Vornado Realty Trust (NYSE:VNO) announced today its 32.7% share of Toys
“R” Us’ second quarter financial results that it will record in its
third quarter ending September 30, 2014. Vornado’s results will include
a net loss of $18,418,000 or $0.09 per diluted share, compared to a net
loss of $34,209,000, or $0.17 per diluted share recorded in the quarter
ended September 30, 2013.
Vornado’s share of negative Funds From Operations (“FFO”) after income
taxes for the quarter ending September 30, 2014 will be $18,035,000 or
$0.09 per diluted share, compared to negative FFO after income taxes of
$22,343,000, or $0.11 per diluted share in the prior year’s third
quarter. Vornado’s share of Toys’ FFO will be treated as non-comparable
in all periods presented.
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 loss, as well as reconciliations of net
loss to earnings before interest, taxes, depreciation and amortization
(“EBITDA”) and negative 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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August 2, 2014
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August 3, 2013
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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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2,440,000
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$
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2,440,000
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$
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2,377,000
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Cost of sales
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1,524,000
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1,524,000
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1,457,000
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Gross margin
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916,000
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916,000
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920,000
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Selling, general and administrative expenses
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878,000
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881,500
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893,700
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Depreciation and amortization
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95,000
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98,500
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99,700
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Other income, net
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(15,000)
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(15,800)
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(10,200)
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Total operating expenses
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958,000
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964,200
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983,200
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Operating loss
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(42,000)
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(48,200)
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(63,200)
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Interest expense
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(102,000)
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(103,900)
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(117,900)
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Interest income
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1,000
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1,000
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1,000
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Loss before income taxes
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(143,000)
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(151,100)
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(180,100)
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Income tax (expense) benefit
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(4,000)
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19,600
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69,500
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Net loss
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(147,000)
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(131,500)
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(110,600)
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Less: Net earnings attributable to noncontrolling interest
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(1,000)
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(1,000)
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-
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Net loss attributable to Toys “R” Us, Inc.
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$
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(148,000)
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$
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(132,500)
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$
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(110,600)
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Vornado’s 32.7% equity in Toys’ net loss
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$
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(43,275)
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$
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(36,056)
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Adjustment to discontinue application of the equity method
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once the investment balance is reduced to zero
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19,121
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-
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Amortization of Vornado’s basis difference, net of tax
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3,797
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-
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Management fee from Toys
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1,939
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1,847
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Total Vornado net loss from its investment in Toys
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$
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(18,418)
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$
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(34,209)
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See page 3 for a reconciliation of net loss to negative FFO.
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Reconciliation of Vornado’s net loss from its
investment in
Toys to EBITDA (1):
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Net loss
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$
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(18,418)
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$
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(34,209)
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Interest and debt expense
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22,471
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38,435
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Depreciation and amortization
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9,923
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32,176
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Income tax benefit
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(1,536)
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(22,690)
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Vornado’s share of Toys’ EBITDA (1)
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$
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12,440
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$
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13,712
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_________________
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(1)
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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.
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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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August 2, 2014
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August 3, 2013
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Reconciliation of Vornado's net loss from its
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investment in Toys to negative FFO (1):
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Net loss
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$
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(18,418)
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$
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(34,209)
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Depreciation and amortization of real property
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9,043
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16,430
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Amortization of Vornado’s basis difference
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attributable to real property
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(7,693)
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-
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Real estate impairment losses
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-
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1,826
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Gain on sale of depreciable real estate
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(760)
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-
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Income tax effect of above adjustments
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(207)
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(6,390)
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Vornado's share of Toys’ negative FFO (1)
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$
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(18,035)
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$
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(22,343)
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_________________
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(1)
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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.
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Copyright Business Wire 2014