1
EXHIBIT INDEX ON PAGE 15
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: JUNE 30, 2001
--------------------------------------------------
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: 1-6064
ALEXANDER'S, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 51-0100517
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
888 SEVENTH AVENUE, NEW YORK, NEW YORK 10019
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(201)894-7000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(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 July 20, 2001 there were 5,000,850 common shares outstanding.
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ALEXANDER'S, INC.
AND SUBSIDIARIES
INDEX
Page Number
-----------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Balance Sheets as of
June 30, 2001 and December 31, 2000....................... 3
Consolidated Statements of Income for the
Three and Six Months Ended June 30, 2001 and June 30,
2000...................................................... 4
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2001 and June 30, 2000.......... 5
Notes to Consolidated Financial Statements................ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 9
Item 3. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 12
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings......................................... 13
Item 4. Submission of Matters to a Vote of Security Holders....... 13
Item 6. Exhibits and Reports on Form 8-K.......................... 13
Signatures .......................................................... 14
Exhibit Index .......................................................... 15
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALEXANDER'S, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share amounts)
JUNE 30, DECEMBER 31,
2001 2000
--------- -----------
ASSETS:
Real estate, at cost:
Land ............................................. $ 81,656 $ 81,656
Buildings, leaseholds and improvements ........... 173,528 141,873
Capitalized expenses, development costs
and construction in progress ................. 157,287 169,811
--------- ---------
Total ................................... 412,471 393,340
Less accumulated depreciation and
amortization ................................. (54,086) (51,848)
--------- ---------
Real estate, net ................................. 358,385 341,492
Asset held for sale ................................... -- 4,559
Cash and cash equivalents ............................. 93,666 2,272
Restricted cash ....................................... 12,820 8,390
Accounts receivable, net of allowance for
doubtful accounts of $698 in 2001 and $722 in
2000.............................................. 1,158 1,723
Receivable arising from the straight-lining of
rents, net ...................................... 16,769 15,084
Deferred lease and other property costs ............... 24,803 24,453
Deferred debt expense ................................. 6,190 2,280
Other assets .......................................... 5,988 3,052
--------- ---------
TOTAL ASSETS .......................................... $ 519,779 $ 403,305
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Debt (including $119,000 and $115,000 due to Vornado
Realty Trust ) ................... $ 459,000 $ 367,788
Amounts due to Vornado Realty Trust and
its affiliate .................................... 2,041 1,267
Accounts payable and accrued liabilities .............. 10,461 13,821
Other liabilities ..................................... 2,905 2,734
--------- ---------
TOTAL LIABILITIES ..................................... 474,407 385,610
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock: no par value;
authorized, 3,000,000 shares;
issued, none
Common stock: $1.00 par value per share;
authorized, 10,000,000 shares;
issued, 5,173,450 shares.......................... 5,174 5,174
Additional capital .................................... 24,843 24,843
Retained earnings/(deficit) ........................... 16,315 (11,362)
--------- ---------
46,332 18,655
Less treasury shares, 172,600 shares
at cost .......................................... (960) (960)
--------- ---------
Total stockholders' equity ............................ 45,372 17,695
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ............................. $ 519,779 $ 403,305
========= =========
See notes to consolidated financial statements.
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ALEXANDER'S, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands except per share amounts)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ------------------------
2001 2000 2001 2000
-------- -------- -------- --------
REVENUES:
Property rentals ........................................... $ 10,884 $ 10,655 $ 21,796 $ 21,167
Expense reimbursements ..................................... 6,178 5,433 12,156 10,007
-------- -------- -------- --------
Total revenues .................................................. 17,062 16,088 33,952 31,174
-------- -------- -------- --------
EXPENSES:
Operating (including management fee to Vornado of $334
and $333 for the three months ended in 2001 and 2000;
$674 and $668 for the six months ended in 2001 and
2000)................................................... 8,242 7,395 15,420 14,009
General and administrative (including management fee to
Vornado of $540 and $1,080 each for the three and
six months ended in 2001 and 2000) ..................... 850 1,903 1,728 2,755
Depreciation and amortization .............................. 1,600 1,364 3,182 2,717
-------- -------- -------- --------
Total expenses .................................................. 10,692 10,662 20,330 19,481
-------- -------- -------- --------
OPERATING INCOME ................................................ 6,370 5,426 13,622 11,693
Interest and debt expense
(including interest on loans from Vornado) ................. (4,728) (5,449) (9,306) (10,681)
Interest and other income, net .................................. 428 256 801 648
-------- -------- -------- --------
Income before gain on sale of Fordham Road property and
extraordinary item ......................................... 2,070 233 5,117 1,660
Gain on sale of Fordham Road property ........................... -- -- 19,026 --
-------- -------- -------- --------
Income before extraordinary item ................................ 2,070 233 24,143 1,660
Extraordinary gain from early extinguishment of debt ............ -- -- 3,534 --
-------- -------- -------- --------
NET INCOME ...................................................... $ 2,070 $ 233 $ 27,677 $ 1,660
======== ======== ======== ========
Basic and diluted income per share before extraordinary item .... $ 0.41 $ 0.05 $ 4.82 $ 0.33
======== ======== ======== ========
Basic and diluted income per share after extraordinary item ..... $ 0.41 $ 0.05 $ 5.53 $ 0.33
======== ======== ======== ========
See notes to consolidated financial statements.
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ALEXANDER'S, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
FOR THE SIX MONTHS ENDED
JUNE 30,
-------------------------
2001 2000
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................................... $ 27,677 $ 1,660
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization (including debt issuance
costs)...................................................... 4,222 3,610
Straight-lining of rental income, net ....................... (1,685) (1,729)
Gain on sale of Fordham Road property ....................... (19,026) --
Extraordinary gain from early extinguishment of debt ........ (3,534) --
Change in assets and liabilities:
Accounts receivable ........................................... 565 1,613
Amounts due to Vornado Realty Trust and its affiliate ......... 774 (916)
Accounts payable and accrued expenses ......................... (3,067) (624)
Other liabilities ............................................. 171 747
Other ......................................................... (4,225) 969
---------- ----------
Net cash provided by operating activities ........................ 1,872 5,330
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate ...................................... (19,131) (41,699)
Proceeds from sale of Fordham Road property ................... 23,701 --
Cash restricted for operating liabilities ..................... (15,673) --
Cash made available for operating liabilities ................. 2,855 87
Cash made available for construction and development .......... 8,388 7,995
---------- ----------
Net cash provided by (used in) investing activities .............. 140 (33,617)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt .............................................. 232,685 12,470
Debt repayments ............................................... (138,168) (222)
Deferred debt expense ......................................... (5,135) (468)
Payment of acquisition obligation ............................. -- (6,784)
---------- ----------
Net cash provided by financing activities ........................ 89,382 4,996
---------- ----------
Net increase (decrease) in cash and cash equivalents ............. 91,394 (23,291)
Cash and cash equivalents at beginning of period ................. 2,272 26,053
---------- ----------
Cash and cash equivalents at end of period ....................... $ 93,666 $ 2,762
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest (of which $9,954 and $6,942 have
been capitalized) ............................................. $ 18,626 $ 14,606
========== ==========
See notes to consolidated financial statements.
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ALEXANDER'S, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Balance Sheet as of June 30, 2001, the Consolidated
Statements of Income for the three and six months ended June 30, 2001 and 2000,
and the Consolidated Statements of Cash Flows for the six months ended June 30,
2001 and 2000 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 have
been made. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. These
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Alexander's, Inc. and Subsidiaries' (the "Company") annual report on Form 10-K
for the year ended December 31, 2000 as filed with the Securities and Exchange
Commission. The results of operations for the three and six months ended June
30, 2001 are not necessarily indicative of the operating results for the full
year.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
2. RELATIONSHIP WITH VORNADO REALTY TRUST ("VORNADO")
Vornado owns 33.1% of the Company's common stock at June 30, 2001. The
Company is managed by and its properties are redeveloped and leased by Vornado,
pursuant to agreements with a one-year term expiring in March of each year which
are automatically renewable. Under these agreements, the Company incurred fees
of $1,601,000 and $1,686,000 in the three month periods ended June 30, 2001 and
2000 and $4,065,000 and $3,373,000 in the six months periods ended June 30, 2001
and 2000.
At June 30, 2001, the Company is indebted to Vornado in the amount of
$119,000,000 comprised of (i) $95,000,000 relating to the subordinated tranche
of a $115,000,000 secured financing, and (ii) $24,000,000 under a secured line
of credit. On March 15, 2001, the interest rate on these loans was reset from
15.72% to 13.74% using the same spread to treasuries as previously used. In
addition, during the six-months ended June 30, 2001, the Company borrowed
$4,000,000 under the secured line of credit from Vornado. At June 30, 2001,
$26,000,000 remains available under this facility. The Company incurred interest
on its loans from Vornado of $4,199,000 and $3,474,000 in the three months ended
June 30, 2001 and 2000 and $8,965,000 and $7,249,000 in the six months ended
June 30, 2001 and 2000.
3. SALE OF FORDHAM ROAD PROPERTY
The Company sold its Fordham Road property, located in the Bronx, New
York, on January 12, 2001. The vacant property contains 303,000 square feet and
was sold for $25,500,000 resulting in a gain of $19,026,000. In addition, the
Company paid off the mortgage on this property at a discount, which resulted in
an extraordinary gain from the early extinguishment of debt of $3,534,000.
Included in the expenses relating to the sale, the Company paid a commission of
$1,020,000, of which $520,000 was paid to Vornado.
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4. LEASES
On May 1, 2001 the Company entered into a lease agreement with Bloomberg
L.P., a global, multi-media based distributor of information services. Under
this agreement, Bloomberg will lease approximately 700,000 square feet at the
Company's 59th Street and Lexington Avenue development property. The initial
term of the lease is for 25 years, with a ten-year renewal option. Base annual
net rent is $34,221,000 in each of the first four years and $38,226,000 in the
fifth year, with similar percentage increases thereafter.
The development will contain approximately 1.4 million square feet of
retail, office and residential space. The funding required for the proposed
building will be in excess of $650,000,000. Alexander's is exploring various
alternatives for financing the project, including equity, debt, joint ventures
and asset sales, which may involve arrangements with Vornado Realty Trust.
There can be no assurance that this project will be ultimately completed,
completed on time or completed for the budgeted amount. If the project is not
completed on a timely basis, the lease may be cancelled and significant
penalties may apply.
5. KINGS PLAZA REGIONAL SHOPPING CENTER
The Company has completed an interior renovation of the Kings Plaza
Regional Shopping Center (the "Center") at a cost of $31,655,000. These costs
were reclassified to "Buildings, leaseholds and improvements" from "Capitalized
expenses, development costs and construction in progress" during the first
quarter of this year. The exterior of the Center is expected to be renovated
this year.
On June 1, 2001, the Company, through a newly formed subsidiary,
completed a $223,000,000 refinancing of its subsidiary's Kings Plaza Regional
Shopping Center property and repaid the $115,210,000 debt collateralized by the
property from the proceeds of the new loan. The new 10-year mortgage matures in
June 2011 and bears interest at 7.46%. Monthly payments include principal based
on a 27-year amortization schedule.
6. COMMITMENTS AND CONTINGENCIES
In June 1997, the Kings Plaza Regional Shopping Center (the "Center"),
commissioned an Environmental Study and Contamination Assessment Site
Investigation (the Phase II "Study") to evaluate and delineate environmental
conditions disclosed in a Phase I study. The results of the Study indicate the
presence of petroleum and bis (2-ethylhexyl) phthalate contamination in the soil
and groundwater. The Company has delineated the contamination and has developed
a remediation approach. The New York State Department of Environmental
Conservation ("NYDEC") has approved a portion of the remediation approach. The
Company accrued $2,000,000 in previous years ($1,733,000 has been paid as of
June 30, 2001) for its estimated obligation with respect to the clean up of the
site, which includes costs of (i) remedial investigation, (ii) feasibility
study, (iii) remedial design, (iv) remedial action and (v) professional fees.
Based upon revised estimates, the Company has accrued an additional $675,000
in the quarter ended June 30, 2001. If the NYDEC insists on a more extensive
remediation approach, the Company could incur additional obligations.
The majority of the contamination may have resulted from activities of
third parties; however, the sources of the contamination have not been fully
identified. Although the Company intends to pursue all available remedies
against any potentially responsible third parties, there can be no assurance
that such parties will be identified, or if identified, whether these
potentially responsible third parties will be solvent. In addition, the costs
associated with pursuing any potentially responsible parties may be cost
prohibitive. The Company has not recorded an asset as of June 30, 2001 for
potential recoveries of environmental remediation costs from other parties.
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ALEXANDER'S, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Neither the Company nor any of its subsidiaries is a party to, nor is
their property the subject of, any material pending legal proceeding other than
routine litigation incidental to their businesses. The Company believes that
these legal actions will not be material to the Company's financial condition or
results of operations.
Letters of Credit
Approximately $900,000 in standby letters of credit were issued at June
30, 2001.
7. INCOME PER SHARE
The following table sets for the computation of basic and diluted income
per share:
For The Three Months Ended For The Six Months Ended
June 30, June 30,
-------------------------- ------------------------
2001 2000 2001 2000
-------- -------- -------- --------
(amounts in thousands except per share amounts)
Numerator:
Income before extraordinary item ............ $ 2,070 $ 233 $ 24,143 $ 1,660
Extraordinary item .......................... -- -- 3,534 --
-------- -------- -------- --------
Net income .................................. $ 2,070 $ 233 $ 27,677 $ 1,660
======== ======== ======== ========
Denominator:
Denominator for basic income per share -
weighted average shares ................... 5,001 5,001 5,001 5,001
Effect of dilutive securities:
Employee stock options .................... -- -- -- 6
-------- -------- -------- --------
Denominator for diluted income per share -
adjusted weighted average shares and
assumed conversions ....................... 5,001 5,001 5,001 5,007
======== ======== ======== ========
INCOME PER COMMON SHARE -
BASIC AND DILUTED:
Income before extraordinary item .......... $ .41 $ .05 $ 4.82 $ .33
Extraordinary item ........................ -- -- .71 --
-------- -------- -------- --------
Net income per common share ............... $ .41 $ .05 $ 5.53 $ .33
======== ======== ======== ========
8. RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board issued SFAS No.
141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 is effective immediately and SFAS 142 will be effective
January 2002. The new standards are not expected to have a significant impact on
our financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements contained herein constitute forward-looking statements
as such term is defined in Section 27A of the Securities Act of 1933, as
amended, and Section 21 E of the Securities Exchange Act of 1934, as amended.
Certain factors could cause actual results to differ materially from those in
the forward-looking statements. Factors that might cause such a material
difference include, but are not limited to, (a) changes in the general economic
climate, (b) local conditions such as an oversupply of space or a reduction in
demand for real estate in the area, (c) conditions of tenants, (d) competition
from other available space, (e) increased operating costs and interest expense,
(f) the timing of and costs associated with property improvements, (g) changes
in taxation or zoning laws, (h) government regulations, (i) failure of
Alexander's to continue to qualify as a REIT, (j) availability of financing on
acceptable terms, (k) potential liability under environmental or other laws or
regulations, (l) general competitive factors, (m) dependence upon Vornado Realty
Trust and (n) possible conflicts of interest with Vornado Realty Trust.
RESULTS OF OPERATIONS
The Company had net income of $2,070,000 in the quarter ended June
30, 2001, compared to $233,000 in the quarter ended June 30, 2000, an increase
of $1,837,000 and $27,677,000 for the six months ended June 30, 2001, compared
to $1,660,000 for the six months ended June 30, 2000, an increase of
$26,017,000. Included in the current six months is a gain on the sale of the
Fordham Road property of $19,026,000 and an extraordinary gain from the early
extinguishment of debt of $3,534,000. Excluding these items, net income would
have been $5,117,000, or a $3,457,000 increase, over the prior year's six month
period.
Tenant expense reimbursements were $6,178,000 in the quarter ended
June 30, 2001, compared to $5,433,000 in the prior year's quarter, an increase
of $745,000 and $12,156,000 for the six months ended June 30, 2001, compared to
$10,007,000 for the six months ended June 30, 2000, an increase $2,149,000.
These increases resulted from reimbursements for incremental real estate taxes,
repairs and maintenance over the prior year's periods. In addition to these
effects, the current year's increase for the six month period resulted primarily
from (i) higher reimbursements for a portion of the increased fuel costs of the
utility plant at the Company's Kings Plaza Regional Shopping Center, and (ii) a
change made in prior year's six months in the method of allocating an anchor
tenant's share of parking lot expenses at the Rego Park I property (which
covered a number of years and reduced the prior year's six month amount).
Operating expenses were $8,242,000 in the quarter ended June 30,
2001, compared to $7,395,000 in the prior year's quarter, an increase of
$847,000. Operating expenses were $15,420,000 for the six months ended June 30,
2001, compared to $14,009,000 for the six months ended June 30, 2000, an
increase of $1,411,000. These increases resulted from higher real estate taxes
and repairs and maintenance compared to the prior year. In addition to these
effects, the current year's increase for the six month period includes an
additional accrual of $675,000 for environmental remediation at the Kings
Plaza Regional Shopping Center.
General and administrative expenses were $850,000 in the quarter
ended June 30, 2001, compared to $1,903,000 in the prior year's quarter, a
decrease of $1,053,000 and $1,728,000 for the six months ended June 30, 2001,
compared to $2,755,000 for the six months ended June 30, 2000, a decrease of
$1,027,000. These decreases resulted primarily from compensation expense of
$983,000 relating to stock appreciation rights recorded in the second quarter of
2000.
Interest and debt expense was $4,728,000 in the quarter ended June
30, 2001, compared to $5,449,000 in the prior year's quarter, a decrease of
$721,000 and $9,306,000 for the six months ended June 30, 2001, compared to
$10,681,000 for the six months ended June 30, 2000, a decrease of $1,375,000.
These decreases resulted from higher capitalized interest relating to the
Company's development properties, partially offset by higher average debt.
LIQUIDITY AND CAPITAL RESOURCES
In the aggregate, Alexander's operating properties do not generate
sufficient cash flow to pay all of its expenses. The Company's three
non-operating properties (Lexington Avenue, Paramus, and Rego Park II) are in
various stages of development. As rents commence from portions of the
development property(s) and from the vacant property the Company expects that
cash flow will become positive.
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The Company has completed the excavation and laying the foundation
for its Lexington Avenue property as part of the proposed development of a large
multi-use building. The proposed 1.4 million square feet building is expected to
be comprised of a commercial portion, which may include a combination of retail
stores and offices; and a residential portion, consisting of condominium units.
If the residential portion of the property is developed, the air rights
representing the residential portion would be transferred to a taxable REIT
subsidiary, as a REIT is not permitted to sell condominiums without being
subject to a 100% excise tax on the gain from the sale of such condominiums. The
funding required for the proposed building will be in excess of $650,000,000.
The Company is exploring various alternatives for financing the project,
including equity, debt, joint ventures and asset sales, which may involve
arrangements with Vornado Realty Trust.
On May 1, 2001 the Company entered into a lease agreement with
Bloomberg L.P., under this agreement, Bloomberg will lease approximately 700,000
square feet. The initial term of the lease is for 25 years, with a ten-year
renewal option. Base annual net rent is $34,221,000 in each of the first four
years and $38,226,000 in the fifth year with similar percentage increases
thereafter. There can be no assurance that this project will be ultimately
completed, completed on time or completed for the budgeted amount. If the
project is not completed on a timely basis, the lease may be cancelled and
significant penalties may apply.
The Company, on its own, in a joint venture or through a third
party, may develop a shopping center of approximately 550,000 square feet on the
Paramus Property. The estimated cost of such development is approximately
$100,000,000. The Company has received municipal approvals on tentative plans to
redevelop the site. No development plans have been finalized.
The Company sold its Fordham road property, located in the Bronx,
New York, on January 12, 2001. The vacant property contains 303,000 square feet
and was sold for $25,500,000 resulting in a gain of $19,026,000. In addition,
the Company paid off the $21,263,000 mortgage on this property at a discount,
which resulted in an extraordinary gain from the early extinguishment of debt of
$3,534,000.
During the six-months ended June 30, 2001, the Company borrowed
$4,000,000 under the secured line of credit from Vornado. At June 30, 2001,
$26,000,000 remains available under this facility.
On March 15, 2001 the interest rate on the $119,000,000 loans from
Vornado were reset from 15.72% to 13.74% using the same spread to treasuries as
previously used.
On June 1, 2001, the Company, through a newly formed subsidiary,
completed a $223,000,000 refinancing of its subsidiary's Kings Plaza Regional
Shopping Center property and repaid the $115,210,000 debt collateralized by the
property from the proceeds of the new loan. The new 10-year mortgage matures in
June 2011 and bears interest at 7.46%.
The Company estimates that the fair market values of its assets
are substantially in excess of their historical cost and that it has additional
borrowing capacity. Alexander's continues to evaluate its needs for capital
which may be raised through (a) property specific or corporate borrowing, (b)
the sale of securities and (c) asset sales. Although there can be no assurance,
the Company believes that these cash sources will be adequate to fund cash
requirements until its operations generate adequate cash flow.
CASH FLOWS
Six Months Ended June 30, 2001
Cash provided by operating activities of $1,872,000 was comprised of (i)
net income of $27,677,000, (ii) non-cash items of $2,537,000, offset by (iii)
gain on sale of Fordham Road property of $19,026,000, (iv) extraordinary gain
from early extinguishment of debt of $3,534,000, and (v) the net change in
operating assets and liabilities of $5,782,000. The adjustments for non-cash
items are comprised of (i) depreciation and amortization of $4,222,000, offset
by (ii) the effect of straight-lining of rental income of $1,685,000.
Net cash provided by investing activities of $140,000 was comprised of (i)
proceeds from the sale of Fordham Road property of $23,701,000, and (ii) the
release of restricted cash of $11,243,000 offset by (iii) capital expenditures
of $19,131,000 and (iv) an increase in restricted cash of $15,673,000. The
capital expenditures were primarily
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comprised of (i) capitalized interest and other carrying costs of $11,000,000,
(ii) renovations to the Kings Plaza Regional Shopping Center of $2,345,000, and
(iii) excavation, foundation and predevelopment costs at Lexington Avenue of
$4,565,000.
Net cash provided by financing activities of $89,382,000 resulted primarily
from an increase in debt of $232,685,000 partially offset by debt payments of
$138,168,000.
Six Months Ended June 30, 2000
Cash provided by operating activities of $5,330,000 was comprised of (i)
net income of $1,660,000, (ii) non-cash items of $1,881,000, and (iii) the net
change in operating assets and liabilities of $1,789,000. The adjustments for
non-cash items are comprised of (i) depreciation and amortization of $3,610,000,
offset by (ii) the effect of straight-lining of rental income of $1,729,000.
Net cash used in investing activities of $33,617,000 was comprised of
capital expenditures of $41,699,000, partially offset by the release of
restricted cash of $8,082,000.
Net cash provided by financing activities of $4,996,000 resulted primarily
from an increase in debt of $12,470,000 partially offset by the payment of
acquisition debt of $6,784,000.
Funds from Operations for the Three and Six Months Ended June 30, 2001 and June
30, 2000
Funds from operations was $2,884,000 in the quarter ended June 30,
2001, compared to $105,000 in the prior year's quarter, an increase of
$2,779,000 and $6,614,000 in the six months ended June 30, 2001, compared to
$1,402,000 in the prior year's six months, an increase of $5,512,000. The
following table reconciles net income to funds from operations:
For The Three Months Ended For The Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Net income .................................... $ 2,070,000 $ 233,000 $ 27,677,000 $ 1,660,000
Gain on Sale of Fordham Road property ......... -- -- (19,026,000) --
Extraordinary gain from early extinguishment
of debt .................................. -- -- (3,534,000) --
Depreciation and amortization of
real property ............................ 1,600,000 1,364,000 3,182,000 2,717,000
Straight-lining of property rentals
for rent escalations ..................... (786,000) (888,000) (1,685,000) (1,781,000)
Leasing fees paid in excess
of expense recognized .................... -- (604,000) -- (1,194,000)
------------ ------------ ------------ ------------
$ 2,884,000 $ 105,000 $ 6,614,000 $ 1,402,000
============ ============ ============ ============
11
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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, which is
disclosed in the Consolidated Statements of Cash Flows for the applicable
periods. There are no material legal or functional restrictions on the use of
funds from operations. 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. Management
considers funds from operations a relevant supplemental measure of operating
performance because it provides a basis for comparison among REITs; however,
funds from operations may not be comparable to similarly titled measures
reported by other REITs since the Company's method of calculating funds from
operations is different from that used by NAREIT. Funds from operations, as
defined by NAREIT, represents net income before depreciation and amortization,
extraordinary items and gains or losses on sales of real estate. Funds from
operations as disclosed above has been modified to adjust for the effect of
straight-lining of property rentals for rent escalations and leasing fee
expenses. Below are the cash flows provided by (used in) operating, investing
and financing activities:
For The Three Months Ended For The Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Operating activities $ 2,365,000 $ 5,033,000 $ 1,872,000 $ 5,330,000
============ ============ ============ ============
Investing activities $(13,089,000) $(17,967,000) $ 140,000 $(33,617,000)
============ ============ ============ ============
Financing activities $102,729,000 $ 810,000 $ 89,382,000 $ 4,996,000
============ ============ ============ ============
RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board issued SFAS
No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 141 is effective immediately and SFAS 142 will be
effective January 2002. The new standards are not expected to have a significant
impact on our financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At June 30, 2001, the Company had $35,000,000 of variable rate of debt at
a weighted average interest rate of 7.27% and $424,000,000 of fixed rate of debt
bearing interest at a weighted average interest rate of 9.18%. A one percent
increase in the base used to determine the interest rate of the variable rate
debt would result in a $350,000 decrease in the Company's annual net income
($.07 per basic and diluted share).
12
13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is a party to, nor is
their property the subject of, any material pending legal proceeding other than
routine litigation incidental to their businesses. The Company believes that
these legal actions will not be material to the Company's financial condition or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 30, 2001, the Company held its annual meeting of stockholders. The
stockholders voted, in person or by proxy, for the election of the three
nominees to serve on the Board of Directors for a term of three years, or until
their respective successors are duly elected and qualified. The three nominees
were approved. The results of the voting are shown below:
Election of Directors:
Votes Votes
Directors Cast For Withheld
- --------- -------- --------
Michael D. Fascitelli 4,776,480 67,053
Arthur Sonnenblick 4,824,673 18,860
Russell B. Wight, Jr. 4,824,483 19,050\
Because of the nature of the matters voted upon, there were no
abstentions or broker non-voter.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits required by Item 601 of Regulation of S-K are filed herewith and
are listed in the attached Exhibit Index.
(b) Reports on Form 8-K:
During the quarter ended June 30, 2001, the Company did not file any
reports on Form 8-K.
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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.
ALEXANDER'S, INC.
---------------------------------------
(Registrant)
Date: August 2, 2001 /s/ Patrick T. Hogan
---------------------------------------
Patrick T. Hogan,
Vice President, Chief Financial Officer
14
15
EXHIBIT INDEX
EXHIBIT
NO. PAGE
- ------------- ----
3(i) -- Certificate of Incorporation, as amended. Incorporated herein by
reference from Exhibit 3.0 to the Registrant's Current Report on
Form 8-K dated September 21, 1993.................................... *
3(ii) -- By-laws, as amended. Incorporated herein by reference from Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2000.................................. *
10(i)(A)(1) -- Agreement, dated as of December 4, 1985, among Seven Thirty One
Limited Partnership ("731 Limited Partnership"), Alexander's
Department Stores of Lexington Avenue, Inc., the Company, Emanuel
Gruss, Riane Gruss and Elizabeth Goldberg (collectively, the
"Partners"). Incorporated herein by reference from Exhibit
10(i)(F)(1) to the Registrant's Form 10-K for the fiscal year ended
July 26, 1986........................................................ *
10(i)(A)(2) -- Amended and Restated Agreement of Limited Partnership in the 731
Limited Partnership, dated as of August 21, 1986, among the
Partners. Incorporated herein by reference from Exhibit 1 to the
Registrant's Current Report on Form 8-K, dated August 21, 1986....... *
10(i)(A)(3) -- Third Amendment to Amended and Restated Agreement of Limited
Partnership dated December 30, 1994, among the Partners.
Incorporated herein by reference from Exhibit 10(i)(A)(3) to the
Registrant's Form 10-K for the fiscal year ended December 31, 1994... *
10(i)(B)(1) -- Promissory Note Modification Agreement, dated October 4, 1993,
between Alexander's Department Stores of New Jersey, Inc. and New
York Life Insurance Company ("New York Life"). Incorporated herein
by reference from Exhibit 10(i)(3)(a) to the Registrant's Form 10-K
for the Transition Period August 1, 1993 to December 31, 1993........ *
10(i)(B)(2) -- Mortgage Modification Agreement, dated October 4, 1993, by
Alexander's Department Stores of New Jersey, Inc. and New York Life
Incorporated herein by reference from Exhibit 10(i)(E)(3)(a) to the
Registrant's Form 10-K for the Transition Period August 1, 1993 to
December 31, 1993.................................................... *
10(i)(C) -- Credit Agreement, dated March 15, 1995, among the Company and
Vornado Lending Corp. Incorporated herein by reference from Exhibit
10(i)(C) to the Registrant's Form 10-K for the fiscal year ended
December 31, 1994.................................................... *
10(i)(C)(1) -- Modification and Extension of Credit Agreement, dated as of March
13, 2000, between Vornado Lending L.L.C., as Lender, and
Alexander's Inc., as Borrower. Incorporated herein by reference
from Exhibit 10(i)(C)(1) to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 2000................. *
10(i)(c) 2 -- First Modification and Extension of Credit Agreement dated as of
March 15, 2000 between Alexander's, Inc., as borrower, and Vornado
Lending L.L.C. as lender.............................................
10(i)(c) 3 -- First Note Modification and Extension Agreement dated as of March
15, 2000 between Alexander's Inc. as borrower, and Vornado Lending
L.L.C................................................................
10(i)(c) 4 -- Third Modification and Extension of Credit Agreement dated as
of March 15, 2000 between Alexander's Inc. as borrower, and
Vornado Lending L.L.C.................................................
- -----------
* Incorporated by reference
15
16
EXHIBIT
NO. PAGE
- --------------- ----
10(i)(c) 5 -- Third Note Modification and Extension Agreement dated as of March
15, 2000 between Alexander's Inc. as borrower, and Vornado Lending
L.L.C..............................................................
10(i)(D) -- Credit Agreement, dated March 15, 1995, among the Company and First
Union Bank, National Association. Incorporated herein by reference
from Exhibit 10(i)(D) to the Registrant's Form 10-K for the fiscal
year ended December 31, 1994....................................... *
10(i)(D)(1) -- Modification and Extension of Credit Agreement, dated as of April
14, 2000, between First Union National Bank, as lender, and
Alexander's Inc., as borrower. Incorporated herein by reference
from Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 2000........................ *
10(i)(D)(2) -- Pledge and Security Agreement for Transferable Development Rights,
dated as of April 14, 2000, between First Union National Bank, as
secured party, 731 Limited Partnership, as assignor, and
Alexander's, Inc. as borrower, Incorporated herein by reference
from Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 2000........................ *
10(i)(D) 3 -- Modification and Extension of Credit Agreement dated as of April
27, 2001 between Alexander's, Inc. as borrower, and First Union
National Bank, as lender...........................................
10(i)(D) 4 -- Note Modification and Extension Agreement of Credit Agreement dated
as of April 27, 2001 between Alexander's, Inc. as borrower, and
First Union National Bank, as lender...............................
10(i)(E) -- Amended, Restated and Consolidated Mortgage and Security Agreement,
dated May 12, 1999, between The Chase Manhattan Bank, as mortgagee,
and Alexander's Rego Shopping Center Inc., as mortgagor.
Incorporated herein by reference from Exhibit 10(i)(E) to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 2000................................................ *
10(i)(G)(1) -- Real Estate Retention Agreement dated as of July 20, 1992, between
Vornado Realty Trust and Keen Realty Consultants, Inc., each as
special real estate consultants, and the Company. Incorporated
herein by reference from Exhibit 10(i)(O) to the Registrant's Form
10-K for the fiscal year ended July 25, 1992....................... *
10(i)(G)(2) -- Extension Agreement to the Real Estate Retention Agreement, dated
as of February 6, 1995, between the Company and Vornado Realty
Trust. Incorporated herein by reference from Exhibit 10(i)(G)(2) to
the Registrant's Form 10-K for the fiscal year ended December 31,
1994............................................................... *
10(i)(H) -- Management and Development Agreement, dated as of February 6, 1995,
between Vornado Realty Trust and the Company, on behalf of itself
and each subsidiary listed therein. Incorporated herein by
reference from Exhibit 10.1 to the Registrant's Current Report on
Form 8-K dated February 6, 1995.................................... *
10(i)(I) -- Commitment letter, dated as of February 6, 1995, between Vornado
Realty Trust and the Company. Incorporated herein by reference from
Exhibit 10.3 to the Registrant's Current Report on Form 8-K dated
February 6, 1995................................................... *
- -----------
* Incorporated by reference
16
17
EXHIBIT
NO. PAGE
- --------------- ----
10(i)(J)(1) -- First Amendment to Mortgage and Security Agreement, dated as of
February 24, 2000, between Banc of America Commercial Finance
Corporation, as mortgagee, and Alexander's of Fordham Road, Inc.,
as mortgagor. Incorporated herein by reference from Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2000......................................... *
10(i)(J)(2) -- Amended and Restated Promissory Note (Secured), dated as of
February 24, 2000, between Banc of America Commercial Finance
Corporation, as lender, and Alexander's of Fordham Road, Inc., as
borrower. Incorporated herein by reference from Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 2000................................................. *
10(i)(J)(3) -- Trigger Agreement, dated as of February 24, 2000, between Banc of
America Commercial Finance Corporation, as lender, and Alexander's,
Inc., as guarantor. Incorporated herein by reference from Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2000.................................. *
10(i)(K) -- Term Loan Agreement dated as of June 18, 1998 among Alexanders'
Kings Plaza Center, Inc., Kings Plaza Corp., and Alexander's
Department Stores of Brooklyn, Inc., as Borrower, Union Bank of
Switzerland, as Lender. Incorporated herein by reference from
Exhibit 10 to the Registrant's Form 10-Q for the fiscal quarter
ended June 30, 1998.................................................. *
10(ii)(A)(3) -- Agreement of Lease for Rego Park, Queens, New York, between
Alexander's, Inc. and Sears Roebuck & Co. Incorporated herein by
reference from Exhibit 10.1 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1994................ *
10(ii)(A)(4)(a) -- Lease for Roosevelt Avenue, Flushing, New York, dated as of
December 1, 1992, between the Company, as landlord, and Caldor, as
tenant. Incorporated herein by reference from Exhibit (ii)(E)(7) to
the Registrant's Form 10-K for the fiscal year ended July 25, 1992... *
10(ii)(A)(4)(b) -- First Amendment to Sublease for Roosevelt Avenue, Flushing, New
York, dated as of February 22, 1995 between the Company, as
sublandlord, and Caldor, as tenant. Incorporated herein by
reference from Exhibit 10(ii)(A)(8)(b) to the Registrant's Form
10-K for the fiscal year ended December 31, 1994..................... *
10(ii)(A)(5) -- Lease Agreement, dated March 1, 1993 by and between the Company and
Alex Third Avenue Acquisition Associates. Incorporated by reference
from Exhibit 10(ii)(F) to the Registrant's Form 10-K for the fiscal
year ended July 31, 1993............................................. *
10(ii)(A)(6) -- Agreement of Lease for Rego Park, Queens, New York, between the
Company and Marshalls of Richfield, MN., Inc., dated as of March 1,
1995. Incorporated herein by reference from Exhibit
10(ii)(A)(12)(a) to the Registrant's Form 10-K for the fiscal year
ended December 31, 1994.............................................. *
10(ii)(A)(7) -- Guaranty, dated March 1, 1995, of the Lease described in Exhibit
10(ii)(A)(6)(a) above by the Company. Incorporated herein by
reference from Exhibit 10(ii)(A)(12)(b) to the Registrant's Form
10-K for the fiscal year ended December 31, 1994..................... *
10(iii)(B) -- Employment Agreement, dated February 9, 1995, between the Company
and Stephen Mann. Incorporated herein by reference from Exhibit
10(iii)(B) to the Registrant's Form 10-K for the fiscal year ended
December 31, 1994.................................................... *
- -----------
* Incorporated by reference
17
18
EXHIBIT
NO. PAGE
- --------------- ----
10(iv)(A) -- Registrant's Omnibus Stock Plan, as amended, dated May 28, 1997.
Incorporated herein by reference from Exhibit 10 to the
Registrant's Form 10-Q for the fiscal quarter ended June 30, 1997.. *
10(v) A1 -- Amended and Restated Consolidated Mortgage and Security Agreement
dated as of May 31, 2001 among Alexander's Kings Plaza L.L.C. as
mortgagor, Alexander's of King L.L.C., as mortgagor and Kings
Parking L.L.C., as mortgagor, collectively borrower, to Morgan
Guaranty Trust Company of New York, as mortgagee...................
10(v) A2 -- Amended, Restated and Consolidated Promissory Note, dated as of May
31, 2001 by and between Alexander's Kings Plaza L.L.C., Alexander's
of Kings L.L.C. and Kings Parking L.L.C., collectively borrower,
and Morgan Guaranty Trust Company of New York, lender..............
10(v) A3 -- Cash Management Agreement dated as of May 31, 2001 by and between
Alexander's Kings Plaza L.L.C., Alexander's of Kings L.L.C. and
Kings Parking L.L.C., collectively borrower, and Morgan Guaranty
Trust Company of New York, lender..................................
10(v) B -- Agreement of Lease dated as of April 30, 2001 between Seven Thirty
One Limited Partnership, landlord, and Bloomberg L.P., tenant......
- -----------
* Incorporated by reference
18