This excerpt taken from the EQR 10-Q filed May 8, 2006.
15. Reportable Segments
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by senior management. Senior management decides how resources are allocated and assesses performance on a monthly basis.
The Companys primary business is owning, managing, and operating multifamily residential properties, which includes the generation of rental and other related income through the leasing of apartment units to residents and includes Equity Corporate Housing (ECH). Senior management evaluates the performance of each of our apartment communities on an individual basis; however, each of our apartment communities has similar economic characteristics, residents, and products and services so they have been aggregated into one reportable segment. The Companys rental real estate segment comprises approximately 99.5% and 99.4% of total revenues from continuing operations for the quarters ended March 31, 2006 and 2005, respectively. The Companys rental real estate segment comprises approximately 99.8% of total assets at both March 31, 2006 and December 31, 2005.
The primary financial measure for the Companys rental real estate segment is net operating income (NOI), which represents rental income less: 1) property and maintenance expense; 2) real estate taxes and insurance expense; and 3) property management expense (as reflected in the accompanying consolidated statements of operations). The Company believes that NOI is helpful to investors as a supplemental measure of the operating performance of a real estate company because it is a direct measure of the actual operating results of the Companys apartment communities. Current year NOI is compared to prior year NOI and current year budgeted NOI as a measure of financial performance. The following table presents the NOI from our rental real estate specific to continuing operations for the quarters ended March 31, 2006 and 2005, respectively (amounts in thousands):
The Companys fee and asset management activity is immaterial and does not meet the threshold requirements of a reportable segment as provided for in SFAS No. 131.
All revenues are from external customers and there is no customer who contributed 10% or more of the Companys total revenues during the quarters ended March 31, 2006 or 2005.