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September 10, 2009

Forest City Enterprises: Good News, Bad News

The good news is that Atlantic Yards developer Forest City Enterprises (FCE) is losing less money than last year, the bad news is that FCE is still hemorrhaging money.

The Plain Dealer, Loss narrows at Forest City during the second quarter

Forest City Enterprises Inc. lost $1.8 million during the second quarter, an improvement from the real estate company's $8.4 million loss a year before.

Forest City said Tuesday that it lost 1 cent per share during the three months that ended July 31, compared with a loss of 8 cents per share during the second quarter of 2008. Earnings before depreciation, amortization and deferred taxes were $95.5 million, up 8.1 percent from $88.3 million a year before. EBDT, a measure used by analysts and investors, strips out factors including gains and losses on sales of rental properties, divisions and other investments.
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Revenue for the six months that ended July 31 was $629.8 million, down from $632.6 million a year before.

Forest City (NYSE: FCE-A) reported its earnings after markets closed Tuesday. Shares of the company's stock were trading at about $9.86, up 7.9 percent or 72 cents, just after 11 a.m. today.

Atlantic Yards Report, Forest City reports better results, but continued losses, including losses on the Nets

Analysis of FCE's quarterly earnings report includes this bit of where the continued losses incurred by the NJ Nets:

Revenues were down slightly from last year, but so were costs. FCE said in the press release, "Reduced losses on the Nets provided a pre-tax EBDT increase of $3.0 million."

What does that mean? According to a 10-Q document filed with the SEC:

Our equity investment in The Nets incurred a pre-tax loss of $8,307,000 and $18,988,000 for the three and six months ended July 31, 2009, respectively, representing a decrease in allocated losses of $241,000 and $3,033,000 compared to the same periods in the prior year. Generally accepted accounting principles require us to report losses, including significant non-cash losses resulting from amortization, in excess of our legal ownership of approximately 23%. For the six months ended July 31, 2009 and 2008, we recognized approximately 51% and 57% of the net loss, respectively, because profits and losses are allocated to each member based on an analysis of the respective member’s claim on the net book equity assuming a liquidation at book value at the end of the accounting period without regard to unrealized appreciation (if any) in the fair value of The Nets. For the six months ended July 31, 2009, we recognized a lower share of the net loss than in the prior year because of the distribution priority among members.

Included in the losses for the six months ended July 31, 2009 and 2008 are approximately $10,238,000 and $13,544,000, respectively, of amortization, at our share, of certain assets related to the purchase of the team. The remainder of the losses substantially relate to the operations of the team. Comparable to prior years, the team is expected to operate at a loss in 2009 and will require additional capital from its members to fund the loss.

(Emphases added)

Posted by lumi at September 10, 2009 6:31 AM