, Quartermaster Plaza and Victoria Gardens. We have identified
additional high-impact projects such as Southeast Federal Center, San Francisco
Centre, Brooklyn Atlantic Yards and the New York Times headquarters.
"Our strong first quarter provides us with the momentum to have a very
successful year in fiscal 2004," Ratner said. "We are on track for 2004 to be
our 25th consecutive year of EBDT growth."
Corporate Description
Forest City Enterprises, Inc. is a $6.8 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.
EBDT
The Company uses EBDT, along with net earnings, to report its operating
results. On a consolidated basis, EBDT is a non-GAAP financial measure and is
not a measure of operating results as defined by GAAP. The Company believes that
EBDT provides additional information about its core business 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 in operating
and understanding its business and 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 used by the chief decision maker and
management to assess operating performance and resource allocations by segment
and on a consolidated basis. 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 (including amortization of mortgage
procurement costs) 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).
EBDT is reconciled to net earnings, the most comparable financial measure
calculated in accordance with GAAP. 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 the
Company believes the values of its properties, in general, have appreciated,
over time, in excess of their original cost. Deferred taxes from real estate
operations, 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 or loss on dispositions of
operating properties. The Company's EBDT may not be directly comparable to
similarly titled measures reported by other companies.
Pro-Rata Method
This news release contains certain financial measures prepared in
accordance with the full consolidation method, which are financial measures
presented in accordance with GAAP, and certain financial measures prepared in
accordance with the pro-rata method, which are non-GAAP financial measures.
Forest City presents certain financial amounts under the pro-rata method. This
information is useful to investors because management believes this method more
accurately reflects the manner in which the Company operates the business. This
is because, in line with industry practice, Forest City has made a large number
of investments in which its economic ownership is less than 100% as a means of
sharing risk. Under the pro-rata consolidation method, the Company presents its
investments proportionate to its share of ownership. Under GAAP, the full
consolidation method is used to report partnership assets and liabilities as
consolidated at 100% if deemed under Forest City's control, or if the Company is
deemed to be the primary beneficiary of an investment in a Variable Interest
Entity (VIE), even if its ownership is not 100%. Forest City provides a
reconciliation to the full consolidation method when the pro-rata consolidation
method is used throughout this news release.
Safe Harbor Language
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 fiscal year ended
January 31, 2004.
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Three Months Ended April 30, 2004 and 2003
(dollars in thousands, except per share data)
Three Months Ended Increase
April 30, (Decrease)
----------- ----------- ------------------
2004 2003 Amount Percent
----------- ----------- -------- ---------
Operating Results:
Earnings from continuing
operations $6,783 $14,739 $(7,956)
Discontinued operations,
net of tax and minority
interest (1) 11,681 53 11,628
Cumulative effect of change
in accounting principle,
net of tax (11,261) - (11,261)
----------- ----------- -----------
Net earnings $7,203 $14,792 $(7,589)
=========== =========== ===========
Earnings Before
Depreciation, Amortization
and Deferred Taxes (EBDT)
(2) $55,121 $51,435 $3,686 7.2%
=========== =========== ===========
Reconciliation of Net
Earnings to Earnings
Before Depreciation,
Amortization and
Deferred Taxes
(EBDT) (2):
Net Earnings $7,203 $14,792 $(7,589)
Depreciation and
amortization - Real
Estate Groups (5) 44,917 31,288 13,629
Depreciation and
amortization - equity
method investments (3) 237 126 111
Deferred income tax
expense - Real Estate
Groups (6) 9,078 5,305 3,773
Current income tax
expense on non-operating
earnings: (6)
Gain on disposition
of other
investments - 9 (9)
Gain on disposition
included in
discontinued
operations - 1,729 (1,729)
Straight-line rent
adjustment (4) 1,924 (1,704) 3,628
Gain on disposition of
other investments - (22) 22
Discontinued operations:(1)
Gain on disposition
of operating
properties (19,499) (411) (19,088)
Minority interest - 323 (323)
Cumulative effect of
change in accounting
principle, net of tax 11,261 - 11,261
----------- ----------- -----------
Earnings Before
Depreciation,
Amortization and
Deferred Taxes (EBDT)
(2) $55,121 $51,435 $3,686 7.2%
=========== =========== ===========
Diluted Earnings per Common
Share:
Earnings from continuing
operations $0.13 $0.29 $(0.16)
Discontinued operations,
net of tax and minority
interest (1) 0.23 - 0.23
Cumulative effect of change
in accounting principle,
net of tax (0.22) - (0.22)
----------- ----------- -----------
Net earnings $0.14 $0.29 $(0.15)
=========== =========== ===========
Earnings Before
Depreciation, Amortization
and Deferred Taxes (EBDT)
(2) $1.08 $1.02 $0.06 5.9%
=========== =========== ===========
Operating earnings, net of
tax (a non-GAAP financial
measure) $0.28 $0.34 $(0.06)
Gain on disposition of
operating properties, net
of tax 0.23 0.01 0.22
Minority interest (0.15) (0.06) (0.09)
Cumulative effect of change
in accounting principle,
net of tax (0.22) - (0.22)
----------- ----------- -----------
Net earnings $0.14 $0.29 $(0.15)
=========== =========== ===========
Diluted weighted average
shares outstanding 50,870,134 50,248,378 621,756
=========== =========== ===========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Three Months Ended April 30, 2004 and 2003
(dollars in thousands)
Three Months Ended Increase
April 30, (Decrease)
------------------- ---------------
2004 2003 Amount Percent
--------- --------- ------- -------
Operating Earnings (a non-GAAP
financial measure) and
Reconciliation to Net Earnings:
Revenues
Commercial Group $165,451 $160,137 $5,314
Residential Group 51,280 38,218 13,062
Land Development Group 31,639 12,378 19,261
Lumber Trading Group 40,137 19,901 20,236
Corporate Activities 74 128 (54)
--------- --------- --------
Total Revenues 288,581 230,762 57,819 25.1%
Operating expenses (174,326) (140,654) (33,672)
Interest expense (59,942) (43,815) (16,127)
Depreciation and amortization (5) (40,947) (29,350) (11,597)
Equity in earnings of
unconsolidated real estate
entities 6,244 9,843 (3,599)
Revenues from discontinued
operations (1) 434 4,585 (4,151)
Expenses from discontinued
operations (1) (609) (4,690) 4,081
--------- --------- --------
Operating earnings (a non-GAAP
financial measure) 19,435 26,681 (7,246)
--------- --------- --------
Income tax expense (6) (5,499) (9,529) 4,030
Income tax expense from
discontinued operations (1) (6) (7,643) (35) (7,608)
Income tax benefit on non-
operating earnings items (see
below) 7,712 44 7,668
--------- --------- --------
Operating earnings,
net of tax (a non-GAAP
financial measure) 14,005 17,161 (3,156)
--------- --------- --------
Gain on disposition of other
investments - 22 (22)
Gain on disposition of operating
properties included in
discontinued operations (1) 19,499 411 19,088
Income tax expense on non-
operating earnings: (6)
Gain on disposition of other
investments - (9) 9
Gain on disposition of
operating properties
included in discontinued
operations (7,712) (35) (7,677)
--------- --------- --------
Income tax expense on non-
operating earnings (see above) (7,712) (44) (7,668)
--------- --------- --------
Minority interest in continuing
operations (7,328) (2,540) (4,788)
Minority interest in discontinued
operations: (1)
Operating earnings - 105 (105)
Gain on disposition - (323) 323
--------- --------- --------
- (218) 218
--------- --------- --------
Minority interest (7,328) (2,758) (4,570)
--------- --------- --------
Cumulative effect of change in
accounting principle, net of tax (11,261) - (11,261)
--------- --------- --------
Net earnings $7,203 $14,792 $(7,589)
========= ========= ========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Three Months Ended April 30, 2004 and 2003
(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 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 (including amortization of mortgage procurement
costs) 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). See our discussion of EBDT in the news release.
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 (a non-GAAP
financial measure). See our discussion of pro-rata consolidation
in the news release.
4) The Company recognizes minimum rents on a straight-line basis over
the term of the related lease pursuant to the provision of SFAS
No. 13, "Accounting for Leases." The straight-line rent adjustment
is recorded as an increase or decrease to revenue from Forest City
Rental Properties Corporation, a wholly-owned subsidiary of Forest
City Enterprises, Inc., with the applicable offset to either
accounts receivable or accounts payable, as appropriate.
5) The following table provides detail of Depreciation and
Amortization. The Company's Real Estate Groups are owned by Forest
City Rental Properties Corporation, a wholly-owned subsidiary
engaged in the ownership, development, acquisition and management
of real estate projects, including apartment complexes, regional
malls and retail centers, hotels, office buildings and mixed-use
facilities, as well as large land development projects.
Three Months
Ended April 30,
-----------------
2004 2003
-------- --------
Full Consolidation $40,947 $29,350
Non-Real Estate Groups (1,004) (928)
-------- --------
Real Estate Groups Full Consolidation 39,943 28,422
Real Estate Groups related to minority interest (2,166) (4,389)
Real Estate Groups equity method 7,033 6,731
Discontinued operations 107 524
-------- --------
Real Estate Groups Pro-Rata Consolidation $44,917 $31,288
======== ========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Three Months Ended April 30, 2004 and 2003
(in thousands)
Three Months
Ended April 30,
-----------------
2004 2003
-------- --------
6) The following table provides detail of Income
Tax Expense (Benefit):
(A) Operating earnings
Current $1,922 $2,875
Deferred 3,577 6,645
-------- --------
5,499 9,520
-------- --------
(B) Current tax on gain on disposition of other
investments - 9
-------- --------
Subtotal (A) (B)
Current 1,922 2,884
Deferred 3,577 6,645
-------- --------
Income tax expense 5,499 9,529
-------- --------
(C) Discontinued operations
Operating earnings
Current (213) (159)
Deferred 144 159
-------- --------
(69) -
Gain on disposition of operating
properties
Current - 1,729
Deferred 7,712 (1,694)
-------- --------
7,712 35
-------- --------
7,643 35
-------- --------
Grand Total (A) (B) (C)
Current 1,709 4,454
Deferred 11,433 5,110
-------- --------
$13,142 $9,564
======== ========
Recap of Grand Total:
Real Estate Groups
Current 3,008 6,887
Deferred 9,078 5,305
-------- --------
12,086 12,192
Non-Real Estate Groups
Current (1,299) (2,433)
Deferred 2,355 (195)
-------- --------
1,056 (2,628)
-------- --------
Grand Total $13,142 $9,564
======== ========
Forest City Enterprises, Inc.
Development Pipeline
April 30, 2004
2004 Openings / Acquisitions
Cost at
FCE
Pro- Economic
Dev. rata Total Share
(D) Date FCE Cost at Full Cost (Non- Sq. ft./
Property/ Acq. Opened/ % Consolidation at 100% GAAP)(b) No. of
Location (A) Acquired (1) (GAAP)(a) (2) (1)x(2) Units
- ---------------------------------------------------------------------
(in millions)
-------------------------------
Residential:
East 29th
Avenue Town
Center/
Denver, CO D Q1-04 90.0 $ 45.9 $ 45.9 $ 41.3 156(h)
Sterling Glen
of Rye
Brook(c)(i)
(o)/Rye
Brook, NY D Q1-04 40.0 0.0 57.8 23.4 165
-------------------------------------
Total 2004
Openings /
Acquisitions
(b)(d) $45.9 $103.7 $64.7 321
=====================================
- -------------------------------------------------------------------
Residential Units
Phased-In Opened in
(c)(e): '04/Total
--------------
Settler's
Landing at
Greentree/
Streetsboro,
OH D 2001-04 50.0 $ 0.0 $25.9 $13.0 16 / 408
Eaton Ridge/
Sagamore
Hills, OH D 2002-04 50.0 0.0 14.1 7.0 36 / 260
--------------------------------------
Total (b)(r) $0.0 $40.0 $20.0 52 / 668
======================================
- -------------------------------------------------------------------
See attached 2004 footnotes.
April 30, 2004
2004 Under Construction or to be Acquired (17)
Cost at
FCE
Economic
Pro- Cost Share
Dev. rata at Full Total (Non- Pre-
(D) Antici- FCE Consoli- Cost GAAP) Sq. ft./ Leased
Property/ Acq. pated % dation at 100% (b) No. of (Wtd.
Location (A) Opening (1) (GAAP)(a) (2) (1)x(2) Units Avg.)
- ----------------------------------------------------------------------
(in millions)
---------------------
Retail Centers:
Brooklyn
Commons/
Brooklyn, NY D Q2-04 70.0 $ 21.4 $ 21.4 $ 15.0 151,000 100%
Quartermaster
Plaza/
Philadelphia,
PA D Q3-04 70.0 69.7 69.7 48.8 459,000 85%
Atlantic
Terminal/
Brooklyn, NY D Q3-04 70.0 87.7 87.7 61.4 373,000 87%
Victoria
Gardens/
Rancho
Cucamonga, CA D Q3-04 80.0 182.3 182.3 145.8 1,224,000(k) 83%
San Francisco
Centre(c)(n)/
San Francisco,
CA D Q3-06 50.0 0.0 396.6 198.3 964,000(l) 8%
-------------------------------
361.1 757.7 469.3 3,171,000 62%
----------------------=========
Office:
Atlantic
Terminal
Office/
Brooklyn, NY D Q2-04 70.0 106.8 106.8 74.8 399,000 80%
University of
Pennsylvania
(m)/
Philadelphia,
PA A Q4-04 100.0 55.4 55.4 55.4 123,000 100%
Twelve
MetroTech
Center/
Brooklyn, NY D Q2-05 80.0 43.9 43.9 35.1 177,000(g) 0%
New York Times
(c)/Manhattan,
NY D Q1-07 28.0 0.0 412.3 115.4 734,000 0%
-------------------------------
206.1 618.4 280.7 1,433,000 31%
----------------------=========
Residential:
Emerald Palms
Expansion/
Miami, FL D Q2-04 100.0 8.7 8.7 8.7 86
23 Sidney
Street/
Cambridge, MA D Q1-05 100.0 17.4 17.4 17.4 51
Subway
Terminal/Los
Angeles, CA D Q1-05 100.0 60.3 60.3 60.3 277
Ashton Mill/
Providence,
RI D Q2-05 100.0 29.0 29.0 29.0 193
Metropolitan
Lofts(c)/Los
Angeles, CA D Q2-05 50.0 0.0 60.3 30.2 264
Sterling Glen
of Lynbrook
(i)(p)/
Lynbrook, NY D Q3-05 80.0 27.0 27.0 21.6 100
100 Landsdowne/
Cambridge, MA D Q3-05 100.0 59.2 59.2 59.2 203
Sterling Glen
of Roslyn(c)
(i)(q)/
Roslyn, NY D Q2-06 80.0 65.4 65.4 52.3 158
-------------------------------
267.0 327.3 278.7 1,332
-------------------------======
Total 2004
Under
Construction
(b)(j) $834.2 $1,703.4 $1,028.7
========================
- ----------------------------------------------------------------------
Residential phased-in units
under construction (c)(e): Under Const./
Total
-------------
Settler's
Landing at
Greentree/
Streetsboro,
OH 2001-04 50.0 $0.0 $25.9 $13.0 88/408
Arbor Glen/
Twinsburg, OH 2001-07 50.0 0.0 17.9 8.9 144/288
Newport
Landing/
Coventry, OH 2002-05 50.0 0.0 16.0 8.0 108/336
Woodgate/Evergreen
Farms/Olmsted
Twshp, OH 2004-07 33.0 0.0 22.5 7.5 348/348
--------------------------------------
Total(b)(f) $0.0 $82.3 $37.4 688/1,380
======================================
- ----------------------------------------------------------------------
See attached 2004 footnotes.
2004 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 we are deemed to have
control or to be the primary beneficiary of our investments in
variable interest entities.
(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). Under the pro-rata consolidation method of
accounting the Company determines its economic share by
multiplying its pro-rata ownership of the applicable property by
total cost. See our discussion of the pro-rata consolidation
method in the preceding narrative.
(c) Reported under the equity method of accounting. This method
represents a GAAP measure for investments in which the Company
is not deemed to have control or be the primary beneficiary of our
investments in variable interest entities.
(d) The difference between the full consolidation amount (GAAP) of
$45.9 million of cost to Forest City's economic share (a non-
GAAP measure) of $64.7 million of cost consists of a reduction to
full consolidation for minority interest of $4.6 million of cost
and the addition of Forest City's share of cost for unconsolidated
investments of $23.4 million.
(e) Phased-in openings. Costs are representative of the total project.
(f) 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 $37.4 million of cost consists of Forest City's share
of cost for unconsolidated investments of $37.4 million.
(g) Represents the Company's portion of this 1.1 million square-foot
office condominium.
(h) Project also includes 141,000 total square feet (57,000 sq ft
owned/managed by FCE) of retail and 34,000 square feet of office
space.
(i) Supported-living property.
(j) The difference between the full consolidation amount (GAAP) of
$834.2 million of cost to Forest City's economic share (a non-
GAAP measure) of $1,028.7 million of cost consists of a reduction
to full consolidation for minority interest of $149.4 million of
cost and the addition of Forest City's share of cost for
unconsolidated investments of $343.9 million.
(k) Includes 45,000 square feet of office space.
(l) Includes 235,000 square feet of office space.
(m) The Company will have an option to acquire this property.
(n) This project will also include the acquisition of an adjacent
retail center totaling 508,000 square feet.
(o) Formerly Stone Gate at Bellefair
(p) Formerly Tanglewood Crest
(q) Formerly Bryant Landing
(r) 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 $20.0 million of cost consists of Forest City's share
of cost for unconsolidated investments of $20.0 million.
Net Operating Income (In Thousands)
Three Months Ended April 30, 2004
------------------------------------------------
Plus
Unconsol- Plus
idated Discont-
Full Less Invest- inued Pro-Rata
Consol- Minority ments at Opera- Consol-
idation Interest Pro-Rata tions idation
--------- --------- --------- -------- ---------
Commercial
Group
Retail
Comparable $32,001 $ 4,716 $ 3,949 $ - $31,234
-------------- ------- ------- ------- ------ -------
Total 37,721 4,925 3,643 - 36,439
Office
Buildings
Comparable 33,117 5,389 1,792 - 29,520
-------------- ------- ------- ------- ------ -------
Total 43,486 8,417 1,074 - 36,143
Hotels
Comparable 1,828 402 623 - 2,049
-------------- ------- ------- ------- ------ -------
Total 3,045 886 623 - 2,782
Other 2,984 2,912 60 - 132
Total
Commercial
Group
Comparable 66,946 10,507 6,364 - 62,803
-------------- ------- ------- ------- ------ -------
Total 87,236 17,140 5,400 - 75,496
Residential
Group
Comparable 22,972 1,229 4,453 - 26,196
-------------- ------- ------- ------- ------ -------
Total 28,115 1,312 6,990 295 34,088
Total Real
Estate Groups
Comparable 89,918 11,736 10,817 - 88,999
-------------- ------- ------- ------- ------ -------
Total 115,351 18,452 12,390 295 109,584
Land Development
Group 14,990 939 171 - 14,222
Lumber Trading
Group 5,420 - - - 5,420
Corporate Group (7,072) - - - (7,072)
-------------- -------- ------- ------- ------ --------
Grand Total $128,689 $19,391 $12,561 $ 295 $122,154
======== ======= ======= ====== ========
Net Operating Income (In Thousands)
Three Months Ended April 30, 2003 % Change
------------------------------------------ ---------------
Plus
Unconsol- Plus
idated Discont-
Full Less Invest- inued Pro-Rata Full Pro-Rata
Consol- Minority ments at Oper- Consol- Consol- Consol-
idation Interest Pro-Rata ations idation idation idation
------------------------------------------ ---------------
Commercial
Group
Retail
Comparable $31,852 $5,444 $4,151 $ - $30,559 0.5% 2.2%
---------- -------- ------- ------- ------ --------
Total 33,846 5,942 5,413 - 33,317
Office
Buildings
Comparable 33,630 5,620 1,581 - 29,591 -1.5% -0.2%
---------- -------- ------- ------- ------ --------
Total 36,583 6,886 1,114 - 30,811
Hotels
Comparable 983 169 637 - 1,451 86.0% 41.2%
---------- -------- ------- ------- ------ --------
Total 2,470 774 637 - 2,333
Other 2,945 (131) 960 - 4,036
Total
Commercial
Group
Comparable 66,465 11,233 6,369 - 61,601 0.7% 2.0%
---------- -------- ------- ------- ------ --------
Total 75,844 13,471 8,124 - 70,497
Residential
Group
Comparable 24,291 1,275 4,311 - 27,327 -5.4% -4.1%
---------- -------- ------- ------- ------ --------
Total 27,679 487 5,621 1,361 34,174
Total Real
Estate Groups
Comparable 90,756 12,508 10,680 - 88,928 -0.9% 0.1%
---------- -------- ------- ------- ------ --------
Total 103,523 13,958 13,745 1,361 104,671
Land
Development
Group 5,573 570 351 - 5,354
Lumber Trading
Group 167 - - - 167
Corporate
Group (5,087) - - - (5,087)
- ----------- -------- ------- ------- ------ --------
Grand
Total $104,176 $14,528 $14,096 $1,361 $105,105
======== ======= ======= ====== ========
Reconciliation of Net Operating Income to Net Earnings:
Quarter Ended April 30, 2004
------------------------------------------------
Plus
Unconsol-
idated Plus
Full Less Invest- Discont- Pro-Rata
Consol- Minority ments at inued Consol-
idation Interest Pro-Rata Operations idation
------------------------------------------------
Revenues $288,581 $38,840 $62,973 $434 $313,148
Exclude straight-line
rent adjustment (1) (2,364) - - - (2,364)
------------------------------------------------
Adjusted revenues 286,217 38,840 62,973 434 310,784
Operating expenses 174,326 19,445 37,398 139 192,418
Add back depreciation
and amortization for
non-Real Estate
Groups (a) 1,004 - 87 - 1,091
Exclude straight-line
rent adjustment (2) (4,288) - - - (4,288)
------------------------------------------------
Adjusted operating
expenses 171,042 19,445 37,485 139 189,221
Add equity in earnings
of unconsolidated
entities 6,244 (4) (5,894) - 354
Add back equity
method depreciation
expense (see below) 7,270 - (7,033) - 237
------------------------------------------------
Net Operating Income 128,689 19,391 12,561 295 122,154
Interest expense (59,942) (9,897) (12,443) (125) (62,613)
Loss on early
extinguishment of
debt - - (118) (238) (356)
Gain on disposition
of operating
properties and other
investments - - - 19,499 19,499
Depreciation and
amortization - Real
Estate Groups (a) (39,943) (2,166) (7,033) (107) (44,917)
Straight-line rent
adjustment (1) + (2) (1,924) - - - (1,924)
Equity method
depreciation expense
(see above) (7,270) - 7,033 - (237)
------------------------------------------------
Earnings before
income taxes 19,610 7,328 - 19,324 31,606
Income tax
(provision) benefit (5,499) - - (7,643) (13,142)
------------------------------------------------
Earnings before
minority interest,
discontinued
operations and
cumulative effect of
change in accounting
principle 14,111 7,328 - 11,681 18,464
Minority Interest (7,328) (7,328) - - -
------------------------------------------------
Earnings from
continuing
operations 6,783 - - 11,681 18,464
Discontinued
operations, net of
tax and minority
interest:
(Loss) earnings
from operations (106) - - 106 -
Gain on disposition
of operating
properties 11,787 - - (11,787) -
------------------------------------------------
11,681 - - (11,681) -
------------------------------------------------
Cumulative effect of
change in accounting
principle, net of
tax (11,261) - - - (11,261)
------------------------------------------------
Net earnings $7,203 $- $- $- $7,203
================================================
(a) Depreciation and
amortization -
Real Estate Groups $39,943 $2,166 $7,033 $107 $44,917
Depreciation and
amortization -
Non-Real Estate
Groups 1,004 - 87 - 1,091
------------------------------------------------
Total depreciation
and amortization $40,947 $2,166 $7,120 $107 $46,008
================================================
Reconciliation of Net Operating Income to Net Earnings:
Quarter Ended April 30, 2003
---------------------------------------------------
Plus
Unconsol-
idated Plus
Full Less Invest- Discont- Pro-Rata
Consol- Minority ments at inued Consol-
idation Interest Pro-Rata Operations idation
---------------------------------------------------
Revenues $230,762 $38,635 $59,281 $3,983 $255,391
Exclude straight-
line rent
adjustment (1) (2,670) - - - (2,670)
---------------------------------------------------
Adjusted revenues 228,092 38,635 59,281 3,983 252,721
Operating expenses 140,654 24,104 33,060 2,622 152,232
Add back
depreciation and
amortization for
non-Real Estate
Groups (a) 928 - 51 - 979
Exclude straight-
line rent
adjustment (2) (966) - - - (966)
---------------------------------------------------
Adjusted operating
expenses 140,616 24,104 33,111 2,622 152,245
Add equity in
earnings of
unconsolidated
entities 9,843 (3) (5,343) - 4,503
Add back equity
method depreciation
expense (see
below) 6,857 - (6,731) - 126
---------------------------------------------------
Net Operating
Income 104,176 14,528 14,096 1,361 105,105
Interest expense (43,815) (7,599) (14,096) (837) (51,149)
Loss on early
extinguishment of
debt - - - - -
Gain on disposition
of operating
properties and
other investments 22 - - 88 110
Depreciation and
amortization -
Real Estate
Groups (a) (28,422) (4,389) (6,731) (524) (31,288)
Straight-line rent
adjustment (1)+(2) 1,704 - - - 1,704
Equity method
depreciation
expense (see
above) (6,857) - 6,731 - (126)
---------------------------------------------------
Earnings before
income taxes 26,808 2,540 - 88 24,356
Income tax
(provision)
benefit (9,529) - - (35) (9,564)
---------------------------------------------------
Earnings before
minority interest,
discontinued
operations and
cumulative effect
of change in
accounting
principle 17,279 2,540 - 53 14,792
Minority Interest (2,540) (2,540) - - -
---------------------------------------------------
Earnings from
continuing
operations 14,739 - - 53 14,792
Discontinued
operations,
net of tax and
minority interest:
(Loss) earnings
from operations - - - - -
Gain on
disposition of
operating
properties 53 - - (53) -
---------------------------------------------------
53 - - (53) -
---------------------------------------------------
Cumulative effect
of change in
accounting
principle, net of
tax - - - - -
---------------------------------------------------
Net earnings $14,792 $- $- $- $14,792
===================================================
(a) Depreciation
and amortization
- Real Estate
Groups $28,422 $4,389 $6,731 $524 $31,288
Depreciation
and amortization
- Non-Real
Estate Groups 928 - 51 - 979
---------------------------------------------------
Total depreciation
and
amortization $29,350 $4,389 $6,782 $524 $32,267
===================================================
CONTACT: Forest City Enterprises, Inc.
Thomas G. Smith, 216-621-6060
Thomas T. Kmiecik, 216-621-6060
ON THE WEB: www.forestcity.net