<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 June 30, 1997
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
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.
36,372,133 shares outstanding as of July 31, 1997.
1 of 13
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Financial Statements -
Condensed Consolidated Balance Sheets as of
June 30, 1997 and December 31, 1996.
Condensed Consolidated Statements of Income for the Three and Six
Months Ended June 30, 1997 and 1996.
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996.
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 $2.9 million or 6.7% to $45.3 million
for the three months ended June 30, 1997, as compared with $42.4 million for the
corresponding quarter ended June 30, 1996. Similarly, revenues from rental
property increased $6.4 million or 7.6% to $90.5 million for the six months
ended June 30, 1997, as compared with $84.1 million for the corresponding
six-month period ended June 30, 1996. These net increases are primarily
attributable to (i) property acquisitions during the six-month period ended June
30, 1997 (6 property interests) and throughout calendar year 1996 (39 property
interests), and (ii) new leasing, property redevelopments and re-tenanting
within the portfolio at improved rental rates.
Rental property expenses increased $.5 million or 2.0% to $25.2 million for the
three months ended June 30, 1997, as compared with $24.7 million for the
corresponding quarter ended June 30, 1996. Rent, real estate taxes and
depreciation and amortization contributed significantly to this net increase in
rental property expenses (increasing $.7 million or 5.2% for the three month
period ended June 30, 1997 compared with the corresponding period in the
preceding year) primarily due to property acquisitions offset by a decrease of
$.2 million in operating and maintenance costs related primarily to reduced snow
removal costs during the corresponding periods. Similarly, the rental
2
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property expense components of rent, real estate taxes and depreciation and
amortization increased by $1.9 million or 8% for the six month period ended June
30, 1997 compared with the corresponding period in the preceding year primarily
due to property acquisitions during the six months ended June 30, 1997 and
throughout 1996. This increase was offset by (i) the net reduction of interest
expense of $.5 million resulting primarily from the reduced average outstanding
balance of secured indebtedness between the corresponding periods and (ii) a
decrease in operating and maintenance costs of $1.3 million primarily
attributable to reduced snow removal costs during the corresponding periods.
During June 1997, the Company disposed of a property in Troy, Ohio. Cash
proceeds from the disposition totaling $1.6 million, together with an additional
$8.3 million cash investment, were used to acquire an exchange shopping center
property located in Ocala, Florida.
Net income for the three and six months ended June 30, 1997 was $21.0 million
and $41.6 million, respectively. Net income for the three and six months ended
June 30, 1996 was $18.4 million and $34.4 million, respectively. Net income
improved $.05 and $.11 per share for the three and six month periods ended June
30, 1997, respectively, after adjusting for the gain on the sale of a shopping
center property, reflecting the effect of property acquisitions, property
redevelopments 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 $1 billion for the purposes of acquiring
interests in neighborhood and community shopping center properties, repaying
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
2000, 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.
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
3
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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.
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 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
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
---------------------------
June 30, December 31,
1997 1996
------------- ---------------
Assets:
Real estate, net of accumulated depreciation
of $192,022,694 and $180,552,647 $ 958,518,198 $ 891,503,339
Investment in retail store leases 16,896,791 18,994,321
Cash and cash equivalents 22,931,408 37,425,206
Accounts and notes receivable 17,538,284 13,986,138
Other assets 67,536,883 61,123,557
--------------- --------------
$ 1,083,421,564 $1,023,032,561
=============== ==============
Liabilities:
Notes payable $370,250,000 $310,250,000
Mortgages payable 49,243,880 54,404,939
Other liabilities, including minority
interests in partnerships 55,061,819 52,606,653
--------------- -------------
474,555,699 417,261,592
--------------- --------------
Stockholders' Equity:
Preferred stock, $1.00 par value, authorized
5,000,000 and 930,000 shares, respectively
Class A Preferred Stock, $1.00 par value,
authorized 345,000 shares
Issued and outstanding 300,000 shares 300,000 300,000
Aggregate liquidation preference $75,000,000
Class B Preferred Stock, $1.00 par value,
authorized 230,000 shares
Issued and outstanding 200,000 shares 200,000 200,000
Aggregate liquidation preference $50,000,000
Class C Preferred Stock, $1.00 par value,
authorized 460,000 shares
Issued and outstanding 400,000 shares 400,000 400,000
Aggregate liquidation preference $100,000,000
Common stock, $.01 par value, authorized
100,000,000 and 50,000,000 shares, respectively
Issued and outstanding
36,309,380 and 36,215,055 shares,
respectively 363,094 362,151
Paid-in capital 721,456,412 719,601,956
Cumulative distributions in excess of
net income (113,853,641) (115,093,138)
--------------- --------------
608,865,865 605,770,969
--------------- --------------
$1,083,421,564 $1,023,032,561
=============== ==============
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
For the Three and Six Months ended June 30, 1997 and 1996
--------------------------------
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
-------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Revenues from rental property $ 45,276,241 $ 42,444,247 $ 90,471,558 $84,106,316
-------------- ------------ ------------ --------------
Rental property expenses:
Rent 426,536 339,448 854,484 681,797
Real estate taxes 5,510,848 5,150,190 10,905,368 9,827,753
Interest 6,775,437 6,713,770 13,071,041 13,578,368
Operating and maintenance 5,403,954 5,612,858 11,290,453 12,635,071
Depreciation and amortization 7,061,471 6,864,396 13,960,719 13,313,796
-------------- ------------ ------------ ------------
25,178,246 24,680,662 50,082,065 50,036,785
-------------- ------------ ------------ ------------
Income from rental property 20,097,995 17,763,585 40,389,493 34,069,532
Income from investment in retail store lease 893,715 900,451 1,809,654 1,819,364
-------------- ------------ ------------ ------------
20,991,710 18,664,036 42,199,147 35,888,896
Management fee income 1,075,460 987,886 1,863,811 1,747,336
General and administrative expenses (2,780,328) (2,520,937) (5,535,019) (4,941,483)
Other income, net 1,514,046 1,307,698 2,877,222 1,671,669
-------------- ------------ ------------ ------------
Income before gain on sale of shopping center
property 20,800,888 18,438,683 41,405,161 34,366,418
Gain on sale of shopping center property 243,995 -- 243,995 --
-------------- ------------ ------------ -------------
Net Income $ 21,044,883 $ 18,438,683 $ 41,649,156 $ 34,366,418
============= ============ ============ =============
Net income applicable to common shares $ 16,435,458 $ 14,038,683 $ 32,430,306 $ 27,450,793
============= ============ ============ =============
Net income per common share $0.45 $0.39 $0.89 $0.77
===== ===== ===== =====
</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 Six Months ended June 30, 1997 and 1996
---------------------
1997 1996
----------- -----------
Cash flow provided by operations $56,362,009 $55,660,772
----------- -----------
Cash flow from investing activities:
Acquisition of and improvements to real estate (80,797,493) (81,621,575)
Investment in marketable securities (996,291) (2,361,001)
Acquisition of real estate through joint venture
investment (907,068) --
Advances to affiliated companies (6,036,000) --
Proceeds from disposition of shopping center
property 1,550,000 --
----------- -----------
Net cash flow used for investing activities (87,186,852) (83,982,576)
----------- -----------
Cash flow from financing activities:
Principal payments on debt, excluding
normal amortization of rental
property debt (4,650,000) --
Principal payments on rental property
debt, net (511,059) (753,593)
Change in notes payable 60,000,000 (15,000,000)
Dividends paid (40,363,295) (32,233,580)
Proceeds from issuance of stock 1,855,399 155,175,423
----------- -----------
Net cash flow provided by financing activities 16,331,045 107,188,250
----------- -----------
Change in cash and cash equivalents (14,493,798) 78,866,446
Cash and cash equivalents, beginning of period 37,425,206 16,164,666
----------- -----------
Cash and cash equivalents, end of period $22,931,408 $95,031,112
=========== ===========
Interest paid during the period $12,635,922 $13,182,286
=========== ===========
Supplemental financing activity:
Declaration of dividends paid in succeeding
period $18,767,183 $17,024,943
=========== ===========
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.
Certain account balances in the accompanying Condensed
Consolidated Balance Sheet as of December 31, 1996 have been reclassified so as
to conform with the current year presentation.
2. Property Acquisitions
During the six months ended June 30, 1997, the Company and its
affiliates acquired interests in 5 shopping center properties located in
Indiana, Florida, Texas and Louisiana and a health care facility located in
Pennsylvania through separate transactions for an aggregate purchase price of
approximately $57.2 million.
3. Investment in Retail Store Leases
Income from the investment in retail store leases for the six
months ended June 30, 1997 and 1996 represents sublease revenues of
approximately $10.6 million and $10.2 million, respectively, less related
expenses of $7.8 million and $7.2 million, respectively, and amounts, which in
management's estimation, reasonably provide for the recovery of the investment
over a ten-year period.
4. Property Disposition
During June 1997, the Company disposed of a shopping center
property in Troy, Ohio. Cash proceeds from the disposition totaling $1.6
million, together with an additional $8.3 million cash investment, were used to
acquire an exchange shopping center property located in Ocala, Florida.
8
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5. Net Income Per Common Share
Net income per common share is based upon weighted average numbers
of common shares outstanding of 36,257,999 and 36,243,762 for the three and six
months ended June 30, 1997, respectively, and 36,060,662 and 35,642,416 for the
three and six months ended June 30, 1996, respectively.
6. Pro Forma Financial Information
As discussed in Notes 2 and 4, the Company and certain of its affiliates
acquired and disposed of interests in certain shopping center properties during
the six months ended June 30, 1997. The pro forma financial information set
forth below is based upon the Company's historical, Condensed Consolidated
Statement of Income for the six months ended June 30, 1996, and the Condensed
Consolidated Statement of Income for the six months ended June 30, 1997,
adjusted to give effect to these transactions as of January 1, 1996.
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, 1996, nor does it purport to
represent the results of future operations. (Amounts presented in millions,
except per share figures.)
Six Months Ended
June 30,
-----------------------------
1997 1996
------------- ------------
Revenues from rental property $ 93.3 $ 87.9
Net income $ 42.0 $ 35.5
Net income per common share $ .90 $ .80
7. Subsequent Event
On August 6, 1997, certain subsidiaries of the Company acquired interests in 49
fee and leasehold properties from a retailer comprising approximately 5.9
million square feet of leasable area located in Illinois, Missouri, Texas,
Oklahoma, Kansas, Indiana and Iowa. The Company was also granted (i) an option
to acquire two other properties for $4.5 million (ii) an option to acquire 11
other properties in this transaction should certain conditions be satisfied, and
(iii) rights of first refusal to acquire 31 additional properties containing 4.2
million square feet of leasable area for a period of 5 years. The transaction
also includes approximately 573,000 square feet of retail space which is
substantially occupied by other retailers.
9
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The aggregate price was approximately $130 million, consisting of $70.5 million
in cash and the assumption of approximately $59.5 million of existing mortgage
debt on certain of these properties. The mortgage debt bears interest at 10.54%
per annum and cannot be repaid, without penalty, until its maturity July 1,
2000.
Simultaneously with this transaction, the Company entered into a single
long-term net unitary lease covering all premises occupied by this retailer
pursuant to which this seller/tenant may remain in occupancy and continue to
conduct business in these premises.
10
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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.
In connection with the Annual Meeting of Stockholders held on May 28, 1997,
stockholders were asked to vote with respect to (i) the election of Directors to
serve for the ensuing year and (ii) the amendment to the Charter of the Company
to (a) increase the number of authorized shares of Common Stock of the Company,
par value $.01 per share (the "Common Stock") from 50 million shares to 100
million shares (b) increase the number of authorized shares of Excess Stock of
the Company, par value $.01 per share (the "Excess Stock") from 25.5 million
shares to 51 million shares, and (c) increase the number of authorized shares of
Preferred Stock of the Company, par value $1.00 per share, (the "Preferred
Stock") from 930,000 shares to 5 million shares.
A total of 31,857,512 votes were cast regarding the election of Messrs. Cooper,
Dooley, Flynn, Grills, Kimmel and Lourenso as follows:
Nominee Votes For Against
- ------- ----- --- -------
Milton Cooper 31,857,512 31,479,307 378,205
Richard G. Dooley 31,857,512 31,481,807 375,705
Michael J. Flynn 31,857,512 31,485,407 372,105
Joe Grills 31,857,512 31,481,907 375,605
Martin S. Kimmel 31,857,512 31,459,407 398,105
Frank Lourenso 31,857,512 31,485,657 371,855
11
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The vote regarding the amendment to the Charter of the Company to increase the
number of authorized shares of Common Stock, Excess Stock and Preferred Stock
was adjourned until June 18, 1997, since an insufficient number of votes were
present (by person or by proxy) to pass the proposal. On such date, 31,857,512
votes were cast with 24,507,753 votes cast in favor of the amendment to the
Charter of the Company to increase the number of authorized shares of Common
Stock, Excess Stock and Preferred Stock.
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibits -
4.1 Agreement to File Instruments
Kimco Realty Corporation (the "Registrant") hereby agrees to
file with the Securities and Exchange Commission, upon
request of the Commission, all instruments defining the
rights of holders of long-term debt of the Registrant and
its consolidated subsidiaries, and for any of its
unconsolidated subsidiaries for which financial statements
are required to be filed, and for which the total amount of
securities authorized thereunder does not exceed 10 percent
of the total assets of the Registrant and its subsidiaries
on a consolidated basis.
Form 8-K -
None
12
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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
08/13/97 /s/ Milton Cooper
- ----------- ------------------
(Date) Milton Cooper
Chairman of the Board
08/13/97 /s/ Michael V. Pappagallo
- ----------- ---------------------------
(Date) Michael V. Pappagallo
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<PERIOD-START> JAN-1-1997
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 22,931,408
<SECURITIES> 8,774,601
<RECEIVABLES> 18,888,284
<ALLOWANCES> 1,350,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,150,540,892
<DEPRECIATION> 192,022,694
<TOTAL-ASSETS> 1,083,421,564
<CURRENT-LIABILITIES> 0
<BONDS> 419,493,880
0
900,000
<COMMON> 363,094
<OTHER-SE> 607,602,771
<TOTAL-LIABILITY-AND-EQUITY> 1,083,421,564
<SALES> 90,471,558
<TOTAL-REVENUES> 90,471,558
<CGS> 23,050,305
<TOTAL-COSTS> 23,050,305
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,071,041
<INCOME-PRETAX> 41,649,156
<INCOME-TAX> 0
<INCOME-CONTINUING> 41,649,156
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,649,156
<EPS-PRIMARY> 0.89
<EPS-DILUTED> 0.89
<FN>
Financial Data Schedule information has been extracted from the
Registrant's Condensed Consolidated Balance Sheet
(non-classified) as of June 30, 1997 and the Condensed
Consolidated Statement of Income for the six months then ended.
</TABLE>
