<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 September 30, 2000
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
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(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 / /
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.
63,056,799 shares outstanding as of October 31, 2000
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 September 30, 2000 and
December 31, 1999.
Condensed Consolidated Statements of Income for the Three and Nine Months
Ended September 30, 2000 and 1999.
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2000 and 1999.
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 $9.7 million or 9.1% to $115.7
million for the three months ended September 30, 2000, as compared with $106.0
million for the corresponding quarter ended September 30, 1999. Similarly,
revenues from rental property increased $17.9 million or 5.5% to $342.9 million
for the nine months ended September 30, 2000, as compared with $325.0 million
for the corresponding nine month period ended September 30, 1999. These
increases resulted primarily from the combined effect of (i) the acquisition of
11 shopping center properties providing revenues of $2.1 million and $3.7
million for the three and nine month periods ended September 30, 2000,
respectively, (ii) acquisitions throughout calendar year 1999 (35 shopping
center properties) providing incremental revenues of $2.7 million and $12.4
million as compared to the corresponding three and nine month periods in 1999,
respectively, and (iii) the completion of certain development and redevelopment
projects, new leasing and re-tenanting within the portfolio at improved rental
rates providing incremental revenues of approximately $4.9 million and $18.1
million as compared to the corresponding three and nine month periods in 1999,
respectively. The nine month increase was reduced as a result of the
deconsolidation of 23 shopping center properties, as of April 28, 1999, in
connection with the sale of a controlling interest in Kimco Income REIT ("KIR").
Revenues from these 23 properties totaled approximately $16.3 million for the
nine month period ended September 30, 1999.
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Rental property expenses, including depreciation and amortization,
increased approximately $5.3 million or 8.4% to $68.7 million for the three
months ended September 30, 2000, as compared with $63.4 million for the
corresponding quarter ended September 30, 1999. The rental property expense
components of operating and maintenance and depreciation and amortization
increased $0.5 million and $1.8 million, respectively, for the three months
ended September 30, 2000 as compared to the same quarter last year. These rental
property expense increases are primarily due to property acquisitions during
1999 and the nine months ended September 30, 2000. Real estate taxes decreased
$0.7 million for the three months ended September 30, 2000 as compared to the
three months ended September 30, 1999. This decrease is the result of successful
real estate tax appeals offset by additional real estate taxes in connection
with property acquisitions during 1999 and 2000. Interest expense increased $3.8
million for the three months ended September 30, 2000 as compared to the same
quarter last year due to higher average outstanding borrowings.
Rental property expenses, including depreciation and amortization, increased
$6.8 million or 3.4% to $205.3 million for the nine months ended September 30,
2000, as compared with $198.5 million for the corresponding period in the
preceding year. These net increases in rental property expenses are the result
of the combined effect of (i) increased expenses relating to new property
acquisitions made throughout calendar year 1999 and during the nine months ended
September 30, 2000, offset by (ii) the reduction of rental property expenses
relating to the deconsolidation of 23 shopping center properties as of April 28,
1999, in connection with the sale of a controlling interest in KIR and (iii) the
reduction of real estate taxes on certain properties due to successful real
estate tax appeals. Interest expense increased $5.7 million for the nine month
period ended September 30, 2000, reflecting higher average outstanding
borrowings as compared to the corresponding period in 1999 resulting from (i)
the issuance of an additional $150.0 million of unsecured debt and the
assumption of mortgage debt during 1999 and 2000 in connection with certain
property acquisitions, offset by (ii) the deconsolidation of $252.4 million of
mortgage debt on 19 properties as of April 28, 1999, in connection with the sale
of a controlling interest 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, KIR sold a
significant interest in the partnership to an institutional investor. As a
result, the Company 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 of KIR for the three and nine month periods ended
September 30, 2000 was approximately $2.3 million and $6.9 million,
respectively.
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Other income, net increased $1.9 million and $7.7 million for the three
and nine month periods ended September 30, 2000, respectively, as compared to
the same periods in 1999. The increases are primarily the result of higher
interest and dividend income related to the Company's investment in certain
marketable equity and debt securities.
During the nine months ended September 30, 2000 the Company, in
separate transactions, disposed of eight shopping center properties comprising
1.1 million square feet of gross leasable area for an aggregate sales price of
approximately $19.7 million, including the assignment of $2.6 million of
mortgage debt. Net gains on sales of these properties was approximately $2.1
million.
During the nine months ended September 30, 1999, the Company disposed
of four shopping center properties. Cash proceeds from three of these
dispositions aggregated approximately $5.9 million, which approximated their
aggregate net book value. During July 1999, the Company disposed of a shopping
center property in New Port Richey, Florida. Cash proceeds from the disposition
totaling $0.5 million, together with an additional $5.5 million cash investment,
were used to acquire an exchange shopping center property located in Greensboro,
North Carolina during September 1999.
Net income for the three and nine months ended September 30, 2000 was
$51.5 million and $151.2 million, respectively. Net income for the three and
nine months ended September 30, 1999 was $45.6 million and $127.5 million,
respectively. On a diluted per share basis, net income improved $0.07 and $0.32
for the three and nine month periods ended September 30, 2000, respectively,
after adjusting for the gains on sales of certain shopping center properties in
the respective periods in 2000 and 1999. This improved performance reflects the
effect of property acquisitions, internal growth from strong leasing activity
and the completion of certain development and redevelopment projects 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 $2.2 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 2000, the Company established a $250 million, unsecured
revolving credit facility (the "Credit Facility"), which is scheduled to expire
in August 2003. This Credit Facility, which replaced the Company's $215 million
unsecured revolving credit facility, has made available funds to both finance
the purchase of properties and meet any short-term working capital requirements.
As of September 30, 2000 there was no amount outstanding under the Credit
Facility.
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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,
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 September 30, 2000, the Company had over 350 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. The Company has approximately
$106.7 million available for issuance under this shelf registration statement.
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 $206.7 million for the nine months ended
September 30, 2000 as compared to $179.8 million for the corresponding period
ended September 30, 1999.
5
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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
debt.
New Accounting Pronouncements
During December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements"
("SAB 101") which, among other things, provides further guidance as to the
recognition of contingent rents (i.e. additional rents based on tenants' sales
volumes). The Company has elected early adoption of SAB 101 effective January 1,
2000. The management of the Company believes the implementation of SAB 101 will
not have a material impact on the Company's financial position or result of
operations.
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 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
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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 September 30, 2000, the Company had approximately $228.8 million
of floating-rate debt outstanding. The interest rate risk on $110.0 million of
such debt has been mitigated through the use of an interest rate swap agreement
(the "Swap") with a major financial institution. The Company is exposed to
credit risk in the event of non-performance by the counter-party to the Swap.
The Company believes it mitigates its credit risk by entering into this Swap
with a major financial institution.
The Company believes the interest rate risk represented by the
remaining $118.8 million of floating-rate debt is not material to the Company or
its overall capitalization.
The Company has not, and does not plan to, enter into any derivative
financial instruments for trading or speculative purposes. As of September 30,
2000, 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>
September 30, December 31,
2000 1999
----------- -----------
<S> <C> <C>
Assets:
Real estate, net of accumulated depreciation
of $376,097 and $323,738, respectively $ 2,707,886 $ 2,627,312
Investment and advances in KIR 123,403 114,217
Investments and advances in other real estate joint ventures 63,086 68,553
Investment in retail store leases 11,690 12,709
Cash and cash equivalents 43,790 28,076
Accounts and notes receivable 41,603 31,689
Other assets 154,523 124,920
----------- -----------
$ 3,145,981 $ 3,007,476
=========== ===========
Liabilities:
Notes payable $ 1,035,250 $ 1,037,250
Mortgages payable 253,016 212,321
Other liabilities, including minority interests in partnerships 157,863 152,470
----------- -----------
1,446,129 1,402,041
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Stockholders' Equity:
Preferred stock, $1.00 par value, authorized 5,000,000 shares
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 418,278 and 428,514 shares, respectively 418 429
Aggregate liquidation preference $104,569 and $107,129, respectively
Common stock, $.01 par value, authorized 200,000,000 shares
Issued and outstanding 63,040,983 and 60,795,593 shares, respectively 630 608
Paid-in capital 1,816,451 1,730,278
Cumulative distributions in excess of net income (114,944) (122,959)
----------- -----------
1,703,455 1,609,256
Notes receivable from officer stockholders (3,603) (3,821)
----------- -----------
1,699,852 1,605,435
----------- -----------
$ 3,145,981 $ 3,007,476
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
8
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KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three and Nine Months ended September 30, 2000 and 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues from rental property $115,726 $106,044 $342,949 $324,992
-------- -------- -------- --------
Rental property expenses:
Rent 3,328 3,536 10,110 10,531
Real estate taxes 13,896 14,579 41,575 42,147
Interest 23,352 19,506 68,575 62,872
Operating and maintenance 9,985 9,440 32,191 32,014
Depreciation and amortization 18,098 16,294 52,852 50,959
-------- -------- -------- --------
68,659 63,355 205,303 198,523
-------- -------- -------- --------
Income from rental property 47,067 42,689 137,646 126,469
Income from investment in retail store leases 998 1,087 3,035 3,067
-------- -------- -------- --------
48,065 43,776 140,681 129,536
Management fee income 1,404 1,576 4,313 3,719
Operating and administrative expenses (6,405) (5,950) (19,067) (17,801)
Equity in income of KIR 2,266 2,128 6,899 3,275
Other income, net 5,750 3,837 16,232 8,567
-------- -------- -------- --------
Income before gain on sale of shopping center
properties 51,080 45,367 149,058 127,296
Gain on sale of shopping center properties, net 432 247 2,109 247
-------- -------- -------- --------
Net income $ 51,512 $ 45,614 $151,167 $127,543
======== ======== ======== ========
Net income applicable to common shares $ 44,942 $ 38,996 $131,409 $107,683
======== ======== ======== ========
Per common share:
Net income
Basic $0.72 $0.64 $2.14 $1.78
----- ----- ----- -----
Diluted $0.71 $0.64 $2.12 $1.77
----- ----- ----- -----
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
9
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KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months ended September 30, 2000 and 1999
(in thousands)
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Cash flow provided by operations $ 206,661 $ 179,774
--------- ---------
Cash flow from investing activities:
Acquisition of and improvements to real estate (117,880) (169,075)
Investment in marketable securities (28,039) (12,814)
Proceeds from sale of marketable securities 8,744 11,443
Investments and advances to affiliated companies (5,266) (950)
Investments and advances to joint ventures -- (17,276)
Construction advances to real estate joint ventures -- (436)
Collection of mortgage loans receivable 2,967 4,545
Investment in real estate joint ventures (500) --
Reimbursement of advances to real estate joint ventures -- 7,500
Investment in KIR (10,066) --
Net proceeds from sale of interest in KIR -- 68,179
Proceeds from sale of real estate properties 21,196 6,365
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Net cash flow used for investing activities (128,844) (102,519)
--------- ---------
Cash flow from financing activities:
Principal payments on debt, excluding
normal amortization of rental property debt (17,024) (61,098)
Principal payments on rental property debt (3,407) (3,467)
Proceeds from mortgage financing 44,396 28,424
Payment of unsecured obligation (18,172) (20,984)
Proceeds from issuance of medium-term notes 110,000 --
Repayment of medium-term notes (60,000) --
Repayment of borrowings under senior term loan (52,000) --
Proceeds from issuance of senior notes -- 130,000
Repayment of senior notes -- (100,000)
Borrowings under revolving credit facility 45,000 95,000
Repayment of borrowings under revolving credit facility (45,000) (35,000)
Dividends paid (140,458) (126,657)
Repurchase and retirement of preferred stock (2,505) --
Proceeds from issuance of stock 77,067 5,539
--------- ---------
Net cash flow used for financing activities (62,103) (88,243)
--------- ---------
Change in cash and cash equivalents 15,714 (10,988)
Cash and cash equivalents, beginning of period 28,076 43,920
--------- ---------
Cash and cash equivalents, end of period $ 43,790 $ 32,932
========= =========
Interest paid during the period $ 56,499 $ 52,234
========= =========
Supplemental schedule of noncash investing/financing activities:
Acquisition of real estate interests by issuance of stock
and/or assumption of mortgage debt $ 30,986 $ 81,402
========= =========
Disposition of real estate interest by assignment of
mortgage debt $ 2,633 $ --
========= =========
Declaration of dividends paid in succeeding period $ 47,985 $ 41,597
========= =========
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
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.
During December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements"
("SAB 101") which, among other things, provides further guidance as to the
recognition of contingent rents (i.e. additional rents based on tenants' sales
volumes). The Company has elected early adoption of SAB 101 effective January 1,
2000. The management of the Company believes the implementation of SAB 101 will
not have a material impact on the Company's financial position or results of
operations.
2. Property Acquisitions
During the three months ended March 31, 2000, the Company acquired
interests in three neighborhood and community shopping center properties, in
separate transactions, comprising approximately 0.4 million square feet of gross
leasable area ("GLA") in three states for an aggregate purchase price of
approximately $26.7 million, including the assumption of approximately $16.5
million in mortgage debt encumbering two of the properties. In addition, the
Company acquired fee title to a shopping center property in which the Company
held a leasehold interest for an aggregate purchase price of approximately $2.5
million.
During 1998, in connection with the Company's merger with The Price
REIT, Inc., the Company acquired a 50% interest in a joint venture in Houston,
TX. During March 2000, the Company acquired the remaining 50% interest in such
partnership for $5.0 million and now accounts for its investment under the
consolidation method of accounting.
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During May 2000, the Company, through an affiliated entity, acquired
five neighborhood and community shopping centers comprising approximately 0.5
million square feet of GLA located in five states for approximately $18.9
million. These properties were formerly anchored by a retailer which filed for
protection under Chapter 11 of the Bankruptcy Code in June 1999 and rejected
these leases in January 2000. The Company acquired these properties with an
occupancy level of approximately 43% (currently 74% occupied) and is actively
negotiating with other retailers to lease the vacant space.
On June 1, 2000, the Company exercised its option to acquire two
shopping center properties comprising 0.4 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 $12.2 million, paid
approximately $11.6 million in shares of the Company's common stock (285,148
shares valued at $40.7625 per share at June 1, 2000) and $0.6 million through
the assumption of mortgage debt encumbering one of the properties. The members
of the Company's Board of Directors who are not also shareholders of KC
Holdings, unanimously approved the Company's purchase of these two shopping
center properties.
During August 2000, the Company acquired a shopping center property
comprising approximately 0.1 million square feet of GLA for an aggregate
purchase price of approximately $3.7 million, including the assumption of
approximately $2.3 million in mortgage debt.
3. Property Dispositions
During the nine months ended September 30, 2000, the Company disposed
of eight shopping center properties, in separate transactions, comprising
approximately 0.6 million square feet of GLA, for aggregate proceeds of
approximately $19.7 million, including the assignment of $2.6 million of
mortgage debt. Gains on sales of these properties were approximately $2.1
million. In addition, the Company disposed of four land parcels, in separate
transactions, for aggregate proceeds of approximately $4.1 million.
4. Debt Financing
During August 2000, the Company issued $110.0 million of floating rate
medium-term notes ("MTN") under its MTN program. This floating rate MTN was
priced at 99.7661% of par, matures in August 2002, and bears interest at LIBOR
plus .25%. The proceeds from this MTN issuance were used to repay a $60.0
million MTN that matured in August 2000 and to prepay a $52.0 million term loan
that was due to mature in November 2000.
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During the nine months ended September 30, 2000, the Company obtained
individual non-recourse mortgage debt on five Kmart anchored shopping centers,
providing aggregate proceeds to the Company of approximately $44.2 million.
These ten-year loans mature in 2010 and have effective interest rates ranging
from 7.91% to 8.15% per annum.
5. Common Stock Offering
During August 2000, the Company completed a primary public stock
offering of 1.8 million shares of common stock at $42.50 per share. The net
proceeds from this sale of common stock, totaling approximately $72.4 million
(after related transaction costs of $4.1 million) will be used for general
corporate purposes, including (i) the investment of additional equity capital in
KIR (ii) the acquisition of neighborhood and community shopping centers as
suitable opportunities arise, and (iii) the development, redevelopment and
expansion of properties in the Company's portfolio.
6. 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, KIR sold a
significant interest in the partnership to an institutional investor. As a
result, the Company 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 of KIR for the nine months ended September 30,
2000 and for the period April 28, 1999 to September 30, 1999, were approximately
$6.9 million and $3.3 million, respectively.
In addition, 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. For the nine months ended September 30, 2000, and for the period
April 28, 1999 to September 30, 1999, the Company earned management fees of
approximately $1.3 million and $0.5 million, respectively.
7. Investment in Retail Store Leases
Income from the investment in retail store leases for the nine months
ended September 30, 2000 and 1999 represents sublease revenues of approximately
$14.3 million and $15.3 million, respectively, less related expenses of $10.2
million and $11.1 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.
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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 Nine Months Ended
September 30, September 30, September 30, September 30,
------------ ------------ ------------ ------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic EPS - weighted
average number of common
shares outstanding 62,307,477 60,710,860 61,361,923 60,380,326
Effect of dilutive securities -
stock options 784,775 495,199 700,219 563,420
------------ ------------ ------------ ------------
Diluted EPS - weighted
average number of
common shares 63,092,252 61,206,059 62,062,142 60,943,746
============ ============ ============ ============
</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 2 and 3, the Company and certain of its
affiliates acquired and disposed of interests in certain shopping center
properties during the nine months ended September 30, 2000. The pro forma
financial information set forth below is based upon the Company's historical
Condensed Consolidated Statement of Income for the nine months ended September
30, 2000 and 1999, adjusted to give effect to these transactions as of January
1, 1999.
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, 1999, nor does it
purport to represent the results of future operations. (Amounts presented in
millions, except per share figures).
Nine Months Ended September 30,
2000 1999
----------- -----------
Revenues from rental property $ 343.9 $ 332.1
Net income $ 149.6 $ 132.5
Net income per common share:
Basic $ 2.11 $ 1.86
=========== ===========
Diluted $ 2.09 $ 1.84
=========== ===========
14
<PAGE>
10. Subsequent Events
During October 2000, the Company issued an aggregate $100.0 million of
senior fixed rate MTNs. These issuances consist of (i) a $50.0 million MTN which
matures in November 2005 and bears interest at 7.68% per annum, and (ii) a $50.0
million MTN which matures in November 2007 and bears interest at 7.86% per
annum. The proceeds from these MTN issuances were used to repay a $100.0 million
senior note that matured in November 2000.
15
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not presently involved in any litigation, nor to its
knowledge is any litigation threatened against the Company or its subsidiaries,
that in management's opinion, would result in any material adverse effect on the
Company's ownership, management or operation of its properties, or which is not
covered by the Company's liability insurance.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibits -
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 August 8, 2000 to disclose
the Underwriting Agreement and U.S. Terms Agreement dated August 1, 2000 between
the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Paine Webber
Incorporated, A.G. Edwards & Sons, Inc. and Edward D. Jones & Co., L.P. in
connection with the Company's 1.8 million primary common stock offering during
August 2000.
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
November 10, 2000 /s/ Milton Cooper
----------------- ------------------------------
(Date) Milton Cooper
Chairman of the Board
November 10, 2000 /s/ Michael V. Pappagallo
----------------- ------------------------------
(Date) Michael V. Pappagallo
Chief Financial Officer
17
