A Agilent Technologies

CLEVELAND, Sept. 8 /PRNewswire-FirstCall/ -- Forest City Enterprises, Inc. (NYSE:FCEANYSE:andNYSE:FCEB), today announced EBDT, net earnings and revenues for the three and six months ended July 31, 2009. EBDT Second-quarter EBDT (earnings before depreciation, amortization and deferred taxes) was $95.5 million, an 8.1 percent increase compared with 2008 second-quarter EBDT of $88.3 million. Year-to-date EBDT was $137.1 million, a 31.4 percent increase compared with $104.3 million for the first six months of fiscal 2008. On a per share basis, second-quarter 2009 EBDT was $0.64, a 22.0 percent decrease compared with 2008 second quarter EBDT of $0.82. Year-to-date per share EBDT was $1.07, a 10.3 percent increase compared with $0.97 per share for the first six months of 2008. Per-share data for both the second quarter and six months of 2009 reflect the dilutive effect of approximately 52.3 million new Class A common shares issued by the Company during the second quarter of 2009. For an explanation of EBDT variances, see the section titled "Review and Discussion of Results" in this news release. EBDT and EBDT per share are non-Generally Accepted Accounting Principle (GAAP) measures. A reconciliation of net earnings (the most directly comparable GAAP measure to EBDT) to EBDT is provided in the Financial Highlights table in this news release. Net Loss The second-quarter net loss attributable to Forest City Enterprises, Inc. was $1.8 million, or $0.01 per share, compared with a net loss of $8.4 million, or $0.08 per share, in the second quarter of 2008. Net loss for the six months ended July 31, 2009, was $32.5 million, or $0.26 per share, compared with $48.8 million, or $0.47 per share for the same period in 2008. Revenues Second-quarter 2009 consolidated revenues were $316.7 million compared with $327.6 million last year. First-half 2009 revenues were $629.8 million compared with $632.6 million for the six months ended July 31, 2008. Review and Discussion of Results Second quarter EBDT For the three months ended July 31, 2009, the Company's Commercial and Residential Segments together provided a pre-tax EBDT increase of $2.9 million, compared with the same period in 2008. Among the factors contributing to this increase were $3.3 million in lower interest expense on the mature portfolio, $4.1 million in increased EBDT from the ramp-up of new properties, and $2.2 million in reduced interest expense from the change in fair market value of derivatives between the comparable periods in 2008 and 2009. These increases in the portfolio were partially offset by 2008 lease termination fee income of $8.3 million, which did not recur in 2009. The Land Segment provided a pre-tax EBDT increase of $4.5 million compared with the same period in 2008. This increase included a gain on early extinguishment of nonrecourse mortgage debt of $9.5 million, which was partially offset by lower land sales, as well as reduced fee income and profit participation at the Company's Stapleton project in Denver. Also impacting EBDT for the second quarter of 2009 was increased corporate interest expense of $3.6 million, which includes the non-cash impact of the FSP APB 14-1 accounting standard in 2009. This was offset by reduced expenses of $4.2 million as a result of cost savings initiatives. Finally, EBDT for the quarter was negatively impacted by a smaller tax benefit of $1.1 million, compared with the second quarter of 2008. Year-to-date EBDT (An exhibit illustrating factors impacting year-to-date 2009 EBDT results, compared with results for the first six months of 2008, is available on the Investor Relations page of the Company's web site: http://www.forestcity.net/) For the six months ended July 31, 2009, the Commercial and Residential Segments combined provided a pre-tax EBDT increase of $27.2 million, compared with the same period in 2008, primarily as the result of decreased interest expense of $9.0 million on the mature portfolio, increased EBDT of $7.2 million from the ramp up of new properties, and decreased project write-offs of $9.1 million, compared with the first six months of 2008. The Land Segment provided a pre-tax EBDT increase of $5.7 million, compared with the first six months of 2008, driven by $9.5 million for debt forgiveness related to early extinguishment of nonrecourse mortgage debt, partially offset by lower land sales and reduced fee income and profit participation at Stapleton in Denver. In the Company's Corporate Segment, pre-tax EBDT decreased $9.8 million, impacted by company-wide severance and outplacement expenses of $8.7 million, and higher corporate interest expense of $10.8 million, which includes the non-cash impact of the FSP APB 14-1 accounting standard in 2009. These decreases were partially offset by $9.7 million in reduced expenses as a result of cost-reduction initiatives. Reduced losses on the Nets provided a pre-tax EBDT increase of $3.0 million, and EBDT was favorably impacted by a larger tax benefit of $6.7 million compared with the first six months of 2008. Commentary "Overall, our results for the first half of 2009 met our expectations, and we're pleased with our EBDT performance year to date and for the second quarter, in particular," said Charles A. Ratner, Forest City president and chief executive officer. "Our core rental properties portfolio was up over the second quarter of 2008, primarily as a result of reduced project write-offs and lower interest expense. These factors offset overall lower comparable property results due to the weak economy and soft near-term fundamentals. "Our office portfolio performed well, driven by continued relative strength in key markets and in the life science segment, and by the expiration of initial free-rent periods for newer tenants at properties in New York, as well as filled vacancies at our Illinois Science + Technology Park in Skokie, Illinois. In addition, our Military Housing business continued to be a solid contributor to results. As expected, performance in our retail and residential portfolios was down, reflecting continued recessionary pressure on consumers and retailers, and the impact of lower occupancies and rent concessions," Ratner added. "While we remain very cautious about the second half of 2009, results for the second quarter and year to date underscore the benefits of the five strategies we adopted in 2008 to address economic and financial-market turmoil: curtailing development, driving out costs, raising capital, proactively managing debt maturities, and taking advantage of opportunities created by market conditions. Together, these strategies focus our team on creating and preserving liquidity - our highest priority as we weather this downturn." NOI, Occupancies and Rent Overall comparable property net operating income (NOI) decreased 1.4 percent during the second quarter compared with the same period a year ago. The office portfolio was up 7.1 percent, while the retail and residential portfolios were down 4.3 percent and 4.2 percent, respectively. For the year to date, overall comparable property NOI decreased 0.4 percent compared with the first six months of 2008. The office portfolio increased 6.7 percent, while the retail and residential portfolios were down 3.0 percent and 3.1 percent, respectively. Comparable property NOI, defined as NOI from properties operated in the three and six months ended July 31, 2009 and 2008, is a non-GAAP financial measure, and is based on the pro-rata consolidation method, also a non-GAAP financial measure. Included in this release is a schedule that presents comparable property NOI on the full-consolidation method. At July 31, 2009, comparable retail occupancies were 89.8 percent compared with 91.8 percent at July 31, 2008, and regional mall sales averaged $401 per square foot on a rolling 12-month basis. Comparable office occupancies decreased to 89.4 percent compared with 90.3 percent last year. Comparable average occupancies for the first half of the year in the residential business were 90.1 percent compared with 92.5 percent last year. Comparable residential net rental income (defined as gross rent less vacancies and concessions) decreased to 86.4 percent, compared with 89.5 percent in the same period in 2008. Liquidity and Financing Activity At July 31, 2009, the Company had approximately $838 million in cash and credit available, including $197 million ($192 million at full consolidation) in cash on its balance sheet, and $641 million of available capacity on its $750 million revolving line of credit. Forest City is in active negotiations with its 14-member bank group to renew its line of credit. In addition, during the second quarter, as previously announced, the Company generated net proceeds of $329.9 million from the issuance of new Class A common stock, which were used to retire then-current borrowings on the line of credit. Since January 31, 2009, the Company has addressed $542.0 million at full consolidation ($520.9 million at its pro-rata share) of the $826.6 million ($917.8 million at pro-rata) of total debt (inclusive of notes payable but exclusive of scheduled amortization payments) maturing in fiscal year 2009, through closed loans and committed financings. Additionally, the Company addressed $301.6 million ($310.9 million at pro-rata) of loans maturing in future years. As of July 31, 2009, the Company's weighted average cost of mortgage debt decreased to 5.05 percent from 5.50 percent at July 31, 2008, primarily due to a decrease in variable-rate mortgage debt. Fixed-rate mortgage debt, which represented 70 percent of the Company's total nonrecourse mortgage debt, and is inclusive of interest rate swaps, decreased from 6.07 percent at July 31, 2008, to 6.05 percent at July 31, 2009. Variable-rate mortgage debt decreased from 3.78 percent at July 31, 2008, to 2.71 percent at July 31, 2009. The Company continues to actively evaluate potential transactions, primarily in the form of joint ventures, as a means of generating liquidity. The property disposition market remains challenging across the industry, with very few transactions consummated due to illiquidity in the credit markets. Despite this, Forest City remains committed to pursuing this strategy in order to maximize value and generate additional liquidity. Openings and Projects Under Construction During the first half of 2009, the Company opened a 127,000-square-foot expansion of its Promenade at Temecula retail center. The expansion is currently 72 percent leased and committed, and the balance of the 1.1 million-square-foot center is 95 percent leased, for a total of 89 percent leased and committed across the entire center. In the second half of the year, Forest City will open the first phase of the East River Plaza retail project in Manhattan when Costco, the international wholesale club, opens its doors in the fourth quarter. Additional tenants, including Target, Best Buy and Marshalls, are expected to open by mid-2010. The project is currently 76 percent pre-leased and committed. Also in the second half of 2009, the Company will complete the 80 DeKalb residential rental community in Brooklyn, with first units available for leasing in 2009 and phased lease-up continuing into 2010. Among other projects under construction, the 497,000-square-foot Village at Gulfstream Park retail center in Hallandale Beach, FL, is currently 79 percent leased (based on total available retail space) and is expected to open in February 2010. In early August, the Company announced an additional 13 retail, restaurant and entertainment tenants for this project. Newly announced tenants include Paradis Latin Miami, an authentic cabaret experience, Ta-Zin, featuring Moroccan cuisine and entertainment, and Adrenalina, an extreme sports destination, which join previously announced tenants including West Elm, Pottery Barn, Crate and Barrel and Williams-Sonoma. As a result of the level of pre-leasing at Gulfstream, the Company recently qualified for and closed a 12-month extension of the project's construction financing. For Ridge Hill, the retail/mixed-use project in Westchester County, New York, the Company recently announced a two-year extension of construction financing. In addition, during the second quarter, the Company announced that it has received a non-binding letter of intent from Saks Fifth Avenue to become a major tenant at the center. The additional time allowed by the extension, together with the opportunity to attract a key major tenant, have put the Company in the position to deliver a superior product in a great market at the right time, giving the economy more time to recover. As noted in the development pipeline included in the Company's second-quarter supplemental package furnished to the SEC on Form 8-K, costs and total Phase 1 square footage for Ridge Hill have increased as a result of additional tenant allowances and costs related to the expansion of approximately 130,000 square feet of additional retail space to accommodate the revised plan. Signed tenants include Whole Foods, L.L. Bean, The Cheesecake Factory, Sephora and Cinema De Lux, a multiplex cinema by National Amusements, among others. Grand opening of the center is expected in 2011. At The Yards in Washington D.C., the Company broke ground in late May for a riverfront park that is a central feature of this mixed-use development along the Anacostia River. The development of the park is financed with public-sector funding, and the first phase is expected to be complete in summer 2010. Forest City ended the second quarter with seven projects under construction with a total cost of $2.1 billion at the Company's pro-rata share ($2.5 billion at full consolidation). With the exception of the Barclays Arena at Atlantic Yards in Brooklyn, and the fee-development construction of a new City Hall project in Las Vegas, the Company does not anticipate commencing construction on any additional projects in 2009. Other Milestones The Company achieved the following additional milestones either during the second quarter or subsequent to the end of the quarter: -- In late July, the Company announced that its Washington, D.C., office had been selected as part of a team of advisors to assist the District government with master planning, entitlements, financial feasibility and other services for Poplar Point, a proposed 130-acre, mixed-use riverfront project in Southeast Washington. -- In August, the Company announced that a subsidiary had been selected by the Puerto Rico Department of Economic Development and Commerce and the Puerto Rico Tourism Company to become program manager for the mixed-use redevelopment of a 21-block, 100-acre area of San Juan's waterfront district. These two projects, and others previously announced, reflect the Company's expansion into fee-based investment management and third-party services - part of Forest City's strategy of taking advantage of opportunities created by current market conditions. -- Forest City's Military Housing business completed Navy family housing neighborhoods in Oak Harbor and Lake Stevens, WA, in June and August, respectively. In July, the Company announced that one of its Marine Corps family housing neighborhoods in Honolulu, Hawaii, had achieved LEED for Neighborhood Development certification from the U.S. Green Building Council. LEED (Leadership in Energy and Environmental Design) is an internationally recognized green-building certification system. Military Housing continues to contribute meaningfully to the Company's results. Initially, these projects have both a development/construction fee component and a management fee component. When development and construction concludes for each military neighborhood, the income stream for the project transitions to asset and property management fees for the balance of the 50-year life of the contract. In addition, the Company has a minority ownership interest in, and participates in the cash flow from, many of its military housing neighborhoods. Outlook "We remain focused on liquidity as our highest priority, and as the most prudent approach to preserving and building shareholder value in a time of continuing uncertainty in the marketplace," Ratner said. "While some see signs of a potential end of the recession, we are taking a conservative course based on what we can observe and are experiencing directly: continued weak fundamentals and little improvement in overall near-term conditions. As a result, we remain very cautious going forward. We expect the second half of the year to be challenging for our Company and for the entire industry, and we do not anticipate meaningful improvement in market conditions in the near or mid-term. "Despite this cautious outlook, we are focused on those issues that are within our control, and we are confident in the longer-term. We believe the five strategies we have put in place are continuing to strengthen our balance sheet and income statement, which, in turn, gives us the opportunity to take advantage of dislocations created by current market conditions. We also continue to nurture key opportunities in our pipeline in order to be prepared to activate and leverage these projects when economic and financial-market conditions improve." Corporate Description Forest City Enterprises, Inc. is an $11.7 billion NYSE-listed national real estate company. The Company is principally engaged in the ownership, development, management and acquisition of commercial and residential real estate and land throughout the United States. For more information, visit http://www.forestcity.net/. EBDT The Company uses an additional measure, along with net earnings, to report its operating results. This non-GAAP measure, referred to as Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDT"), is not a measure of operating results or cash flows from operations as defined by GAAP and may not be directly comparable to similarly titled measures reported by other companies. The Company believes that EBDT provides additional information about its core operations and, along with net earnings, is necessary to understand its operating results. EBDT is used by the chief operating decision maker and management in assessing operating performance and to consider capital requirements and allocation of resources by segment and on a consolidated basis. The Company believes EBDT is important to investors because it provides another method for the investor to measure its long-term operating performance, as net earnings can vary from year to year due to property dispositions, acquisitions and other factors that have a short-term impact. EBDT is defined as net earnings excluding the following items: i) gain (loss) on disposition of rental properties, divisions and other investments (net of tax); ii) the adjustment to recognize rental revenues and rental expense using the straight-line method; iii) non-cash charges for real estate depreciation, amortization, amortization of mortgage procurement costs and deferred income taxes; iv) preferred payment classified as noncontrolling interest expense on the Company's Consolidated Statement of Earnings; v) impairment of real estate (net of tax); vi) extraordinary items (net of tax); and vii) cumulative or retrospective effect of change in accounting principle (net of tax). Unlike the real estate segments, EBDT for the Nets segment equals net earnings. EBDT is reconciled to net earnings (loss), the most comparable financial measure calculated in accordance with GAAP, in the table titled Financial Highlights below and in the Company's Supplemental Package, which the Company will also furnish to the SEC on Form 8-K. The adjustment to recognize rental revenues and rental expenses on the straight-line method is excluded because it is management's opinion that rental revenues and expenses should be recognized when due from the tenants or due to the landlord. The Company excludes depreciation and amortization expense related to real estate operations from EBDT because it believes the values of its properties, in general, have appreciated over time in excess of their original cost. Deferred taxes from real estate operations, which are the result of timing differences of certain net expense items deducted in a future year for federal income tax purposes, are excluded until the year in which they are reflected in the Company's current tax provision. The impairment of real estate is excluded from EBDT because it varies from year to year based on factors unrelated to the Company's overall financial performance and is related to the ultimate gain on dispositions of operating properties. The Company's EBDT may not be directly comparable to similarly titled measures reported by other companies. Pro-Rata Consolidation Method This press release contains certain financial measures prepared in accordance with GAAP under the full consolidation accounting method and certain financial measures prepared in accordance with the pro-rata consolidation method (non-GAAP). The Company presents certain financial amounts under the pro-rata method because it believes this information is useful to investors as this method reflects the manner in which the Company operates its business. In line with industry practice, the Company has made a large number of investments in which its economic ownership is less than 100 percent as a means of procuring opportunities and sharing risk. Under the pro-rata consolidation method, the Company presents its investments proportionate to its economic share of ownership. Under GAAP, the full consolidation method is used to report partnership assets and liabilities consolidated at 100 percent if deemed to be under its control or if the Company is deemed to be the primary beneficiary of the variable interest entities ("VIE"), even if its ownership is not 100 percent. The Company provides reconciliations from the full consolidation method to the pro-rata consolidation method in the exhibits below and throughout its Supplemental Package, which the Company will also furnish to the SEC on Form 8-K. Safe Harbor Language Statements made in this news release that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. The Company's actual results could differ materially from those expressed or implied in such forward-looking statements due to various risks, uncertainties and other factors. Risks and factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the impact of current market conditions on our liquidity, ability to finance or refinance projects and repay our debt, general real estate investment and development risks, vacancies in our properties, further downturns in the housing market, competition, illiquidity of real estate investments, bankruptcy or defaults of tenants, anchor store consolidations or closings, international activities, the impact of terrorist acts, risks associated with an investment in a professional sports team, our substantial debt leverage and the ability to obtain and service debt, the impact of restrictions imposed by our credit facility and senior debt, exposure to hedging agreements, the level and volatility of interest rates, the continued availability of tax-exempt government financing, the impact of credit rating downgrades, effects of uninsured or underinsured losses, environmental liabilities, conflicts of interest, risks associated with developing and managing properties in partnership with others, the ability to maintain effective internal controls, compliance with governmental regulations, volatility in the market price of our publicly traded securities, litigation risks, as well as other risks listed from time to time in the Company's SEC filings, including but not limited to, the Company's annual and quarterly reports. Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Six Months Ended July 31, 2009 and 2008 (dollars in thousands, except per share data) Three Months Ended Increase July 31, (Decrease) ---------------- ---------------- 2009 2008 Amount Percent ---- ---- ------ ------- Operating Results: Earnings (loss) from continuing operations $1,964 $(8,779) $10,743 Discontinued operations, net of tax - 5,561 (5,561) --- ----- ------ Net loss 1,964 (3,218) 5,182 Net earnings attributable to noncontrolling interest (3,753) (5,168) 1,415 ------ ------ ----- Net loss attributable to Forest City Enterprises, Inc. $(1,789) $(8,386) $6,597 ======= ======= ====== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $95,483 $88,343 $7,140 8.1% ======= ======= ====== Reconciliation of Net Loss to Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2): Net loss attributable to Forest City Enterprises, Inc. $(1,789) $(8,386) $6,597 Depreciation and amortization - Real Estate Groups (7) 75,024 73,638 1,386 Amortization of mortgage procurement costs - Real Estate Groups (7) 3,823 3,448 375 Deferred income tax expense - Real Estate Groups (8) 8,099 16,073 (7,974) Deferred income tax expense - Non-Real Estate Groups: (8) Gain on disposition of other investments - - - Current income tax expense on non-operating earnings: (8) Gain on disposition included in discontinued operations - - - Gain on disposition of unconsolidated entities - 707 (707) Straight-line rent adjustment (3) (3,614) 4,248 (7,862) Preference payment (5) 586 931 (345) Preferred return on disposition - 208 (208) Impairment of real estate 1,451 - 1,451 Impairment of unconsolidated entities 11,903 6,026 5,877 Gain on disposition of unconsolidated entities - - - Gain on disposition of other investments - - - Discontinued operations: (1) Gain on disposition of rental properties - (8,627) 8,627 Retrospective effect of FSP APB 14-1 (6) - 77 (77) ------- ------- ------ Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $95,483 $88,343 $7,140 8.1% ======= ======= ====== Diluted Earnings per Common Share: Earnings (loss) from continuing operations $0.01 $(0.08) $0.09 Discontinued operations, net of tax - 0.05 (0.05) --- ---- ----- Net earnings (loss) 0.01 (0.03) 0.04 Net earnings attributable to noncontrolling interest (0.02) (0.05) 0.03 ----- ----- ---- Net loss attributable to Forest City Enterprises, Inc. $(0.01) $(0.08) $0.07 ====== ====== ===== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) (4) $0.64 $0.82 $(0.18) (22.0%) ===== ===== ====== Operating earnings (loss), net of tax (a non-GAAP financial measure) $0.07 $(0.04) $0.11 Impairment of real estate, net of tax (0.06) (0.04) (0.02) Gain on disposition of rental properties and other investments, net of tax - 0.05 (0.05) Net earnings attributable to noncontrolling interest (0.02) (0.05) 0.03 ------ ------ ----- Net loss attributable to Forest City Enterprises, Inc. $(0.01) $(0.08) $0.07 ====== ====== ===== Basic weighted average shares outstanding (4) 144,547,045 102,682,825 41,864,220 =========== =========== ========== Diluted weighted average shares outstanding (4) 148,194,800 107,196,491 40,998,309 =========== =========== ========== Six Months Ended Increase July 31, (Decrease) ---------------- ----------------- 2009 2008 Amount Percent ---- ---- ------ ------- Operating Results: Earnings (loss) from continuing operations $(29,602) $(48,875) $19,273 Discontinued operations, net of tax 2,820 5,949 (3,129) ----- ----- ------ Net loss (26,782) (42,926) 16,144 Net earnings attributable to noncontrolling interest (5,686) (5,862) 176 ------ ------ --- Net loss attributable to Forest City Enterprises, Inc. $(32,468) $(48,788) $16,320 ======== ======== ======= Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $137,087 $104,297 $32,790 31.4% ======== ======== ======= Reconciliation of Net Loss to Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2): Net loss attributable to Forest City Enterprises, Inc. $(32,468) $(48,788) $16,320 Depreciation and amortization - Real Estate Groups (7) 147,152 144,448 2,704 Amortization of mortgage procurement costs - Real Estate Groups (7) 7,845 6,791 1,054 Deferred income tax expense - Real Estate Groups (8) (3,499) 654 (4,153) Deferred income tax expense - Non-Real Estate Groups: (8) Gain on disposition of other investments - 58 (58) Current income tax expense on non-operating earnings: (8) Gain on disposition included in discontinued operations 3,785 - 3,785 Gain on disposition of unconsolidated entities - 1,339 (1,339) Straight-line rent adjustment (3) (6,389) 1,101 (7,490) Preference payment (5) 1,171 1,867 (696) Preferred return on disposition - 208 (208) Impairment of real estate 2,575 - 2,575 Impairment of unconsolidated entities 21,463 6,026 15,437 Gain on disposition of unconsolidated entities - (881) 881 Gain on disposition of other investments - (150) 150 Discontinued operations: (1) Gain on disposition of rental properties (4,548) (8,627) 4,079 Retrospective effect of FSP APB 14-1 (6) - 251 (251) Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) $137,087 $104,297 $32,790 31.4% ======== ======== ======= Diluted Earnings per Common Share: Earnings (loss) from continuing operations $(0.24) $(0.47) $0.23 Discontinued operations, net of tax 0.02 0.06 (0.04) ---- ---- ----- Net earnings (loss) (0.22) (0.41) 0.19 Net earnings attributable to noncontrolling interest (0.04) (0.06) 0.02 ----- ----- ---- Net loss attributable to Forest City Enterprises, Inc. $(0.26) $(0.47) $0.21 ====== ====== ===== Earnings Before Depreciation, Amortization and Deferred Taxes (EBDT) (2) (4) $1.07 $0.97 $0.10 10.3% ===== ===== ===== Operating earnings (loss), net of tax (a non-GAAP financial measure) $(0.12) $(0.43) $0.31 Impairment of real estate, net of tax (0.12) (0.04) (0.08) Gain on disposition of rental properties and other investments, net of tax 0.02 0.06 (0.04) Net earnings attributable to noncontrolling interest (0.04) (0.06) 0.02 ------ ------ ----- Net loss attributable to Forest City Enterprises, Inc. $(0.26) $(0.47) $0.21 ====== ====== ===== Basic weighted average shares outstanding (4) 124,074,311 102,648,700 21,425,611 =========== =========== ========== Diluted weighted average shares outstanding (4) 127,729,311 107,213,800 20,515,511 =========== =========== ========== Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Six Months Ended July 31, 2009 and 2008 (dollars in thousands) Three Months Ended Increase July 31, (Decrease) ---------------- ----------------- 2009 2008 Amount Percent ---- ---- ------ ------- Operating Earnings (a non-GAAP financial measure) and Reconciliation to Net Earnings: Revenues from real estate operations Commercial Group $243,811 $247,054 $(3,243) Residential Group 68,023 73,378 (5,355) Land Development Group 4,901 7,159 (2,258) Corporate Activities - - - --- --- --- Total Revenues 316,735 327,591 (10,856) (3.3%) Operating expenses (165,544) (185,658) 20,114 Interest expense (80,223) (81,403) 1,180 Loss on early extinguishment of debt 9,063 (52) 9,115 Amortization of mortgage procurement costs (7) (3,450) (3,082) (368) Depreciation and amortization (7) (67,853) (69,616) 1,763 Interest and other income 11,594 12,884 (1,290) Equity in earnings (loss), including impairment, of unconsolidated entities (17,438) (5,942) (11,496) Impairment of unconsolidated entities 11,903 6,026 5,877 Gain on disposition of unconsolidated entities - - - Preferred return on disposition - 208 (208) Revenues and interest income from discontinued operations (1) - 2,844 (2,844) Expenses from discontinued operations (1) - (2,409) 2,409 --- ------ ----- Operating loss (a non-GAAP financial measure) 14,787 1,391 13,396 ------ ----- ------ Income tax expense (8) 531 (3,501) 4,032 Income tax expense from discontinued operations (1) (8) - (3,501) 3,501 Income tax expense on non- operating earnings items (see below) (5,179) 925 (6,104) ------ --- ------ Operating earnings (loss), net of tax (a non-GAAP financial measure) 10,139 (4,686) 14,825 ------ ------ ------ Impairment of real estate (1,451) - (1,451) Impairment of unconsolidated entities (11,903) (6,026) (5,877) Gain on disposition of unconsolidated entities - - - Preferred return on disposition - (208) 208 Gain on disposition of other investments - - - Gain on disposition of rental properties included in discontinued operations (1) - 8,627 (8,627) Income tax benefit (expense) on non-operating earnings: (8) Impairment of real estate 563 141 422 Impairment of unconsolidated entities 4,616 2,187 2,429 Gain on disposition of other investments - - - Gain on disposition of unconsolidated entities - 80 (80) Gain on disposition of rental properties included in discontinued operations - (3,333) 3,333 --- ------ ----- Income tax expense on non- operating earnings (see above) 5,179 (925) 6,104 ----- ---- ----- Net earnings (loss) 1,964 (3,218) 5,182 Net earnings attributable to noncontrolling interest (3,753) (5,168) 1,415 ------ ------ ----- Net loss attributable to Forest City Enterprises, Inc. $(1,789) $(8,386) $6,597 ======= ======= ====== Six Months Ended Increase July 31, (Decrease) ---------------- ----------------- 2009 2008 Amount Percent ---- ---- ------ ------- Operating Earnings (a non-GAAP financial measure) and Reconciliation to Net Earnings: Revenues from real estate operations Commercial Group $479,438 $468,348 $11,090 Residential Group 142,955 150,672 (7,717) Land Development Group 7,371 13,581 (6,210) Corporate Activities - - - ------- ------- ----- Total Revenues 629,764 632,601 (2,837) (0.4%) Operating expenses (360,391) (393,014) 32,623 Interest expense (171,931) (163,876) (8,055) Loss on early extinguishment of debt 9,063 (5,231) 14,294 Amortization of mortgage procurement costs (7) (7,121) (5,934) (1,187) Depreciation and amortization (7) (134,311) (135,622) 1,311 Interest and other income 18,402 21,282 (2,880) Equity in earnings (loss), including impairment, of unconsolidated entities (33,304) (15,589) (17,715) Impairment of unconsolidated entities 21,463 6,026 15,437 Gain on disposition of unconsolidated entities - (881) 881 Preferred return on disposition - 208 (208) Revenues and interest income from discontinued operations (1) 813 6,031 (5,218) Expenses from discontinued operations (1) (754) (4,964) 4,210 ---- ------ ----- Operating loss (a non-GAAP financial measure) (28,307) (58,963) 30,656 ------- ------- ------ Income tax expense (8) 22,802 16,358 6,444 Income tax expense from discontinued operations (1) (8) (1,787) (3,745) 1,958 Income tax expense on non- operating earnings items (see below) (7,558) 1,323 (8,881) ------ ----- ------ Operating earnings (loss), net of tax (a non-GAAP financial measure) (14,850) (45,027) 30,177 ------- ------- ------ Impairment of real estate (2,575) - (2,575) Impairment of unconsolidated entities (21,463) (6,026) (15,437) Gain on disposition of unconsolidated entities - 881 (881) Preferred return on disposition - (208) 208 Gain on disposition of other investments - 150 (150) Gain on disposition of rental properties included in discontinued operations (1) 4,548 8,627 (4,079) Income tax benefit (expense) on non-operating earnings: (8) Impairment of real estate 999 141 858 Impairment of unconsolidated entities 8,323 2,187 6,136 Gain on disposition of other investments - (58) 58 Gain on disposition of unconsolidated entities - (260) 260 Gain on disposition of rental properties included in discontinued operations (1,764) (3,333) 1,569 ------ ------ ----- Income tax expense on non- operating earnings (see above) 7,558 (1,323) 8,881 ----- ------ ----- Net earnings (loss) (26,782) (42,926) 16,144 Net earnings attributable to noncontrolling interest (5,686) (5,862) 176 ------ ------ --- Net loss attributable to Forest City Enterprises, Inc. $(32,468) $(48,788) $16,320 ======== ======== ======= 1) Pursuant to the definition of a component of an entity of SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", assuming no significant continuing involvement, all earnings of properties that have been sold or are held for sale are reported as discontinued operations. 2) The Company uses an additional measure, along with net earnings, to report its operating results. This measure, referred to as Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDT"), is not a measure of operating results as defined by generally accepted accounting principles and may not be directly comparable to similarly-titled measures reported by other companies. The Company believes that EBDT provides additional information about its operations, and along with net earnings, is necessary to understand its operating results. EBDT is defined as net earnings excluding the following items: i) gain (loss) on disposition of operating properties, divisions and other investments (net of tax); ii) the adjustment to recognize rental revenues and rental expense using the straight-line method; iii) non-cash charges for real estate depreciation, amortization (including amortization of mortgage procurement costs) and deferred income taxes; iv) preferred payment classified as non-controlling interest expense on the Company's Consolidated Statement of Earnings; v) impairment of real estate (net of tax); vi)extraordinary items (net of tax); and vii) cumulative or retrospective effect of change in accounting principle (net of tax). See our discussion of EBDT in the news release. 3) The Company recognizes minimum rents on a straight-line basis over the term of the related lease pursuant to the provision of SFAS No. 13, "Accounting for Leases." The straight-line rent adjustment is recorded as an increase or decrease to revenue or operating expense from Forest City Rental Properties Corporation, a wholly-owned subsidiary of Forest City Enterprises, Inc., with the applicable offset to either accounts receivable or accounts payable, as appropriate. 4) For the six months ended July 31, 2009, the effect of 3,655,000 shares of dilutive securities were not included in the computation of diluted earnings per share because their effect is anti-dilutive to the loss from continuing operations. (Since these shares are dilutive for the computation of EBDT per share for the three months ended July 31, 2009, diluted weighted average shares outstanding of 127,729,311 were used to arrive at $1.07/share.) For the three and six months ended July 31, 2008, the effect of 4,513,666 and 4,565,100 shares of dilutive securities were not included in the computation of diluted earnings per share because their effect is anti- dilutive to the loss from continuing operations. (Since these shares are dilutive for the computation of EBDT per share for the three and six months ended July 31, 2008, diluted weighted average shares outstanding 107,196,491 and 107,213,800 were used to arrive at $0.82/share and $0.97/share, respectively.) 5) The preference payment represents the respective period's share of the annual preferred payment in connection with the issuance of Class A Common Units in exchange for Bruce C. Ratner's noncontrolling interest in the Forest City Ratner Companies portfolio. 6) Effective February 1, 2009, we adopted Financial Accounting Standards Board ("FASB") Staff Position ("FSP") No. APB 14-1, "Accounting for Convertible Debt Instruments That May be Settled in Cash Upon Conversion (Including Partial Cash Settlement)"("FSP APB 14-1"). This standard required us to restate the prior year financial statements to show retrospective application upon adoption. 7) The following table provides detail of depreciation and amortization and amortization of mortgage procurement costs. Depreciation and Depreciation and ---------------- ---------------- Amortization Amortization ------------ ------------ Three Months Ended Six Months Ended ------------------ ---------------- July 31, July 31, ------- ------- 2009 2008 2009 2008 ------------- ------------- Full Consolidation $67,853 $69,616 $134,311 $135,622 Non-Real Estate (3,508) (3,502) (6,960) (6,821) ------ ------ ------ ------ Real Estate Groups Full Consolidation 64,345 66,114 127,351 128,801 Real Estate Groups related to noncontrolling interest (318) (1,548) (1,725) (2,531) Real Estate Groups Unconsolidated 10,997 8,325 21,419 16,768 Real Estate Groups Discontinued Operations - 747 107 1,410 --- --- --- ----- Real Estate Groups Pro-Rata Consolidation $75,024 $73,638 $147,152 $144,448 ======= ======= ======== ======== Amortization of Amortization of --------------- --------------- Mortgage Procurement Mortgage Procurement -------------------- -------------------- Costs Costs ----- ----- Three Months Ended Six Months Ended ------------------ ---------------- July 31, July 31, ------- ------- 2009 2008 2009 2008 ------------- ------------- Full Consolidation $3,450 $3,082 $7,121 $5,934 Non-Real Estate - - - - --- --- --- --- Real Estate Groups Full Consolidation 3,450 3,082 7,121 5,934 Real Estate Groups related to noncontrolling interest (163) (117) (323) (269) Real Estate Groups Unconsolidated 536 396 1,042 942 Real Estate Groups Discontinued Operations - 87 5 184 --- --- --- --- Real Estate Groups Pro-Rata Consolidation $3,823 $3,448 $7,845 $6,791 ====== ====== ====== ====== Forest City Enterprises, Inc. and Subsidiaries Financial Highlights Six Months Ended July 31, 2009 and 2008 (in thousands) Three Months Ended Six Months Ended ------------------ ---------------- July 31, July 31, ------- ------- 2009 2008 2009 2008 -------------- -------------- (in thousands) (in thousands) 8) The following table provides detail of Income Tax Expense (Benefit): (A) Operating earnings Current $(6,107) $(11,613) $(13,438) $(11,894) Deferred 10,755 17,522 (42) (2,454) ------ ------ --- ------ 4,648 5,909 (13,480) (14,348) ----- ----- ------- ------- (B) Impairment of real estate Deferred (563) (141) (999) (141) Deferred - Unconsolidated entities (4,616) (2,187) (8,323) (2,187) ------ ------ ------ ------ Subtotal (5,179) (2,328) (9,322) (2,328) ------ ------ ------ ------ (C) Gain on disposition of other investments Current - Non-Real Estate Groups - - - - Deferred - Non- Real Estate Groups - - - 58 --- --- --- --- - - - 58 --- --- --- --- (D) Gain on disposition of unconsolidated entities Current - 707 - 1,339 Deferred - (787) - (1,079) --- --- --- ------ - (80) - 260 --- --- --- --- Subtotal (A) (B) (C) (D) Current (6,107) (10,906) (13,438) (10,555) Deferred 5,576 14,407 (9,364) (5,803) ----- ------ ------ ------ Income tax expense (531) 3,501 (22,802) (16,358) ---- ----- ------- ------- (E) Discontinued operations Operating earnings Current - (876) (8) (736) Deferred - 1,044 31 1,148 --- ----- --- ----- - 168 23 412 Gain on disposition of rental properties Current - - 3,785 - Deferred - 3,333 (2,021) 3,333 --- ----- ------ ----- - 3,333 1,764 3,333 --- ----- ----- ----- - 3,501 1,787 3,745 --- ----- ----- ----- Grand Total (A) (B) (C) (D) (E) Current (6,107) (11,782) (9,661) (11,291) Deferred 5,576 18,784 (11,354) (1,322) ----- ------ ------- ------ $(531) $7,002 $(21,015) $(12,613) ----- ------ -------- -------- Recap of Grand Total: Real Estate Groups Current (4,290) 7,671 (4,209) 10,072 Deferred 8,099 16,073 (3,499) 654 ----- ------ ------ --- 3,809 23,744 (7,708) 10,726 Non-Real Estate Groups Current (1,817) (19,453) (5,452) (21,363) Deferred (2,523) 2,711 (7,855) (1,976) ------ ----- ------ ------ (4,340) (16,742) (13,307) (23,339) ------ ------- ------- ------- Grand Total $(531) $7,002 $(21,015) $(12,613) ===== ====== ======== ======== Reconciliation of Net Operating Income (non-GAAP) to Net Earnings (Loss) (GAAP) (in thousands): Three Months Ended July 31, 2009 ------------------------------------ Plus Less Unconsol- Full Non- idated Plus Pro-Rata Consol- controll- Invest- Dis- Consol- idation ing ments at continued idation (GAAP) Interest Pro-Rata Operations (Non-GAAP) ---- -------- -------- ---------- ------- Revenues from real estate operations $316,735 $13,142 $97,417 $- $401,010 Exclude straight-line rent adjustment (1) (5,225) - - - (5,225) ------- ------ ------ ----- ------ Adjusted revenues 311,510 13,142 97,417 - 395,785 Operating expenses 165,544 5,657 72,992 - 232,879 Add back non-Real Estate depreciation and amortization (b) 3,508 - 2,839 - 6,347 Add back amortization of mortgage procurement costs for non-Real Estate Groups (d) - - 121 - 121 Exclude straight-line rent adjustment (2) (1,611) - - - (1,611) Exclude preference payment (586) - - - (586) ------- ----- ------ ----- ------- Adjusted operating expenses 166,855 5,657 75,952 - 237,150 Add interest and other income 11,594 203 732 - 12,123 Add equity in earnings (loss), including impairment of unconsolidated entities (17,438) (86) 17,733 - 381 Exclude impairment of unconsolidated entities 11,903 - (11,903) - - Exclude depreciation and amortization of unconsolidated entities (see below) 11,533 - (11,533) - - ------- ----- ------- ----- ------- Net Operating Income 162,247 7,602 16,494 - 171,139 Interest expense (80,223) (3,368) (16,494) - (93,349) Gain (loss) on early extinguishment of debt 9,063 - - - 9,063 Equity in earnings (loss), including impairment of unconsolidated entities 17,438 86 (17,733) - (381) Impairment of unconsolidated entities (11,903) - - - (11,903) Depreciation and amortization of unconsolidated entities (see above) (11,533) - 11,533 - - Gain on disposition of rental properties - - - - - Preferred return on disposition - - - - - Impairment of real estate (1,451) - - - (1,451) Depreciation and amortization - Real Estate Groups (a) (64,345) (318) (10,997) - (75,024) Amortization of mortgage procurement costs - Real Estate Groups (c) (3,450) (163) (536) - (3,823) Straight-line rent adjustment (1) + (2) 3,614 - - - 3,614 Preference payment (586) - - - (586) ------ ----- ------- ---- ---- Earnings (loss) before income taxes 18,871 3,839 (17,733) - (2,701) Income tax provision 531 - - - 531 Equity in earnings (loss), including impairment of unconsolidated entities (17,438) (86) 17,733 - 381 ------- --- ------ ---- --- Earnings (loss) from continuing operations 1,964 3,753 - - (1,789) Discontinued operations, net of tax - - - - - ----- ----- ----- ---- ------ Net earnings (loss) 1,964 3,753 - - (1,789) Net earnings attributable to noncontrolling interest (3,753) (3,753) - - - ------- ------ ----- ---- ------- Net loss attributable to Forest City Enterprises, Inc. $(1,789) $- $- $- $(1,789) ======= ====== ===== ==== ======= (a) Depreciation and amortization - Real Estate Groups $64,345 $318 $10,997 $- $75,024 (b) Depreciation and amortization - Non-Real Estate 3,508 - 2,839 - 6,347 ------- ---- ------- --- ------- Total depreciation and amortization $67,853 $318 $13,836 $- $81,371 ======= ==== ======= === ======= (c) Amortization of mortgage procurement costs - Real Estate Groups $3,450 $163 $536 $- $3,823 (d) Amortization of mortgage procurement costs - Non-Real Estate - - 121 - 121 ------ ---- ---- --- ------ Total amortization of mortgage procurement costs $3,450 $163 $657 $- $3,944 ====== ==== ==== === ====== Three Months Ended July 31, 2008 ------------------------------------ Plus Less Unconsol- Full Non- idated Plus Pro-Rata Consol- controll- Invest- Dis- Consol- idation ing ments at continued idation (GAAP) Interest Pro-Rata Operations (Non-GAAP) ---- -------- -------- ---------- -------- Revenues from real estate operations $327,591 $15,053 $108,196 $2,810 $423,544 Exclude straight-line rent adjustment (1) 2,727 - - (89) 2,638 ------- ------ ------- ----- ------- Adjusted revenues 330,318 15,053 108,196 2,721 426,182 Operating expenses 185,658 5,324 80,936 508 261,778 Add back non-Real Estate depreciation and amortization (b) 3,502 - 2,828 - 6,330 Add back amortization of mortgage procurement costs for non-Real Estate Groups (d) - - 60 - 60 Exclude straight-line rent adjustment (2) (1,610) - - - (1,610) Exclude preference payment (931) - - - (931) ------- ----- ------ --- ------- Adjusted operating expenses 186,619 5,324 83,824 508 265,627 Add interest and other income 12,884 652 1,482 34 13,748 Add equity in earnings (loss), including impairment of unconsolidated entities (5,942) (146) 6,868 - 1,072 Exclude impairment of unconsolidated entities 6,026 - (6,026) - - Exclude depreciation and amortization of unconsolidated entities (see below) 8,721 - (8,721) - - ------- ------ ------ ----- ------- Net Operating Income 165,388 10,235 17,975 2,247 175,375 Interest expense (81,403) (3,402) (17,767) (1,067) (96,835) Gain (loss) on early extinguishment of debt (52) - - - (52) Equity in earnings (loss), including impairment of unconsolidated entities 5,942 146 (6,868) - (1,072) Impairment of unconsolidated entities (6,026) - - - (6,026) Depreciation and amortization of unconsolidated entities (see above) (8,721) - 8,721 - - Gain on disposition of rental properties - - - 8,627 8,627 Preferred return on disposition - - (208) - (208) Impairment of real estate - - - - - Depreciation and amortization - Real Estate Groups (a) (66,114) (1,548) (8,325) (747) (73,638) Amortization of mortgage procurement costs - Real Estate Groups (c) (3,082) (117) (396) (87) (3,448) Straight-line rent adjustment (1) + (2) (4,337) - - 89 (4,248) Preference payment (931) - - - (931) ------ ----- ------ ----- ---- Earnings (loss) before income taxes 664 5,314 (6,868) 9,062 (2,456) Income tax provision (3,501) - - (3,501) (7,002) Equity in earnings (loss), including impairment of unconsolidated entities (5,942) (146) 6,868 - 1,072 ------ ---- ----- ----- ------ Earnings (loss) from continuing operations (8,779) 5,168 - 5,561 (8,386) Discontinued operations, net of tax 5,561 - - (5,561) - ------ ----- --- ------ ------ Net earnings (loss) (3,218) 5,168 - - (8,386) Net earnings attributable to noncontrolling interest (5,168) (5,168) - - - ------- ------ --- --- ------- Net loss attributable to Forest City Enterprises, Inc. $(8,386) $- $- $- $(8,386) ======= === === === ======= (a) Depreciation and amortization - Real Estate Groups $66,114 $1,548 $8,325 $747 $73,638 (b) Depreciation and amortization - Non-Real Estate 3,502 - 2,828 - 6,330 ------- ------ ------- ---- ------- Total depreciation and amortization $69,616 $1,548 $11,153 $747 $79,968 ======= ====== ======= ==== ======= (c) Amortization of mortgage procurement costs - Real Estate Groups $3,082 $117 $396 $87 $3,448 (d) Amortization of mortgage procurement costs - Non-Real Estate - - 60 - 60 ------ ---- ---- --- ------ Total amortization of mortgage procurement costs $3,082 $117 $456 $87 $3,508 ====== ==== ==== === ====== Reconciliation of Net Operating Income (non-GAAP) to Net Loss (GAAP) (in thousands): Six Months Ended July 31, 2009 ---------------------------------- Plus Unconsol- Plus Full Less idated Dis- Pro-Rata Consol- Noncon- invest- continued Consol- idation trolling ments at Oper- idated (GAAP) Interest Pro-Rata ations (Non-GAAP) ---- -------- -------- ------ -------- Revenues from real estate operations $629,764 $25,561 $188,292 $813 $793,308 Exclude straight- line rent adjustment (1) (9,624) - - (12) (9,636) ------ --- --- --- ------ Adjusted revenues 620,140 25,561 188,292 801 783,672 Operating expenses 360,391 11,302 136,070 320 485,479 Add back non-Real Estate depreciation and amortization (b) 6,960 - 9,997 - 16,957 Add back amortization of mortgage procurement costs for non-Real Estate Groups (d) - - 241 - 241 Exclude straight-line rent adjustment (2) (3,247) - - - (3,247) Exclude preference payment (1,171) - - - (1,171) ------ --- --- --- ------ Adjusted operating expenses 362,933 11,302 146,308 320 498,259 Add interest and other income 18,402 343 1,205 - 19,264 Add equity in earnings (loss), including impairment of unconsolidated entities (33,304) (68) 33,685 - 449 Exclude gain on disposition of unconsolidated entities - - - - - Exclude impairment of unconsolidated entities 21,463 - (21,463) - - Exclude depreciation and amortization of unconsolidated entities (see below) 22,461 - (22,461) - - ------ --- ------- --- --- Net Operating Income 286,229 14,534 32,950 481 305,126 Interest expense (171,931) (6,800) (32,774) (322) (198,227) Gain (loss) on early extinguishment of debt 9,063 - (176) - 8,887 Equity in earnings (loss), including impairment of unconsolidated entities 33,304 68 (33,685) - (449) Gain on disposition of unconsolidated entities - - - - - Impairment of unconsolidated entities (21,463) - - - (21,463) Depreciation and amortization of unconsolidated entities (see above) (22,461) - 22,461 - - Gain on disposition of rental properties and other investments - - - 4,548 4,548 Preferred return on disposition - - - - - Impairment of real estate (2,575) - - - (2,575) Depreciation and amortization - Real Estate Groups (a) (127,351) (1,725) (21,419) (107) (147,152) Amortization of mortgage procurement costs - Real Estate Groups (c) (7,121) (323) (1,042) (5) (7,845) Straight-line rent adjustment (1) + (2) 6,377 - - 12 6,389 Preference payment (1,171) - - - (1,171) ------ --- --- --- ------ Earnings (loss) before income taxes (19,100) 5,754 (33,685) 4,607 (53,932) Income tax provision 22,802 - - (1,787) 21,015 Equity in earnings (loss), including impairment of unconsolidated entities (33,304) (68) 33,685 - 449 Earnings (loss) from continuing operations (29,602) 5,686 - 2,820 (32,468) Discontinued operations, net of tax 2,820 - - (2,820) - ------- --- --- ----- --- Net earnings (loss) (26,782) 5,686 - - (32,468) Net earnings attributable to noncontrolling interest (5,686) (5,686) - - - ----- ----- --- --- --- Net loss attributable to Forest City Enterprises, Inc. $(32,468) $- $- $- $(32,468) ====== === === === ====== (a) Depreciation and amortization - Real Estate Groups $127,351 $1,725 $21,419 $107 $147,152 (b) Depreciation an amortization - Non-Real Estate 6,960 - 9,997 - 16,957 ----- --- ----- --- ------ Total depreciation and amortization $134,311 $1,725 $31,416 $107 $164,109 ======== ====== ======= ==== ======== (c) Amortization of mortgage procurement costs - Real Estate Groups $7,121 $323 $1,042 $5 $7,845 (d) Amortization of mortgage procurement costs - Non-Real Estate - - 241 - 241 --- --- --- --- --- Total amortization of mortgage procurement costs $7,121 $323 $1,283 $5 $8,086 ====== ==== ====== === ====== Reconciliation of Net Operating Income (non-GAAP) to Net Earnings(Loss) (GAAP) (in thousands): Six Months Ended July 31, 2008 ---------------------------------- Plus Unconsol- Plus Full Less idated Dis- Pro-Rata Consol- Noncon- invest- continued Consol- idation trolling ments at Oper- idated (GAAP) Interest Pro-Rata ations (Non-GAAP) ---- -------- -------- ------ -------- Revenues from real estate operations $632,601 $31,566 $199,342 $5,990 $806,367 Exclude straight- line rent adjustment (1) (1,993) - - (99) (2,092) ----- --- --- --- ----- Adjusted revenues 630,608 31,566 199,342 5,891 804,275 Operating expenses 393,014 17,043 145,511 1,039 522,521 Add back non-Real Estate depreciation and amortization (b) 6,821 - 13,439 - 20,260 Add back amortization of mortgage procurement costs for non-Real Estate Groups (d) - - 105 - 105 Exclude straight- line rent adjustment (2) (3,193) - - - (3,193) Exclude preference payment (1,867) - - - (1,867) ----- --- --- --- ----- Adjusted operating expenses 394,775 17,043 159,055 1,039 537,826 Add interest and other income 21,282 1,127 3,083 41 23,279 Add equity in earnings (loss), including impairment of unconsolidated entities (15,589) (127) 15,895 - 433 Exclude gain on disposition of unconsolidated entities (881) - 881 - - Exclude impairment of unconsolidated entities 6,026 - (6,026) - - Exclude depreciation and amortization of unconsolidated entities (see below) 17,710 - (17,710) - - ------ --- ------ --- --- Net Operating Income 264,381 15,523 36,410 4,893 290,161 Interest expense (163,876) (6,742) (36,180) (2,331) (195,645) Gain (loss) on early extinguishment of debt (5,231) (119) (22) - (5,134) Equity in earnings (loss), including impairment of unconsolidated entities 15,589 127 (15,895) - (433) Gain on disposition of unconsolidated entities 881 - - - 881 Impairment of unconsolidated entities (6,026) - - - (6,026) Depreciation and amortization of unconsolidated entities (see above) (17,710) - 17,710 - - Gain on disposition of rental properties and other investments 150 - - 8,627 8,777 Preferred return on disposition - - (208) - (208) Impairment of real estate - - - - - Depreciation and amortization - Real Estate Groups (a) (128,801) (2,531) (16,768) (1,410) (144,448) Amortization of mortgage procurement costs - Real Estate Groups (c) (5,934) (269) (942) (184) (6,791) Straight-line rent adjustment (1) + (2) (1,200) - - 99 (1,101) Preference payment (1,867) - - - (1,867) Earnings (loss) before income taxes (49,644) 5,989 (15,895) 9,694 (61,834) Income tax provision 16,358 - - (3,745) 12,613 Equity in earnings (loss), including impairment of unconsolidated entities (15,589) (127) 15,895 - 433 Earnings (loss) from continuing operations (48,875) 5,862 - 5,949 (48,788) Discontinued operations, net of tax 5,949 - - (5,949) - ----- --- --- ----- --- Net earnings (loss) (42,926) 5,862 - - (48,788) Net earnings attributable to noncontrolling interest (5,862) (5,862) - - - ----- ----- --- --- --- Net loss attributable to Forest City Enterprises, Inc. $(48,788) $- $- $- $(48,788) ======== === === === ======== (a) Depreciation and amortization - Real Estate Groups $128,801 $2,531 $16,768 $1,410 $144,448 (b) Depreciation and amortization - Non-Real Estate 6,821 - 13,439 - 20,260 ----- --- ------ --- ------ Total depreciation and amortization $135,622 $2,531 $30,207 $1,410 $164,708 ========= ======= ======= ====== ======== (c) Amortization of mortgage procurement costs - Real Estate Groups $5,934 $269 $942 $184 $6,791 (d) Amortization of mortgage procurement costs - Non- Real Estate - - 105 - 105 Total amortization of mortgage procurement costs $5,934 $269 $1,047 $184 $6,896 ====== ==== ====== ==== ====== Forest City Enterprises, Inc. and Subsidiaries Supplemental Operating Information Net Operating Income (dollars in thousands) Three Months Ended July 31, 2009 Plus Full Less Unconsoli Plus Pro-Rata Consolida Non- -dated Dis- Consolida -tion controlling Investments continued -tion (GAAP) Interest at Pro-Rata Operations (Non-GAAP) ---- -------- ----------- ---------- -------- Commercial Group Retail Comparable $56,098 $3,005 $5,598 $- $58,691 ---------- ------- ------ ------ --- ------- Total 63,120 3,014 5,663 - 65,769 Office Buildings Comparable 51,674 2,636 2,346 - 51,384 ---------- ------- ------ ------ --- ------- Total 66,156 2,741 2,402 - 65,817 Hotels Comparable 4,144 - - - 4,144 ---------- ------- ------ ------ --- ------- Total 4,144 - - - 4,144 Earnings from Commercial Land Sales 1,733 257 - - 1,476 Other (1) (1,392) 184 (552) - (2,128) ---------- ------- ------ ------ --- ------- Total Commercial Group Comparable 111,916 5,641 7,944 - 114,219 ---------- ------- ------ ------ --- ------- Total 133,761 6,196 7,513 - 135,078 Residential Group Apartments Comparable 27,834 652 6,050 - 33,232 ---------- ------- ------ ------ --- ------- Total 34,363 1,128 6,738 - 39,973 Military Housing Comparable (2) - - - - - ---------- ------- ------ ------ --- ------- Total 13,286 138 243 - 13,391 Other (1) (6,846) 36 - - (6,882) ---------- ------- ------ ------ --- ------- Total Residential Group Comparable 27,834 652 6,050 - 33,232 ---------- ------- ------ ------ --- ------- Total 40,803 1,302 6,981 - 46,482 Total Rental Properties Comparable 139,750 6,293 13,994 - 147,451 ---------- ------- ------ ------ --- ------- Total 174,564 7,498 14,494 - 181,560 Land Development Group 2,065 104 48 - 2,009 The Nets (8,307) - 1,952 - (6,355) Corporate Activities (6,075) - - - (6,075) ------ --- --- --- ------ Grand Total $162,247 $7,602 $16,494 $- $171,139 Net Operating Income (dollars in thousands) Three Months Ended July 31, 2008 Plus Full Less Unconsoli Plus Pro-Rata Consolida Non- -dated Dis- Consolida -tion controlling Investments continued -tion (GAAP) Interest at Pro-Rata Operations (Non-GAAP) ---- -------- ----------- ---------- -------- Commercial Group Retail Comparable $58,872 $3,012 $5,470 $- $61,330 ---------- ------- ------ ------ --- ------- Total 60,929 3,342 5,515 565 63,667 Office Buildings Comparable 47,636 2,124 2,451 - 47,963 ---------- ------ ----- ----- --- ------ Total 70,342 2,858 2,451 - 69,935 Hotels Comparable 5,507 - - - 5,507 ---------- ----- --- --- --- ----- Total 5,507 - - - 5,507 Earnings from Commercial Land Sales 4,855 2,005 - - 2,850 Other (1) (2,847) 472 (555) - (3,874) ------ --- ---- --- ------ Total Commercial Group Comparable 112,015 5,136 7,921 - 114,800 ---------- ------- ----- ----- --- ------- Total 138,786 8,677 7,411 565 138,085 Residential Group Apartments Comparable 28,743 723 6,666 - 34,686 ---------- ------ --- ----- --- ------ Total 29,799 709 7,790 1,682 38,562 Military Housing Comparable (2) - - - - - --------- --- --- --- --- --- Total 15,679 396 936 - 16,219 Other (1) (6,774) 52 - - (6,826) ------ -- --- --- ------ Total Residential Group Comparable 28,743 723 6,666 - 34,686 ---------- ------ --- ----- --- ------ Total 38,704 1,157 8,726 1,682 47,955 Total Rental Properties Comparable 140,758 5,859 14,587 - 149,486 ---------- ------- ----- ------ --- ------- Total 177,490 9,834 16,137 2,247 186,040 Land Development Group 6,717 401 148 - 6,464 The Nets (8,548) - 1,690 - (6,858) Corporate Activities (10,271) - - - (10,271) Grand Total $165,388 $10,235 $17,975 $2,247 $175,375 % Change Full Pro-Rata Consolidation Consolidation (GAAP) (Non-GAAP) ------------- ------------- Commercial Group Retail Comparable (4.7%) (4.3%) ---------- Total Office Buildings Comparable 8.5% 7.1% ---------- Total Hotels Comparable (24.8%) (24.8%) ---------- Total Earnings from Commercial Land Sales Other (1) Total Commercial Group Comparable (0.1%) (0.5%) ---------- Total Residential Group Apartments Comparable (3.2%) (4.2%) ---------- Total Military Housing Comparable (2) -------------- Total Other (1) Total Residential Group Comparable (3.2%) (4.2%) ---------- Total Total Rental Properties Comparable (0.7%) (1.4%) ---------- Total Land Development Group The Nets Corporate Activities ----------- Grand Total (1) Includes write-offs of abandoned development projects, non-capitalizable development costs and unallocated management and service company overhead, net of historic and new market tax credit income. (2) Comparable NOI for Military Housing commences once the operating projects complete initial development phase. Forest City Enterprises, Inc. and Subsidiaries Supplemental Operating Information Net Operating Income (dollars in thousands) Six Months Ended July 31, 2009 Plus Full Less Unconsoli- Plus Pro-Rata Consolida- Non- dated Dis- Consolida- tion controlling Investments continued tion (GAAP) Interest at Pro-Rata Operations (Non-GAAP) ---- -------- ----------- ---------- -------- Commercial Group Retail Comparable $114,736 $5,768 $11,052 $- $120,020 ---------- -------- ------ ------- --- -------- Total 126,648 5,486 11,171 481 132,814 Office Buildings Comparable 102,066 5,220 4,684 - 101,530 ---------- ------- ----- ----- --- ------- Total 129,261 5,303 4,789 - 128,747 Hotels Comparable 5,330 - - - 5,330 ---------- ----- ----- --- --- ------- Total 5,330 - - - 5,330 Earnings from Commercial Land Sales 4,471 850 - - 3,621 Other (1) (9,472) 549 (721) - (10,742) ------ --- --- --- ------ Total Commercial Group Comparable 222,132 10,988 15,736 - 226,880 ---------- ------- ------ ------ --- ------- Total 256,238 12,188 15,239 481 259,770 Residential Group Apartments Comparable 55,244 1,389 12,137 - 65,992 ---------- ------ ----- ------ --- ------ Total 65,043 2,186 14,143 - 77,000 Military Housing Comparable (2) - - - - - --------- --- --- --- --- --- Total 20,984 38 454 - 21,400 Other (1) (17,205) 72 - - (17,277) ------ --- --- --- ------ Total Residential Group Comparable 55,244 1,389 12,137 - 65,992 ---------- ------ ----- ------ --- ------ Total 68,822 2,296 14,597 - 81,123 Total Rental Properties Comparable 277,376 12,377 27,873 - 292,872 ---------- ------- ------ ------ --- ------- Total 325,060 14,484 29,836 481 340,893 Land Development Group 2,772 50 165 - 2,887 The Nets (18,988) - 2,949 - (16,039) Corporate Activities (22,615) - - - (22,615) Grand Total $286,229 $14,534 $32,950 $481 $305,126 Net Operating Income (dollars in thousands) Six Months Ended July 31, 2008 Plus Full Less Unconsoli Plus Pro-Rata Consolida Non- -dated Dis- Consolida -tion controlling Investments continued -tion (GAAP) Interest at Pro-Rata Operations (Non-GAAP) ---- -------- ----------- ---------- -------- Commercial Group Retail Comparable $118,503 $5,699 $10,924 $- $123,728 ---------- -------- ------ ------- --- -------- Total 121,514 6,314 11,044 1,217 127,461 Office Buildings Comparable 94,225 4,173 5,132 - 95,184 ---------- ------ ----- ----- --- ------ Total 125,059 5,247 5,239 - 125,051 Hotels Comparable 7,104 - - - 7,104 ---------- ----- --- --- --- ----- Total 7,104 - - - 7,104 Earnings from Commercial Land Sales 5,879 2,242 - - 3,637 Other (1) (27,273) (595) (1,081) - (27,759) ------ --- ----- --- ------ Total Commercial Group Comparable 219,832 9,872 16,056 - 226,016 ---------- ------- ----- ------ --- ------- Total 232,283 13,208 15,202 1,217 235,494 Residential Group Apartments Comparable 55,884 1,418 13,658 - 68,124 ---------- ------ ----- ------ --- ------ Total 60,505 1,409 15,567 3,676 78,339 Military Housing Comparable (2) - - - - - --------- --- --- --- --- --- Total 25,639 396 2,060 - 27,303 Other (1) (14,600) 91 - - (14,691) ------- --- --- --- ------ Total Residential Group Comparable 55,884 1,418 13,658 - 68,124 ---------- ------ ----- ------ --- ------ Total 71,544 1,896 17,627 3,676 90,951 Total Rental Properties Comparable 275,716 11,290 29,714 - 294,140 ---------- ------- ------ ------ --- ------- Total 303,827 15,104 32,829 4,893 326,445 Land Development Group 6,158 419 278 - 6,017 The Nets (22,021) - 3,303 - (18,718) Corporate Activities (23,583) - - - (23,583) Grand Total $264,381 $15,523 $36,410 $4,893 $290,161 % Change Full Pro-Rata Consolidation Consolidation (GAAP) (Non-GAAP) ------------- ------------- Commercial Group Retail Comparable (3.2%) (3.0%) ---------- Total Office Buildings Comparable 8.3% 6.7% ---------- Total Hotels Comparable (25.0%) (25.0%) ---------- Total Earnings from Commercial Land Sales Other (1) Total Commercial Group Comparable 1.0% 0.4% ---------- Total Residential Group Apartments Comparable (1.1%) (3.1%) ---------- Total Military Housing Comparable (2) -------------- Total Other (1) Total Residential Group Comparable (1.1%) (3.1%) ---------- Total Total Rental Properties Comparable 0.6% (0.4%) ---------- Total Land Development Group The Nets Corporate Activities ----------- Grand Total (1) Includes write-offs of abandoned development projects, non- capitalizable development costs and unallocated management and service company overhead, net of historic and new market tax credit income. (2) Comparable NOI for Military Housing commences once the operating projects complete initial development phase. Development Pipeline -------------------------- July 31, 2009 2009 Openings and Acquisitions (1) Date Pro-Rata Dev (D) Opened / FCE Legal FCE % (a) Property Location Acq (A) Acquired Ownership % (a) (1) -------- -------- ------ -------- -------------- -------- Retail Centers: Promenade at Temecula Expansion Temecula, CA D Q1-09 75.0% 100.0% Total Openings and Acquisitions Residential Phased-In Units (d) (e): Cobblestone Court Painesville, OH D 2006-10 50.0% 50.0% Sutton Landing Brimfield, OH D 2007-09 50.0% 50.0% Stratford Crossing Wadsworth, OH D 2007-10 50.0% 50.0% Total (f) Cost at FCE Cost at Full Total Cost Pro-Rata Share Sq. ft./ Gross Consolidation at 100% (Non-GAAP) (c) No. of Leasable Property (GAAP) (b) (2) (1) X (2) Units Area --------- ------------- ----------- ------------ ----- -------- (in millions) ------------------------------------------------------------ Retail Centers: Promenade at Temecula Expansion $106.5 $106.5 $106.5 127,000 127,000 ------ ------ ------ ======= ======= ------ ------ ------ Total Openings and Acqui- sitions $106.5 $106.5 $106.5 ====== ====== ====== Residential Phased-In Units (d) (e): Opened in '09 / Total Cobblestone Court $0.0 $30.2 $15.1 48/400 Sutton Landing 0.0 15.9 8.0 36/216 Stratford Crossing 0.0 25.3 12.7 36/348 --- ---- ---- ------ Total (f) $0.0 $71.4 $35.8 120/964 ==== ===== ===== ======= See attached footnotes. Development Pipeline -------------------------- July 31, 2009 Under Construction (7) FCE Pro-Rata Dev (D) Anticipat- Legal Owner- FCE % (a) Property Location Acq (A) ed Opening ship % (a) (1) -------- -------- ------ ---------- ----------- --------- Retail Centers: East River Plaza (d) (e) Manhattan, NY D Q4-09/10 35.0% 50.0% Village at Gulfstream Park Hallandale Beach, FL D Q1-10 50.0% 50.0% Ridge Hill (e) (k) Yonkers, NY D 2011/2012 70.0% 100.0% Office: Waterfront Station - East 4th & West 4th Buildings Washington, D.C. D Q1-10 45.0% 45.0% Residential: 80 Dekalb Avenue (e) Brooklyn, NY D Q3-09/10 70.0% 100.0% Presidio San Francisco, CA D Q2-10 100.0% 100.0% Beekman (e) Manhattan, NY D Q1-11/12 49.0% 70.0% Total Under Construction (g) Residential Phased-In Units (d) (e): Cobblestone Court Painesville, OH D 2006-10 50.0% 50.0% Stratford Crossing Wadsworth, OH D 2007-10 50.0% 50.0% Total (h) Cost at Cost at FCE Pro- Gross Full Consoli- Total Cost Rata Share Sq. ft./ Leas- Lease dation at 100% (Non-GAAP) (c) No. of able Commit- Property (GAAP) (b) (2) (1) X (2) Units Area ment -------- ----------- ----------- -------- ---------- ------ ------ (in millions) ---------------------------------------------------------------- Retail Centers: East River Plaza (d) (e) $0.0 $392.2 $196.1 517,000 517,000 76% Village at Gulfstream Park 207.0 207.0 103.5 497,000 497,000 (i) 65% Ridge Hill (e) (k) 798.7 798.7 798.7 1,336,000 1,336,000 (j) 28% ----- ----- ----- --------- --------- $1,005.7 $1,397.9 $1,098.3 2,350,000 2,350,000 -------- -------- -------- ========= ========= Office: Waterfront Station - East 4th & West 4th Buildings $329.9 $329.9 $148.5 628,000 (l) 97% ------ ------ ------ ======= Residential: 80 Dekalb Avenue (e) $163.3 $163.3 $163.3 365 Presidio 110.5 110.5 110.5 161 Beekman (e) 875.7 875.7 613.0 904 ----- ----- ----- --- $1,149.5 $1,149.5 $886.8 1,430 -------- -------- ----- ===== Total Under Construction (g) $2,485.1 $2,877.3 $2,133.6 ======== ======== ======== Residential Phased-In Units (d) (e): Under Const. / Total Cobblestone Court $0.0 $30.2 $15.1 48/400 Stratford Crossing $0.0 25.3 12.7 96/348 ---- ---- ------ ------- Total (h) $0.0 $55.5 $27.8 144/748 ===== ===== ======= ======= See attached footnotes. Military Housing - see footnote m Development Pipeline 2009 FOOTNOTES ( a ) As is customary within the real estate industry, the Company invests in certain real estate projects through joint ventures. For some of these projects, the Company provides funding at percentages that differ from the Company's legal ownership. ( b ) Amounts are presented on the full consolidation method of accounting, a GAAP measure. Under full consolidation, costs are reported as consolidated at 100 percent if we are deemed to have control or to be the primary beneficiary of our investments in the variable interest entity ("VIE"). ( c ) Cost at pro-rata share represents Forest City's share of cost, based on the Company's pro-rata ownership of each property (a non-GAAP measure). Under the pro-rata consolidation method of accounting the Company determines its pro-rata share by multiplying its pro-rata ownership by the total cost of the applicable property. ( d ) Reported under the equity method of accounting. This method represents a GAAP measure for investments in which the Company is not deemed to have control or to be the primary beneficiary of our investments in a VIE. ( e ) Phased-in openings. Costs are representative of the total project. ( f ) The difference between the full consolidation cost amount (GAAP) of $0.0 million to the Company's pro-rata share (a non-GAAP measure) of $35.8 million consists of the Company's share of cost for unconsolidated investments of $35.8 million. ( g ) The difference between the full consolidation cost amount (GAAP) of $2,485.1 million to the Company's pro-rata share (a non-GAAP measure) of $2,133.6 million consists of a reduction to full consolidation for noncontrolling interest of $547.6 million of cost and the addition of its share of cost for unconsolidated investments of $196.1 million. ( h ) The difference between the full consolidation cost amount (GAAP) of $0.0 million to the Company's pro-rata share (a non-GAAP measure) of $27.8 million consists of the Company's share of cost for unconsolidated investments of $27.8 million. ( i ) Includes 89,000 square feet of office space. Excluding this office space from the calculation of the preleased percentage would result in the retail space being 79% preleased. ( j ) Includes 156,000 square feet of office space. ( k ) Costs and total Phase 1 square footage have increased as a result of additional tenant allowances and expansion to include retail space originally planned for a later phase. ( l ) Includes 85,000 square feet of retail space. ( m ) Below is a summary of our equity method investments for Military Housing Development projects. The Company provides development, construction, and management services for these projects and receives agreed upon fees for these services. Antici- FCE Cost at Total Sq.ft./ pated Pro- Full Consoli- Cost No. of Property Location Opening Rata % (f) dation (a) at 100% Units -------- -------- ------- --------- ------------ ------ ------ (in millions) ----------- Military Housing Under Construc- tion (7) Midwest Millington Memphis, TN 2008-2010 * 0.0 37.0 318 Navy Midwest Chicago, IL 2006-2010 * 0.0 248.8 1,658 Air Force Academy Colorado Springs, CO 2007-2009 50.0% 0.0 69.5 427 Marines, Hawaii Increment II Honolulu, HI 2007-2011 * 0.0 293.3 1,175 Navy, Hawaii Increment III Honolulu, HI 2007-2011 * 0.0 535.1 2,520 Pacific Northwest Communities Seattle, WA 2007-2010 * 0.0 280.5 2,986 Hawaii Phase IV Kaneohe, HI 2007-2014 * 0.0 364.0 917 --- ----- --- Total Military Housing Under Construction 0.0 $1,828.2 10,001 === ======== ====== * The Company's share of residual cash flow ranges from 0-20% during the life cycle of the project. DATASOURCE: Forest City Enterprises, Inc. CONTACT: Robert O'Brien, Executive Vice President - Chief Financial Officer, +1-216-621-6060, or Tom Kmiecik, Assistant Treasurer, +1-216-621-6060, Jeff Linton, Vice President - Corporate Communication, +1-216-621-6060, all of Forest City Enterprises, Inc. Web Site: http://www.forestcity.net/

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