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Vornado (NYSE:VNO) announced today that its fourth quarter 2013 financial results will include a $162,215,000, or $0.82 per diluted share, non-cash impairment of its investment in Toys.
Vornado previously announced on December 24, 2013 that its fourth quarter 2013 financial results will include a net loss of $130,851,000, or $0.66 per diluted share, representing its 32.6% share of Toys’ third quarter 2013 net loss.
These combined losses totaling $293,066,000, or $1.42 per diluted share, reduce the carrying amount of Vornado’s investment in Toys to its estimated fair value of $80,062,000 at December 31, 2013. In determining the fair value of its investment in Toys, Vornado considered, among other inputs, a December 31, 2013 third-party valuation of Toys.
Vornado will continue to assess the recoverability of its Toys investment each quarter. To the extent that the estimated fair value of its investment in Toys doesn’t change, Vornado will recognize a non-cash impairment equal to its share of Toys’ fourth quarter net income, if any, which it records in its first quarter 2014 financial results.
Attached is a reconciliation of Vornado’s total net loss from its investment in Toys to total negative Funds From Operations (“FFO”) that it will include in its fourth quarter 2013 financial results. Vornado’s share of Toys’ negative FFO will be treated as non-comparable.
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.
Funds From Operations – Unaudited For the Quarter Ended December 31, 2013
(Amounts in thousands)
Reconciliation of Vornado's net loss from its investment in Toys to negative FFO (1):
Depreciation and amortization of real property
Real estate impairment losses
Income tax effect of above adjustments
Vornado's share of Toys’ negative FFO (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.