<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, 1998
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
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Kimco Realty Corporation
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(Exact name of registrant as specified in its charter)
Maryland 13-2744380
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3333 New Hyde Park Road, New Hyde Park, NY 11042
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(Address of principal executive offices - Zip Code)
(516) 869-9000
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(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.
56,816,316 shares outstanding as of July 31, 1998
1 of 18
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Financial Statements -
Condensed Consolidated Balance Sheets as of June 30, 1998 and December
31, 1997.
Condensed Consolidated Statements of Income for the Three and Six Months
Ended June 30, 1998 and 1997.
Condensed Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1998 and 1997.
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 $24.0 million or 53.2% to $69.3
million for the three months ended June 30, 1998, as compared with $45.3
million for the corresponding quarter ended June 30, 1997. Similarly, revenues
from rental property increased $42.0 million or 46.4% to $132.5 million for
the six months ended June 30, 1998, as compared with $90.5 million for the
corresponding six-month period ended June 30, 1997. These increases resulted
primarily from the combined effect of (i) property acquisitions during the six
month period ended June 30, 1998 (15 shopping center properties and 3 retail
properties) providing revenues of $4.7 million and $6.8 million for the three
and six month periods ended June 30, 1998, respectively, (ii) acquisitions
throughout calendar year 1997 (14 shopping center properties and 49 retail
properties) providing incremental revenues of $13.4 million and $27.1 million
as compared to the corresponding three and six month periods in 1997, (iii)
the acquisition of The Price REIT, Inc. as of June 19, 1998 (the "Price REIT
Acquisition") providing revenues of $3.3 million for the three and six month
periods ended June 30, 1998 and (iv) new leasing, property redevelopments and
re-tenanting within the portfolio at improved rental rates.
2
<PAGE>
Rental property expenses, including depreciation and amortization,
increased $16.4 million or 65.2% to $41.6 million for the three months ended
June 30, 1998, as compared with $25.2 million for the corresponding quarter
ended June 30, 1997. Rent, real estate taxes and depreciation and amortization
contributed significantly to this net increase in rental property expenses
(increasing $2.4 million, $3.9 million and $2.9 million, respectively, for the
three month period ended June 30, 1998, as compared with the corresponding
quarter in the preceding year) primarily due to the 1998 property
acquisitions, the Price REIT Acquisition and the incremental costs related to
the property acquisitions throughout 1997. Similarly, the rental property
expense components of rent, real estate taxes and depreciation and
amortization increased by $4.7 million, $7.4 million and $4.9 million,
respectively, for the six month period ended June 30, 1998 compared with the
corresponding period in the preceding year, primarily due to the property
acquisitions during the six months ended June 30, 1998 and throughout 1997 and
the Price REIT Acquisition. Interest expense increased $5.6 million and $10.3
million for the three and six month periods ended June 30, 1998, respectively,
reflecting higher average outstanding borrowings (resulting from the (i)
issuance of an aggregate $100.0 million unsecured medium-term notes during May
and July 1997 and an additional $100.0 million of unsecured medium-term notes
during June 1998, (ii) the assumption of additional mortgage debt during 1997
and the six months ended June 30, 1998 in connection with certain property
acquisitions, (iii) the assumption of approximately $250 million of unsecured
debt and $60 million of mortgage debt in connection with the Price REIT
Acquisition and (iv) increased borrowings under the Company's unsecured
revolving credit facilities), as compared to the corresponding periods in
1997.
During January 1998, the Company disposed of a shopping center property
in Pinellas Park, FL. Cash proceeds from the disposition totaling $2.3
million, together with an additional $7.1 million cash investment, were used
to acquire an exchange shopping center property located in Cranston, RI during
March 1998.
Net income for the three and six months ended June 30, 1998 was $27.5
million and $53.0 million, respectively. Net income for the three and six
months ended June 30, 1997 was $21.0 million and $41.6 million, respectively.
Net income improved $0.07 per share and $0.13 per share for the three and six
month periods ended June 30, 1998, respectively, after adjusting for the gains
on sales of shopping center properties in the respective periods, reflecting
the effect of property acquisitions, including the Price REIT Acquisition,
property redevelopments and increased leasing activity which strengthened
operating profitability.
3
<PAGE>
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 $1.4 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, scheduled to
expire in June 2000, and an additional $150 million interim unsecured
revolving credit facility established in March 1998, which is scheduled to
expire in August 1998, has made available funds to both finance property
acquisitions and meet any short-term working capital requirements. It is the
Company's intention to extend the term of the $150 million interim revolving
credit facility and establish it as a continuing part of the Company's total
unsecured credit availability. As of June 30, 1998, there were no borrowings
under the revolving credit facilities. The Company has also implemented a
medium-term notes ("MTN") program pursuant to which it may from time to
time offer for sale its senior unsecured debt for any general corporate
purposes, including (i) funding specific liquidity requirements in its
business, including property acquisitions 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
payout ratio, reserving such amounts as it considers necessary for the
expansion and renovation of shopping centers in its portfolio, repayment of
debt, the acquisition of interests in new properties 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 financings in a manner consistent with its intention to
operate with a conservative debt capitalization policy.
4
<PAGE>
The Company anticipates that cash flows from operations will continue to
provide adequate capital to fund its operating and administrative expenses,
regular debt service obligations and the payment of dividends in accordance
with REIT requirements in both the short-term and long-term. In addition, the
Company anticipates that cash on hand, availability under its revolving credit
facilities, issuance of equity and public debt, as well as other debt and
equity alternatives, will provide the necessary capital required by the
Company. Cash flows from operations increased to $70.3 million for the six
months ended June 30, 1998 as compared to $56.4 million for the corresponding
period ended June 30, 1997.
Effects of Inflation
- --------------------
Many of the Company's leases contain provisions designed to mitigate the
adverse impact of inflation. Such provisions include clauses enabling the
Company to receive payment of additional rent calculated as a percentage of
tenants' gross sales above pre-determined thresholds, which generally increase
as prices rise, and/or escalation clauses, which generally increase rental
rates during the terms of the leases. Such escalation clauses often include
increases based upon changes in the consumer price index or similar inflation
indices. In addition, many of the Company's leases are for terms of less than
10 years, which permits the Company to seek to increase rents to market rates
upon renewal. Most of the Company's leases require the tenant to pay an
allocable share of operating expenses, including common area maintenance
costs, real estate taxes and insurance, thereby reducing the Company's
exposure to increases in costs and operating expenses resulting from
inflation. The Company periodically evaluates its exposure to short-term
interest rates and will, from time to time, enter into interest rate
protection agreements which mitigate, but do not eliminate, the effect of
changes in interest rates on its floating-rate loans.
New Accounting Pronouncements
- -----------------------------
On June 15, 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities ("FAS 133"). FAS 133 is
effective for all fiscal quarters of all fiscal years beginning after June 15,
1999. FAS 133 requires that all derivative instruments be recorded on the
balance sheet at their fair value. Changes in the fair value of derivatives
are recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designed as part of a hedge transaction
and, if it is, the type of hedge transaction. Management of the Company
anticipates that due to its limited use of derivative instruments, the
adoption of FAS 133 will not have a material effect on the Company's results
of operations or its financial position.
5
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Impact of Year 2000
- -------------------
Like most corporations, the Company is reliant upon technology to run its
business. Many computer systems process dates using two digits to identify the
year, and some systems are unable to properly process dates beginning with the
year 2000. The Company is currently assessing and addressing this "Year 2000"
issue and does not believe the costs connected with this assessment will have
a material adverse effect on the Company's results of operations.
Forward-looking Statements
- --------------------------
This quarterly report on Form 10-Q includes certain forward-looking
statements, reflecting the Company's and management's intentions and
expectations, however, many factors which may affect the actual results are
difficult to predict. Factors that may cause actual results to differ
materially from current expectations include general economic conditions,
local real estate conditions, increases in interest rates and increases in
operating costs. Accordingly, there is no assurance that the Company's
expectations will be realized.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
6
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
---------
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------------- ---------------
<S> <C> <C>
Assets:
Real estate, net of accumulated depreciation
of $225,151,864 and $207,408,091, respectively $ 2,311,122,932 $ 1,196,788,068
Investment in retail store leases 15,220,823 15,938,041
Cash and cash equivalents 33,921,947 30,978,178
Accounts and notes receivable 24,806,498 16,203,454
Other assets 143,714,737 83,982,383
--------------- ---------------
$ 2,528,786,937 $ 1,343,890,124
=============== ===============
Liabilities:
Notes payable $ 715,250,000 $ 410,250,000
Mortgages payable 215,236,686 121,363,908
Other liabilities, including minority interests
in partnerships 112,506,756 68,957,005
--------------- ---------------
1,042,993,442 600,570,913
--------------- ---------------
Stockholders' Equity:
Preferred stock, $1.00 par value, authorized 3,470,000 and 5,000,000
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
Class D Convertible Preferred Stock, $1.00 par value, authorized 700,000 shares
Issued and outstanding 429,159 shares 429,159 --
Aggregate liquidation preference $107,289,750
Class E Preferred Stock, $1.00 par value, authorized 65,000 shares
Issued and outstanding 65,000 shares 65,000 --
Aggregate liquidation preference $65,000,000
Common stock, $.01 par value, authorized 100,000,000 shares
Issued and outstanding 55,446,111 and 40,394,805 554,461 403,948
shares, respectively
Paid-in capital 1,597,131,335 857,658,054
Cumulative distributions in excess of net income (113,286,460) (115,642,791)
--------------- ---------------
1,485,793,495 743,319,211
--------------- ---------------
$ 2,528,786,937 $ 1,343,890,124
=============== ===============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
7
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three and Six Months ended June 30, 1998 and 1997
----------------------------------------
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues from rental property $ 69,340,998 $ 45,276,241 $ 132,452,630 $ 90,471,558
------------- ------------- ------------- -------------
Rental property expenses:
Rent 2,806,576 426,536 5,558,711 854,484
Real estate taxes 9,432,426 5,510,848 18,309,425 10,905,368
Interest 12,371,969 6,775,437 23,411,176 13,071,041
Operating and maintenance 6,984,030 5,403,954 13,920,139 11,290,453
Depreciation and amortization 9,990,920 7,061,471 18,890,684 13,960,719
------------- ------------- ------------- -------------
41,585,921 25,178,246 80,090,135 50,082,065
------------- ------------- ------------- -------------
Income from rental property 27,755,077 20,097,995 52,362,495 40,389,493
Income from investment in retail store leases 912,077 893,715 1,828,248 1,809,654
------------- ------------- ------------- -------------
28,667,154 20,991,710 54,190,743 42,199,147
Management fee income 729,585 1,075,460 1,531,293 1,863,811
General and administrative expenses (3,824,006) (2,780,328) (7,004,659) (5,535,019)
Other income, net 1,957,191 1,514,046 3,395,054 2,877,222
------------- ------------- ------------- -------------
Income before gain on sale of shopping center
property 27,529,924 20,800,888 52,112,431 41,405,161
Gain on sale of shopping center property -- 243,995 901,249 243,995
------------- ------------- ------------- -------------
Net Income $ 27,529,924 $ 21,044,883 $ 53,013,680 $ 41,649,156
============= ============= ============= =============
Net income applicable to common shares $ 22,485,875 $ 16,435,458 $ 43,360,226 $ 32,430,306
============= ============= ============= =============
Net income per common share
Basic $ 0.51 $ 0.45 $ 1.03 $ 0.89
====== ====== ====== ======
Diluted $ 0.50 $ 0.45 $ 1.01 $ 0.89
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
8
<PAGE>
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months ended June 30, 1998 and 1997
---------
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Cash flow provided by operations $ 70,324,903 $ 56,362,009
------------- -------------
Cash flow from investing activities:
Acquisition of and improvements to real estate (169,175,807) (80,797,493)
Investment in marketable securities (4,100,029) (996,291)
Acquisition of real estate through joint venture investment (16,224,989) (907,068)
Advances to affiliated companies -- (6,036,000)
Investment in mortgage loans receivable (1,980,760) --
Repayment of mortgage loans receivable 1,456,200 --
Construction advance to real estate joint ventures (1,462,006) --
Proceeds from disposition of shopping center property 2,300,000 1,550,000
------------- -------------
Net cash flow used for investing activities (189,187,391) (87,186,852)
------------- -------------
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 (1,943,557) (511,059)
Proceeds from mortgage financing 9,000,000 --
Proceeds from issuance of medium-term notes 100,000,000 50,000,000
Borrowings under revolving credit facilities 100,000,000 10,000,000
Repayment of borrowings under revolving credit facilities (145,000,000) --
Dividends paid (48,008,718) (40,363,295)
Proceeds from issuance of stock 107,758,532 1,855,399
------------- -------------
Net cash flow provided by financing activities 121,806,257 16,331,045
------------- -------------
Change in cash and cash equivalents 2,943,769 (14,493,798)
Cash and cash equivalents, beginning of period 30,978,178 37,425,206
------------- -------------
Cash and cash equivalents, end of period $ 33,921,947 $ 22,931,408
============= =============
Interest paid during the period $ 22,753,561 $ 12,635,922
============= =============
Supplemental schedule of noncash investing/financing activity:
Acquisition of real estate interests by issuance of common stock,
preferred stock, and assumption of debt $ 989,466,479 $ --
============= =============
Declaration of dividends paid in succeeding period $ 25,638,170 $ 18,767,183
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
9
<PAGE>
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. Common Stock Offerings
During April and May 1998, the Company completed the sale of an aggregate
3,039,507 shares of common stock in five separate transactions consisting of
(i) a primary public stock offering of 460,000 shares of common stock priced
at $36.0625 per share, and (ii) four private placements of 415,945 shares,
546,075 shares, 837,000 shares and 780,487 shares of common stock priced at
$36.0625, $36.625, $36.25 and $38.4375 per share, respectively.
The shares of common stock sold in the private placements were deposited
in separate unit investment trusts. The net proceeds from these offerings
totaling approximately $106.0 million (after related transaction costs of
approximately $5.9 million) were used for general corporate purposes,
including the acquisition of interests in neighborhood and community shopping
centers and the expansion and improvement of certain properties in the
Company's portfolio.
3. Property Acquisitions
During the six months ended June 30, 1998, the Company and its affiliates
acquired interests in 15 neighborhood and community shopping center properties
comprising approximately 1.7 million square feet of gross leasable area
("GLA") in eight states for an aggregate purchase price of approximately
$136.3 million, including the assumption of approximately $20.8 million in
mortgage debt.
10
<PAGE>
4. Retail Properties Acquisition
During January 1998, the Company, through an affiliated entity, acquired
fee interest in three properties from a retailer in the Chicago, IL market
comprising approximately 516,000 square feet of GLA for an aggregate purchase
price of approximately $23.7 million. These properties include approximately
70,000 square feet of showroom space and adjoining warehouses of approximately
100,000 square feet at each location. Simultaneous with this transaction, the
Company leased, to a national furniture retailer, the showroom portion of each
property under individual long-term leases. The Company is currently planning
the redevelopment of the warehouse portion of each property.
During the six months ended June 30, 1998, the Company has invested
approximately $16.2 million in a partnership which has acquired and
leased-back 10 automotive dealerships. The Company has a 50% interest in this
partnership.
5. Property Disposition
During January 1998, the Company disposed of a shopping center property
in Pinellas Park, FL. Cash proceeds from the disposition totaling $2.3
million, together with an additional $7.1 million cash investment, were used
to acquire an exchange shopping center property located in Cranston, RI during
March 1998.
6. Price REIT Merger
On January 13, 1998, the Company, REIT Sub, Inc., a Maryland corporation
and a wholly owned subsidiary of the Company ("Merger Sub") and The Price
REIT, Inc., a Maryland corporation, ("Price REIT"), signed a definitive
Agreement and Plan of Merger dated January 13, 1998, as amended March 5, 1998
and May 14, 1998, (the "Merger Agreement"). On June 19, 1998, the shareholders
of the Company and the shareholders of Price REIT approved the issuance of the
Merger Consideration (as defined in the Merger Agreement) and the Merger,
respectively, and Price REIT was merged into Merger Sub.
Prior to the Merger, Price REIT was a self-administered and self-managed
equity REIT that was primarily focused on the acquisition, development,
management and redevelopment of destination retail shopping center properties
known as "power centers." As of June 19, 1998, Price REIT owned or had
interests in 43 properties, consisting of 39 power and community centers, one
stand-alone retail warehouse, one project under development and two
undeveloped land parcels, located in 17 states containing approximately 8.0
million square feet of GLA.
In connection with the Merger, holders of Price REIT common stock
received one share of Kimco common stock and 0.36 shares of Kimco Class D
Depositary Shares (the "Class D Depositary Shares"), each Class D Depositary
Share representing a one-tenth fractional interest in a new issue of Kimco
7.5%
11
<PAGE>
Cumulative Convertible Preferred Stock, par value $1.00 per share (the "Class
D Preferred Stock"), for each share of Price REIT common stock. On June 19,
1998, the Company issued 11,921,992 shares of its common stock and 429,159
shares of Class D Preferred Stock (represented by 4,291,590 Class D Depositary
Shares) in connection with the Merger. Additionally, in connection with the
Merger, the Company issued 65,000 shares of a new issue of Kimco Class E
Floating Rate Cumulative Preferred Stock, par value $1.00 per share (the
"Class E Preferred Stock", represented by 650,000 Class E Depositary Shares,
(the "Class E Depositary Shares")), each Class E Depositary Share representing
a one-tenth fractional interest in the Class E Preferred Stock. The Merger was
accounted for using the purchase method of accounting for financial reporting
purposes.
Dividends on the Class D Depositary Shares are cumulative and payable
quarterly in arrears at the rate per depositary share equal to the greater of
(i) 7.5% per annum based on the $25 per share initial value, or $1.875 per
share or (ii) the cash dividends on the shares of the Company's common stock
into which a Class D Depositary Share is convertible, plus $.0275 per quarter.
The Class D Depositary Shares are convertible at any time into the Company's
common stock at a conversion price of $40.25 per share of common stock or a
conversion rate of 0.62112 for each Class D Depositary Share. The Class D
Depositary Shares may be redeemed in whole, or from time to time, in part, on
any date on or after June 19, 2001 at the option of the Company if, for any 20
trading days within any period of 30 consecutive trading days, including the
last trading day of such period, the average closing price per share of the
Company's common stock exceeds 120% of the conversion price or $48.30 per
share.
The Class D Preferred Stock (represented by the Class D Depositary Shares
outstanding) ranks pari passu with the Company's 7 3/4% Class A Cumulative
Redeemable Preferred Stock, 8 1/2% Class B Cumulative Redeemable Preferred
Stock, 8 3/8 % Class C Cumulative Redeemable Preferred Stock and the Class E
Floating Rate Cumulative Preferred Stock (represented by the Class E
Depositary Depositary Shares) as described below, as to voting rights priority
for receiving dividends and liquidation preferences.
Dividends on the Class E Depositary Shares are cumulative at the rate of
LIBOR plus 2.00% per annum (7.68% per annum initial rate) based on the initial
issue price of $100 per depositary share. The dividend rate on Class E
Depositary Shares resets and is payable quarterly in arrears. The Class E
Preferred Stock (represented by the Class E Depositary Shares) is redeemable at
the option of the Company for 150 days after the effective time of the Merger
(the "Repurchase Termination Date") at a price equal to the liquidation
preference plus accrued and unpaid dividends. If not redeemed during this 150
day period, the Class E Preferred Stock will not be redeemable again until after
the fifth anniversary of the Repurchase Termination Date. The redemption price
of the Class E Preferred Stock must be paid solely from the sale of proceeds of
other capital stock of the Company, which may include other classes or series of
preferred stock. The Class E Depositary
12
<PAGE>
Shares are not convertible or exchangeable for any other property or
securities of the Company. The Class E Preferred Stock ranks pari passu with
the Class A, Class B, Class C and Class D Preferred Stock as described above,
as to voting rights, priority for receiving dividends and liquidation
preferences.
7. Investment in Retail Store Leases
Income from the investment in retail store leases for the six months
ended June 30, 1998 and 1997 represents sublease revenues of approximately
$10.1 million and $10.6 million, respectively, less related expenses of $7.4
million and $7.8 million, respectively, and amounts, which in management's
estimation, reasonably provide for the recovery of the investment over a
period representing the expected remaining term of the retail store leases.
8. Net Income Per Common Share
The following table sets forth the basic and diluted weighted average
numbers of common shares outstanding for each period used in the calculation
of basic and diluted net income per common share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Basic EPS - weighted
average number of common
shares outstanding 44,128,650 36,257,999 42,279,021 36,243,762
Effect of dilutive securities -
Stock options 587,163 405,306 561,317 446,925
---------- ---------- ---------- ----------
Diluted EPS - weighted
average number of 44,715,813 36,663,305 42,840,338 36,690,687
common shares ========== ========== ========== ==========
</TABLE>
The effect of the conversion of the Class D Preferred Stock would have an
anti-dilutive effect upon the calculation of net income per common share.
Accordingly, the impact of such conversion has not been included in the
determination of diluted net income per common share.
9. Pro Forma Financial Information
As discussed in Notes 3, 5 and 6, the Company and certain of its
affiliates acquired and disposed of interests in certain shopping center
properties during the six months ended June 30, 1998. 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, 1998 and
1997, adjusted to give effect to these transactions as of January 1, 1997.
13
<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, 1997, nor does it
purport to represent the results of future operations. (Amounts presented in
millions, except per share figures).
Six Months Ended June 30,
1998 1997
------------ ------------
Revenues from rental property $ 181.9 $ 148.2
Net Income $ 69.5 $ 62.8
Net Income per common share:
Basic $ 1.01 $ .98
Diluted $ 1.00 $ .97
10. Subsequent Events
On July 1, 1998, certain subsidiaries of the Company acquired a portfolio
of 30 fee and leasehold positions from Metropolitan Life Insurance Company
("Met Life") consisting of 29 neighborhood and community shopping center
properties and one office/distribution facility. These properties, comprising
approximately 3.8 million square feet of GLA located in 5 states, were
acquired for an aggregate purchase price of approximately $167.5 million. The
properties were leased to Venture Stores, Inc. ("Venture") under a single
master lease agreement.
On July 17, 1998, the Company acquired Venture's leasehold position at 88
locations, including the 30 locations acquired from Met Life, 56 locations
pursuant to two unitary leases currently in place with the Company and two
other locations. The purchase price for the leasehold positions will be a
minimum of $95 million, but is subject to upward adjustment based on the
Company's ability to re-tenant the properties over a two year period.
Simultaneous with this transaction, the Company leased 46 of these locations
to a national retailer.
During July 1998, the Company completed the sale of an aggregate
1,315,498 shares of common stock in three separate transactions consisting of
(i) a primary public stock offering of 510,000 shares of common stock priced
at $39.4375 per share, and (ii) two direct placements of 375,000 and 430,498
shares of common stock priced at $38.2575 and $38.56 per share, respectively.
The net proceeds from these sales of common stock, totaling approximately
$49.9 million (after related transaction costs of approximately $1.2 million)
have been used for general corporate purposes, including the acquisition of
neighborhood and community shopping centers and the expansion and improvement
of certain properties in the Company's portfolio.
14
<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.
In connection with the Annual Meeting of Stockholders held on June 19,
1998, stockholders were asked to vote with respect to (I) the issuance by the
Company of shares of its Common Stock, par value $.01 per share, and
depositary shares, each of which represents a one-tenth fractional interest in
a share of a new issue of 7.5% Class D Cumulative Convertible Preferred Stock,
par value $1.00 per share, liquidation preference $250.00 per share in
connection with the Merger (the "Kimco Share Proposal"), (II) the election of
Directors to serve for the ensuing year, (III) a proposal to adopt the 1998
Equity Participation Plan of the Company and (IV) the postponement or
adjournment of the Kimco Annual Meeting in order to solicit additional votes
for the Kimco Share Proposal if the Chairman of the Kimco Annual Meeting
determines that there are not sufficient votes to approve the Kimco Share
Proposal.
15
<PAGE>
A total of 32,612,802 votes were cast regarding the following proposals:
<TABLE>
<CAPTION>
Proposal I - Votes For Against Abstain No Vote
- ---------- ----- --- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(Approval of the Kimco 32,612,802 27,628,560 185,179 109,947 4,689,116
Share Proposal)
</TABLE>
Proposal II -
- -----------
(Election of Directors) Votes For Withheld
----- --- --------
Nominees:
---------
Martin S. Kimmel 32,612,802 32,154,389 458,413
Milton Cooper 32,612,802 32,184,212 428,590
Joe Grills 32,612,802 32,201,262 411,540
Richard G. Dooley 32,612,802 32,201,462 411,340
Michael J. Flynn 32,612,802 32,183,312 429,490
Frank Lourenso 32,612,802 32,163,717 449,085
<TABLE>
<CAPTION>
Proposal III - Votes For Against Abstain No Vote
- ------------ ----- --- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(Approval of the Kimco 32,612,802 21,894,899 5,900,943 116,944 4,700,016
1998 Equity Participation
Plan)
<CAPTION>
Proposal IV - Votes For Against Abstain No Vote
- ----------- ----- --- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(Approval of the Kimco 32,612,802 28,599,625 3,624,836 122,146 266,195
Adjournment Proposal)
</TABLE>
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.
16
<PAGE>
Form 8-K -
A current report on Form 8-K was filed on May 22, 1998 to disclose
certain historical financial information for certain properties acquired
during 1998 and pro forma financial information for all shopping center
acquisitions from January 1998 through May 1998.
A current report on Form 8-K was filed on June 4, 1998, to disclose a
preferred stock purchase agreement between Price REIT and the Company and LBI
Group, Inc. ("LBI") whereby Price REIT proposes to sell to LBI shares of its
Class A Floating Rate Cumulative Preferred Stock.
A current report on Form 8-K was filed on June 24, 1998 to disclose the
consummation of a merger (the "Merger") whereby the Company acquired control
of Price REIT, Inc. ("Price REIT") pursuant to an Agreement and Plan of
Merger.
17
<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
August 14, 1998 /s/ Milton Cooper
- -------------------- ------------------------------
(Date) Milton Cooper
Chairman of the Board
August 14, 1998 /s/ Michael V. Pappagallo
- -------------------- ------------------------------
(Date) Michael V. Pappagallo
Chief Financial Officer
18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 33,921,947
<SECURITIES> 23,016,586
<RECEIVABLES> 27,592,628
<ALLOWANCES> 2,786,130
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,536,274,796
<DEPRECIATION> 225,151,864
<TOTAL-ASSETS> 2,528,786,937
<CURRENT-LIABILITIES> 0
<BONDS> 930,486,686
0
1,394,159
<COMMON> 554,461
<OTHER-SE> 1,483,844,875
<TOTAL-LIABILITY-AND-EQUITY> 2,528,786,937
<SALES> 132,452,630
<TOTAL-REVENUES> 132,452,630
<CGS> 37,788,275
<TOTAL-COSTS> 37,788,275
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,411,176
<INCOME-PRETAX> 53,013,680
<INCOME-TAX> 0
<INCOME-CONTINUING> 53,013,680
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,013,680
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.01
<FN>
Financial Data Schedule information has been extracted from the
Registrant's Condensed Consolidated Balance Sheet
(non-classified) as of June 30, 1998 and the Condensed
Consolidated Statement of Income for the six months then ended.
</FN>
</TABLE>
