-----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, GVvma5Bp0Lelhn5i/raYsKOCGbZog6vzxoSPLjW97A2PP4MFSO744hI9lA93zGRr jzOcoot/VCGcluhdtpUFVg== 0000889812-99-003399.txt : 19991117 0000889812-99-003399.hdr.sgml : 19991117 ACCESSION NUMBER: 0000889812-99-003399 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: 99755488 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 September 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. 60,730,510 shares outstanding as of October 29, 1999 ================================================================================ 1 of 18 PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Financial Statements - Condensed Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998. Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 1999 and 1998. Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 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 $7.9 million or 8.1% to $106.0 million for the three months ended September 30, 1999, as compared with $98.1 million for the corresponding quarter ended September 30, 1998. This net increase resulted primarily from the combined effect of (i) the acquisition of 23 shopping center properties during 1999 providing revenues of $5.3 million for the three month period ended September 30, 1999, (ii) acquisitions throughout calendar year 1998 (62 shopping center properties and three retail properties) providing incremental revenues of $2.8 million as compared to the corresponding three month period in 1998 and (iii) new leasing, property redevelopments and re-tenanting within the portfolio at improved rental rates providing incremental revenues of $8.8 million. These increases were offset as a result of the deconsolidation of 19 shopping center properties as of April 28, 1999 in connection with the sale of a controlling interest in Kimco Income REIT ("KIR"). Revenues from these 19 properties totaled approximately $9.0 million for the three months ended September 30, 1998. 2 Revenues from rental property increased $94.5 million or 41.0% to $325.0 million for the nine months ended September 30, 1999, as compared with $230.5 million for the corresponding nine-month period ended September 30, 1998. This increase resulted primarily from the combined effect of (i) the acquisition of 25 shopping center properties during 1999 providing revenues of $9.6 million for the nine month period ended September 30, 1999, two of which were subsequently sold to KIR, (ii) acquisitions throughout calendar year 1998 (62 shopping center properties and three retail properties) providing incremental revenues of $28.2 million as compared to the corresponding nine month period in 1998, (iii) the acquisition of The Price REIT, Inc. as of June 19, 1998 (the "Price REIT Acquisition") providing incremental revenues of $33.9 million for the nine month period ended September 30, 1999 and (iv) new leasing, property redevelopments and re-tenanting within the portfolio at improved rental rates. Rental property expenses, including depreciation and amortization, increased $2.3 million or 3.7% to $63.4 million for the three months ended September 30, 1999, as compared with $61.1 million for the corresponding quarter ended September 30, 1998. The rental property expense components of real estate taxes, operating and maintenance, and depreciation and amortization increased $1.3 million, $.2 million and $.8 million, respectively, for the three month period ended September 30, 1999, as compared with the corresponding quarter in the preceding year. These rental property expense increases are primarily due to property acquisitions during 1999 and 1998 reduced by rental property expenses relating to the deconsolidation of 19 shopping center properties as of April 28, 1999 in connection with the sale of a controlling interest in KIR. Rental property expenses, including depreciation and amortization, increased $57.3 million or 40.6% to $198.5 million for the nine months ended September 30, 1999, as compared with $141.2 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 by $10.6 million, $8.9 million and $16.5 million, respectively, for the nine month period ended September 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 nine months ended September 30, 1999 and throughout 1998, including the incremental costs associated with the Price REIT Acquisition. Interest expense increased $19.9 million for the nine month period ended September 30, 1999, reflecting higher average outstanding borrowings as compared to the corresponding period 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 nine months ended September 30, 1999 in connection with certain property acquisitions and (iii) 3 mortgage financing obtained on certain properties in 1999 and 1998, offset by the deconsolidation of $252.4 million of mortgage debt on 19 properties as of April 28, 1999 in connection with the sale of a controlling interest in KIR. General and administrative expenses increased approximately $5.3 million for the nine months ended September 30, 1999, as compared to the corresponding period 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 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 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 three months ended September 30, 1999 and the period April 28, 1999 to September 30, 1999 was approximately $2.1 million and $3.3 million, respectively. During the nine months ended September 30, 1999, the Company disposed of four shopping center properties. Cash proceeds from three of these dispositions aggregated approximately $5.9 million, which approximated their aggregate net book value. In addition, during July 1999, the Company disposed of an additional shopping center property in New Port Richey, FL. Cash proceeds from the disposition totaling $.5 million, together with an additional $5.5 million cash investment, were used to acquire an exchange shopping center property located in Greensboro, NC during September 1999. 4 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 nine months ended September 30, 1999 was $45.6 million and $127.5 million, respectively. Net income for the three and nine months ended September 30, 1998 was $31.3 million and $84.3 million, respectively. On a per-basic share basis net income improved $.14 and $.28 for the three and nine month periods ended September 30, 1999, respectively, after adjusting for the extraordinary charge in the three and nine month periods ended September 30, 1998 and the gains on sales of shopping center properties in the respective periods in 1999 and 1998, 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 September 30, 1999 there was $60.0 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 September 30, 1999, the Company had over 300 unencumbered property interests in its portfolio. 5 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 September 30, 1999, the Company had approximately $493.2 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 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 $179.8 million for the nine months ended September 30, 1999 as compared to $125.2 million for the corresponding period ended September 30, 1998. 6 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. 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 believes it has completed the assessment, modification and testing phases of its systems as to Year 2000 compliance and functionality. The Company believes it has 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. 7 The Company believes it has addressed substantially all of its 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 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 September 30, 1999, the Company had approximately $238.7 million of floating-rate debt outstanding, including $60.0 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. 8 The Company believes the interest rate risk represented by the remaining $78.7 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 September 30, 1999, the Company had no other material exposure to market risk. 9 KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share information)
September 30, December 31, 1999 1998 ------------- ------------ Assets: Real estate, net of accumulated depreciation of $310,840 and $255,950, respectively $ 2,538,998 $ 2,767,952 Investments and advances in KIR 114,178 - Investments and advances in real estate joint ventures 58,609 64,263 Investment in retail store leases 13,941 15,172 Cash and cash equivalents 32,932 43,920 Accounts and notes receivable 36,898 31,821 Other assets 118,102 128,050 ----------- ----------- $ 2,913,658 $ 3,051,178 =========== =========== Liabilities: Notes payable $ 945,250 $ 855,250 Mortgages payable 195,594 434,311 Other liabilities, including minority interests in partnerships 167,858 176,598 ----------- ----------- 1,308,702 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 428,514 and 429,159 shares, respectively 429 429 Aggregate liquidation preferences $107,129 and $107,290, respectively Common stock, $.01 par value, authorized 200,000,000 and 100,000,000 shares, respectively Issued and outstanding 60,719,965 and 60,133,704 shares, respectively 607 601 Paid-in capital 1,728,470 1,707,272 Cumulative distributions in excess of net income (125,450) (124,183) ----------- ----------- 1,604,956 1,585,019 ----------- ----------- $ 2,913,658 $ 3,051,178 =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. 10 KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Three and Nine Months ended September 30, 1999 and 1998 (in thousands, except per share information)
Three Months Ended September 30, Nine Months Ended September 30, 1999 1998 1999 1998 --------- -------- --------- --------- Revenues from rental property $ 106,044 $ 98,085 $ 324,992 $ 230,538 --------- -------- --------- --------- Rental property expenses: Rent 3,536 3,461 10,531 9,020 Real estate taxes 14,579 13,263 42,147 31,572 Interest 19,506 19,576 62,872 42,987 Operating and maintenance 9,440 9,223 32,014 23,144 Depreciation and amortization 16,294 15,543 50,959 34,433 --------- -------- --------- --------- 63,355 61,066 198,523 141,156 --------- -------- --------- --------- Income from rental property 42,689 37,019 126,469 89,382 Income from investment in retail store leases 1,087 902 3,067 2,730 --------- -------- --------- --------- 43,776 37,921 129,536 92,112 Management fee income 1,576 999 3,719 2,530 General and administrative expenses (5,950) (5,489) (17,801) (12,494) Equity in income of KIR 2,128 - 3,275 - Other income, net 3,837 2,676 8,567 6,072 --------- -------- --------- --------- Income before gain on sale of shopping center property and extraordinary items 45,367 36,107 127,296 88,220 Gain on sale of shopping center property 247 - 247 901 --------- -------- --------- --------- Income before extraordinary items 45,614 36,107 127,543 89,121 Extraordinary items - (4,852) - (4,852) --------- -------- --------- --------- Net Income $ 45,614 $ 31,255 $ 127,543 $ 84,269 ========= ======== ========= ========= Net income applicable to common shares $ 38,996 $ 23,358 $ 107,683 $ 66,718 ========= ======== ========= ========= Per common share: Income before extraordinary items Basic $0.64 $0.50 $1.78 $1.52 ===== ===== ===== ===== Diluted $0.64 $0.49 $1.77 $1.50 ===== ===== ===== ===== Net income Basic $0.64 $0.41 $1.78 $1.42 ===== ===== ===== ===== Diluted $0.64 $0.41 $1.77 $1.40 ===== ===== ===== =====
The accompanying notes are an integral part of these condensed consolidated financial statements. 11 KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months ended September 30, 1999 and 1998 (in thousands)
1999 1998 --------- -------- Cash flow provided by operations $ 179,774 $ 125,185 --------- --------- Cash flow from investing activities: Acquisition of and improvements to real estate (169,075) (468,794) Acquisition of real estate through joint venture investment - (18,664) Investment in marketable securities (12,814) (7,930) Proceeds from sale of marketable securities 11,443 - 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 (436) (1,674) 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 6,365 2,300 --------- --------- Net cash flow used for investing activities (102,519) (495,287) --------- --------- Cash flow from financing activities: Principal payments on debt, excluding normal amortization of rental property debt (61,098) (61,808) Principal payments on rental property debt (3,467) (3,318) Proceeds from mortgage financing 28,424 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 - 290,000 Repayment of medium-term notes - (50,000) Borrowings under revolving credit facilities 95,000 220,000 Repayment of borrowings under revolving credit facilities (35,000) (145,000) Dividends paid (126,657) (75,385) Proceeds from issuance of stock 5,539 186,416 --------- --------- Net cash flow (used for)/provided by financing activities (88,243) 369,905 --------- --------- Change in cash and cash equivalents (10,988) (197) Cash and cash equivalents, beginning of period 43,920 30,978 --------- --------- Cash and cash equivalents, end of period $ 32,932 $ 30,781 ========= ========= Interest paid during the period $ 52,234 $ 32,205 ========= ========= Supplemental schedule of noncash investing/financing activity: Acquisition of real estate interests by issuance of common stock, preferred stock, and assumption of debt $ 81,402 $ 977,542 ========= ========= Declaration of dividends paid in succeeding period $ 41,597 $ 33,661 ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 12 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 On July 1, 1999, the Company exercised its option to acquire 13 shopping center properties comprising 1.6 million square feet of gross leaseable area ("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 (401,646 shares valued at $39.00 per share at July 1, 1999) and $24.1 million through the assumption of mortgage debt encumbering the properties. Such mortgage debt was repaid during September 1999. The members of the Company's Board of Directors who are not also shareholders of KC Holdings, unanimously approved the Company's purchase of these 13 shopping center properties. During the nine months ended September 30, 1999, the Company and its affiliates acquired interests in 12 shopping center properties, in separate transactions, (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 1.2 million square feet of GLA in 11 states for an aggregate purchase price of approximately $110.3 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. 13 During the nine months ended September 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. 3. Property Dispositions During the nine months ended September 30, 1999, the Company disposed of four shopping center properties. Cash proceeds from three of these dispositions aggregated approximately $5.9 million, which approximated their aggregate net book value. In addition, during July 1999, the Company disposed of an additional shopping center property in New Port Richey, FL. Cash proceeds from the disposition totaling $.5 million, together with an additional $5.5 million cash investment, were used to acquire an exchange shopping center property located in Greensboro, NC during September 1999. 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 nine months ended September 30, 1999 and 1998 represents sublease revenues of approximately $15.3 million and $15.1 million, respectively, less related expenses of $11.1 million and $11.1 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. 14 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 Nine Months Ended Sept. 30, 1999 Sept. 30, 1998 Sept. 30, 1999 Sept. 30, 1998 -------------- -------------- -------------- -------------- Basic EPS - weighted average number of common shares outstanding 60,710,860 56,697,990 60,380,326 47,138,161 Effect of dilutive securities- stock options 495,199 566,348 563,420 564,871 ---------- ---------- ---------- ---------- Diluted EPS - weighted average number of common shares 61,206,059 57,264,338 60,943,746 47,703,032 ========== ========== ========== ==========
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 purchased 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. As a result of these transactions, 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 from KIR for the three months ended September 30, 1999 and the period April 28, 1999 to September 30, 1999 was approximately $2.1 million and $3.3 million, respectively. 15 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 three months ended September 30, 1999 and the period from April 28, 1999 to September 30, 1999, the Company earned management fees of approximately $.3 million and $.5 million, respectively. During August 1999, KIR entered into an agreement whereby three additional institutional investors subscribed for an aggregate $35.0 million of equity in KIR, of which approximately $6.0 million has been contributed. During the period April 28, 1999 to September 30, 1999 KIR purchased three additional properties, in separate transactions, for approximately $49.1 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 nine months ended September 30, 1999. The pro forma financial information set forth below is based upon the Company's historical Condensed Consolidated Statement of Income for the nine months ended September 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). Nine Months Ended September 30, 1999 1998 ---- ---- Revenues from rental property $ 331.0 $246.2 Income before extraordinary items $ 128.8 $ 94.0 Net income $ 128.8 $ 89.2 Per common share: Income before extraordinary items: Basic $ 1.80 $ 1.61 ======= ======= Diluted $ 1.78 $ 1.59 ======= ======= Net income: Basic $ 1.80 $ 1.51 ======= ======= Diluted $ 1.78 $ 1.49 ======= ======= 16 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. None. 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. 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 November 12, 1999 /s/ Milton Cooper - ---------------------------- ----------------------------- (Date) Milton Cooper Chairman of the Board November 12, 1999 /s/ Michael V. Pappagallo - ---------------------------- ------------------------------ (Date) Michael V. Pappagallo Chief Financial Officer 18 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 32,932 27,691 39,848 2,950 0 0 2,849,838 310,840 2,913,658 0 1,140,844 0 1,329 607 1,603,020 2,913,658 324,992 324,992 84,692 84,692 0 0 62,872 127,543 0 127,543 0 0 0 127,543 1.78 1.77 Financial Data Schedule information has been extracted from the Registrant's Condensed Consolidated Balance Sheet (non-classified) as of September 30, 1999 and the Consolidated Statement of Income for the nine months then ended.
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