-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P12L61pEAoQ1eF8IO2GL79I8+7BTC8YTIBP6lPOB1NIpVRrr3PKOtHCABNe1+Zj4 RKRYDzEqzQhQ87aijAkXvA== 0000889812-98-001974.txt : 19980817 0000889812-98-001974.hdr.sgml : 19980817 ACCESSION NUMBER: 0000889812-98-001974 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KIMCO REALTY CORP CENTRAL INDEX KEY: 0000879101 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 132744380 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10899 FILM NUMBER: 98688838 BUSINESS ADDRESS: STREET 1: 3333 NEW HYDE PARK RD STREET 2: PO BOX 5020 CITY: NEW HYDE PARK STATE: NY ZIP: 11042 BUSINESS PHONE: 5168699000 MAIL ADDRESS: STREET 1: 3333 NEW HYDE PARK ROAD STREET 2: PO BOX 5020 CITY: NEW HYDE PARKQ STATE: NY ZIP: 11042 10-Q 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 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 1-10899 -------------------------------------------------------- Kimco Realty Corporation - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) Maryland 13-2744380 - ------------------------------- ---------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3333 New Hyde Park Road, New Hyde Park, NY 11042 - ------------------------------------------------------------------------------ (Address of principal executive offices - Zip Code) (516) 869-9000 - ------------------------------------------------------------------------------ (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. Yes X No ----- ----- 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. 56,816,316 shares outstanding as of July 31, 1998 1 of 18 PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Financial Statements - Condensed Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997. Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 1998 and 1997. Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997. 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 $24.0 million or 53.2% to $69.3 million for the three months ended June 30, 1998, as compared with $45.3 million for the corresponding quarter ended June 30, 1997. Similarly, revenues from rental property increased $42.0 million or 46.4% to $132.5 million for the six months ended June 30, 1998, as compared with $90.5 million for the corresponding six-month period ended June 30, 1997. These increases resulted primarily from the combined effect of (i) property acquisitions during the six month period ended June 30, 1998 (15 shopping center properties and 3 retail properties) providing revenues of $4.7 million and $6.8 million for the three and six month periods ended June 30, 1998, respectively, (ii) acquisitions throughout calendar year 1997 (14 shopping center properties and 49 retail properties) providing incremental revenues of $13.4 million and $27.1 million as compared to the corresponding three and six month periods in 1997, (iii) the acquisition of The Price REIT, Inc. as of June 19, 1998 (the "Price REIT Acquisition") providing revenues of $3.3 million for the three and six month periods ended June 30, 1998 and (iv) new leasing, property redevelopments and re-tenanting within the portfolio at improved rental rates. 2 Rental property expenses, including depreciation and amortization, increased $16.4 million or 65.2% to $41.6 million for the three months ended June 30, 1998, as compared with $25.2 million for the corresponding quarter ended June 30, 1997. Rent, real estate taxes and depreciation and amortization contributed significantly to this net increase in rental property expenses (increasing $2.4 million, $3.9 million and $2.9 million, respectively, for the three month period ended June 30, 1998, as compared with the corresponding quarter in the preceding year) primarily due to the 1998 property acquisitions, the Price REIT Acquisition and the incremental costs related to the property acquisitions throughout 1997. Similarly, the rental property expense components of rent, real estate taxes and depreciation and amortization increased by $4.7 million, $7.4 million and $4.9 million, respectively, for the six month period ended June 30, 1998 compared with the corresponding period in the preceding year, primarily due to the property acquisitions during the six months ended June 30, 1998 and throughout 1997 and the Price REIT Acquisition. Interest expense increased $5.6 million and $10.3 million for the three and six month periods ended June 30, 1998, respectively, reflecting higher average outstanding borrowings (resulting from the (i) issuance of an aggregate $100.0 million unsecured medium-term notes during May and July 1997 and an additional $100.0 million of unsecured medium-term notes during June 1998, (ii) the assumption of additional mortgage debt during 1997 and the six months ended June 30, 1998 in connection with certain property acquisitions, (iii) the assumption of approximately $250 million of unsecured debt and $60 million of mortgage debt in connection with the Price REIT Acquisition and (iv) increased borrowings under the Company's unsecured revolving credit facilities), as compared to the corresponding periods in 1997. During January 1998, the Company disposed of a shopping center property in Pinellas Park, FL. Cash proceeds from the disposition totaling $2.3 million, together with an additional $7.1 million cash investment, were used to acquire an exchange shopping center property located in Cranston, RI during March 1998. Net income for the three and six months ended June 30, 1998 was $27.5 million and $53.0 million, respectively. Net income for the three and six months ended June 30, 1997 was $21.0 million and $41.6 million, respectively. Net income improved $0.07 per share and $0.13 per share for the three and six month periods ended June 30, 1998, respectively, after adjusting for the gains on sales of shopping center properties in the respective periods, reflecting the effect of property acquisitions, including the Price REIT Acquisition, property redevelopments and increased leasing activity which strengthened operating profitability. 3 Liquidity and Capital Resources - ------------------------------- Since the Company's initial public stock offering in November 1991, the Company has completed additional offerings of its public unsecured debt and equity raising in the aggregate in excess of $1.4 billion for the purposes of acquiring interests in neighborhood and community shopping center properties, repaying indebtedness and for expanding and improving properties in the portfolio. Management believes the public debt and equity markets will be the Company's principal source of capital for the future. A $100 million, unsecured revolving credit facility established in June 1994, scheduled to expire in June 2000, and an additional $150 million interim unsecured revolving credit facility established in March 1998, which is scheduled to expire in August 1998, has made available funds to both finance property acquisitions and meet any short-term working capital requirements. It is the Company's intention to extend the term of the $150 million interim revolving credit facility and establish it as a continuing part of the Company's total unsecured credit availability. As of June 30, 1998, there were no borrowings under the revolving credit facilities. 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 and redevelopment costs and (ii) better managing the Company's debt maturities. 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 have access to the capital resources necessary to expand and develop its business. Accordingly, the Company may seek to obtain funds through additional equity offerings or debt financings in a manner consistent with its intention to operate with a conservative debt capitalization policy. 4 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 facilities, 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 $70.3 million for the six months ended June 30, 1998 as compared to $56.4 million for the corresponding period ended June 30, 1997. 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 loans. New Accounting Pronouncements - ----------------------------- On June 15, 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("FAS 133"). FAS 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999. FAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designed as part of a hedge transaction and, if it is, the type of hedge transaction. Management of the Company anticipates that due to its limited use of derivative instruments, the adoption of FAS 133 will not have a material effect on the Company's results of operations or its financial position. 5 Impact of Year 2000 - ------------------- Like most corporations, the Company is reliant upon technology to run its business. Many computer systems process dates using two digits to identify the year, and some systems are unable to properly process dates beginning with the year 2000. The Company is currently assessing and addressing this "Year 2000" issue and does not believe the costs connected with this assessment will have a material adverse effect on the Company's results of operations. Forward-looking Statements - -------------------------- This quarterly report on Form 10-Q includes certain forward-looking statements, reflecting the Company's and management's intentions and expectations, however, many factors which may affect the actual results are difficult to predict. Factors that may cause actual results to differ materially from current expectations include general economic conditions, local real estate conditions, increases in interest rates and increases in operating costs. Accordingly, there is no assurance that the Company's expectations will be realized. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not applicable. 6 KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ---------
June 30, December 31, 1998 1997 --------------- --------------- Assets: Real estate, net of accumulated depreciation of $225,151,864 and $207,408,091, respectively $ 2,311,122,932 $ 1,196,788,068 Investment in retail store leases 15,220,823 15,938,041 Cash and cash equivalents 33,921,947 30,978,178 Accounts and notes receivable 24,806,498 16,203,454 Other assets 143,714,737 83,982,383 --------------- --------------- $ 2,528,786,937 $ 1,343,890,124 =============== =============== Liabilities: Notes payable $ 715,250,000 $ 410,250,000 Mortgages payable 215,236,686 121,363,908 Other liabilities, including minority interests in partnerships 112,506,756 68,957,005 --------------- --------------- 1,042,993,442 600,570,913 --------------- --------------- Stockholders' Equity: Preferred stock, $1.00 par value, authorized 3,470,000 and 5,000,000 shares, respectively Class A Preferred Stock, $1.00 par value, authorized 345,000 shares Issued and outstanding 300,000 shares 300,000 300,000 Aggregate liquidation preference $75,000,000 Class B Preferred Stock, $1.00 par value, authorized 230,000 shares Issued and outstanding 200,000 shares 200,000 200,000 Aggregate liquidation preference $50,000,000 Class C Preferred Stock, $1.00 par value, authorized 460,000 shares Issued and outstanding 400,000 shares 400,000 400,000 Aggregate liquidation preference $100,000,000 Class D Convertible Preferred Stock, $1.00 par value, authorized 700,000 shares Issued and outstanding 429,159 shares 429,159 -- Aggregate liquidation preference $107,289,750 Class E Preferred Stock, $1.00 par value, authorized 65,000 shares Issued and outstanding 65,000 shares 65,000 -- Aggregate liquidation preference $65,000,000 Common stock, $.01 par value, authorized 100,000,000 shares Issued and outstanding 55,446,111 and 40,394,805 554,461 403,948 shares, respectively Paid-in capital 1,597,131,335 857,658,054 Cumulative distributions in excess of net income (113,286,460) (115,642,791) --------------- --------------- 1,485,793,495 743,319,211 --------------- --------------- $ 2,528,786,937 $ 1,343,890,124 =============== ===============
The accompanying notes are an integral part of these condensed consolidated financial statements. 7 KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Three and Six Months ended June 30, 1998 and 1997 ----------------------------------------
Three Months Ended June 30, Six Months Ended June 30, 1998 1997 1998 1997 ------------- ------------- ------------- ------------- Revenues from rental property $ 69,340,998 $ 45,276,241 $ 132,452,630 $ 90,471,558 ------------- ------------- ------------- ------------- Rental property expenses: Rent 2,806,576 426,536 5,558,711 854,484 Real estate taxes 9,432,426 5,510,848 18,309,425 10,905,368 Interest 12,371,969 6,775,437 23,411,176 13,071,041 Operating and maintenance 6,984,030 5,403,954 13,920,139 11,290,453 Depreciation and amortization 9,990,920 7,061,471 18,890,684 13,960,719 ------------- ------------- ------------- ------------- 41,585,921 25,178,246 80,090,135 50,082,065 ------------- ------------- ------------- ------------- Income from rental property 27,755,077 20,097,995 52,362,495 40,389,493 Income from investment in retail store leases 912,077 893,715 1,828,248 1,809,654 ------------- ------------- ------------- ------------- 28,667,154 20,991,710 54,190,743 42,199,147 Management fee income 729,585 1,075,460 1,531,293 1,863,811 General and administrative expenses (3,824,006) (2,780,328) (7,004,659) (5,535,019) Other income, net 1,957,191 1,514,046 3,395,054 2,877,222 ------------- ------------- ------------- ------------- Income before gain on sale of shopping center property 27,529,924 20,800,888 52,112,431 41,405,161 Gain on sale of shopping center property -- 243,995 901,249 243,995 ------------- ------------- ------------- ------------- Net Income $ 27,529,924 $ 21,044,883 $ 53,013,680 $ 41,649,156 ============= ============= ============= ============= Net income applicable to common shares $ 22,485,875 $ 16,435,458 $ 43,360,226 $ 32,430,306 ============= ============= ============= ============= Net income per common share Basic $ 0.51 $ 0.45 $ 1.03 $ 0.89 ====== ====== ====== ====== Diluted $ 0.50 $ 0.45 $ 1.01 $ 0.89 ====== ====== ====== ======
The accompanying notes are an integral part of these condensed consolidated financial statements. 8 KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months ended June 30, 1998 and 1997 ---------
1998 1997 ------------- ------------- Cash flow provided by operations $ 70,324,903 $ 56,362,009 ------------- ------------- Cash flow from investing activities: Acquisition of and improvements to real estate (169,175,807) (80,797,493) Investment in marketable securities (4,100,029) (996,291) Acquisition of real estate through joint venture investment (16,224,989) (907,068) Advances to affiliated companies -- (6,036,000) Investment in mortgage loans receivable (1,980,760) -- Repayment of mortgage loans receivable 1,456,200 -- Construction advance to real estate joint ventures (1,462,006) -- Proceeds from disposition of shopping center property 2,300,000 1,550,000 ------------- ------------- Net cash flow used for investing activities (189,187,391) (87,186,852) ------------- ------------- Cash flow from financing activities: Principal payments on debt, excluding normal amortization of rental property debt -- (4,650,000) Principal payments on rental property debt (1,943,557) (511,059) Proceeds from mortgage financing 9,000,000 -- Proceeds from issuance of medium-term notes 100,000,000 50,000,000 Borrowings under revolving credit facilities 100,000,000 10,000,000 Repayment of borrowings under revolving credit facilities (145,000,000) -- Dividends paid (48,008,718) (40,363,295) Proceeds from issuance of stock 107,758,532 1,855,399 ------------- ------------- Net cash flow provided by financing activities 121,806,257 16,331,045 ------------- ------------- Change in cash and cash equivalents 2,943,769 (14,493,798) Cash and cash equivalents, beginning of period 30,978,178 37,425,206 ------------- ------------- Cash and cash equivalents, end of period $ 33,921,947 $ 22,931,408 ============= ============= Interest paid during the period $ 22,753,561 $ 12,635,922 ============= ============= Supplemental schedule of noncash investing/financing activity: Acquisition of real estate interests by issuance of common stock, preferred stock, and assumption of debt $ 989,466,479 $ -- ============= ============= Declaration of dividends paid in succeeding period $ 25,638,170 $ 18,767,183 ============= =============
The accompanying notes are an integral part of these condensed consolidated financial statements. 9 KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS --------- 1. Interim Financial Statements 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 majority-owned partnerships. 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. 2. Common Stock Offerings During April and May 1998, the Company completed the sale of an aggregate 3,039,507 shares of common stock in five separate transactions consisting of (i) a primary public stock offering of 460,000 shares of common stock priced at $36.0625 per share, and (ii) four private placements of 415,945 shares, 546,075 shares, 837,000 shares and 780,487 shares of common stock priced at $36.0625, $36.625, $36.25 and $38.4375 per share, respectively. The shares of common stock sold in the private placements were deposited in separate unit investment trusts. The net proceeds from these offerings totaling approximately $106.0 million (after related transaction costs of approximately $5.9 million) were used for general corporate purposes, including the acquisition of interests in neighborhood and community shopping centers and the expansion and improvement of certain properties in the Company's portfolio. 3. Property Acquisitions During the six months ended June 30, 1998, the Company and its affiliates acquired interests in 15 neighborhood and community shopping center properties comprising approximately 1.7 million square feet of gross leasable area ("GLA") in eight states for an aggregate purchase price of approximately $136.3 million, including the assumption of approximately $20.8 million in mortgage debt. 10 4. Retail Properties Acquisition During January 1998, the Company, through an affiliated entity, acquired fee interest in three properties from a retailer in the Chicago, IL market comprising approximately 516,000 square feet of GLA for an aggregate purchase price of approximately $23.7 million. These properties include approximately 70,000 square feet of showroom space and adjoining warehouses of approximately 100,000 square feet at each location. Simultaneous with this transaction, the Company leased, to a national furniture retailer, the showroom portion of each property under individual long-term leases. The Company is currently planning the redevelopment of the warehouse portion of each property. During the six months ended June 30, 1998, the Company has invested approximately $16.2 million in a partnership which has acquired and leased-back 10 automotive dealerships. The Company has a 50% interest in this partnership. 5. Property Disposition During January 1998, the Company disposed of a shopping center property in Pinellas Park, FL. Cash proceeds from the disposition totaling $2.3 million, together with an additional $7.1 million cash investment, were used to acquire an exchange shopping center property located in Cranston, RI during March 1998. 6. Price REIT Merger On January 13, 1998, the Company, REIT Sub, Inc., a Maryland corporation and a wholly owned subsidiary of the Company ("Merger Sub") and The Price REIT, Inc., a Maryland corporation, ("Price REIT"), signed a definitive Agreement and Plan of Merger dated January 13, 1998, as amended March 5, 1998 and May 14, 1998, (the "Merger Agreement"). On June 19, 1998, the shareholders of the Company and the shareholders of Price REIT approved the issuance of the Merger Consideration (as defined in the Merger Agreement) and the Merger, respectively, and Price REIT was merged into Merger Sub. Prior to the Merger, Price REIT was a self-administered and self-managed equity REIT that was primarily focused on the acquisition, development, management and redevelopment of destination retail shopping center properties known as "power centers." As of June 19, 1998, Price REIT owned or had interests in 43 properties, consisting of 39 power and community centers, one stand-alone retail warehouse, one project under development and two undeveloped land parcels, located in 17 states containing approximately 8.0 million square feet of GLA. In connection with the Merger, holders of Price REIT common stock received one share of Kimco common stock and 0.36 shares of Kimco Class D Depositary Shares (the "Class D Depositary Shares"), each Class D Depositary Share representing a one-tenth fractional interest in a new issue of Kimco 7.5% 11 Cumulative Convertible Preferred Stock, par value $1.00 per share (the "Class D Preferred Stock"), for each share of Price REIT common stock. On June 19, 1998, the Company issued 11,921,992 shares of its common stock and 429,159 shares of Class D Preferred Stock (represented by 4,291,590 Class D Depositary Shares) in connection with the Merger. Additionally, in connection with the Merger, the Company issued 65,000 shares of a new issue of Kimco Class E Floating Rate Cumulative Preferred Stock, par value $1.00 per share (the "Class E Preferred Stock", represented by 650,000 Class E Depositary Shares, (the "Class E Depositary Shares")), each Class E Depositary Share representing a one-tenth fractional interest in the Class E Preferred Stock. The Merger was accounted for using the purchase method of accounting for financial reporting purposes. Dividends on the Class D Depositary Shares are cumulative and payable quarterly in arrears at the rate per depositary share equal to the greater of (i) 7.5% per annum based on the $25 per share initial value, or $1.875 per share or (ii) the cash dividends on the shares of the Company's common stock into which a Class D Depositary Share is convertible, plus $.0275 per quarter. The Class D Depositary Shares are convertible at any time into the Company's common stock at a conversion price of $40.25 per share of common stock or a conversion rate of 0.62112 for each Class D Depositary Share. The Class D Depositary Shares may be redeemed in whole, or from time to time, in part, on any date on or after June 19, 2001 at the option of the Company if, for any 20 trading days within any period of 30 consecutive trading days, including the last trading day of such period, the average closing price per share of the Company's common stock exceeds 120% of the conversion price or $48.30 per share. The Class D Preferred Stock (represented by the Class D Depositary Shares outstanding) ranks pari passu with the Company's 7 3/4% Class A Cumulative Redeemable Preferred Stock, 8 1/2% Class B Cumulative Redeemable Preferred Stock, 8 3/8 % Class C Cumulative Redeemable Preferred Stock and the Class E Floating Rate Cumulative Preferred Stock (represented by the Class E Depositary Depositary Shares) as described below, as to voting rights priority for receiving dividends and liquidation preferences. Dividends on the Class E Depositary Shares are cumulative at the rate of LIBOR plus 2.00% per annum (7.68% per annum initial rate) based on the initial issue price of $100 per depositary share. The dividend rate on Class E Depositary Shares resets and is payable quarterly in arrears. The Class E Preferred Stock (represented by the Class E Depositary Shares) is redeemable at the option of the Company for 150 days after the effective time of the Merger (the "Repurchase Termination Date") at a price equal to the liquidation preference plus accrued and unpaid dividends. If not redeemed during this 150 day period, the Class E Preferred Stock will not be redeemable again until after the fifth anniversary of the Repurchase Termination Date. The redemption price of the Class E Preferred Stock must be paid solely from the sale of proceeds of other capital stock of the Company, which may include other classes or series of preferred stock. The Class E Depositary 12 Shares are not convertible or exchangeable for any other property or securities of the Company. The Class E Preferred Stock ranks pari passu with the Class A, Class B, Class C and Class D Preferred Stock as described above, as to voting rights, priority for receiving dividends and liquidation preferences. 7. Investment in Retail Store Leases Income from the investment in retail store leases for the six months ended June 30, 1998 and 1997 represents sublease revenues of approximately $10.1 million and $10.6 million, respectively, less related expenses of $7.4 million and $7.8 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. 8. Net Income Per Common Share The following table sets forth the basic and diluted weighted average numbers of common shares outstanding for each period used in the calculation of basic and diluted net income per common share:
Three Months Ended Six Months Ended June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 ------------- ------------- ------------- ------------- Basic EPS - weighted average number of common shares outstanding 44,128,650 36,257,999 42,279,021 36,243,762 Effect of dilutive securities - Stock options 587,163 405,306 561,317 446,925 ---------- ---------- ---------- ---------- Diluted EPS - weighted average number of 44,715,813 36,663,305 42,840,338 36,690,687 common shares ========== ========== ========== ==========
The effect of the conversion of the Class D Preferred Stock would have 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 net income per common share. 9. Pro Forma Financial Information As discussed in Notes 3, 5 and 6, the Company and certain of its affiliates acquired and disposed of interests in certain shopping center properties during the six months ended June 30, 1998. The pro forma financial information set forth below is based upon the Company's historical Condensed Consolidated Statement of Income for the six months ended June 30, 1998 and 1997, adjusted to give effect to these transactions as of January 1, 1997. 13 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, 1997, nor does it purport to represent the results of future operations. (Amounts presented in millions, except per share figures). Six Months Ended June 30, 1998 1997 ------------ ------------ Revenues from rental property $ 181.9 $ 148.2 Net Income $ 69.5 $ 62.8 Net Income per common share: Basic $ 1.01 $ .98 Diluted $ 1.00 $ .97 10. Subsequent Events On July 1, 1998, certain subsidiaries of the Company acquired a portfolio of 30 fee and leasehold positions from Metropolitan Life Insurance Company ("Met Life") consisting of 29 neighborhood and community shopping center properties and one office/distribution facility. These properties, comprising approximately 3.8 million square feet of GLA located in 5 states, were acquired for an aggregate purchase price of approximately $167.5 million. The properties were leased to Venture Stores, Inc. ("Venture") under a single master lease agreement. On July 17, 1998, the Company acquired Venture's leasehold position at 88 locations, including the 30 locations acquired from Met Life, 56 locations pursuant to two unitary leases currently in place with the Company and two other locations. The purchase price for the leasehold positions will be a minimum of $95 million, but is subject to upward adjustment based on the Company's ability to re-tenant the properties over a two year period. Simultaneous with this transaction, the Company leased 46 of these locations to a national retailer. During July 1998, the Company completed the sale of an aggregate 1,315,498 shares of common stock in three separate transactions consisting of (i) a primary public stock offering of 510,000 shares of common stock priced at $39.4375 per share, and (ii) two direct placements of 375,000 and 430,498 shares of common stock priced at $38.2575 and $38.56 per share, respectively. The net proceeds from these sales of common stock, totaling approximately $49.9 million (after related transaction costs of approximately $1.2 million) have been used for general corporate purposes, including the acquisition of neighborhood and community shopping centers and the expansion and improvement of certain properties in the Company's portfolio. 14 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 June 19, 1998, stockholders were asked to vote with respect to (I) the issuance by the Company of shares of its Common Stock, par value $.01 per share, and depositary shares, each of which represents a one-tenth fractional interest in a share of a new issue of 7.5% Class D Cumulative Convertible Preferred Stock, par value $1.00 per share, liquidation preference $250.00 per share in connection with the Merger (the "Kimco Share Proposal"), (II) the election of Directors to serve for the ensuing year, (III) a proposal to adopt the 1998 Equity Participation Plan of the Company and (IV) the postponement or adjournment of the Kimco Annual Meeting in order to solicit additional votes for the Kimco Share Proposal if the Chairman of the Kimco Annual Meeting determines that there are not sufficient votes to approve the Kimco Share Proposal. 15 A total of 32,612,802 votes were cast regarding the following proposals:
Proposal I - Votes For Against Abstain No Vote - ---------- ----- --- ------- ------- ------- (Approval of the Kimco 32,612,802 27,628,560 185,179 109,947 4,689,116 Share Proposal)
Proposal II - - ----------- (Election of Directors) Votes For Withheld ----- --- -------- Nominees: --------- Martin S. Kimmel 32,612,802 32,154,389 458,413 Milton Cooper 32,612,802 32,184,212 428,590 Joe Grills 32,612,802 32,201,262 411,540 Richard G. Dooley 32,612,802 32,201,462 411,340 Michael J. Flynn 32,612,802 32,183,312 429,490 Frank Lourenso 32,612,802 32,163,717 449,085
Proposal III - Votes For Against Abstain No Vote - ------------ ----- --- ------- ------- ------- (Approval of the Kimco 32,612,802 21,894,899 5,900,943 116,944 4,700,016 1998 Equity Participation Plan) Proposal IV - Votes For Against Abstain No Vote - ----------- ----- --- ------- ------- ------- (Approval of the Kimco 32,612,802 28,599,625 3,624,836 122,146 266,195 Adjournment Proposal)
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. 16 Form 8-K - A current report on Form 8-K was filed on May 22, 1998 to disclose certain historical financial information for certain properties acquired during 1998 and pro forma financial information for all shopping center acquisitions from January 1998 through May 1998. A current report on Form 8-K was filed on June 4, 1998, to disclose a preferred stock purchase agreement between Price REIT and the Company and LBI Group, Inc. ("LBI") whereby Price REIT proposes to sell to LBI shares of its Class A Floating Rate Cumulative Preferred Stock. A current report on Form 8-K was filed on June 24, 1998 to disclose the consummation of a merger (the "Merger") whereby the Company acquired control of Price REIT, Inc. ("Price REIT") pursuant to an Agreement and Plan of Merger. 17 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 14, 1998 /s/ Milton Cooper - -------------------- ------------------------------ (Date) Milton Cooper Chairman of the Board August 14, 1998 /s/ Michael V. Pappagallo - -------------------- ------------------------------ (Date) Michael V. Pappagallo Chief Financial Officer 18 EX-27 2 FINANCIAL DATA SCHEDULE
5 1 6-MOS DEC-31-1998 JUN-30-1998 33,921,947 23,016,586 27,592,628 2,786,130 0 0 2,536,274,796 225,151,864 2,528,786,937 0 930,486,686 0 1,394,159 554,461 1,483,844,875 2,528,786,937 132,452,630 132,452,630 37,788,275 37,788,275 0 0 23,411,176 53,013,680 0 53,013,680 0 0 0 53,013,680 1.03 1.01 Financial Data Schedule information has been extracted from the Registrant's Condensed Consolidated Balance Sheet (non-classified) as of June 30, 1998 and the Condensed Consolidated Statement of Income for the six months then ended.
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