UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-10899 Kimco Realty Corporation (Exact name of registrant as specified in its charter) Maryland 13-2744380 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No) 3333 New Hyde Park Road, New Hyde Park, NY 11042 (Address of principal executive offices - Zip Code) (516)869-9000 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. 36,243,075 shares outstanding as of April 30, 1997. 1 of 9
PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Financial Statements - Condensed Consolidated Balance Sheets as of March 31, 1997 and December 31, 1996. Condensed Consolidated Statements of Income for the Three Months Ended March 31, 1997 and 1996. Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1997 and 1996. Notes to Condensed Consolidated Financial Statements. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes thereto. These unaudited financial statements include all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature. Results of Operations Revenues from rental property increased $3.5 million or 8.5% to $45.2 million for the three months ended March 31, 1997, as compared with $41.7 million for the corresponding quarter ended March 31, 1996. This net increase is primarily attributable to (i) the acquisition of 39 property interests throughout calendar year 1996, and (ii) new leasing, property redevelopments and re-tenanting within the portfolio at improved rental rates. Rental property expenses decreased $.5 million or 1.8% to $24.9 million for the three months ended March 31, 1997, as compared with $25.4 million for the corresponding quarter ended March 31, 1996. This net decrease in rental property expenses is primarily due to (i) a decrease of $1.1 million in snow removal costs between periods, (ii) a decrease of $.5 million in interest expense resulting from the repayment of secured indebtedness aggregating approximately $16 million during the three months ended March 31, 1997 and throughout calendar year 1996, offset by (iii) increases in depreciation and amortization expenses and real estate taxes of $.4 million and $.7 million, respectively, due to property acquisitions during 1996. Net income for the three months ended March 31, 1997 and 1996 was $20.6 million and $15.9 million, respectively. This increase of $.06 per common share is primarily attributable to property acquisitions, property redevelopments and increased leasing activity which strengthened operating profitability. Liquidity and Capital Resources Since the Company's initial public stock offering in November 1991, the Company has completed additional offerings of its public unsecured debt and equity raising in the aggregate in excess of $900 million for the purposes of acquiring interests in neighborhood and community shopping center properties, repaying indebtedness and for expanding and improving properties in the portfolio. Management believes the public debt and equity markets will be the Company's principal source of capital for the future. A $100 million, unsecured revolving credit facility established in June 1994, which is scheduled to expire in June 1999, has made -2-
available funds to both finance property acquisitions and meet any short-term working capital requirements. The Company has also implemented a $150 million medium-term notes program pursuant to which it may from time to time offer for sale its senior unsecured debt for any general corporate purposes, including (i) funding specific liquidity requirements in its business, including property acquisitions and redevelopment costs and (ii) better managing the Company's debt maturities. In connection with its intention to continue to qualify as a REIT for Federal income tax purposes, the Company expects to continue paying regular dividends to its stockholders. These dividends will be paid from operating cash flows which are expected to increase due to property acquisitions and growth in rental revenues in the existing portfolio and from other sources. Since cash used to pay dividends reduces amounts available for capital investment, the Company generally intends to maintain a conservative dividend payout ratio, reserving such amounts as it considers necessary for the expansion and renovation of shopping centers in its portfolio, debt reduction, the acquisition of interests in new properties as suitable opportunities arise, and such other factors as the Board of Directors considers appropriate. It is management's intention that the Company continually have access to the capital resources necessary to expand and develop its business. Accordingly, the Company may seek to obtain funds through additional equity offerings or debt financing in a manner consistent with its intention to operate with a conservative debt capitalization policy. The Company anticipates that adequate cash will be available from operations to fund its operating and administrative expenses, regular debt service obligations and the payment of dividends in accordance with REIT requirements in both the short-term and long-term. Effects of Inflation Substantially all of the Company's leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling the Company to receive payment of additional rent calculated as a percentage of tenants' gross sales above pre-determined thresholds, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. Such escalation clauses are often related to increases in the consumer price index or similar inflation indices. In addition, many of the Company's leases are for terms of less than 10 years, which permits the Company to seek to increase rents to market rates upon renewal. Most of the Company's leases require the tenant to pay an allocable share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. The Company periodically evaluates its exposure to short-term interest rates and will, from time to time, enter into interest rate protection agreements which mitigate, but do not eliminate, the effect of changes in interest rates on its floating-rate loans. -3-
KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS --------------------------- <TABLE> <CAPTION> March 31, December 31, 1997 1996 ---------------- ---------------- <S> <C> <C> Assets: Real estate, net of accumulated depreciation of $186,444,006 and $180,552,647 $900,829,772 $891,503,339 Investment in retail store leases 18,470,556 18,994,321 Cash and cash equivalents 26,486,562 37,425,206 Accounts and notes receivable 15,717,209 13,986,138 Other assets 62,169,715 61,123,557 ----------------- -------------------- $1,023,673,814 $1,023,032,561 ================= ==================== Liabilities: Notes payable $310,250,000 $310,250,000 Mortgages payable 49,443,842 54,404,939 Other liabilities, including minority interests in partnerships 57,343,681 52,606,653 ---------------- ---------------- 417,037,523 417,261,592 ---------------- ---------------- Stockholders' Equity: Preferred stock, $1.00 par value, authorized 930,000 shares Class A Preferred Stock, $1.00 par value, authorized 345,000 shares Issued and outstanding 300,000 shares 300,000 300,000 Aggregate liquidation preference $75,000,000 Class B Preferred Stock, $1.00 par value, authorized 230,000 shares Issued and outstanding 200,000 shares 200,000 200,000 Aggregate liquidation preference $50,000,000 Class C Preferred Stock, $1.00 par value, authorized 460,000 shares Issued and outstanding 400,000 shares 400,000 400,000 Aggregate liquidation preference $100,000,000 Common stock, $.01 par value, authorized 50,000,000 shares Issued and outstanding 36,238,075 and 36,215,055 362,381 362,151 shares, respectively Paid-in capital 720,052,126 719,601,956 Cumulative distributions in excess of net income (114,678,216) (115,093,138) ---------------- ---------------- 606,636,291 605,770,969 ---------------- ---------------- $1,023,673,814 $1,023,032,561 ================= ===================== </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements. -4-
KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Three Months ended March 31, 1997 and 1996 ------------------------------------ <TABLE> <CAPTION> 1997 1996 --------------- --------------- <S> <C> <C> Revenues from rental property $45,195,317 $41,662,070 --------------- --------------- Rental property expenses: Rent 427,948 342,349 Real estate taxes 5,394,520 4,677,563 Interest 6,295,604 6,864,598 Operating and maintenance 5,886,499 7,022,213 Depreciation and amortization 6,899,248 6,449,400 --------------- --------------- 24,903,819 25,356,123 --------------- ---------------- Income from rental property 20,291,498 16,305,947 Income from investment in retail store leases 915,939 918,913 --------------- ---------------- 21,207,437 17,224,860 Management fee income 788,351 759,450 General and administrative expenses (2,754,691) (2,420,546) Other income, net 1,363,176 363,971 --------------- --------------- Net income $20,604,273 $15,927,735 =============== =============== Net income applicable to common shares $15,994,848 $13,412,110 =============== =============== Net income per common share $0.44 $0.38 ===== ===== </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements. -5-
KIMCO REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months ended March 31, 1997 and 1996 ---------------------------------- <TABLE> <CAPTION> 1997 1996 ------------------ ------------------ <S> <C> <C> Cash flow provided by operations $29,939,986 $27,122,138 ------------------ ------------------ Cash flow from investing activities: Acquisition of and improvements to real estate (15,217,792) (68,250,500) Investment in marketable securities (976,197) - ------------------ ------------------ Net cash flow investing activities (16,193,989) (68,250,500) ------------------ ------------------ Cash flow from financing activities: Principal payments on debt, excluding normal amortization of rental property debt (4,650,000) - Principal payments on rental property debt, net (311,097) (426,902) Dividends paid (20,173,944) (15,670,850) Proceeds from issuance of stock 450,400 56,920,538 ------------------ ------------------ Net cash flow provided by financing activities (24,684,641) 40,822,786 ------------------ ------------------ Change in cash and cash equivalents (10,938,644) (305,576) Cash and cash equivalents, beginning of period 37,425,206 16,164,666 ------------------ ------------------ Cash and cash equivalents, end of period $26,486,562 $15,859,090 ================== ================== Interest paid during the period $3,641,774 $4,512,109 ================== ================== Supplemental financing activity: Declaration of dividends paid in succeeding period $18,736,226 $15,109,605 ================== ================== </TABLE> [S]The accompanying notes are an integral part of these condensed consolidated financial statements. -6-
KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1.Interim Financial Statements The accompanying Condensed Consolidated Financial Statements include the accounts of Kimco Realty Corporation (the "Company"), its subsidiaries, all of which are wholly-owned, and all majority-owned partnerships. The information furnished is unaudited and reflects all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements included in the Company's Annual Report on Form 10-K. Certain account balances in the accompanying Condensed Consolidated Balance sheet as of December 31, 1996 have been reclassified so as to conform with the current year presentation. 2.Property Acquisitions During the three months ended March 31, 1997, the Company and its affiliates acquired 2 property interests in Indiana and Pennsylvania through separate transactions for an aggregate purchase price of approximately $8.5 million. 3.Investment in Retail Store Leases Income from the investment in retail store leases for the three months ended March 31, 1997 and 1996 represents sublease revenues of approximately $5.4 million and $5.1 million, respectively, less related expenses of $4.0 million and $3.6 million, respectively, and amounts, which in management's estimation, reasonably provide for the recovery of the investment over a ten-year period. 4.Net Income Per Common Share Net income per common share is based upon weighted average numbers of common shares outstanding of 36,229,366 and 35,224,170 for the three months ended March 31, 1997 and 1996, respectively. -7-
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 - None Form 8-K - None -8-
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 05/12/97 /s/ Milton Cooper - ------------- --------------------------- (Date) Milton Cooper Chairman of the Board 05/12/97 /s/ Louis J. Petra - ------------ -------------------------- (Date) Louis J. Petra Chief Financial Officer -9-