Vornado Announces its Share of Toys “R” Us’ First Quarter Financial Results

Business Wire

PARAMUS, N.J.--(BUSINESS WIRE)--

Vornado Realty Trust (VNO) announced today its 32.6% share of Toys “R” Us’ first quarter financial results that it will record in its second quarter ending June 30, 2014. Vornado’s results will include a net loss of $57,591,000, or $0.29 per diluted share, compared to a net loss of $36,861,000, or $0.19 per diluted share recorded in the quarter ended June 30, 2013.

Vornado’s share of negative Funds From Operations (“FFO”) after income taxes for the quarter ending June 30, 2014 will be $51,862,000, or $0.26 per diluted share, compared to negative FFO after income taxes of $25,088,000, or $0.13 per diluted share in the prior year’s second 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 32.6% 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.

 
Toys "R" Us, Inc.
Condensed Consolidated Statements of Operations – Unaudited
 
For the Quarter Ended
May 3, 2014     May 4, 2013
(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 $ 2,479,000 $ 2,479,000 $ 2,408,000
Cost of sales 1,561,000 1,561,000 1,508,000
Gross margin 918,000 918,000 900,000
 
Selling, general and administrative expenses 917,000 920,900 891,200
Depreciation and amortization 104,000 109,400 104,800
Other income, net (12,000 ) (9,600 ) (11,300 )
Total operating expenses 1,009,000 1,020,700 984,700
Operating loss (91,000 ) (102,700 ) (84,700 )
Interest expense (108,000 ) (109,800 ) (115,700 )
Interest income 1,000 1,000 3,000
Loss before income taxes (198,000 ) (211,500 ) (197,400 )
Income tax benefit 2,000 17,900 78,700
Net loss $ (196,000 ) $ (193,600 ) $ (118,700 )
 
Vornado’s 32.6% equity in Toys’ net loss $ (63,210 ) $ (38,708 )
Reversal of Vornado’s 32.6% share of asset impairments included in

Toys’ net loss which Vornado previously recognized in the impairment

of its investment, net of basis difference amortization and tax

3,680 -
Management fee from Toys, net 1,939 1,847
Total Vornado net loss from its investment in Toys $ (57,591 ) $ (36,861 )
 
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 $ (57,591 ) $ (36,861 )
Interest and debt expense 39,529 37,730
Depreciation and amortization 27,686 33,882
Income tax benefit (4,435 ) (25,697 )
Vornado’s share of Toys’ EBITDA (1) $ 5,189 $ 9,054
 
     

 

_________________

(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
May 3, 2014   May 4, 2013
Reconciliation of Vornado's net loss from its investment in Toys to negative FFO (1):  
Net loss $ (57,591 ) $ (36,861 )
Depreciation and amortization of real property 8,814 17,479
Real estate impairment losses - 620
Income tax effect of above adjustments (3,085 ) (6,326 )
Vornado's share of Toys’ negative FFO (1) $ (51,862 ) $ (25,088 )
 
     

_________________

(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.
 

Contact:
Vornado Realty Trust
Stephen Theriot, 201-587-1000

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