WASHINGTON, Feb. 29 /PRNewswire-FirstCall/ -- DuPont Fabros Technology,Inc. (NYSE:
Fourth Quarter Highlights * Completed IPO, raising net proceeds of $677.0 million * Phase II of the ACC4 data center placed in service October 2007, adding 85,600 raised square feet and 18.2 megawatts (MW) of critical power to portfolio * Acquisition of 17.2 acre parcel of land in Santa Clara, California for $21.1 million completed in December 2007 * Entered into a $148.9 million construction loan for the CH1 data center development located in Elk Grove, Illinois in December 2007 * Portfolio of operating data centers was 93.2% leased as of December 31, 2007 2008 Outlook The Company announced today guidance for 2008 Earnings per Share("EPS"), Funds From Operations ("FFO") and Adjusted Funds From Operations("AFFO"). The Company currently expects 2008 EPS per diluted share to be in therange of $0.44 to $0.54, 2008 FFO to be in the range of $80.3 million to$87.0 million (or $1.20 to $1.30 per share and unit on a fully dilutedbasis) and 2008 AFFO to be in the range of $53.6 million to $60.3 million(or $0.80 to $0.90 per share and unit on a fully diluted basis). Theseestimated ranges reflect management's view of current and future marketconditions, including assumptions with respect to rental rates, occupancylevels, operating and general and administrative expenses, interest rates,and the potential impact of property dispositions and acquisitions. Theestimated ranges assume no change in the current 66.957 million dilutedshares and units outstanding and no one-time non-recurring charges orcredits. Factors that may materially impact our estimated results aredetailed in our Form S-11, including factors described under the headingRisk Factors. For a discussion on how the Company calculates FFO and AFFO, howmanagement uses these financial measures and some of the limitationsassociated with these financial measures, please refer to the notes to theenclosed financial data. Formation Transactions Prior to August 7, 2007, each of our initial properties, or datacenters, was directly owned by a single property entity that was affiliatedwith Lammot J. du Pont, the Executive Chairman of our Board of Directorsand Hossein Fateh, our President and Chief Executive Officer. To facilitatea closing with KeyBank National Association (the "KeyBank Credit Facility")on August 7, 2007 and in contemplation of the IPO we combined the entities'holding interests in several of our operating and developmentproperties-VA3, VA4, ACC2, ACC3 and CH1-into one holding company, SafariVentures LLC ("Safari") in order for those properties to serve ascollateral for the KeyBank Credit Facility. Following the closing of theKeyBank Credit Facility, each of the members of the entities that held theproperties contributed to Safari became a direct or indirect member ofSafari. Safari made borrowings under the KeyBank Credit Facility topurchase land in Ashburn, Virginia that is being held for use in thedevelopment of our ACC5 and ACC6 data centers. For accounting purposes,Quill Ventures, LLC, the entity that owns our ACC3 data center located inAshburn, Virginia was determined to be the Company's accounting acquirer(the "Predecessor") in the Safari transaction and the other data centerproperties -- ACC2, VA3, VA4 and CH1 -- were determined to be the "AcquiredProperties". The Predecessor is presented on a historical cost basis andthe contribution of the interests of ACC2, VA3, VA4 and CH1 has beenrecorded at their estimated fair value. Subsequent to August 6, 2007,Safari is the accounting predecessor. We also acquired as part of the IPO formation transactions on October24, 2007, our ACC4 data center, land held for the development of anadditional data center (ACC7) located in Ashburn, Virginia, land held fordevelopment of a data center (NJ1) located in Piscataway, New Jersey, acontract to acquire land in Santa Clara, California (SC1)and propertymanagement, development, leasing, asset management and technical servicesagreements and arrangements for all of our properties from entitiesaffiliated with the Executive Chairman of our Board of Directors, and ourPresident and Chief Executive Officer. The contribution of the interests ofACC4, the two undeveloped parcels of land and the contract to acquire landwere recorded at their estimated fair value. Prior to October 24, 2007, operating results include those of thePredecessor. Operating results for the Acquired Properties are onlyreflected for the period subsequent to August 7, 2007. For the periodOctober 24, 2007 to December 31, 2007, operating results are presented forthe Company, which includes the Predecessor, the Acquired Properties, ACC4,NJ1 and ACC7 and the other formation transactions. Current Status As of December 31, 2007, the Company's operating data center portfolio,encompassing 82.4 MW of critical load and 539,188 raised square feet, was93.2% leased compared to 100% leased at September 30, 2007, as a result ofPhase II of ACC4 opening during the quarter which was 69.2% leased as ofDecember 31, 2007. During the fourth quarter, two new leases were signedfor Phase II of ACC4, covering approximately 21,600 raised square feet, or4.6 MW. The Company's IPO consisted of 35.1 million common shares which werepriced at $21.00 per share and closed on October 24, 2007. As of December31, 2007, total debt outstanding was $296.7 million, representing 22.7% ofour total market capitalization. Hossein Fateh, President and Chief Executive Officer, said "We arepleased with our performance for the fourth quarter. We demonstrated ourability to execute our strategies of acquiring excellent development sites(Santa Clara); completing construction on time and budget (Phase II of ACC4) and effectively sourcing capital (CH1 construction financing).Furthermore, we have been pleased with the level of leasing interest inChicago. We believe we are in an excellent position to continue tointegrate this strategy in 2008." Fourth Quarter Results For the period from October 24, 2007 to December 31, 2007, the Companyreported a net loss of $99.3 million, or $2.80 per diluted common share,which included several one-time related charges including $176.5 millionrelated to the acquisition of property management, development, leasing,asset management and technical services agreements and arrangements notedabove and $13.4 million of non-cash stock based compensation costs at thetime of the IPO. Adjusted Funds from Operations ("AFFO") for the periodfrom October 24, 2007 to December 31, 2007 was $8.1 million, or $0.12 perdiluted common share and unit. For the period from January 1 to October 23,2007, the Company's Predecessor reported a net loss of $1.6 million. Thehistorical financial results of the Company's Predecessor, as noted above,do not include the financial performance of those entities that have beenconsolidated under the ownership of the Company as a result of the IPO anddo not include a full year of results for the entities combined with ACC3to create Safari. In addition, the Predecessor's results exclude the impactof purchase accounting adjustments resulting from the Company's formationafter the completion of our IPO. For these and other reasons, thePredecessor's historical operating results are not directly comparable tothe Company's operating results after the IPO. Dividends During the fourth quarter 2007, the Company's Board of Directorsdeclared a regular quarterly cash dividend at the rate of $0.1875 percommon share. Shareholders of record as of December 28, 2007 received aprorated portion of this dividend in the amount of $0.15 per common share,which reflects the partial quarterly period beginning October 24, 2007 (thecompletion date of the Company's IPO) and ending December 31, 2007. Thedividend was paid on January 11, 2008. On February 26, 2008, the Company's Board of Directors declared aregular quarterly cash dividend for the first quarter of 2008 at the rateof $0.1875 ($0.75 annual rate) per common share for shareholders of recordas of March 28, 2008. The dividend will be paid on April 11, 2008. Other The Company has also announced that the one-year employment agreementbetween the Company and Executive Vice President and Chief FinancialOfficer Steven G. Osgood will conclude on its expiration date of July 25,2008. DuPont Fabros Technology is presently fielding candidates for thechief financial officer position. Lammot J. du Pont, Executive Chairman of DuPont Fabros Technology,said, "As part of our transition over the last year from private to public,we benefited tremendously from the skills and experience that Steve broughtto us. In that time, Steve capably met his mandate by assisting us with thesuccessful completion of our IPO and putting into place a sound accountingand financial reporting infrastructure and other financial controls. Wehave mutually decided not to renew Steve's employment arrangement with usafter its term expires in July. Steve and his family reside in Ohio, and webelieve our long term needs require a CFO who resides locally in theWashington, D.C. area. We are extraordinarily grateful for Steve'scontributions and role in the Company's evolution. Steve will work with usto help identify a suitable CFO candidate and effect a seamlesstransition." Conference Call and Web Cast Information The Company will host a conference call to discuss 2007 fourth quarterand year-end results and outlook for 2008 on Friday, February 29, 2008 at10:00AM EST. Interested parties can listen to the call via the internet at
Financial tables to follow ... DUPONT FABROS TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEETS DuPont Fabros The Technology, Inc. Predecessor December 31, December 31, 2007 2006 (in thousands except share and per share data) ASSETS Income producing property: Land $26,971 $1,071 Buildings and improvements 1,102,954 93,400 1,129,925 94,471 Less: Accumulated depreciation (17,710) (2,450) Net income producing property 1,112,215 92,021 Construction in progress and land held for development 245,636 - Net real estate 1,357,851 92,021 Cash and cash equivalents 11,510 4,861 Restricted cash 119 - Rents and other receivables, net 13,915 4,338 Lease contracts above market value, net of accumulated amortization of $1,022 and $0, respectively 22,078 - Deferred costs, net 45,863 12,568 Prepaid expenses and other assets 2,093 117 Due from related parties 237 - Non-real estate fixed assets, net of depreciation of $16 and $ 0, respectively 489 - Total assets $1,454,155 $113,905 LIABILITIES AND STOCKHOLDERS' EQUITY AND MEMBERS' DEFICIT Liabilities: Mortgages and notes payable $296,719 $112,490 Accounts payable and accrued liabilities 39,178 2,305 Dividend and distribution payable 10,044 - Lease contracts below market value, net of accumulated amortization of $3,623 and $0, respectively 48,277 - Advance rents and security deposits 4,392 1,580 Due to related parties - 4,535 Interest rate swap liability 7,870 - Total liabilities 406,480 120,910 Stockholders' equity and members' deficit: Minority interests - operating partnership 490,102 - Members' deficit - (7,005) DuPont Fabros The Technology, Inc. Predecessor December 31, December 31, 2007 2006 (in thousands except share and per share data) Preferred stock, par value $.001, 50,000,000 shares authorized, no shares issued or outstanding at December 31, 2007 and December 31, 2006 - - Common stock, par value $.001, 250,000,000 shares authorized, 35,453,833 shares issued and outstanding at December 31, 2007, and no shares issued or outstanding at December 31, 2006 35 - Additional paid in capital 664,714 - Accumulated deficit (99,306) - Accumulated other comprehensive loss (7,870) - Total stockholders' equity and members' deficit 557,573 (7,005) Total liabilities and stockholders' equity and members' deficit $1,454,155 $113,905 DUPONT FABROS TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS DuPont Fabros The Technology, Inc. Predecessor For the For the period from period from October 24, January 1, 2007 through 2007 through (in thousands except share and per December 31, October 23, share data) 2007 2007 Revenue: Base rent $16,295 $23,458 Recoveries from tenants 8,961 11,823 Other revenue 615 122 Total operating revenue 25,871 35,403 Expenses: Real estate taxes 393 495 Insurance 146 174 Property operating costs 7,436 10,186 Management fees - 1,772 Depreciation and amortization 8,896 8,419 General and administrative, including $15,026 and $0 of non-cash stock based compensation expense 17,143 381 Acquisition of service agreements 176,526 - Other expenses 480 - Total operating expenses 211,020 21,427 Operating income (loss) (185,149) 13,976 Other income and expense: Interest income 132 280 Interest expense (1,531) (15,875) Loss before minority interests (186,548) (1,619) Minority interests 87,242 - Net loss $(99,306) $(1,619) Basic and diluted loss per common share $(2.80) N/A Dividends declared per common share $0.15 N/A Weighted average number of common shares outstanding, basic and diluted 35,382,404 N/A Adjusted Funds From Operations Funds From Operations, or FFO, is used by industry analysts andinvestors as a supplemental operating performance measure for REITs. Wecalculate FFO in accordance with the definition that was adopted by theBoard of Governors of the National Association of Real Estate InvestmentTrusts, or NAREIT. FFO, as defined by NAREIT, represents net income (loss)determined in accordance with GAAP, excluding extraordinary items asdefined under GAAP and gains or losses from sales of previously depreciatedoperating real estate assets, plus specified non-cash items, such as realestate asset depreciation and amortization, and after adjustments forunconsolidated partnerships and joint ventures. We use FFO as a supplemental performance measure because, in excludingreal estate related depreciation and amortization and gains and losses fromproperty dispositions, it provides a performance measure that, whencompared year over year, captures trends in occupancy rates, rental ratesand operating expenses. We also believe that, as a widely recognizedmeasure of the performance of equity REITs, FFO will be used by investorsas a basis to compare our operating performance with that of other REITs.However, because FFO excludes depreciation and amortization and capturesneither the changes in the value of our properties that result from use ormarket conditions nor the level of capital expenditures and leasingcommissions necessary to maintain the operating performance of ourproperties, all of which have real economic effects and could materiallyimpact our results from operations, the utility of FFO as a measure of ourperformance is limited. While funds from operations is a relevant and widely used measure ofoperating performance of equity REITs, other equity REITs may use differentmethodologies for calculating funds from operations and, accordingly, fundsfrom operations as disclosed by such other REITs may not be comparable tofunds from operations published herein. Therefore, we believe that in orderto facilitate a clear understanding of our historical operating results,funds from operations should be examined in conjunction with net income(loss) as presented in the consolidated financial statements includedelsewhere in this prospectus. Funds from operations should not beconsidered as an alternative to net income (loss) (computed in accordancewith GAAP) as an indicator of the properties' financial performance or tocash flow from operating activities (computed in accordance with GAAP) asan indicator of our liquidity, nor is it indicative of funds available tofund our cash needs, including our ability to pay dividends or makedistributions. We also present FFO with a supplemental adjustment which we callAdjusted FFO ("AFFO"). AFFO is FFO excluding straight-line revenue,non-cash stock based compensation, gain or loss on derivative instruments,acquisition of service agreements, below market lease amortization net ofabove market lease amortization and early extinguishment of debt costs. Adjusted Funds From Operations, or AFFO, does not represent cashgenerated from operating activities in accordance with GAAP and thereforeshould not be considered an alternative to net income as an indicator ofour operating performance or as an alternative to cash flow provided byoperations as a measure of liquidity and is not necessarily indicative offunds available to fund our cash needs including our ability to paydividends. In addition, AFFO may not be comparable to similarly titledmeasurements employed by other companies.
Our management uses AFFO: * in management reports given to our board of directors; * to provide a measure of REIT operating performance that can be compared to other companies using AFFO; and * as an important measure of operating performance. The following table sets forth a reconciliation of our net income(loss) to FFO and AFFO (in thousands):
Period from Period from October 24, January 1, 2007 to 2007 to December 31, October 23, 2007 2007 Net loss $(99,306) $(1,619) Adjustments: Real estate depreciation and amortization 8,880 8,419 Minority interests in OP (87,242) ----- FFO $(177,668) $6,800 Straight-line revenue (4,494) (3,934) Non-cash stock based compensation expense 15,026 ----- Acquisition of service agreements 176,526 ----- Below market lease amortization, net of above market lease amortization (1,307) (1,294) Early extinguishment of debt costs ----- 2,014 AFFO $8,083 $3,586 Below is a reconciliation of expected FFO and AFFO for 2008 to ourexpected net income available to common stockholders for 2008 based on themidpoint of the ranges for 2008 FFO and AFFO guidance set forth above:
For the Year December 31, 2008 (based on mid-points of 2008 guidance) (000's) Net income available to common stockholders $17,591 Adjustments: Real estate related depreciation and amortization 50,647 Minority interests in operating partnership 15,462 FFO $83,700 Straight-line revenue (22,825) Non-cash stock based compensation expense 3,000 Below market lease amortization, net of above market lease amortization (6,975) AFFO $56,900 Diluted FFO per share and unit $1.25 Diluted AFFO per share and unit $0.85 Total dilutive common stock and units outstanding 66,957
DuPont Fabros Technology, Inc. Announces Fourth Quarter 2007 Earnings Results
March 05, 2008, 10:19 p.m. EST 17 Min Read
