<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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 (I.R.S. Employer
of incorporation or organization) Identification No)
3333 New Hyde Park Road, New Hyde Park, NY 11042
- ------------------------------------------------------------------------------
(Address of principal executive offices - Zip Code)
(516)869-9000
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
36,182,682 shares outstanding as of
October 31, 1996.
1 of 12
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Financial Statements -
Condensed Consolidated Balance Sheets as of
September 30, 1996 and December 31, 1995.
Condensed Consolidated Statements of Income for the Three Months and
Nine Months Ended September 30, 1996 and 1995.
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1996 and 1995.
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 $4.9 million or 13.6% to $40.8 million
for the three months ended September 30, 1996, as compared with $35.9 million
for the corresponding quarter ended September 30, 1995. Similarly, revenues
from rental property increased $18.1 million or 16.9% to $124.9 million for the
nine months ended September 30, 1996, as compared with $106.8 million for the
corresponding nine-month period ended September 30, 1995. These net increases
are primarily attributable to (i) the acquisition of interests in 38 properties
during the nine months ended September 30, 1996 and throughout calendar year
1995 (18 properties), and (ii) new leasing and re-tenanting within the
portfolio at improved rental rates.
Rental property expenses, including depreciation and amortization, increased
$.7 million or 3.2% to $23.0 million for the three months ended September 30,
1996, as compared with $22.3 million for the corresponding quarter ended
September 30, 1995. Rental property expenses also increased $6.8 million or
10.3% to $73.1 million for the nine months ended September 30, 1996, as
compared with $66.3 million for the nine-month period ended September 30, 1995.
These net increases in rental property expenses are primarily due to the
aforementioned property acquisitions, as well as increased snow removal costs
which inflated operating and maintenance expenses during the first six months
of 1996.
During July 1995, certain subsidiaries of the Company made investments in
various retail store leases relating to the anchor store premises in
neighborhood and community shopping centers. These premises have been
substantially sublet to retailers which lease the stores pursuant to net lease
agreements. Income from the investment in retail store leases was $2.7 million
and $.9 million for the nine months ended September 30, 1996 and the quarter
ended September 30, 1995, respectively.
Other income (expenses), net for the three and nine months ended September 30,
1996 increased $1.4 million and $2.6 million, respectively, as compared with
the corresponding periods in the preceding year. The 1996 amounts include
interest earned on funds raised through public equity offerings and held in
short-term income
2
<PAGE>
producing investments pending the acquisition of interests in neighborhood and
community shopping center properties.
During September 1996, the Company disposed of a property in Watertown, New
York. Proceeds from the disposition, totaling approximately $1.8 million in
cash, will be used to acquire an exchange shopping center property.
Net income for the three and nine months ended September 30, 1996 was $19.8
million, and $54.2 million, respectively. Net income for the three and nine
months ended September 30, 1995 was $13.9 million and $38.7 million,
respectively. Net income improved $.06 and $.16 per share for the three and
nine month periods ended September 30, 1996, respectively, after adjusting for
the gain on the sale of a shopping center property, reflecting the effects of
property acquisitions, the investment in retail store leases and increased
leasing activity which strengthened operating profitability.
Liquidity and Capital Resources
Since the Company's initial public stock offering in November 1991, the Company
has completed additional offerings of its public unsecured debt and equity
raising in the aggregate in excess of $900 million for the purposes of
acquiring interests in neighborhood and community shopping center properties,
repaying secured indebtedness and for expanding and improving properties in the
portfolio. Management believes the public debt and equity markets will be the
Company's principal source of capital for the future. A $100 million, unsecured
revolving credit facility established in June 1994, which is scheduled to
expire in June 1999, has made available funds to both finance property
acquisitions and meet any short-term working capital requirements. The Company
has also implemented a $150 million medium-term notes 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 and redevelopment
costs and (ii) better managing the Company's debt maturities, including its
mortgage maturities during 1996 and succeeding years.
In connection with its intention to continue to qualify as a REIT for Federal
income tax purposes, the Company expects to continue paying regular dividends
to its stockholders. These dividends will be paid from operating cash flows
which are expected to increase due to property acquisitions and growth in
rental revenues in the existing portfolio and from other sources. Since cash
used to pay dividends reduces amounts available for capital investment, the
Company generally intends to maintain a conservative dividend payout ratio,
reserving such amounts as it considers necessary for the expansion and
renovation of shopping centers in its portfolio, debt reduction, the
acquisition of interests in new properties as suitable opportunities arise, and
such other factors as the Board of Directors considers appropriate.
It is management's intention that the Company continually have access to the
capital resources necessary to expand and develop its business. Accordingly,
the Company may seek to obtain funds through additional equity offerings or
debt financing in a manner consistent with its intention to operate with a
conservative debt capitalization policy.
The Company anticipates that adequate cash will be available from operations to
fund its operating and administrative expenses, regular debt service
obligations and the payment of dividends in accordance with REIT requirements
in both the short-term and long-term.
3
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Effects of Inflation
Substantially all of the Company's leases contain provisions designed to
mitigate the adverse impact of inflation. Such provisions include clauses
enabling the Company to receive percentage rents based on tenants' gross sales,
which generally increase as prices rise, and/or escalation clauses, which
generally increase rental rates during the terms of the leases. Such escalation
clauses are often related to increases 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, real estate taxes and insurance, thereby reducing the Company's
exposure to increases in costs and operating expenses resulting from inflation.
The Company periodically evaluates its exposure to short-term interest rates
and will, from time to time, enter into interest rate protection agreements
which mitigate, but do not eliminate, the effect of changes in interest rates
on its floating-rate loans.
4
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KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
--------------- ---------------
<S> <C> <C>
Assets:
Real estate, net of accumulated depreciation
of $173,591,070 and $156,131,718 (Notes 3, 4, and 6) $ 883,969,817 $ 776,258,543
Investment in retail store leases (Note 5) 19,425,675 22,127,786
Cash and cash equivalents 54,498,438 16,164,666
Accounts and notes receivable 16,444,160 16,146,808
Other assets 60,948,587 53,544,331
--------------- ---------------
$ 1,035,286,677 $ 884,242,134
=============== ===============
Liabilities:
Notes payable $ 310,250,000 $ 325,250,000
Mortgages payable 62,267,640 63,972,735
Other liabilities, including minority interests
in partnerships 58,539,857 47,868,939
--------------- ---------------
431,057,497 437,091,674
--------------- ---------------
Stockholders' Equity (Note 2):
Preferred stock, $1.00 par value, authorized 930,000 shares
Class A Preferred Stock, authorized 345,000 shares
Issued and outstanding 300,000 shares 300,000 300,000
Aggregate liquidation preference $75,000,000
Class B Preferred Stock, authorized 230,000 shares
Issued and outstanding 200,000 shares 200,000 200,000
Aggregate liquidation preference $50,000,000
Class C Preferred Stock, authorized 460,000 shares
Issued and outstanding 400,000 shares 400,000 --
Aggregate liquidation preference $100,000,000
Common stock, $.01 par value, authorized 50,000,000 shares
Issued and outstanding 36,168,010 and 33,731,348 361,680 337,313
shares, respectively
Paid-in capital 718,677,279 562,311,822
Cumulative distributions in excess of net income (114,546,477) (114,665,183)
Loans receivable from officer stockholders (1,163,302) (1,333,492)
--------------- ---------------
604,229,180 447,150,460
--------------- ---------------
$ 1,035,286,677 $ 884,242,134
=============== ===============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
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KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues from rental property $ 40,837,356 $ 35,958,338 $ 124,943,673 $ 106,859,780
------------- ------------- ------------- -------------
Rental property expenses:
Rent 336,489 325,944 1,018,286 975,736
Real estate taxes 4,697,077 4,035,280 14,524,830 12,716,405
Interest 6,742,537 6,375,946 20,320,905 18,959,242
Operating and maintenance 4,337,982 4,674,996 16,973,053 14,198,638
Depreciation and amortization 6,919,811 6,897,583 20,233,607 19,422,269
------------- ------------- ------------- -------------
23,033,896 22,309,749 73,070,681 66,272,290
------------- ------------- ------------- -------------
Income from rental property 17,803,460 13,648,589 51,872,992 40,587,490
Income from investment in retail store leases (Note 5) 904,371 879,138 2,723,735 879,138
------------- ------------- ------------- -------------
18,707,831 14,527,727 54,596,727 41,466,628
Management fee income 946,427 1,068,738 2,693,763 2,748,692
General and administrative expenses (2,572,785) (2,243,641) (7,514,268) (6,535,752)
Other income (expenses), net 1,949,764 521,739 3,621,433 1,060,084
------------- ------------- ------------- -------------
Income before gain on sale of shopping
center property 19,031,237 13,874,563 53,397,655 38,739,652
Gain on sale of shopping center property (Note 6) 801,955 -- 801,955 --
------------- ------------- ------------- -------------
Net income $ 19,833,192 $ 13,874,563 $ 54,199,610 $ 38,739,652
============= ============= ============= =============
Net income applicable to common shares $ 15,223,767 $ 11,665,882 $ 42,674,560 $ 33,624,721
============= ============= ============= =============
Net income per common share (Note 7) $ 0.42 $ 0.34 $ 1.19 $ 1.01
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
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KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months ended September 30, 1996 and 1995
----------------------------------
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Cash flow provided by operations $ 78,658,029 $ 55,319,540
------------- -------------
Cash flow from investing activities:
Acquisition of and improvements to real estate (126,261,585) (71,456,055)
Investment in retail store leases -- (23,026,673)
Investment in marketable securities (4,935,008) (1,235,442)
Proceeds from disposition of real estate 1,825,000 4,975,582
Construction advance to real estate joint venture -- 6,794,928
------------- -------------
Net cash flow used for investing activities (129,371,593) (83,947,660)
------------- -------------
Cash flow from financing activities:
Principal payments on debt, excluding
normal amortization of rental
property debt (649,153) (24,210,728)
Principal payments on rental property
debt, net (1,055,942) (918,148)
Change in notes payable (15,000,000) (24,950,000)
Dividends paid (51,037,393) (39,384,939)
Proceeds from issuance of stock 156,789,824 120,249,424
------------- -------------
Net cash flow provided by financing activities 89,047,336 30,785,609
------------- -------------
Change in cash and cash
equivalents 38,333,772 2,157,489
Cash and cash equivalents, beginning of period 16,164,666 10,944,226
------------- -------------
Cash and cash equivalents, end of period $ 54,498,438 $ 13,101,715
============= =============
Interest paid during the period $ 17,556,631 $ 16,538,483
============= =============
Supplemental schedule of noncash investing/
financing activity:
Acquisition of real estate interests by issuance of common stock
and assumption of debt -- $ 38,714,717
============= =============
Declaration of dividends paid in succeeding period $ 17,261,237 $ 12,868,260
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
7
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KIMCO REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. Interim Financial Statements
The accompanying Condensed Consolidated Financial Statements
include the accounts of Kimco Realty Corporation (the "Company"), its
subsidiaries, all of which are wholly-owned, and all majority-owned
partnerships. The information furnished is unaudited and reflects all
adjustments which are, in the opinion of management, necessary to reflect a
fair statement of the results for the interim periods presented, and all such
adjustments are of a normal recurring nature. These Condensed Consolidated
Financial Statements should be read in conjunction with the financial
statements included in the Company's Annual Report on Form 10-K.
2. Public Equity Offerings
On February 2, 1996, the Company completed a primary public stock
offering of 2,200,000 shares of Common Stock at $26.50 per share. The proceeds
from this sale of Common Stock, net of related transaction costs of
approximately $3.4 million, totaling approximately $55.0 million, have been
used primarily for the acquisition of neighborhood and community shopping
centers.
On April 10, 1996, the Company completed a public offering of
4,000,000 Depositary Shares (the "Class C Depositary Shares") at $25.00 per
share, each such Class C Depositary Share representing 1/10 of a share of the
Company's 8-3/8% Class C Cumulative Redeemable Preferred Stock (the "Class C
Preferred Stock"), par value $1.00 per share. The cash proceeds to the Company,
net of related transaction costs of approximately $3.6 million, totaling
approximately $96.4 million, will be used for general corporate purposes,
including the acquisition of interests in neighborhood and community shopping
centers, and the redevelopment, expansion and improvement of properties in the
Company's portfolio.
Dividends on the Class C Depositary Shares are cumulative and
payable quarterly in arrears at the rate of 8-3/8% per annum based on the $25
per share initial offering price, or $2.0938 per share. The Class C Depositary
Shares are redeemable, in whole or in part, for cash on or after April 15, 2001
at the option of the Company at a redemption price of $25 per share, plus any
accrued and unpaid dividends thereon. The redemption price of the Class C
Preferred Stock may be paid solely from the sale proceeds of other capital
stock of the Company, which may include other classes or series of preferred
stock. The Class C Depositary Shares are not convertible or exchangeable for
any other property or securities of the Company. The Class C Preferred Stock
(represented by the Class C Depositary Shares outstanding) ranks pari passu
with the Company's 7-3/4% Class A Cumulative Redeemable Preferred Stock and
8-1/2% Class B Cumulative Redeemable Preferred Stock as to voting rights,
priority for receiving dividends and liquidation preferences.
3. Retail Property Acquisitions
During January 1996, the Company entered into two sale-leaseback
transactions pursuant to which it acquired fee title to 16 retail properties
located in Texas, Iowa, Oklahoma, Illinois and Kansas for a purchase price of
$40 million. Simultaneously, the Company executed two long-term net leases
covering the 16 locations pursuant to which the seller/tenant may remain in
occupancy and continue to conduct business in these premises.
8
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During August 1996, certain subsidiaries of the Company acquired
interests in 16 retail properties, including 2 properties to which the Company
and its affiliates already held fee title, for $21.8 million in cash. These
property interests were acquired from a retailer which had elected to
discontinue operation of its discount department store division. The Company
has executed long-term net leases with tenants covering 7 of the properties and
is actively involved in negotiations concerning the re-tenanting and
redevelopment of the remaining locations.
4. Shopping Center Acquisitions
During the nine months ended September 30, 1996, the Company
acquired interests in 6 shopping center properties in Florida, Michigan, North
Carolina, Texas and Arizona through separate transactions for an aggregate
purchase price of approximately $33.0 million.
5. Investment in Retail Store Leases
During July 1995, certain subsidiaries of the Company obtained
interests in various retail store leases relating to the anchor store premises
in neighborhood and community shopping centers. These premises have been
substantially sublet to retailers which lease the stores pursuant to net lease
agreements. Income from the investment in these retail store leases for the
nine months ended September 30, 1996 was approximately $2.7 million. This
amount represents sublease revenues of approximately $15.9 million less related
expenses of $11.5 million and an amount which, in management's estimation,
reasonably provides for the recovery of the investment over a ten-year period.
6. Property Disposition
During September 1996, the Company disposed of a property in
Watertown, New York. Proceeds from the disposition, totaling approximately $1.8
million in cash, will be used to acquire an exchange shopping center property.
7. Net Income Per Common Share
Net income per common share is based upon weighted average
numbers of common shares outstanding of 36,148,885 and 35,812,472 for the three
and nine month periods ended September 30, 1996, respectively, and 33,636,863
and 33,280,905 for the three and nine month periods ended September 30, 1995,
respectively.
8. Pro Forma Financial Information
As discussed in Notes 4 and 6, the Company and certain of its
subsidiaries acquired and disposed of interests in certain shopping center
properties during the nine months ended September 30, 1996. The pro forma
financial information set forth below is based upon the Company's historical,
Consolidated Statement of Income for the year ended December 31, 1995, and the
Condensed Consolidated Statement of Income for the nine months ended September
30, 1996, adjusted to give effect to these transactions as of January 1, 1995.
9
<PAGE>
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, 1995,
nor does it purport to represent the results of future operations. (Amounts
presented in millions, except per share figures.)
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, December 31,
1996 1995
---------- --------
<S> <C> <C>
Revenues from rental property $126.9 $148.3
Net income $54.5 $54.7
Net income per common share $1.20 $1.38
</TABLE>
10
<PAGE>
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 -
None
Form 8-K -
None
11
<PAGE>
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
11/13/96 /s/ Milton Cooper
- ------------ ----------------------------
(Date) Milton Cooper
Chairman of the Board
11/13/96 /s/ Louis J. Petra
- ------------ ----------------------------
(Date) Louis J. Petra
Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 54,498,438
<SECURITIES> 13,401,157
<RECEIVABLES> 17,794,160
<ALLOWANCES> 1,350,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,057,560,887
<DEPRECIATION> 173,591,070
<TOTAL-ASSETS> 1,035,286,677
<CURRENT-LIABILITIES> 0
<BONDS> 372,517,640
0
900,000
<COMMON> 361,680
<OTHER-SE> 602,967,500
<TOTAL-LIABILITY-AND-EQUITY> 1,035,286,677
<SALES> 124,943,673
<TOTAL-REVENUES> 124,943,673
<CGS> 32,516,169
<TOTAL-COSTS> 32,516,169
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,320,905
<INCOME-PRETAX> 54,199,610
<INCOME-TAX> 0
<INCOME-CONTINUING> 54,199,610
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,199,610
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.19
<FN>
Financial Data Schedule information has been extracted from the Registrant's
Condensed Consolidated Balance Sheet (non-classified) as of September 30, 1996
and the Condensed Consolidated Statement of Income for the nine months then
ended.
</TABLE>
