<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 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
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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)
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(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
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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.
60,713,691 shares outstanding as of July 30, 1999
1 of 17
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Financial Statements -
Condensed Consolidated Balance Sheets as of June 30, 1999 and December 31,
1998.
Condensed Consolidated Statements of Income for the Three and Six Months
Ended June 30, 1999 and 1998.
Condensed Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1999 and 1998.
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 $36.8 million or 53.0% to
$106.1 million for the three months ended June 30, 1999, as compared with $69.3
million for the corresponding quarter ended June 30, 1998. Similarly, revenues
from rental property increased $86.5 million or 65.3% to $218.9 million for the
six months ended June 30, 1999, as compared with $132.4 million for the
corresponding six month period ended June 30, 1998. These increases resulted
primarily from the combined effect of (i) the acquisition of 11 shopping center
properties providing revenues of $2.5 million and $4.2 million for the three and
six month periods ended June 30, 1999, respectively, two of which were
subsequently sold to Kimco Income REIT ("KIR", an unconsolidated real estate
joint venture in which the Company has an interest), (ii) acquisitions
throughout calendar year 1998 (62 shopping center properties and three retail
properties) providing incremental revenues of $11.0 million and $25.8 million as
compared to the corresponding three and six month periods in 1998, respectively,
(iii) the acquisition of The Price REIT, Inc. as of June 19, 1998 (the "Price
REIT Acquisition") providing incremental revenues of $15.9 million and $42.5
million for the three and six month periods ended June 30, 1999, respectively,
and (iv) new leasing, property redevelopments and re-tenanting within the
portfolio at improved rental rates.
2
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Rental property expenses, including depreciation and amortization,
increased $22.4 million or 53.8% to $64.0 million for the three months ended
June 30, 1999, as compared with $41.6 million for the corresponding quarter
ended June 30, 1998. Similarly, rental property expenses, including depreciation
and amortization, increased $55.1 million or 68.8% to $135.2 million for the six
months ended June 30, 1999 as compared with $80.1 million for the corresponding
period in the preceding year. The rental property expense components of real
estate taxes, operating and maintenance and depreciation and amortization
increased $3.8 million, $3.3 million and $6.8 million, respectively, for the
three month period ended June 30, 1999, as compared with the corresponding
quarter in the preceding year. Similarly, the rental property expense components
of real estate taxes, operating and maintenance and depreciation and
amortization increased by $9.3 million, $8.7 million and $15.8 million,
respectively, for the six month period ended June 30, 1999, as compared with the
corresponding period in the preceding year. These rental property expense
increases are primarily due to property acquisitions during the six months
ended June 30, 1999, and the incremental costs associated with the Price REIT
Acquisition and the property acquisitions throughout 1998. Interest expense
increased $7.8 million and $20.0 million for the three and six month periods
ended June 30, 1999, respectively, reflecting higher average outstanding
borrowings as compared to the corresponding periods in 1998 resulting from (i)
the issuance of additional unsecured debt during 1999 and 1998 and the
assumption of $250 million in connection with the Price REIT Acquisition, (ii)
the assumption of mortgage debt during 1998 and the six months ended June 30,
1999 in connection with certain property acquisitions and (iii) mortgage
financing obtained on 22 properties in 1998 totaling $281.3 million and three
properties in 1999 totaling $23.3 million.
During 1998, the Company formed KIR, a limited partnership established
to invest in high quality retail properties financed primarily through the use
of individual non-recourse mortgages. At the time of formation, the Company
contributed 19 property interests to KIR. On April 28, 1999, KIR sold a
significant interest in the partnership to an institutional investor for
approximately $70 million. Simultaneous with this transaction, KIR purchased
four properties for approximately $70.1 million. As a result of these
transactions, the Company now holds a non-controlling limited partnership
interest in KIR and accounts for its investment in KIR under the equity method
of accounting. The Company's equity in income from KIR for the period April 28,
1999 to June 30, 1999 was approximately $1.1 million.
General and administrative expenses increased approximately $2.1
million and $4.8 million for the three and six months ended June 30, 1999,
respectively, as compared to the corresponding periods in 1998. These increases
are due primarily to an increase in senior management and staff levels and other
personnel costs in connection with the growth of the Company and the Price REIT
Acquisition.
During the six months ended June 30, 1999, the Company disposed of
three shopping center properties. Cash proceeds from these dispositions
aggregated approximately $5.9 million, which approximated their aggregate net
book value.
3
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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, 1999 was $42.4
million and $81.9 million, respectively. Net income for the three and six months
ended June 30, 1998 was $27.5 million and $53.0 million, respectively. On a per-
basic share basis, net income improved $.08 and $.13 for the three and six month
periods ended June 30, 1999, respectively, after adjusting for the gain on sale
of a shopping center property in the respective period, reflecting the effect of
property acquisitions, including the Price REIT Acquisition, property
redevelopments and increased leasing activity and re-tenanting at improved
rental rates which strengthened operating profitability.
Liquidity and Capital Resources
- -------------------------------
Since the completion of the Company's IPO in 1991, the Company has
utilized the public debt and equity markets as its principal source of capital.
Since the IPO, the Company has completed additional offerings of its public
unsecured debt and equity, raising in the aggregate over $1.9 billion for the
purposes of repaying indebtedness, acquiring interests in neighborhood and
community shopping centers and for expanding and improving properties in the
portfolio.
During August 1998, the Company established a $215 million, unsecured
revolving credit facility (the "Credit Facility"), which is scheduled to expire
in August 2001. This Credit Facility, which replaced both the Company's $100
million unsecured revolving credit facility and $150 million interim unsecured
credit facility, has made available funds to both finance the purchase of
properties and meet any short-term working capital requirements. As of June 30,
1999 there was $15 million outstanding under the Credit Facility.
The Company has also implemented a $200 million MTN program pursuant to
which it may from time to time offer for sale its senior unsecured debt for any
general corporate purposes, including (i) funding specific liquidity
requirements in its business, including property acquisitions, development and
redevelopment costs and (ii) managing the Company's debt maturities.
In addition to the public equity and debt markets as capital sources,
the Company may, from time to time, obtain mortgage financing on selected
properties. As of June 30, 1999, the Company had over 300 unencumbered property
interests in its portfolio.
During 1998, the Company filed a shelf registration statement on Form
S-3 for up to $750 million of debt securities, preferred stock, depositary
shares, common stock and common stock warrants. As of June 30, 1999, the Company
had approximately $493.2 million available for issuance under this shelf
registration statement.
4
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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, unsecured debt financings and/or mortgage financings in a manner
consistent with its intention to operate with a conservative debt capitalization
policy.
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 facility,
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 $114.8 million for the six months ended June
30, 1999 as compared to $70.3 million for the corresponding period ended June
30, 1998.
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.
5
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Impact of Year 2000
- -------------------
Like most corporations, the Company depends upon its business and
technical information systems in operating 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. This problem is commonly
referred to as the "Year 2000" issue.
The Company has substantially completed the assessment, modification
and testing phases of its systems as to Year 2000 compliance and functionality.
The Company has substantially completed the identification and review of
computer hardware and software suppliers and is currently verifying the Year
2000 compliance of third-party suppliers, vendors and service providers that the
Company has deemed important to the ongoing operations of the business.
The total costs to date related to the Year 2000 issue have been
immaterial to the Company's operations. These costs have been expensed as
incurred and consist primarily of internal staff costs and other related
expenses. The Company does not believe that the remaining costs expected to be
incurred in addressing the Year 2000 issue will have a material adverse effect
on the Company's financial condition or results of operations.
Based upon the substantial progress made to date, the Company does not
anticipate delays in finalizing internal Year 2000 compliance issues. However,
the Company cannot guarantee that its third party vendors, partners or others
will be Year 2000 compliant. If the Company or such third party vendors,
partners and others encounter problems in addressing the Year 2000 issue, the
Company's ability to operate its properties and to bill and collect revenues in
a timely manner could be materially adversely affected. The Company is currently
addressing the development of a contingency plan in the event that its systems
or the systems of third party vendors, partners or others fail to resolve the
Year 2000 issue.
Forward-looking Statements
- --------------------------
This quarterly report on Form 10-Q, together with other statements and
information publicly disseminated by the Company contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. The Company intends such forward-looking statements to be covered by
the safe harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995 and include this statement for
purposes of complying with these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe the Company's
future plans, strategies and expectations, are generally identifiable by use of
the words "believe," "expect," "intend," "anticipate," "estimate," "project" or
similar expressions. You should not rely on forward-looking statements since
they involve known and unknown risks, uncertainties and other factors which are,
in some cases, beyond the Company's
6
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control and which could materially affect actual results, performances or
achievements. Factors which may cause actual results to differ materially from
current expectations include, but are not limited to, (i) general economic and
local real estate conditions, (ii) financing risks, such as the inability to
obtain equity or debt financing on favorable terms, (iii) changes in
governmental laws and regulations, (iv) the level and volatility of interest
rates (v) the availability of suitable acquisition opportunities and (vi)
increases in operating costs. Accordingly, there is no assurance that the
Company's expectations will be realized.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As of June 30, 1999, the Company had approximately $193.8 million of
floating-rate debt outstanding, including $15.0 million on its unsecured line of
credit. The interest rate risk on $160.0 million of such debt has been mitigated
through the use of interest rate swap agreements (the "Swaps") with major
financial institutions. The Company is exposed to credit risk in the event of
non-performance by the counter-parties to the Swaps. The Company believes it
mitigates its credit risk by entering into these Swaps with major financial
institutions.
The Company believes the interest rate risk represented by the
remaining $33.8 million of floating-rate debt is not material in relation to the
total debt outstanding of the Company or its market capitalization.
The Company has not, and does not plan to, enter into any derivative
financial instruments for trading or speculative purposes. As of June 30, 1999,
the Company had no other material exposure to market risk.
7
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KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------------ -----------------
<S> <C> <C>
Assets:
Real estate, net of accumulated depreciation
of $281,341 and $255,950, respectively $ 2,485,007 $ 2,767,952
Investments and advances in real estate joint ventures 58,335 64,263
Investments and advances in KIR 115,207 -
Investment in retail store leases 14,456 15,172
Cash and cash equivalents 32,321 43,920
Accounts and notes receivable 33,262 31,821
Other assets 109,928 128,050
------------------ -----------------
$ 2,848,516 $ 3,051,178
================== =================
Liabilities:
Notes payable $ 900,250 $ 855,250
Mortgages payable 209,791 434,311
Other liabilities, including minority interests
in partnerships 153,051 176,598
------------------ -----------------
1,263,092 1,466,159
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Stockholders' Equity:
Preferred stock, $1.00 par value, authorized 5,000,000 and 3,470,000
shares, respectively
Class A Preferred Stock, $1.00 par value, authorized 345,000 shares
Issued and outstanding 300,000 shares 300 300
Aggregate liquidation preference $75,000
Class B Preferred Stock, $1.00 par value, authorized 230,000 shares
Issued and outstanding 200,000 shares 200 200
Aggregate liquidation preference $50,000
Class C Preferred Stock, $1.00 par value, authorized 460,000 shares
Issued and outstanding 400,000 shares 400 400
Aggregate liquidation preference $100,000
Class D Convertible Preferred Stock, $1.00 par value, authorized 700,000 shares
Issued and outstanding 429,144 and 429,159 shares, respectively 429 429
Aggregate liquidation preferences $107,286 and $107,290, respectively
Common stock, $.01 par value, authorized 200,000,000 and 100,000,000
shares, respectively
Issued and outstanding 60,279,163 and 60,133,704 shares, respectively 603 601
Paid-in capital 1,711,506 1,707,272
Cumulative distributions in excess of net income (128,014) (124,183)
------------------ -----------------
1,585,424 1,585,019
------------------ -----------------
$ 2,848,516 $ 3,051,178
================== =================
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
8
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KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three and Six Months ended June 30, 1999 and 1998
(in thousands, except share information)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
--------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Revenues from rental property $ 106,072 $ 69,341 $ 218,948 $ 132,453
--------------- ----------------- ------------------ -----------------
Rental property expenses:
Rent 3,497 2,807 6,995 5,559
Real estate taxes 13,255 9,432 27,568 18,309
Interest 20,128 12,372 43,366 23,411
Operating and maintenance 10,290 6,984 22,574 13,920
Depreciation and amortization 16,794 9,991 34,665 18,891
--------------- ----------------- ------------------ -----------------
63,964 41,586 135,168 80,090
--------------- ----------------- ------------------ -----------------
Income from rental property 42,108 27,755 83,780 52,363
Income from investment in retail store leases 997 912 1,980 1,828
--------------- ----------------- ------------------ -----------------
43,105 28,667 85,760 54,191
Management fee income 1,307 730 2,143 1,531
General and administrative expenses (5,882) (3,824) (11,851) (7,005)
Equity in income of KIR 1,147 - 1,147 -
Other income, net 2,764 1,957 4,730 3,395
--------------- ----------------- ------------------ -----------------
Income before gain on sale of shopping
center property 42,441 27,530 81,929 52,112
Gain on sale of shopping center property - - - 901
--------------- ----------------- ------------------ -----------------
Net Income $ 42,441 $ 27,530 $ 81,929 $ 53,013
=============== ================= ================== =================
Net income applicable to common shares $ 35,820 $ 22,486 $ 68,687 $ 43,360
=============== ================= ================== =================
Net income per common share
Basic $0.59 $0.51 $1.14 $1.03
====== ====== ====== =====
Diluted $0.59 $0.50 $1.13 $1.01
====== ====== ====== =====
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
9
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KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months ended June 30, 1999 and 1998
(in thousands)
<TABLE>
<CAPTION>
1999 1998
--------------- -----------------
<S> <C> <C>
Cash flow provided by operations $ 114,846 $ 70,325
--------------- -----------------
Cash flow from investing activities:
Acquisition of and improvements to real estate (139,728) (169,175)
Acquisition of real estate through joint venture investment - (16,225)
Investment in marketable securities (11,833) (4,100)
Proceeds from sale of marketable securities 10,416 -
Investments and advances to affiliated companies (950) -
Investments and advances to joint ventures (17,276) -
Investment in mortgage loans receivable - (1,981)
Repayment of mortgage loans receivable 4,545 1,456
Construction advances to real estate joint ventures - (1,462)
Reimbursement of advances to real estate joint ventures 7,500 -
Net proceeds from sale of interest in KIR 68,179 -
Proceeds from sale of shopping center properties 5,890 2,300
--------------- -----------------
Net cash flow used for investing activities (73,257) (189,187)
--------------- -----------------
Cash flow from financing activities:
Principal payments on debt, excluding
normal amortization of rental property debt (18,464) -
Principal payments on rental property debt (2,655) (1,944)
Proceeds from mortgage financing 23,306 9,000
Payment of unsecured obligation (20,984) -
Proceeds from issuance of senior notes 130,000 -
Repayment of senior notes (100,000) -
Proceeds from issuance of medium-term notes - 100,000
Borrowings under revolving credit facilities 50,000 100,000
Repayment of borrowings under revolving credit facilities (35,000) (145,000)
Dividends paid (83,627) (48,009)
Proceeds from issuance of stock 4,236 107,759
--------------- -----------------
Net cash flow (used for)/provided by financing activities (53,188) 121,806
--------------- -----------------
Change in cash and cash equivalents (11,599) 2,944
Cash and cash equivalents, beginning of period 43,920 30,978
=============== =================
Cash and cash equivalents, end of period $ 32,321 $ 33,922
=============== =================
Interest paid during the period $ 41,937 $ 22,754
=============== =================
Supplemental schedule of noncash investing/financing activities:
Acquisition of real estate interests by issuance of common stock,
preferred stock, and assumption of debt $ 41,607 $ 989,466
=============== =================
Declaration of dividends paid in succeeding period $ 41,576 $ 25,638
=============== =================
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
10
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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 partnerships in which the Company has a
controlling interest. The information furnished is unaudited and reflects all
adjustments which are, in the opinion of management, necessary to reflect a fair
statement of the results for the interim periods presented, and all such
adjustments are of a normal recurring nature. These Condensed Consolidated
Financial Statements should be read in conjunction with the financial statements
included in the Company's Annual Report on Form 10-K.
2. Property Acquisitions / Other Investments
During the six months ended June 30, 1999, the Company and its
affiliates acquired interests in 11 shopping center properties (two of which
were subsequently sold to Kimco Income REIT ("KIR", an unconsolidated real
estate joint venture in which the Company has an interest)) comprising
approximately 1.1 million square feet of gross leasable area ("GLA") in 10
states for an aggregate purchase price of approximately $104.3 million,
including the assumption of approximately $16.9 million in mortgage debt.
During December 1998, the Company acquired a first mortgage interest on
a shopping center in Manhasset, NY for approximately $21 million. During April
1999, the Company acquired fee title to this property.
During the six months ended June 30, 1999, the Company acquired one
land parcel and, through separate partnership investments, interests in two
additional land parcels for the ground-up development of shopping centers for an
aggregate purchase price of approximately $17.3 million.
During June 1999, the Company, through an affiliated entity, invested
$17.3 million in a joint venture which acquired a mortgage participation
interest secured by 28 properties owned by a national retailer.
11
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3. Property Dispositions
During the six months ended June 30, 1999, the Company disposed of
three shopping center properties. Cash proceeds from these dispositions
aggregated approximately $5.9 million, which approximated their aggregate net
book value.
4. Debt Financings
During February 1999, the Company issued $130 million of 6-7/8%
fixed-rate Senior Notes due 2009 (the "Notes"). Interest on the Notes is payable
semi-annually in arrears. The Notes were sold at 99.85% of par value. Net
proceeds from the issuance totaling approximately $128.9 million, after related
transaction costs of approximately $.9 million, were used, in part, to repay
$100 million floating-rate senior notes that matured during February 1999 and
for general corporate purposes.
5. Investment in Retail Store Leases
Income from the investment in retail store leases for the six months
ended June 30, 1999 and 1998 represents sublease revenues of approximately $10.2
million and $10.1 million, respectively, less related expenses of $7.4 million
and $7.4 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.
6. 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, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Basic EPS - weighted
average number of common
shares outstanding 60,258,048 44,128,650 60,212,320 42,279,021
Effect of dilutive securities -
stock options 588,405 587,163 595,084 561,317
-------------- -------------- -------------- ---------------
Diluted EPS - weighted
average number of
common shares 60,846,453 44,715,813 60,807,404 42,840,338
============== ========== ============== ==========
</TABLE>
12
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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.
7. Investment and Advances in KIR:
During 1998, the Company formed KIR, a limited partnership established
to invest in high quality retail properties financed primarily through the use
of individual non-recourse mortgages. At the time of formation, the Company
contributed 19 property interests to KIR. On April 28, 1999, the Company entered
into an agreement whereby an institutional investor would purchase a significant
interest in KIR. Under the terms of the agreement, the agreed equity value for
the 19 shopping centers previously contributed to KIR by the Company was
approximately $107 million and the Company has agreed to contribute an
additional $10 million for a total investment of $117 million. The institutional
investor has subscribed for up to $117 million of equity in KIR, of which
approximately $70 million has been contributed. Simultaneous with these
transactions, KIR purchased four properties for approximately $70.1 million.
During the period April 28, 1999 to June 30, 1999 KIR purchased two additional
properties for approximately $24.9 million. As a result of these transactions,
the Company now holds a non-controlling limited partnership interest in KIR and
accounts for its investment in KIR under the equity method of accounting.
Additionally, in connection with these transactions, KIR entered into a master
management agreement with the Company, whereby, the Company will perform
services for fee relating to the management, operation, supervision and
maintenance of the joint venture properties. The Company's equity in income from
KIR for the period April 28, 1999 to June 30, 1999 was approximately $1.1
million.
8. Pro Forma Financial Information
As discussed in Notes 2 and 3, the Company and certain of its
affiliates acquired and disposed of interests in certain shopping center
properties during the six months ended June 30, 1999. 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, 1999 and
1998, adjusted to give effect to these transactions as of January 1, 1998.
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, 1998, nor does it
purport to represent the results of future operations. (Amounts presented in
millions, except per share figures).
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Six Months Ended June 30,
1999 1998
---- ----
Revenues from rental property $ 219.6 $ 138.4
Net Income $ 81.7 $ 54.8
Net Income per common share:
Basic $ 1.14 $ 1.07
========= =========
Diluted $ 1.13 $ 1.05
========= =========
9. Subsequent Events:
Effective July 1, 1999, the Company exercised its option to acquire 13
properties comprising 1.6 million square feet of GLA from KC Holdings, Inc. ("KC
Holdings"), an entity formed in connection with the Company's initial public
stock offering in November 1991. The properties were acquired for an aggregate
option price of approximately $39.8 million, paid $15.7 million in shares of the
Company's common stock (valued at $39.00 per share) and $24.1 million through
the assumption of mortgage debt encumbering the properties. The members of the
Company's Board of Directors who are not also shareholders of KC Holdings have
unanimously approved the Company's purchase of these 13 properties.
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 May 20,
1999 (the "Meeting"), 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
100 million shares to 200 million shares (b) increase the number of authorized
shares of Excess Stock of the Company, par value $.01 per share (the "Excess
Stock") from 51 million shares to 102 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 3.47 million shares to 5 million shares
(collectively, the "Kimco Share Proposal"). The Meeting was adjourned with
respect to Proposal II until June 1, 1999.
A total of 54,150,840 votes were cast regarding Proposal I and
57,842,980 votes were cast regarding the following proposals:
Proposal I -
- ----------
(Election of Directors) Votes For Withheld
----- --- --------
Nominees:
---------
Martin S. Kimmel 54,150,840 53,572,144 578,696
Milton Cooper 54,150,840 53,615,733 535,107
Joe Grills 54,150,840 53,685,381 465,459
Richard G. Dooley 54,150,840 53,219,455 931,385
Michael J. Flynn 54,150,840 53,613,857 536,983
Frank Lourenso 54,150,840 53,297,970 852,870
<TABLE>
<CAPTION>
Broker
Proposal II - Votes For Against Abstain Non-Votes
- ----------- ----- --- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
(Approval of the Kimco Share 57,842,980 40,130,519 6,763,490 158,571 10,790,400
Proposal)
</TABLE>
15
<PAGE>
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 -
A current report on Form 8-K was filed on May 13, 1999 to disclose
certain pro forma financial information for the contribution of 19 shopping
center properties and the sale of four shopping center properties by the Company
to a limited partnership in which the Company has an interest.
16
<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 13, 1999 /s/ Milton Cooper
(Date) Milton Cooper
Chairman of the Board
August 13, 1999 /s/ Michael V. Pappagallo
(Date) Michael V. Pappagallo
Chief Financial Officer
17
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 32,321
<SECURITIES> 27,422
<RECEIVABLES> 36,212
<ALLOWANCES> 2,950
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,766,348
<DEPRECIATION> 281,341
<TOTAL-ASSETS> 2,848,516
<CURRENT-LIABILITIES> 0
<BONDS> 1,110,041
0
1,329
<COMMON> 603
<OTHER-SE> 1,583,492
<TOTAL-LIABILITY-AND-EQUITY> 2,848,516
<SALES> 218,948
<TOTAL-REVENUES> 218,948
<CGS> 57,137
<TOTAL-COSTS> 57,137
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,366
<INCOME-PRETAX> 81,929
<INCOME-TAX> 0
<INCOME-CONTINUING> 81,929
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81,929
<EPS-BASIC> 1.14
<EPS-DILUTED> 1.13
<FN>
Financial Data Schedule information has been extracted from the Registrant's
Condensed Consolidated Balance Sheet (non-classified) as of June 30, 1999 and
the Condensed Consolidated Statement of Income for the six months then ended.
</FN>
</TABLE>
