Equity Office Announces Second Quarter 2006 Results.CHICAGO Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. -- Equity Office Properties Trust Equity Office Properties Trust, headquartered in Chicago, Illinois, is the largest owner of office buildings in the United States. It was formed in 1976 by Samuel Zell [1] and in February 2007, was acquired by the Blackstone Group for $23 billion plus the assumption of (NYSE NYSE See: New York Stock Exchange :EOP EOP Educational Opportunity Program (California State University) EOP Executive Office of the President EOP Equity Office Properties Trust (ticker) EOP Emergency Operations Plan EOP Earth Orientation Parameters ) today reported results for the second quarter 2006. "Our second quarter results reflect significant improvement in virtually every market," said Richard Ri·chard , Joseph Henri Maurice Known as "Rocket." 1921-2000. Canadian hockey player. A right wing for the Montreal Canadiens (1942-1960), he led his team to eight Stanley Cup championships and was the first player to score 50 goals in a D. Kincaid Kincaid may refer to: People
In a fire insurance policy, for example, the term occupancy and net office space absorption absorption [Lat.,=sucking from], taking of molecules of one substance directly into another substance. It is contrasted with adsorption, in which the molecules adhere only to the surface of the second substance. in our markets improved for the 12th consecutive quarter and we expect this trend to continue." Financial and Operating Results Net Income Available to Common Shareholders For the second quarter 2006, net income available to common shareholders totaled $87.9 million with diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of (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 $0.24, compared to a net loss of $205.4 million in second quarter 2005, or $0.50 per share on a 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. basis. The second quarter 2005 results included non-cash impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges and losses on assets sold. For the six months ended June June: see month. 30, 2006, net income available to common shareholders totaled $133.5 million with diluted EPS of $0.36, compared to a net loss of $104.6 million, or $0.26 per share on a diluted basis in 2005. Again, the prior period results included non-cash impairment charges and losses on assets sold. Effective January January: see month. 1, 2006, 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 GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , EOP consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: the assets, liabilities and results of operations of 18 joint ventures that were previously accounted for under the equity method. This consolidation did not impact net income or FFO FFO See: Funds from operations , but did impact various line items on the income statement, making comparisons difficult. Exhibit A of this press release reflects the impact on both the balance sheet and income statement as a result of this change. 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. For the second quarter 2006, FFO available to common shareholders totaled $225.7 million, or $0.55 per share on a diluted basis. FFO for the same period in 2005 totaled a net loss of $98.0 million, or $0.22 per share on a diluted basis. Second quarter 2005 FFO included non-cash impairment charges and losses on assets sold. For the six months ended June 30, 2006, FFO available to common shareholders totaled $452.1 million, or $1.10 per share on a diluted basis. FFO for the same period in 2005 totaled $199.5 million, or $0.44 per share on a diluted basis. The attachment See attach a file. to this press release reconciles FFO to net income/loss, the most directly comparable GAAP measure. Same-Store 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. Same-store property net operating income, excluding income from early lease terminations, decreased 1.0% for the second quarter 2006 and year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. 2006, as compared to the same periods in 2005. In the same-store portfolio, revenues (excluding lease terminations) increased as a result of occupancy gains. Utility costs and repairs and maintenance expenses were higher than a year ago and reduced same-store 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 and margins on a comparative basis.
Financial Results Summary
----------------------------------------
For the three months For the six months
ended June 30, ended June 30,
----------------------------------------
2006 2005 2006 2005
----------------------------------------
(Dollars in thousands,
except per share amounts)
Net income (loss) available to
common shareholders $87,857 ($205,442) $133,477 ($104,572)
Earnings (loss) per share -
diluted $0.24 ($0.50) $0.36 ($0.26)
Funds From Operations (FFO)
available to common
shareholders $225,708 ($98,009) $452,112 $199,543
FFO per share $0.55 ($0.22) $1.10 $0.44
Same-Store NOI, excluding
lease terminations $424,471 $428,641 $849,718 $858,476
Same-Store NOI change from
prior period (1.0%) (1.0%)
Leasing Results On a same-store basis, occupancy increased to 91.1% at quarter-end, up from 89.7% a year ago. EOP's effective office portfolio occupancy was 90.7% at June 30, 2006, compared to 88.4% at June 30, 2005. The effective office portfolio represents the company's economic interest in the properties, which is used to derive de·rive v. 1. To obtain or receive from a source. 2. To produce or obtain a chemical compound from another substance by chemical reaction. GAAP net income. In the second quarter 2006, the company leased 4.8 million square feet, compared to 5.6 million square feet in second quarter 2005 on a larger portfolio. For the first six months of 2006, the company leased 9.0 million square feet, compared to 10.4 million square feet for the same period in 2005. Tenant improvements and leasing costs for leases that commenced during the second quarter 2006 were $18.02 per square foot on a weighted average basis, compared to $21.71 per square foot in the second quarter 2005. Tenant improvements and leasing costs for leases that commenced during the six months ended June 30, 2006 were $17.17 per square foot on a weighted average basis, compared to $19.06 per square foot in the first half of 2005. Common Share and Unit Repurchases The company repurchased 35.6 million EOP common shares during the six months ended June 30, 2006, at an average price of $34.03 per share, for a total cost of $1.2 billion. Included in these amounts are the 17.2 million EOP common shares repurchased concurrently con·cur·rent adj. 1. Happening at the same time as something else. See Synonyms at contemporary. 2. Operating or acting in conjunction with another. 3. Meeting or tending to meet at the same point; convergent. with the June 2006 issuance of $1.5 billion of exchangeable senior 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. notes. In addition, the company redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. 2.8 million operating partnership units for $87.9 million during the six months ended June 30, 2006. The company currently has $296.6 million available under its share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. authorization The right or permission to use a system resource; the process of granting access. See access control. . Investment Activity "We are committed to our strategy of having superior assets in supply constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. markets that have strong potential for job growth and higher average occupancy over time," said Kincaid. "Since 2003, we have significantly repositioned our portfolio and have sold over 35 million square feet of assets. We will continue to resize Verb 1. resize - change the size of; make the size more appropriate size - make to a size; bring to a suitable size rescale - establish on a new scale our portfolio to take advantage of the current strong demand for office buildings and, as conditions permit, recycle re·cy·cle tr.v. re·cy·cled, re·cy·cling, re·cy·cles 1. To put or pass through a cycle again, as for further treatment. 2. To start a different cycle in. 3. a. capital into the best markets and submarkets across the country." EOP is exploring the sale of as much as $2.0 billion to $2.5 billion of additional assets over the course of the next six to 12 months. Dispositions under consideration include certain assets in core markets such as Chicago, Denver Denver, city (1990 pop. 467,610), alt. 5,280 ft (1,609 m), state capital, coextensive with Denver co., N central Colo., on a plateau at the foot of the Front Range of the Rocky Mts., along the South Platte River where Cherry Creek meets it; inc. 1861. and Northern California Northern California, sometimes referred to as NorCal, is the northern portion of the U.S. state of California. The region contains the San Francisco Bay Area, the state capital, Sacramento; as well as the substantial natural beauty of the redwood forests, the northern . As a part of this strategy, EOP may also exit the Atlanta Atlanta (ətlăn`tə, ăt–), city (1990 pop. 394,017), state capital and seat of Fulton co., NW Ga., on the Chattahoochee R. and Peachtree Creek, near the Appalachian foothills; inc. 1847. market over time. While the company expects to recognize an overall net gain from any such dispositions should they occur, the decision to sell certain assets may require material non-cash impairment charges in the third and perhaps subsequent quarters. Year-to-date as of July July: see month. 31, 2006, EOP completed $1.1 billion in investment activity, acquiring 1.6 million square feet for $690.2 million, and selling 2.7 million square feet of office space and one land parcel for $433.9 million. The net gain on sales of real estate was $117.4 million during the six months ended June 30, 2006. 2006 Outlook Consistent with the ongoing repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. of its portfolio, EOP anticipates reducing overhead costs overhead costs see fixed costs. and bringing its organizational structure  This article has no lead section.To comply with Wikipedia's lead section guidelines, one should be written. in line with its reduced size. As a result, the company expects to take a charge to earnings of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $30 million in the second half of 2006, the majority of which will be taken in the third quarter, related primarily to severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and the cash settlement of long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. compensation awards. 2006 EPS and FFO guidance has been updated to reflect this charge. EPS guidance has also been updated to reflect the net gains on sales of real estate recorded in the six months ended June 30, 2006. No additional changes have been made to previously issued guidance.
Diluted EPS $0.36 to $0.51
Less: Gain on Sales of Real Estate through June 30, 2006 ($0.30)
Plus: Real Estate Depreciation and Amortization $2.01
--------------
Diluted FFO per share $2.07 to $2.22
--------------
The primary assumptions used in calculating the 2006 EPS and FFO
guidance ranges include:
Year-End Effective Office Portfolio
Occupancy 91% to 92%
Income from Early Lease Terminations $20 million to $30 million
Deferred Rental Revenue $45 million to $50 million
Corporate G&A Expense $64 million to $69 million
Same-Store Net Operating Income Growth 0% to (1.0%)
(excluding income from early lease
terminations)
Tenant Improvements/Leasing Costs $21.50 to $23.50 per
square foot
The guidance ranges do not include the effect of future acquisitions, dispositions (and any related gains, losses, and impairments), and future common share repurchases, which, if significant, could materially impact the foregoing guidance ranges. Conference Call Details Management will discuss its second quarter 2006 results on EOP's earnings conference call scheduled for Tuesday Tuesday: see week. , August 1, 2006, at 10:00 a.m. Central. The conference call telephone number is 888-283-0069. Participants should dial in 15 minutes before the scheduled start of the call. The pass code to access the call is "EOP." Participants calling from outside 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. should dial 210-795-9226. A replay of the call will be available until August 8, 2006, by calling 888-566-0458. No pass code is necessary. For callers outside of the United States, the replay telephone number is 402-998-0628. A live webcast of the conference call will be available in listen-only mode at www.equityoffice.com and at www.fulldisclosure.com. In addition to the information provided in this release, Equity Office publishes a quarterly Supplemental Operating and Financial Data Report, which can be found at www.equityoffice.com in the Investor Relations Investor relations The process by which the corporation communicates with its investors. section, and as part of a Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. furnished fur·nish tr.v. fur·nished, fur·nish·ing, fur·nish·es 1. To equip with what is needed, especially to provide furniture for. 2. to the Securities and Exchange Commission (SEC). Hard copies of the Supplemental Operating and Financial Data Report are also available via mail by calling 800-692-5304. Forward - Looking Statements This release includes certain "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. " within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These forward-looking statements are based on management's present expectations and beliefs about future events. As with any projection projection, in psychology: see defense mechanism. See rear-projection TV, front-projection TV and LCD panel. (theory) projection - In domain theory, a function, f, which is (a) idempotent, i.e. or forecast, these statements are inherently susceptible susceptible /sus·cep·ti·ble/ (su-sep´ti-b'l) 1. readily affected or acted upon. 2. lacking immunity or resistance and thus at risk of infection. sus·cep·ti·ble adj. to uncertainty and changes in circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . Important factors that could cause actual results to differ materially from those reflected in such forward-looking statements and that should be considered in evaluating this release and the outlook of Equity Office include, but are not limited to, changes in economic, business and competitive conditions, and other factors affecting the operation of the business of Equity Office. These and other risks and uncertainties are detailed from time to time in Equity Office's filings with the SEC, including its 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. filed on March 15, 2006. Equity Office is under no obligation, and expressly disclaims any obligation, to update or alter its forward-looking statements, whether as a result of changes, new information, subsequent events or otherwise. Equity Office Properties Trust (NYSE:EOP), operating through its various subsidiaries and affiliates, is the nation's largest publicly held office building owner and manager with a total office portfolio of 596 buildings comprising 110.1 million square feet in 16 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). . Equity Office has an ownership presence in 23 Metropolitan Statistical Areas (MSAs) and in 100 submarkets, enabling it to provide a wide range of office solutions for local, regional and national customers. For more company information visit the Equity Office web site at http://www.equityoffice.com.
Equity Office Properties Trust
Exhibit A
Impact of EITF 04-5
In accordance with Emerging Issues Task Force 04-5, Determining
Whether a General Partner, or the General Partners as a Group,
Controls a Limited Partnership or Similar Entity When the Limited
Partners Have Certain Rights ("EITF 04-5"), effective January 1, 2006
Equity Office consolidated the assets, liabilities and results of
operations of 18 joint ventures that it previously accounted for under
the equity method. Prior periods have not been restated for this
change. The table below summarizes the effect on Equity Office's
assets and liabilities as a result of the consolidation of these joint
ventures.
As of January 1, 2006
---------------------
(Dollars in thousands)
Increase in investments
in real estate, net of
accumulated depreciation $2,556,549
Decrease in investments
in unconsolidated joint
ventures $844,591
Increase in mortgage
debt, net of discounts $681,986
Increase in minority
interests - partially
owned properties $1,205,236
Increase in net other
assets and liabilities $175,264
Change in total
shareholders' equity $-
Prior to January 1, 2006, Equity Office's share of the net income from
these joint ventures was included in "Income from investments in
unconsolidated joint ventures" on the consolidated statements of
operations. Upon consolidation, Equity Office's results of operations
include the revenues and expenses of these joint ventures and an
allocation to the minority interest partners for their share of the
net income. The consolidation of the joint ventures did not impact net
income available to common shareholders or funds from operations
available to common shareholders. The table below summarizes the
effect on Equity Office's results of operations for the three months
and six months ended June 30, 2006 as a result of the consolidation of
these joint ventures.
For the three months For the six months
ended June 30, 2006 ended June 30, 2006
--------------------- ----------------------
(Dollars in thousands)
Increase in total
revenues $101,890 $200,675
Increase in total
operating expenses $72,796 $141,546
Increase in other expense
(primarily interest
expense) $7,105 $18,171
Decrease in income from
investments in
unconsolidated joint
ventures $11,319 $20,435
Increase in minority
interests - partially
owned properties $10,670 $20,523
Change in income from
continuing operations $- $-
Equity Office Properties Trust
Consolidated Statements of Operations
(Unaudited)
For the three months For the six months
ended June 30, ended June 30,
------------------------- -------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
(Dollars in thousands, except per share amounts)
Revenues:
Rental $664,423 $572,243 $1,328,497 $1,136,701
Tenant
reimbursements 120,318 91,510 251,452 184,528
Parking 37,510 28,447 73,471 55,943
Other 16,634 17,791 33,421 75,889
Fee income 1,478 3,697 2,394 8,474
------------ ------------ ------------ ------------
Total
revenues 840,363 713,688 1,689,235 1,461,535
------------ ------------ ------------ ------------
Expenses:
Depreciation 195,750 160,269 386,473 315,588
Amortization 32,844 21,475 69,244 42,612
Real estate
taxes 101,146 83,304 209,101 165,764
Insurance 9,091 7,034 17,490 12,736
Repairs and
maintenance 104,039 76,646 196,861 147,045
Property
operating 120,103 99,548 248,501 198,187
Ground rent 6,758 5,074 12,616 10,193
Corporate
general and
administrative 16,056 15,218 33,050 32,391
Impairment - 24,382 - 24,382
------------ ------------ ------------ ------------
Total
expenses 585,787 492,950 1,173,336 948,898
------------ ------------ ------------ ------------
Operating
income 254,576 220,738 515,899 512,637
------------ ------------ ------------ ------------
Other income
(expense):
Interest and
dividend income 5,963 3,566 9,328 6,658
Interest:
Expense
incurred (223,392) (207,932) (447,619) (420,704)
Amortization
of deferred
financing
costs and
prepayment
expenses (3,032) (2,594) (5,961) (5,389)
------------ ------------ ------------ ------------
Total other
income
(expense) (220,461) (206,960) (444,252) (419,435)
------------ ------------ ------------ ------------
Income before
income taxes,
allocation to
minority interests,
income from
investments in
unconsolidated
joint ventures and
gain on sales of
real estate 34,115 13,778 71,647 93,202
Income taxes 147 (437) (1,064) (891)
Minority Interests:
EOP Partnership (9,675) 23,677 (14,791) 11,923
Partially owned
properties (13,710) (2,499) (26,515) (5,527)
Income from
investments in
unconsolidated
joint ventures
(including (loss)
gain on sales of
real estate of
$(91), $17,376,
$(91) and $17,376,
respectively) 34 28,681 90 38,199
Gain on sales of
real estate 379 - 533 -
------------ ------------ ------------ ------------
Income from
continuing
operations 11,290 63,200 29,900 136,906
Discontinued
operations
(including net
gain (loss) on
sales of real
estate and
provision for
(loss) on properties
held for sale of
$82,503, $(94,220),
$116,943 and
$(83,513),
respectively) 85,268 (259,941) 120,979 (224,076)
------------ ------------ ------------ ------------
Net income (loss) 96,558 (196,741) 150,879 (87,170)
Preferred
distributions (8,701) (8,701) (17,402) (17,402)
------------ ------------ ------------ ------------
Net income (loss)
available to
common
shareholders $87,857 ($205,442) $133,477 ($104,572)
============ ============ ============ ============
Earnings (loss)
per share -
basic:
Income from
continuing
operations per
share $0.03 $0.07 $0.07 $0.24
============ ============ ============ ============
Net income (loss)
available to
common
shareholders per
share $0.24 ($0.51) $0.36 ($0.26)
============ ============ ============ ============
Weighted average
Common Shares
outstanding 363,933,914 406,164,577 366,488,855 404,514,824
============ ============ ============ ============
Earnings (loss)
per share -
diluted:
Income from
continuing
operations per
share $0.03 $0.07 $0.07 $0.24
============ ============ ============ ============
Net income (loss)
available to
common
shareholders per
share $0.24 ($0.50) $0.36 ($0.26)
============ ============ ============ ============
Weighted average
Common Shares
outstanding and
dilutive
potential common
shares 408,494,060 455,609,570 411,497,236 454,101,167
============ ============ ============ ============
Distributions
declared per
Common Share
outstanding $0.33 $0.50 $0.66 $1.00
============ ============ ============ ============
Refer to Exhibit A of this Press Release for the impact of Equity
Office's adoption of EITF 04-5 on the consolidated statements of
operations.
Equity Office Properties Trust
Consolidated Balance Sheets
June 30, 2006
(Unaudited) December 31, 2005
----------------------------------
(Dollars in thousands,
except per share amounts)
Assets:
Investments in real estate $25,846,400 $22,949,723
Developments in process 611,173 567,129
Land available for development 174,078 176,868
Investments in real estate held for
sale, net of accumulated
depreciation - 75,211
Accumulated depreciation (3,970,681) (3,336,789)
----------------------------------
Investments in real
estate, net of
accumulated depreciation 22,660,970 20,432,142
Cash and cash equivalents 152,628 78,164
Tenant and other receivables (net of
allowance for doubtful accounts of
$9,297 and $8,853, respectively) 76,454 94,858
Deferred rent receivable 565,188 496,826
Escrow deposits and restricted cash 230,170 38,658
Investments in unconsolidated joint
ventures 120,678 947,989
Deferred financing costs (net of
accumulated amortization of $50,988
and $45,920, respectively) 88,237 58,809
Deferred leasing costs and other
related intangibles (net of
accumulated amortization of
$324,185 and $232,024,
respectively) 665,429 522,926
Prepaid expenses and other assets 245,388 303,181
----------------------------------
Total Assets $24,805,142 $22,973,553
==================================
Liabilities, Minority Interests,
Mandatorily Redeemable Preferred
Shares and Shareholders' Equity:
Liabilities:
Mortgage debt (net of
(discounts) of $(4,977) and
$(5,185), respectively) $3,432,004 $2,164,198
Unsecured notes (net of
(discounts) of $(24,389) and
$(23,936), respectively) 10,032,104 9,032,620
Lines of credit 1,148,800 1,631,000
Accounts payable and accrued
expenses 582,476 574,225
Distribution payable 131,298 3,736
Other liabilities (net of
(discounts) of $(24,127) and
$(25,597), respectively) 511,804 483,468
Commitments and contingencies - -
----------------------------------
Total Liabilities 15,838,486 13,889,247
----------------------------------
Minority Interests:
EOP Partnership 721,199 863,923
Partially owned properties 1,370,979 172,278
----------------------------------
Total Minority Interests 2,092,178 1,036,201
----------------------------------
Mandatorily Redeemable Preferred
Shares:
5.25% Series B Convertible,
Cumulative Redeemable Preferred
Shares, liquidation
preference $50.00 per share,
5,989,930 issued and
outstanding 299,497 299,497
----------------------------------
Shareholders' Equity:
Preferred Shares, 100,000,000
authorized:
7.75% Series G Cumulative
Redeemable Preferred Shares,
liquidation preference
$25.00 per share, 8,500,000
issued and outstanding 212,500 212,500
Common Shares, $0.01 par value;
750,000,000 shares authorized,
349,760,401 and 380,674,998
issued and outstanding,
respectively 3,498 3,807
Other Shareholders' Equity:
Additional paid in capital 8,671,119 9,745,819
Deferred compensation - (533)
Dividends in excess of
accumulated earnings (2,259,442) (2,156,627)
Accumulated other comprehensive
loss (net of accumulated
amortization of $15,356 and
$11,948, respectively) (52,694) (56,358)
----------------------------------
Total Shareholders'
Equity 6,574,981 7,748,608
----------------------------------
Total Liabilities,
Minority Interests,
Mandatorily Redeemable
Preferred Shares and
Shareholders' Equity $24,805,142 $22,973,553
==================================
Refer to Exhibit A of this Press Release for the impact of Equity
Office's adoption of EITF 04-5 on the consolidated balance sheets.
Equity Office Properties Trust
Reconciliation of Net Income (Loss) to Funds From Operations ("FFO")
For the three months ended June 30,
----------------------------------------------------
2006 2005
------------------------ ------------------------
(Dollars in thousands, except per share amounts)
Reconciliation of
net income (loss)
to FFO (a):
Net income (loss) $96,558 ($196,741)
Adjustments:
Plus depreciation
and amortization:
Included in
income from
continuing
operations
and discontinued
operations 229,491 202,980
Included in
income from
investments in
unconsolidated
joint ventures 2,888 12,616
Allocated
to minority
interests
in partially
owned properties (16,930) (1,416)
Non-real
estate
related
depreciation and
amortization (4,268) (3,422)
Less net gain on
sales of real
estate:
Included in
income from
continuing
operations
and
discontinued
operations (83,096) (91,971)
Included in
income from
investments in
unconsolidated
joint ventures (b) 91 (17,376)
Allocated to
minority
interests in
partially owned
properties - 29,699
Less minority
interests in EOP
Partnership share
of the above
adjustments (12,597) (13,158)
------------ ------------
FFO 212,137 (78,789)
Preferred
distributions (8,701) (8,701)
------------ ------------
FFO available to
common shareholders
- basic $203,436 ($87,490)
============ ============
Net income (loss)
available to common
shareholders per
share - basic $0.24 ($0.51)
============ ============
FFO available to
common shareholders
per share - basic $0.56 (c) ($0.22) (c)
============ ============
Adjustments to
arrive at net
income (loss)
and FFO
available to
common
shareholders: Net Income FFO Net Loss FFO
------------------------ ------------------------
Net income
(loss) and FFO $96,558 $212,137 ($196,741) ($78,789)
Preferred
distributions (8,701) (8,701) (8,701) (8,701)
------------------------ ------------------------
Net income
(loss) and
FFO available
to common
shareholders 87,857 203,436 (205,442) (87,490)
Net income
(loss)
allocated to
minority
interests in
EOP Partnership 9,675 9,675 (23,677) (23,677)
Minority
interests in
EOP Partnership
share of the
above
adjustments - 12,597 - 13,158
------------------------ ------------------------
Net income
(loss) and
FFO available
to common
shareholders
- diluted $97,532 $225,708 ($229,119) ($98,009)
======================== ========================
Weighted average
Common Shares
and dilutive
potential
common shares
outstanding 408,494,060 408,494,060 455,609,570 455,609,570
======================== ========================
Net income
(loss) and FFO
available to
common
shareholders
per share -
diluted $0.24 $0.55 (c) ($0.50) ($0.22) (c)
======================== ========================
Common Shares and common share equivalents
------------------------------------------
Weighted average
Common Shares
outstanding
(used for both net
income (loss) and
FFO basic per share
calculation) 363,933,914 406,164,577
Effect of dilutive
potential common
shares:
Units 40,075,717 45,563,665
Share options and
restricted shares 4,484,429 3,881,328
------------ ------------
Weighted average
Common Shares and
dilutive potential
common shares used
for net income
(loss) available to
common shareholders
and the calculation
of FFO available to
common shareholders 408,494,060 455,609,570
============ ============
(a) FFO is a non-GAAP financial measure. The most directly comparable
GAAP measure is net income (loss), to which it is reconciled. See
definition below.
(b) The loss for the three months ended June 30, 2006 represents an
adjustment to the gain previously recorded on properties sold in
prior periods.
(c) FFO for the three months ended June 30, 2006 and 2005 includes
$0.2 million and $367.0 million, respectively, of non-cash charges
relating to properties sold and properties held for sale, which is
equivalent to $0.00 and $0.81 per share on a diluted basis,
respectively. These charges are not added back to net income
(loss) when calculating FFO.
FFO Definition:
FFO is defined as net income (loss), computed in accordance with
accounting principles generally accepted in the United States
("GAAP"), excluding gains from sales of properties (but not losses
from sales of properties, impairments or provisions for losses on
properties held for sale), plus real estate related depreciation and
amortization, and after adjustments for unconsolidated partnerships
and joint ventures. Adjustments for unconsolidated partnerships and
joint ventures are calculated to reflect FFO on the same basis. Equity
Office believes that FFO is helpful to investors as one of several
measures of the performance of an equity REIT. Equity Office further
believes that by excluding the effect of depreciation, amortization
and gains from sales of real estate, all of which are based on
historical costs and which may be of limited relevance in evaluating
current performance, FFO can facilitate comparisons of operating
performance between periods and between other equity REITs. Investors
should review FFO, along with GAAP net income (loss) when trying to
understand an equity REIT's operating performance. Equity Office
computes FFO in accordance with its interpretation of the standards
established by the Board of Governors of the National Association of
Real Estate Investment Trusts ("NAREIT"), which may not be comparable
to FFO reported by other equity REITs that do not define the term in
accordance with the current NAREIT definition or that interpret the
current NAREIT definition differently than Equity Office does. FFO
does not represent cash generated from operating activities in
accordance with GAAP, nor does it represent cash available to pay
distributions and should not be considered as an alternative to net
income (loss), determined in accordance with GAAP, as an indication of
Equity Office's financial performance, or to cash flow from operating
activities, determined in accordance with GAAP, as a measure of its
liquidity, nor is it indicative of funds available to fund its cash
needs, including its ability to make cash distributions.
Equity Office Properties Trust
Reconciliation of Net Income (Loss) to Funds From Operations ("FFO")
For the six months ended June 30,
----------------------------------------------------
2006 2005
------------------------ ------------------------
(Dollars in thousands, except per share amounts)
Reconciliation of
net income (loss)
to FFO (a):
Net income (loss) $150,879 ($87,170)
Adjustments:
Plus depreciation
and amortization:
Included in
income from
continuing
operations
and
discontinued
operations 459,305 404,884
Included in
income from
investments in
unconsolidated
joint ventures 5,661 25,048
Allocated
to minority
interests in
partially
owned
properties (34,139) (2,979)
Non-real estate
related
depreciation and
amortization (8,395) (7,022)
Less net gain on
sales of real
estate:
Included in
income from
continuing
operations
and
discontinued
operations (118,679) (116,216)
Included in
income from
investments in
unconsolidated
joint ventures (b) 91 (17,376)
Allocated to
minority
interests in
partially owned
properties - 29,699
Less minority
interests in EOP
Partnership
share of the above
adjustments (30,311) (32,346)
------------ ------------
FFO 424,412 196,522
Preferred
distributions (17,402) (17,402)
------------ ------------
FFO available to
common
shareholders
- basic $407,010 $179,120
============ ============
Net income (loss)
available to common
shareholders per
share - basic $0.36 ($0.26)
============ ============
FFO available to
common shareholders
per share - basic $1.11 (c) $0.44 (c)
============ ============
Adjustments to
arrive at net
income (loss)
and FFO
available to
common
shareholders: Net Income FFO Net Loss FFO
------------------------ ------------------------
Net income
(loss) and FFO $150,879 $424,412 ($87,170) $196,522
Preferred
distributions (17,402) (17,402) (17,402) (17,402)
------------------------ ------------------------
Net income
(loss) and
FFO available
to common
shareholders 133,477 407,010 (104,572) 179,120
Net income
(loss)
allocated to
minority
interests in
EOP Partnership 14,791 14,791 (11,923) (11,923)
Minority
interests in
EOP Partnership
share of the
above
adjustments - 30,311 - 32,346
------------------------ ------------------------
Net income
(loss) and FFO
available to
common
shareholders
- diluted $148,268 $452,112 ($116,495) $199,543
======================== ========================
Weighted average
Common Shares
and dilutive
potential
common shares
outstanding 411,497,236 411,497,236 454,101,167 454,101,167
======================== ========================
Net income
(loss) and
FFO available
to common
shareholders
per share -
diluted $0.36 $1.10 (c) ($0.26) $0.44 (c)
======================== ========================
Common Shares and common share equivalents
------------------------------------------
Weighted average
Common Shares
outstanding
(used for both net
income (loss)
and FFO basic per
share calculation) 366,488,855 404,514,824
Effect of dilutive
potential common
shares:
Units 40,846,328 46,366,561
Share options and
restricted shares 4,162,053 3,219,782
------------ ------------
Weighted average
Common Shares and
dilutive potential
common shares used
for net income
(loss) available
to common
shareholders and
the calculation of
FFO available to
common shareholders 411,497,236 454,101,167
============ ============
(a) FFO is a non-GAAP financial measure. The most directly comparable
GAAP measure is net income (loss), to which it is reconciled. See
definition below.
(b) The loss for the six months ended June 30, 2006 represents an
adjustment to the gain previously recorded on properties sold in
prior periods.
(c) FFO for the six months ended June 30, 2006 and 2005 includes $1.2
million and $380.6 million, respectively, of non-cash charges
relating to properties sold and properties held for sale, which is
equivalent to $0.00 and $0.84 per share on a diluted basis,
respectively. These charges are not added back to net income
(loss) when calculating FFO.
FFO Definition:
FFO is defined as net income (loss), computed in accordance with
accounting principles generally accepted in the United States
("GAAP"), excluding gains from sales of properties (but not losses
from sales of properties, impairments or provisions for losses on
properties held for sale), plus real estate related depreciation and
amortization, and after adjustments for unconsolidated partnerships
and joint ventures. Adjustments for unconsolidated partnerships and
joint ventures are calculated to reflect FFO on the same basis. Equity
Office believes that FFO is helpful to investors as one of several
measures of the performance of an equity REIT. Equity Office further
believes that by excluding the effect of depreciation, amortization
and gains from sales of real estate, all of which are based on
historical costs and which may be of limited relevance in evaluating
current performance, FFO can facilitate comparisons of operating
performance between periods and between other equity REITs. Investors
should review FFO, along with GAAP net income (loss) when trying to
understand an equity REIT's operating performance. Equity Office
computes FFO in accordance with its interpretation of the standards
established by the Board of Governors of the National Association of
Real Estate Investment Trusts ("NAREIT"), which may not be comparable
to FFO reported by other equity REITs that do not define the term in
accordance with the current NAREIT definition or that interpret the
current NAREIT definition differently than Equity Office does. FFO
does not represent cash generated from operating activities in
accordance with GAAP, nor does it represent cash available to pay
distributions and should not be considered as an alternative to net
income (loss), determined in accordance with GAAP, as an indication of
Equity Office's financial performance, or to cash flow from operating
activities, determined in accordance with GAAP, as a measure of its
liquidity, nor is it indicative of funds available to fund its cash
needs, including its ability to make cash distributions.
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