AvalonBay Communities Inc. Announces First Quarter 2006 Operating Results.ALEXANDRIA Alexandria, city, Egypt Alexandria, Arabic Al Iskandariyah, city (1996 pop. 3,328,196), N Egypt, on the Mediterranean Sea. It is at the western extremity of the Nile River delta, situated on a narrow isthmus between the sea and Lake Mareotis (Maryut). , Va. -- AvalonBay Communities AvalonBay Communities, Inc. (NYSE: AVB) is an Alexandria, Virginia-based public real estate investment trust. The company specializes in acquiring, developing, redeveloping and managing high-quality apartment communities in high barrier-to-entry markets, such as the Northeast, , Inc. (NYSE NYSE See: New York Stock Exchange :AVB AVB Allgemeine Versicherungsbedingungen AVB Armin Van Buuren (musician) AVB Atrioventricular Block AVB Association Vaincre le Bègaiement AVB Acappella Vocal Band (men's Christian a cappella group) ) reported today that Net Income Available to Common Stockholders for the quarter ended March 31, 2006 was $111,902,000. This resulted in Earnings per Share - diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ("EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. ") of $1.49 for the quarter ended March 31, 2006, compared to $0.92 for the comparable period of 2005, a per share increase of 62.0%. This increase is primarily attributable to the timing and volume of gains on the sale of assets in the quarter ended March 31, 2006 as compared to the same period of 2005, coupled with growth in income from existing and newly developed communities. Funds from Operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. attributable to common stockholders - diluted ("FFO FFO See: Funds from operations ") for the quarter ended March 31, 2006 was $86,844,000, or $1.15 per share compared to $71,249,000, or $0.96 per share for the comparable period of 2005, a per share increase of 19.8%. FFO per share for the quarter ended March 31, 2006 includes $0.17 per share related to the sale of a land parcel. FFO per share for the quarter ended March 31, 2005 includes several non-routine items totaling $0.07 per share. Adjusting for these non-routine items in both periods, FFO per share increased 10.1%, driven primarily by improved community operating results and contributions from newly developed communities. Commenting on the Company's results, Bryce Bryce is a given name and surname in English. It can refer to: People
British lawyer, politician, and Labour Party leader who was elected prime minister in 1997. , Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. said, "We enjoyed double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. FFO growth, which was driven by 7.5% NOI NOI Net Operating Income NOI Notice of Intent NOI Nation of Islam NOI Notice of Inquiry NOI Neuro Orthopaedic Institute NOI New Organizing Institute NOI Notice of Interest NOI No Offense Intended NOI National Olympiad in Informatics growth. This was our strongest operating performance in five years and underscores the increasing value of our operating portfolio and of our communities under development and in planning." Operating Results for the Quarter Ended March 31, 2006 Compared to the Quarter Ended March 31, 2005 For the Company, including discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. , total revenue increased by $6,787,000, or 4.0% to $176,789,000. For Established Communities, rental revenue increased 6.1%, comprised of an increase in Average Rental Rates of 5.0% and an increase in Economic Occupancy of 1.1%. As a result, total revenue for Established Communities increased $7,802,000 to $135,487,000. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for Established Communities increased $1,177,000 or 2.9% to $41,897,000. Accordingly, Net Operating Income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. ("NOI") for Established Communities increased by $6,625,000 or 7.6%, to $93,590,000. The following table reflects the percentage changes in rental revenue, operating expenses and NOI for Established Communities from the first quarter of 2005 to the first quarter of 2006:
1Q 06 Compared to 1Q 05
----------------------------------------------------------------------
Rental Operating % of
Revenue Expenses NOI NOI (1)
--------- --------- --------- ---------
Northeast 4.4% 5.8% 3.8% 41.6%
Mid-Atlantic 8.4% (0.6%) 12.2% 17.8%
Midwest 0.7% 2.8% (0.7%) 2.1%
Pacific NW 7.8% 7.8% 7.7% 4.5%
No. California 6.8% 1.1% 9.4% 22.9%
So. California 6.6% (0.5%) 9.7% 11.1%
--------- --------- --------- ---------
Total 6.1% 2.9% 7.6% 100.0%
========= ========= ========= =========
(1) Total represents each region's % of total NOI from the Company,
including discontinued operations.
Cash concessions are recognized in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ") and are amortized over the approximate lease term, which is generally one year. The following table reflects the percentage changes in GAAP rental revenue and Rental Revenue with Concessions on a Cash Basis for our Established Communities:
1Q 06 vs 1Q 05
---------------
GAAP Rental Revenue 6.1%
Rental Revenue with Concessions on a Cash Basis 6.5%
Development and Redevelopment Activity The Company completed development of Avalon Avalon (ăv`əlŏn), in Celtic mythology, the blissful otherworld of the dead. In medieval romance it was the island to which the mortally wounded King Arthur was taken, and from which it was expected he would someday return. at Bedford Bedford, town, England Bedford, town (1991 pop. 75,632), county seat of Bedfordshire, central England, on the Ouse River. It is an important industrial center; diesel engines, pumps, turbines, agricultural machinery, electrical equipment, and transistors Center during the first quarter of 2006 for a Total Capital Cost of $25,300,000. Avalon at Bedford Center is a garden-style and townhome community containing 139 apartment homes and is located in the Boston, MA area. In addition, the Company commenced construction of two communities during the first quarter of 2006: Avalon on the Sound II, a high-rise community located in the New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , NY area, and Avalon Meydenbauer, a mid-rise community located in the Seattle, WA area. These two communities are expected to contain an aggregate of 956 apartment homes when completed for a Total Capital Cost of $268,500,000. The Company commenced redevelopment of two communities during the first quarter of 2006: 200 Arlington Place, located in the Chicago, IL area, and Avalon Walk, a two-phase community located in the Fairfield-New Haven, CT area. These communities contain an aggregate of 1,173 apartment homes. The expected Total Capital Cost to redevelop re·de·vel·op v. re·de·vel·oped, re·de·vel·op·ing, re·de·vel·ops v.tr. 1. To develop (something) again. 2. these communities is $18,700,000, excluding costs incurred prior to the start of redevelopment. Disposition Activity During the first quarter of 2006, the Company sold two communities, Avalon Estates, located in the Boston, MA area, and Avalon Cupertino, located in San Jose San Jose, city, United States San Jose (sănəzā`, săn hōzā`), city (1990 pop. 782,248), seat of Santa Clara co., W central Calif.; founded 1777, inc. 1850. , CA. These two communities, which contained a total of 473 apartment homes, were sold for an aggregate sales price of $122,550,000. The sale of these two communities resulted in a gain as reported in accordance with GAAP of $65,419,000 and an Economic Gain of $51,469,000. In April 2006, the Company sold Avalon Corners, located in the Fairfield-New Haven, CT area. This community contained 195 apartment homes and was sold for a price of $60,200,000. This resulted in a GAAP gain of approximately $31,900,000 and an Economic Gain of approximately $26,800,000. The weighted average Initial Year Market Cap Rate related to these three communities was 4.4%, and the Unleveraged IRR IRR In currencies, this is the abbreviation for the Iranian Rial. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. over an approximate eight year weighted average holding period was 16.6%. The buyers of these three assets intend to continue to operate these communities as rental apartments. In addition, the Company sold a parcel of land located in the Northern NJ area during the first quarter of 2006, for a sales price of $15,000,000. This land parcel was purchased in 1997 in connection with the development of the Tower at Avalon Cove, which was sold in December 2005. The sale of this land parcel resulted in a GAAP gain and an Economic Gain of $13,166,000. Investment Activity During the first quarter of 2006, AvalonBay Value Added Value Added The enhancement a company gives its product or service before offering the product to customers. Notes: This can either increase the products price or value. Fund, L.P. (the "Fund"), the private, discretionary investment vehicle in which the Company holds an equity interest of approximately 15%, acquired one community, Aurora Aurora, cities, United States Aurora (ərôr`ə, ô–). 1 City (1990 pop. 222,103), Adams and Arapahoe counties, N central Colo., a growing suburb on the east side of Denver; inc. 1903. at Yerba Buena yerba buena (yĕr`bə bwā`nə), trailing evergreen perennial (Micromeria chamissonis) of the family Labiatae (mint family). It is native to W North America and especially common to woodland areas along the Pacific coast. for $66,000,000. Aurora at Yerba Buena is a mixed-use community located in San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden , CA, containing 160 apartment homes and 32,000 square feet of fully leased retail space. The Company's pro rata [Latin, Proportionately.] A phrase that describes a division made according to a certain rate, percentage, or share. In a Bankruptcy case, when the debtor is insolvent, creditors generally agree to accept a pro rata share of what is owed to them. share of the capital invested in this acquisition is approximately $10,000,000. In addition, the Company transferred the assets of Avalon at Juanita Village, a 211 apartment-home community located in the Seattle, WA area, to a joint venture entity. The Company completed construction of Avalon at Juanita Village at the end of 2005 for a Total Capital Cost of $45,300,000. The Company was reimbursed for the Total Capital Cost upon transfer of the assets to the joint venture. The Company does not hold an equity interest in the joint venture, but retained a promoted residual interest Residual Interest A type of interest payment received by investors in a real estate mortgage investment conduit (REMIC). Notes: Investors receive interest payments after all required regular interest has been paid to investors within higher priority tranches. in the profits of the entity. Financing, Liquidity and Balance Sheet Statistics As of March 31, 2006, the Company had no outstanding balance under its $500,000,000 unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. credit facility. Leverage, calculated as total debt as a percentage of Total Market Capitalization Total Market Capitalization The total market value of all of a firm's outstanding securities. , was 21.8% at March 31, 2006. Unencumbered Unencumbered Property that is not subject to any creditor claims or liens. Notes: For example, if a house is owned free and clear (meaning the owner owes no mortgage to anyone), it is unencumbered. NOI for the year ended March 31, 2006 was approximately 85% and Interest Coverage for the first quarter of 2006 was 3.3 times. The Company currently has an effective shelf registration statement on file with the Securities and Exchange Commission. During the first quarter of 2006, the Company increased its debt and equity capacity under its shelf registration statement to $750,000,000. Second Quarter and Full Year Outlook The Company expects EPS in the range of $1.36 to $1.40 for the second quarter of 2006. The Company expects EPS in the range of $3.79 to $3.93 for the full year 2006. The Company expects Projected FFO per share in the range of $0.97 to $1.01 for the second quarter of 2006. The sale of the land parcel in the first quarter of 2006 was not included in the full year 2006 Projected FFO range provided on January 24, 2006. The Company is increasing its outlook for Projected FFO per share to a range of $4.18 to $4.32 for the full year 2006. This revised outlook reflects the gain on the sale of land during the first quarter 2006, as well as better than expected operating results in the first quarter of 2006. Second Quarter 2006 Conference Schedule Management is scheduled to present and conduct a question and answer session at the REITWeek 2006: NAREIT NAREIT National Association of Real Estate Investment Trusts Investor Forum on June 6 - 8, 2006, which may include reference to the Company's operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. and trends; development, redevelopment, disposition and acquisition activity; the Company's outlook and other business and financial matters affecting the Company. Details on how to access a webcast and/or related materials will be available at http://www.avalonbay.com/events on June 1, 2006. Other Matters The Company will hold a conference call on April 26, 2006 at 1:00 PM EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT to review and answer questions about its first quarter results, the Attachments (described below) and related matters. To participate on the call, dial 1-877-510-2397 domestically and 1-706-634-5877 internationally. To hear a replay of the call, which will be available from April 26, 2006 at 4:00 PM EDT until May 3, 2006 at 11:59 PM EDT, dial 1-800-642-1687 domestically and 1-706-645-9291 internationally, and use Access Code: 6627245. A webcast of the conference call will also be available at http://www.avalonbay.com/earnings, and an on-line playback Playback could mean:
The Company produces Earnings Release Attachments (the "Attachments") that provide detailed information regarding operating, development, redevelopment, disposition and acquisition activity. These Attachments are considered a part of this earnings release and are available in full with this earnings release via the Company's website at http://www.avalonbay.com/earnings and through e-mail distribution. To receive future press releases via e-mail, please send a request to IR@avalonbay.com. Some items referenced in the earnings release may require the Adobe adobe (ədō`bē): see rammed earth. adobe Handmade sun-dried bricks formed from a mixture of heavy clay and straw found in arid regions. Acrobat Reader The former name of Adobe Reader. See PDF. . If you do not have the Adobe Acrobat Reader, you may download it "Download It" is Clea's debut single. It was released in the UK on September 22, 2003 and missed the top 20 charting at #21. The single had average promotion, being performed in shows like Top of the Pops. at http://www.adobe.com/products/acrobat/readstep2.html. About AvalonBay Communities, Inc. As of March 31, 2006, the Company owned or held an ownership interest in 158 apartment communities containing 46,117 apartment homes in ten states and the District of Columbia District of Columbia, federal district (2000 pop. 572,059, a 5.7% decrease in population since the 1990 census), 69 sq mi (179 sq km), on the east bank of the Potomac River, coextensive with the city of Washington, D.C. (the capital of the United States). , of which 16 communities were under construction and four communities were under reconstruction. The Company is an equity REIT Equity REIT A Real Estate Investment Trust that assumes ownership status in the property it invests in enabling investors of the REIT to earn dividends on rental income from the property and appreciation in property resale. Antithesis of a Mortgage REIT. in the business of developing, redeveloping, acquiring and managing apartment communities in high barrier-to-entry markets of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . More information may be found on the Company's website at http://www.avalonbay.com. For additional information, please contact Thomas (language) Thomas - A language compatible with the language Dylan(TM). Thomas is NOT Dylan(TM). The first public release of a translator to Scheme by Matt Birkholz, Jim Miller, and Ron Weiss, written at Digital Equipment Corporation's Cambridge Research Laboratory runs J. Sargeant, Chief Financial Officer, at 1-703-317-4635 or Gary Tiedemann, Director of Investor Relations Investor relations The process by which the corporation communicates with its investors. , at 1-703-317-4704. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This release, including its Attachments, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these forward-looking statements by the Company's use of words such as "expects," "plans," "estimates," "projects," "intends," "believes" and similar expressions that do not relate to historical matters. Actual results may differ materially from those expressed or implied by the forward-looking statements as a result of risks and uncertainties, which include the following: changes in local employment conditions, demand for apartment homes, supply of competitive housing products, and other economic conditions may result in lower than expected occupancy and/or rental rates and adversely affect the profitability of our communities; increases in costs of materials, labor or other expenses may result in communities that we develop or redevelop failing to achieve expected profitability; delays in completing development, redevelopment and/or lease-up may result in increased financing and construction costs, and may delay and/or reduce the profitability of a community; debt and/or equity financing Equity Financing The act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. for development, redevelopment or acquisitions of communities may not be available on favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. terms; we may be unable to obtain, or experience delays in obtaining, necessary governmental permits and authorizations; or we may abandon development or redevelopment opportunities for which we have already incurred costs. Additional discussions of risks and uncertainties appear in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended December 31, 2005 under the headings "Risk Factors" and "Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations - Forward-Looking Statements." The Company does not undertake a duty to update forward-looking statements, including its expected operating results for the second quarter and full year 2006. The Company may, in its discretion, provide information in future public announcements regarding its outlook that may be of interest to the investment community. The format and extent of future outlooks may be different from the format and extent of the information contained in this release. Definitions and Reconciliations Non-GAAP financial measures and other capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. terms, as used in the text of this earnings release, are defined and further explained on Attachment 12, "Definitions and Reconciliations of Non-GAAP Financial Measures and Other Terms." Attachment 12 is included in the full earnings release available on the Company's website at http://www.avalonbay.com/earnings. This wire distribution includes only definitions and reconciliations of the following Non-GAAP financial measures: FFO is determined based on a definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). FFO is calculated by the Company as net income or loss computed in accordance with GAAP, adjusted for gains or losses on sales of previously depreciated Depreciated may refer to:
Q1 Q1
2006 2005
------------ ------------
Net income $ 114,077 $ 69,610
Dividends attributable to preferred stock (2,175) (2,175)
Depreciation - real estate assets,
including discontinued operations and joint
venture adjustments 40,262 40,950
Minority interest, including
discontinued operations 99 477
Gain on sale of previously depreciated
real estate assets (65,419) (37,613)
------------ ------------
FFO attributable to common stockholders $ 86,844 $ 71,249
============ ============
Average shares outstanding - diluted 75,290,124 74,258,296
EPS - diluted $ 1.49 $ 0.92
============ ============
FFO per common share - diluted $ 1.15 $ 0.96
============ ============
NOI is defined by the Company as total property revenue less direct property operating expenses (including property taxes), and excludes corporate-level income (including management, development and other fees), corporate-level property management and other indirect operating expenses, investments and investment management, net interest expense, general and administrative expense, joint venture income, minority interest, depreciation expense, gain on sale of real estate assets and income from discontinued operations. The Company considers NOI to be an appropriate supplemental measure to net income of operating performance of a community or communities because it helps both investors and management to understand the core operations of a community or communities prior to the allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of corporate-level property management overhead or general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. . This is more reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. of the operating performance of a community, and allows for an easier comparison of the operating performance of single assets or groups of assets. In addition, because prospective buyers of real estate have different overhead structures, with varying marginal impact to overhead by acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or groups of assets. A reconciliation of NOI (from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the ) to net income, as well as a breakdown of NOI by operating segment, is as follows (dollars in thousands):
Q1 Q1
2006 2005
-------------- --------------
Net income $114,077 $69,610
Property management and other
indirect operating expenses 8,631 7,129
Corporate-level other income (1,196) (548)
Investments and investment management 1,471 992
Interest expense, net 28,664 32,118
General and administrative expense 6,283 7,159
Joint venture income, minority interest (95) (6,070)
Depreciation expense 39,619 38,874
Gain on sale of real estate assets (78,585) (37,613)
Income from discontinued operations (1,770) (4,605)
-------------- --------------
NOI from continuing operations $117,099 $107,046
============== ==============
Established:
Northeast $33,073 $31,871
Mid-Atlantic 18,490 16,481
Midwest 1,666 1,677
Pacific NW 5,167 4,795
No. California 24,995 22,840
So. California 10,199 9,301
-------------- --------------
Total Established 93,590 86,965
-------------- --------------
Other Stabilized 14,287 12,395
Development/Redevelopment 9,222 7,686
-------------- --------------
NOI from continuing operations $117,099 $107,046
============== ==============
NOI as reported by the Company does not include the operating results from discontinued operations (i.e., assets sold or held for sale as of March 31, 2006). A reconciliation of NOI from communities sold or held for sale to net income for these communities is as follows (dollars in thousands):
Q1 Q1
2006 2005
-------------- --------------
Income from discontinued operations $ 1,770 $ 4,605
Interest expense, net -- 4
Depreciation expense 298 2,232
-------------- --------------
NOI from discontinued operations $ 2,068 $ 6,841
============== ==============
NOI from assets sold $ 296 $ 5,258
NOI from assets held for sale 1,772 1,583
-------------- --------------
NOI from discontinued operations $ 2,068 $ 6,841
============== ==============
Rental Revenue with Concessions on a Cash Basis is considered by the Company to be a supplemental measure to rental revenue in conformity with GAAP in helping investors to evaluate the impact of both current and historical concessions on GAAP based rental revenue and to more readily enable comparisons to revenue as reported by other companies. In addition, rental revenue (with concessions on a cash basis) allows an investor to understand the historical trend in cash concessions. A reconciliation of rental revenue from Established Communities in conformity with GAAP to rental revenue (with concessions on a cash basis) is as follows (dollars in thousands):
Q1 Q1
2006 2005
-------------- --------------
Rental revenue (GAAP basis) $ 135,412 $ 127,619
Concessions amortized 4,015 5,489
Concessions granted (1,776) (3,907)
-------------- --------------
Rental revenue (with concessions on a
cash basis) $ 137,651 $ 129,201
============== ==============
% change -- GAAP revenue 6.1%
% change -- cash revenue 6.5%
Economic Gain is calculated by the Company as the gain on sale in accordance with GAAP, less accumulated depreciation accumulated depreciation The total amount of depreciation that has been recorded for an asset since its date of acquisition. For example, a computer with a 5-year estimated life that was purchased for $2,000 would have accumulated depreciation of $800 [( through the date of sale and any other non-cash adjustments that may be required under GAAP accounting. Management generally considers Economic Gain to be an appropriate supplemental measure to gain on sale in accordance with GAAP because it helps investors to understand the relationship between the cash proceeds from a sale and the cash invested in the sold community. The Economic Gain for each of the communities presented is estimated based on their respective final settlement statements. A reconciliation of Economic Gain for the quarter ended March 31, 2006 to gain on sale in accordance with GAAP is presented on Attachment 11. For the disposition of Avalon Corners, which occurred subsequent to March 31, 2006, the Economic Gain of approximately $26,800,000 represents a GAAP gain of approximately $31,900,000 less accumulated depreciation of $5,100,000. Projected FFO, as provided within this release in the Company's outlook, is calculated on a consistent basis as historical FFO, and is therefore considered to be an appropriate supplemental measure to projected net income of projected operating performance. A reconciliation of the range provided for Projected FFO per share (diluted) for the second quarter and full year 2006 to the range provided for projected EPS (diluted) is as follows:
Low High
range range
--------- ---------
Projected EPS (diluted) - Q2 06 $ 1.36 $ 1.40
Projected depreciation (real estate related) 0.53 0.57
Projected gain on sale of operating communities (0.92) (0.96)
--------- ---------
Projected FFO per share (diluted) - Q2 06 $ 0.97 $ 1.01
========= =========
Projected EPS (diluted) - Full Year 2006 $ 3.79 $ 3.93
Projected depreciation (real estate related) 2.17 2.21
Projected gain on sale of operating communities (1.78) (1.82)
--------- ---------
Projected FFO per share (diluted) - Full Year 2006 $ 4.18 $ 4.32
========= =========
Interest Coverage is calculated by the Company as EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become from continuing operations, excluding land gains, divided by the sum of interest expense, net, and preferred dividends preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) . Interest Coverage is presented by the Company because it provides rating agencies and investors an additional means of comparing our liquidity to that of other companies. EBITDA is defined by the Company as net income before interest income and expense, income taxes, depreciation and amortization. A reconciliation of EBITDA and a calculation of Interest Coverage for the first quarter of 2006 are as follows (dollars in thousands):
Net income $ 114,077
Interest expense, net 28,664
Depreciation expense 39,619
Depreciation expense (discontinued operations) 298
--------------
EBITDA $ 182,658
==============
EBITDA from continuing operations $ 115,171
EBITDA from discontinued operations 67,487
--------------
EBITDA $ 182,658
==============
EBITDA from continuing operations $ 115,171
Land gains (13,166)
--------------
EBITDA from continuing operations, excluding land gains $ 102,005
==============
Interest expense, net 28,664
Dividends attributable to preferred stock 2,175
--------------
Interest charges 30,839
--------------
Interest coverage 3.3
==============
In the calculations of EBITDA above, EBITDA from discontinued operations includes $65,419 in gain on sale of communities. |
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