<PAGE> 1
EXHIBIT INDEX ON PAGE 16
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/XX/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: MARCH 31, 1996
-------------------------------------------------
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------------- --------------------
Commission File Number: 1-11954
VORNADO REALTY TRUST
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 22-1657560
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(201)587-1000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
/X/ Yes / / No
As of May 3, 1996 there were 24,285,038 common shares outstanding.
Page 1 of 18
<PAGE> 2
VORNADO REALTY TRUST
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income for the Three Months
Ended March 31, 1996 and March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1996 and March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Exhibit 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Exhibit 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
Page 2 of 18
<PAGE> 3
PART I. FINANCIAL INFORMATION
VORNADO REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31,
1996 1995 1996 1995
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
ASSETS: LIABILITIES AND SHAREHOLDERS' EQUITY:
Real estate, at cost: Notes and mortgages payable $233,178 $233,353
Land $ 61,278 $ 61,278 Due for U.S. treasury obligations 13,839 43,875
Buildings and improvements 315,348 314,265 Amounts due under revolving credit facility 10,000 -
Leasehold improvements and equipment 7,349 6,933 Accounts payable and accrued expenses 6,926 6,545
--------- --------- Deferred leasing fee income 7,122 8,888
Total 383,975 382,476 Other liabilities 4,594 4,561
Less accumulated depreciation and -------- -------
amortization (142,328) (139,495) Total liabilities 275,659 297,222
--------- --------- -------- -------
Real estate, net 241,647 242,981
Commitments and contingencies
Shareholders' equity:
Preferred shares of beneficial interest:
Cash and cash equivalents, including U.S. no par value per share;
government obligations under repurchase authorized, 1,000,000 shares;
agreements of $16,465 and $12,575 25,672 19,127 issued, none
Marketable securities 29,356 70,997 Common shares of beneficial interest:
Investment in and advances to $.04 par value per share;
Alexander's, Inc. 106,972 109,686 authorized, 50,000,000 shares; issued,
Investment in and advances to Vornado 24,285,038 and 24,246,913
Management Corp. 5,045 5,074 shares in each period 971 970
Due from officer 8,418 8,418 Additional capital 279,906 279,231
Accounts receivable, net of allowance for Accumulated deficit (78,271) (79,380)
doubtful accounts of $587 and $578 8,847 7,086 -------- -------
Mortgage note receivable 17,000 - 202,606 200,821
Receivable arising from the Unrealized loss on securities
straight-lining of rents 15,018 14,376 available for sale (1,338) (1,362)
Other assets 13,767 13,751 Due from officers for purchase of common
--------- --------- shares of beneficial interest (5,185) (5,185)
-------- -------
Total shareholders' equity 196,083 194,274
-------- -------
TOTAL LIABILITIES AND
TOTAL ASSETS $471,742 $491,496 SHAREHOLDERS' EQUITY $471,742 $491,496
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands except share amounts)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
-----------------------------------
MARCH 31, MARCH 31,
1996 1995
--------- ---------
<S> <C> <C>
Revenues:
Property rentals $ 21,337 $ 18,972
Expense reimbursements 6,881 5,539
Other income (including fee income from
related parties of $392 and $1,630) 392 1,705
-------- --------
Total revenues 28,610 26,216
-------- --------
Expenses:
Operating 8,914 7,560
Depreciation and amortization 2,835 2,566
General and administrative 1,189 1,703
-------- --------
Total expenses 12,938 11,829
-------- --------
Operating income 15,672 14,387
Income/(loss) applicable to Alexander's:
Equity in loss (136) (141)
Depreciation (157) (52)
Interest income on loan 1,802 392
Income from investment in and
advances to Vornado Management Corp. 1,141 -
Interest income on mortgage note receivable 594 -
Interest and dividend income 871 1,578
Interest and debt expense (4,223) (4,185)
Net gain/(loss) on marketable securities 358 (142)
-------- --------
NET INCOME $ 15,922 $ 11,837
======== ========
Net Income Per Share $ .65 $ .54
===== =====
Weighted average number of common
shares and common share equivalents
outstanding during period 24,464,478 21,865,515
========== ==========
Dividends per share $ .61 $ .56
===== =====
</TABLE>
See notes to consolidated financial statements.
Page 4 of 18
<PAGE> 5
VORNADO REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
---------------------------------
MARCH 31, MARCH 31,
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15,922 $ 11,837
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization
(including debt issuance costs) 3,090 2,801
Straight-lining of rental income (642) (495)
Equity in loss of Alexander's, including
depreciation of $157 and $52 293 193
Net (gain)/loss on marketable securities (358) 142
Changes in assets and liabilities:
Trading securities 831 19
Accounts receivable (1,761) (255)
Accounts payable and accrued expenses 381 2,991
Other 446 (1,193)
-------- --------
Net cash provided by operating activities 18,202 16,040
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in mortgage note receivable (17,000) -
Additions to real estate (1,501) (4,377)
Investment in and advances to Alexander's - (100,105)
Proceeds from sale or maturity of securities
available for sale 41,192 12,073
-------- --------
Net cash provided by (used in) investing activities 22,691 (92,409)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of borrowings on U.S. treasury obligations (40,036) -
Proceeds from borrowings on U.S. treasury obligations 10,000 21,892
Proceeds from borrowings 10,000 60,000
Payments on borrowings (175) (197)
Dividends paid (14,813) (12,152)
Exercise of stock options 676 943
-------- --------
Net cash (used in) provided by financing activities (34,348) 70,486
-------- --------
Net increase (decrease) in cash and cash equivalents 6,545 (5,883)
Cash and cash equivalents at beginning of period 19,127 23,559
-------- --------
Cash and cash equivalents at end of period $ 25,672 $ 17,676
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest $ 3,968 $ 3,578
======== ========
NON-CASH TRANSACTIONS:
Unrealized gain/(loss) on securities available for sale $ 24 $ (2,803)*
======== ========
</TABLE>
* Reflects a reduction of $3,435 to the Company's investment in
Alexander's as a result of the change from fair value to the
equity method of accounting.
See notes to consolidated financial statements.
Page 5 of 18
<PAGE> 6
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of March 31, 1996, the consolidated
statements of income for the three months ended March 31, 1996 and March 31,
1995 and the consolidated statements of changes in cash flows for the three
months ended March 31, 1996 and March 31, 1995 are unaudited. In the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and changes in cash flows at March 31, 1996 and March 31, 1995 have
been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These condensed consolidated
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's 1995 Annual Report to
Shareholders. The results of operations for the period ended March 31, 1996
are not necessarily indicative of the operating results for the full year.
2. INVESTMENTS IN AND ADVANCES TO ALEXANDER'S (A RELATED PARTY):
Below are summarized Statements of Operations of Alexander's:
<TABLE>
<CAPTION>
Three Months Period from
Ended March 2, 1995 to
March 31, 1996 March 31, 1995
-------------- ----------------
<S> <C> <C>
Statement of Operations:
Revenues $ 4,405,000 $ 1,141,000
Expenses 2,172,000 1,210,000
----------- -----------
Operating income/(loss) 2,233,000 (69,000)
Interest and debt expense (3,317,000) (913,000)
Interest and other income 622,000 32,000
----------- -----------
Loss from continuing operations
before income tax benefit (462,000) (950,000)
Reversal of deferred taxes - 469,000
Net Loss $ (462,000) $ (481,000)
=========== ===========
Vornado's 29.3% equity in loss $ (136,000) $ (141,000)
=========== ===========
</TABLE>
Page 6 of 18
<PAGE> 7
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENT IN AND ADVANCES TO ALEXANDER'S (A RELATED PARTY) - CONTINUED
The unaudited proforma information set forth below presents the condensed
statement of income for Vornado for the three months ended March 31, 1995, as
if on January 1, 1994, the investment in Alexander's and related agreements
were consummated and 1,880,000 common shares of beneficial interest of Vornado
were issued to partially fund the investment.
<TABLE>
<CAPTION>
Proforma
Three Months Ended
March 31, 1995
------------------
<S> <C>
Revenues $26,086,000
Expenses 11,829,000
-----------
Operating income 14,257,000
Income/(loss) applicable to Alexander's:
Equity in loss (989,000)
Depreciation (156,000)
Interest income on loan 1,974,000
Interest and dividend income 946,000
Interest and debt expense (3,813,000)
Net loss on marketable securities (142,000)
-----------
Net income $12,077,000
===========
Net income per share $.51
====
</TABLE>
The Company recognized leasing fee income under a leasing agreement
(the "Leasing Agreement") with Alexander's of $61,000 for the three months
ended March 31, 1996 and $1,048,000 for the three months ended March 31,
1995, which included $915,000 applicable to 1993 and 1994 (no leasing fee
income was recognized prior to 1995 because required conditions had not been
met). Subject to the payment of rents by Alexander's tenants, the Company is
due $5,592,000 at March 31, 1996 under such agreement. The lease which the
Company had previously negotiated with Caldor on behalf of Alexander's for its
Rego Park I property was rejected in March 1996 in Caldor's bankruptcy
proceedings, resulting in $1,717,000 of previously recorded leasing fees
receivable and a corresponding credit (deferred leasing fee income) being
reversed in the quarter ended March 31, 1996. In addition to the leasing fees
received by the Company, Vornado Management Corp. receives management fees from
Alexander's (see Note 3).
Page 7 of 18
<PAGE> 8
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. VORNADO MANAGEMENT CORP.
In July 1995, the Company assigned its management and development
agreement (the "Management Agreement") with Alexander's to Vornado Management
Corp. ("VMC"). In exchange, the Company received 100% of the non-voting
preferred stock of VMC which entitles it to 95% of the distributions by VMC to
its shareholders. Steven Roth and Richard West, Trustees of the Company, own
the common stock of VMC. In addition, the Company lent $5,000,000 to VMC for
working capital purposes under a three-year term loan bearing interest at the
prime rate plus 2%. VMC is responsible for its pro-rata share of compensation
and fringe benefits of employees and 30% of other expenses which are common to
both Vornado and VMC. This entity is not consolidated and accordingly, the
Company accounts for its investment in VMC on the equity method. Below is a
summarized Statement of Operations of VMC for the three months ended March 31,
1996:
<TABLE>
<S> <C>
Revenues:
Management fees from Alexander's $ 2,430,000
Expenses:
General and administrative 563,000
Interest, net 69,000
-----------
Income before income taxes 1,798,000
Income taxes 735,000
-----------
Net income 1,063,000
Preferred dividends to Vornado (1,010,000)
-----------
Net income available to common shareholders $ 53,000
===========
</TABLE>
The fee income in the three months ended March 31, 1996 includes
$1,343,000 of fees related to the completion of the redevelopment of
Alexander's Rego Park I property.
4. OTHER RELATED PARTY TRANSACTIONS
At March 31, 1996, there are amounts due to the Company from Mr. Rowan
($253,000) and Mr. Macnow ($227,000) in connection with the exercise of their
stock options in previous years. The Company has agreed that on each January
1st (commencing January 1, 1997) to forgive one-fifth of the amounts due from
Mr. Rowan and Mr. Macnow, provided that they remain employees of the Company.
The Company currently manages and leases the real estate assets of
Interstate Properties pursuant to a Management Agreement. For the three months
ended March 31, 1996 and 1995, $331,000 and $194,000 of management fees were
earned by the Company pursuant to the Management Agreement.
5. MORTGAGE NOTE RECEIVABLE
In January 1996, the Company provided $17 million of debtor-in-possession
financing to Rickel Home Centers, Inc. ("Rickel"), which is operating under
Chapter 11 of the Bankruptcy Code. The loan is secured by 29 of Rickel's
leasehold properties and has a term of one year plus two annual extensions, but
is due not later than the date on which Rickel's plan of reorganization is
confirmed. The loan bears interest at 13% per annum for the first year and at
a fixed rate of LIBOR plus 7.50% for the extension periods. In addition, the
Company received a loan origination fee of 2% or $340,000 and will receive an
additional fee of 2% of the outstanding principal amount on each extension.
Page 8 of 18
<PAGE> 9
VORNADO REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. EMPLOYEES' SHARE OPTION PLAN
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS No. 123), which was effective for the Company
as of January 1, 1996. SFAS No. 123 requires expanded disclosures of
stock-based compensation arrangements with employees and encourages, but does
not require compensation cost to be measured based on the fair value of the
equity instrument awarded. Companies are permitted, however, to continue to
apply Accounting Principles Board ("APB") Opinion No. 25, which recognizes
compensation cost based on the intrinsic value of the equity instrument
awarded. The Company will continue to apply APB Opinion No. 25 to its stock
based compensation awards to employees and will disclose the required pro forma
effect on net income and earnings per share in its annual financial statements.
Page 9 of 18
<PAGE> 10
VORNADO REALTY TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's revenues, which consist of property rentals, tenant expense
reimbursements and other income were $28,610,000 in the quarter ended March 31,
1996, compared to $26,216,000 in the prior year's quarter, an increase of
$2,394,000 or 9.1%.
Property rentals were $21,337,000 in the quarter ended March 31, 1996,
compared to $18,972,000 in the prior year's quarter, an increase of $2,365,000
or 12.5%. Of this increase (i) $1,010,000 resulted from expansions of shopping
centers and the previous acquisition of a retail property, (ii) $959,000
resulted from step-ups in leases which are not subject to the straight-line
method of revenue recognition and (iii) $396,000 resulted from property rentals
received from new tenants exceeding property rentals lost from vacating
tenants.
Tenant expense reimbursements were $6,881,000 in the quarter ended March
31, 1996, compared to $5,539,000 in the prior year's quarter, an increase of
$1,342,000. This increase reflects a corresponding increase in operating
expenses passed through to tenants.
Other income was $392,000 in the quarter ended March 31, 1996, compared
to $1,705,000 in the prior year's quarter, a decrease of $1,313,000. This
decrease resulted primarily from the recognition of fee income in the first
quarter of 1995 in connection with the Leasing Agreement with Alexander's of
$915,000 applicable to 1993 and 1994 (no leasing fee income was recognized
prior to 1995 because required conditions had not been met). The prior year's
quarter also included $388,000 of fee income pursuant to the Management
Agreement with Alexander's, whereas this year, such income is included in
"Income from investment in and advances to Vornado Management Corp." (see
paragraph below).
Operating expenses were $8,914,000 in the quarter ended March 31, 1996,
as compared to $7,560,000 in the prior year's quarter, an increase of
$1,354,000. This increase resulted primarily from higher snow removal costs,
which were passed through to tenants.
Depreciation and amortization expense increased in 1996 as compared to
1995, primarily as a result of property expansions.
General and administrative expenses were $1,189,000 in the quarter ended
March 31, 1996, compared to $1,703,000 in the prior year's quarter, a decrease
of $514,000. This decrease resulted primarily from a reduction in general
corporate office expenses resulting from the assignment of the Company's
Management Agreement with Alexander's to VMC in the third quarter of 1995.
Income/(loss) applicable to Alexander's, which includes equity in loss,
depreciation and interest income on loan, is reflected for a full quarter in
1996 and for the period from March 2nd to March 31st in 1995.
Page 10 of 18
<PAGE> 11
VORNADO REALTY TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In July 1995, the Company assigned its Management Agreement with
Alexander's to VMC. In exchange, the Company received 100% of the non-voting
preferred stock of VMC which entitles it to 95% of the distributions by VMC to
its shareholders. In addition, the Company lent $5,000,000 to VMC for working
capital purposes under a three year term loan bearing interest at the prime
rate plus 2%. VMC is responsible for its pro-rata share of compensation and
fringe benefits of employees and 30% of other expenses which are common to
both Vornado and VMC. Income from investment in and advances to VMC for the
three months ended March 31, 1996, consists of dividend income of $1,010,000
and interest income of $131,000.
In January 1996, the Company lent Rickel Home Centers, Inc. ("Rickel")
$17,000,000. The Company recognized $594,000 of interest income on this loan
to Rickel in the three months ended March 31, 1996.
Investment income (interest and dividend income and net gains/(losses) on
marketable securities) was $1,229,000 for the quarter ended March 31, 1996,
compared to $1,436,000 in the prior year's quarter, a decrease of $207,000 or
14.4%. This decrease resulted from interest income on investments in
Alexander's and Rickel being shown as separate line items on the Consolidated
Statements of Income this year. This decrease was partially offset by an
increase in net gains on marketable securities of $500,000.
The decrease in interest and debt expense for the three months ended
March 31, 1996 resulting from the repayment of borrowings under the revolving
credit facility was offset by a reduction in interest capitalized during
construction.
The Company operates in a manner intended to enable it to qualify as a
real estate investment trust ("REIT") under Sections 856-860 of the Internal
Revenue Code of 1986 as amended (the "Code"). Under those sections, a real
estate investment trust which distributes at least 95% of its REIT taxable
income as a dividend to its shareholders each year and which meets certain
other conditions will not be taxed on that portion of its taxable income which
is distributed to its shareholders. The Company has distributed to its
shareholders an amount greater than its taxable income. Therefore, no
provision for federal income taxes is required.
LIQUIDITY AND CAPITAL RESOURCES
Three Months Ended March 31, 1996
Cash flows provided by operating activities of $18,202,000 was comprised
of (i) net income of $15,922,000 and (ii) adjustments for non-cash items of
$2,383,000, less (iii) the net change in operating assets and liabilities of
$103,000. The adjustments for non-cash items are primarily comprised of
depreciation and amortization of $3,090,000, plus equity in loss of Alexander's
of $293,000, offset by the effect of straight-lining of rental income of
$642,000. Further, during this period in connection with the rejection of a
lease by an Alexander's tenant "Leasing fees and other receivables" decreased
by $1,717,000 and "Deferred leasing fee income" correspondingly decreased.
"Leasing fees and other receivables" of $490,000 were collected during this
period. These amounts have been included in "Changes in assets and liabilities:
other" in the Consolidated Statements of Cash Flows and are part of the net
change in operating assets and liabilities shown in item (iii) above.
Net cash provided by investing activities of $22,691,000 was comprised of
(i) proceeds from sale or maturity of securities available for sale of
$41,192,000, offset by (ii) the Company's investment in a mortgage note
receivable (see Note 5) of $17,000,000 and (iii) capital expenditures of
$1,501,000.
Page 11 of 18
<PAGE> 12
VORNADO REALTY TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net cash used in financing activities of $34,348,000 was primarily
comprised of (i) the net repayment of borrowings on U.S. Treasury obligations
of $30,036,000 and (ii) dividends paid of $14,813,000, offset by (iii) the
proceeds from borrowings of $10,000,000.
Three Months Ended March 31, 1995
Cash flows provided by operating activities of $16,040,000 was comprised
of (i) net income of $11,837,000, (ii) adjustments for non-cash items of
$2,641,000 and (iii) the net change in operating assets and liabilities of
$1,562,000. The adjustments for non-cash items are primarily comprised of
depreciation and amortization of $2,801,000, plus equity in loss of Alexander's
of $193,000, offset by the effect of straight-lining of rental income of
$495,000.
Net cash used in investing activities of $92,409,000 was comprised of (i)
the Company's investment in and advances to Alexander's of $100,105,000 and
(ii) capital expenditures of $4,377,000, offset by (iii) proceeds from sale of
securities available for sale of $12,073,000.
Net cash provided by financing activities of $70,486,000 was primarily
comprised of (i) net proceeds from borrowings of $60,000,000 under the
revolving credit facility and (ii) borrowings on U.S. Treasury obligations of
$21,892,000, offset by (iii) dividends paid of $12,152,000.
Funds from Operations for the Three Months Ended March 31, 1996 and 1995
Management considers funds from operations an appropriate supplemental
measure of the Company's operating performance. Funds from operations were
$18,416,000 in the quarter ended March 31, 1996, compared to $13,419,000 in the
prior year's quarter, an increase of $4,997,000 or 37.2%. The following table
reconciles funds from operations and net income:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
March 31, March 31,
1996 1995
----------- -----------
<S> <C> <C>
Net income $15,922,000 $11,837,000
Depreciation and amortization of
real property 2,612,000 2,435,000
Straight-lining of property rentals (642,000) (495,000)
Leasing fees received in excess
of/(less than) income recognized 514,000 (798,000)
Loss on sale of securities
available for sale - 360,000
Proportionate share of adjustments
to Alexander's loss to arrive at
funds from operations 10,000 80,000
----------- -----------
Funds from operations * $18,416,000 $13,419,000
=========== ===========
</TABLE>
* The Company's definition of funds from operations does not
conform to the NAREIT definition because the Company deducts the
effect of straight-lining of property rentals.
Page 12 of 18
<PAGE> 13
VORNADO REALTY TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles and is
not necessarily indicative of cash available to fund cash needs. Funds from
operations should not be considered as an alternative to net income as an
indicator of the Company's operating performance or as an alternative to cash
flows as a measure of liquidity. Below are the cash flows provided by (used
in) operating, investing and financing activities:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
March 31, March 31,
1996 1995
------------ ------------
<S> <C> <C>
Operating activities $ 18,202,000 $ 16,040,000
============ ============
Investing activities $ 22,691,000 $(92,409,000)
============ ============
Financing activities $(34,348,000) $(70,486,000)
============ ============
</TABLE>
In January 1996, the Company provided $17 million of debtor-in-possession
financing to Rickel, which is operating under Chapter 11 of the Bankruptcy
Code. The loan is secured by 29 of Rickel's leasehold properties and has a
term of one year plus two annual extensions, but is due not later than the date
on which Rickel's plan of reorganization is confirmed. The loan bears interest
at 13% per annum for the first year and at a fixed rate of LIBOR plus 7.50% for
the extension periods. In addition, the Company received a loan origination
fee of 2% or $340,000 and will receive an additional fee of 2% of the
outstanding principal amount on each extension.
At March 31, 1996, the Company had $10,000,000 of borrowings outstanding
under its unsecured revolving credit facility which provides for borrowings of
up to $75,000,000. Borrowings bear annual interest, at the Company's election,
at LIBOR plus 1.50% or the higher of the federal funds rate plus 1% or prime
rate plus .50%.
The Company anticipates that cash from continuing operations, net liquid
assets, borrowings under its revolving credit facility and/or proceeds from the
issuance of securities under the Company's shelf registration statement will be
adequate to fund its business operations, capital expenditures, continuing debt
obligations and the payment of dividends.
Page 13 of 18
<PAGE> 14
VORNADO REALTY TRUST
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: The following exhibits are filed with this
Quarterly Report on Form 10-Q.
11 Statement Re Computation of Per Share Earnings.
27 Financial Data Schedule
(b) Reports on Form 8-K
None
Page 14 of 18
<PAGE> 15
VORNADO REALTY TRUST
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
VORNADO REALTY TRUST
------------------------------------
(Registrant)
Date: May 9, 1996 /s/ Joseph Macnow
------------------------------------
JOSEPH MACNOW
Vice President - Chief Financial
Officer and Chief Accounting Officer
Page 15 of 18
<PAGE> 16
VORNADO REALTY TRUST
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE NUMBER IN
SEQUENTIAL
EXHIBIT NO. NUMBERING
- ----------- --------------
<S> <C> <C>
11 Statement Re Computation of Per Share Earnings. 17
27 Financial Data Schedule 18
</TABLE>
Page 16 of 18
<PAGE> 1
EXHIBIT 11
VORNADO REALTY TRUST
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
----------------------------------
MARCH 31, MARCH 31,
1996 1995
------------ ---------
<S> <C> <C>
Weighted average number of shares
outstanding 24,274,053 21,686,059
Common share equivalents for
options after applying treasury
stock method 190,425 179,456
---------- ----------
Weighted Average Number of Shares
and Common Share Equivalents
Outstanding 24,464,478 21,865,515
========== ==========
Net income $15,922,000 $11,837,000
=========== ===========
Net Income Per Share $ .65 $ .54
===== =====
</TABLE>
Page 17 of 18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's unaudited financial statements for the three months ended March 31,
1996 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 25,672
<SECURITIES> 29,356
<RECEIVABLES> 8,847
<ALLOWANCES> 587
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 383,975
<DEPRECIATION> 142,328
<TOTAL-ASSETS> 471,742
<CURRENT-LIABILITIES> 0
<BONDS> 233,178
0
0
<COMMON> 971
<OTHER-SE> 195,112
<TOTAL-LIABILITY-AND-EQUITY> 471,742
<SALES> 0
<TOTAL-REVENUES> 28,610
<CGS> 0
<TOTAL-COSTS> 8,914
<OTHER-EXPENSES> 4,024
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,223
<INCOME-PRETAX> 15,922
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,922
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,922
<EPS-PRIMARY> .65
<EPS-DILUTED> .65
</TABLE>
