But the recalculations aren't affecting the company's general financial health, Stein says. "These accounting pronouncements do not impact the solid fundamentals of Regency's business and have no effect on the strategic direction or management's future outlook for the company," the CEO says.
Following FASB's newly issued Rule 150, Regency will reduce net income by about $9.5 million. "In accordance with NAREIT's definition of FFO and the treatment of cumulative effects of accounting changes, the initial impact of Statement 150 will be added back to net income to calculate FFO for the third quarter," according to the Regency statement.
However, the future adjustments required until the new rule "will not be added back to net income to calculate FFO and therefore impact the company's FFO," Regency says.
The company notes NAREIT announced on Oct. 1 that "the treatment of preferred stock issuance costs in calculating FFO per share should follow the SEC's revised GAAP rule provided in the Emerging Issues Task Force Issue D-42," dated July 31, 2003.
"This accounting announcement also clarified that impairment writedowns should be included in the calculation of FFO," the company says.
In the quarter ended March 31, 2003, Regency recorded a $1.9 million expense associated with the redemption of $75 million of preferred units. In the quarter ended June 30, the company posted a $2 million provision for loss on the sale of operating properties, an impairment writedown.
"Both of these GAAP expenses were added back to GAAP net income in calculating FFO," according to the company's statement. "In accordance with NAREIT's recent announcement, these adjustments will be reversed from the year-to-date FFO calculation."
During the quarter ended Sept. 30, 2003, Regency also redeemed $80 million of preferred units. About $1.2 million of issuance costs related to this redemption "will not be added back to GAAP net income in calculating FFO for the third quarter," the company says.
"These adjustments were not previously considered in the company's FFO per share guidance and therefore impact the company's third-quarter FFO per share guidance by two cents and full-year FFO per share guidance by nine cents," according to the REIT's statement.
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