Kimco Realty Corp. 10-Q Summary: Period Ended June 30, 2001
Business Context and Reporting Period
This is a quarterly report (Form 10-Q) for Kimco Realty Corporation, a Real Estate Investment Trust (REIT) focused on neighborhood and community shopping centers. The report covers the three and six-month periods ended June 30, 2001. As of July 31, 2001, there were 64,094,370 shares of common stock outstanding.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2001 | Six Months Ended June 30, 2000 |
|---|---|---|
| Revenues from Rental Property | $239.5 million | $227.2 million |
| Net Income | $115.4 million | $99.7 million |
| Net Income Applicable to Common Shares | $102.3 million | $86.5 million |
| Diluted EPS | $1.59 | $1.41 |
| Cash Flow from Operations | $148.0 million | $128.7 million |
| Total Debt (Notes & Mortgages) | $1.33 billion | $1.33 billion (approx.) |
| Cash and Cash Equivalents | $83.3 million | $19.1 million (Dec 31, 2000) |
| Dividends Paid | $104.3 million | $93.5 million |
Material Changes vs. Prior Period
- Revenue Growth: Rental revenues increased 5.4% year-over-year for the six-month period, driven by acquisitions in 2000 and 2001, completion of development projects, and new leasing, partially offset by property dispositions.
- Profitability: Net income rose 15.7% to $115.4 million. This improvement was bolstered by gains on the sale of operating properties ($3.0 million) and development properties ($6.2 million), as well as increased equity income from Kimco Income REIT (KIR).
- Expenses: Rental property expenses increased 5.4% to $144.0 million due to acquisitions and renovations. Operating and administrative expenses rose 14% to $14.4 million, largely due to increased personnel costs and a $1.1 million stock grant to a new executive.
- Portfolio Activity: The company disposed of four operating properties (approx. 0.6 million sq. ft.) for $43.5 million in cash proceeds. It also sold development projects for $33.6 million, realizing a net gain of $3.9 million after taxes.
Guidance, Outlook, and Risks
- Liquidity Strategy: Management maintains a conservative dividend payout ratio to reserve capital for expansion and debt repayment. The company expects operating cash flows to fund dividends and debt service.
- Capital Resources: The company has a $250 million unsecured revolving credit facility (no borrowings outstanding as of June 30, 2001) and a shelf registration for up to $750 million in debt and equity securities.
- Development Subsidiary: The wholly-owned subsidiary KDI elected taxable REIT subsidiary status effective Jan 1, 2001, to engage in ground-up development and sales.
- Risks: Forward-looking statements highlight risks including general economic conditions, financing availability, interest rate volatility, and changes in government regulations. The company has $227.7 million in floating-rate debt, with $110 million hedged via an interest rate swap.
- Accounting Changes: Adoption of FASB No. 133 resulted in a $3.3 million liability recorded for an interest rate swap, with an anticipated reclassification of $3.0 million to earnings over the next 12 months.
Investor Verification Checklist
- Verify the sustainability of rental revenue growth given the offsetting effect of property dispositions.
- Confirm the impact of the $2.6 million income tax provision related to the new taxable REIT subsidiary (KDI) on future net income.
- Review the terms of the $51.2 million in new mortgage financings obtained during the period (rates 7.31% - 7.64%).
- Assess the potential upside and carrying costs associated with the $60.5 million investment in asset designation rights for the Montgomery Ward bankrupt estate.
- Monitor the reclassification of the $3.0 million interest rate swap value from accumulated other comprehensive income to earnings over the coming year.