-----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, PdTV9QNhOfBVfIY9C5L3d8219dPGe5iFGSXveHYNKyZ64TNH412Yz4Ga226bweS/ 7IUNLAVIoN/aeX4i/zY9QA== 0000889812-99-002472.txt : 19990817 0000889812-99-002472.hdr.sgml : 19990817 ACCESSION NUMBER: 0000889812-99-002472 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 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: 99691301 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 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, 1999 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. 60,713,691 shares outstanding as of July 30, 1999 1 of 17 PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Financial Statements - Condensed Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998. Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 1999 and 1998. Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1999 and 1998. 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 $36.8 million or 53.0% to $106.1 million for the three months ended June 30, 1999, as compared with $69.3 million for the corresponding quarter ended June 30, 1998. Similarly, revenues from rental property increased $86.5 million or 65.3% to $218.9 million for the six months ended June 30, 1999, as compared with $132.4 million for the corresponding six month period ended June 30, 1998. These increases resulted primarily from the combined effect of (i) the acquisition of 11 shopping center properties providing revenues of $2.5 million and $4.2 million for the three and six month periods ended June 30, 1999, respectively, two of which were subsequently sold to Kimco Income REIT ("KIR", an unconsolidated real estate joint venture in which the Company has an interest), (ii) acquisitions throughout calendar year 1998 (62 shopping center properties and three retail properties) providing incremental revenues of $11.0 million and $25.8 million as compared to the corresponding three and six month periods in 1998, respectively, (iii) the acquisition of The Price REIT, Inc. as of June 19, 1998 (the "Price REIT Acquisition") providing incremental revenues of $15.9 million and $42.5 million for the three and six month periods ended June 30, 1999, respectively, 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 $22.4 million or 53.8% to $64.0 million for the three months ended June 30, 1999, as compared with $41.6 million for the corresponding quarter ended June 30, 1998. Similarly, rental property expenses, including depreciation and amortization, increased $55.1 million or 68.8% to $135.2 million for the six months ended June 30, 1999 as compared with $80.1 million for the corresponding period in the preceding year. The rental property expense components of real estate taxes, operating and maintenance and depreciation and amortization increased $3.8 million, $3.3 million and $6.8 million, respectively, for the three month period ended June 30, 1999, as compared with the corresponding quarter in the preceding year. Similarly, the rental property expense components of real estate taxes, operating and maintenance and depreciation and amortization increased by $9.3 million, $8.7 million and $15.8 million, respectively, for the six month period ended June 30, 1999, as compared with the corresponding period in the preceding year. These rental property expense increases are primarily due to property acquisitions during the six months ended June 30, 1999, and the incremental costs associated with the Price REIT Acquisition and the property acquisitions throughout 1998. Interest expense increased $7.8 million and $20.0 million for the three and six month periods ended June 30, 1999, respectively, reflecting higher average outstanding borrowings as compared to the corresponding periods in 1998 resulting from (i) the issuance of additional unsecured debt during 1999 and 1998 and the assumption of $250 million in connection with the Price REIT Acquisition, (ii) the assumption of mortgage debt during 1998 and the six months ended June 30, 1999 in connection with certain property acquisitions and (iii) mortgage financing obtained on 22 properties in 1998 totaling $281.3 million and three properties in 1999 totaling $23.3 million. During 1998, the Company formed KIR, a limited partnership established to invest in high quality retail properties financed primarily through the use of individual non-recourse mortgages. At the time of formation, the Company contributed 19 property interests to KIR. On April 28, 1999, KIR sold a significant interest in the partnership to an institutional investor for approximately $70 million. Simultaneous with this transaction, KIR purchased four properties for approximately $70.1 million. As a result of these transactions, the Company now 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 from KIR for the period April 28, 1999 to June 30, 1999 was approximately $1.1 million. General and administrative expenses increased approximately $2.1 million and $4.8 million for the three and six months ended June 30, 1999, respectively, as compared to the corresponding periods in 1998. 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 and the Price REIT Acquisition. During the six months ended June 30, 1999, the Company disposed of three shopping center properties. Cash proceeds from these dispositions aggregated approximately $5.9 million, which approximated their aggregate net book value. 3 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, 1999 was $42.4 million and $81.9 million, respectively. Net income for the three and six months ended June 30, 1998 was $27.5 million and $53.0 million, respectively. On a per- basic share basis, net income improved $.08 and $.13 for the three and six month periods ended June 30, 1999, respectively, after adjusting for the gain on sale of a shopping center property in the respective period, reflecting the effect of property acquisitions, including the Price REIT Acquisition, property redevelopments and increased leasing activity and re-tenanting at improved rental rates which strengthened operating 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 $1.9 billion for the purposes of repaying indebtedness, acquiring interests in neighborhood and community shopping centers and for expanding and improving properties in the portfolio. During August 1998, the Company established a $215 million, unsecured revolving credit facility (the "Credit Facility"), which is scheduled to expire in August 2001. This Credit Facility, which replaced both the Company's $100 million unsecured revolving credit facility and $150 million interim unsecured 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, 1999 there was $15 million outstanding under the Credit Facility. The Company has also implemented a $200 million 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. 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, 1999, the Company had over 300 unencumbered property interests in its portfolio. During 1998, the Company filed a shelf registration statement on Form S-3 for up to $750 million of debt securities, preferred stock, depositary shares, common stock and common stock warrants. As of June 30, 1999, the Company had approximately $493.2 million available for issuance under this shelf registration statement. 4 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, 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 $114.8 million for the six months ended June 30, 1999 as compared to $70.3 million for the corresponding period ended June 30, 1998. 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. 5 Impact of Year 2000 - ------------------- Like most corporations, the Company depends upon its business and technical information systems in operating 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. This problem is commonly referred to as the "Year 2000" issue. The Company has substantially completed the assessment, modification and testing phases of its systems as to Year 2000 compliance and functionality. The Company has substantially completed the identification and review of computer hardware and software suppliers and is currently verifying the Year 2000 compliance of third-party suppliers, vendors and service providers that the Company has deemed important to the ongoing operations of the business. The total costs to date related to the Year 2000 issue have been immaterial to the Company's operations. These costs have been expensed as incurred and consist primarily of internal staff costs and other related expenses. The Company does not believe that the remaining costs expected to be incurred in addressing the Year 2000 issue will have a material adverse effect on the Company's financial condition or results of operations. Based upon the substantial progress made to date, the Company does not anticipate delays in finalizing internal Year 2000 compliance issues. However, the Company cannot guarantee that its third party vendors, partners or others will be Year 2000 compliant. If the Company or such third party vendors, partners and others encounter problems in addressing the Year 2000 issue, the Company's ability to operate its properties and to bill and collect revenues in a timely manner could be materially adversely affected. The Company is currently addressing the development of a contingency plan in the event that its systems or the systems of third party vendors, partners or others fail to resolve the Year 2000 issue. 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 6 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. Item 3. Quantitative and Qualitative Disclosures about Market Risk As of June 30, 1999, the Company had approximately $193.8 million of floating-rate debt outstanding, including $15.0 million on its unsecured line of credit. The interest rate risk on $160.0 million of such debt has been mitigated through the use of interest rate swap agreements (the "Swaps") with major financial institutions. The Company is exposed to credit risk in the event of non-performance by the counter-parties to the Swaps. The Company believes it mitigates its credit risk by entering into these Swaps with major financial institutions. The Company believes the interest rate risk represented by the remaining $33.8 million of floating-rate debt is not material in relation to the total debt outstanding of the Company or its market 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, 1999, 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, 1999 1998 ------------------ ----------------- Assets: Real estate, net of accumulated depreciation of $281,341 and $255,950, respectively $ 2,485,007 $ 2,767,952 Investments and advances in real estate joint ventures 58,335 64,263 Investments and advances in KIR 115,207 - Investment in retail store leases 14,456 15,172 Cash and cash equivalents 32,321 43,920 Accounts and notes receivable 33,262 31,821 Other assets 109,928 128,050 ------------------ ----------------- $ 2,848,516 $ 3,051,178 ================== ================= Liabilities: Notes payable $ 900,250 $ 855,250 Mortgages payable 209,791 434,311 Other liabilities, including minority interests in partnerships 153,051 176,598 ------------------ ----------------- 1,263,092 1,466,159 ------------------ ----------------- Stockholders' Equity: Preferred stock, $1.00 par value, authorized 5,000,000 and 3,470,000 shares, respectively 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 429,144 and 429,159 shares, respectively 429 429 Aggregate liquidation preferences $107,286 and $107,290, respectively Common stock, $.01 par value, authorized 200,000,000 and 100,000,000 shares, respectively Issued and outstanding 60,279,163 and 60,133,704 shares, respectively 603 601 Paid-in capital 1,711,506 1,707,272 Cumulative distributions in excess of net income (128,014) (124,183) ------------------ ----------------- 1,585,424 1,585,019 ------------------ ----------------- $ 2,848,516 $ 3,051,178 ================== ================= 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, 1999 and 1998 (in thousands, except share information)
Three Months Ended June 30, Six Months Ended June 30, 1999 1998 1999 1998 --------------- ----------------- ------------------ ----------------- Revenues from rental property $ 106,072 $ 69,341 $ 218,948 $ 132,453 --------------- ----------------- ------------------ ----------------- Rental property expenses: Rent 3,497 2,807 6,995 5,559 Real estate taxes 13,255 9,432 27,568 18,309 Interest 20,128 12,372 43,366 23,411 Operating and maintenance 10,290 6,984 22,574 13,920 Depreciation and amortization 16,794 9,991 34,665 18,891 --------------- ----------------- ------------------ ----------------- 63,964 41,586 135,168 80,090 --------------- ----------------- ------------------ ----------------- Income from rental property 42,108 27,755 83,780 52,363 Income from investment in retail store leases 997 912 1,980 1,828 --------------- ----------------- ------------------ ----------------- 43,105 28,667 85,760 54,191 Management fee income 1,307 730 2,143 1,531 General and administrative expenses (5,882) (3,824) (11,851) (7,005) Equity in income of KIR 1,147 - 1,147 - Other income, net 2,764 1,957 4,730 3,395 --------------- ----------------- ------------------ ----------------- Income before gain on sale of shopping center property 42,441 27,530 81,929 52,112 Gain on sale of shopping center property - - - 901 --------------- ----------------- ------------------ ----------------- Net Income $ 42,441 $ 27,530 $ 81,929 $ 53,013 =============== ================= ================== ================= Net income applicable to common shares $ 35,820 $ 22,486 $ 68,687 $ 43,360 =============== ================= ================== ================= Net income per common share Basic $0.59 $0.51 $1.14 $1.03 ====== ====== ====== ===== Diluted $0.59 $0.50 $1.13 $1.01 ====== ====== ====== ===== The accompanying notes are an integral part of these condensed consolidated financial statements.
9 KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months ended June 30, 1999 and 1998 (in thousands)
1999 1998 --------------- ----------------- Cash flow provided by operations $ 114,846 $ 70,325 --------------- ----------------- Cash flow from investing activities: Acquisition of and improvements to real estate (139,728) (169,175) Acquisition of real estate through joint venture investment - (16,225) Investment in marketable securities (11,833) (4,100) Proceeds from sale of marketable securities 10,416 - Investments and advances to affiliated companies (950) - Investments and advances to joint ventures (17,276) - Investment in mortgage loans receivable - (1,981) Repayment of mortgage loans receivable 4,545 1,456 Construction advances to real estate joint ventures - (1,462) Reimbursement of advances to real estate joint ventures 7,500 - Net proceeds from sale of interest in KIR 68,179 - Proceeds from sale of shopping center properties 5,890 2,300 --------------- ----------------- Net cash flow used for investing activities (73,257) (189,187) --------------- ----------------- Cash flow from financing activities: Principal payments on debt, excluding normal amortization of rental property debt (18,464) - Principal payments on rental property debt (2,655) (1,944) Proceeds from mortgage financing 23,306 9,000 Payment of unsecured obligation (20,984) - Proceeds from issuance of senior notes 130,000 - Repayment of senior notes (100,000) - Proceeds from issuance of medium-term notes - 100,000 Borrowings under revolving credit facilities 50,000 100,000 Repayment of borrowings under revolving credit facilities (35,000) (145,000) Dividends paid (83,627) (48,009) Proceeds from issuance of stock 4,236 107,759 --------------- ----------------- Net cash flow (used for)/provided by financing activities (53,188) 121,806 --------------- ----------------- Change in cash and cash equivalents (11,599) 2,944 Cash and cash equivalents, beginning of period 43,920 30,978 =============== ================= Cash and cash equivalents, end of period $ 32,321 $ 33,922 =============== ================= Interest paid during the period $ 41,937 $ 22,754 =============== ================= Supplemental schedule of noncash investing/financing activities: Acquisition of real estate interests by issuance of common stock, preferred stock, and assumption of debt $ 41,607 $ 989,466 =============== ================= Declaration of dividends paid in succeeding period $ 41,576 $ 25,638 =============== ================= The accompanying notes are an integral part of these condensed consolidated financial statements.
10 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 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. 2. Property Acquisitions / Other Investments During the six months ended June 30, 1999, the Company and its affiliates acquired interests in 11 shopping center properties (two of which were subsequently sold to Kimco Income REIT ("KIR", an unconsolidated real estate joint venture in which the Company has an interest)) comprising approximately 1.1 million square feet of gross leasable area ("GLA") in 10 states for an aggregate purchase price of approximately $104.3 million, including the assumption of approximately $16.9 million in mortgage debt. During December 1998, the Company acquired a first mortgage interest on a shopping center in Manhasset, NY for approximately $21 million. During April 1999, the Company acquired fee title to this property. During the six months ended June 30, 1999, the Company acquired one land parcel and, through separate partnership investments, interests in two additional land parcels for the ground-up development of shopping centers for an aggregate purchase price of approximately $17.3 million. During June 1999, the Company, through an affiliated entity, invested $17.3 million in a joint venture which acquired a mortgage participation interest secured by 28 properties owned by a national retailer. 11 3. Property Dispositions During the six months ended June 30, 1999, the Company disposed of three shopping center properties. Cash proceeds from these dispositions aggregated approximately $5.9 million, which approximated their aggregate net book value. 4. Debt Financings During February 1999, the Company issued $130 million of 6-7/8% fixed-rate Senior Notes due 2009 (the "Notes"). Interest on the Notes is payable semi-annually in arrears. The Notes were sold at 99.85% of par value. Net proceeds from the issuance totaling approximately $128.9 million, after related transaction costs of approximately $.9 million, were used, in part, to repay $100 million floating-rate senior notes that matured during February 1999 and for general corporate purposes. 5. Investment in Retail Store Leases Income from the investment in retail store leases for the six months ended June 30, 1999 and 1998 represents sublease revenues of approximately $10.2 million and $10.1 million, respectively, less related expenses of $7.4 million and $7.4 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. 6. 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, 1999 June 30, 1998 June 30, 1999 June 30, 1998 ------------- ------------- ------------- ------------- Basic EPS - weighted average number of common shares outstanding 60,258,048 44,128,650 60,212,320 42,279,021 Effect of dilutive securities - stock options 588,405 587,163 595,084 561,317 -------------- -------------- -------------- --------------- Diluted EPS - weighted average number of common shares 60,846,453 44,715,813 60,807,404 42,840,338 ============== ========== ============== ==========
12 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. 7. Investment and Advances in KIR: During 1998, the Company formed KIR, a limited partnership established to invest in high quality retail properties financed primarily through the use of individual non-recourse mortgages. At the time of formation, the Company contributed 19 property interests to KIR. On April 28, 1999, the Company entered into an agreement whereby an institutional investor would purchase a significant interest in KIR. Under the terms of the agreement, the agreed equity value for the 19 shopping centers previously contributed to KIR by the Company was approximately $107 million and the Company has agreed to contribute an additional $10 million for a total investment of $117 million. The institutional investor has subscribed for up to $117 million of equity in KIR, of which approximately $70 million has been contributed. Simultaneous with these transactions, KIR purchased four properties for approximately $70.1 million. During the period April 28, 1999 to June 30, 1999 KIR purchased two additional properties for approximately $24.9 million. As a result of these transactions, the Company now holds a non-controlling limited partnership interest in KIR and accounts for its investment in KIR under the equity method of accounting. Additionally, in connection with these transactions, 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. The Company's equity in income from KIR for the period April 28, 1999 to June 30, 1999 was approximately $1.1 million. 8. 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 shopping center properties during the six months ended June 30, 1999. 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, 1999 and 1998, adjusted to give effect to these transactions as of January 1, 1998. 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, 1998, nor does it purport to represent the results of future operations. (Amounts presented in millions, except per share figures). 13 Six Months Ended June 30, 1999 1998 ---- ---- Revenues from rental property $ 219.6 $ 138.4 Net Income $ 81.7 $ 54.8 Net Income per common share: Basic $ 1.14 $ 1.07 ========= ========= Diluted $ 1.13 $ 1.05 ========= ========= 9. Subsequent Events: Effective July 1, 1999, the Company exercised its option to acquire 13 properties comprising 1.6 million square feet of GLA from KC Holdings, Inc. ("KC Holdings"), an entity formed in connection with the Company's initial public stock offering in November 1991. The properties were acquired for an aggregate option price of approximately $39.8 million, paid $15.7 million in shares of the Company's common stock (valued at $39.00 per share) and $24.1 million through the assumption of mortgage debt encumbering the properties. The members of the Company's Board of Directors who are not also shareholders of KC Holdings have unanimously approved the Company's purchase of these 13 properties. 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 May 20, 1999 (the "Meeting"), stockholders were asked to vote with respect to (I) the election of Directors to serve for the ensuing year and (II) the amendment to the Charter of the Company to (a) increase the number of authorized shares of Common Stock of the Company, par value $.01 per share (the "Common Stock") from 100 million shares to 200 million shares (b) increase the number of authorized shares of Excess Stock of the Company, par value $.01 per share (the "Excess Stock") from 51 million shares to 102 million shares, and (c) increase the number of authorized shares of Preferred Stock of the Company, par value $1.00 per share, (the "Preferred Stock") from 3.47 million shares to 5 million shares (collectively, the "Kimco Share Proposal"). The Meeting was adjourned with respect to Proposal II until June 1, 1999. A total of 54,150,840 votes were cast regarding Proposal I and 57,842,980 votes were cast regarding the following proposals: Proposal I - - ---------- (Election of Directors) Votes For Withheld ----- --- -------- Nominees: --------- Martin S. Kimmel 54,150,840 53,572,144 578,696 Milton Cooper 54,150,840 53,615,733 535,107 Joe Grills 54,150,840 53,685,381 465,459 Richard G. Dooley 54,150,840 53,219,455 931,385 Michael J. Flynn 54,150,840 53,613,857 536,983 Frank Lourenso 54,150,840 53,297,970 852,870
Broker Proposal II - Votes For Against Abstain Non-Votes - ----------- ----- --- ------- ------- --------- (Approval of the Kimco Share 57,842,980 40,130,519 6,763,490 158,571 10,790,400 Proposal)
15 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 - A current report on Form 8-K was filed on May 13, 1999 to disclose certain pro forma financial information for the contribution of 19 shopping center properties and the sale of four shopping center properties by the Company to a limited partnership in which the Company has an interest. 16 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 13, 1999 /s/ Milton Cooper (Date) Milton Cooper Chairman of the Board August 13, 1999 /s/ Michael V. Pappagallo (Date) Michael V. Pappagallo Chief Financial Officer 17 EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1999 JUN-30-1999 32,321 27,422 36,212 2,950 0 0 2,766,348 281,341 2,848,516 0 1,110,041 0 1,329 603 1,583,492 2,848,516 218,948 218,948 57,137 57,137 0 0 43,366 81,929 0 81,929 0 0 0 81,929 1.14 1.13 Financial Data Schedule information has been extracted from the Registrant's Condensed Consolidated Balance Sheet (non-classified) as of June 30, 1999 and the Condensed Consolidated Statement of Income for the six months then ended.
-----END PRIVACY-ENHANCED MESSAGE-----