10-Q 1 b324625_10q.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, 2003 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 ----- ------ Indicate by check mark whether the registrant is an accelerated filer (as defined in rule 12-b of the Act). 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. 105,050,015 shares outstanding as of April 30, 2003. 1 of 34 PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Financial Statements - Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002. Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2003 and 2002. Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2003 and 2002. Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002. 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 $12.0 million or 10.7% to $124.1 million for the three months ended March 31, 2003, as compared with $112.1 million for the corresponding quarter ended March 31, 2002. This net increase resulted primarily from the combined effect of (i) the acquisition of six operating properties during the three months ended March 31, 2003 providing incremental revenues of $1.0 million, (ii) acquisitions throughout calendar year 2002 (13 shopping center properties) providing incremental revenues of $7.3 million, (iii) the completion of certain development and redevelopment projects, tenant buyouts and new leasing within the portfolio providing incremental revenues of approximately $10.4 million as compared to the corresponding three month period in 2002, offset by (iv) a decrease in revenues of $4.8 million resulting from the bankruptcy filing of Kmart Corporation ("Kmart") and Ames Department Stores, Inc. ("Ames") and subsequent rejection of leases and (v) sales of certain development properties throughout 2002 and the three months ended March 31, 2003, resulting in a decrease of revenues of approximately $1.9 2 million for the three months ended March 31, 2003 as compared to the corresponding three month period in 2002. Rental property expenses, including depreciation and amortization, increased $6.2 million or 13.0% to $54.6 million for the three months ended March 31, 2003 as compared to $48.4 million for the corresponding quarter ended March 31, 2002. The rental property expense component of operating and maintenance increased approximately $4.9 million for the three months ended March 31, 2003 as compared with the corresponding quarter ended March 31, 2002. This increase is primarily due to increased snow removal costs and property acquisitions during 2003 and 2002. Equity in income of real estate joint ventures, net increased $2.8 million to $9.3 million for the three months ended March 31, 2003, as compared to $6.5 million for the corresponding quarter ended March 31, 2002. This increase is primarily attributable to the equity in income from the Kimco Income REIT joint venture investment ("KIR"), the RioCan joint venture investment ("RioCan Venture") and the Kimco Retail Opportunity Fund joint venture investment ("KROP"). The Company has made additional capital investments in these joint ventures for the acquisition of additional shopping center properties by the ventures throughout 2002 and the three months ended March 31, 2003. 3 Minority interests in income of partnerships, net increased $1.4 million to $1.6 million as compared to $0.2 million for the corresponding quarter in the preceding year. This increase is primarily due to the acquisition of a shopping center property acquired through a newly formed partnership in 2002 by issuing approximately 2.4 million downREIT units valued at $80.0 million. The downREIT units are convertible at a ratio of 1:1 into the Company's common stock and are entitled to a distribution equal to the dividend rate on the Company's common stock multiplied by 1.1057. Mortgage financing income increased $4.4 million to $5.5 million for the three months ended March 31, 2003, as compared to $1.1 million for the corresponding quarter ended March 31, 2002. This increase is primarily due to increased interest income earned related to certain real estate lending activities during 2002 and the three months ended March 31, 2003. Effective January 1, 2001, the Company has elected taxable REIT subsidiary status for its wholly-owned development subsidiary ("KDI"). KDI is primarily engaged in the ground-up development of neighborhood and community shopping centers and the subsequent sale thereof upon completion. During the three months ended March 31, 2003, KDI sold five out-parcels, in separate transactions, for approximately $4.0 million. These sales resulted in pre-tax gains of approximately $1.2 million. During the three months ended March 31, 2002, KDI sold its recently completed project in Miamisburg, OH and three out-parcels, in separate transactions, for approximately $13.1 million, which resulted in net pre-tax gains of approximately $4.3 million. Interest, dividends and other investment income decreased approximately $4.7 million during the quarter ended March 31, 2003, as compared to the same period in 2002. This decrease is primarily due to less realized gains on the sale of certain marketable equity and debt securities and decreased dividend income as a result of the sale of securities during 2002 and the quarter ended March 31, 2003. 4 Other income, net decreased $3.6 million for the three months ended March 31, 2003, as compared to the same period in 2002. This decrease is primarily due to pre-tax profits recognized by the Company during 2002 in connection with the Company's participation in a joint venture established for the purpose of providing inventory liquidation services to a regional retailer in bankruptcy. During February 2003, the Company reached agreement with a lender in connection with two individual non-recourse mortgages encumbering two former Kmart sites. The Company paid approximately $8.3 million in full satisfaction of these loans which aggregated approximately $14.7 million. As a result of this transaction, the Company recognized a gain on early extinguishment of debt of approximately $6.3 million during the first quarter of 2003. During the three months ended March 31, 2003, the Company sold operating properties in Bridgeview, IL and Trexlertown, PA, in separate transactions, for aggregate proceeds of $5.9 million, which resulted in gains of approximately $3.3 million. Net income for the three months ended March 31, 2003 was $71.0 million as compared to $60.9 million for the three months ended March 31, 2002, representing an increase of $10.1 million. On a diluted per share basis, net income improved $0.10 to $0.63 for the three month period ended March 31, 2003 as compared to $0.53 for the corresponding quarter in the previous year. This improved performance is primarily attributable to (i) significant leasing within the portfolio which improved operating profitability, (ii) increased contributions from KIR, the RioCan Venture and KROP, and (iii) increases from the Company's mortgage financing investments. The increase in net income also includes the gain on early extinguishment of debt and gains on dispositions of operating properties. Tenant Concentration The Company seeks to reduce its operating and leasing risks through diversification achieved by the geographic distribution of its properties, avoiding dependence on any single property, and a large tenant base. At March 31, 2003, the Company's five largest tenants include Kmart Corporation, The Home Depot, Kohl's, TJX Companies and Wal-Mart, which represented approximately 4.3%, 2.9%, 2.7%, 2.6% and 2.0%, respectively, of the Company's annualized base rental revenues including the proportionate share of base rental revenues from properties in which the Company has less than a 100% economic interest. On January 14, 2003, Kmart announced it would be closing an additional 326 locations relating to its January 22, 2002 filing of protection under Chapter 11 of the U.S Bankruptcy Code. Nine of these locations (excluding the KIR portfolio which includes three additional locations and Kimsouth Realty, Inc., ("Kimsouth") an entity in which the Company holds a 44.5% non-controlling interest, which includes two additional locations) are leased from the Company. The annualized base rental revenues from these nine locations are approximately $4.3 million. Effective May 1, 2003, Kmart rejected its leases at six of these 5 locations representing approximately $3.0 million of annualized base rental revenues. The Company is currently negotiating leases with prospective tenants on four of these sites and reviewing offers received to purchase two of these sites, however, no assurances can be provided that these locations will be leased in the near term or at comparable rents previously paid by Kmart. The Company generally will have the right to file claims in connection with rejected leases for lost rent equal to three years of rental obligations as well as other amounts related to obligations under the leases. Actual amounts to be received in satisfaction of these claims will be subject to Kmart's final plan of reorganization and the availability of funds to pay creditors such as the Company. Liquidity and Capital Resources It is management's intention that the Company continually have access to the capital resources necessary to expand and develop its business. As such, the Company intends to operate with and maintain a conservative capital structure with a level of debt to total market capitalization of 50% or less. As of March 31, 2003, the Company's level of debt to total market capitalization was 30%. In addition, the Company intends to maintain strong debt service coverage and fixed charge coverage ratios as part of its commitment to maintaining its investment-grade debt ratings. The Company may, from time to time, seek to obtain funds through additional equity offerings, unsecured debt financings and/or mortgage financings and other debt and equity alternatives in a manner consistent with its intention to operate with a conservative debt structure. 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 for its expansion needs. Since the IPO, the Company has completed additional offerings of its public unsecured debt and equity, raising in the aggregate over $2.7 billion for the purposes of, among other things, repaying indebtedness, acquiring interests in neighborhood and community shopping centers, funding ground-up development projects, expanding and improving properties in the portfolio and other investments. The Company has a $250.0 million unsecured revolving credit facility, which is scheduled to expire in August 2003. This 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, 2003, there was $150.0 million outstanding under this credit facility. The Company intends to renew this facility prior to the maturity date. 6 During April 2003, the Company further enhanced its liquidity position by establishing an additional $95.0 million unsecured revolving bridge facility which is scheduled to expire June 27, 2003. The Company also has a $200.0 million 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. As of March 31, 2003, the Company had $98.0 million available for issuance under the MTN program. 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, 2003, the Company had over 390 unencumbered property interests in its portfolio. During May 2001, the company filed a shelf registration statement on Form S-3 for up to $750.0 million of debt securities, preferred stock, depositary shares, common stock and common stock warrants. As of March 31, 2003, the Company had $288.7 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 increased investment in properties and other real estate related opportunities, growth in operating income from 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, debt reduction, 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. 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 all dividend payments in accordance with REIT requirements in both the short-term and long-term. In addition, the Company anticipates that cash on hand, availability under its revolving credit facilities, issuance of equity and public debt, as well as other debt and equity alternatives, will provide the necessary capital required by the Company. Cash flows from operations increased to $84.8 million for the quarter ended March 31, 2003, as compared to $78.0 million for the corresponding period ended March 31, 2002. 7 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 foreign currency exchange rates and will, from time to time, enter into interest rate protection agreements and/or foreign currency hedge agreements which mitigate, but do not eliminate, the effect of changes in interest rates on its floating-rate debt and fluctuations in foreign currency exchange rates. New Accounting Pronouncements In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("FASB No. 146"). This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). For purpose of this statement, an exit or disposal activity is initiated when management, having the authority to approve the action, commits to an exit or disposal plan or otherwise disposes of a long-lived asset (disposal group) and, if the activity involves the termination of employees, the criteria for a plan of termination of this statement are met. The provisions of this statement shall be effective for exit or disposal activities initiated after December 31, 2002. The impact of the adoption of FASB No. 146 did not have a material adverse impact on the Company's financial position or results of operations. In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (an interpretation of FASB Statement No. 5, 57 and 107 and rescission of FASB Interpretation No. 34). 8 FIN 45 clarifies the requirements of FASB Statement No. 5, Accounting for Contingencies. It requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under the guarantee regardless of whether or not the guarantor receives separate identifiable consideration (i.e., a premium). The Company has adopted the new disclosure requirements, which were effective beginning with 2002 calendar year-end financials. FIN 45's provision for initial recognition and measurement are effective on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 did not have a material adverse impact on the Company's financial position or results of operations. In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure and amendment of FASB Statement No. 123 ("FASB No. 148"). This statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of FASB Statement No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition and annual disclosure provisions of FASB No. 148 shall be applied for fiscal years ending after December 15, 2002. The new interim disclosure provisions are effective for the first interim period beginning after December 15, 2002. Effective January 1, 2003, the Company adopted the prospective method provisions of FASB No. 148, which will apply the recognition provisions of FASB No. 123 to all employee awards granted, modified or settled after January 1, 2003. The adoption did not have a material adverse impact on the Company's financial position or results of operations. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46"), the primary objective of which is to provide guidance on the identification of entities for which control is achieved through means other than voting rights ("variable interest entities" or "VIEs") and to determine when and which business enterprise should consolidate the VIE (the "primary beneficiary"). This new model applies when either (i) the equity investors (if any) do not have a controlling financial interest or (ii) the equity investment at risk is insufficient to finance that entity's activities without additional financial support. In addition, FIN 46 requires additional disclosures. The Company's exposure to losses associated with its unconsolidated joint ventures is limited to its carrying value in these investments. The adoption of FIN 46 did not have a material adverse impact on the Company's financial position or results of operations. 9 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) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or general downturn in their business, (iii) financing risks, such as the inability to obtain equity or debt financing on favorable terms, (iv) changes in governmental laws and regulations, (v) the level and volatility of interest rates, (vi) the availability of suitable acquisition opportunities and (vii) 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 March 31, 2003, the Company had approximately $410.2 million of floating-rate debt outstanding including $150.0 million on its unsecured revolving credit facility. The interest rate risk on $185.0 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-party to the Swaps. The Company believes it mitigates its credit risk by entering into these Swaps with major financial institutions. The Company believes the interest rate risk represented by the remaining $225.2 million of floating-rate debt is not material to the Company or its overall capitalization. As of March 31, 2003, the Company has Canadian investments totaling CAD $211.8 million (approximately USD $144.2 million) comprised of marketable securities and a real estate joint venture. In addition, the Company has Mexican real estate investments of MXN $396.4 million (approximately USD $36.8 million). 10 The foreign currency exchange risk has been mitigated through the use of foreign currency forward contracts (the "Forward Contracts") and a cross currency swap (the "CC Swap") with major financial institutions. The Company is exposed to credit risk in the event of non-performance by the counter-party to the Forward Contracts and the CC Swap. The Company believes it mitigates its credit risk by entering into the Forward Contracts and the CC Swap with major financial institutions. The Company has not, and does not plan to, enter into any derivative financial instruments for trading or speculative purposes. As of March 31, 2003, the Company had no other material exposure to market risk. Item 4. Controls and Procedures Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that as of the date of that evaluation the Company's disclosure controls and procedures are effective in providing timely reporting of material information regarding required disclosure and ensure that such information is recorded, processed, summarized and reported within the required time periods and included in the Company's periodic filings with the SEC. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect the Company's internal controls subsequent to the date the Company carried out this evaluation. 11 KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share information)
March 31, December 31, 2003 2002 ----------- ----------- Assets: Operating real estate, net of accumulated depreciation of $533,882 and $516,558, respectively $ 2,737,937 $ 2,669,648 Investment and advances in real estate joint ventures 442,857 412,672 Real estate under development 243,555 212,765 Other real estate investments 102,136 99,542 Mortgages and other financing receivables 73,510 94,024 Cash and cash equivalents 55,653 35,962 Marketable securities 77,467 66,992 Accounts and notes receivable 53,697 55,012 Other assets 108,252 110,261 ----------- ----------- $ 3,895,064 $ 3,756,878 =========== =========== Liabilities & Stockholders' Equity: Notes payable $ 1,412,250 $ 1,302,250 Mortgages payable 212,680 230,760 Construction loans payable 64,417 43,972 Other liabilities, including minority interests in partnerships 277,025 272,568 ----------- ----------- 1,966,372 1,849,550 ----------- ----------- 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 Common stock, $.01 par value, authorized 200,000,000 shares Issued and outstanding 104,940,140 and 104,601,828 shares, respectively 1,049 1,046 Paid-in capital 1,992,878 1,984,820 Cumulative distributions in excess of net income (75,683) (85,367) ----------- ----------- 1,919,144 1,901,399 Accumulated other comprehensive income 10,892 7,401 Notes receivable from officer stockholders (1,344) (1,472) ----------- ----------- 1,928,692 1,907,328 ----------- ----------- $ 3,895,064 $ 3,756,878 =========== =========== The accompanying notes are an integral part of these condensed consolidated financial statements.
12 KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Three Months Ended March 31, 2003 and 2002 (in thousands, except per share data)
2003 2002 --------- --------- Real estate operations: Revenues from rental property $ 124,062 $ 112,077 --------- --------- Rental property expenses: Rent 3,015 3,135 Real estate taxes 15,012 15,129 Operating and maintenance 16,742 11,884 --------- --------- 34,769 30,148 --------- --------- 89,293 81,929 Equity in income of real estate joint ventures, net 9,312 6,471 Minority interests in income of partnerships, net (1,591) (208) Income from other real estate investments 4,900 4,461 Mortgage financing income 5,512 1,065 Management and other fee income 2,902 3,346 Depreciation and amortization (19,867) (18,213) --------- --------- Income from real estate operations 90,461 78,851 --------- --------- Other investments: Interest, dividends and other investment income 2,402 7,125 Other income, net 318 3,871 --------- --------- 2,720 10,996 --------- --------- Interest expense (22,724) (21,463) General and administrative expenses (8,615) (7,527) Gain on early extinguishment of debt 6,262 - --------- --------- Income from continuing operations before income taxes 68,104 60,857 Provision for income taxes (1,822) (5,350) --------- --------- Income from continuing operations 66,282 55,507 --------- --------- Discontinued operations: Income from discontinued operating properties 184 1,107 Gain on disposition of operating properties 3,280 - --------- --------- Income from discontinued operations 3,464 1,107 --------- --------- Gain on sale of development properties 1,215 4,280 --------- --------- Net income 70,961 60,894 Preferred stock dividends (4,609) (4,609) --------- --------- Net income available to common shareholders $ 66,352 $ 56,285 ========= ========= Per common share: Income from continuing operations - Basic $ 0.60 $ 0.53 ========= ========= - Diluted $ 0.59 $ 0.52 ========= ========= Net Income - Basic $ 0.63 $ 0.54 ========= ========= - Diluted $ 0.63 $ 0.53 ========= ========= The accompanying notes are an integral part of these condensed consolidated financial statements.
13 KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Three Months ended March 31, 2003 and 2002 (in thousands)
2003 2002 -------- -------- Net Income $ 70,961 $ 60,894 -------- -------- Other comprehensive income: Unrealized gain (loss) on marketable securities 1,432 (1,744) Unrealized gain on interest rate swaps 65 1,248 Unrealized gain on warrants 617 289 Unrealized gain (loss) on foreign currency hedge agreements 2,717 (58) Foreign currency translation adjustment (1,340) - -------- -------- Other comprehensive income 3,491 (265) -------- -------- Comprehensive income $ 74,452 $ 60,629 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements.
14 KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months ended March 31, 2003 and 2002 (in thousands)
2003 2002 -------- -------- Cash flow provided by operations $ 84,814 $ 77,953 -------- -------- Cash flow from investing activities: Acquisition of and improvements to operating real estate (89,002) (14,783) Acquisition of and improvements to real estate under development (33,584) (18,124) Investment in marketable securities (11,950) (23,494) Proceeds from sale of marketable securities 4,824 22,963 Reimbursements of advances to joint ventures - 1,382 Investments and advances to real estate joint ventures (39,300) (21,804) Reimbursements of advances to real estate joint ventures 11,430 Other real estate investments (8,397) - Investment in mortgage loans receivable (18,002) (65,313) Collection of mortgage loans receivable 2,657 6,473 Proceeds from sale of mortgage loan receivable 36,723 - Investments and advances for designation rights (1,216) - Proceeds from sale of operating properties 9,126 - Proceeds from sale of development properties 3,968 13,138 -------- -------- Net cash flow used for investing activities (132,723) (99,562) -------- -------- Cash flow from financing activities: Principal payments on debt, excluding normal amortization of rental property debt (8,250) - Principal payments on rental property debt (1,685) (1,699) Principal payments on construction loan financings (3,433) - Proceeds from construction loan financings 23,878 11,200 Borrowings under revolving credit facility 110,000 - Dividends paid (61,100) (58,798) Proceeds from issuance of stock 8,190 3,525 -------- -------- Net cash flow provided by (used for) financing activities 67,600 (45,772) -------- -------- Change in cash and cash equivalents 19,691 (67,381) Cash and cash equivalents, beginning of period 35,962 93,847 -------- -------- Cash and cash equivalents, end of period $ 55,653 $ 26,466 ======== ======== Interest paid during the period $ 11,127 $ 11,906 ======== ======== Income taxes paid during the period $ 2,391 $ 2,032 ======== ======== Supplemental schedule of noncash investing/financing activities: Disposition of real estate interest by assignment of mortgage debt $ 1,746 $ - ======== ======== Proceeds held in escrow from sale of real estate interests $ 270 $ - ======== ======== Notes received upon exercise of stock options $ 100 $ 528 ======== ======== Declaration of dividends paid in succeeding period $ 59,824 $ 57,425 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements.
15 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 2002 amounts have been reclassified to conform to the 2003 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, 2003, the Company's provision for federal and state income taxes was approximately $1.8 million relating to activities conducted in its taxable REIT subsidiaries. 16 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, 2003 2002 ---- ---- Computation of Basic Earnings Per Share: Income from continuing operations $66,282 $55,507 Gain on sale of development properties 1,215 4,280 Preferred stock dividends (4,609) (4,609) ------- ------- Income from continuing operations applicable to common shares 62,888 55,178 Income from discontinued operations 3,464 1,107 ------- ------- Net income applicable to common shares $66,352 $56,285 ======= ======= Weighted average common shares outstanding 104,711 104,299 Basic Earnings Per Share: Income from continuing operations $0.60 $0.53 Income from discontinued operations 0.03 0.01 ------- ------- Net income $0.63 $0.54 ======= ======= Computation of Diluted Earnings Per Share: Income from continuing operations applicable to common shares $62,888 $55,178 Dividends on convertible downREIT units 1,423 - ------- ------- Income from continuing operations for diluted earnings per share 64,311 55,178 Income from discontinued operations 3,464 1,107 ------- ------- Net income for diluted earnings per share $67,775 $56,285 ======= ======= 17 Weighted average common shares outstanding - basic 104,711 104,299 Effect of dilutive securities: stock options 1,072 1,071 Assumed conversion of Class D Preferred Stock to common stock - 16 Assumed conversion of downREIT units 2,446 - ------- ------- Shares for diluted earnings per share 108,229 105,386 ------- ------- Diluted Earning Per Share: Income from continuing operations $0.59 $0.52 Income from discontinued operations 0.04 0.01 ------- ------- Net income $0.63 $0.53 ======= ======= The Company maintains a stock option plan (the "Plan") for which prior to January 1, 2003 the Company accounted for under the intrinsic value-based method of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation (an interpretation of APB Opinion No. 25), issued in March 2000. Effective January 1, 2003, the Company adopted the prospective method provisions of SFAS No. 148, Accounting for Stock-Based Compensation- Transition and Disclosure and Amendment of FASB Statement No. 123 ("FASB No. 148"), which will apply the recognition provisions of FASB No. 123, Accounting for Stock-Based Compensation ("FASB No. 123") to all employee awards granted, modified or settled after January 1, 2003. Awards under the Company's Plan generally vest ratably over a three-year term and expire ten years from the date of grant. Therefore, the cost related to stock-based employee compensation included in the determination of net income for the three months ended March 31, 2003 is less than that which would have been recognized if the fair value based method had been applied to all awards since the original effective date of FASB No. 123. The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to all outstanding stock awards in each period: 18 Three Months Ended March 31, 2003 2002 ---- ---- Net income, as reported $70,961 $60,894 Add: Stock based employee compensation expense included in reported net income 15 - Deduct: Total stock based employee compensation expense determined under fair value based method for all awards (737) (788) -------- ------- Pro Forma Net income - Basic $70,239 $60,106 ======= ======= Earnings Per Share Basic - as reported $0.63 $0.54 ======= ======= Basic - pro forma $0.63 $0.53 ======= ======= Net income for diluted earnings per share $67,775 $56,285 Add: Stock based employee compensation expense included in reported net income 15 - Deduct: Total stock based employee compensation expense determined under fair value based method for all awards (737) (788) -------- ------- Pro Forma Net income - Diluted $67,053 $55,497 ======= ======= Earnings Per Share Diluted - as reported $0.63 $0.53 ======= ======= Diluted - pro forma $0.62 $0.53 ======= ======= In addition, there were approximately 1.0 million and 1.1 million stock options that were anti-dilutive for the three month period ended March 31, 2003 and 2002, respectively. New Accounting Pronouncements - In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("FASB No. 146"). This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). For purpose of this statement, an exit or disposal activity is initiated when management, having the authority to approve the action, commits to an exit or 19 disposal plan or otherwise disposes of a long-lived asset (disposal group) and, if the activity involves the termination of employees, the criteria for a plan of termination of this statement are met. The provisions of this statement shall be effective for exit or disposal activities initiated after December 31, 2002. The impact of the adoption of FASB No. 146 did not have a material adverse impact on the Company's financial position or results of operations. In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (an interpretation of FASB Statement No. 5, 57 and 107 and rescission of FASB Interpretation No. 34). FIN 45 clarifies the requirements of FASB Statement No. 5, Accounting for Contingencies. It requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under the guarantee regardless of whether or not the guarantor receives separate identifiable consideration (i.e., a premium). The Company has adopted the new disclosure requirements, which were effective beginning with 2002 calendar year-end financials. FIN 45's provision for initial recognition and measurement are effective on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 did not have a material adverse impact on the Company's financial position or results of operations. In December 2002, the FASB issued FASB No. 148. This statement amends FASB No. 123, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of FASB No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition and annual disclosure provisions of FASB No. 148 shall be applied for fiscal years ending after December 15, 2002. The new interim disclosure provisions are effective for the first interim period beginning after December 15, 2002. Effective January 1, 2003, the Company adopted the prospective method provisions of FASB No. 148, which will apply the recognition provisions of FASB No. 123 to all employee awards granted, modified or settled after January 1, 2003. The adoption did not have a material adverse impact on the Company's financial position or results of operations. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46"), the primary objective of which is to provide guidance on the identification of entities for which control is achieved through means other than voting rights ("variable interest entities" or "VIEs") and to determine when and which business enterprise should consolidate the VIE (the "primary beneficiary"). This new model applies when either (i) the equity 20 investors (if any) do not have a controlling financial interest or (ii) the equity investment at risk is insufficient to finance that entity's activities without additional financial support. In addition, FIN 46 requires additional disclosures. The Company's exposure to losses associated with its unconsolidated joint ventures is limited to its carrying value in these investments. The adoption of FIN 46 did not have a material adverse impact on the Company's financial position or results of operations. 2. Operating Property Activities During January 2003, the Company acquired a shopping center property located in Houston, TX, comprising approximately 0.2 million square feet of gross leasable area ("GLA"), for an aggregate purchase price of approximately $26.3 million. During February 2003, the Company acquired a shopping center property located in Nashua, NH, comprising approximately 0.2 million square feet of GLA, for an aggregate purchase price of approximately $25.7 million. During March 2003, the Company acquired a portfolio of four shopping center properties located in Queens, NY, comprising approximately 0.1 million square feet of GLA, for an aggregate purchase price of approximately $19.9 million. During the three months ended March 31, 2003, the Company disposed of two operating properties, in separate transactions, for an aggregate sales price of $5.9 million including the assignment of approximately $1.7 million of mortgage debt encumbering one of the properties. These dispositions resulted in net gains of approximately $3.3 million for the three months ended March 31, 2003. In accordance with Statement of Financial Accounting Standard No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("FASB 144"), the operations and net gain on disposition of these properties have been included in the caption Discontinued operations on the Condensed Consolidated Statement of Income. 3. Discontinued Operations In accordance with FASB 144, the Company now reports as discontinued operations assets held for sale (as defined by FASB 144) and operating assets sold in the current period. All results of these discontinued operations are included in a separate component of income on the Condensed Consolidated Statements of Income under Discontinued operations. This change has resulted in certain reclassifications of 2002 financial statement amounts. 21 The Components of Income from operations related to discontinued operations for the three months ended March 31, 2003 and 2002 are shown below. These include the results of operations through the date of each respective sale for properties sold during 2003 and a full quarter of operations for those assets classified as held for sale as of March 31, 2003. (in thousands): Three Months Ended March 31, 2003 March 31, 2002 -------------- -------------- Discontinued Operations: Revenues from rental property $ 306 $3,914 Rental property expenses (101) (1,790) -------- -------- Income from property operations 205 2,124 Depreciation and amortization (27) (633) Interest expense (11) (381) Other 17 (3) -------- -------- Income from discontinued operating properties 184 1,107 Gain on disposition of operating properties, net 3,280 - -------- -------- Income from discontinued operations $3,464 $1,107 ======== ======== 4. Kimco Developers, Inc. ("KDI") Effective January 1, 2001, the Company elected taxable REIT subsidiary status for its wholly-owned development subsidiary, KDI. During the three months ended March 31, 2003, KDI acquired two land parcels, in separate transactions, for the ground-up development of shopping centers and subsequent sale thereof upon completion for an aggregate purchase price of approximately $5.4 million. During the three months ended March 31, 2003, KDI sold five of its out-parcels, in separate transactions, for approximately $4.0 million. These sales provided pre-tax gains of approximately $1.2 million. 22 Additionally, during the three months ended March 31, 2003, KDI obtained construction financing on one ground-up development property for an aggregate loan amount of up to $6.2 million, of which approximately $1.8 million has been funded to KDI as of March 31, 2003. As of March 31, 2003, KDI has 10 loans with total commitments of up to $125.9 million of which $64.4 million has been funded to KDI. These loans have maturities ranging from 18 to 36 months and a weighted average interest rate of 4.20% at March 31, 2003. 5. Investments and Advances in Real Estate Joint Ventures Kimco Income REIT - During 1998, the Company formed Kimco Income REIT ("KIR"), a limited partnership which the Company manages, established to invest in high quality retail properties financed primarily through the use of individual non-recourse mortgages. As of March 31, 2003 the KIR portfolio was comprised of 70 properties aggregating 14.6 million square feet of GLA located in 21 states. The Company holds a 43.3% 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, 2003 and 2002 was approximately $4.9 million and $3.6 million, respectively. During the three months ended March 31, 2003, the Company contributed approximately $10.8 million in cash to KIR in connection with its subscription agreement. In addition, KIR entered into a master management agreement with the Company, whereby, the Company will perform services for fees relating to the management, operation, supervision and maintenance of the joint venture properties. For the three months ended March 31, 2003 and 2002 the Company earned management fees of approximately $0.7 million and $1.0 million, respectively. RioCan Venture - During October 2001, the Company formed a joint venture (the "RioCan Venture") with RioCan Real Estate Investment Trust ("RioCan", Canada's largest publicly traded REIT measured by GLA) in which the Company has a 50% interest, to acquire retail properties and development projects in Canada. The acquisitions and development projects are to be sourced and managed by RioCan and are subject to review and approval by a joint oversight committee consisting of RioCan management and the Company's management personnel. As of March 31, 2003, the RioCan Venture consisted of 29 shopping center properties and three development projects aggregating 6.9 million square feet of GLA. During the 23 three months ended March 31, 2003 and 2002 the Company recognized equity in income of the RioCan Venture of approximately $2.7 million and $0.9 million, respectively. KROP Venture - During October 2001, the Company formed the Kimco Retail Opportunity Fund ("KROP"), a venture with GE Capital Real Estate ("GECRE") which the Company manages and has a 20% interest. The purpose of this venture is to acquire established, high-growth potential retail properties in the United States. The initial funding for this venture consists of an equity pool of up to $250.0 million, provided $50.0 million by the Company and $200.0 million by GECRE. The Company will be responsible for the day-to-day management, redevelopment and leasing of the properties acquired and will be paid fees for those services. In addition, the Company will earn fees related to the acquisition and disposition of the properties by KROP. Capital contributions will only be required as suitable opportunities arise and are agreed to by the Company and GECRE. As of March 31, 2003, the KROP venture consisted of 17 properties aggregating 2.2 million square feet of GLA located in seven states. For the three months ended March 31, 2003, the Company recognized equity in income of KROP of approximately $0.4 million. Additionally, during the three months ended March 31, 2003 the Company earned management and acquisition fees of approximately $0.6 million. Other Real Estate Joint Ventures - During March 2003, the Company acquired a property located in South Bend, IN, through a joint venture in which the Company has a 50% non-controlling interest. The property was purchased for an aggregate purchase price of approximately $1.3 million. 24 6. Other Real Estate Investments Kimsouth - During November 2002, the Company through its taxable REIT subsidiary, together with Prometheus Southeast Retail Trust, completed the merger and privatization of Konover Property Trust, which has been renamed Kimsouth Realty, Inc., ("Kimsouth"). The Company acquired 44.5% of the common stock of Kimsouth, which consisted primarily of 38 retail shopping center properties comprising approximately 4.6 million square feet of GLA. Total acquisition value was approximately $280.9 million including approximately $216.2 million in mortgage debt. The Company's investment strategy with respect to Kimsouth includes re-tenanting, repositioning and disposition of the properties. During the three months ended March 31, 2003, Kimsouth sold two properties for net proceeds of approximately $11.0 million. For the three months ended March 31, 2003, the Company recognized equity in income of Kimsouth of approximately $3.0 million. Additionally, during the three months ended March 31, 2003, the Company earned management fees of approximately $0.2 million. Preferred Equity Capital - During 2002, the Company established a preferred equity program, which provides capital to developers and owners of shopping centers. As of March 31, 2003, the Company has provided an aggregate of approximately $38.9 million in investment capital to developers and owners of 14 shopping centers. The Company earned approximately $0.9 million for the three months ended March 31, 2003 from these investments. 7. Mortgages and Other Financing Receivables During August 2001, the Company, through a joint venture in which the Company has a 50% interest, provided $27.5 million of debtor-in-possession financing (the "Ames Loan") to Ames Department Stores, Inc., ("Ames"), a 25 retailer in bankruptcy. This loan bore interest at prime plus 6.0%, was collateralized by all real estate owned by Ames and was scheduled to mature in August 2003. During September 2002, the Ames Loan, was restructured as a two-year $100.0 million secured revolving loan of which the Company has a 40% interest. This revolving loan is collateralized by all of Ames' real estate interests. The loan bears interest at 8.5% per annum and provides for contingent interest upon the successful disposition of the Ames properties. During January 2003, Ames paid the outstanding balance of approximately $4.1 million and the Company earned approximately $2.4 million in additional interest. As of March 31, 2003, there was no balance outstanding on this revolving loan. During March 2002, the Company provided a $50.0 million ten-year loan to Shopko Stores Inc., at an interest rate of 11.0% per annum collateralized by 15 properties. The Company receives principal and interest payments on a monthly basis. During January 2003, the Company sold a $37.0 million participation interest in this loan to an unaffiliated third party. The interest rate of the $37.0 million participation interest is a variable rate based on LIBOR plus 3.50%. The Company continues to act as the servicer for the full amount of the loan. During May 2002, the Company provided a $15 million three-year loan to Frank's Nursery & Crafts, Inc. ("Frank's"), at an interest rate of 10.25% per annum collateralized by 40 real estate interests. Interest is payable quarterly in arrears. An additional $17.5 million revolving loan at an interest rate of 10.25% per annum was also established. As of March 31, 2003, the outstanding loan balance was approximately $32.5 million. As an inducement to make these loans, Frank's issued the Company approximately 4.4 million warrants with an exercise price of $1.15 per share, and 5.0 million warrants with an exercise price of $2.00 per share. 8. Mortgages Payable During February 2003, the Company reached agreement with a lender in connection with two individual non-recourse mortgages encumbering two former Kmart sites. The Company paid approximately $8.3 million in full satisfaction of these loans which aggregated approximately $14.7 million. As a result of this transaction, the Company recognized a gain on early extinguishment of debt of approximately $6.3 million during the first quarter of 2003. 26 9. Tenant Concentration On January 14, 2003, Kmart announced it would be closing an additional 326 locations relating to its January 22, 2002 filing of protection under Chapter 11 of the U.S Bankruptcy Code. Nine of these locations (excluding the KIR portfolio which includes three additional locations and Kimsouth which includes two additional locations) are leased from the Company. The annualized base rental revenues from these nine locations are approximately $4.3 million. Effective May 1, 2003, Kmart rejected its leases at six of these locations representing approximately $3.0 million of annualized base rental revenues. The Company is currently negotiating leases to prospective tenants on four of these sites and reviewing offers received to purchase two of these sites, however, no assurances can be provided that these locations will be leased in the near term or at comparable rents previously paid by Kmart. As of March 31, 2003, Kmart represented 4.3% of annualized base rents and 6.8% of leased GLA. The Company generally will have the right to file claims in connection with rejected leases for lost rent equal to three years of rental obligations as well as other amounts related to obligations under the leases. Actual amounts to be received in satisfaction of these claims will be subject to Kmart's final plan of reorganization and the availability of funds to pay creditors such as the Company. 10. Pro Forma Financial Information As discussed in Note 2, the Company and certain of its affiliates acquired and disposed of interests in certain operating properties during the three months ended March 31, 2003. 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, 2003 and 2002, adjusted to give effect to these transactions as of January 1, 2002. 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, 2002, nor does it purport to represent the results of future operations. (Amounts presented in millions, except per share figures.) 27 Three Months ended March 31, 2003 2002 ---- ---- Revenues from rental property $125,342 $114,475 Net income $67,863 $60,896 Net income per common share: Basic $0.60 $0.54 ======== ======== Diluted $0.60 $0.53 ======== ======== 11. Subsequent Events On May 1, 2003, the Company announced that it will redeem all 2,000,0000 outstanding depositary shares of the Company's 8 1/2% Class B Cumulative Redeemable Preferred Stock, par value $1.00 per share (the "Class B Preferred Stock"), at the redemption price of $25.00 per depositary share plus accrued and unpaid dividends. The Company's Board of Directors has set June 2, 2003 as the redemption date on which all outstanding depositary shares of Class B Preferred Stock will be redeemed. Holders of the Class B depositary shares will receive cash consideration of $25.00 per depositary share plus 27.7431 cents per depositary share representing accrued and unpaid dividends on the redemption date. Dividends will cease to accrue on the Class B Preferred Stock as of the redemption date. 28 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. 29 Form 8-K - A current report on Form 8-K dated February 13, 2003 was furnished under Item 9 relating to the announcement of the Company's fourth quarter and full year 2002 operating results. A current report on Form 8-K dated March 26, 2003 was furnished under Item 9 relating to the certifications of the Company's Chief Executive Officer and Chief Financial Officer as required by 18 U.S.C. ss. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002. 30 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 5, 2003 /s/ Milton Cooper ----------- ---------------------------- (Date) Milton Cooper Chairman of the Board May 5, 2003 /s/ Michael V. Pappagallo ----------- ---------------------------- (Date) Michael V. Pappagallo Chief Financial Officer 31 Kimco Realty Corporation Certification I, Milton Cooper, Chief Executive Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Kimco Realty Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 5, 2003 /s/ Milton Cooper ----------------------- Milton Cooper Chief Executive Officer 32 Kimco Realty Corporation Certification I, Michael V. Pappagallo, Chief Financial Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Kimco Realty Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 5, 2003 /s/ Michael V. Pappagallo -------------------------------- Michael V. Pappagallo Chief Financial Officer 33