Vornado Realty Trust (NYSE:VNO) announced today that it will record its
32.7% share of Toys “R” Us’ first quarter financial results in its
second quarter ending June 30, 2009. Vornado’s results will include a
net loss of $14,273,000 or $.07 per diluted share compared to a net loss
of $15,811,000 or $.09 per diluted share recorded in the quarter ended
June 30, 2008.
Vornado’s share of negative Funds From Operations (“FFO”) before income
taxes for the quarter ending June 30, 2009 will be $10,164,000 or $.05
per share as compared to negative FFO before income taxes of $14,550,000
or $.08 per share in the prior year’s quarter ended June 30, 2008.
Vornado’s share of negative FFO after income taxes for the quarter
ending June 30, 2009 will be $4,155,000 or $.02 per share as compared to
negative FFO after income taxes of $5,401,000, or $.03 per share in the
quarter ended June 30, 2008.
The business of Toys is highly seasonal; historically, Toys’ fourth
quarter net income accounts for more than 80% of its fiscal year net
income.
Attached is a summary of Toys’ financial results and Vornado’s 32.7%
share of its equity in Toys’ net income, as well as reconciliations of
net income to earnings before interest, taxes, depreciation and
amortization (“EBITDA”) and FFO.
Vornado Realty Trust is a fully-integrated equity real estate investment
trust.
Certain statements contained herein may constitute “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Such factors include, among others, risks associated with the timing of
and costs associated with property improvements, financing commitments
and general competitive factors.
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Toys "R" Us, Inc.
Condensed Consolidated Statements of Operations – Unaudited
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For the Quarter Ended
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May 2, 2009
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May 3, 2008
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(Amounts in thousands)
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Results on a
Historical
Basis
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Results on
Vornado’s
Purchase Price
Accounting
Basis
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Results on
Vornado’s
Purchase Price
Accounting
Basis
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Net sales
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$
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2,477,000
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$
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2,477,000
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$
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2,719,000
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Cost of sales
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1,587,000
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1,587,000
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1,742,000
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Gross margin
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890,000
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890,000
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977,000
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Selling, general and administrative expenses
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788,000
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798,100
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907,100
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Depreciation and amortization
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93,000
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101,000
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107,000
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Other income – net
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(12,000
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)
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(12,000
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)
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(20,000
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)
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Total operating expenses
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869,000
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887,100
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994,100
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Operating earnings (loss)
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21,000
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2,900
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(17,100
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)
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Interest expense
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(94,000
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)
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(98,600
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)
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(104,000
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)
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Interest income
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2,000
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2,000
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7,000
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Loss before income taxes
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(71,000
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)
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(93,700
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)
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(114,100
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)
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Income tax benefit
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31,000
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39,100
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51,200
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Net loss
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(40,000
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)
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(54,600
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)
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(62,900
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)
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Less: Net loss attributable to noncontrolling interest
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5,000
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5,000
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8,500
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Net loss attributable to Toys “R” Us, Inc.
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$
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(35,000
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)
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$
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(49,600
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)
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$
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(54,400
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)
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Vornado’s 32.7% equity in Toys’ net loss
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$
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(16,220
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)
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$
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(17,798
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)
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Management fee from Toys, net
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1,571
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1,447
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Interest income on credit facility
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376
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540
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Total Vornado net loss from its investment in Toys
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$
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(14,273
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)
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$
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(15,811
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) (1)
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See page 3 for a reconciliation of net income to FFO.
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Reconciliation of Vornado’s net income from its
investment in
Toys to EBITDA (2):
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Net loss
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$
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(14,273
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)
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$
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(15,811
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)
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Interest and debt expense
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31,521
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33,906
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Depreciation and amortization
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31,754
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34,034
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Income tax benefit
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(11,630
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)
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(15,097
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)
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Vornado’s 32.7% share of Toys’ EBITDA (2)
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$
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37,372
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$
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37,032
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(1) Excludes a $14,900 non-cash charge relating to income tax expense in
the purchase accounting basis financial statements for fiscal years 2006
and 2007 identified in July 2008 and included in Vornado’s second
quarter 2008 results.
(2) EBITDA represents “Earnings Before Interest, Taxes, Depreciation and
Amortization.” Management considers EBITDA a supplemental measure for
making decisions and assessing the un-levered performance of its
segments as it relates to the total return on assets as opposed to the
levered return on equity. As properties are bought and sold based on a
multiple of EBITDA, management utilizes this measure to make investment
decisions as well as to compare the performance of its assets to that of
its peers. EBITDA should not be considered a substitute for net income.
EBITDA may not be comparable to similarly titled measures employed by
other companies.
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Toys "R" Us, Inc.
Funds From Operations - Unaudited
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(Amounts in thousands)
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For the Quarter Ended
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May 2, 2009
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May 3, 2008
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Reconciliation of Vornado's net income from its investment in Toys
to FFO (1):
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Net loss
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$
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(14,273
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)
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$
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(15,811
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)
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Depreciation and amortization of real property
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15,566
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16,358
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Income tax effect of above adjustment
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(5,448
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)
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(5,948
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)
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Vornado's share of FFO (1)
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$
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(4,155
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)
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$
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(5,401
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)
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(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.
Vornado Realty Trust
Joseph Macnow, 201-587-1000
