Exhibit 99.1
Forest City Reports Increases in Net Earnings, Revenues and EBDT for Fiscal 2004
Third Quarter and Year-to-Date
CLEVELAND--(BUSINESS WIRE)--Dec. 9, 2004--Forest City Enterprises,
Inc. (NYSE:FCEA)(NYSE:FCEB) today announced increases in net earnings,
revenues and EBDT for the third quarter and nine months ended October
31, 2004.
Net earnings for the fiscal 2004 third quarter were $37.3 million,
or $0.73 per share, compared with $26.0 million, or $0.51 per share,
in 2003. Third-quarter consolidated revenues increased 8.5 percent to
$256.1 million compared with $236.0 million in the prior year's third
quarter. EBDT (Earnings Before Depreciation, Amortization and Deferred
Taxes) for the third quarter was $82.6 million, or $1.62 per share, a
17.4 percent increase on a per share basis over last year's
third-quarter EBDT of $69.9 million, or $1.38 per share.
EBDT and EBDT per share are non-Generally Accepted Accounting
Principle (GAAP) measures provided as a supplement to net earnings and
net earnings per share prepared in accordance with GAAP. The Company
believes that EBDT provides additional information about its core
business operations and is necessary to understand its ongoing
financial position. A reconciliation of net earnings (the most
directly comparable GAAP measure to EBDT) to EBDT is provided in the
Financial Highlights table in this news release. A more complete
discussion of EBDT is included at the end of this news release.
For the nine-month period ended October 31, 2004, net earnings
were $79.4 million, or $1.56 per share, compared with $47.4 million,
or $0.94 per share, in 2003. Consolidated revenues for the nine months
increased 17.9 percent to $762.2 million compared with $646.7 million
for the nine months ended October 31, 2003. EBDT for the nine months
ended October 31, 2004 was $208.7 million, or $4.10 per share, a 20.6
percent increase on a per share basis compared with last year's $171.6
million, or $3.40 per share.
Please refer to the Investor Relations section of 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 three and
nine months ended October 31, 2004, with reconciliations of non-GAAP
financial measures, such as comparable net operating income and
pro-rata financial statements, to their most directly comparable GAAP
financial measures.
Discussion of Results
During the fiscal third quarter of 2004, Forest City held the
grand openings of two retail developments: Victoria Gardens, a $183
million open-air lifestyle center designed as a pedestrian-friendly
"new downtown" for Rancho Cucamonga in Southern California; and
Quartermaster Plaza, a $70 million retail project in Philadelphia.
"Our third-quarter results and the October grand openings of Victoria
Gardens and Quartermaster Plaza continue the momentum that we have
been building throughout the year," said Charles A. Ratner, president
and chief executive officer of Forest City Enterprises.
Ratner continued, "The growth in net earnings, revenues and EBDT
was primarily driven by our 13 project openings and acquisitions
completed in fiscal 2003 and eight project openings during the first
three quarters of fiscal 2004. EBDT for the quarter and first nine
months was favorably impacted by the income recognition related to our
Denver Stapleton project's retained interest in a trust holding $145
million of bonds, and our continued tax management initiatives to
decrease the Company's current tax provision, thereby increasing
deferred taxes."
In addition to the items mentioned in the previous paragraph, net
earnings for the fiscal 2004 third quarter and first nine months were
impacted by the gains on the disposition of several properties and the
Company's fiscal 2004 first-quarter adoption of Financial Accounting
Standards Board Interpretation No. 46 (as revised) (FIN 46 (R)),
"Consolidation of Variable Interest Entities," which resulted in the
cumulative effect of a change in accounting principle charge to
earnings, net of tax, of $11.3 million.
Net Operating Income (NOI), a non-GAAP financial measure, is a key
driver of Forest City's EBDT. Total Real Estate Groups NOI for the
third quarter grew largely due to the openings and acquisitions
completed last year and thus far this year. Comparable property NOI -
NOI from properties operated during the third quarters of both 2004
and 2003 - was up 2.5 percent in 2004 compared with the prior year.
This is the fourth consecutive quarter of comparable NOI growth in the
Total Real Estate Groups, compared with decreases in the two previous
fiscal years (2003 and 2002).
The retail portfolio's comparable NOI was flat for the fiscal 2004
third quarter and increased 1.7 percent year-to-date. Comparable NOI
for the office portfolio increased 3.7 percent for the quarter and 3.1
percent year-to-date, continuing the recent positive momentum for the
Company's office buildings. The residential portfolio decrease was 4.8
percent for the quarter and 4.9 percent year-to-date because of
ongoing pressure on apartment rentals caused by low interest rates
(which spur home buying) and slower than expected job creation.
Comparable property NOI (mentioned above), a non-GAAP financial
measure, is based on the pro-rata consolidation method, also a
non-GAAP financial measure - see Exhibit to this news release, which
presents comparable property NOI on the full consolidation method.
Third-quarter comparable occupancies were up portfolio-wide
compared with the same period a year ago. Retail occupancies were 92.3
percent compared with 90.5 percent for the third quarter last year;
office increased to 93.2 percent from 92.6 percent; hotels increased
to 75.8 percent from 73.0 percent; and residential increased to 91.0
percent from 90.6 percent.
Portfolio and Development Highlights
A schedule of the Company's project openings and pipeline of
projects under construction is included in this news release.
Highlighted below are several of the Company's project openings and
projects under development.
During the fiscal 2004 third quarter, Forest City continued to
expand its presence in its core markets of New York City/Philadelphia,
California, Boston, Greater Washington, D.C./Baltimore, and Denver.
Forest City's business strategy is to concentrate on high-growth,
high-barrier-to-entry urban markets where the Company has gained
access to large, complex commercial, residential and mixed-use
projects. As of October 31, 2004, approximately 67 percent of Forest
City's current operating portfolio is located in its core markets,
while approximately 86 percent of projects under construction are in
those markets.
Project Openings
Through the first three quarters of fiscal 2004, Forest City
opened eight properties. The four retail centers, one office building
and three residential developments represent a total of $509.6 million
of cost at the Company's share ($527.5 million on a full consolidation
basis).
The million-square-foot Victoria Gardens features anchor stores
Macy's, JCPenney, Robinsons-May and AMC Theaters, in addition to more
than 100 shopping, dining and entertainment establishments. Located in
Southern California's Inland Empire, Victoria Gardens will be anchored
by a community facility (due to open in 2006), which will include a
library, performing arts center and meeting facilities. Contributing
to the project's current and future success is the Company's strong
"private/public partnership" with the City of Rancho Cucamonga. The
total project cost is estimated to be $146.2 million at the Company's
share, and $182.8 million on a full consolidation basis.
Quartermaster Plaza transforms the site of a former military
supply depot into a premier retail destination for South
Philadelphia's residents and visitors. Quartermaster Plaza represents
459,000 square feet of leasable retail space and $69.7 million in
project cost. It features anchor stores Home Depot and BJ's Wholesale
Club, with additional stores such as Staples, AJ Wright, PETsMart and
Walgreens, among other national retailers and local merchants.
Quartermaster Plaza is located near Girard Estates, a historically
significant and architecturally distinguished community.
In the fourth quarter in Philadelphia, Forest City opened a life
sciences research facility at the University of Pennsylvania. The
Company's Boston-based University Bioscience & Technology Group has
acted as developer for the $56.5 million, 123,000-square-foot
facility.
Dispositions
Over the last three years, the Company has disposed of 18 projects
for a total sales price of $358.9 million, generating $118.3 million
in cash proceeds and resulting in a total pre-tax gain of $110.3
million. Ratner said, "We remain committed to our current business,
but are currently a 'strategic seller' of specific properties where we
can take advantage of market conditions and relatively high
valuations. This higher level of sales activity enables us to improve
our operating portfolio and redeploy our capital toward higher-impact
opportunities in our commercial, residential and land development
portfolios."
In the fiscal 2004 third quarter, Forest City announced the
disposition of the 372-unit Regency Towers apartment community in
Jackson, New Jersey, which resulted in an after-tax gain of
approximately $15 million.
In early November, the Company announced the disposition of five
apartment communities, totaling 1,125 units. The five dispositions
resulted in a total after-tax gain of approximately $9 million and
generated cash proceeds of approximately $25 million. The properties
were disposed of at a blended capitalization rate of 6.5 percent. Four
of the properties are located in Virginia - the 184-unit Arboretum
Place, 153-unit Silver Hill, and 176-unit Trellis at Lee's Mill, all
in Newport News, Virginia; and the 216-unit Bridgewater in Hampton,
Virginia. The fifth property, the 396-unit Colony Woods, is located in
Bellevue, Washington.
On November 12, 2004, the Company announced the sale of the assets
of one of its wholly-owned subsidiaries, Forest City Trading Group,
Inc., a lumber wholesaler based in Portland, Oregon. Of the
approximate $39 million selling price, $35 million was paid in cash at
closing, with the remaining purchase price to be paid over the next
five years. Forest City Enterprises expects to report a pre-tax gain
of approximately $22 million and a pre-tax deferred gain of
approximately $4 million that will be recorded and recognized as
income over the next five years as purchase price payments are
received.
"We purchased Trading Group in 1969 and it has been an excellent
performer for us over the years," said Ratner. "We are pleased to be
able to sell Trading Group to its employees, who have been our
long-term partners in this very successful business. Forest City's
current and future focus is on the real estate development business,
where we have established a unique franchise."
Denver -- Stapleton Update
Forest City's Stapleton mixed-use development in Denver continues
to grow and attract additional residents, retail and industrial
tenants. Demand for both single-family lots and apartment community
living remains strong.
During the fiscal third quarter, the builders active at Stapleton
reported that 102 homes were sold and 165 home sales closed. Inception
to date, 1,523 homes have been sold, 1,216 are occupied, and 282 are
currently under construction. The builders currently selling
single-family and multifamily homes have acquired or are under
contract to acquire an additional 2,313 lots. Residents continued to
move into Stapleton's rental flats, loft-style apartments, and
affordable senior rental homes.
Also during the third quarter, Forest City purchased approximately
93 additional acres of land at Stapleton. The bulk of this acreage
will allow the Company to deliver lots for another 310 homes starting
in late summer 2005. Forest City began construction on phase one of
Stapleton's second regional retail center, the 779,000-square-foot
Northfield at Stapleton, which will combine anchor stores, specialty
shops, restaurants and entertainment venues in an outdoor setting.
Northfield at Stapleton is expected to open in fiscal 2005.
Projects Under Construction
At the end of the fiscal third quarter, Forest City's development
pipeline included 18 projects under construction, totaling $1.2
billion of cost at the Company's share ($848.9 million of cost on a
full consolidation basis). These include six retail projects, three
office buildings and nine residential communities. As mentioned above,
the University of Pennsylvania life sciences research facility opened
in the fiscal fourth quarter, while 12 of the remaining 17 projects,
representing $579.0 million of cost at the Company's share ($604.5
million on a full consolidation basis), are due to be completed in
2005. See the Company's Pipeline schedule in this news release for a
complete listing of projects under construction.
Projects Under Development
Forest City has more than 25 projects under development -
including several of the largest and most exciting projects in Company
history. These projects, currently in the initial stages of
development, represent opportunities that will continue to fuel the
Company's growth. Forest City expects the majority of these projects
to open between fiscal 2005 and 2008.
Large retail projects under development include Ridge Hill Village
Center, 1.3 million square feet in Yonkers, New York; East River
Plaza, 532,000 square feet in Manhattan; the million-square-foot
Bolingbrook near Chicago; and Westminster Mall, 912,000 square feet in
Westminster, Colorado. Ridge Hill includes a residential component,
which will feature as many as 364 apartment units. Forest City is also
beginning redevelopment of the former Waterside mall in Washington
D.C. Waterfront will include 2.1 million square feet of office space,
residential units, retail and restaurants. In addition, Forest City
has begun initial development work on a 722-unit apartment complex,
due to open in fiscal 2008, in downtown Oakland.
Given favorable market conditions and low interest rates, Forest
City is pursuing the development of condominiums in selected markets
with high demand for upscale urban homes. Current condominium projects
under development include 1100 Wilshire Building, a previously
unfinished office building in downtown Los Angeles; and Beekman, a
site adjacent to a hospital in Manhattan.
Financing Activity
Forest City continues to take advantage of current interest rates
and attractive debt markets for its project financings, with primary
emphasis on locking in fixed-rate nonrecourse mortgages. During the
first nine months of fiscal 2004, Forest City closed on transactions
totaling $746.5 million in nonrecourse mortgage financings, including
$221.4 million for new development projects and acquisitions, $405.3
million in refinancings, and $119.8 million in loan extensions.
At October 31, 2004, the Company's weighted average cost of
mortgage debt decreased to 5.74 percent from 5.97 percent at October
31, 2003, primarily due to the general decrease in the fixed-rate
portfolio. Fixed-rate mortgage debt, which represented 69 percent of
the Company's total nonrecourse mortgage debt, decreased from 6.79
percent at October 31, 2003 to 6.58 percent at October 31, 2004. Due
to the general increases in short-term interest rates, the
variable-rate mortgage debt increased from 3.74 percent at October 31,
2003 to 3.92 percent at October 31, 2004.
Outlook
Ratner said, "Our robust development pipeline will continue to
drive our growth. The 13 projects we opened in fiscal 2003 and the
eight projects opened through the first nine months of 2004 will be a
significant growth driver in the near term. We have 18 projects under
construction, totaling $1.2 billion of cost at our share ($848.9
million of cost on a full consolidation basis), and another $2.0
billion of projects at various stages of development. Many are
high-impact projects due to be completed between fiscal 2005 and 2008,
thus ensuring our continued growth and further strengthening our
diversified portfolio."
Ratner continued, "We are confident that our financial performance
to date will result in a very successful year for the Company in
fiscal 2004. We are on track for 2004 to be our 25th consecutive year
of EBDT growth."
Corporate Description
Forest City Enterprises, Inc. is a $7.2 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 19
states and the District of Columbia.
EBDT
The Company uses an additional measure, along with net earnings,
to report its operating results. This measure, referred to as Earnings
Before Depreciation, Amortization and Deferred Taxes ("EBDT"), is not
a measure of operating results or cash flows from operations as
defined by GAAP and may not be directly comparable to similarly-titled
measures reported by other companies.
The Company believes that EBDT provides additional information
about its core operations and, along with net earnings, is necessary
to understand its operating results. EBDT is used by the chief
operating decision maker and management in assessing operating
performance and to consider capital requirements and allocation of
resources by segment and on a consolidated basis. The Company believes
EBDT is important to investors because it provides another method for
the investor to measure its long term operating performance as net
earnings can vary from year to year due to property dispositions,
acquisitions and other factors that have a short-term impact.
EBDT is defined as net earnings excluding the following items: i)
gain (loss) on disposition of operating properties, divisions and
other investments (net of tax); ii) the adjustment to recognize rental
revenues and rental expense using the straight-line method; iii)
non-cash charges from real estate operations of 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 in the Company's
Supplemental Package furnished to the SEC on form 8-K. The adjustment
to recognize rental revenues and rental expenses on the straight-line
method is excluded because it is management's opinion that rental
revenues and expenses should be recognized when due from the tenants
or due to the landlord. The Company excludes depreciation and
amortization expense related to real estate operations from EBDT
because it believes the values of its properties, in general, have
appreciated over time in excess of their original cost. Deferred taxes
from real estate operations, which are the result of timing
differences of certain net expense items deducted in a future year for
federal income tax purposes, are excluded until the year in which they
are reflected in our 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 our overall financial performance
and is related to the ultimate gain on dispositions of operating
properties. Our EBDT may not be directly comparable to
similarly-titled measures reported by other companies.
Pro-Rata Consolidation Method
This press release contains certain financial measures prepared in
accordance with the generally accepted accounting principles ("GAAP")
under the full consolidation accounting method, and certain financial
measures prepared in accordance with the pro-rata consolidation
method, (non-GAAP). The Company presents certain financial amounts
under the pro-rata method, because it believes this information is
useful to investors as this method more accurately reflects the manner
in which the Company operates its business. This is because, in line
with industry practice, the Company has made a large number of
investments in which its economic ownership is less than 100% as a
means of procuring opportunities and 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 to be under its control
or if the Company is deemed to be the primary beneficiary for our
investments in the variable interest entities ("VIE"), even if its
ownership is not 100%. The Company provides reconciliations from the
full consolidation method to the pro-rata consolidation method
throughout its Supplemental Package furnished to the SEC on form 8-K.
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
Nine Months Ended October 31, 2004 and 2003
(dollars in thousands, except per share data)
Three Months Ended Increase
October 31, (Decrease)
---------------------- ----------------
2004 2003 Amount Percent
---------------------- ----------------
Operating Results:
Earnings from continuing
operations $16,799 $20,200 $(3,401)
Discontinued operations, net of
tax and minority interest(1) 20,541 5,772 14,769
Cumulative effect of change in
accounting principle, net of
tax - - -
---------------------- --------
Net earnings $37,340 $25,972 $11,368
====================== ========
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT)(2) $82,585 $69,896 $12,689 18.2%
====================== ========
Reconciliation of Net Earnings
to Earnings Before
Depreciation, Amortization and
Deferred Taxes (EBDT)(2):
Net Earnings $37,340 $25,972 $11,368
Depreciation and amortization
- Real Estate Groups(5) 45,067 34,859 10,208
Depreciation and amortization
- equity method investments(3) - 133 (133)
Deferred income tax expense -
Real Estate Groups(6) 34,540 17,948 16,592
Deferred income tax (expense) benefit
Non-Real Estate Groups:(6)
Gain on disposition of
other investments - - -
Loss on disposition of
one division of Lumber
Group - - -
Current income tax expense on
non-operating earnings:(6)
Gain on disposition of
other investments - - -
Gain on disposition
included in discontinued
operations 219 (4) 223
Gain on disposition
recorded on equity
method - - -
Straight-line rent
adjustment(4) (3,184) (2,654) (530)
Provision for decline in real
estate, net of minority
interest - - -
Gain on disposition recorded
on equity method - - -
Gain on disposition of other
investments - - -
Discontinued operations:(1)
Gain on disposition of
rental properties (31,625) (6,358) (25,267)
Loss on disposition of
one division of Lumber
Group - - -
Provision for decline - - -
Minority interest 228 - 228
Cumulative effect of change
in accounting principle, net
of tax - - -
---------------------- --------
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT)(2) $82,585 $69,896 $12,689 18.2%
====================== ========
Diluted Earnings per Common
Share:
Earnings from continuing
operations $0.33 $0.40 $(0.07)
Discontinued operations, net of
tax and minority interest(1) 0.40 0.11 0.29
Cumulative effect of change in
accounting principle, net of tax - - -
---------------------- --------
Net earnings $0.73 $0.51 $0.22
====================== ========
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT)(2) $1.62 $1.38 $0.24 17.4%
====================== ========
Operating earnings, net of tax
(a non-GAAP financial measure) $0.43 $0.47 $(0.04)
Provision for decline in real
estate, net of tax - - -
Gain on disposition of rental
properties, division and other
investments, net of tax 0.38 0.07 0.31
Minority interest (0.08) (0.03) (0.05)
Cumulative effect of change in
accounting principle, net of tax - - -
---------------------- --------
Net earnings $0.73 $0.51 $0.22
====================== ========
Diluted weighted average shares
outstanding 50,919,128 50,671,974 247,154
====================== ========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Nine Months Ended October 31, 2004 and 2003
(dollars in thousands, except per share data)
Nine Months Ended Increase
October 31, (Decrease)
---------------------- ----------------
2004 2003 Amount Percent
---------------------- ----------------
Operating Results:
Earnings from continuing
operations $53,117 $40,755 $12,362
Discontinued operations, net of
tax and minority interest(1) 37,510 6,612 30,898
Cumulative effect of change in
accounting principle, net of
tax (11,261) - (11,261)
---------------------- --------
Net earnings $79,366 $47,367 $31,999
====================== ========
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT)(2) $208,701 $171,581 $37,120 21.6%
====================== ========
Reconciliation of Net Earnings
to Earnings Before
Depreciation, Amortization and
Deferred Taxes (EBDT)(2):
Net Earnings $79,366 $47,367 $31,999
Depreciation and amortization
- Real Estate Groups(5) 137,734 98,851 38,883
Depreciation and amortization
- equity method investments(3) 237 380 (143)
Deferred income tax expense -
Real Estate Groups(6) 65,949 32,231 33,718
Deferred income tax
(expense) benefit - Non-
Real Estate Groups:(6)
Gain on disposition of
other investments - (179) 179
Loss on disposition of
one division of Lumber
Group 89 - 89
Current income tax expense on
non-operating earnings:(6)
Gain on disposition of
other investments - 9 (9)
Gain on disposition
included in discontinued
operations (140) 1,725 (1,865)
Gain on disposition
recorded on equity
method (209) - (209)
Straight-line rent
adjustment(4) (2,646) (5,185) 2,539
Provision for decline in real
estate, net of minority
interest - 1,624 (1,624)
Gain on disposition recorded
on equity method (31,996) - (31,996)
Gain on disposition of other
investments - 431 (431)
Discontinued operations:(1)
Gain on disposition of
rental properties (52,931) (6,769) (46,162)
Loss on disposition of
one division of Lumber
Group 1,093 - 1,093
Provision for decline - 1,104 (1,104)
Minority interest 894 (8) 902
Cumulative effect of change
in accounting principle, net
of tax 11,261 - 11,261
---------------------- --------
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT)(2) $208,701 $171,581 $37,120 21.6%
====================== ========
Diluted Earnings per Common
Share:
Earnings from continuing
operations $1.04 $0.81 $0.23
Discontinued operations, net of
tax and minority interest(1) 0.74 0.13 0.61
Cumulative effect of change in
accounting principle, net of tax (0.22) - (0.22)
---------------------- --------
Net earnings $1.56 $0.94 $0.62
====================== ========
Earnings Before Depreciation,
Amortization and Deferred
Taxes (EBDT)(2) $4.10 $3.40 $0.70 20.6%
====================== ========
Operating earnings, net of tax
(a non-GAAP financial measure) $1.19 $1.07 $0.12
Provision for decline in real
estate, net of tax - (0.03) 0.03
Gain on disposition of rental
properties, division and other
investments, net of tax 1.00 0.07 0.93
Minority interest (0.41) (0.17) (0.24)
Cumulative effect of change in
accounting principle, net of tax (0.22) - (0.22)
---------------------- --------
Net earnings $1.56 $0.94 $0.62
====================== ========
Diluted weighted average shares
outstanding 50,886,173 50,499,698 386,475
====================== ========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Nine Months Ended October 31, 2004 and 2003
(dollars in thousands)
Three Months Ended Increase
October 31, (Decrease)
------------------ --------------
2004 2003 Amount Percent
------------------ ---------------
Operating Earnings (a non-GAAP
financial measure) and
Reconciliation to Net Earnings:
Revenues from real estate operations
Commercial Group $181,867 $153,074 $28,793
Residential Group 52,410 33,124 19,286
Land Development Group 21,822 49,734 (27,912)
Lumber Trading Group - - -
Corporate Activities 9 111 (102)
------------------ --------
Total Revenues 256,108 236,043 20,065 8.5%
Operating expenses (149,562)(132,716) (16,846)
Interest expense (66,496) (47,449) (19,047)
Loss on early extinguishment of debt (1,275) - (1,275)
Depreciation and amortization(5) (41,759) (29,643) (12,116)
Retained interest and interest
income-Stapleton 24,169 - 24,169
Equity in earnings of unconsolidated
real estate entities 10,777 11,433 (656)
Gain on disposition recorded on
equity method - - -
Revenues from discontinued
operations(1) 37,935 46,996 (9,061)
Expenses from discontinued
operations(1) (35,183) (43,416) 8,233
---------------------------
Operating earnings (a non-GAAP
financial measure) 34,714 41,248 (6,534)
------------------ --------
Income tax expense(6) (11,486) (16,086) 4,600
Income tax expense from discontinued
operations(1)(6) (13,542) (4,082) (9,460)
Income tax expense on non-operating
earnings items (see below) 12,418 2,514 9,904
------------------ --------
Operating earnings, net of tax (a
non-GAAP financial measure) 22,104 23,594 (1,490)
------------------ --------
Provision for decline in real estate - - -
Provision for decline in real estate
included in discontinued operations - - -
Gain on disposition recorded on
equity method - - -
Loss on disposition of other
investments - - -
Gain on disposition of rental
properties included in discontinued
operations(1) 31,625 6,358 25,267
Loss on disposition of one division
of Lumber Group included in
discontinued operations(1) - - -
Income tax benefit (expense) on non-
operating earnings:(6)
Provision for decline in real
estate - - -
Provision for decline in real
estate included in
discontinued operations - - -
Gain on disposition of other
investments - - -
Gain on disposition recorded on
equity method - - -
Gain on disposition of rental
properties included in
discontinued operations (12,418) (2,514) (9,904)
Loss on disposition of division
of Lumber Group included in
discontinued operations - - -
------------------ --------
Income tax (expense) benefit on non-
operating earnings (see above) (12,418) (2,514) (9,904)
------------------ --------
Minority interest in continuing
operations (3,677) (1,382) (2,295)
Minority interest in discontinued
operations:(1)
Operating earnings (66) (84) 18
Provision for decline in real
estate - - -
Gain on disposition of rental
properties (228) - (228)
------------------ --------
(294) (84) (210)
------------------ --------
Minority interest (3,971) (1,466) (2,505)
------------------ --------
Cumulative effect of change in
accounting principle, net of tax - - -
------------------ --------
Net earnings $37,340 $25,972 $11,368
===========================
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Nine Months Ended October 31, 2004 and 2003
(dollars in thousands)
Nine Months Ended Increase
October 31, (Decrease)
------------------ ---------------
2004 2003 Amount Percent
------------------ ---------------
Operating Earnings (a non-GAAP
financial measure) and
Reconciliation to Net Earnings:
Revenues from real estate operations
Commercial Group $539,120 $462,958 $76,162
Residential Group 151,477 108,775 42,702
Land Development Group 71,452 74,565 (3,113)
Lumber Trading Group - - -
Corporate Activities 103 411 (308)
------------------ --------
Total Revenues 762,152 646,709 115,443 17.9%
Operating expenses (434,704)(366,614) (68,090)
Interest expense (182,519)(133,556) (48,963)
Loss on early extinguishment of debt (1,275) (10,718) 9,443
Depreciation and amortization(5) (124,501) (86,953) (37,548)
Retained interest and interest
income-Stapleton 29,337 - 29,337
Equity in earnings of unconsolidated
real estate entities 60,671 33,103 27,568
Gain on disposition recorded on
equity method (31,996) - (31,996)
Revenues from discontinued
operations(1) 126,237 111,942 14,295
Expenses from discontinued
operations(1) (114,596)(105,736) (8,860)
---------------------------
Operating earnings (a non-GAAP
financial measure) 88,806 88,177 629
------------------ --------
Income tax expense(6) (36,262) (30,578) (5,684)
Income tax expense from discontinued
operations(1)(6) (24,753) (5,059) (19,694)
Income tax expense on non-operating
earnings items (see below) 32,803 1,431 31,372
------------------ --------
Operating earnings, net of tax (a
non-GAAP financial measure) 60,594 53,971 6,623
------------------ --------
Provision for decline in real estate - (1,624) 1,624
Provision for decline in real estate
included in discontinued operations - (1,104) 1,104
Gain on disposition recorded on
equity method 31,996 - 31,996
Loss on disposition of other
investments - (431) 431
Gain on disposition of rental
properties included in discontinued
operations(1) 52,931 6,769 46,162
Loss on disposition of one division
of Lumber Group included in
discontinued operations(1) (1,093) - (1,093)
Income tax benefit (expense) on non-
operating earnings:(6)
Provision for decline in real
estate - 642 (642)
Provision for decline in real
estate included in
discontinued operations - 306 (306)
Gain on disposition of other
investments - 170 (170)
Gain on disposition recorded on
equity method (12,655) - (12,655)
Gain on disposition of rental
properties included in
discontinued operations (20,580) (2,549) (18,031)
Loss on disposition of division
of Lumber Group included in
discontinued operations 432 - 432
------------------ --------
Income tax benefit (expense) on non-
operating earnings (see above) (32,803) (1,431) (31,372)
------------------ --------
Minority interest in continuing
operations (19,782) (8,583) (11,199)
Minority interest in discontinued
operations:(1)
Operating earnings (322) (208) (114)
Provision for decline in real
estate - 331 (331)
Gain on disposition of rental
properties (894) (323) (571)
------------------ --------
(1,216) (200) (1,016)
------------------ --------
Minority interest (20,998) (8,783) (12,215)
------------------ --------
Cumulative effect of change in
accounting principle, net of tax (11,261) - (11,261)
------------------ --------
Net earnings $79,366 $47,367 $31,999
================== ========
Forest City Enterprises, Inc. and Subsidiaries
Financial Highlights
Nine Months Ended October 31, 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 and a division 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, divisions 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
preceding narrative.
3) Amount represents depreciation expense for certain 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
preceding narrative.
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 development projects.
Three Months Ended Nine Months Ended
October 31, October 31,
------------------ -----------------
2004 2003 2004 2003
------------------ -----------------
Full Consolidation $41,759 $29,643 $124,501 $86,953
Non-Real Estate Groups (531) (483) (1,614) (1,477)
------------------ -----------------
Real Estate Groups Full
Consolidation 41,228 29,160 122,887 85,476
Real Estate Groups related to
minority interest (3,253) (4,596) (8,634)(13,545)
Real Estate Groups Equity
Method 6,492 9,280 20,843 23,516
Real Estate Groups Discontinued
Operations 600 1,015 2,638 3,404
------------------ -----------------
Real Estate Groups Pro-Rata
Consolidation $45,067 $34,859 $137,734 $98,851
================== =================
Three Months Ended Nine Months Ended
October 31, October 31,
------------------ -----------------
2004 2003 2004 2003
------------------ -----------------
6) The following table provides
detail of Income Tax Expense
(Benefit):
(A) Operating earnings
Current $(9,168) $(2,914) $(10,208) $27
Deferred 20,654 19,000 33,815 31,363
------------------ -----------------
11,486 16,086 23,607 31,390
------------------ -----------------
(B) Deferred tax on provision
for decline in real estate - - - (642)
------------------ -----------------
(C) Loss on disposition of
other investments
Current - - - 9
Deferred - Non-Real
Estate Groups - - - (179)
------------------ -----------------
- - - (170)
------------------ -----------------
(D) Gain on disposition
recorded on equity method
Current - - (209) -
Deferred - - 12,864 -
------------------ -----------------
- - 12,655 -
------------------ -----------------
Subtotal (A)(B)(C)(D)
Current (9,168) (2,914) (10,417) 36
Deferred 20,654 19,000 46,679 30,542
------------------ -----------------
Income tax expense 11,486 16,086 36,262 30,578
------------------ -----------------
(E) Discontinued operations -
Rental Properties
Operating earnings
Current (380) (301) 34 24
Deferred 452 211 476 643
------------------ -----------------
72 (90) 510 667
Deferred tax on
provision for decline
in real estate - - - (306)
------------------ -----------------
Gain (loss) on
disposition of
rental properties
Current 219 (4) 381 1,725
Deferred 12,199 2,518 20,199 824
------------------ -----------------
12,418 2,514 20,580 2,549
------------------ -----------------
12,490 2,424 21,090 2,910
------------------ -----------------
Subtotal (A)(B)(C)(D)(E)
Current (9,329) (3,219) (10,002) 1,785
Deferred 33,305 21,729 67,354 32,009
------------------ -----------------
23,976 18,510 57,352 33,794
------------------ -----------------
(F) Discontinued operations -
Lumber Group
Operating earnings
Current 2,289 788 4,212 1,378
Deferred (1,237) 870 (117) 771
------------------ -----------------
1,052 1,658 4,095 2,149
Loss on disposition of
one division of
Lumber Group
Current - - (521) -
Deferred - - 89 -
------------------ -----------------
- - (432) -
------------------ -----------------
13,542 4,082 24,753 5,059
------------------ -----------------
Grand Total
(A)(B)(C)(D)(E)(F)
Current (7,040) (2,431) (6,311) 3,163
Deferred 32,068 22,599 67,326 32,780
------------------ -----------------
25,028 20,168 61,015 35,943
------------------ -----------------
Recap of Grand Total:
Real Estate Groups
Current (7,176) 1,933 3,217 14,724
Deferred 34,540 17,948 65,949 32,231
------------------ -----------------
27,364 19,881 69,166 46,955
Non-Real Estate Groups
Current 136 (4,364) (9,528)(11,561)
Deferred (2,472) 4,651 1,377 549
------------------ -----------------
(2,336) 287 (8,151)(11,012)
------------------ -----------------
Grand Total $25,028 $20,168 $61,015 $35,943
================== =================
Development Pipeline Forest City Enterprises, Inc. and Subsidiaries
October 31, 2004
2004 Openings / Acquisitions (8)
Cost
Cost at
at Pro-
Full Rata
Con- Total Share Square
Dev. Date Pro- solid- Cost (Non- Feet/
(D) Opened/ Legal Rata ation at GAAP) Number
Property/ Acq. Acquir- Owner- %(t) (GAAP) 100% (b) of
Location (A) ed ship%(t) (1) (a) (2) (1)x(2) Units
- --------- ---- ------- ------ ------ ------ ---- ------- --------
(in millions)
--------------------
Retail
Centers:
Brooklyn
Commons
Brooklyn,
NY D Q2-04 70.0% 100.0% $21.5 $21.5 $21.5 151,000
Atlantic
Terminal
Brooklyn,
NY D Q2-04 70.0% 100.0% 90.1 90.1 90.1 373,000
Quartermaster
Plaza
Phila-
delphia,
PA D Q3-04 70.0% 100.0% 69.7 69.7 69.7 459,000
Victoria
Gardens
Rancho
Cucamonga,
CA D Q3-04 80.0% 80.0% 182.8 182.8 146.2 1,034,000(l)
------------------------------
$364.1 $364.1 $327.5 2,017,000
---------------------=========
Office:
------------------------------
Atlantic
Terminal
(2 Hanson
Place)
Brooklyn,
NY D Q2-04 70.0% 100.0% $107.9 $107.9 $107.9 399,000
---------------------=========
Residential:
East 29th
Avenue Town
Center/
Botanica
Denver,CO D Q1-04 90.0% 90.0% $46.0 $46.0 $41.4 157(h)
Sterling
Glen of Rye
Brook(i)
(p)(c)
Rye Brook,
NY D Q1-04 40.0% 40.0% 0.0 58.3 23.3 165
Emerald Palms
Expansion
Miami, FL D Q2-04 100.0% 100.0% 9.5 9.5 9.5 86
------------------------------
$55.5 $113.8 $74.2 408
---------------------=========
Total 2004 Openings/
Acquisitions(b)(d) $527.5 $585.8 $509.6
=====================
- ----------------------------------------------------------------------
Residential phased-in units (c)(e): Opened in
'04/Total
---------
Settler's
Landing at
Greentree
Streetsboro,
OH D 2001-04 50.0% 50.0% $0.0 $25.9 $13.0 68/408
Woodgate/
Evergreen
Farms
Olmsted
Township,
OH D 2004-07 33.0% 33.0% 0.0 22.5 7.4 36/348
Eaton Ridge
Sagamore
Hills, OH D 2002-04 50.0% 50.0% 0.0 14.7 7.4 36/260
Newport
Landing
Coventry,
OH D 2002-05 50.0% 50.0% 0.0 16.0 8.0 48/336
------------------------------
Total(b)(s) $0.0 $79.1 $35.8 188/1,352
==============================
- ----------------------------------------------------------------------
See attached October 31, 2004 footnotes.
Development Pipeline Forest City Enterprises, Inc. and Subsidiaries
October 31, 2004
2004 Under Construction or to be Acquired (18)
Cost
Cost at
at Pro-
Full Rata
Anti- Con- Total Share Square Pre-
Dev. cipat- Pro- solid- Cost (Non- Feet/ Leas-
(D) ed Legal Rata ation at GAAP) Number ed
Property/ Acq. Open- Owner- %(t) (GAAP) 100% (b) of (Wtd.
Location (A) ing ship%(t) (1) (a) (2) (1)x(2) Units Avg.)
- --------- ---- ----- ------- ------ ------ ---- ------- ------ -----
(in millions)
--------------------
Retail
Centers:
Hispanic
Retail
Group -
Gigante(c)
Inglewood,
CA D Q1-05 19.0% 19.0% $0.0 $9.6 $1.8 53,000 100%
Saddle Rock
Aurora,
CO D Q1-05 80.0% 80.0% 31.8 31.8 25.4 185,000 30%
Northfield
at Stapleton
Denver,
CO D Q3-05 90.0% 90.0% 165.1 165.1 148.6 779,000(k)48%
Simi Valley
Simi
Valley,
CA D Q3-05 85.0% 85.0% 131.2 131.2 111.5 600,000 68%
Short Pump
Expansion
Richmond,
VA D Q3-05 50.0% 100.0% 27.6 27.6 27.6 87,000 73%
San Francisco
Centre
(c)(o)
San
Francisco,
CA D Q3-06 50.0% 50.0% 0.0 416.2 208.1 964,000(m) 8%
-------------------------------
$355.7 $781.5 $523.0 2,668,000 39%
-------------------------------
Office:
University of
Pennsylvania
(n)
Philadel-
phia, PA A Q4-04 100.0% 100.0% $56.5 $56.5 $56.5 123,000 100%
Twelve
MetroTech
Center
Brooklyn,
NY D Q2-05 80.0% 80.0% 52.1 52.1 41.7 177,000(g) 0%
New York
Times(c)
Manhattan,
NY D Q2-07 28.0% 40.0% 0.0 415.0 166.0 734,000 0%
-------------------------------
$108.6 $523.6 $264.2 1,034,000 12%
----------------------=========
Residential:
23 Sidney
Street
Cambridge,
MA D Q1-05 100.0% 100.0% $17.7 $17.7 $17.7 51
Subway
Terminal
Los
Angeles,
CA D Q1-05 100.0% 100.0% 57.3 57.3 57.3 277
Metropolitan
Lofts(c)
Los
Angeles,
CA D Q1-05 50.0% 50.0% 0.0 62.3 31.2 264
Ashton Mill
Providence,
RI D Q1-05 100.0% 100.0% 28.9 28.9 28.9 193
Sterling Glen
of Lynbrook
(i)(q)
Lynbrook,
NY D Q2-05 80.0% 80.0% 27.5 27.5 22.0 100
100 Lands-
downe
Cambridge,
MA D Q3-05 100.0% 100.0% 65.3 65.3 65.3 203
Central
Station
Apartments
Chicago,
IL D Q1-06 100.0% 100.0% 115.8 115.8 115.8 502
Sterling Glen
of
Roslyn(r)
Roslyn,
NY D Q2-06 80.0% 80.0% 72.1 72.1 57.8 158
Ohana
Military
Commun-
ities(c)
Honolulu,
HI D Q1-08 7.0% 7.0% 0.0 316.5 22.2 1,952
-------------------------------
$384.6 $763.4 $418.2 3,700
---------------------==========
Total 2004 Under
Construction(b)(j) $848.9 $2,068.5 $1,205.4
========================
- ----------------------------------------------------------------------
Residential phased-in units under Under
construction(c)(e): Const./
Total
-------
Settler's
Landing at
Greentree
Streetsboro,
OH 2001-04 50.0% 50.0% $0.0 $25.9 $13.0 36/408
Arbor Glen
Twinsburg,
OH 2001-07 50.0% 50.0% 0.0 18.8 9.4 144/288
Newport
Landing
Coventry,
OH 2002-05 50.0% 50.0% 0.0 16.0 8.0 60/336
Woodgate/
Evergreen
Farms
Olmsted
Township, OH 2004-07 33.0% 33.0% 0.0 22.5 7.4 312/348
Pine Ridge
Expansion
Willoughby,
OH 2004-06 50.0% 50.0% 0.0 16.4 8.2 162/162
-------------------------------
Total(b)(f) $0.0 $99.6 $46.0 714/1,542
===============================
- ----------------------------------------------------------------------
See attached October 31, 2004 footnotes.
Development Pipeline Forest City Enterprises, Inc. and Subsidiaries
October 31, 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% if we are deemed to have control
or to be the primary beneficiary of our investments in the
variable interest entity ("VIE").
(b) Cost at Pro-Rata Share represents Forest City's share of cost,
based on its pro-rata ownership of each property (a Non-GAAP
measure). Under the pro-rata consolidation method of accounting
the Company determines its pro-rata share by multiplying its
pro-rata ownership by the total cost of the applicable property.
(c) Reported under the equity method of accounting. This method
represents a GAAP presentation for investments in which the
Company is not deemed to have control or to be the primary
beneficiary of our investments in a VIE.
(d) The difference between the full consolidation amount (GAAP) of
$527.5 million of cost to the Company's pro-rata share (a non-GAAP
measure) of $509.6 million of cost consists of a reduction to full
consolidation for minority interest of $41.3 million of cost and
the addition of its share of cost for unconsolidated investments
of $23.3 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 the Company's pro-rata share (a non-GAAP
measure) of $46.0 million of cost consists of the Company's share
of cost for unconsolidated investments of $46.0 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 square
feet owned/managed by Forest City) of retail and 34,000 square
feet of office space.
(i) Supported-living property.
(j) The difference between the full consolidation amount (GAAP) of
$848.9 million of cost to the Company's pro-rata share (a non-GAAP
measure) of $1,205.4 million of cost consists of a reduction to
full consolidation for minority interest of $72.8 million of cost
and the addition of its share of cost for unconsolidated
investments of $429.3 million.
(k) Includes 30,000 square feet of office space.
(l) Includes 45,000 square feet of office space.
(m) Includes 235,000 square feet of office space.
(n) The Company will have an option to acquire this property.
(o) This project will also include the acquisition of an adjacent
retail center totaling 508,000 square feet.
(p) Formerly Stone Gate at Bellefair.
(q) Formerly Tanglewood Crest.
(r) Formerly Bryant Landing.
(s) The difference between the full consolidation amount (GAAP) of
$0.0 million of cost to the Company's pro-rata share (a non-GAAP
measure) of $35.8 million of cost consists of its share of cost
for unconsolidated investments of $35.8 million.
(t) As is customary within the real estate industry, the Company
invests in certain real estate projects through joint ventures.
For these projects, the Company provides funding for certain of
its partners' equity contributions. The Company consolidates its
investments in these projects in accordance with FIN No. 46(R) at
a consolidation percentage (reflected in the Pro-Rata % column).
These advances entitle the Company to a preferred return on
investment, which is payable from cash flows of each respective
property. At the point the Company is no longer entitled to a
preferred return on a particular joint venture because the
partner's advance has been repaid in full, the Company's net
assets will be adjusted to its intended ownership percentage
(reflected in the Legal Ownership % column) by recording a
minority interest to reflect the amount of the partner's claim on
those net assets.
Net Operating Income (in thousands)
-----------------------------------------------
Three Months Ended October 31, 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 $27,514 $4,353 $4,835 $- $27,996
---------------------------------------------------------------------
Total 37,962 2,422 3,203 (13) 38,730
Office Buildings
Comparable 34,117 5,844 1,072 - 29,345
---------------------------------------------------------------------
Total 42,928 7,147 1,072 380 37,233
Hotels
Comparable 6,679 973 970 - 6,676
---------------------------------------------------------------------
Total 7,271 49 615 - 7,837
Other 1,358 (687) 29 - 2,074
Total Commercial Group
Comparable 68,310 11,170 6,877 - 64,017
---------------------------------------------------------------------
Total 89,519 8,931 4,919 367 85,874
Residential Group
Comparable 20,938 1,068 4,712 - 24,582
---------------------------------------------------------------------
Total 25,654 1,159 7,590 1,585 33,670
Total Real Estate
Groups
Comparable 89,248 12,238 11,589 - 88,599
---------------------------------------------------------------------
Total 115,173 10,090 12,509 1,952 119,544
Land Development Group 40,490 3,231 278 - 37,537
The Nets (1,630) - 156 - (1,474)
Corporate Activities (9,553) - - - (9,553)
- ----------------------------------------------------------------------
Grand Total $144,480 $13,321 $12,943 $1,952 $146,054
======================================================================
Net Operating Income (in thousands)
-------------------------------------------------------------
Three Months Ended October 31, 2003 % Change
-------------------------------------------- ----------------
Plus
Unconsol- Plus
idated Discont-
Full Less Invest- inued Pro-Rata Full Pro-Rata
Consol- Minority ments at Opera- Consol- Consol- Consol-
idation Interest Pro-Rata tions idation idation idation
-------------------------------------------- ----------------
Commercial
Group
Retail
Comparable $27,985 $4,735 $4,776 $- $28,026 (1.7)% (0.1)%
-------------------------------------------------------
Total 31,465 5,573 6,216 581 32,689
Office
Buildings
Comparable 33,223 5,999 1,082 - 28,306 2.7% 3.7%
-------------------------------------------------------
Total 42,794 8,632 1,082 811 36,055
Hotels
Comparable 4,107 458 630 - 4,279 62.6% 56.0%
-------------------------------------------------------
Total 4,626 577 630 - 4,679
Other 700 (1,310) 908 - 2,918
Total
Commercial
Group
Comparable 65,315 11,192 6,488 - 60,611 4.6% 5.6%
-------------------------------------------------------
Total 79,585 13,472 8,836 1,392 76,341
Residential
Group
Comparable 22,040 469 4,249 - 25,820 (5.0)% (4.8)%
-------------------------------------------------------
Total 21,801 399 5,510 1,582 28,494
Total Real
Estate
Groups
Comparable 87,355 11,661 10,737 - 86,431 2.2% 2.5%
-------------------------------------------------------
Total 101,386 13,871 14,346 2,974 104,835
Land
Development
Group 26,746 810 (16) - 25,920
The Nets - - - - -
Corporate
Activities (6,816) - - - (6,816)
- --------------------------------------------------------
Grand Total $121,316 $14,681 $14,330 $2,974 $123,939
========================================================
Net Operating Income (in thousands)
----------------------------------------------
Nine Months Ended October 31, 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 $84,531 $13,837 $14,178 $- $84,872
---------------------------------------------------------------------
Total 116,439 11,808 9,409 1,263 115,303
Office Buildings
Comparable 102,878 17,607 3,212 - 88,483
---------------------------------------------------------------------
Total 142,195 27,012 3,212 2,227 120,622
Hotels
Comparable 13,319 1,916 3,617 - 15,020
---------------------------------------------------------------------
Total 19,056 2,758 1,861 - 18,159
Other 865 (1,042) 932 - 2,839
Total Commercial Group
Comparable 200,728 33,360 21,007 - 188,375
---------------------------------------------------------------------
Total 278,555 40,536 15,414 3,490 256,923
Residential Group
Comparable 63,966 3,536 14,045 - 74,475
---------------------------------------------------------------------
Total 76,498 3,444 21,481 5,018 99,553
Total Real Estate
Groups
Comparable 264,694 36,896 35,052 - 262,850
---------------------------------------------------------------------
Total 355,053 43,980 36,895 8,508 356,476
Land Development Group 73,760 4,943 671 - 69,488
The Nets (1,630) - 156 - (1,474)
Corporate Activities (24,059) - - - (24,059)
- ----------------------------------------------------------------------
Grand Total $403,124 $48,923 $37,722 $8,508 $400,431
======================================================================
Net Operating Income (in thousands)
-------------------------------------------------------------
Nine Months Ended October 31, 2003 % Change
-------------------------------------------- ----------------
Plus
Unconsol- Plus
idated Discont-
Full Less Invest- inued Pro-Rata Full Pro-Rata
Consol- Minority ments at Opera- Consol- Consol- Consol-
idation Interest Pro-Rata tions idation idation idation
-------------------------------------------- ----------------
Commercial
Group
Retail
Comparable $83,339 $14,288 $14,365 $- $83,416 1.4% 1.7%
-------------------------------------------------------
Total 96,044 17,242 16,888 1,761 97,451
Office
Buildings
Comparable 100,224 17,652 3,264 - 85,836 2.6% 3.1%
-------------------------------------------------------
Total 118,719 23,548 3,264 2,914 101,349
Hotels
Comparable 8,981 886 1,905 - 10,000 48.3% 50.2%
-------------------------------------------------------
Total 17,327 4,610 1,905 - 14,622
Other 4,647 (2,742) 3,011 - 10,400
Total
Commercial
Group
Comparable 192,544 32,826 19,534 - 179,252 4.3% 5.1%
-------------------------------------------------------
Total 236,737 42,658 25,068 4,675 223,822
Residential
Group
Comparable 66,969 1,424 12,769 - 78,314 (4.5)% (4.9)%
-------------------------------------------------------
Total 72,574 1,264 17,236 6,530 95,076
Total Real
Estate
Groups
Comparable 259,513 34,250 32,303 - 257,566 2.0% 2.1%
-------------------------------------------------------
Total 309,311 43,922 42,304 11,205 318,898
Land
Development
Group 41,148 1,928 485 - 39,705
The Nets - - - - -
Corporate
Activities (19,194) - - - (19,194)
- ---------------------------------------------------------
Grand Total $331,265 $45,850 $42,789 $11,205 $339,409
=========================================================
Reconciliation of Net Operating Income (non-GAAP) to Net Earnings
(GAAP)(in thousands):
Three Months Ended October 31, 2004
--------------------------------------------------
Plus
Unconsol-
idated Plus
Full Less Invest- Discont- Pro-Rata
Consol- Minority ments at inued Consol-
idation Interest Pro-Rata Operations idation
--------------------------------------------------
Revenues from real
estate operations $256,108 $28,027 $67,604 $4,101 $299,786
Exclude straight-
line rent
adjustment(1) (4,915) - - (202) (5,117)
--------------------------------------------------
Adjusted revenues 251,193 28,027 67,604 3,899 294,669
Operating expenses 149,562 17,127 39,402 1,938 173,775
Add back
depreciation and
amortization for
Non-Real Estate
Groups(b) 531 - 185 - 716
Exclude straight-
line rent
adjustment(2) (1,942) - - 9 (1,933)
--------------------------------------------------
Adjusted operating
expenses 148,151 17,127 39,587 1,947 172,558
Retained interest
and interest
income-Stapleton 24,169 2,417 - - 21,752
Add equity in
earnings of
unconsolidated
entities 10,777 4 (8,582) - 2,191
Add back equity
method
depreciation
expense (see
below) 6,492 - (6,492) - -
--------------------------------------------------
Net Operating
Income 144,480 13,321 12,943 1,952 146,054
Interest expense,
including loss on
early
extinguishment of
debt (67,771) (6,391) (12,943) (1,338) (75,661)
Gain on disposition
of rental
properties - - - 31,397 31,397
Depreciation and
amortization -
Real Estate
Groups(a) (41,228) (3,253) (6,492) (600) (45,067)
Straight-line rent
adjustment(1)+(2) 2,973 - - 211 3,184
Equity method
depreciation
expense (see
above) (6,492) - 6,492 - -
--------------------------------------------------
Earnings before
income taxes 31,962 3,677 - 31,622 59,907
Income tax
provision (11,486) - - (12,490) (23,976)
--------------------------------------------------
Earnings before
minority interest
and discontinued
operations 20,476 3,677 - 19,132 35,931
Minority Interest (3,677) (3,677) - - -
--------------------------------------------------
Earnings from
continuing
operations 16,799 - - 19,132 35,931
Discontinued
operations, net of
tax and minority
interest:
Operating
earnings from
Lumber Group 1,409 - - - 1,409
Operating
earnings from
rental
properties 153 - - (153) -
Gain on
disposition
of rental
properties 18,979 - - (18,979) -
--------------------------------------------------
20,541 - - (19,132) 1,409
--------------------------------------------------
Net earnings $37,340 $- $- $- $37,340
==================================================
(a) Depreciation and
amortization - Real
Estate Groups $41,228 $3,253 $6,492 $600 $45,067
(b) Depreciation and
amortization - Non-
Real Estate Groups 531 - 185 - 716
--------------------------------------------------
Total
depreciation
and
amortization $41,759 $3,253 $6,677 $600 $45,783
==================================================
Reconciliation of Net Operating Income (non-GAAP) to Net Earnings
(GAAP)(in thousands):
Three Months Ended October 31, 2003
--------------------------------------------------
Plus
Unconsol-
idated Plus
Full Less Invest- Discont- Pro-Rata
Consol- Minority ments at inued Consol-
idation Interest Pro-Rata Operations idation
--------------------------------------------------
Revenues from real
estate operations $236,043 $35,480 $67,497 $6,830 $274,890
Exclude straight-
line rent
adjustment(1) (3,921) - - (287) (4,208)
--------------------------------------------------
Adjusted revenues 232,122 35,480 67,497 6,543 270,682
Operating expenses 132,716 20,799 37,695 3,576 153,188
Add back
depreciation and
amortization for
Non-Real Estate
Groups(b) 483 - 70 - 553
Exclude straight-
line rent
adjustment(2) (1,547) - - (7) (1,554)
--------------------------------------------------
Adjusted operating
expenses 131,652 20,799 37,765 3,569 152,187
Add equity in
earnings of
unconsolidated
entities 11,433 - (6,122) - 5,311
Add back equity
method
depreciation
expense (see
below) 9,413 - (9,280) - 133
--------------------------------------------------
Net Operating
Income 121,316 14,681 14,330 2,974 123,939
Interest expense,
including loss on
early
extinguishment of
debt (47,449) (8,703) (14,330) (2,470) (55,546)
Gain on disposition
of rental
properties - - - 6,358 6,358
Depreciation and
amortization -
Real Estate
Groups(a) (29,160) (4,596) (9,280) (1,015) (34,859)
Straight-line rent
adjustment(1)+(2) 2,374 - - 280 2,654
Equity method
depreciation
expense (see
above) (9,413) - 9,280 - (133)
--------------------------------------------------
Earnings before
income taxes 37,668 1,382 - 6,127 42,413
Income tax
provision (16,086) - - (2,424) (18,510)
--------------------------------------------------
Earnings before
minority interest
and discontinued
operations 21,582 1,382 - 3,703 23,903
Minority Interest (1,382) (1,382) - - -
--------------------------------------------------
Earnings from
continuing
operations 20,200 - - 3,703 23,903
Discontinued
operations, net of
tax and minority
interest:
Operating
earnings from
Lumber Group 2,069 - - - 2,069
Operating
earnings from
rental
properties (141) - - 141 -
Gain on
disposition
of rental
properties 3,844 - - (3,844) -
--------------------------------------------------
5,772 - - (3,703) 2,069
--------------------------------------------------
Net earnings $25,972 $- $- $- $25,972
==================================================
(a) Depreciation and
amortization - Real
Estate Groups $29,160 $4,596 $9,280 $1,015 $34,859
(b) Depreciation and
amortization - Non-
Real Estate Groups 483 - 70 - 553
--------------------------------------------------
Total
depreciation
and
amortization $29,643 $4,596 $9,350 $1,015 $35,412
==================================================
Reconciliation of Net Operating Income (non-GAAP) to Net Earnings
(GAAP)(in thousands):
Nine Months Ended October 31, 2004
--------------------------------------------------
Plus
Unconsol-
idated Plus
Full Less Invest- Discont- Pro-Rata
Consol- Minority ments at inued Consol-
idation Interest Pro-Rata Operations idation
--------------------------------------------------
Revenues from real
estate operations $762,152 $108,358 $200,670 $16,753 $871,217
Exclude straight-
line rent
adjustment(1) (10,052) - - (849) (10,901)
--------------------------------------------------
Adjusted revenues 752,100 108,358 200,670 15,904 860,316
Operating expenses 434,704 62,368 118,097 7,401 497,834
Add back
depreciation and
amortization for
non-Real Estate
Groups(b) 1,614 - 343 - 1,957
Exclude straight-
line rent
adjustment(2) (8,250) - - (5) (8,255)
--------------------------------------------------
Adjusted operating
expenses 428,068 62,368 118,440 7,396 491,536
Retained interest
and interest
income-Stapleton 29,337 2,933 - - 26,404
Add equity in
earnings of
unconsolidated
entities 60,671 - (55,661) - 5,010
Remove gain on
disposition of
equity method
operating
properties (31,996) - 31,996 - -
Add back equity
method
depreciation
expense (see
below) 21,080 - (20,843) - 237
--------------------------------------------------
Net Operating
Income 403,124 48,923 37,722 8,508 400,431
Interest expense,
including loss on
early
extinguishment of
debt (183,794) (20,507) (37,722) (5,254)(206,263)
Gain on disposition
of equity method
rental
properties(c) 31,996 - - - 31,996
(Loss) gain on
disposition of
rental properties,
divisions and
other investments - - - 52,037 52,037
Provision for
decline in real
estate - - - - -
Depreciation and
amortization -
Real Estate
Groups(a) (122,887) (8,634) (20,843) (2,638)(137,734)
Straight-line rent
adjustment(1)+(2) 1,802 - - 844 2,646
Equity method
depreciation
expense (see
above) (21,080) - 20,843 - (237)
--------------------------------------------------
Earnings before
income taxes 109,161 19,782 - 53,497 142,876
Income tax
provision (36,262) - - (21,090) (57,352)
--------------------------------------------------
Earnings before
minority interest,
discontinued
operations and
cumulative effect
of change in
accounting
principle 72,899 19,782 - 32,407 85,524
Minority Interest (19,782) (19,782) - - -
--------------------------------------------------
Earnings from
continuing
operations 53,117 - - 32,407 85,524
Discontinued
operations, net of
tax and minority
interest:
Operating
earnings
from Lumber
Group 5,764 - - - 5,764
Operating
earnings
from rental
properties 950 - - (950) -
Loss on
disposition
of one
division of
Lumber Group (661) - - - (661)
Gain on
disposition
of rental
properties 31,457 - - (31,457) -
--------------------------------------------------
37,510 - - (32,407) 5,103
--------------------------------------------------
Cumulative effect
of change in
accounting
principle, net of
tax (11,261) - - - (11,261)
--------------------------------------------------
--------------------------------------------------
Net earnings $79,366 $- $- $- $79,366
==================================================
(a) Depreciation
and amortization -
Real Estate Groups$122,887 $8,634 $20,843 $2,638 $137,734
(b) Depreciation
and amortization -
Non-Real Estate
Groups 1,614 - 343 - 1,957
--------------------------------------------------
Total
depreciation
and
amortization $124,501 $8,634 $21,186 $2,638 $139,691
==================================================
Note C: Properties accounted for on the equity method do not meet
the definition of a component of an entity under SFAS No. 144
and therefore are reported in continuing operations when sold.
For the nine months ended October 31, 2004, three equity
method investments were sold including Chapel Hill Mall,
Chapel Hill Suburban and Manhattan Town Center Mall, resulting
in a gain on disposition of $31,996 which is included in
Equity in Earnings of Unconsolidated Entities in the Company's
Consolidated Statement of Earnings.
Reconciliation of Net Operating Income (non-GAAP) to Net Earnings
(GAAP)(in thousands):
Nine Months Ended October 31, 2003
--------------------------------------------------
Plus
Unconsol-
idated Plus
Full Less Invest- Discont- Pro-Rata
Consol- Minority ments at inued Consol-
idation Interest Pro-Rata Operations idation
--------------------------------------------------
Revenues from real
estate operations $646,709 $111,366 $192,866 $23,160 $751,369
Exclude straight-
line rent
adjustment(1) (8,136) - - (854) (8,990)
--------------------------------------------------
Adjusted revenues 638,573 111,366 192,866 22,306 742,379
Operating expenses 366,614 65,516 107,605 11,122 419,825
Add back
depreciation and
amortization for
non-Real Estate
Groups(b) 1,477 - 150 - 1,627
Exclude straight-
line rent
adjustment(2) (3,784) - - (21) (3,805)
--------------------------------------------------
Adjusted operating
expenses 364,307 65,516 107,755 11,101 417,647
Add equity in
earnings of
unconsolidated
entities 33,103 - (18,806) - 14,297
Remove gain on
disposition of
equity method
operating
properties - - - - -
Add back equity
method
depreciation
expense (see
below) 23,896 - (23,516) - 380
--------------------------------------------------
Net Operating
Income 331,265 45,850 42,789 11,205 339,409
Interest expense,
including loss on
early
extinguishment of
debt (144,274) (23,722) (42,789) (6,943)(170,284)
Gain on disposition
of equity method
rental properties - - - - -
(Loss) gain on
disposition of
rental properties,
divisions, and
other investments (431) - - 6,446 6,015
Provision for
decline in real
estate (1,624) - - (773) (2,397)
Depreciation and
amortization -
Real Estate
Groups(a) (85,476) (13,545) (23,516) (3,404) (98,851)
Straight-line rent
adjustment(1)+(2) 4,352 - - 833 5,185
Equity method
depreciation
expense (see
above) (23,896) - 23,516 - (380)
--------------------------------------------------
Earnings before
income taxes 79,916 8,583 - 7,364 78,697
Income tax
provision (30,578) - - (2,910) (33,488)
--------------------------------------------------
Earnings before
minority interest,
discontinued
operations and
cumulative effect
of change in
accounting
principle 49,338 8,583 - 4,454 45,209
Minority Interest (8,583) (8,583) - - -
--------------------------------------------------
Earnings from
continuing
operations 40,755 - - 4,454 45,209
Discontinued
operations, net of
tax and minority
interest:
Operating
earnings
from Lumber
Group 2,158 - - - 2,158
Operating
earnings
from rental
properties 557 - - (557) -
Loss on
disposition
of one
division of
Lumber Group - - - - -
Gain on
disposition
of rental
properties 3,897 - - (3,897) -
--------------------------------------------------
6,612 - - (4,454) 2,158
--------------------------------------------------
Cumulative effect
of change in
accounting
principle, net of
tax - - - - -
--------------------------------------------------
--------------------------------------------------
Net earnings $47,367 $- $- $- $47,367
==================================================
(a) Depreciation and
amortization - Real
Estate Groups $85,476 $13,545 $23,516 $3,404 $98,851
(b) Depreciation and
amortization - Non-
Real Estate Groups 1,477 - 150 - 1,627
--------------------------------------------------
Total
depreciation and
amortization $86,953 $13,545 $23,666 $3,404 $100,478
==================================================
CONTACT: Forest City Enterprises, Inc.
Thomas G. Smith or Thomas T. Kmiecik, 216-621-6060
On the Web: www.forestcity.net