<PAGE> 1
EXHIBIT INDEX ON PAGE 17
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: SEPTEMBER 30, 1999
------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- ---------------------
Commission File Number: 1-6064
-------------------------------------------------------
ALEXANDER'S, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 51-0100517
- ---------------------------------------------------- -------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663
- ---------------------------------------------------- -------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
(201) 587-8541
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- -------------------------------------------------------------------------------
(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.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
[ ] Yes [ ] No
As of October 25, 1999 there were 5,000,850 common shares outstanding.
Page 1
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page Number
------------
PART I. FINANCIAL INFORMATION:
----------------------
<S> <C> <C> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1999
and December 31, 1998........................................................................... 3
Consolidated Statements of Operations for the Three
and Nine Months Ended September 30, 1999 and September 30, 1998................................. 4
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1999 and September 30, 1998.......................................... 5
Notes to Consolidated Financial Statements...................................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................................. 9
Item 3. Quantitative and Qualitative
Disclosures about Market Risk................................................................... 14
PART II. OTHER INFORMATION:
------------------
Item 1. Legal........................................................................................... 15
Item 6. Exhibits and Reports on Form 8-K................................................................ 15
Signatures ................................................................................................ 16
Exhibit Index ................................................................................................ 17
</TABLE>
Page 2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALEXANDER'S, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share amounts)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------------------- ----------------------
<S> <C> <C>
ASSETS:
Real estate, at cost:
Land...................................................... $ 83,957 $ 83,957
Buildings, leaseholds and improvements.................... 151,044 149,054
Capitalized expenses and predevelopment
costs............................................ 67,910 57,675
------------------------- ----------------------
Total................................ 302,911 290,686
Less accumulated depreciation and
amortization..................................... (54,283) (51,529)
------------------------- ----------------------
Real estate, net.......................................... 248,628 239,157
Cash and cash equivalents.......................................... 5,223 15,363
Restricted cash.................................................... 7,634 9,402
Accounts receivable, net of allowance for
doubtful accounts of $804 in 1999 and $841
in 1998................................................... 3,454 3,303
Receivable arising from the straight-lining of
rents, net................................................ 12,742 13,036
Deferred lease and other property costs............................ 25,143 27,921
Deferred debt expense.............................................. 4,639 2,693
Other assets....................................................... 5,762 6,168
------------------------- ----------------------
TOTAL ASSETS....................................................... $ 313,225 $ 317,043
========================= ======================
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
--------------------------- ----------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY:
Debt (including $45,000 due to Vornado).......... $ 273,648 $ 277,113
Amounts due to Vornado Realty Trust and
its affiliate........................... 3,122 5,840
Accounts payable and accrued liabilities......... 10,755 10,113
Other liabilities............................... 13,280 17,003
--------------------------- ----------------------
300,805 310,069
--------------------------- ----------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock; no par value;
authorized 3,000,000;
issued, none
Common stock; $1.00 par value per share;
authorized 10,000,0000 shares;
issued 5,173,450....................... 5,174 5,174
Additional capital............................... 24,843 24,843
Deficiency....................................... (16,637) (22,083)
--------------------------- ----------------------
13,380 7,934
Less treasury shares, 172,600 shares
at cost.............................. (960) (960)
--------------------------- ----------------------
Total stockholders' equity...................... 12,420 6,974
--------------------------- ----------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY.................... $ 313,225 $ 317,043
=========================== ======================
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE> 4
ALEXANDER'S, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED SEPTEMBER 30,
-------------------------------------------
1999 1998
-------------------- --------------------
<S> <C> <C>
Revenues:
Property rentals............................................... $ 10,724 $ 11,100
Expense reimbursements......................................... 5,223 5,101
Equity in income of unconsolidated
joint venture......................................... -- --
-------------------- --------------------
Total revenues.......................................................... 15,947 16,201
-------------------- --------------------
Expenses:
Operating (including management fee to Vornado of $326
and $210 each for the three months ended in 1999 and
1998; $1,000 and $630 each for the nine months ended
in 1999 and 1998).................................... 7,768 6,951
General and administrative (including
management fee to Vornado of $540 and $1,620
each for the three and nine months ended in 1999
and 1998, respectively)............................... 872 869
Depreciation and amortization.................................. 1,444 1,219
-------------------- --------------------
Total expenses.......................................................... 10,084 9,039
-------------------- --------------------
Operating income........................................................ 5,863 7,162
Write-off resulting from the razing of the building formerly
located at the Company's Lexington Avenue site................. -- (15,096)
Interest and debt expense
(including interest on loan due to Vornado).................... (4,223) (4,336)
Other income (expense), net............................................. (5) 328
-------------------- --------------------
Net income (loss)....................................................... $ 1,635 $ (11,942)
==================== =====================
Net income (loss) per share - basic .................................... $ .33 $ (2.39)
==================== =====================
Net income (loss) per share - diluted................................... $ .32 $ (2.39)
==================== =====================
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-------------------------------------------------
1999 1998
-------------------- --------------------
<S> <C> <C>
Revenues:
Property rentals............................................... $ 32,870 $ 23,451
Expense reimbursements......................................... 15,737 7,711
Equity in income of unconsolidated
joint venture......................................... -- 2,519
-------------------- --------------------
Total revenues.......................................................... 48,607 33,681
-------------------- --------------------
Expenses:
Operating (including management fee to Vornado of $326
and $210 each for the three months ended in 1999 and
1998; $1,000 and $630 each for the nine months ended
in 1999 and 1998).................................... 24,568 11,964
General and administrative (including
management fee to Vornado of $540 and $1,620
each for the three and nine months ended in 1999
and 1998, respectively)............................... 2,793 3,106
Depreciation and amortization.................................. 4,074 2,910
-------------------- --------------------
Total expenses.......................................................... 31,435 17,980
-------------------- --------------------
Operating income........................................................ 17,172 15,701
Write-off resulting from the razing of the building formerly
located at the Company's Lexington Avenue site................. -- (15,096)
Interest and debt expense
(including interest on loan due to Vornado).................... (12,323) (11,261)
Other income (expense), net............................................. 597 752
-------------------- --------------------
Net income (loss)....................................................... $ 5,446 $ (9,904)
==================== ====================
Net income (loss) per share - basic .................................... $ 1.09 $ (1.98)
==================== ====================
Net income (loss) per share - diluted................................... $ 1.08 $ (1.98)
==================== ====================
</TABLE>
See notes to consolidated financial statements.
Page 4
<PAGE> 5
ALEXANDER'S, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------
1999 1998
-------------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................................ $ 5,446 $ (9,904)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization
(including debt issuance costs).............................. 5,604 3,937
Straight-lining of rental income................................... (2,706) (4,076)
Write-off of the asset arising from the straight-lining of rents... 3,000 --
Write-off resulting from the razing of the building
formerly located at the Company's Lexington
Avenue site.................................................. -- 15,096
Change in assets and liabilities:
Accounts receivable....................................................... 2,925 (472)
Investment in excess of equity in income
of unconsolidated joint venture.................................... -- (386)
Amounts due to Vornado Realty Trust and its affiliate..................... (2,718) (1,048)
Accounts payable and accrued liabilities.................................. 642 (1,299)
Other liabilities......................................................... (3,723) (120)
Other..................................................................... (1,212) (4,632)
-------------------- ------------------
Net cash provided by (used in) operating activities.............................. 7,258 (2,904)
-------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate......................................................... (12,225) (10,656)
Cash restricted for construction and development................................. (178) (9,237)
Cash restricted for operating liabilities........................................ 1,946 (66)
Acquisition of Kings Plaza Mall.................................................. -- (28,000)
Collection of condemnation proceeds.............................................. -- 14,700
-------------------- ------------------
Net cash used in investing activities ........................................... (10,457) (33,259)
-------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt................................................................. 82,000 90,000
Debt repayments.................................................................. (85,465) (38,720)
Deferred debt expense............................................................ (3,476) (3,342)
-------------------- ------------------
Net cash (used in) provided by financing activities.............................. (6,941) 47,938
-------------------- ------------------
Net (decrease) increase in cash and cash equivalents............................. (10,140) 11,775
Cash and cash equivalents at beginning of period................................. 15,363 2,691
-------------------- ------------------
Cash and cash equivalents at end of period....................................... $ 5,223 $ 14,466
==================== ==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest (including capitalized interest of
$6,630 and $5,529)............................................................. $ 17,423 $ 15,762
==================== ==================
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE> 6
ALEXANDER'S, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Balance Sheet as of September 30, 1999, the Consolidated
Statements of Operations for the three and nine months ended September 30, 1999
and 1998, and the Consolidated Statements of Cash Flows for the nine months
ended September 30, 1999 and 1998 are unaudited. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and changes in cash
flows have been made.
Certain information and disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed consolidated financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's 1998 Annual Report to Shareholders. The
results of operations for the nine months ended September 30, 1999 are not
necessarily indicative of the operating results for the full year.
2. ACQUISITION OF KINGS PLAZA MALL
On June 18, 1998, the Company increased its interest in the Kings Plaza
Mall (the "Mall") to 100% by acquiring Federated Department Store's
("Federated") 50% interest. The purchase price was approximately $28,000,000,
which was paid in cash, plus the Company has agreed to pay Federated $15,000,000
to renovate its Macy's store in the Mall of which $4,649,000 has been paid and
Federated agreed to certain modifications to the Kings Plaza Operating
Agreement.
Set forth below is the unaudited pro forma condensed consolidated
operating data for the Company for the nine months ended September 30, 1998 as
if the acquisition of the Kings Plaza Mall and the related financing
transactions had occurred on January 1, 1998.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998
-------------------------
<S> <C>
(amounts in thousands except per share amounts)
Revenues......................................................... $ 45,327
====================
Net loss......................................................... $ (6,708)
====================
Net loss per share - basic and diluted........................... $ (1.34)
====================
</TABLE>
The pro forma results include the write-off of $15,096,000 resulting from the
razing of the building formerly located at the Company's Lexington Avenue site.
3. RELATIONSHIP WITH VORNADO REALTY TRUST ("VORNADO")
Vornado owned 29.3% of the Company's Common Stock at September 30, 1999.
The Company is managed by and its properties are redeveloped and leased by
Vornado, pursuant to agreements with a one-year term expiring in March of each
year which are automatically renewable. Under these agreements, the Company
incurred fees of $1,677,000 and $1,563,000 in each of the three month periods
ended September 30, 1999 and 1998 and $5,057,000 and $4,688,000 in each of the
nine month periods ended September 30, 1999 and 1998. In addition, Vornado is
due $2,333,000 at September 30, 1999 under the leasing agreement, subject to the
payment of rents by tenants.
Page 6
<PAGE> 7
ALEXANDER'S, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
At September 30, 1999, the Company was indebted to Vornado in the amount
of $45,000,000, the subordinated tranche of a $65,000,000 secured financing. The
Company incurred interest on its loan from Vornado of $1,631,000 and $1,595,000
in the three months ended September 30, 1999 and 1998, of which $1,198,000 and
$976,000 were capitalized. Interest on the loan was $4,806,000 and $4,891,000 in
the nine months ended September 30, 1999 and 1998, of which $3,415,000 and
$2,785,000 were capitalized.
On October 20, 1999, the Company borrowed an additional $50,000,000 from
Vornado and on October 21, 1999, Vornado increased its ownership percentage in
the Company - see "Subsequent Events".
4. LEASES
In the first quarter of 1999, Caldor closed all of its stores. Caldor
previously sub-leased its Flushing store from the Company. Caldor rejected the
Flushing lease effective March 29, 1999. In connection therewith the Company
wrote-off the $3,000,000 asset arising from the straight lining of Caldor's
rent.
5. COMMITMENTS AND CONTINGENCIES
In June 1997, the Kings Plaza Regional Shopping Center (the "Center"),
commissioned an Environmental Study and Contamination Assessment Site
Investigation (the Phase II "Study") to evaluate and delineate environmental
conditions disclosed in a Phase I study. The results of the Study indicate the
presence of petroleum and other hydrocarbons in the soil and groundwater. The
Study recommends a remedial approach, but agreement has not yet been reached
with the New York State Department of Environmental Conservation ("NYDEC") on
the finalization of the approach. In 1997, the Center accrued $1,500,000 for its
estimated obligation with respect to the clean up of the site, which includes
costs of (i) remedial investigation, (ii) feasibility study, (iii) remedial
design, (iv) remedial action and (v) professional fees. Based upon revised
estimates, the Company accrued an additional $500,000 in the second quarter of
1999. If the NYDEC insists on a more extensive remediation approach, the Center
could incur additional obligations.
Such contamination may have resulted from activities of third parties;
however, the sources of the contamination have not been fully identified.
Although the Company intends to pursue all available remedies against any
potentially responsible third parties, there can be no assurance that such
parties will be identified, or if identified, whether these potentially
responsible third parties will be solvent. In addition, the costs associated
with pursuing any potentially responsible parties may be cost prohibitive. The
Company has not recorded an asset as of September 30, 1999 for potential
recoveries of environmental remediation costs from other parties.
The Company let a contract for $20,000,000 to excavate and build a
foundation at the Lexington Avenue site which is expected to be completed next
year.
Page 7
<PAGE> 8
ALEXANDER'S, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- --------------------------------
1999 1998 1999 1998
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
(amounts in thousands except per share amounts)
Numerator:
Net income (loss)........................................ $ 1,635 $ (11,942) $ 5,446 $ (9,904)
============= ============== ============= ==============
Denominator:
Denominator for basic earnings per share -
weighted average shares................................ 5,001 5,001 5,001 5,001
Effect of dilutive securities:
Employee stock options................................. 60 -- 19 --
------------- -------------- ------------- --------------
Denominator for diluted earnings per share -
adjusted weighted average shares and assumed conversions. 5,061 5,001 5,020 5,001
============= ============== ============= ==============
Net income (loss) per share - basic........................... $ .33 $ (2.39) $ 1.09 $ (1.98)
============= ============== ============= ==============
Net income (loss) per share - diluted......................... $ .32 $ (2.39) $ 1.08 $ (1.98)
============= ============== ============= ==============
</TABLE>
7. SUBSEQUENT EVENTS
On October 20, 1999, the Company borrowed an additional $50,000,000 from
Vornado under the same terms and conditions as its existing $45,000,000 loan
from Vornado, including the interest rate of 14.18% and the maturity date of
March 15, 2000. The Company plans to use the proceeds to fund a portion of the
real estate development costs at its Lexington Avenue property and a portion of
the costs to refurbish its Kings Plaza Regional Shopping Center. In connection
therewith, the Company paid to Vornado $11,200,000 (Vornado's cost plus $200,000
in interest and closing costs) for 112,000 square feet of air rights which
Vornado had recently contracted to purchase. Vornado paid for the air rights at
the time it entered into the contracts with closings to take place when the
developments which give rise to the air rights are completed in 2000.
On October 21, 1999, Vornado aquired 135,600 additional shares of the
Company's stock increasing its ownership from 29.3% to 32.0%.
Page 8
<PAGE> 9
ALEXANDER'S, INC.
AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements contained herein constitute forward-looking statements
as such term is defined in Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Certain factors could cause actual results to differ materially from those in
the forward-looking statements. Factors that might cause such a material
difference include, but are not limited to, (a) changes in the general economic
climate, (b) local conditions such as an oversupply of space or a reduction in
demand for real estate in the area, (c) conditions of tenants, (d) competition
from other available space, (e) increased operating costs and interest expense,
(f) the timing of and costs associated with property improvements, (g) changes
in taxation or zoning laws, (h) government regulations, (i) failure of
Alexander's to continue to qualify as a REIT, (j) availability of financing on
acceptable terms, (k) potential liability under environmental or other laws or
regulations, (l) general competitive factors, (m) dependence upon Vornado Realty
Trust, (n) possible conflicts of interest with Vornado Realty Trust and (o)
failure by Alexander's, or by other companies with which it does business, to
remediate possible Year 2000 problems in computer software or embedded
technology.
RESULTS OF OPERATIONS
The Company had net income of $1,635,000 in the quarter ended September
30, 1999, compared to a net loss of $11,942,000 in the quarter ended September
30, 1998, an increase of $13,577,000 and net income of $5,446,000 for the nine
months ended September 30, 1999, compared to a net loss of $9,904,000 for the
nine months ended September 30, 1998, an increase of $15,350,000. The net loss
for the quarter and the nine months ended September 30, 1998, includes the
write-off of $15,096,000 resulting from the razing of the building formerly
located at the Company's Lexington Avenue site. Operating income before
depreciation and amortization and the effect of the straight-lining of property
rentals for rent escalations, was $6,329,000 in the quarter ended September 30,
1999, compared to $7,216,000 in the quarter ended September 30, 1998, a decrease
of $887,000 and $21,314,000 for the nine months ended September 30, 1999,
compared to $15,665,000 for the nine months ended September 30, 1998, an
increase of $5,649,000.
Property rentals were $10,724,000 in the quarter ended September 30,
1999, compared to $11,100,000 in the quarter ended September 30, 1998, a
decrease of $376,000. Property rentals were $32,870,000 for the nine months
ended September 30, 1999, compared to $23,451,000 for the nine months ended
September 30, 1998, an increase of $9,419,000. These changes resulted from:
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
EFFECTIVE DATE SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
-------------- ------------------ ------------------
<S> <C> <C> <C>
(amounts in thousands)
Rent from new tenants............................... Various $ 330,000 $ 1,462,000
Acquisition of additional 50% interest in the
Kings Plaza Mall........................... June 1998 -- 9,978,000
Caldor's rejection of its Flushing
lease...................................... April 1999 (844,000) (1,688,000)
Closure of parking operations at the Lexington
Avenue property............................ (152,000) (633,000)
Other............................................... 290,000 300,000
------------- ---------------
$ (376,000) $ 9,419,000
============= ===============
</TABLE>
Tenant expense reimbursements were $5,223,000 in the quarter ended
September 30, 1999, compared to $5,101,000 in the prior year's quarter, an
increase of $122,000. Tenant expense reimbursements were $15,737,000 for the
nine months ended September 30, 1999, compared to $7,711,000 for the prior
year's nine months, an increase of $8,026,000. The increase for the nine months
ended September 30, 1999, resulted primarily from the acquisition of the
remaining 50% interest in the Kings Plaza Mall (the Mall) and the resulting
consolidation of the Mall's operations after June 18, 1998.
The decrease in equity in income of unconsolidated joint venture resulted
from the consolidation of the Mall's operations as noted above.
Operating expenses were $7,768,000 in the quarter ended September 30,
1999, compared to $6,951,000 in the prior year's quarter, an increase of
$817,000. This increase resulted primarily from higher real estate taxes and bad
debt expenses. Operating expenses were $24,568,000 for the nine months ended
September 30, 1999, compared to $11,964,000 in the prior year's nine months, an
increase of $12,604,000. This increase resulted primarily from the
Page 9
<PAGE> 10
ALEXANDER'S, INC.
AND SUBSIDIARIES
acquisition of the remaining 50% interest in the Kings Plaza Mall and the
resulting consolidation of the Mall's operations after June 18, 1998. In
addition, operating expenses for the nine months ended September 30, 1999,
includes $3,000,000 resulting from the write-off of the asset arising from the
straight-lining of rents due to Caldors rejection of its Flushing lease in the
first quarter of 1999.
General and administrative expenses were $872,000 in the quarter ended
September 30, 1999, compared to $869,000 in the prior year's quarter, an
increase of $3,000. General and administrative expenses were $2,793,000 for the
nine months ended September 30, 1999, compared to $3,106,000 in the prior year's
nine months, a decrease of $313,000. This decrease resulted primarily from lower
professional fees.
Depreciation and amortization expense increased for the three and nine
months ended September 30, 1999, as compared to last year primarily as a result
of the acquisition of the remaining 50% interest in the Kings Plaza Mall and the
resulting consolidation of the Mall's operations after June 18, 1998.
Interest and debt expense was $4,223,000 in the quarter ended September
30, 1999, compared to $4,336,000 in the prior year's quarter, a decrease of
$113,000. Interest and debt expense was $12,323,000 for the nine months ended
September 30, 1999, compared to $11,261,000 in the prior year's nine months, an
increase of $1,062,000. This increase resulted primarily from higher average
debt, offset by an increase in capitalized interest relating to the Company's
non-operating properties.
Other income (expense) was an expense of $5,000 in the quarter ended
September 30, 1999, compared to income of $328,000 in the prior year's quarter,
a decrease of $333,000. This decrease resulted from the write-off of certain
deferred costs and a decrease in interest income which resulted from lower
average invested balances. Other income (expense) was $597,000 for the nine
months ended September 30, 1999, compared to $752,000 in the prior year's nine
months, a decrease of $155,000. This decrease resulted from the write-off of
certain deferred costs, partially offset by an increase in interest income which
resulted from higher average invested balances.
LIQUIDITY AND CAPITAL RESOURCES
In the aggregate, Alexander's current operating properties (five of the
eight properties) do not generate sufficient cash flow to pay all of its
expenses. The Company's three non-operating properties (Lexington Avenue,
Paramus, and Rego Park II) are in various stages of redevelopment. As rents
commence from a portion of the redevelopment properties, the Company expects
that cash flow will become positive.
In connection with the acquisition of the remaining 50% interest in the
Kings Plaza Mall in June 1998, the Company obtained a $90,000,000 three-year
mortgage loan with Union Bank of Switzerland. On August 9, 1999 the Company
increased the availability under this mortgage loan by $30,000,000, of which
$15,000,000 will be used to partially fund a renovation of the Mall (estimated
to cost $33,000,000) and $15,000,000 will be used to pay its liability to
Federated ($4,649,000 has been paid as of September 30, 1999).
The Company estimates that capital expenditure requirements for the
redevelopment of its Paramus property, will approximate $100,000,000. The
Company is evaluating development plans for the Lexington Avenue site, which may
include a large multi-use building requiring capital in excess of $300,000,000
to be expended; of such amount, the Company let a contract for $20,000,000 to
excavate and build a foundation which is expected to be completed next year.
On October 20, 1999, the Company borrowed an additional $50,000,000 from
Vornado under the same terms and conditions as its existing $45,000,000 loan
from Vornado, including the interest rate of 14.18% and the maturity date of
March 15, 2000. The Company plans to use the proceeds to fund a portion of the
real estate development costs at its Lexington Avenue property and a portion of
the costs to refurbish its Kings Plaza Regional Shopping
Page 10
<PAGE> 11
ALEXANDER'S, INC.
AND SUBSIDIARIES
Center. In connection therewith, the Company paid to Vornado $11,200,000
(Vornado's cost plus $200,000 in interest and closing costs) for 112,000 square
feet of air rights which Vornado had recently contracted to purchase. Vornado
paid for the air rights at the time it entered into the contracts with closings
to take place when the developments which give rise to the air rights are
completed in 2000.
While the Company anticipates that additional financing will be available
after tenants have been obtained for these redevelopment projects, there can be
no assurance that such additional financing will be obtained or if obtained,
that such financings will be on terms that are acceptable to the Company. It is
uncertain as to when these projects will commence.
In the first quarter of 1999, Caldor closed all of its stores. Caldor
previously sub-leased its Flushing Store from the Company. Caldor rejected the
Flushing lease effective March 29, 1999. The annual base rental under the lease
was $2,963,000.
On May 12, 1999, the Company, through a newly formed subsidiary,
completed an $82,000,000 refinancing of its subsidiary's Rego Park I property
and repaid the then existing $75,000,000 debt on the property from the proceeds
of the new loan. The new 10-year debt, which is an obligation of the subsidiary,
matures in May 2009 and bears interest at 7.25%.
The Company estimates that the fair market values of its assets are
substantially in excess of their historical cost and that it has additional
borrowing capacity. Alexander's continues to evaluate its needs for capital
which may be raised through (a) property specific or corporate borrowing, (b)
the sale of securities and (c) asset sales.
Although there can be no assurance, the Company believes that these cash
sources will be adequate to fund cash requirements until its operations generate
adequate cash flow.
CASH FLOWS
Nine Months Ended September 30, 1999
Cash provided by operating activities of $7,258,000 was comprised of (i)
net income of $5,446,000, (ii) non-cash items of $5,154,000, off-set by (iii)
the net change in operating assets and liabilities of $3,342,000. The
adjustments for non-cash items are comprised of (i) the write-off of the asset
arising from the straight-lining of rents of $3,000,000 and (ii) depreciation
and amortization of $4,860,000, offset by (iii) the effect of straight-lining of
rental income of $2,706,000.
Net cash used in investing activities of $10,457,000 was primarily
comprised of capital expenditures.
Net cash used in financing activities of $6,941,000 resulted primarily
from proceeds of $82,000,000 from the refinancing of its subsidiary's Rego Park
I property offset by (i) the repayment of the then existing $75,000,000 debt on
the property, (ii) repayment of the $10,000,000 debt on the Paramus property
and, (iii) an increase in debt issuance costs of $3,476,000.
Nine Months Ended September 30, 1998
Cash used in operating activities of $2,904,000 was comprised of (i) a
net loss of $9,904,000 and (ii) the net change in operating assets and
liabilities of $7,957,000, offset by (iii) non-cash items of $14,957,000. The
adjustments for non-cash items are comprised of (i) the write-off of the
carrying value of the Lexington Avenue building and related predevelopment costs
of $15,096,000 and (ii) depreciation and amortization of $3,937,000, offset by
(iii) the effect of straight-lining of rental income of $4,076,000.
Page 11
<PAGE> 12
ALEXANDER'S, INC.
AND SUBSIDIARIES
Net cash used in investing activities of $33,259,000 was primarily
comprised of (i) $28,000,000 for the acquisition of the remaining 50% interest
in the Kings Plaza Mall, (ii) the escrowing of cash from the condemnation of a
portion of the Paramus property ($4,172,000) and cash from the proceeds from the
Kings Plaza Shopping Center loan ($5,131,000) which is restricted as to its use
and (iii) capital expenditures of $10,656,000, partially offset by (iv) proceeds
from the condemnation of a portion of the Paramus property of $14,700,000.
Net cash provided by financing activities of $47,938,000 was comprised of
(i) proceeds from the issuance of debt on the Kings Plaza Center of $90,000,000,
offset by (ii) repayments of debt of $38,720,000 and (iii) debt issuance costs
of $3,342,000.
Funds from Operations for the Three and Nine Months Ended September 30, 1999 and
1998
Funds from operations were $1,406,000 in the quarter ended September 30,
1999, compared to $2,707,000 in the prior year's quarter, a decrease of
$1,301,000. Funds from operations were $8,231,000 in the nine months ended
September 30, 1999, compared to $4,108,000 in the prior year's nine months, an
increase of $4,123,000. The following table reconciles funds from operations and
net income (loss):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------- ------------------------------------
1999 1998 1999 1998
---------------- -------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
(amounts in thousands)
Net income (loss)............................... $ 1,635,000 $ (11,942,000) $ 5,446,000 $ (9,904,000)
Depreciation and amortization of
real property.......................... 1,444,000 1,219,000 4,074,000 2,910,000
Straight-lining of property rentals
for rent escalations................... (978,000) (1,165,000) (2,932,000) (2,946,000)
Leasing fees paid in excess
of expense recognized.................. (695,000) (501,000) (1,357,000) (1,488,000)
Write-off of the carrying value of the
Lexington Avenue building
and related predevelopment costs....... -- 15,096,000 -- 15,096,000
Proportionate share of adjustments
to equity in income of previously
unconsolidated joint venture to
arrive at funds from operations........ -- -- -- 440,000
Write-off of asset arising from the
straight-lining of rents............... -- -- 3,000,000 --
---------------- -------------------- ---------------- -----------------
$ 1,406,000 $ 2,707,000 $ 8,231,000 $ 4,108,000
================ ==================== ================ =================
</TABLE>
Page 12
<PAGE> 13
ALEXANDER'S, INC.
AND SUBSIDIARIES
The number of shares that should be used for determining funds from
operations per share is the number used for basic and diluted earnings per
share. (See Note 6 of Notes to Consolidated Financial Statements.)
Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles and is
not necessarily indicative of cash available to fund cash needs, which is
disclosed in the Consolidated Statements of Cash Flows for the applicable
periods. There are no material legal or functional restrictions on the use of
funds from operations. Funds from operations should not be considered as an
alternative to net income as an indicator of the Company's operating performance
or as an alternative to cash flows as a measure of liquidity. Management
considers funds from operations a relevant supplemental measure of operating
performance because it provides a basis for comparison among REITs; however,
funds from operations may not be comparable to similarly titled measures
reported by other REITs since the Company's method of calculating funds from
operations is different from that used by NAREIT. Funds from operations, as
defined by NAREIT, represents net income before depreciation and amortization,
extraordinary items and gains or losses on sales of real estate. Funds from
operations as disclosed above has been modified to adjust for the effect of
straight-lining of property rentals for rent escalations and leasing fee
expenses. Below are the cash flows provided by (used in) operating, investing
and financing activities:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------- ---------------------------------
1999 1998 1999 1998
-------------------- ------------------- --------------- ---------------
<S> <C> <C> <C> <C>
Operating activities............. $ (3,311,000) $ (2,936,000) $ 7,258,000 $ (2,904,000)
==================== =================== =============== ===============
Investing activities............. $ (5,087,000) $ (2,856,000) $ (10,457,000) $ (33,259,000)
==================== =================== =============== ===============
Financing activities............. $ (1,488,000) $ (756,000) $ (6,941,000) $ 47,938,000
==================== =================== =============== ===============
</TABLE>
Year 2000 Issues
The Company is managed by Vornado Realty Trust. Vornado has advised the
Company that Vornado initiated its Year 2000 compliance programs and information
systems modifications in early 1998 to ensure that its systems and key processes
will remain functional. Vornado has determined that all mission critical systems
are Year 2000 compliant. Vornado believes that any issues encountered with
informational or operational systems have been remediated. Vornado completed its
testing of all mission critical systems during the quarter ended September 30,
1999. In certain cases, Vornado will be relying on statements from outside
vendors as to the Year 2000 readiness of its systems.
The Company is not aware of any operational systems within its control
that are not Year 2000 compliant. In the event that a third-party service is
interrupted due to a Year 2000 issue, the Company will seek to obtain such
service from another third-party provider. Failure of third parties with which
the Company conducts business to successfully respond to their Year 2000 issues
may have an adverse effect on the Company.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
Because the Company does not currently utilize derivatives or engage in hedging
activities, management does not anticipate that implementation of this statement
will have a material effect on the Company's financial statements.
Page 13
<PAGE> 14
ALEXANDER'S, INC.
AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At September 30, 1999, the Company had $126,648,000 of variable rate debt
at a weighted average interest rate of 7.45% and $147,000,000 of fixed rate debt
bearing interest at a weighted average interest rate of 9.35%. A one percent
increase in the base used to determine the interest rate of the variable rate
debt would result in a $1,266,000 decrease in the Company's annual net income
($.25 per basic and diluted share).
Page 14
<PAGE> 15
ALEXANDER'S, INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is from time to time involved in legal actions arising in the
ordinary course of its business. In the opinion of management, after
consultation with legal counsel, the outcome of such matters will not have a
material adverse effect on the Company's financial condition, results of
operations or cash flows.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K are filed herewith and
are listed in the attached Exhibit Index.
(b) Reports on Form 8-K:
None
Page 15
<PAGE> 16
ALEXANDER'S, INC.
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.
ALEXANDER'S, INC.
------------------------------
(Registrant)
Date: November 4, 1999 /s/ Joseph Macnow.
------------------------------
Joseph Macnow, Vice President,
Chief Financial Officer
Page 16
<PAGE> 17
ALEXANDER'S, INC.
EXHIBIT INDEX
The following is a list of all exhibits filed as part of this Report:
<TABLE>
<CAPTION>
EXHIBIT
NO. PAGE
- ------- -----
<S> <C> <C> <C>
3(i) -- Certificate of Incorporation, as amended. Incorporated herein by reference from Exhibit 3.0 to the
Registrant's Current Report on Form 8-K dated September 21, 1993.................................. *
3(ii) -- By-laws, as amended. Incorporated herein by reference from Exhibit 3.1 to the Registrants Form
10-Q for the quarter ended September 30, 1996..................................................... *
10(i)(A)(1) -- Agreement, dated as of December 4, 1985, among Seven Thirty One Limited Partnership
("731 Limited Partnership"), Alexander's Department Stores of Lexington Avenue, Inc., the
Company, Emanuel Gruss, Riane Gruss and Elizabeth Goldberg (collectively, the "Partners").
Incorporated herein by reference from Exhibit 10(i)(F)(1) to the Registrant's Form 10-K for the
fiscal year ended July 26, 1986................................................................... *
10(i)(A)(2) -- Amended and Restated Agreement of Limited Partnership in the 731 Limited Partnership, dated as
of August 21, 1986, among the Partners. Incorporated herein by reference from Exhibit 1 to the
Registrant's Current Report on Form 8-K, dated August 21, 1986.................................... *
10(i)(A)(3) -- Third Amendment to Amended and Restated Agreement of Limited Partnership dated December 30,
1994, among the Partners. Incorporated herein by reference from Exhibit 10(i)(A)(3) to the
Registrant's Form 10-K for the fiscal year ended December 31, 1994................................ *
10(i)(B)(1) -- Promissory Note Modification Agreement, dated October 4, 1993, between Alexander's Department
Stores of New Jersey, Inc. and New York Life Insurance Company ("New York Life").
Incorporated herein by reference from Exhibit 10(i)(3)(a) to the Registrant's Form 10-K for the
Transition Period August 1, 1993 to December 31, 1993............................................. *
10(i)(B)(2) -- Mortgage Modification Agreement, dated October 4, 1993, by Alexander's Department Stores of
New Jersey, Inc. and New York Life Incorporated herein by reference from Exhibit 10(i)(E)(3)(a)
to the Registrant's Form 10-K for the Transition Period August 1, 1993 to December 31, 1993........ *
10(i)(C) -- Credit Agreement, dated March 15, 1995, among the Company and Vornado Lending Corp.
Incorporated herein by reference from Exhibit 10(i)(C) to the Registrant's Form 10-K for the fiscal
year ended December 31, 1994...................................................................... *
10(i)(D) -- Credit Agreement, dated March 15, 1995, among the Company and First Union Bank, National
Association. Incorporated herein by reference from Exhibit 10(i)(D) to the Registrant's Form
10-K for the fiscal year ended December 31, 1994................................................... *
10(i)(E) -- Building Loan Agreement, dated as of March 29, 1995, among the Company, Union Bank of
Switzerland ("UBS") (New York Branch), as Lender, and UBS (New York Branch), as Agent.
Incorporated by reference from Exhibit 10(i)(E) to the Registrant's Form 10-K for the fiscal year
ended December 31, 1994............................................................................ *
</TABLE>
* Incorporated by reference
Page 17
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT
NO. PAGE
- ------- ----
<S> <C> <C> <C>
10(i)(F) -- Project Loan Agreement, dated as of March 29,1995, among the Company, UBS (New York
Branch), as Lender, and UBS (New York Branch), as Agent. Incorporated herein by reference
from Exhibit 10(i)(F) to the Registrant's Form 10-K for the fiscal year ended December 31, 1994..... *
10(i)(G)(1) -- Real Estate Retention Agreement dated as of July 20, 1992, between Vornado Realty Trust and Keen
Realty Consultants, Inc., each as special real estate consultants, and the Company. Incorporated
herein by reference from Exhibit 10(i)(O) to the Registrant's Form 10-K for the fiscal year ended
July 25, 1992....................................................................................... *
10(i)(G)(2) -- Extension Agreement to the Real Estate Retention Agreement, dated as of February 6, 1995, between
the Company and Vornado Realty Trust. Incorporated herein by reference from Exhibit
10(i)(G)(2) to the Registrant's Form 10-K for the fiscal year ended December 31, 1994................ *
10(i)(H) -- Management and Development Agreement, dated as of February 6, 1995, between Vornado Realty
Trust and the Company, on behalf of itself and each subsidiary listed therein. Incorporated herein
by reference from Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated February 6,
1995................................................................................................. *
10(i)(I) -- Commitment letter, dated as of February 6, 1995, between Vornado Realty Trust and the Company.
Incorporated herein by reference from Exhibit 10.3 to the Registrant's Current Report on Form
8-K dated February 6, 1995.......................................................................... *
10(ii)(A)(1) -- Agreement of Lease, dated April 22, 1966, between S&E Realty Company and Alexander's
Department Stores of Valley Stream, Inc. Incorporated herein by reference from Exhibit 13N to
the Registrant's Registration Statement on Form S-1 (Registration No. 2-29780)...................... *
10(ii)(A)(2) -- Guarantee, dated April 22, 1966, of the Lease described as Exhibit 10(ii)(A)(1) above by
Alexander's Department Stores, Inc. Incorporated herein by reference from Exhibit 13N(1) to the
Registrant's Registration Statement on Form S-1 (Registration No. 2-29780)........................... *
10(ii)(A)(3) -- Agreement of Lease for Rego Park, Queens, New York, between Alexander's, Inc. and Sears
Roebuck & Co. Incorporated herein by reference from Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 1994..................................... *
10(ii)(A)(4)(a) -- Lease for Roosevelt Avenue, Flushing, New York, dated as of December 1, 1992, between the
Company, as landlord, and Caldor, as tenant. Incorporated herein by reference from
Exhibit (ii)(E)(7) to the Registrant's Form 10-K for the fiscal year ended July 25, 1992............. *
10(ii)(A)(4)(b) -- First Amendment to Sublease for Roosevelt Avenue, Flushing, New York, dated as of February 22,
1995 between the Company, as sublandlord, and Caldor, as tenant. Incorporated herein by
reference from Exhibit 10(ii)(A)(8)(b) to the Registrant's Form 10-K for the fiscal year ended
December 31, 1994.................................................................................... *
10(ii)(A)(5) -- Lease Agreement, dated March 1, 1993 by and between the Company and Alex Third Avenue
Acquisition Associates. Incorporated by reference from Exhibit 10(ii)(F) to the Registrant's Form
10-K for the fiscal year ended July 31, 1993......................................................... *
</TABLE>
Page 18
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT
NO. PAGE
- -------- ------
<S> <C> <C>
10(ii)(A)(6) -- Agreement of Lease for Rego Park, Queens, New York, between the Company and Marshalls of
Richfield, MN., Inc., dated as of March 1, 1995. Incorporated herein by reference from Exhibit
10(ii)(A)(12)(a) to the Registrant's Form 10-K for the fiscal year ended December 31, 1994......... *
10(ii)(A)(7) -- Guaranty, dated March 1, 1995, of the Lease described in Exhibit 10(ii)(A)(12)(a) above by the
Company. Incorporated herein by reference from Exhibit 10(ii)(A)(12)(b) to the Registrant's
Form 10-K for the fiscal year ended December 31, 1994.............................................. *
10(iii)(B) -- Employment Agreement, dated February 9, 1995, between the Company and Stephen Mann.
Incorporated herein by reference from Exhibit 10(iii)(B) to the Registrant's
Form 10-K for the fiscal year ended December 31, 1994.............................................. *
10(iv)(A) -- Registrant's Omnibus Stock Plan, as amended, dated May 28, 1997. Incorporated herein by
reference from Exhibit 10 to the Registrant's Form 10-Q for the fiscal quarter ended June 30,
1997............................................................................................... *
27 -- Financial Data Schedule............................................................................. 20
</TABLE>
* Incorporated by reference
Page 19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's unaudited financial statements for the nine months ended
September 30, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> $5,223
<SECURITIES> 0
<RECEIVABLES> 4,258
<ALLOWANCES> 804
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 302,911
<DEPRECIATION> 54,283
<TOTAL-ASSETS> 313,225
<CURRENT-LIABILITIES> 0
<BONDS> 273,648
0
0
<COMMON> 5,174
<OTHER-SE> 7,246
<TOTAL-LIABILITY-AND-EQUITY> 313,225
<SALES> 0
<TOTAL-REVENUES> 48,607
<CGS> 0
<TOTAL-COSTS> 24,568
<OTHER-EXPENSES> 6,867
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,323
<INCOME-PRETAX> 5,446
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,446
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,446
<EPS-BASIC> 1.09
<EPS-DILUTED> 1.08
</TABLE>
