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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 March 31, 2003
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
----- ------
Indicate by check mark whether the registrant is an accelerated filer
(as defined in rule 12-b of the Act).
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.
105,050,015 shares outstanding as of April 30, 2003.
1 of 34
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Financial Statements -
Condensed Consolidated Balance Sheets as of March 31, 2003 and December
31, 2002.
Condensed Consolidated Statements of Income for the Three Months Ended
March 31, 2003 and 2002.
Condensed Consolidated Statements of Comprehensive Income for the Three
Months Ended March 31, 2003 and 2002.
Condensed Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2003 and 2002.
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 $12.0 million or 10.7% to
$124.1 million for the three months ended March 31, 2003, as compared with
$112.1 million for the corresponding quarter ended March 31, 2002. This net
increase resulted primarily from the combined effect of (i) the acquisition of
six operating properties during the three months ended March 31, 2003 providing
incremental revenues of $1.0 million, (ii) acquisitions throughout calendar year
2002 (13 shopping center properties) providing incremental revenues of $7.3
million, (iii) the completion of certain development and redevelopment projects,
tenant buyouts and new leasing within the portfolio providing incremental
revenues of approximately $10.4 million as compared to the corresponding three
month period in 2002, offset by (iv) a decrease in revenues of $4.8 million
resulting from the bankruptcy filing of Kmart Corporation ("Kmart") and Ames
Department Stores, Inc. ("Ames") and subsequent rejection of leases and (v)
sales of certain development properties throughout 2002 and the three months
ended March 31, 2003, resulting in a decrease of revenues of approximately $1.9
2
million for the three months ended March 31, 2003 as compared to the
corresponding three month period in 2002.
Rental property expenses, including depreciation and amortization,
increased $6.2 million or 13.0% to $54.6 million for the three months ended
March 31, 2003 as compared to $48.4 million for the corresponding quarter ended
March 31, 2002. The rental property expense component of operating and
maintenance increased approximately $4.9 million for the three months
ended March 31, 2003 as compared with the corresponding quarter ended March 31,
2002. This increase is primarily due to increased snow removal costs and
property acquisitions during 2003 and 2002.
Equity in income of real estate joint ventures, net increased $2.8
million to $9.3 million for the three months ended March 31, 2003, as compared
to $6.5 million for the corresponding quarter ended March 31, 2002. This
increase is primarily attributable to the equity in income from the Kimco Income
REIT joint venture investment ("KIR"), the RioCan joint venture investment
("RioCan Venture") and the Kimco Retail Opportunity Fund joint venture
investment ("KROP"). The Company has made additional capital investments in
these joint ventures for the acquisition of additional shopping center
properties by the ventures throughout 2002 and the three months ended March 31,
2003.
3
Minority interests in income of partnerships, net increased $1.4
million to $1.6 million as compared to $0.2 million for the corresponding
quarter in the preceding year. This increase is primarily due to the acquisition
of a shopping center property acquired through a newly formed partnership in
2002 by issuing approximately 2.4 million downREIT units valued at $80.0
million. The downREIT units are convertible at a ratio of 1:1 into the Company's
common stock and are entitled to a distribution equal to the dividend rate on
the Company's common stock multiplied by 1.1057.
Mortgage financing income increased $4.4 million to $5.5 million for
the three months ended March 31, 2003, as compared to $1.1 million for the
corresponding quarter ended March 31, 2002. This increase is primarily due to
increased interest income earned related to certain real estate lending
activities during 2002 and the three months ended March 31, 2003.
Effective January 1, 2001, the Company has elected taxable REIT
subsidiary status for its wholly-owned development subsidiary ("KDI"). KDI is
primarily engaged in the ground-up development of neighborhood and community
shopping centers and the subsequent sale thereof upon completion. During the
three months ended March 31, 2003, KDI sold five out-parcels, in separate
transactions, for approximately $4.0 million. These sales resulted in pre-tax
gains of approximately $1.2 million.
During the three months ended March 31, 2002, KDI sold its recently
completed project in Miamisburg, OH and three out-parcels, in separate
transactions, for approximately $13.1 million, which resulted in net pre-tax
gains of approximately $4.3 million.
Interest, dividends and other investment income decreased approximately
$4.7 million during the quarter ended March 31, 2003, as compared to the same
period in 2002. This decrease is primarily due to less realized gains on the
sale of certain marketable equity and debt securities and decreased dividend
income as a result of the sale of securities during 2002 and the quarter ended
March 31, 2003.
4
Other income, net decreased $3.6 million for the three months ended
March 31, 2003, as compared to the same period in 2002. This decrease is
primarily due to pre-tax profits recognized by the Company during 2002 in
connection with the Company's participation in a joint venture established for
the purpose of providing inventory liquidation services to a regional retailer
in bankruptcy.
During February 2003, the Company reached agreement with a lender in
connection with two individual non-recourse mortgages encumbering two former
Kmart sites. The Company paid approximately $8.3 million in full satisfaction of
these loans which aggregated approximately $14.7 million. As a result of this
transaction, the Company recognized a gain on early extinguishment of debt of
approximately $6.3 million during the first quarter of 2003.
During the three months ended March 31, 2003, the Company sold
operating properties in Bridgeview, IL and Trexlertown, PA, in separate
transactions, for aggregate proceeds of $5.9 million, which resulted in gains of
approximately $3.3 million.
Net income for the three months ended March 31, 2003 was $71.0 million
as compared to $60.9 million for the three months ended March 31, 2002,
representing an increase of $10.1 million. On a diluted per share basis, net
income improved $0.10 to $0.63 for the three month period ended March 31, 2003
as compared to $0.53 for the corresponding quarter in the previous year. This
improved performance is primarily attributable to (i) significant leasing within
the portfolio which improved operating profitability, (ii) increased
contributions from KIR, the RioCan Venture and KROP, and (iii) increases from
the Company's mortgage financing investments. The increase in net income also
includes the gain on early extinguishment of debt and gains on dispositions of
operating properties.
Tenant Concentration
The Company seeks to reduce its operating and leasing risks through
diversification achieved by the geographic distribution of its properties,
avoiding dependence on any single property, and a large tenant base. At March
31, 2003, the Company's five largest tenants include Kmart Corporation, The Home
Depot, Kohl's, TJX Companies and Wal-Mart, which represented approximately 4.3%,
2.9%, 2.7%, 2.6% and 2.0%, respectively, of the Company's annualized base rental
revenues including the proportionate share of base rental revenues from
properties in which the Company has less than a 100% economic interest.
On January 14, 2003, Kmart announced it would be closing an additional
326 locations relating to its January 22, 2002 filing of protection under
Chapter 11 of the U.S Bankruptcy Code. Nine of these locations (excluding the
KIR portfolio which includes three additional locations and Kimsouth Realty,
Inc., ("Kimsouth") an entity in which the Company holds a 44.5% non-controlling
interest, which includes two additional locations) are leased from the Company.
The annualized base rental revenues from these nine locations are approximately
$4.3 million. Effective May 1, 2003, Kmart rejected its leases at six of these
5
locations representing approximately $3.0 million of annualized base rental
revenues. The Company is currently negotiating leases with prospective tenants
on four of these sites and reviewing offers received to purchase two of these
sites, however, no assurances can be provided that these locations will be
leased in the near term or at comparable rents previously paid by Kmart.
The Company generally will have the right to file claims in connection
with rejected leases for lost rent equal to three years of rental obligations as
well as other amounts related to obligations under the leases. Actual amounts to
be received in satisfaction of these claims will be subject to Kmart's final
plan of reorganization and the availability of funds to pay creditors such as
the Company.
Liquidity and Capital Resources
It is management's intention that the Company continually have access
to the capital resources necessary to expand and develop its business. As such,
the Company intends to operate with and maintain a conservative capital
structure with a level of debt to total market capitalization of 50% or less. As
of March 31, 2003, the Company's level of debt to total market capitalization
was 30%. In addition, the Company intends to maintain strong debt service
coverage and fixed charge coverage ratios as part of its commitment to
maintaining its investment-grade debt ratings. The Company may, from time to
time, seek to obtain funds through additional equity offerings, unsecured debt
financings and/or mortgage financings and other debt and equity alternatives in
a manner consistent with its intention to operate with a conservative debt
structure.
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
for its expansion needs. Since the IPO, the Company has completed additional
offerings of its public unsecured debt and equity, raising in the aggregate over
$2.7 billion for the purposes of, among other things, repaying indebtedness,
acquiring interests in neighborhood and community shopping centers, funding
ground-up development projects, expanding and improving properties in the
portfolio and other investments.
The Company has a $250.0 million unsecured revolving credit facility,
which is scheduled to expire in August 2003. This credit facility has made
available funds to both finance the purchase of properties and meet any
short-term working capital requirements. As of March 31, 2003, there was $150.0
million outstanding under this credit facility. The Company intends
to renew this facility prior to the maturity date.
6
During April 2003, the Company further enhanced its liquidity position
by establishing an additional $95.0 million unsecured revolving bridge facility
which is scheduled to expire June 27, 2003.
The Company also has a $200.0 million 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. As of March 31, 2003, the Company had $98.0 million available for
issuance under the MTN program.
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 March 31, 2003, the Company had over 390 unencumbered property
interests in its portfolio.
During May 2001, the company filed a shelf registration statement on
Form S-3 for up to $750.0 million of debt securities, preferred stock,
depositary shares, common stock and common stock warrants. As of March 31, 2003,
the Company had $288.7 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 increased investment in properties
and other real estate related opportunities, growth in operating income from the
existing portfolio and from other sources. Since cash used to pay dividends
reduces amounts available for capital investment, the Company generally intends
to maintain a conservative dividend payout ratio, reserving such amounts as it
considers necessary for the expansion and renovation of shopping centers in its
portfolio, debt reduction, the acquisition of interests in new properties and
other investments as suitable opportunities arise, and such other factors as the
Board of Directors considers appropriate.
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 all dividend payments 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 $84.8 million for the quarter ended March 31,
2003, as compared to $78.0 million for the corresponding period ended March 31,
2002.
7
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 foreign
currency exchange rates and will, from time to time, enter into interest rate
protection agreements and/or foreign currency hedge agreements which mitigate,
but do not eliminate, the effect of changes in interest rates on its
floating-rate debt and fluctuations in foreign currency exchange rates.
New Accounting Pronouncements
In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities ("FASB No. 146"). This statement
addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).
For purpose of this statement, an exit or disposal activity is initiated when
management, having the authority to approve the action, commits to an exit or
disposal plan or otherwise disposes of a long-lived asset (disposal group) and,
if the activity involves the termination of employees, the criteria for a plan
of termination of this statement are met. The provisions of this statement shall
be effective for exit or disposal activities initiated after December 31, 2002.
The impact of the adoption of FASB No. 146 did not have a material adverse
impact on the Company's financial position or results of operations.
In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN
45"), Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others (an interpretation of
FASB Statement No. 5, 57 and 107 and rescission of FASB Interpretation No. 34).
8
FIN 45 clarifies the requirements of FASB Statement No. 5, Accounting for
Contingencies. It requires that upon issuance of a guarantee, the guarantor must
recognize a liability for the fair value of the obligation it assumes under the
guarantee regardless of whether or not the guarantor receives separate
identifiable consideration (i.e., a premium). The Company has adopted the new
disclosure requirements, which were effective beginning with 2002 calendar
year-end financials. FIN 45's provision for initial recognition and measurement
are effective on a prospective basis to guarantees issued or modified after
December 31, 2002. The adoption of FIN 45 did not have a material adverse impact
on the Company's financial position or results of operations.
In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure and amendment of FASB
Statement No. 123 ("FASB No. 148"). This statement amends FASB Statement No.
123, Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this statement amends the
disclosure requirements of FASB Statement No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The transition and annual disclosure provisions of
FASB No. 148 shall be applied for fiscal years ending after December 15, 2002.
The new interim disclosure provisions are effective for the first interim period
beginning after December 15, 2002. Effective January 1, 2003, the Company
adopted the prospective method provisions of FASB No. 148, which will apply the
recognition provisions of FASB No. 123 to all employee awards granted, modified
or settled after January 1, 2003. The adoption did not have a material adverse
impact on the Company's financial position or results of operations.
In January 2003, the FASB issued Interpretation No. 46, Consolidation
of Variable Interest Entities ("FIN 46"), the primary objective of which is to
provide guidance on the identification of entities for which control is achieved
through means other than voting rights ("variable interest entities" or "VIEs")
and to determine when and which business enterprise should consolidate the VIE
(the "primary beneficiary"). This new model applies when either (i) the equity
investors (if any) do not have a controlling financial interest or (ii) the
equity investment at risk is insufficient to finance that entity's activities
without additional financial support. In addition, FIN 46 requires additional
disclosures. The Company's exposure to losses associated with its unconsolidated
joint ventures is limited to its carrying value in these investments. The
adoption of FIN 46 did not have a material adverse impact on the Company's
financial position or results of operations.
9
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) the
inability of major tenants to continue paying their rent obligations due to
bankruptcy, insolvency or general downturn in their business, (iii) financing
risks, such as the inability to obtain equity or debt financing on favorable
terms, (iv) changes in governmental laws and regulations, (v) the level and
volatility of interest rates, (vi) the availability of suitable acquisition
opportunities and (vii) 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 March 31, 2003, the Company had approximately $410.2 million of
floating-rate debt outstanding including $150.0 million on its unsecured
revolving credit facility. The interest rate risk on $185.0 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-party 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 $225.2 million of floating-rate debt is not
material to the Company or its overall capitalization.
As of March 31, 2003, the Company has Canadian investments totaling CAD
$211.8 million (approximately USD $144.2 million) comprised of marketable
securities and a real estate joint venture. In addition, the Company has Mexican
real estate investments of MXN $396.4 million (approximately USD $36.8 million).
10
The foreign currency exchange risk has been mitigated through the use of foreign
currency forward contracts (the "Forward Contracts") and a cross currency swap
(the "CC Swap") with major financial institutions. The Company is exposed to
credit risk in the event of non-performance by the counter-party to the Forward
Contracts and the CC Swap. The Company believes it mitigates its credit risk by
entering into the Forward Contracts and the CC Swap with major financial
institutions.
The Company has not, and does not plan to, enter into any derivative
financial instruments for trading or speculative purposes. As of March 31, 2003,
the Company had no other material exposure to market risk.
Item 4. Controls and Procedures
Within the 90 days prior to the date of this report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based upon that evaluation, the Company's Chief Executive Officer and
Chief Financial Officer concluded that as of the date of that evaluation the
Company's disclosure controls and procedures are effective in providing timely
reporting of material information regarding required disclosure and ensure that
such information is recorded, processed, summarized and reported within the
required time periods and included in the Company's periodic filings with the
SEC.
There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect the Company's
internal controls subsequent to the date the Company carried out this
evaluation.
11
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
March 31, December 31,
2003 2002
----------- -----------
Assets:
Operating real estate, net of accumulated depreciation
of $533,882 and $516,558, respectively $ 2,737,937 $ 2,669,648
Investment and advances in real estate joint ventures 442,857 412,672
Real estate under development 243,555 212,765
Other real estate investments 102,136 99,542
Mortgages and other financing receivables 73,510 94,024
Cash and cash equivalents 55,653 35,962
Marketable securities 77,467 66,992
Accounts and notes receivable 53,697 55,012
Other assets 108,252 110,261
----------- -----------
$ 3,895,064 $ 3,756,878
=========== ===========
Liabilities & Stockholders' Equity:
Notes payable $ 1,412,250 $ 1,302,250
Mortgages payable 212,680 230,760
Construction loans payable 64,417 43,972
Other liabilities, including minority interests in partnerships 277,025 272,568
----------- -----------
1,966,372 1,849,550
----------- -----------
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
Common stock, $.01 par value, authorized 200,000,000 shares
Issued and outstanding 104,940,140 and 104,601,828 shares, respectively 1,049 1,046
Paid-in capital 1,992,878 1,984,820
Cumulative distributions in excess of net income (75,683) (85,367)
----------- -----------
1,919,144 1,901,399
Accumulated other comprehensive income 10,892 7,401
Notes receivable from officer stockholders (1,344) (1,472)
----------- -----------
1,928,692 1,907,328
----------- -----------
$ 3,895,064 $ 3,756,878
=========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements.
12
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2003 and 2002
(in thousands, except per share data)
2003 2002
--------- ---------
Real estate operations:
Revenues from rental property $ 124,062 $ 112,077
--------- ---------
Rental property expenses:
Rent 3,015 3,135
Real estate taxes 15,012 15,129
Operating and maintenance 16,742 11,884
--------- ---------
34,769 30,148
--------- ---------
89,293 81,929
Equity in income of real estate joint ventures, net 9,312 6,471
Minority interests in income of partnerships, net (1,591) (208)
Income from other real estate investments 4,900 4,461
Mortgage financing income 5,512 1,065
Management and other fee income 2,902 3,346
Depreciation and amortization (19,867) (18,213)
--------- ---------
Income from real estate operations 90,461 78,851
--------- ---------
Other investments:
Interest, dividends and other investment income 2,402 7,125
Other income, net 318 3,871
--------- ---------
2,720 10,996
--------- ---------
Interest expense (22,724) (21,463)
General and administrative expenses (8,615) (7,527)
Gain on early extinguishment of debt 6,262 -
--------- ---------
Income from continuing operations before income taxes 68,104 60,857
Provision for income taxes (1,822) (5,350)
--------- ---------
Income from continuing operations 66,282 55,507
--------- ---------
Discontinued operations:
Income from discontinued operating properties 184 1,107
Gain on disposition of operating properties 3,280 -
--------- ---------
Income from discontinued operations 3,464 1,107
--------- ---------
Gain on sale of development properties 1,215 4,280
--------- ---------
Net income 70,961 60,894
Preferred stock dividends (4,609) (4,609)
--------- ---------
Net income available to common shareholders $ 66,352 $ 56,285
========= =========
Per common share:
Income from continuing operations
- Basic $ 0.60 $ 0.53
========= =========
- Diluted $ 0.59 $ 0.52
========= =========
Net Income
- Basic $ 0.63 $ 0.54
========= =========
- Diluted $ 0.63 $ 0.53
========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements.
13
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months ended March 31, 2003 and 2002
(in thousands)
2003 2002
-------- --------
Net Income $ 70,961 $ 60,894
-------- --------
Other comprehensive income:
Unrealized gain (loss) on marketable securities 1,432 (1,744)
Unrealized gain on interest rate swaps 65 1,248
Unrealized gain on warrants 617 289
Unrealized gain (loss) on foreign currency hedge agreements 2,717 (58)
Foreign currency translation adjustment (1,340) -
-------- --------
Other comprehensive income 3,491 (265)
-------- --------
Comprehensive income $ 74,452 $ 60,629
======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
14
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months ended March 31, 2003 and 2002
(in thousands)
2003 2002
-------- --------
Cash flow provided by operations $ 84,814 $ 77,953
-------- --------
Cash flow from investing activities:
Acquisition of and improvements to operating real estate (89,002) (14,783)
Acquisition of and improvements to real estate under development (33,584) (18,124)
Investment in marketable securities (11,950) (23,494)
Proceeds from sale of marketable securities 4,824 22,963
Reimbursements of advances to joint ventures - 1,382
Investments and advances to real estate joint ventures (39,300) (21,804)
Reimbursements of advances to real estate joint ventures 11,430
Other real estate investments (8,397) -
Investment in mortgage loans receivable (18,002) (65,313)
Collection of mortgage loans receivable 2,657 6,473
Proceeds from sale of mortgage loan receivable 36,723 -
Investments and advances for designation rights (1,216) -
Proceeds from sale of operating properties 9,126 -
Proceeds from sale of development properties 3,968 13,138
-------- --------
Net cash flow used for investing activities (132,723) (99,562)
-------- --------
Cash flow from financing activities:
Principal payments on debt, excluding
normal amortization of rental property debt (8,250) -
Principal payments on rental property debt (1,685) (1,699)
Principal payments on construction loan financings (3,433) -
Proceeds from construction loan financings 23,878 11,200
Borrowings under revolving credit facility 110,000 -
Dividends paid (61,100) (58,798)
Proceeds from issuance of stock 8,190 3,525
-------- --------
Net cash flow provided by (used for) financing activities 67,600 (45,772)
-------- --------
Change in cash and cash equivalents 19,691 (67,381)
Cash and cash equivalents, beginning of period 35,962 93,847
-------- --------
Cash and cash equivalents, end of period $ 55,653 $ 26,466
======== ========
Interest paid during the period $ 11,127 $ 11,906
======== ========
Income taxes paid during the period $ 2,391 $ 2,032
======== ========
Supplemental schedule of noncash investing/financing activities:
Disposition of real estate interest by assignment of mortgage debt $ 1,746 $ -
======== ========
Proceeds held in escrow from sale of real estate interests $ 270 $ -
======== ========
Notes received upon exercise of stock options $ 100 $ 528
======== ========
Declaration of dividends paid in succeeding period $ 59,824 $ 57,425
======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements.
15
KIMCO REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. Interim Financial Statements
Principles of Consolidation -
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.
Certain 2002 amounts have been reclassified to conform to the 2003
financial statement presentation.
Income Taxes -
The Company and its qualified REIT subsidiaries file a consolidated
federal income tax return. The Company has made an election to qualify, and
believes it is operating so as to qualify, as a Real Estate Investment Trust (a
"REIT") for federal income tax purposes. Accordingly, the Company generally will
not be subject to federal income tax, provided that distributions to its
stockholders equal at least the amount of its REIT taxable income as defined
under the Code. However, in connection with the Tax Relief Extension Act of
1999, which became effective January 1, 2001, the Company is now permitted to
participate in certain activities which it was previously precluded from in
order to maintain its qualification as a REIT, so long as these activities are
conducted in entities which elect to be treated as taxable REIT subsidiaries
under the Code. As such, the Company will be subject to federal and state income
taxes on the income from these activities. During the three months ended March
31, 2003, the Company's provision for federal and state income taxes was
approximately $1.8 million relating to activities conducted in its taxable REIT
subsidiaries.
16
Earnings Per Share -
The following table sets forth the reconciliation of earnings and the
weighted average number of shares used in the calculation of basic and diluted
earnings per share (amounts presented in thousands except per share data):
Three Months Ended March 31,
2003 2002
---- ----
Computation of Basic Earnings Per Share:
Income from continuing operations $66,282 $55,507
Gain on sale of development properties 1,215 4,280
Preferred stock dividends (4,609) (4,609)
------- -------
Income from continuing operations
applicable to common shares 62,888 55,178
Income from discontinued operations 3,464 1,107
------- -------
Net income applicable to common shares $66,352 $56,285
======= =======
Weighted average common shares outstanding 104,711 104,299
Basic Earnings Per Share:
Income from continuing operations $0.60 $0.53
Income from discontinued operations 0.03 0.01
------- -------
Net income $0.63 $0.54
======= =======
Computation of Diluted Earnings Per Share:
Income from continuing operations
applicable to common shares $62,888 $55,178
Dividends on convertible downREIT units 1,423 -
------- -------
Income from continuing operations for diluted
earnings per share 64,311 55,178
Income from discontinued operations 3,464 1,107
------- -------
Net income for diluted earnings per share $67,775 $56,285
======= =======
17
Weighted average common shares
outstanding - basic 104,711 104,299
Effect of dilutive securities: stock options 1,072 1,071
Assumed conversion of Class D Preferred
Stock to common stock - 16
Assumed conversion of downREIT units 2,446 -
------- -------
Shares for diluted earnings per share 108,229 105,386
------- -------
Diluted Earning Per Share:
Income from continuing operations $0.59 $0.52
Income from discontinued operations 0.04 0.01
------- -------
Net income $0.63 $0.53
======= =======
The Company maintains a stock option plan (the "Plan") for which prior
to January 1, 2003 the Company accounted for under the intrinsic value-based
method of accounting prescribed by Accounting Principles Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations
including FASB Interpretation No. 44, Accounting for Certain Transactions
involving Stock Compensation (an interpretation of APB Opinion No. 25), issued
in March 2000. Effective January 1, 2003, the Company adopted the prospective
method provisions of SFAS No. 148, Accounting for Stock-Based Compensation-
Transition and Disclosure and Amendment of FASB Statement No. 123 ("FASB No.
148"), which will apply the recognition provisions of FASB No. 123, Accounting
for Stock-Based Compensation ("FASB No. 123") to all employee awards granted,
modified or settled after January 1, 2003. Awards under the Company's Plan
generally vest ratably over a three-year term and expire ten years from the date
of grant. Therefore, the cost related to stock-based employee compensation
included in the determination of net income for the three months ended March 31,
2003 is less than that which would have been recognized if the fair value based
method had been applied to all awards since the original effective date of FASB
No. 123. The following table illustrates the effect on net income and earnings
per share if the fair value based method had been applied to all outstanding
stock awards in each period:
18
Three Months Ended March 31,
2003 2002
---- ----
Net income, as reported $70,961 $60,894
Add: Stock based employee compensation
expense included in reported net income 15 -
Deduct: Total stock based employee
compensation expense determined under
fair value based method for all awards (737) (788)
-------- -------
Pro Forma Net income - Basic $70,239 $60,106
======= =======
Earnings Per Share
Basic - as reported $0.63 $0.54
======= =======
Basic - pro forma $0.63 $0.53
======= =======
Net income for diluted earnings per share $67,775 $56,285
Add: Stock based employee compensation
expense included in reported net income 15 -
Deduct: Total stock based employee
compensation expense determined under
fair value based method for all awards (737) (788)
-------- -------
Pro Forma Net income - Diluted $67,053 $55,497
======= =======
Earnings Per Share
Diluted - as reported $0.63 $0.53
======= =======
Diluted - pro forma $0.62 $0.53
======= =======
In addition, there were approximately 1.0 million and 1.1 million stock
options that were anti-dilutive for the three month period ended March 31, 2003
and 2002, respectively.
New Accounting Pronouncements -
In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities ("FASB No. 146"). This statement
addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).
For purpose of this statement, an exit or disposal activity is initiated when
management, having the authority to approve the action, commits to an exit or
19
disposal plan or otherwise disposes of a long-lived asset (disposal group) and,
if the activity involves the termination of employees, the criteria for a plan
of termination of this statement are met. The provisions of this statement shall
be effective for exit or disposal activities initiated after December 31, 2002.
The impact of the adoption of FASB No. 146 did not have a material adverse
impact on the Company's financial position or results of operations.
In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN
45"), Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others (an interpretation of
FASB Statement No. 5, 57 and 107 and rescission of FASB Interpretation No. 34).
FIN 45 clarifies the requirements of FASB Statement No. 5, Accounting for
Contingencies. It requires that upon issuance of a guarantee, the guarantor must
recognize a liability for the fair value of the obligation it assumes under the
guarantee regardless of whether or not the guarantor receives separate
identifiable consideration (i.e., a premium). The Company has adopted the new
disclosure requirements, which were effective beginning with 2002 calendar
year-end financials. FIN 45's provision for initial recognition and measurement
are effective on a prospective basis to guarantees issued or modified after
December 31, 2002. The adoption of FIN 45 did not have a material adverse impact
on the Company's financial position or results of operations.
In December 2002, the FASB issued FASB No. 148. This statement amends
FASB No. 123, to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, this statement amends the disclosure requirements of
FASB No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
transition and annual disclosure provisions of FASB No. 148 shall be applied for
fiscal years ending after December 15, 2002. The new interim disclosure
provisions are effective for the first interim period beginning after December
15, 2002. Effective January 1, 2003, the Company adopted the prospective method
provisions of FASB No. 148, which will apply the recognition provisions of FASB
No. 123 to all employee awards granted, modified or settled after January 1,
2003. The adoption did not have a material adverse impact on the Company's
financial position or results of operations.
In January 2003, the FASB issued Interpretation No. 46, Consolidation
of Variable Interest Entities ("FIN 46"), the primary objective of which is to
provide guidance on the identification of entities for which control is achieved
through means other than voting rights ("variable interest entities" or "VIEs")
and to determine when and which business enterprise should consolidate the VIE
(the "primary beneficiary"). This new model applies when either (i) the equity
20
investors (if any) do not have a controlling financial interest or (ii) the
equity investment at risk is insufficient to finance that entity's activities
without additional financial support. In addition, FIN 46 requires additional
disclosures. The Company's exposure to losses associated with its unconsolidated
joint ventures is limited to its carrying value in these investments. The
adoption of FIN 46 did not have a material adverse impact on the Company's
financial position or results of operations.
2. Operating Property Activities
During January 2003, the Company acquired a shopping center property
located in Houston, TX, comprising approximately 0.2 million square feet of
gross leasable area ("GLA"), for an aggregate purchase price of approximately
$26.3 million.
During February 2003, the Company acquired a shopping center property
located in Nashua, NH, comprising approximately 0.2 million square feet of GLA,
for an aggregate purchase price of approximately $25.7 million.
During March 2003, the Company acquired a portfolio of four shopping
center properties located in Queens, NY, comprising approximately 0.1 million
square feet of GLA, for an aggregate purchase price of approximately
$19.9 million.
During the three months ended March 31, 2003, the Company disposed of
two operating properties, in separate transactions, for an aggregate sales price
of $5.9 million including the assignment of approximately $1.7 million of
mortgage debt encumbering one of the properties. These dispositions resulted in
net gains of approximately $3.3 million for the three months ended March 31,
2003. In accordance with Statement of Financial Accounting Standard No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets ("FASB 144"), the
operations and net gain on disposition of these properties have been included in
the caption Discontinued operations on the Condensed Consolidated Statement of
Income.
3. Discontinued Operations
In accordance with FASB 144, the Company now reports as discontinued
operations assets held for sale (as defined by FASB 144) and operating assets
sold in the current period. All results of these discontinued operations are
included in a separate component of income on the Condensed Consolidated
Statements of Income under Discontinued operations. This change has resulted in
certain reclassifications of 2002 financial statement amounts.
21
The Components of Income from operations related to discontinued
operations for the three months ended March 31, 2003 and 2002 are shown below.
These include the results of operations through the date of each respective sale
for properties sold during 2003 and a full quarter of operations for those
assets classified as held for sale as of March 31, 2003. (in thousands):
Three Months Ended
March 31, 2003 March 31, 2002
-------------- --------------
Discontinued Operations:
Revenues from rental property $ 306 $3,914
Rental property expenses (101) (1,790)
-------- --------
Income from property operations 205 2,124
Depreciation and amortization (27) (633)
Interest expense (11) (381)
Other 17 (3)
-------- --------
Income from discontinued operating
properties 184 1,107
Gain on disposition of operating
properties, net 3,280 -
-------- --------
Income from discontinued operations $3,464 $1,107
======== ========
4. Kimco Developers, Inc. ("KDI")
Effective January 1, 2001, the Company elected taxable REIT subsidiary
status for its wholly-owned development subsidiary, KDI. During the three months
ended March 31, 2003, KDI acquired two land parcels, in separate transactions,
for the ground-up development of shopping centers and subsequent sale thereof
upon completion for an aggregate purchase price of approximately $5.4 million.
During the three months ended March 31, 2003, KDI sold five of its
out-parcels, in separate transactions, for approximately $4.0 million. These
sales provided pre-tax gains of approximately $1.2 million.
22
Additionally, during the three months ended March 31, 2003, KDI
obtained construction financing on one ground-up development property for an
aggregate loan amount of up to $6.2 million, of which approximately $1.8 million
has been funded to KDI as of March 31, 2003. As of March 31, 2003, KDI has 10
loans with total commitments of up to $125.9 million of which $64.4 million has
been funded to KDI. These loans have maturities ranging from 18 to 36 months and
a weighted average interest rate of 4.20% at March 31, 2003.
5. Investments and Advances in Real Estate Joint Ventures
Kimco Income REIT -
During 1998, the Company formed Kimco Income REIT ("KIR"), a limited
partnership which the Company manages, established to invest in high quality
retail properties financed primarily through the use of individual non-recourse
mortgages. As of March 31, 2003 the KIR portfolio was comprised of 70 properties
aggregating 14.6 million square feet of GLA located in 21 states.
The Company holds a 43.3% 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 months ended
March 31, 2003 and 2002 was approximately $4.9 million and $3.6 million,
respectively. During the three months ended March 31, 2003, the Company
contributed approximately $10.8 million in cash to KIR in connection with its
subscription agreement.
In addition, KIR entered into a master management agreement with the
Company, whereby, the Company will perform services for fees relating to the
management, operation, supervision and maintenance of the joint venture
properties. For the three months ended March 31, 2003 and 2002 the Company
earned management fees of approximately $0.7 million and $1.0 million,
respectively.
RioCan Venture -
During October 2001, the Company formed a joint venture (the "RioCan
Venture") with RioCan Real Estate Investment Trust ("RioCan", Canada's largest
publicly traded REIT measured by GLA) in which the Company has a 50% interest,
to acquire retail properties and development projects in Canada. The
acquisitions and development projects are to be sourced and managed by RioCan
and are subject to review and approval by a joint oversight committee consisting
of RioCan management and the Company's management personnel. As of March 31,
2003, the RioCan Venture consisted of 29 shopping center properties and three
development projects aggregating 6.9 million square feet of GLA. During the
23
three months ended March 31, 2003 and 2002 the Company recognized equity in
income of the RioCan Venture of approximately $2.7 million and $0.9 million,
respectively.
KROP Venture -
During October 2001, the Company formed the Kimco Retail Opportunity
Fund ("KROP"), a venture with GE Capital Real Estate ("GECRE") which the Company
manages and has a 20% interest. The purpose of this venture is to acquire
established, high-growth potential retail properties in the United States. The
initial funding for this venture consists of an equity pool of up to $250.0
million, provided $50.0 million by the Company and $200.0 million by GECRE. The
Company will be responsible for the day-to-day management, redevelopment and
leasing of the properties acquired and will be paid fees for those services. In
addition, the Company will earn fees related to the acquisition and disposition
of the properties by KROP. Capital contributions will only be required as
suitable opportunities arise and are agreed to by the Company and GECRE.
As of March 31, 2003, the KROP venture consisted of 17 properties
aggregating 2.2 million square feet of GLA located in seven states. For the
three months ended March 31, 2003, the Company recognized equity in income of
KROP of approximately $0.4 million. Additionally, during the three months ended
March 31, 2003 the Company earned management and acquisition fees of
approximately $0.6 million.
Other Real Estate Joint Ventures -
During March 2003, the Company acquired a property located in South
Bend, IN, through a joint venture in which the Company has a 50% non-controlling
interest. The property was purchased for an aggregate purchase price of
approximately $1.3 million.
24
6. Other Real Estate Investments
Kimsouth -
During November 2002, the Company through its taxable REIT subsidiary,
together with Prometheus Southeast Retail Trust, completed the merger and
privatization of Konover Property Trust, which has been renamed Kimsouth Realty,
Inc., ("Kimsouth"). The Company acquired 44.5% of the common stock of Kimsouth,
which consisted primarily of 38 retail shopping center properties comprising
approximately 4.6 million square feet of GLA. Total acquisition value was
approximately $280.9 million including approximately $216.2 million in mortgage
debt. The Company's investment strategy with respect to Kimsouth includes
re-tenanting, repositioning and disposition of the properties. During the three
months ended March 31, 2003, Kimsouth sold two properties for net proceeds of
approximately $11.0 million. For the three months ended March 31, 2003, the
Company recognized equity in income of Kimsouth of approximately $3.0 million.
Additionally, during the three months ended March 31, 2003, the Company earned
management fees of approximately $0.2 million.
Preferred Equity Capital -
During 2002, the Company established a preferred equity program, which
provides capital to developers and owners of shopping centers. As of March 31,
2003, the Company has provided an aggregate of approximately $38.9 million in
investment capital to developers and owners of 14 shopping centers. The Company
earned approximately $0.9 million for the three months ended March 31, 2003 from
these investments.
7. Mortgages and Other Financing Receivables
During August 2001, the Company, through a joint venture in which the
Company has a 50% interest, provided $27.5 million of debtor-in-possession
financing (the "Ames Loan") to Ames Department Stores, Inc., ("Ames"), a
25
retailer in bankruptcy. This loan bore interest at prime plus 6.0%, was
collateralized by all real estate owned by Ames and was scheduled to mature in
August 2003.
During September 2002, the Ames Loan, was restructured as a two-year
$100.0 million secured revolving loan of which the Company has a 40% interest.
This revolving loan is collateralized by all of Ames' real estate interests. The
loan bears interest at 8.5% per annum and provides for contingent interest upon
the successful disposition of the Ames properties. During January 2003, Ames
paid the outstanding balance of approximately $4.1 million and the Company
earned approximately $2.4 million in additional interest. As of March 31, 2003,
there was no balance outstanding on this revolving loan.
During March 2002, the Company provided a $50.0 million ten-year loan
to Shopko Stores Inc., at an interest rate of 11.0% per annum collateralized by
15 properties. The Company receives principal and interest payments on a monthly
basis. During January 2003, the Company sold a $37.0 million participation
interest in this loan to an unaffiliated third party. The interest rate of the
$37.0 million participation interest is a variable rate based on LIBOR plus
3.50%. The Company continues to act as the servicer for the full amount of the
loan.
During May 2002, the Company provided a $15 million three-year loan to
Frank's Nursery & Crafts, Inc. ("Frank's"), at an interest rate of 10.25% per
annum collateralized by 40 real estate interests. Interest is payable quarterly
in arrears. An additional $17.5 million revolving loan at an interest rate of
10.25% per annum was also established. As of March 31, 2003, the outstanding
loan balance was approximately $32.5 million. As an inducement to make these
loans, Frank's issued the Company approximately 4.4 million warrants with an
exercise price of $1.15 per share, and 5.0 million warrants with an exercise
price of $2.00 per share.
8. Mortgages Payable
During February 2003, the Company reached agreement with a lender in
connection with two individual non-recourse mortgages encumbering two former
Kmart sites. The Company paid approximately $8.3 million in full satisfaction of
these loans which aggregated approximately $14.7 million. As a result of this
transaction, the Company recognized a gain on early extinguishment of debt of
approximately $6.3 million during the first quarter of 2003.
26
9. Tenant Concentration
On January 14, 2003, Kmart announced it would be closing an additional
326 locations relating to its January 22, 2002 filing of protection under
Chapter 11 of the U.S Bankruptcy Code. Nine of these locations (excluding the
KIR portfolio which includes three additional locations and Kimsouth which
includes two additional locations) are leased from the Company. The annualized
base rental revenues from these nine locations are approximately $4.3 million.
Effective May 1, 2003, Kmart rejected its leases at six of these locations
representing approximately $3.0 million of annualized base rental revenues. The
Company is currently negotiating leases to prospective tenants on four of these
sites and reviewing offers received to purchase two of these sites, however, no
assurances can be provided that these locations will be leased in the near term
or at comparable rents previously paid by Kmart.
As of March 31, 2003, Kmart represented 4.3% of annualized base rents
and 6.8% of leased GLA.
The Company generally will have the right to file claims in connection
with rejected leases for lost rent equal to three years of rental obligations as
well as other amounts related to obligations under the leases. Actual amounts to
be received in satisfaction of these claims will be subject to Kmart's final
plan of reorganization and the availability of funds to pay creditors such as
the Company.
10. Pro Forma Financial Information
As discussed in Note 2, the Company and certain of its affiliates
acquired and disposed of interests in certain operating properties during the
three months ended March 31, 2003. The pro forma financial information set forth
below is based upon the Company's historical Condensed Consolidated Statements
of Income for the three months ended March 31, 2003 and 2002, adjusted to give
effect to these transactions as of January 1, 2002.
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, 2002, nor does it
purport to represent the results of future operations. (Amounts presented in
millions, except per share figures.)
27
Three Months ended March 31,
2003 2002
---- ----
Revenues from rental property $125,342 $114,475
Net income $67,863 $60,896
Net income per common share:
Basic $0.60 $0.54
======== ========
Diluted $0.60 $0.53
======== ========
11. Subsequent Events
On May 1, 2003, the Company announced that it will redeem all
2,000,0000 outstanding depositary shares of the Company's 8 1/2% Class B
Cumulative Redeemable Preferred Stock, par value $1.00 per share (the "Class B
Preferred Stock"), at the redemption price of $25.00 per depositary share plus
accrued and unpaid dividends.
The Company's Board of Directors has set June 2, 2003 as the redemption
date on which all outstanding depositary shares of Class B Preferred Stock will
be redeemed. Holders of the Class B depositary shares will receive cash
consideration of $25.00 per depositary share plus 27.7431 cents per depositary
share representing accrued and unpaid dividends on the redemption date.
Dividends will cease to accrue on the Class B Preferred Stock as of the
redemption date.
28
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.
29
Form 8-K -
A current report on Form 8-K dated February 13, 2003 was furnished
under Item 9 relating to the announcement of the Company's fourth quarter and
full year 2002 operating results.
A current report on Form 8-K dated March 26, 2003 was furnished under
Item 9 relating to the certifications of the Company's Chief Executive Officer
and Chief Financial Officer as required by 18 U.S.C. ss. 1350, as created by
Section 906 of the Sarbanes-Oxley Act of 2002.
30
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
May 5, 2003 /s/ Milton Cooper
- ----------- ----------------------------
(Date) Milton Cooper
Chairman of the Board
May 5, 2003 /s/ Michael V. Pappagallo
- ----------- ----------------------------
(Date) Michael V. Pappagallo
Chief Financial Officer
31
Kimco Realty Corporation
Certification
I, Milton Cooper, Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Kimco Realty
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 5, 2003
/s/ Milton Cooper
-----------------------
Milton Cooper
Chief Executive Officer
32
Kimco Realty Corporation
Certification
I, Michael V. Pappagallo, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Kimco Realty
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 5, 2003
/s/ Michael V. Pappagallo
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Michael V. Pappagallo
Chief Financial Officer
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