Vornado Announces its Share of Toys "R" Us Second Quarter Financial Results
PARAMUS, N.J.--(BUSINESS WIRE)--
Vornado Realty Trust (NYSE:VNO) announced today that it will record its 32.7% share of Toys "R" Us' second quarter financial results in its third quarter ending September 30, 2008. Vornado's results will include a net loss of $8,141,000 or $.05 per diluted share compared to a net loss of $20,289,000 or $.11 per diluted share recorded in the quarter ended September 30, 2007.
Vornado's share of negative Funds From Operations ("FFO") before income taxes for the quarter ended September 30, 2008 is $1,359,000 or $.01 per share as compared to negative FFO before income taxes of $19,906,000 or $.11 per share in the prior year's quarter. In the quarter ended September 30, 2008, Vornado's results will include FFO after income taxes of $3,381,000, or $.02 per share as compared to negative FFO after income taxes of $8,622,000, or $.05 per share in the quarter ended September 30, 2007.
The business of Toys is highly seasonal; historically, Toys' fourth quarter net income accounts for more than 80% of its fiscal year net income.
Attached is a summary of Toys' financial results and Vornado's 32.7% share of its equity in Toys' net income, as well as reconciliations of net income to earnings before interest, taxes, depreciation and amortization ("EBITDA") and FFO.
Vornado Realty Trust is a fully-integrated equity real estate investment trust.
Certain statements contained herein may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, risks associated with the timing of and costs associated with property improvements, financing commitments and general competitive factors.
Toys "R" Us, Inc.
Condensed Consolidated Statements of Operations - Unaudited
For the Quarter Ended
--------------------------------------------
August 2, 2008 August 4, 2007
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Results on Results on
Vornado's Vornado's
Results on a Purchase Price Purchase Price
Historical Accounting Accounting
(Amounts in thousands) Basis Basis Basis
------------ -------------- --------------
Net sales $ 2,771,000 $ 2,771,000 $ 2,605,000
Cost of sales 1,757,000 1,757,000 1,669,000
----------- ------------- -------------
Gross margin 1,014,000 1,014,000 936,000
----------- ------------- -------------
Selling, general and
administrative expenses 875,000 883,400 833,800
Depreciation and
amortization 103,000 111,300 109,500
Gain on liquidation of
foreign subsidiary (39,000) (9,700) --
Net gains on sales of
properties (4,000) (500) (1,600)
----------- ------------- -------------
Total operating
expenses 935,000 984,500 941,700
----------- ------------- -------------
Operating income (loss) 79,000 29,500 (5,700)
Interest expense (100,000) (103,600) (125,400)
Interest income 4,000 4,000 4,000
----------- ------------- -------------
Loss before income tax
benefit and minority
interest (17,000) (70,100) (127,100)
Income tax benefit 26,000 35,700 55,400
Minority interest 4,000 3,500 1,000
----------- ------------- -------------
Net earnings (loss) $ 13,000 $ (30,900) $ (70,700)
=========== ============= =============
Vornado's 32.7% equity
in Toys' net loss $ (10,107) $ (23,199)
Adjustment to eliminate
Vornado's share of the
after-tax net loss on
the stores previously
sold to Vornado -- 1,202
Management fee from
Toys, net 1,447 987
Interest income on
credit facility 519 721
------------- -------------
Total Vornado net loss
from its investment in
Toys $ (8,141) $ (20,289)
============= =============
See page 3 for a
reconciliation of net
income to FFO.
Reconciliation of
Vornado's net income
from its investment in
Toys to EBITDA (1):
Net loss $ (8,141) $ (20,289)
Interest and debt
expense 33,570 40,875
Depreciation and
amortization 35,155 34,495
Income tax benefit (10,945) (18,213)
------------- -------------
Vornado's 32.7% share of
Toys' EBITDA (1) $ 49,639 $ 36,868
============= =============
(1) EBITDA represents "Earnings Before Interest, Taxes, Depreciation
and Amortization." Management considers EBITDA a supplemental
measure for making decisions and assessing the un-levered
performance of its segments as it relates to the total return on
assets as opposed to the levered return on equity. As properties
are bought and sold based on a multiple of EBITDA, management
utilizes this measure to make investment decisions as well as to
compare the performance of its assets to that of its peers.
EBITDA should not be considered a substitute for net income.
EBITDA may not be comparable to similarly titled measures
employed by other companies.
Toys "R" Us, Inc.
Funds From Operations - Unaudited
(Amounts in thousands) For the Quarter Ended
--------------------------------
August 2, 2008 August 4, 2007
-------------- --------------
Reconciliation of Vornado's net loss
from its investment in Toys to FFO
(1):
Net loss $ (8,141) $ (20,289)
Depreciation and amortization of
real property 17,891 17,949
Net gains on sale of real estate (164) --
Income tax effect of above
adjustments (6,205) (6,282)
------------- --------------
Vornado's share of FFO (1) $ 3,381 $ (8,622)
============= ==============
(1) FFO is computed in accordance with the definition adopted by the
Board of Governors of the National Association of Real Estate
Investment Trusts ("NAREIT"). NAREIT defines FFO as net income or
loss determined in accordance with Generally Accepted Accounting
Principles ("GAAP"), excluding extraordinary items as defined
under GAAP and gains or losses from sales of previously
depreciated operating real estate assets, plus specified non-cash
items, such as real estate asset depreciation and amortization,
and after adjustments for unconsolidated partnerships and joint
ventures. FFO is used by management, investors and industry
analysts as supplemental measures of operating performance of
equity REITs. FFO should be evaluated along with GAAP net income
and income per diluted share (the most directly comparable GAAP
measures), as well as cash flow from operating activities,
investing activities and financing activities, in evaluating the
operating performance of equity REITs. Management believes that
FFO is helpful to investors as supplemental performance measures
because these measures exclude the effect of depreciation,
amortization and gains or losses from sales of real estate, all
of which are based on historical costs which implicitly assumes
that the value of real estate diminishes predictably over time.
Since real estate values instead have historically risen or
fallen with market conditions, these non-GAAP measures can
facilitate comparisons of operating performance between periods
and among other equity REITs. FFO does not represent cash
generated from operating activities in accordance with GAAP and
is not necessarily indicative of cash available to fund cash
needs as disclosed in the Company's Consolidated Statements of
Cash Flows. FFO should not be considered as an alternative to net
income as an indicator of the Company's operating performance or
as an alternative to cash flows as a measure of liquidity.
Source: Vornado Realty Trust
Contact: Vornado Realty Trust Joseph Macnow, 201-587-1000