-----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, NUcBElT2v6/S4JF2NbhShsjm64l/lwP6NzkgTU+OxOi7ps2+SPoROhuylbCYbVkT lw8gy+WzmejXCq4XIYzeiw== 0001125282-01-500320.txt : 20010511 0001125282-01-500320.hdr.sgml : 20010511 ACCESSION NUMBER: 0001125282-01-500320 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010510 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: 1627791 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 tenq.txt 10-Q 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 March 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------------------- ----------------------- Commission file number 1-10899 --------------------------------------------------------- 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. 63,556,574 shares outstanding as of April 30, 2001. 1 of 19 PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Financial Statements - Condensed Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000. Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2001 and 2000. Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2001 and 2000. Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000. Notes to Condensed Consolidated Financial Statements. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes thereto. These unaudited financial statements include all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature. Results of Operations - --------------------- Revenues from rental property increased $9.2 million or 8.2% to $121.6 million for the three months ended March 31, 2001, as compared with $112.4 million for the corresponding quarter ended March 31, 2000. This increase resulted primarily from the combined effect of (i) acquisitions throughout calendar year 2000 (12 shopping center properties) providing incremental revenues of $3.7 million, as compared to the corresponding three month period in 2000 and (ii) the completion of certain development and redevelopment projects, new leasing and re-tenanting within the portfolio at improved rental rates, offset by sales of certain properties throughout 2000 and 2001, providing net incremental revenues of approximately $5.5 million. 2 Rental property expenses, including depreciation and amortization, increased approximately $6.6 million or 9.7% to $74.2 million for the three months ended March 31, 2001, as compared with $67.6 million for the corresponding quarter ended March 31, 2000. The rental property expense components of real estate taxes, operating and maintenance, and depreciation and amortization increased $1.3 million, $3.6 million and $1.1 million, respectively, for the three month period ended March 31, 2001, as compared with the corresponding quarter in the preceding year. These rental property expense increases are primarily due to property acquisitions, renovations within the existing portfolio and increased snow removal costs. The Company has a non-controlling limited partnership interest in Kimco Income REIT ("KIR"), a limited partnership established to invest in high quality retail properties financed primarily through the use of individual non-recourse mortgages. Equity in income of KIR increased $0.6 million to $2.9 million for the three months ended March 31, 2001, as compared with $2.3 million for the corresponding period in 2000. This increase is primarily due to the Company's increased capital investment in KIR. The additional capital investments received by KIR from the Company and its other institutional partners were used to purchase additional shopping center properties throughout calendar year 2000 and during the three months ended March 31, 2001. Other income, net increased $1.9 million for the three months ended March 31, 2001, as compared to the same period in 2000. The net increase is primarily the result of higher interest and dividend income related to the Company's investment in certain marketable equity and debt securities. Operating and administrative expenses increased approximately $1.6 million for the three months ended March 31, 2001, as compared to the same period in 2000. The increase is due primarily to an increase in senior management and staff levels and other personnel costs in connection with the growth of the Company, including the issuance of a stock grant award to a newly-appointed executive officer of the Company valued at approximately $1.1 million. Effective January 1, 2001, the Company has elected taxable REIT subsidiary status for its wholly-owned development subsidiary ("KDI"). KDI is primarily engaged in the ground-up development of neighborhood and community shopping centers and the subsequent sale thereof upon completion. During January 2001, KDI sold its recently completed project in Chandler, AZ for approximately $32.5 million, which resulted in a net gain of approximately $3.5 million after provision for income taxes of approximately $1.9 million. 3 Net income for the three months ended March 31, 2001 and 2000 was $56.1 million and $48.7 million, respectively. On a diluted per share basis, net income improved $0.09 for the three month period ended March 31, 2001, after adjusting for the gain on sale of operating property during the three months ended March 31, 2000. This improved performance reflects the combined effect of property acquisitions, profits from KDI and internal growth from leasing activity and the completion of certain redevelopment projects 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 $2.2 billion for the purposes of, among other things, repaying indebtedness, acquiring interests in neighborhood and community shopping centers, funding ground-up development projects and for expanding and improving properties in the portfolio. During August 2000, the Company established a $250.0 million unsecured revolving credit facility, which is scheduled to expire in August 2003. This credit facility, which replaced the Company's $215.0 million unsecured revolving credit facility has made available funds to both finance the purchase of properties and meet any short-term working capital requirements. As of March 31, 2001, there was $55.0 million outstanding under the credit facility. The Company has also implemented a medium-term notes ("MTN") program pursuant to which it may from time to time offer for sale its senior unsecured debt for any general corporate purposes, including (i) funding specific liquidity requirements in its business, including property acquisitions, development and redevelopment costs and (ii) managing the Company's debt maturities. 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 March 31, 2001, the Company had over 350 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 March 31, 2001, the Company had approximately $106.7 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 and other investments 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 $73.2 million for the three months ended March 31, 2001 as compared to $63.8 million for the corresponding period ended March 31, 2000. Effects of Inflation - -------------------- Many of the Company's leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling the Company to receive payment of additional rent calculated as a percentage of tenants' gross sales above pre-determined thresholds, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. Such escalation clauses often include increases based upon changes in the consumer price index or similar inflation indices. In addition, many of the Company's leases are for terms of less than 10 years, which permits the Company to seek to increase rents to market rates upon renewal. Most of the Company's leases require the tenant to pay an allocable share of operating expenses, including common area maintenance costs, real estate taxes and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. The Company periodically evaluates its exposure to short-term interest rates and will, from time to time, enter into 5 interest rate protection agreements which mitigate, but do not eliminate, the effect of changes in interest rates on its floating-rate debt. New Accounting Pronouncement - ---------------------------- Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("FASB No. 133"), as amended. In accordance with the provisions of FASB No. 133, the Company's interest-rate swap agreement on its $110.0 million floating-rate MTN has been designated and qualified as a cash flow hedge. The Company has determined that this swap agreement is highly effective in offsetting future variable interest cash flows related to the Company's debt portfolio. The fair value of the swap agreement was recorded on the balance sheet in other liabilities in the amount of approximately $3.2 million with a corresponding amount to accumulated other comprehensive loss, a component of stockholders' equity. The Company does not anticipate any reclassifications to earnings from accumulated other comprehensive loss over the next 12 months, with adjustments during the year related to changes in the fair value of the related swap agreement. Currently, the Company does not have any other financial contracts, which contain embedded derivatives or fair value hedge relationships, which are within the scope of FASB No. 133. Forward-looking Statements - -------------------------- This quarterly report on Form 10-Q, together with other statements and information publicly disseminated by the Company contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe the Company's future plans, strategies and expectations, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company's control and which could materially affect actual results, performances or achievements. Factors which may cause actual results to differ materially from current expectations include, but are not limited to, (i) general economic and local real estate conditions, (ii) financing risks, such as the inability to obtain equity or debt financing on favorable terms, (iii) changes in governmental laws and regulations, (iv) the level and volatility of interest rates (v) the availability of suitable acquisition opportunities and (vi) increases in 6 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 March 31, 2001, the Company had approximately $276.9 million of floating-rate debt outstanding, including $55.0 million on its unsecured line of credit. The interest rate risk on $110.0 million of such debt has been mitigated through the use of an interest rate swap agreement (the "Swap") with a major financial institution. The Company is exposed to credit risk in the event of non-performance by the counter party to the Swap. The Company believes it mitigates its credit risk by entering into the Swap with a major financial institution. The Company believes the interest rate risk represented by the remaining $166.9 million of floating-rate debt is not material to the Company or its overall capitalization. The Company has not, and does not plan to, enter into any derivative financial instruments for trading or speculative purposes. As of March 31, 2001, the Company had no other material exposure to market risk. 7 KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share information)
March 31, December 31, 2001 2000 ------------- --------------- Assets: Operating real estate, net of accumulated depreciation of $404,892 and $391,946, respectively $ 2,584,337 $ 2,594,872 Real estate under development 132,537 127,685 Investment and advances in KIR 141,962 142,437 Investments and advances in other real estate joint ventures 69,603 61,601 Investments in retail store leases 10,950 11,316 Cash and cash equivalents 25,363 19,097 Accounts and notes receivable 49,099 44,673 Other assets 192,455 169,667 ----------- ----------- $ 3,206,306 $ 3,171,348 =========== =========== Liabilities: Notes payable $ 1,090,250 $ 1,080,250 Mortgages payable 239,425 245,413 Other liabilities, including minority interests in partnerships 156,432 141,346 ----------- ----------- 1,486,107 1,467,009 ----------- ----------- Stockholders' Equity: Preferred stock, $1.00 par value, authorized 5,000,000 shares Class A Preferred Stock, $1.00 par value, authorized 345,000 shares Issued and outstanding 300,000 shares 300 300 Aggregate liquidation preference $75,000 Class B Preferred Stock, $1.00 par value, authorized 230,000 shares Issued and outstanding 200,000 shares 200 200 Aggregate liquidation preference $50,000 Class C Preferred Stock, $1.00 par value, authorized 460,000 shares Issued and outstanding 400,000 shares 400 400 Aggregate liquidation preference $100,000 Class D Convertible Preferred Stock, $1.00 par value, authorized 700,000 shares Issued and outstanding 418,218 and 418,254 shares, respectively 418 418 Aggregate liquidation preference $104,555 and $104,564, respectively Common stock, $.01 par value, authorized 200,000,000 shares Issued and outstanding 63,501,577 and 63,144,859 shares, respectively 635 631 Paid-in capital 1,830,553 1,819,446 Cumulative distributions in excess of net income (109,365) (113,110) ----------- ----------- 1,723,141 1,708,285 Accumulated other comprehensive loss (1,122) - Notes receivable from officer stockholders (1,820) (3,946) ----------- ----------- 1,720,199 1,704,339 ----------- ----------- $ 3,206,306 $ 3,171,348 =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. 8 KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Three Months ended March 31, 2001 and 2000 (in thousands, except per share data)
2001 2000 --------- -------- Revenues from rental property $ 121,601 $ 112,356 --------- --------- Rental property expenses: Rent 3,456 3,415 Real estate taxes 14,375 13,027 Interest 22,775 22,284 Operating and maintenance 15,376 11,801 Depreciation and amortization 18,210 17,074 --------- --------- 74,192 67,601 --------- --------- Income from rental property 47,409 44,755 Income from investment in retail store leases 972 1,013 --------- --------- 48,381 45,768 Equity in income of KIR 2,913 2,348 Management fee income 2,165 1,520 Other income, net 6,930 4,991 Operating and administrative expenses (7,791) (6,221) --------- --------- Income before gain on sale of shopping center properties and income taxes 52,598 48,406 Gain on sale of development property 5,392 - Gain on sale of operating property - 303 --------- --------- Income before income taxes 57,990 48,709 Provision for income taxes (1,937) - --------- --------- Net income $ 56,053 $ 48,709 ======== ======== Net income applicable to common shares $ 49,484 $ 42,091 ======== ======== Net income per common share: Basic $0.78 $0.69 ----- ----- Diluted $0.77 $0.69 ----- -----
The accompanying notes are an integral part of these condensed consolidated financial statements. 9 KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Three Months ended March 31, 2001 and 2000 (in thousands)
2001 2000 --------- -------- Net income $ 56,053 $ 48,709 -------- -------- Other comprehensive loss: Unrealized gains on marketable securities 2,054 - Unrealized loss on interest rate swap (3,176) - -------- -------- Other comprehensive loss (1,122) - -------- -------- Comprehensive income $ 54,931 $ 48,709 ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. 10 KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months ended March 31, 2001 and 2000 (in thousands)
2001 2000 -------- ------- Cash flow provided by operations $ 73,182 $ 63,802 -------- -------- Cash flow from investing activities: Acquisition of and improvements to operating real estate (9,674) (23,782) Acquisition of and improvements to real estate under development (34,257) (14,600) Investment in marketable securities (4,250) (12,656) Proceeds from sale of marketable securities 9,761 3,200 Investments and advances to joint ventures, net (24,824) - Investments and advances to real estate joint ventures (4,635) - Redemption of minority interests in real estate partnerships (1,600) - Investments and advances to affiliated companies (100) (2,466) Collection of mortgage loans receivable - 2,517 Proceeds from sale of operating properties 2,910 390 Proceeds from sale of development properties 35,300 - -------- -------- Net cash flow used for investing activities (31,369) (47,397) -------- -------- Cash flow from financing activities: Principal payments on debt, excluding normal amortization of rental property debt (4,587) - Principal payments on rental property debt (1,401) (1,252) Proceeds from mortgage financing - 191 Payment of unsecured obligation - (3,250) Borrowings under revolving credit facility 10,000 45,000 Dividends paid (52,023) (46,743) Proceeds from issuance of stock 12,464 137 -------- -------- Net cash flow used for financing activities (35,547) (5,917) -------- -------- Change in cash and cash equivalents 6,266 10,488 Cash and cash equivalents, beginning of period 19,097 28,076 -------- -------- Cash and cash equivalents, end of period $ 25,363 $ 38,564 ======== ======== Interest paid during the period $ 13,009 $ 12,125 ======== ======== Supplemental schedule of noncash investing/financing activity: Acquisition of real estate interests by assumption of mortgage debt $ - $ 16,498 ======== ======== Investment in real estate joint venture by issuance of stock $ 820 $ - ======= ======== Declaration of dividends paid in succeeding period $ 50,856 $ 45,295 ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. 11 KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------- 1. Interim Financial Statements Principles of Consolidation - The accompanying Condensed Consolidated Financial Statements include the accounts of Kimco Realty Corporation (the "Company"), its subsidiaries, all of which are wholly owned, and all partnerships in which the Company has a controlling interest. The information furnished is unaudited and reflects all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements included in the Company's Annual Report on Form 10-K. Certain 2000 amounts have been reclassified to conform to the 2001 financial statement presentation. Income Taxes - The Company and its qualified REIT subsidiaries file a consolidated federal income tax return. The Company has made an election to qualify, and believes it is operating so as to qualify, as a Real Estate Investment Trust (a "REIT") for federal income tax purposes. Accordingly, the Company generally will not be subject to federal income tax, provided that distributions to its stockholders equal at least the amount of its REIT taxable income as defined under the Code. However, in connection with the Tax Relief Extension Act of 1999, which became effective January 1, 2001, the Company is now permitted to participate in certain activities which it was previously precluded from in order to maintain its qualification as a REIT, so long as these activities are conducted in entities which elect to be treated as taxable REIT subsidiaries under the Code. As such, the Company will be subject to federal and state income taxes on the income from these activities. During the three months ended March 31, 2001, the Company's provision for federal and state income taxes was approximately $1.9 million relating to activities conducted in its taxable REIT subsidiaries. 12 New Accounting Pronouncement - Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("FASB No. 133"), as amended. In accordance with the provisions of FASB No. 133, the Company's interest-rate swap agreement on its $110.0 million floating-rate medium-term note ("MTN") has been designated and qualified as a cash flow hedge. The Company has determined that this swap agreement is highly effective in offsetting future variable interest cash flows related to the Company's debt portfolio. The adoption of FASB No. 133 as of January 1, 2001, resulted in a cumulative transition adjustment of $1.5 million to other comprehensive loss, a component of stockholders' equity ("OCL") and a corresponding liability of the same amount. For the three months ended March 31, 2001, the change in the fair market value of the interest rate swap was $1.7 million and was recorded in OCL. The Company does not anticipate any reclassifications to earnings from accumulated other comprehensive loss over the next 12 months, with adjustments during the year related to changes in the fair value of the related agreement. Currently, the Company does not have any other financial contracts, which contain embedded derivatives or fair value hedge relationships, which are within the scope of FASB No. 133. Earnings Per Share - The following table sets forth the reconciliation of earnings and the weighted average number of shares used in the calculation of basic and diluted earnings per share (amounts presented in thousands except per share data):
Three Months Ended March 31, 2001 March 31, 2000 -------------- -------------- Computation of Basic Earnings Per Share: Net income applicable to common shares $49,484 $42,091 Weighted average common shares outstanding 63,306 60,796 -------- -------- Basic Earnings Per Share $ 0.78 $ 0.69 ======== ======== Computation of Diluted Earnings Per Share: Net income applicable to common shares $49,484 $42,091 Dividends on Class D Convertible Preferred Stock 1,960 - (a) -------- -------- Net income for diluted earnings per share $51,444 $42,091 -------- -------- Weighted average common shares outstanding - Basic 63,306 60,796 Effect of dilutive securities: Stock options 692 455 Assumed conversion of Class D Preferred Stock to common stock 2,598 - (a) -------- -------- Shares for diluted earnings per share 66,596 61,251 -------- -------- Diluted Earnings Per Share $ 0.77 $ 0.69 ======== ========
(a) In 2000, the effect of the assumed conversion of the Class D Preferred Stock had an anti-dilutive effect upon the calculation of net income per common share. Accordingly, the impact of such conversion has not been included in the determination of diluted earnings per common share. 13 2. Property Acquisitions / Other Investments Property Acquisitions - During the three months ended March 31, 2001, the Company, through its development subsidiary ("KDI"), acquired three land parcels for the ground-up development of shopping centers and subsequent sales thereof upon completion, in separate transactions, for an aggregate purchase price of approximately $12.1 million. On March 1, 2001, the Company exercised its option to acquire a 50% interest in a joint venture from KC Holdings, Inc. ("KC Holdings"), an entity formed in connection with the Company's initial public stock offering in November 1991. This joint venture consists of three shopping center properties located in Buffalo, NY comprising approximately 0.4 million square feet of gross leasable area. The joint venture was acquired for an aggregate option price of approximately $3.5 million, paid approximately $2.7 million in cash and $0.8 million in shares of the Company's common stock (19,759 shares valued at $41.50 per share). The members of the Company's Board of Directors who are not also shareholders of KC Holdings, unanimously approved the Company's purchase of this joint venture investment. Other Investments - During March 2001, the Company through a joint venture (the "Ward Venture") in which the Company has a 50% interest, acquired asset designation rights for substantially all of the real estate property interests of the bankrupt estate of Montgomery Ward LLC and its affiliates. These asset designation rights will enable the Ward Venture to direct the ultimate disposition of the 315 fee and leasehold interests held by the bankrupt estate. The Ward Venture acquired the asset designation rights for an initial purchase price of $60.5 million, however, the price may ultimately exceed $435.5 million under the terms of the designation rights agreement. 14 The asset designation rights expire in February 2002 for the leasehold positions and December 2004 for the fee owned locations. During the marketing period, the Ward Venture will be responsible for all carrying costs associated with the properties until the site is designated to a user. 3. Property Dispositions During January 2001, the Company disposed of an operating property in Jennings, MO. Cash proceeds from this disposition totaled approximately $2.2 million, which approximated net book value. Effective January 1, 2001, the Company has elected taxable REIT subsidiary status for its wholly-owned development subsidiary, KDI. KDI is primarily engaged in the ground-up development of neighborhood and community shopping centers and the subsequent sale thereof upon completion. During January 2001, KDI sold its recently completed project in Chandler, AZ for approximately $32.5 million, which resulted in a net gain of approximately $3.5 million after provision for income taxes of approximately $1.9 million. 4. Investment and Advances in KIR During 1998, the Company formed Kimco Income REIT ("KIR"), a limited partnership established to invest in high quality retail properties financed primarily through the use of individual non-recourse mortgages. The Company holds a non-controlling limited partnership interest in KIR and accounts for its investment in KIR under the equity method of accounting. The Company's equity in income of KIR for the three months ended March 31, 2001 and 2000, was approximately $2.9 million and $2.3 million, respectively. In addition, KIR entered into a master management agreement with the Company, whereby, the Company will perform services for fee relating to the management, operation, supervision and maintenance of the joint venture properties. For the three months ended March 31, 2001 and 2000, the Company earned management fees of approximately $0.8 million and $0.4 million, respectively. 15 5. Investment in Retail Store Leases Income from the investment in retail store leases for the three months ended March 31, 2001 and 2000 represents sublease revenues of approximately $4.5 million and $4.8 million, respectively, less related expenses of $3.1 million and $3.4 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. Pro Forma Financial Information As discussed in Note 3, the Company and certain of its affiliates disposed of an interest in an operating property during the three months ended March 31, 2001. The pro forma financial information set forth below is based upon the Company's historical Condensed Consolidated Statements of Income for the three months ended March 31, 2001 and 2000, adjusted to give effect to this transaction as of January 1, 2000. The pro forma financial information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transaction occurred as of January 1, 2000, nor does it purport to represent the results of future operations. (Amounts presented in millions, except per share figures). Three Months Ended March 31, 2001 2000 ---- ---- Revenues from rental property $121.6 $112.3 Net income $ 56.2 $ 48.7 Net income per common share: Basic $ 0.78 $ 0.69 ====== ====== Diluted $ 0.78 $ 0.69 ====== ====== 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. 17 10.11 Employment Agreement between Kimco Realty Corporation and Mr. David B. Henry - the Company commenced a five-year employment agreement with Mr. Henry pursuant to which Mr. Henry will serve as Chief Investment Officer and has been nominated as Vice Chairman of the Board of Directors. Form 8-K - None. 18 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 May 10, 2001 /s/ Milton Cooper - ------------- ----------------------------------- (Date) Milton Cooper Chairman of the Board May 10, 2001 /s/ Michael V. Pappagallo - ------------- ----------------------------------- (Date) Michael V. Pappagallo Chief Financial Officer 19 EX-10.1 2 ex10-1.txt EX-10.1 EMPLOYMENT AGREEMENT THIS AGREEMENT, dated February 14, 2001 is made by and between Kimco Realty Corporation (the "Company"), a Maryland corporation, and David Henry (the "Executive"). RECITALS: A. It is the desire of the Company to assure itself of the management services of the Executive by engaging the Executive as Vice Chairman and Chief Investment Officer of the Company. B. The Executive desires to commit himself to serve the Company on the terms herein provided. NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below the parties hereto agree as follows: 1 Certain Definitions. (a) "Base Salary" is defined in Section 5(a). (b) "Benefits" is defined in Section 5(e). (c) "Bonus" is defined in Section 5(b). (d) "Calendar Quarter" shall mean each of the three-month periods ending March 31, June 30, September 30 and December 31 of each year. (e) "Cause" For purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment hereunder upon (i) a reasonable finding by the Board that he has materially harmed the Company through a material act of dishonesty in the performance of his duties hereunder, (ii) his conviction of a felony, or (iii) his failure to perform his material duties under this Agreement (other than a failure due to disability) after written notice from the Board of Directors of the Company specifying the failure and a reasonable opportunity (of at least 30 days duration) to cure (it being understood that if his failure to perform is not of a type requiring a single action to cure fully, that he may commence the cure within 30 days after such written notice and thereafter diligently prosecute such cure to completion). (f) "Disability" shall mean the absence of the Executive from the Executive's duties to the Company on a full-time basis for a total of 16 weeks during any 12 month period as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (g) "Effective Date" shall mean April 16, 2001. (h) "Good Reason" shall mean the Company's breach of any material term of this Agreement including the second sentence of Section 10. (i) "Stock Options" is defined in Section 5(c). (j) "Term of Employment" is defined in Section 2. 2 Employment. The Company shall employ the Executive, and the Executive shall enter the employ of the Company, in the position set forth in Section 3 and upon the other terms and conditions herein provided. Unless sooner terminated as provided herein, this Agreement and the term of employment hereunder (the "Term of Employment") shall commence on the Effective Date and expire on the fifth anniversary of such date, provided that the Term of Employment shall automatically be extended in successive one year terms unless either party hereto gives written notice of non-extension to the other (pursuant to Section 13) no later than three months prior to the end of the otherwise applicable term. 3 Position. During the Term of Employment, the Executive shall serve as Vice Chairman and Chief Investment Officer of the Company. 4 Place of Performance. In connection with his employment during the Term of Employment, the Executive shall be based at the Company's principal executive offices in New Hyde Park, NY, or such other location as shall be agreed between the Executive and the Company. 5 Compensation and Related Matters. (a) Base Salary. During the Term of Employment the Executive shall receive a base salary ("Base Salary") at a rate of $500,000 per annum (or such greater amount as shall be determined by the Company's Chief Executive Officer), payable monthly or more frequently in accordance with the Company's practice as applied to other senior executives. Such base salary shall be reviewed at least annually. (b) Bonus. As additional compensation for services rendered, the Executive shall receive a bonus ("Bonus") in cash as of the latest day in each Calendar Quarter any part of which falls within the Term of Employment. The amount of the Bonus shall be one-quarter of the product of $250,000 and the Employment Fraction for the Calendar Quarter period in question (the "Guaranteed Bonus") or such higher amount as the Board in its sole discretion shall determine. The "Employment Fraction" for a Calendar Quarter is the fraction of such period which falls within the Term of Employment. (c) Equity Compensation. Executive shall be eligible to be granted options with respect to the Company's common stock ("Stock Options") pursuant to an agreement under the Stock Option Plan for Key Employees and Outside Directors of Kimco Realty Corporation (the "Option Plan"). The amount, terms and conditions of any such grant shall be determined in the sole discretion of the Company's Board of Directors or committee thereof. Executive shall initially be granted 25,000 shares of the Company's common stock. Additionally, the Executive shall receive 250,000 Stock Options of the Company's common stock. The Stock Options with respect to a maximum of 25,000 of these shares shall be granted with intent that they qualify as "incentive stock options" as defined in Section 422 (b) of the Internal Revenue Code of 1986 as amended. (i) If Executive is employed by the Company on the tenth anniversary of the Effective Date, on such date the Company shall grant Executive 25,000 shares of the Company's common stock. (d) Automobile. During the period of employment, Executive shall be entitled to an automobile and driver. (e) Benefits. During the Term of Employment, the Executive shall be entitled to participate in or receive benefits under the employee benefit plans (including health, welfare and insurance plans) and other arrangements made available by the Company to its senior employees generally (collectively "Benefits"), subject to and on a basis consistent with the terms, conditions and overall administration of such plans or arrangements. Additionally, Executive shall receive a life insurance policy in the amount of $3,500,000. (f) Business Expenses. The Company shall promptly reimburse the Executive for all reasonable travel and other business expenses incurred by the Executive in the performance of his duties to the Company hereunder. (g) No Waiver. The Executive shall also be entitled to such other benefits or terms of employment as are provided by law. 6 Termination. The Executive's employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances: (a) Death. The Executive's employment hereunder shall terminate upon his death. (b) Disability. If the Company determines in good faith that the Disability of the Executive has occurred during the Term of Employment, the Company may give the Executive written notice of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive, provided that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of his duties. The Executive shall continue to receive his Base Salary and Benefits until the date of termination. This subsection 6(b) shall not limit the entitlement of the Executive, his estate or beneficiaries to any disability or other benefits then available to the Executive under any disability insurance or other benefit plan or policy which is maintained by the Company for the Executive's benefit. (c) Cause. The Company may terminate the Executive's employment hereunder for Cause. (d) Without Cause. The Company may terminate the Executive's employment hereunder without Cause upon thirty days notice. The giving of a notice of non-extension as described in Section 2 shall not be deemed to constitute a termination without Cause. (e) For Good Reason. The Executive may resign his employment upon thirty days notice for Good Reason. (f) Notice of Termination. Any termination of the Executive's employment hereunder (other than by reason of the Executive's death) shall be communicated by a notice of termination to the other parties hereto. For purposes of this Agreement, a "notice of termination" shall mean a written notice which (i) indicates the specific termination provision in the Agreement relied upon, (ii) sets forth in reasonable detail any facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision indicated and (iii) specifies the effective date of the termination. 7 Benefits upon Termination of Employment. (a) Termination upon Death or Disability: If the Executive's employment shall terminate by reason of his death (pursuant to Section 6(a)) or by reason of his Disability (pursuant to Section 6(b)), the Company shall continue to pay to, or on behalf of, the Executive his Base Salary at the time of his Death or Disability and Guaranteed Bonus and to make all necessary payments for and provide all Benefits to the Executive under this Agreement pursuant to Section 5(e) until the effective date of his termination and any Stock Options of Executive shall become fully vested as of such effective date of termination. (b) Termination without Cause: If the Executive's employment shall terminate without Cause (pursuant to Section 6(d)) or for Good Reason (pursuant to Section 6(e)), (i) the Company shall continue, on its regular payroll dates, to pay the Executive his Base Salary at the time of his termination without cause and Guaranteed Bonus and to make all necessary payments for and provide all Benefits to the Executive under this Agreement for a period from the effective date of his termination of employment equal to the greater of (A) the duration of the remaining Term of Employment (without extension) and (B) one year; and (ii) any Stock Options of Executive which have not become vested and have not otherwise expired as of such date of termination, shall thereupon become vested and exercisable. (c) Other Terminations of Employment: Should the Executive's employment hereunder terminate by reason of expiration of the Term of Employment or for any other reason not set forth in subsections (a) - (b) above, then any Stock Options not then vested shall be forfeited and the Company shall have no other obligation of any kind hereunder to the Executive, except to the extent that any obligation to the Executive hereunder remains unpaid. 8 Survival. The expiration or termination of the Term of Employment shall not impair the rights or obligations of any party hereto which shall have accrued hereunder prior to such expiration. 9 Disputes. Any dispute or controversy arising under, out of, in connection with or in relation to this Agreement shall, at the election and upon written demand of any party to this Agreement, be finally determined and settled by arbitration in New York, New York in accordance with the rules and procedures of the American Arbitration Association, and judgment upon the award may be entered in any court having jurisdiction thereof. The prevailing party in any such proceeding shall be entitled to collect from the other party, all legal fees and expenses reasonably incurred in connection therewith. 10 Binding on Successors. This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable. The Company shall cause any successor to all or substantially all of its assets or business to assume this Agreement. 11 Governing Law. This Agreement is being made and executed in and is intended to be performed in the State of New York, and shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of New York without regard to its choice of law rules. 12 Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 13 Notices. Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent, by telex, telecopy, facsimile transmission, or certified or registered mail, postage prepaid, as follows: If to the Company, addressed to: 3333 New Hyde Park Rd. New Hyde Park, NY 11042 Att: Vice President of Human Resources If to the Executive, to him at the address set forth below under his signature; or at any other address as any party shall have specified by notice in writing to the other parties in accordance herewith. 14 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. 15 Entire Agreement. The terms of this Agreement are intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement. 16 Amendments; Waivers. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and a disinterested director of the Company. By an instrument in writing similarly executed, the Executive or the Company may waive compliance by the other party with any provision of this Agreement that such other party was or is obligated to comply with or perform, provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder shall preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity. 17 No Effect on Other Contractual Rights. Notwithstanding Section 6, the provisions of this Agreement, and any other payment provided for hereunder, shall not reduce any amounts otherwise payable to the Executive under any other agreement between the Executive and the Company, or in any way diminish the Executive's rights under any employee benefit plan, program or arrangement of the Company to which he may be entitled as an employee of the Company. Upon the execution hereof the Original Agreement shall be of no further force or effect. 18 No Inconsistent Actions; Cooperation. (a) The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement. (b) Each of the parties hereto shall cooperate and take such actions, and execute such other documents as may be reasonably requested by the other in order to carry out the provisions and purposes of this Agreement. 19 No Alienation of Benefits. To the extent permitted by law the benefits provided by this Agreement shall not be subject to garnishment, attachment or any other legal process by the creditors of the Executive, his beneficiary or his estate. 20 Indemnification. The Company shall provide indemnification to the Executive to the maximum extent permitted by the Company's corporate bylaws and under New York law. 21 Change in Control. Change in Control shall mean (i) a sale of all or substantially all of the assets of the Company to a Person who is not an Affiliate of the Company or an entity in which the shareholders of the Company immediately prior to such transaction do not control more than 50% of the voting power immediately following the transaction, (ii) a sale by any Person resulting in more than 50% of the voting stock of the Company being held by a Person or Group that does not include Company or (iii) a merger or consolidation of the Company into another Person which is not an Affiliate of Company or an entity in which the shareholders of the Company immediately prior to such transaction do not control more than 50% of the voting power immediately following the transaction. (a) Following the Change in Control (a) the Executive may terminate his employment within 60 days or (b) if the acquiring Company decides to terminate the Executive without cause, then upon Executive's execution of a general release in the Company's customary form, Executive shall be entitled, as his exclusive remedy hereunder to (x) full and immediate vesting of all otherwise unvested Stock Options and (y) a payment equal to the lesser of (i) the amount of salary and bonus he would have been entitled to receive under this contract for the duration of the otherwise applicable term or (ii) the greatest payment which, in combination with all other payments to which he would be entitled, would not constitute an "excess parachute payment" as such term is defined in Section 280G(b)(1) of the Code. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. KIMCO REALTY CORPORATION, a Maryland corporation By: /s/ Milton Cooper -------------------------- Milton Cooper Chief Executive Officer EXECUTIVE /s/ David Henry - ---------------------- David Henry Executive's payee pursuant to Section 7(a): Name ______________________________ Address ___________________________ ___________________________ -----END PRIVACY-ENHANCED MESSAGE-----