|FOREST CITY REALTY TRUST, INC. filed this Form 10-Q on 10/30/2018|
Forest City Realty Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
T. Segment Information
The following tables summarize financial data for the Company’s reportable operating segments. All amounts are presented in thousands.
The Company uses Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") to manage its business and report its operating results by segment. Adjusted EBITDA, a non-GAAP measure, is defined as net earnings excluding the following items at the Company's ownership: i) non-cash charges for depreciation and amortization; ii) interest expense; iii) amortization of mortgage procurement costs; iv) income taxes; v) impairment of real estate; vi) gains or losses from extinguishment of debt; vii) gains or losses on full or partial disposition of rental properties, development projects and other investments; viii) gains or losses on change in control of interests; and ix) other transactional items, including organizational transformation and termination benefits.
The Company believes that Adjusted EBITDA is an appropriate measure to assess operating performance by segment as it represents ongoing key operating components of each segment without regard to how the business is financed. The Company’s Chief Executive Officer, the chief operating decision maker, uses Adjusted EBITDA, as presented, to assess performance of the Company’s real estate assets by reportable operating segment because it provides information on the financial performance of the core real estate portfolio operations, development, corporate general and administrative expenses and interest and other income derived from the Company's investments. Adjusted EBITDA measures the profitability of each real estate segment in operations based on the process of collecting rent and paying operating expenses and represents the equivalent of Net Operating Income (“NOI”), a non-GAAP measure, as all property level interest expense is reported in the Corporate segment. NOI by operating segment is discussed in the Net Operating Income section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) of this Form 10-Q. For the development segment, adjusted EBITDA measures the profitability of our land development sales activity and any recently opened unstabilized properties, offset by development expenses that do not qualify for capitalization. Interest expense is monitored and evaluated by the chief operating decision maker on an overall company-wide basis and is not a factor in evaluating individual segment performance.