Vornado Realty Trust (NYSE:VNO) announced today that it will record its
32.6% share of Toys "R" Us' third quarter financial results in its
fourth quarter ending December 31, 2013. Based on Toys information
currently available to Vornado, Vornado’s results will include in its
fourth quarter a net loss of $130,851,000, or $0.66 per diluted share,
attributable to Toys 2013 third quarter, compared to a net loss of
$73,837,000, or $0.37 per diluted share in Vornado’s fourth quarter
ending December 31, 2012, attributable to Toys’ 2012 third quarter which
includes a $40,000,000 non-cash impairment loss on Vornado’s investment
in Toys.
Vornado’s share of Toys’ negative Funds From Operations (“FFO”) before
income taxes for the fourth quarter 2013 will be $91,316,000 or $0.46
per diluted share, compared to negative FFO before income taxes and
impairment of $49,241,000, or $0.25 per diluted share in the prior
year’s quarter. Vornado’s share of negative FFO after income taxes for
the fourth quarter 2013 will be $119,826,000 or $0.60 per diluted share,
compared to negative FFO after income taxes of $61,358,000 or $0.31 per
diluted share in the prior year’s quarter. Included in this year’s
negative FFO after income taxes is Vornado’s $41,330,000 share of Toys’
non-cash charge for the valuation allowance of certain deferred tax
assets. Included in last year’s negative FFO after income taxes is a
$40,000,000 non-cash impairment loss on Vornado’s investment in Toys.
Vornado’s share of Toys’ negative FFO after income taxes will be treated
as non-comparable in both periods.
Vornado records its proportionate share of Toys’ results based on
purchase price accounting, which differs from Toys’ publicly reported
historical accounting. As required under purchase price accounting, Toys
has recorded an additional $690,000,000 (of which Vornado’s share is
$225,000,000) of intangible assets and goodwill which is net of prior
quarter impairments that Vornado previously recorded. Toys is evaluating
these intangible assets and goodwill for possible impairment. Depending
upon the outcome of that evaluation, Vornado’s 32.6% share of Toys'
third quarter net loss and negative FFO may increase.
Vornado’s carrying amount of its investment in Toys as of September 30,
2013 was $378,615,000. After giving effect to the $130,851,000 net loss
referred to above, Vornado’s carrying amount of its investment in Toys
will be reduced to $247,764,000.
In addition, as part of its periodic assessment of the carrying amount
of its investment in Toys, Vornado may determine that its investment has
been other than temporarily impaired. The maximum amount of any such
impairment would not exceed the then carrying amount of Vornado’s
investment in Toys since Vornado does not guarantee any obligations of
Toys and is not obligated to fund Toys with any additional equity. Any
such impairment would result in a non-cash charge.
The business of Toys is highly seasonal; historically, Toys' fourth
quarter net income accounts for more than 80% of its fiscal year net
income.
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
|
|
|
|
|
November 2, 2013
|
|
|
|
October 27, 2012
|
|
(Amounts in thousands)
|
|
|
Results on a
Historical
Basis
|
|
|
|
Results on
Vornado’s
Purchase Price
Accounting
Basis
|
|
|
|
Results on
Vornado’s
Purchase Price
Accounting
Basis
|
|
Net sales
|
|
|
$
|
2,491,000
|
|
|
|
$
|
2,491,000
|
|
|
|
$
|
2,609,000
|
|
|
Cost of sales
|
|
|
|
1,595,000
|
|
|
|
|
1,595,000
|
|
|
|
|
1,642,000
|
|
|
Gross margin
|
|
|
|
896,000
|
|
|
|
|
896,000
|
|
|
|
|
967,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
|
959,000
|
|
|
|
|
962,800
|
|
|
|
|
965,600
|
|
|
Depreciation and amortization
|
|
|
|
92,000
|
|
|
|
|
97,400
|
|
|
|
|
108,000
|
|
|
Other income, net
|
|
|
|
(15,000
|
)
|
|
|
|
(15,600
|
)
|
|
|
|
(21,000
|
)
|
|
Total operating expenses
|
|
|
|
1,036,000
|
|
|
|
|
1,044,600
|
|
|
|
|
1,052,600
|
|
|
Operating loss
|
|
|
|
(140,000
|
)
|
|
|
|
(148,600
|
)
|
|
|
|
(85,600
|
)
|
|
Interest expense
|
|
|
|
(189,000
|
)
|
|
|
|
(190,800
|
)
|
|
|
|
(136,900
|
)
|
|
Interest income
|
|
|
|
2,000
|
|
|
|
|
2,000
|
|
|
|
|
4,000
|
|
|
Loss before income taxes
|
|
|
|
(327,000
|
)
|
|
|
|
(337,400
|
)
|
|
|
|
(218,500
|
)
|
|
Income tax (expense) benefit
|
|
|
|
(278,000
|
)
|
|
|
|
69,400
|
|
|
|
|
106,500
|
|
|
Net loss
|
|
|
$
|
(605,000
|
)
|
|
|
$
|
(406,800
|
)
|
|
|
$
|
(112,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vornado’s 32.6% equity in Toys’ net loss
|
|
|
|
|
|
|
|
$
|
(132,698
|
)
|
|
|
$
|
(36,400
|
)
|
|
Impairment loss
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
(40,000
|
)
|
|
Management fee from Toys, net
|
|
|
|
|
|
|
|
|
1,847
|
|
|
|
|
2,563
|
|
|
Total Vornado net loss from its investment in Toys
|
|
|
|
|
|
|
|
$
|
(130,851
|
)
|
|
|
$
|
(73,837
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See page 3 for a reconciliation of net loss to negative FFO.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Vornado’s net loss from its
investment in
Toys to EBITDA (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
$
|
(130,851
|
)
|
|
|
$
|
(73,837
|
)
|
|
Interest and debt expense
|
|
|
|
|
|
|
|
|
62,239
|
|
|
|
|
44,492
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
31,446
|
|
|
|
|
34,808
|
|
|
Income tax expense (benefit)
|
|
|
|
|
|
|
|
|
22,573
|
|
|
|
|
(34,611
|
)
|
|
Vornado’s share of Toys’ EBITDA (1)
|
|
|
|
|
|
|
|
$
|
(14,593
|
)
|
|
|
$
|
(29,148
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_________________
|
|
(1)
|
|
EBITDA represents “Earnings Before Interest, Taxes, Depreciation
and Amortization.” Management considers EBITDA a supplemental
measure for making decisions and assessing the unlevered
performance of its segments as it relates to the total return on
assets as opposed to the levered return on equity. 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
|
|
|
|
|
November 2, 2013
|
|
|
October 27, 2012
|
|
Reconciliation of Vornado's net loss from its
investment in
Toys to negative FFO (1):
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
$
|
(130,851
|
)
|
|
|
$
|
(73,837
|
)
|
|
Depreciation and amortization of real property
|
|
|
|
16,506
|
|
|
|
|
17,777
|
|
|
Real estate impairment losses
|
|
|
|
456
|
|
|
|
|
1,430
|
|
|
Income tax effect of above adjustments
|
|
|
|
(5,937
|
)
|
|
|
|
(6,728
|
)
|
|
Vornado's share of Toys’ negative FFO (1)
|
|
|
$
|
(119,826
|
)
|
|
|
$
|
(61,358
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_________________
|
|
(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 GAAP net
income or loss adjusted to exclude net gains from sales of
depreciated real estate assets, real estate impairment losses,
depreciation and amortization expense from real estate assets,
extraordinary items and other specified non-cash items, including
the pro rata share of such adjustments of unconsolidated
subsidiaries. FFO and FFO per diluted share are used by
management, investors and analysts to facilitate meaningful
comparisons of operating performance between periods and among our
peers because it excludes the effect of real estate depreciation
and amortization and net gains on sales, which are based on
historical costs and implicitly assume that the value of real
estate diminishes predictably over time, rather than fluctuating
based on existing market conditions. FFO does not represent cash
generated from operating activities and is not necessarily
indicative of cash available to fund cash requirements and should
not be considered as an alternative to net income as a performance
measure or cash flows as a liquidity measure. FFO may not be
comparable to similarly titled measures employed by other
companies.
|
|
|
|
|
Copyright Business Wire 2013