UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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
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Commission file number 1-10899
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Kimco Realty Corporation
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(Exact name of registrant as specified in its charter)
Maryland 13-2744380
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3333 New Hyde Park Road, New Hyde Park, NY 11042
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(Address of principal executive offices - Zip Code)
(516) 869-9000
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(Registrant's telephone number, including area code)
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(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.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
-------------------------------------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
64,094,370 shares outstanding as of July 31, 2001
1 of 20
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Financial Statements -
Condensed Consolidated Balance Sheets as of June 30, 2001 and December 31,
2000.
Condensed Consolidated Statements of Income for the Three and Six Months
Ended June 30, 2001 and 2000.
Condensed Consolidated Statements of Comprehensive Income for the Three and
Six Months Ended June 30, 2001 and 2000.
Condensed Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2001 and 2000.
Notes to Condensed Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with the
accompanying Condensed Consolidated Financial Statements and Notes thereto.
These unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to reflect a fair statement of the results for
the interim periods presented, and all such adjustments are of a normal
recurring nature.
Results of Operations
Revenues from rental property increased $3.0 million or 2.6% to $117.9
million for the three months ended June 30, 2001, as compared with $114.9
million for the corresponding quarter ended June 30, 2000. Similarly, revenues
from rental property increased $12.3 million or 5.4% to $239.5 million for the
six months ended June 30, 2001, as compared with $227.2 million for the
corresponding six month period ended June 30, 2000. These increases resulted
primarily from the combined effect of (i) the acquisition of one shopping center
property during 2001 providing revenues of $0.1 million for the three and six
month periods ended June 30, 2001, (ii) acquisitions throughout calendar year
2000 (12 shopping center properties) and the completion of certain development
projects providing incremental revenues of $2.6 million and $6.3 million, as
compared to the corresponding three and six month periods in 2000, respectively,
and (iii) the completion of certain redevelopment projects, new leasing and
re-tenanting within the portfolio, offset by sales of certain properties
throughout 2000 and 2001 providing incremental revenues of approximately $0.3
million and $5.9 million as compared to the corresponding three and six month
periods in 2000, respectively.
2
Rental property expenses, including depreciation and amortization,
increased approximately $0.8 million or 1.2% to $69.8 million for the three
months ended June 30, 2001, as compared with $69.0 million for the corresponding
quarter ended June 30, 2000. Similarly, rental property expenses, including
depreciation and amortization, increased $7.4 million or 5.4% to $144.0 million
for the six months ended June 30, 2001, as compared with $136.6 million for the
corresponding period in the preceding year. These net rental property expense
increases are primarily due to property acquisitions, renovations within the
existing portfolio and increased snow removal costs offset by the disposition of
certain shopping center properties.
The Company has a non-controlling limited partnership interest in Kimco
Income REIT ("KIR"), a limited partnership established to invest in high quality
retail properties financed primarily through the use of individual non-recourse
mortgages. Equity in income of KIR increased $0.7 million to $3.0 million for
the three months ended June 30, 2001, as compared with $2.3 million for the
corresponding period in 2000. Similarly, equity in income of KIR increased $1.3
million to $5.9 million for the six months ended June 30, 2001, as compared with
$4.6 million for the corresponding period in 2000. These increases are primarily
due to the Company's increased capital investment in KIR. The additional capital
investments received by KIR from the Company and its other institutional
partners were used to purchase additional shopping center properties throughout
calendar year 2000 and during the six months ended June 30, 2001.
Other income, net increased $3.4 million and $5.3 million for the three
and six month periods ended June 30, 2001, respectively, as compared to the same
periods in 2000. The net increases are primarily the result of higher interest
income, dividend income and realized gains related to the Company's investment
and sale of certain marketable equity and debt securities.
Operating and administrative expenses increased approximately $0.2
million and $1.8 million for the three and six month periods ended June 30,
2001, respectively, as compared to the same periods in 2000. These increases are
due primarily to an increase in senior management and staff levels and other
personnel costs in connection with the growth of the Company, including the
issuance of a stock grant award to a newly-appointed executive officer of the
Company valued at approximately $1.1 million during 2001.
Effective January 1, 2001, the Company has elected taxable REIT
subsidiary status for its wholly-owned development subsidiary ("KDI"). KDI is
primarily engaged in the ground-up development of neighborhood and community
shopping centers and the subsequent sale thereof upon completion. During the six
months ended June 30, 2001, KDI sold one of its recently completed projects and
an out-parcel, in separate transactions, for approximately $33.6 million, which
resulted in net gains of approximately $3.9 million after provision for income
taxes of approximately $2.3 million.
3
During the six months ended June 30, 2001, the Company, in separate
transactions, disposed of four operating properties, including the sale of a
property to KIR, comprising approximately 0.6 million square feet of gross
leasable area ("GLA"). Cash proceeds from three of these dispositions aggregated
approximately $43.5 million, which approximated their aggregate net book value.
During May 2001, the Company realized a gain of approximately $3.0 million from
the sale of an operating property in Elyria, Ohio. Total proceeds of $5.8
million will be used to acquire an exchange shopping center property.
During the six months ended June 30, 2000, the Company disposed of four
operating properties, in separate transactions, comprising approximately 0.2
million square feet of GLA for aggregate proceeds of approximately $5.1 million.
Gain on sale of these properties was approximately $1.7 million.
Net income for the three and six months ended June 30, 2001 was $59.4
million and $115.4 million, respectively. Net income for the three and six
months ended June 30, 2000 was $50.9 million and $99.7 million, respectively. On
a diluted per share basis, net income improved $0.10 and $0.18 for the three and
six month periods ended June 30, 2001, respectively, including the gains on
sales of certain operating properties in the respective periods in 2001 and
2000. This improved performance reflects the combined effect of internal growth
and property acquisitions in the core portfolio, profits from KDI and income
generated from the investment in KIR which strengthened profitability.
Liquidity and Capital Resources
Since the completion of the Company's IPO in 1991, the Company has
utilized the public debt and equity markets as its principal source of capital.
Since the IPO, the Company has completed additional offerings of its public
unsecured debt and equity, raising in the aggregate over $2.2 billion for the
purposes of, among other things, repaying indebtedness, acquiring interests in
neighborhood and community shopping centers, funding ground-up development
projects and expanding and improving properties in the portfolio.
During August 2000, the Company established a $250.0 million unsecured
revolving credit facility, which is scheduled to expire in August 2003. This
credit facility, which replaced the Company's $215.0 million unsecured revolving
credit facility has made available funds to both finance the purchase of
properties and meet any short-term working capital requirements. As of June 30,
2001, there were no borrowings outstanding under this credit facility.
The Company has also implemented a medium-term notes ("MTN") program
pursuant to which it may, from time to time, offer for sale its senior unsecured
debt for any general corporate purposes, including (i) funding specific
liquidity requirements in its business, including property acquisitions,
development and redevelopment costs and (ii) managing the Company's debt
maturities.
4
In addition to the public equity and debt markets as capital sources,
the Company may, from time to time, obtain mortgage financing on selected
properties. As of June 30, 2001, the Company had over 350 unencumbered property
interests in its portfolio.
During May 2001, the Company filed a shelf registration statement on
Form S-3 for up to $750.0 million of debt securities, preferred stock,
depositary shares, common stock and common stock warrants. As of June 30, 2001,
the Company had $750.0 million available for issuance under this shelf
registration statement.
In connection with its intention to continue to qualify as a REIT for
federal income tax purposes, the Company expects to continue paying regular
dividends to its stockholders. These dividends will be paid from operating cash
flows which are expected to increase due to property acquisitions and growth in
rental revenues in the existing portfolio and from other sources. Since cash
used to pay dividends reduces amounts available for capital investment, the
Company generally intends to maintain a conservative dividend payout ratio,
reserving such amounts as it considers necessary for the expansion and
renovation of shopping centers in its portfolio, repayment of debt, the
acquisition of interests in new properties as suitable opportunities arise, and
such other factors as the Board of Directors considers appropriate.
It is management's intention that the Company continually has access to
the capital resources necessary to expand and develop its business. Accordingly,
the Company may seek to obtain funds through additional equity offerings,
unsecured debt financings and/or mortgage financings in a manner consistent with
its intention to operate with a conservative debt capitalization policy.
The Company anticipates that cash flows from operations will continue
to provide adequate capital to fund its operating and administrative expenses,
regular debt service obligations and the payment of dividends in accordance with
REIT requirements in both the short-term and long-term. In addition, the Company
anticipates that cash on hand, availability under its revolving credit facility,
issuance of equity and public debt, as well as other debt and equity
alternatives, will provide the necessary capital required by the Company. Cash
flows from operations increased to $148.0 million for the six months ended June
30, 2001 as compared to $128.7 million for the corresponding period ended June
30, 2000.
Effects of Inflation
Many of the Company's leases contain provisions designed to mitigate
the adverse impact of inflation. Such provisions include clauses enabling the
Company to receive payment of additional rent calculated as a percentage of
tenants' gross sales above pre-determined thresholds, which generally increase
as prices rise, and/or escalation clauses, which generally increase rental rates
during the terms of the leases. Such escalation clauses often include increases
based upon changes in the consumer price index or similar inflation indices. In
addition, many of the Company's leases are for terms of less than 10 years,
which permits the Company to seek to increase rents to market rates upon
renewal. Most of the Company's leases require the tenant to pay an allocable
share of operating expenses, including common area maintenance costs, real
estate taxes and insurance, thereby reducing the Company's exposure to increases
in costs and operating expenses resulting from inflation. The Company
periodically evaluates its exposure to short-term interest rates and will, from
time to time, enter into interest rate protection agreements which mitigate, but
do not eliminate, the effect of changes in interest rates on its floating-rate
debt.
5
New Accounting Pronouncements
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities ("FASB No. 133"), as amended. In accordance with the provisions of
FASB No. 133, the Company's interest-rate swap agreement on its $110.0 million
floating-rate MTN has been designated and qualified as a cash flow hedge. The
Company has determined that this swap agreement is highly effective in
offsetting future variable interest cash flows related to the Company's debt
portfolio. The fair value of the swap agreement was recorded on the balance
sheet in other liabilities in the amount of approximately $3.3 million with a
corresponding amount to accumulated other comprehensive income, a component of
stockholders' equity. The Company anticipates a reclassification to earnings
from accumulated other comprehensive income of approximately $3.0 million over
the next 12 months. Currently, the Company does not have any other financial
contracts, which contain embedded derivatives or fair value hedge relationships,
which are within the scope of FASB No. 133.
Forward-looking Statements
This quarterly report on Form 10-Q, together with other statements and
information publicly disseminated by the Company contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. The Company intends such forward-looking statements to be covered by
the safe harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995 and include this statement for
purposes of complying with these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe the Company's
future plans, strategies and expectations, are generally identifiable by use of
the words "believe," "expect," "intend," "anticipate," "estimate," "project" or
similar expressions. You should not rely on forward-looking statements since
they involve known and unknown risks, uncertainties and other factors which are,
in some cases, beyond the Company's control and which could materially affect
actual results, performances or achievements. Factors which may cause actual
results to differ materially from current expectations include, but are not
limited to, (i) general economic and local real estate conditions, (ii)
financing risks, such as the inability to obtain equity or debt financing on
favorable terms, (iii) changes in governmental laws and regulations, (iv) the
level and volatility of interest rates (v) the availability of suitable
acquisition opportunities and (vi) increases in operating costs. Accordingly,
there is no assurance that the Company's expectations will be realized.
6
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As of June 30, 2001, the Company had approximately $227.7 million of
floating-rate debt outstanding. The interest rate risk on $110.0 million of such
debt has been mitigated through the use of an interest rate swap agreement (the
"Swap") with a major financial institution. The Company is exposed to credit
risk in the event of non-performance by the counter-party to the Swap. The
Company believes it mitigates its credit risk by entering into this Swap with a
major financial institution.
The Company believes the interest rate risk represented by the
remaining $117.7 million of floating-rate debt is not material to the Company or
its overall capitalization.
The Company has not, and does not plan to, enter into any derivative
financial instruments for trading or speculative purposes. As of June 30, 2001,
the Company had no other material exposure to market risk.
7
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
June 30, December 31,
2001 2000
------------ -------------
Assets:
Operating real estate, net of accumulated depreciation
of $418,073 and $391,946, respectively $ 2,542,034 $ 2,594,872
Real estate under development 164,796 127,685
Investment and advances in KIR 150,063 142,437
Investments and advances in other real estate joint ventures 70,219 61,601
Investments in retail store leases 10,584 11,316
Cash and cash equivalents 83,293 19,097
Marketable securities 64,873 63,225
Accounts and notes receivable 47,210 44,673
Other assets 101,839 106,442
----------- -----------
$ 3,234,911 $ 3,171,348
=========== ===========
Liabilities:
Notes payable $ 1,035,250 $ 1,080,250
Mortgages payable 295,477 245,413
Other liabilities, including minority interests in partnerships 155,241 141,346
----------- -----------
1,485,968 1,467,009
----------- -----------
Stockholders' Equity:
Preferred stock, $1.00 par value, authorized 5,000,000 shares
Class A Preferred Stock, $1.00 par value, authorized 345,000 shares
Issued and outstanding 300,000 shares 300 300
Aggregate liquidation preference $75,000
Class B Preferred Stock, $1.00 par value, authorized 230,000 shares
Issued and outstanding 200,000 shares 200 200
Aggregate liquidation preference $50,000
Class C Preferred Stock, $1.00 par value, authorized 460,000 shares
Issued and outstanding 400,000 shares 400 400
Aggregate liquidation preference $100,000
Class D Convertible Preferred Stock, $1.00 par value, authorized 700,000 shares
Issued and outstanding 418,208 and 418,254 shares, respectively 418 418
Aggregate liquidation preference $104,552 and $104,564, respectively
Common stock, $.01 par value, authorized 200,000,000 shares
Issued and outstanding 64,078,218 and 63,144,859 shares, respectively 641 631
Paid-in capital 1,848,957 1,819,446
Cumulative distributions in excess of net income (102,719) (113,110)
----------- -----------
1,748,197 1,708,285
Accumulated other comprehensive income 2,633 --
Notes receivable from officer stockholders (1,887) (3,946)
----------- -----------
1,748,943 1,704,339
----------- -----------
$ 3,234,911 $ 3,171,348
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
8
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three and Six Months ended June 30, 2001 and 2000
(in thousands, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
2001 2000 2001 2000
--------- --------- --------- ---------
Revenues from rental property $ 117,867 $ 114,867 $ 239,468 $ 227,224
--------- --------- --------- ---------
Rental property expenses:
Rent 3,518 3,368 6,973 6,782
Real estate taxes 14,077 14,651 28,452 27,678
Interest 22,607 22,940 45,382 45,223
Operating and maintenance 10,714 10,404 26,089 22,208
Depreciation and amortization 18,930 17,679 37,139 34,753
--------- --------- --------- ---------
69,846 69,042 144,035 136,644
--------- --------- --------- ---------
Income from rental property 48,021 45,825 95,433 90,580
Income from investment in retail store leases 855 1,024 1,827 2,037
--------- --------- --------- ---------
48,876 46,849 97,260 92,617
Equity in income of KIR 3,010 2,285 5,923 4,633
Management fee income 2,072 1,388 4,236 2,909
Other income, net 8,846 5,490 15,775 10,480
Operating and administrative expenses (6,636) (6,440) (14,427) (12,661)
--------- --------- --------- ---------
Income before gain on sale of shopping center
properties and income taxes 56,168 49,572 108,767 97,978
Gain on sale of development properties 824 -- 6,216 --
Gain on sale of operating properties 3,040 1,374 3,040 1,677
--------- --------- --------- ---------
Income before income taxes 60,032 50,946 118,023 99,655
Provision for income taxes (680) -- (2,617) --
--------- --------- --------- ---------
Net income $ 59,352 $ 50,946 $ 115,406 $ 99,655
========= ========= ========= =========
Net income applicable to common shares $ 52,782 $ 44,376 $ 102,266 $ 86,467
========= ========= ========= =========
Net income per common share:
Basic $ 0.83 $ 0.73 $ 1.61 $ 1.42
========= ========= ========= =========
Diluted $ 0.82 $ 0.72 $ 1.59 $ 1.41
========= ========= ========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
9
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months ended June 30, 2001 and 2000
(in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2001 2000 2001 2000
--------- --------- --------- ---------
Net income $ 59,352 $ 50,946 $ 115,406 $ 99,655
--------- --------- --------- ---------
Other comprehensive income:
Unrealized gains on marketable securities 3,874 -- 5,927 --
Unrealized loss on interest rate swap (119) -- (3,294) --
--------- --------- --------- ---------
Other comprehensive income 3,755 -- 2,633 --
--------- --------- --------- ---------
Comprehensive income $ 63,107 $ 50,946 $ 118,039 $ 99,655
========= ========= ========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
10
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months ended June 30, 2001 and 2000
(in thousands)
2001 2000
---------- ----------
Cash flow provided by operations $ 148,048 $ 128,701
--------- ---------
Cash flow from investing activities:
Acquisition of and improvements to operating real estate (26,645) (92,704)
Acquisition of and improvements to real estate under development (58,465) --
Investment in marketable securities (7,883) (14,366)
Proceeds from sale of marketable securities 22,294 6,958
Investment in KIR (6,500) --
Investments and advances to real estate joint ventures (31,374) (500)
Reimbursement of advances to real estate joint ventures 24,824 --
Redemption of minority interests in real estate partnerships (4,925) --
Investment in joint ventures (1,257) --
Investments and advances to affiliated companies (100) (2,766)
Collection of mortgage loans receivable 5,952 2,517
Proceeds from sale of operating properties 40,966 7,964
Proceeds from sale of development properties 33,597 --
--------- ---------
Net cash flow used for investing activities (9,516) (92,897)
--------- ---------
Cash flow from financing activities:
Principal payments on debt, excluding normal
amortization of rental property debt (4,587) (16,420)
Principal payments on rental property debt (2,479) (2,261)
Proceeds from mortgage financing 51,230 34,396
Payment of unsecured obligation -- (3,250)
Borrowings under revolving credit facility 10,000 45,000
Repayment of borrowings under revolving credit facility (55,000) (10,000)
Dividends paid (104,333) (93,491)
Repurchase and retirement of preferred stock -- (2,505)
Proceeds from issuance of stock 30,833 3,393
--------- ---------
Net cash flow used for financing activities (74,336) (45,138)
--------- ---------
Change in cash and cash equivalents 64,196 (9,334)
Cash and cash equivalents, beginning of period 19,097 28,076
--------- ---------
Cash and cash equivalents, end of period $ 83,293 $ 18,742
========= =========
Interest paid during the period $ 44,743 $ 43,699
========= =========
Supplemental schedule of noncash investing/financing activities:
Acquisition of real estate interests by issuance of stock
and/or assumption of mortgage debt $ 5,900 $ 28,727
========= =========
Proceeds held in escrow from sale of real estate interest $ 5,800 $ --
========= =========
Investment in real estate joint ventures by issuance of stock
and contribution of property $ 3,420 $ --
========= =========
Notes received upon exercise of stock options $ 100 $ --
========= =========
Declaration of dividends paid in succeeding period $ 51,253 $ 45,513
========= =========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
11
KIMCO REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. Interim Financial Statements
Principles of Consolidation -
The accompanying Condensed Consolidated Financial Statements include
the accounts of Kimco Realty Corporation (the "Company"), its subsidiaries, all
of which are wholly owned, and all partnerships in which the Company has a
controlling interest. The information furnished is unaudited and reflects all
adjustments which are, in the opinion of management, necessary to reflect a fair
statement of the results for the interim periods presented, and all such
adjustments are of a normal recurring nature. These Condensed Consolidated
Financial Statements should be read in conjunction with the financial statements
included in the Company's Annual Report on Form 10-K.
Certain 2000 amounts have been reclassified to conform to the 2001
financial statement presentation.
Income Taxes -
The Company and its qualified REIT subsidiaries file a consolidated
federal income tax return. The Company has made an election to qualify, and
believes it is operating so as to qualify, as a Real Estate Investment Trust (a
"REIT") for federal income tax purposes. Accordingly, the Company generally will
not be subject to federal income tax, provided that distributions to its
stockholders equal at least the amount of its REIT taxable income as defined
under the Code. However, in connection with the Tax Relief Extension Act of
1999, which became effective January 1, 2001, the Company is now permitted to
participate in certain activities which it was previously precluded from in
order to maintain its qualification as a REIT, so long as these activities are
conducted in entities which elect to be treated as taxable REIT subsidiaries
under the Code. As such, the Company will be subject to federal and state income
taxes on the income from these activities. During the six months ended June 30,
2001, the Company's provision for federal and state income taxes was
approximately $2.6 million relating to activities conducted in its taxable REIT
subsidiaries.
12
New Accounting Pronouncement -
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities ("FASB No. 133"), as amended. In accordance with the provisions of
FASB No. 133, the Company's interest-rate swap agreement on its $110.0 million
floating-rate medium-term note has been designated and qualified as a cash flow
hedge. The Company has determined that this swap agreement is highly effective
in offsetting future variable interest cash flows related to the Company's debt
portfolio. The adoption of FASB No. 133 as of January 1, 2001, resulted in a
cumulative transition adjustment of $1.5 million to other comprehensive income
("OCI"), a component of stockholders' equity and a corresponding liability of
the same amount. For the six months ended June 30, 2001, the change in the fair
market value of the interest rate swap was $1.8 million and was recorded in OCI.
The Company anticipates a reclassification to earnings from accumulated other
comprehensive income of approximately $3.0 million over the next 12 months.
Currently, the Company does not have any other financial contracts, which
contain embedded derivatives or fair value hedge relationships, which are within
the scope of FASB No. 133.
Earnings Per Share -
The following table sets forth the reconciliation of earnings and the
weighted average number of shares used in the calculation of basic and diluted
earnings per share (amounts presented in thousands, except per share data):
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
---- ---- ---- ----
Computation of Basic Earnings Per
Share:
Net income applicable to common
shares $ 52,782 $44,376 $102,266 $86,467
Weighted average common shares
outstanding 63,791 60,972 63,550 60,884
-------- -------- --------- --------
Basic Earnings Per Share $ 0.83 $ 0.73 $ 1.61 $ 1.42
======== ======== ========= ========
13
Computation of Diluted Earnings
Per Share:
Net income applicable to common
shares $ 52,782 $44,376 $102,266 $86,467
Dividends on Class D Convertible
Preferred Stock 1,960 -- (a) 3,921 -- (a)
--------- ------- -------- -------
Net income for diluted earnings per
share $ 54,742 $44,376 $106,187 $86,467
--------- ------- -------- -------
Weighted average common shares
outstanding - Basic 63,791 60,972 63,550 60,884
Effect of dilutive securities:
Stock options 607 727 653 554
Assumed conversion of Class D
Preferred Stock to Common Stock 2,598 -- (a) 2,598 -- (a)
--------- ------- -------- --------
Shares for diluted earnings per
share 66,996 61,699 66,801 61,438
--------- ------- ------- --------
Diluted Earnings Per Share $ 0.82 $ 0.72 $ 1.59 $ 1.41
========= ======== ======== ========
(a) In 2000, the effect of the assumed conversion of the Class D Preferred Stock
had an anti-dilutive effect upon the calculation of net income per common share.
Accordingly, the impact of such conversion has not been included in the
determination of diluted earnings per common share.
2. Property Acquisitions / Other Investments
Property Acquisitions -
During the six months ended June 30, 2001, the Company, through its
wholly-owned development subsidiary ("KDI"), acquired five land parcels, in
separate transactions, for the ground-up development of shopping centers and
subsequent sales thereof upon completion for an aggregate purchase price of
approximately $20.7 million, including the assumption of approximately $5.9
million in mortgage debt encumbering one of the properties.
On March 1, 2001, the Company exercised its option to acquire a 50%
interest in a joint venture from KC Holdings, Inc. ("KC Holdings"), an entity
formed in connection with the Company's initial public stock offering in
November 1991. This joint venture consists of three shopping center properties
located in Buffalo, NY, comprising approximately 0.4 million square feet of
gross leasable area ("GLA"). The joint venture was acquired for an aggregate
option price of approximately $3.5 million, paid approximately $2.7 million in
cash and $0.8 million in shares of the Company's common stock (19,759 shares
valued at $41.50 per share). The members of the Company's Board of Directors who
are not also shareholders of KC Holdings, unanimously approved the Company's
purchase of this joint venture investment.
14
During May 2001, the Company acquired a shopping center property in
Raleigh, NC, comprising approximately 0.1 million square feet of GLA for an
aggregate purchase price of approximately $6.2 million.
Other Investments -
During March 2001, the Company through a joint venture (the "Ward
Venture") in which the Company has a 50% interest, acquired asset designation
rights for substantially all of the real estate property interests of the
bankrupt estate of Montgomery Ward LLC and its affiliates. These asset
designation rights will enable the Ward Venture to direct the ultimate
disposition of the 315 fee and leasehold interests held by the bankrupt estate.
The Ward Venture acquired the asset designation rights for an initial price of
$60.5 million, however, the price may ultimately exceed $435.5 million under the
terms of the designation rights agreement.
The asset designation rights expire in February 2002 for the leasehold
positions and December 2004 for the fee owned locations. During the marketing
period, the Ward Venture will be responsible for all carrying costs associated
with the properties until the site is designated to a user.
3. Property Dispositions
During the six months ended June 30, 2001, the Company disposed of four
operating properties, in separate transactions, including the sale of a property
to KIR, comprising approximately 0.6 million square feet of GLA. Cash proceeds
from three of these dispositions aggregated approximately $43.5 million, which
approximated their aggregate net book value. During May 2001, the Company
realized a gain of approximately $3.0 million from the sale of an operating
property in Elyria, Ohio. Total proceeds of $5.8 million will be used to acquire
an exchange shopping center property.
Effective January 1, 2001, the Company has elected taxable REIT
subsidiary status for its wholly-owned development subsidiary, KDI. KDI will be
primarily engaged in the ground-up development of neighborhood and community
shopping centers and the subsequent sale thereof upon completion. During the six
months ended June 30, 2001, KDI sold one of its recently completed projects and
an out-parcel, in separate transactions, for approximately $33.6 million, which
resulted in net gains of approximately $3.9 million after provision for income
taxes of approximately $2.3 million.
15
4. Debt Financings
During the six months ended June 30, 2001, the Company obtained four
individual non-recourse mortgage loans of which three are on Kmart anchored
locations, providing aggregate proceeds to the Company of approximately $51.2
million. These ten-year loans mature in 2011 and have effective interest rates
ranging from 7.31% to 7.64% per annum.
5. Investment and Advances in KIR
During 1998, the Company formed Kimco Income REIT ("KIR"), a limited
partnership established to invest in high quality retail properties financed
primarily through the use of individual non-recourse mortgages. The Company
holds a non-controlling limited partnership interest in KIR and accounts for its
investment in KIR under the equity method of accounting. The Company's equity in
income of KIR for the six months ended June 30, 2001 and 2000, was approximately
$5.9 million and $4.6 million, respectively.
In addition, KIR entered into a master management agreement with the
Company, whereby, the Company will perform services for fee relating to the
management, operation, supervision and maintenance of the joint venture
properties. For the six months ended June 30, 2001 and 2000, the Company earned
management fees of approximately $1.4 million and $0.9 million, respectively.
During the six months ended June 30, 2001 the Company contributed $6.5
million in cash and $2.6 million in property to KIR in connection with its
subscription agreement.
6. Investment in Retail Store Leases
Income from the investment in retail store leases for the six months
ended June 30, 2001 and 2000 represents sublease revenues of approximately $8.7
million and $9.5 million, respectively, less related expenses of $6.2 million
and $6.8 million, respectively, and amounts, which in management's estimation,
reasonably provide for the recovery of the investment over a period representing
the expected remaining term of the retail store leases.
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7. Pro Forma Financial Information
As discussed in Notes 2 and 3, the Company and certain of its
affiliates acquired and disposed of interests in certain operating properties
during the six months ended June 30, 2001. The pro forma financial information
set forth below is based upon the Company's historical Condensed Consolidated
Statements of Income for the six months ended June 30, 2001 and 2000, adjusted
to give effect to these transactions as of January 1, 2000.
The pro forma financial information is presented for informational
purposes only and may not be indicative of what actual results of operations
would have been had the transactions occurred as of January 1, 2000, nor does it
purport to represent the results of future operations. (Amounts presented in
millions, except per share figures).
Six Months Ended June 30,
2001 2000
---- ----
Revenues from rental property $ 236.2 $ 224.9
Net Income $ 112.1 $ 99.5
Net Income per common share:
Basic $ 1.56 $ 1.42
======= ========
Diluted $ 1.54 $ 1.40
======== ========
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not presently involved in any litigation, nor to its
knowledge is any litigation threatened against the Company or its subsidiaries,
that in management's opinion, would result in any material adverse effect on the
Company's ownership, management or operation of its properties, or which is not
covered by the Company's liability insurance.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
In connection with the Annual Meeting of Stockholders held on May 15,
2001 (the "Meeting"), stockholders were asked to vote with respect to (i) the
election of Directors to serve for the ensuing year, (ii) a proposal by the
Executive Compensation Committee of the Board of Directors to increase the
number of shares of the Company's common stock subject to option under the 1998
Equity Participation Plan by 3,000,000 shares and (iii) a proposal to amend the
Charter of the Company to permit the Board of Directors to change the number of
authorized shares of stock of the Company.
A total of 53,364,940 votes were cast as follows:
Proposal I - Election of Directors
Votes For Against
----- --- -------
Nominees:
Martin S. Kimmel 53,364,940 51,708,129 1,656,811
Milton Cooper 53,364,940 49,760,770 3,604,170
Richard G. Dooley 53,364,940 51,726,502 1,638,438
Joe Grills 53,364,940 51,830,419 1,534,521
David B. Henry 53,364,940 51,832,681 1,532,259
Michael J. Flynn 53,364,940 51,844,202 1,520,738
Frank Lourenso 53,364,940 51,833,009 1,531,931
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Proposal II - to increase the number of shares of the Company's common stock
subject to option under the 1998 Equity Participation Plan by 3,000,000 shares.
Votes For Against Abstain Broker Non-Vote
----- --- ------- ------- ---------------
53,364,940 37,748,808 14,230,144 1,385,987 1
Proposal III -
- ------------
The vote regarding the proposed amendment to the Charter of the Company to
permit the Board of Directors to change the number of authorized shares of stock
of the Company was adjourned since an insufficient number of votes were present
(by person or by proxy) to pass the proposal.
Votes For Against Abstain Broker Non-Vote
----- --- ------- ------- ---------------
53,364,940 23,420,931 20,183,488 1,350,965 8,409,556
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibits -
4.1 Agreement to File Instruments
Kimco Realty Corporation (the "Registrant") hereby agrees to file with
the Securities and Exchange Commission, upon request of the Commission, all
instruments defining the rights of holders of long-term debt of the Registrant
and its consolidated subsidiaries, and for any of its unconsolidated
subsidiaries for which financial statements are required to be filed, and for
which the total amount of securities authorized thereunder does not exceed 10
percent of the total assets of the Registrant and its subsidiaries on a
consolidated basis.
Form 8-K -
None.
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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.
KIMCO REALTY CORPORATION
August 10, 2001 /s/ Milton Cooper
- -------------------- ------------------------------
(Date) Milton Cooper
Chairman of the Board
August 10, 2001 /s/ Michael V. Pappagallo
- -------------------- ------------------------------
(Date) Michael V. Pappagallo
Chief Financial Officer
20