10-Q 1 kimco_10q-093012.htm FORM 10-Q kimco_10q-093012.htm


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, 2012

or

o
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 of incorporation or organization)
 
(I.R.S. Employer 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)
 
        N/A        
(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 ý   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)    Yes ý   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer” and “smaller reporting company” in Rule 12-b-2 of the Exchange Act.

Large accelerated filer
ý
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
o
(Do not check if a smaller reporting company)
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Exchange Act). Yes o No ý
 
As of October 24, 2012, the registrant had 407,623,066 shares of common stock outstanding.




 
 

 
 
PART I   FINANCIAL INFORMATION
     
Item 1.
Financial Statements of Kimco Realty Corporation and Subsidiaries (the “Company”)
 
     
Condensed Consolidated Financial Statements -
 
     
 
Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011
3
     
 
Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2012 and 2011
4
     
 
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2012 and 2011
5
     
 
Condensed Consolidated Statements of Changes in Equity for the Nine Months Ended September 30, 2012 and 2011
6
     
 
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011
7
     
Notes to Condensed Consolidated Financial Statements
8
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
24
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
33
     
Item 4.
Controls and Procedures
35
     
PART II   OTHER INFORMATION
   
Item 1.
Legal Proceedings
35
   
Item 1A.
Risk Factors
35
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
35
     
Item 6.
Exhibits
36
   
Signatures
37
 
 
2

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share information)
 
   
September 30,
   
December 31,
 
   
2012
   
2011
 
Assets:
           
Operating real estate, net of accumulated depreciation of $1,745,992 and $1,693,090, respectively
  $ 7,078,206     $ 6,898,445  
Investments and advances in real estate joint ventures
    1,433,450       1,404,214  
Real estate under development
    132,113       179,722  
Other real estate investments
    326,268       344,131  
Mortgages and other financing receivables
    98,188       102,972  
Cash and cash equivalents
    429,529       112,882  
Marketable securities
    35,811       33,540  
Accounts and notes receivable
    138,558       149,807  
Other assets
    443,853       388,803  
Total assets
  $ 10,115,976     $ 9,614,516  
                 
                 
Liabilities:
               
Notes payable
  $ 3,159,943     $ 2,983,886  
Mortgages payable
    1,015,313       1,085,371  
Construction loans payable
    42,935       45,128  
Dividends payable
    94,856       92,159  
Other liabilities
    464,691       432,755  
Total liabilities
    4,777,738       4,639,299  
Redeemable noncontrolling interests
    95,059       95,074  
                 
Stockholders' equity:
               
Preferred Stock, $1.00 par value, authorized 5,791,200 and 5,146,000 shares, respectively
         
Class F Preferred Stock, $1.00 par value, authorized zero shares and 700,000 shares, respectively issued
and outstanding zero shares and 700,000 shares, respectively Aggregate liquidation preference $175,000
    -       700  
Class G Preferred Stock, $1.00 par value, authorized 184,000 shares issued and outstanding 184,000
shares Aggregate liquidation preference $460,000
    184       184  
Class H Preferred Stock, $1.00 par value, authorized 70,000 shares issued and outstanding
70,000 shares Aggregate liquidation preference $175,000
    70       70  
Class I Preferred Stock, $1.00 par value, authorized 18,400 and zero shares, respectively issued
and outstanding 16,000 and zero shares, respectively Aggregate liquidation preference $400,000
    16       -  
Class J preferred stock, $1.00 par value, authorized 9,000 and zero shares, respectively issued
and outstanding 9,000 and zero shares, respectively Aggregate liquidation preference $225,000
    9       -  
Common Stock, $.01 par value, authorized 750,000,000 shares issued and outstanding
407,608,794 and 406,937,830 shares, respectively
    4,076       4,069  
Paid-in capital
    5,938,244       5,492,022  
Cumulative distributions in excess of net income
    (813,097 )     (702,999 )
      5,129,502       4,794,046  
Accumulated other comprehensive income
    (56,785 )     (107,660 )
Total stockholders' equity
    5,072,717       4,686,386  
Noncontrolling interests
    170,462       193,757  
Total equity
    5,243,179       4,880,143  
Total liabilities and equity
  $ 10,115,976     $ 9,614,516  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
3

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share data)
 
   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2012
   
2011
   
2012
   
2011
 
Revenues
                       
Revenues from rental property
  $ 222,961     $ 204,297     $ 660,502     $ 620,440  
Management and other fee income
    8,917       8,728       27,053       26,827  
                                 
Total revenues
    231,878       213,025       687,555       647,267  
                                 
Operating expenses
                               
Rent
    3,270       3,455       9,457       10,545  
Real estate taxes
    29,917       27,827       87,606       83,985  
Operating and maintenance
    27,478       27,315       82,589       84,896  
General and administrative expenses
    29,957       30,846       95,317       90,188  
Impairment charges
    588       4,037       22,539       7,757  
Depreciation and amortization
    65,631       56,870       187,839       176,165  
                                 
Total operating expenses
    156,841       150,350       485,347       453,536  
                                 
Operating income
    75,037       62,675       202,208       193,731  
                                 
Other income/(expense)
                               
Mortgage and other financing income
    2,092       1,959       6,083       5,728  
Interest, dividends and other investment income
    598       375       1,110       14,173  
Other expense, net
    (3,085 )     (2,655 )     (6,169 )     (2,153 )
Interest expense
    (57,116 )     (56,120 )     (171,632 )     (166,535 )
Income from other real estate investments
    545       2,449       1,688       3,062  
                                 
Income from continuing operations before income taxes, equity in income of joint ventures and equity in income from other real estate investments
    18,071       8,683       33,288       48,006  
                                 
Provision for income taxes, net
    (5,183 )     (4,443 )     (4,822 )     (14,332 )
Equity in income of joint ventures, net
    24,498       19,641       103,743       49,810  
Equity in income of other real estate investments, net
    10,239       24,788       35,340       35,123  
Income from continuing operations
    47,625       48,669       167,549       118,607  
                                 
Discontinued operations
                               
Income/(loss) from discontinued operating properties, net of tax
    734       5,678       (2,195 )     13,521  
Impairment/loss on operating properties sold, net of tax
    (2,604 )     (289 )     (15,364 )     (8,919 )
Gain on disposition of operating properties, net of tax
    11,329       4,535       34,571       8,722  
Income from discontinued operations
    9,459       9,924       17,012       13,324  
                                 
Gain on sale of operating properties, net of tax
    -       -       4,059       -  
                                 
Net income
    57,084       58,593       188,620       131,931  
                                 
Net income attributable to noncontrolling interests
    (2,143 )     (3,612 )     (10,928 )     (9,277 )
                                 
Net income attributable to the Company
    54,941       54,981       177,692       122,654  
                                 
Redemption costs
    (6,213 )     -       (6,213 )     -  
Preferred stock dividends
    (21,622 )     (14,841 )     (58,037 )     (44,522 )
Net income available to the Company's common shareholders
  $ 27,106     $ 40,140     $ 113,442     $ 78,132  
                                 
Per common share:
                               
Income from continuing operations:
                               
-Basic
  $ 0.04     $ 0.07     $ 0.24     $ 0.16  
-Diluted
  $ 0.04     $ 0.07     $ 0.24     $ 0.16  
Net income:
                               
-Basic
  $ 0.07     $ 0.10     $ 0.28     $ 0.19  
-Diluted
  $ 0.07     $ 0.10     $ 0.28     $ 0.19  
                                 
Weighted average shares:
                               
-Basic
    405,810       406,564       405,880       406,521  
-Diluted
    406,747       407,292       406,650       407,386  
                                 
Amounts available to the Company's common shareholders:
                               
Income from continuing operations, net of tax
  $ 16,761     $ 30,191     $ 97,795     $ 65,010  
Income from discontinued operations
    10,345       9,949       15,647       13,122  
Net income
  $ 27,106     $ 40,140     $ 113,442     $ 78,132  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
4

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in thousands)
 
   
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
         
 
             
   
2012
   
2011
   
2012
   
2011
 
                         
Net income
  $ 57,084     $ 58,593     $ 188,620     $ 131,931  
Other comprehensive income:
                               
     Change in unrealized gain/(loss) on marketable securities
    1,382       (5,240 )     2,311       (7,369 )
     Change in unrealized gain on interest rate swaps
    31       103       403       362  
     Foreign currency translation adjustment
    42,807       (113,855 )     52,378       (55,823 )
Other comprehensive income
    44,220       (118,992 )     55,092       (62,830 )
                                 
Comprehensive income
    101,304       (60,399 )     243,712       69,101  
                                 
Comprehensive income attributable to noncontrolling interests
    (3,259 )     1,310       (15,145 )     (8,674 )
                                 
Comprehensive income attributable to the Company
  $ 98,045     $ (59,089 )   $ 228,567     $ 60,427  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
5

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Nine Months Ended September 30, 2012 and 2011
(Unaudited)
(in thousands)
 
   
Cumulative
Distributions in Excess of Net
   
Accumulated
Other
Comprehensive
   
Preferred Stock
   
Common Stock
   
Paid-in
   
Total
Stockholders'
    Noncontrolling  
Total
 
   
Income
   
Income
   
Issued
   
Amount
   
Issued
   
Amount
   
Capital
   
Equity
   
Interests
 
Equity
 
                                                             
Balance, January 1, 2011
  $ (515,164 )   $ (23,853 )     954     $ 954       406,424     $ 4,064     $ 5,469,841     $ 4,935,842     $ 225,444     $ 5,161,286  
                                                                                 
Contributions from noncontrolling interests
    -       -       -       -       -       -       -       -       1,011       1,011  
                                                                                 
Comprehensive income:
                                                                               
Net income
    122,654       -       -       -       -       -       -       122,654       9,277       131,931  
Other comprehensive income, net of tax:
                                                                               
Change in unrealized loss on marketable securities
    -       (7,369 )     -       -       -       -       -       (7,369 )     -       (7,369 )
Change in unrealized gain on interest rate swaps
    -       362       -       -       -       -       -       362       -       362  
Change in foreign currency translation adjustment
    -       (55,220 )     -       -       -       -       -       (55,220 )     (603 )     (55,823 )
Comprehensive income
                                                                               
                                                                                 
Redeemable noncontrolling interests
    -       -       -       -       -       -       -       -       (4,758 )     (4,758 )
Dividends ($0.54 per common share;
$1.2468 per Class F Depositary Share, $1.4532 per Class G Depositary Share and $1.2989 per Class H Depositary Share, respectively)
    (264,727 )     -       -       -       -       -       -       (264,727 )     -       (264,727 )
Distributions to noncontrolling interests
    -       -       -       -       -       -       -       -       (11,539 )     (11,539 )
Issuance of common stock
    -       -       -       -       438       5       4,936       4,941       -       4,941  
Surrender of common stock
    -       -       -       -       (34 )     (1 )     (579 )     (580 )     -       (580 )
Repurchase of common stock
    -       -       -       -       (214 )     (2 )     (3,979 )     (3,981 )     -       (3,981 )
Exercise of common stock options
    -       -       -       -       326       3       4,897       4,900       -       4,900  
Acquisition of noncontrolling interests
    -       -       -       -       -       -       2,970       2,970       (22,456 )     (19,486 )
Amortization of equity awards
    -       -       -       -       -       -       10,669       10,669       -       10,669  
Balance, September 30, 2011
  $ (657,237 )   $ (86,080 )     954     $ 954       406,940     $ 4,069     $ 5,488,755     $ 4,750,461     $ 196,376     $ 4,946,837  
                                                                                 
Balance, January 1, 2012
  $ (702,999 )   $ (107,660 )     954     $ 954       406,938     $ 4,069     $ 5,492,022     $ 4,686,386     $ 193,757     $ 4,880,143  
                                                                                 
Contributions from noncontrolling interests
    -       -       -       -       -       -       -       -       1,343       1,343  
                                                                                 
Comprehensive income:
                                                                               
Net income
    177,692       -       -       -       -       -       -       177,692       10,928       188,620  
Other comprehensive income, net of tax:
                                                                               
Change in unrealized gain on marketable securities
    -       2,311       -       -       -       -       -       2,311       -       2,311  
Change in unrealized gain on interest rate swaps
    -       403       -       -       -       -       -       403       -       403  
Change in foreign currency translation adjustment
    -       48,161       -       -       -       -       -       48,161       4,217       52,378  
                                                                                 
Redeemable noncontrolling interests
    -       -       -       -       -       -       -       -       (4,745 )     (4,745 )
Dividends ($0.57 per common share;
$1.0344 per Class F Depositary Share, $1.4532 per Class G Depositary Share, $1.2989 per Class H Depositary Share and $0.79583 per Class I Depositary Share, and $0.2521 per Class J Depositary Share, respectively)
    (287,790 )     -       -       -       -       -       -       (287,790 )     -       (287,790 )
Distributions to noncontrolling interests
    -       -       -       -       -       -       -       -       (11,874 )     (11,874 )
Issuance of common stock
    -       -       -       -       1,093       11       18,055       18,066       -       18,066  
Issuance of preferred stock
    -       -       25       25       -       -       605,046       605,071       -       605,071  
Surrender of common stock
    -       -       -       -       (111 )     (1 )     (2,072 )     (2,073 )     -       (2,073 )
Repurchase of common stock
    -       -       -       -       (1,636 )     (16 )     (30,930 )     (30,946 )     -       (30,946 )
Exercise of common stock options
    -       -       -       -       1,325       13       20,018       20,031       -       20,031  
Acquisition of noncontrolling interests
    -       -       -       -       -       -       296       296       (23,164 )     (22,868 )
Amortization of equity awards
    -       -       -       -       -       -       10,109       10,109       -       10,109  
Redemption of preferred stock
    -       -       (700 )     (700 )     -       -       (174,300 )     (175,000 )     -       (175,000 )
Balance, September 30, 2012
  $ (813,097 )   $ (56,785 )     279     $ 279       407,609     $ 4,076     $ 5,938,244     $ 5,072,717     $ 170,462     $ 5,243,179  
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
6

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 
 
 
Nine Months Ended
September 30,
 
   
2012
   
2011
 
             
Cash flow from operating activities:
           
Net income
  $ 188,620     $ 131,931  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    197,964       188,812  
Impairment charges
    37,740       16,676  
Gain on sale of operating properties
    (44,596 )     (8,722 )
Equity in income of joint ventures, net
    (103,743 )     (49,810 )
Equity in income from other real estate investments, net
    (35,340 )     (35,123 )
Distributions from joint ventures and other real estate investments
    150,721       108,595  
Cash retained from excess tax benefits
    -       (69 )
Change in accounts and notes receivable
    11,249       (5,182 )
Change in accounts payable and accrued expenses
    34,915       32,826  
Change in other operating assets and liabilities
    (29,940 )     (12,019 )
Net cash flow provided by operating activities
    407,590       367,915  
                 
Cash flow from investing activities:
               
Acquisition of and improvements to operating real estate
    (421,849 )     (169,350 )
Acquisition of and improvements to real estate under development
    (2,423 )     (26,939 )
Proceeds from sale/repayments of marketable securities
    156       178,290  
Investments and advances to real estate joint ventures
    (159,121 )     (90,747 )
Reimbursements of investments and advances to real estate joint ventures
    135,987       44,894  
Other real estate investments
    (4,215 )     (5,225 )
Reimbursements of investments and advances to other real estate investments
    26,637       50,536  
Investment in mortgage loans receivable
    (15,623 )     -  
Collection of mortgage loans receivable
    24,613       14,732  
Other investments
    (924 )     (730 )
Reimbursements of other investments
    9,538       11,122  
Proceeds from sale of operating properties
    277,174       65,593  
Proceeds from sale of development properties
    -       7,373  
Net cash flow (used for) provided by investing activities
    (130,050 )     79,549  
                 
Cash flow from financing activities:
               
Principal payments on debt, excluding normal amortization of rental property debt
    (212,105 )     (24,393 )
Principal payments on rental property debt
    (17,585 )     (17,130 )
Principal payments on construction loan financings
    (213 )     (409 )
Proceeds from mortgage/construction loan financings
    6,276       13,685  
(Repayment) proceeds under unsecured revolving credit facilities, net
    (226,558 )     13,326  
Proceeds from issuance of unsecured term loan
    400,000       -  
Repayment of unsecured notes
    (17,000 )     (88,000 )
Financing origination costs
    (1,904 )     (855 )
Redemption of non-controlling interests
    (25,868 )     (23,890 )
Dividends paid
    (285,092 )     (265,674 )
Cash retained from excess tax benefits
    -       69  
Proceeds from issuance of stock
    625,102       4,832  
Redemption of preferred stock
    (175,000 )     -  
Repurchase of common stock
    (30,946 )     (3,981 )
Net cash flow provided by (used for) financing activities
    39,107       (392,420 )
                 
Change in cash and cash equivalents
  $ 316,647     $ 55,044  
                 
Cash and cash equivalents, beginning of year
    112,882       125,154  
Cash and cash equivalents, end of year
  $ 429,529     $ 180,198  
                 
Interest paid during the year (net of capitalized interest of $1,273 and $6,142, respectively)
  $ 149,976     $ 145,378  
                 
Income taxes paid during the year
  $ 1,970     $ 2,062  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
7

 

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 and Subsidiaries, (the “Company”). The Company’s Subsidiaries includes subsidiaries which are wholly-owned, and all entities in which the Company has a controlling financial interest, including where the Company has been determined to be a primary beneficiary of a variable interest entity (“VIE”) or meets certain criteria of a sole general partner or managing member in accordance with the Consolidation guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). All inter-company balances and transactions have been eliminated in consolidation.  The information furnished in the accompanying Condensed Consolidated Financial Statements 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 Company's 2011 Annual Report on Form 10-K for the year ended December 31, 2011 ("10-K"), as certain disclosures in the Quarterly Report on Form 10-Q that would duplicate those included in the 10-K are not included in these Condensed Consolidated Financial Statements.

Subsequent Events -

The Company has evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements.

Income Taxes -

The Company elected status as a Real Estate Investment Trust (a “REIT”) for federal income tax purposes beginning in its taxable year ended December 31, 1991 and operates in a manner that enables the Company to maintain its status as a REIT.  As a REIT, the Company must distribute at least 90 percent of its taxable income and will not pay federal income taxes on the amount distributed to its shareholders.  Therefore, the Company is not subject to federal income taxes if it distributes 100 percent of its taxable income.   Most states, where the Company holds investments in real estate, conform to the federal rules recognizing REITs.  Certain subsidiaries have made a joint election with the Company to be treated as taxable REIT subsidiaries (“TRS”), which permit the Company to engage in certain business activities in which the REIT may not conduct directly.  A TRS is subject to federal and state income taxes on the income from these activities and the Company includes a provision for taxes in its condensed consolidated financial statements.  The Company is subject to and also includes in its tax provision non-U.S. income taxes on certain investments located in jurisdictions outside the U.S.
 
 
8

 

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
September 30,
   
Nine Months Ended
September 30,
 
   
2012
   
2011
   
2012
   
2011
 
Computation of Basic Earnings Per Share:
                       
                         
Income from continuing operations
  $ 47,625     $ 48,669     $ 167,549     $ 118,607  
Gain on sale of operating properties, net of tax
    -       -       4,059       -  
Net income attributable to noncontrolling interests
    (2,143 )     (3,612 )     (10,928 )     (9,277 )
Discontinued operations attributable to noncontrolling interests
    (886 )     (25 )     1,365       202  
Redemption costs
    (6,213 )     -       (6,213 )     -  
Preferred stock dividends
    (21,622 )     (14,841 )     (58,037 )     (44,522 )
Income from continuing operations available to the common shareholders
    16,761       30,191       97,795       65,010  
Earnings attributable to unvested restricted shares
    (298 )     (150 )     (893 )     (450 )
Income from continuing operations attributable to common shareholders
    16,463       30,041       96,902       64,560  
Income from discontinued operations attributable to the Company
    10,345       9,949       15,647       13,122  
Net income attributable to the Company’s common shareholders for basic earnings per share
  $ 26,808     $ 39,990     $ 112,549     $ 77,682  
                                 
Weighted average common shares outstanding
    405,810       406,564       405,880       406,521  
                                 
Basic Earnings Per Share Attributable to the Company’s Common Shareholders:
                               
Income from continuing operations
  $ 0.04     $ 0.07     $ 0.24     $ 0.16  
Income from discontinued operations
    0.03       0.03       0.04       0.03  
Net income
  $ 0.07     $ 0.10     $ 0.28     $ 0.19  
                                 
Computation of Diluted Earnings Per Share:
                               
Income from continuing operations attributable to common shareholders
  $ 16,463     $ 30,041     $ 96,902     $ 64,560  
Income from discontinued operations attributable to the Company
    10,345       9,949       15,647       13,122  
Net income attributable to the Company’s common shareholders for diluted earnings per share
  $ 26,808     $ 39,990     $ 112,549     $ 77,682  
                                 
Weighted average common shares  outstanding – basic
    405,810       406,564       405,880       406,521  
Effect of dilutive securities (a):
                               
Equity awards
    937       728       770       865  
Shares for diluted earnings per common share
    406,747       407,292       406,650       407,386  
                                 
Diluted Earnings Per Share Attributable to the Company’s Common Shareholders:
                               
Income from continuing operations
  $ 0.04     $ 0.07     $ 0.24     $ 0.16  
Income from discontinued operations
    0.03       0.03       0.04       0.03  
Net income
  $ 0.07     $ 0.10     $ 0.28     $ 0.19  
 
(a)  For the three and nine months ended September 30, 2012 and 2011, the effect of certain convertible units would have an anti-dilutive effect upon the calculation of Income from continuing operations per share.  Accordingly, the impact of such conversion has not been included in the determination of diluted earnings per share calculations.  Additionally, there were 11,205,056 and 13,552,139 stock options that were not dilutive at September 30, 2012 and 2011, respectively.
 
The Company's unvested restricted share awards contain non-forfeitable rights to distributions or distribution equivalents. The impact of the unvested restricted share awards on earnings per share has been calculated using the two-class method whereby earnings are allocated to the unvested restricted share awards based on dividends declared and the unvested restricted shares' participation rights in undistributed earnings.

New Accounting Pronouncements -

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, "Fair Value Measurements and Disclosures (Topic 820) - Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS" ("ASU 2011-04").  ASU 2011-04 clarifies the application of existing fair value measurement requirements, changes certain principles related to measuring fair value and requires additional disclosures about fair value measurements.  Specifically, the guidance specifies that the concepts of highest and best use and valuation premise in a fair value measurement are only relevant when measuring the fair value of nonfinancial assets whereas they are not relevant when measuring the fair value of financial assets and liabilities.  Required disclosures are expanded under the new guidance, especially for fair value measurements that are categorized within Level 3 of the fair value hierarchy, for which quantitative information about the unobservable inputs used, and a narrative description of the valuation processes in place and sensitivity of recurring Level 3 measurements to changes in unobservable inputs will be required. Entities will also be required to disclose the categorization by level of the fair value hierarchy for items that are not measured at fair value in the balance sheet but for which the fair value is required to be disclosed.  ASU 2011-04 is effective for annual periods beginning after December 15, 2011, and is to be applied prospectively.  The Company’s adoption of this guidance did not have a material impact on its financial statement presentation.
 
 
9

 

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”). The amendments in this ASU require an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity. In December 2011, the FASB deferred portions of this update in its issuance of ASU 2011-12 Accounting Standards Update No. 2011-12 (“ASU 2011-12”), Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05. The amendment requires that all non-owner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-12 defers only those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. ASU 2011-05 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2011, with early adoption permitted, but full retrospective application is required. The adoption of ASU 2011-05 and ASU 2011-12 did not have a material impact on the Company’s financial statement presentation.

In November 2011, the FASB issued ASU 2011-10, Property, Plant and Equipment (Topic 360): Derecognition of in Substance Real Estate - a Scope Clarification (a consensus of the FASB Emerging Issues Task Force) (“ASU 2011-10”). ASU 2011-10 requires a parent company that ceases to have a controlling financial interest in a subsidiary that is in substance real estate because the subsidiary has defaulted on its nonrecourse debt to use the FASB’s Real Estate guidance to determine whether to derecognize the in substance real estate entities.  ASU 2011-10 is effective for reporting periods beginning on or after June 15, 2012.  The adoption of ASU 2011-10 did not have a material impact on the Company’s financial position or results of operations.

In December 2011, the FASB released ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). ASU 2011-11 requires companies to provide new disclosures about offsetting and related arrangements for financial instruments and derivatives. The provisions of ASU 2011-11 are effective for reporting periods beginning on or after January 1, 2013, and are required to be applied retrospectively. The adoption of ASU 2011-11 is not expected to have a material impact on the Company’s financial statement disclosures.

Reclassifications –

The Company made the following reclassification to the Company’s 2011 Condensed Consolidated Balance Sheets to conform to the 2012 presentation: (i) a reclassification of amounts relating to leasing commissions from Operating real estate and Real estate under development to Other assets.
 
2. Operating Property Activities

Acquisitions -

During the nine months ended September 30, 2012, the Company acquired the following properties, in separate transactions (in thousands):

       
Purchase Price
 
Property Name
Location
Month
Acquired
 
Cash
   
Debt
Assumed
   
Total
   
GLA*
 
Woodbridge S.C.
Sugarland, TX
Jan-12
 
$
9,000
   
$
-
   
$
9,000
     
97
 
Bell Camino Center
Sun City, AZ
Jan-12
   
4,185
     
4,210
     
8,395
     
63
 
Olympia West Outparcel
Olympia, WA
Feb-12
   
1,200
     
-
     
1,200
     
6
 
Frontier Village (1)
Lake Stevens, WA
Mar-12
   
12,231
     
30,900
     
43,131
     
195
 
Silverdale S.C. (1)
Silverdale, WA
Mar-12
   
8,335
     
24,000
     
32,335
     
170
 
31 parcels (2)
Various
Jan-12
   
30,753
     
-
     
30,753
     
83
 
1 parcel (3)
Duncan, SC
Jan-12
   
1,048
     
-
     
1,048
     
3
 
30 parcels (2)
Various
Mar-12
   
39,493
     
-
     
39,493
     
107
 
1 parcel (3)
Peru, IL
Mar-12
   
995
     
-
     
995
     
4
 
Towson Place (4)
Towson, MD
Apr - 12
   
69,375
     
57,625
     
127,000
     
680
 
Prien Lake Outparcel
Lake Charles, LA
May - 12
   
1,800
     
-
     
1,800
     
8
 
Devon Village
Devon, PA
June -12
   
28,550
     
-
     
28,550
     
79
 
4 Properties
Various, NC
June - 12
   
63,750
     
-
     
63,750
     
368
 
Lake Jackson (5)
Lake Jackson, TX
July - 12
   
5,500
     
-
     
5,500
     
35
 
Woodlawn S.C.
Charlotte, NC
July - 12
   
7,050
     
-
     
7,050
     
137
 
Columbia Crossing - 2 Outparcels
Columbia, MD
July - 12
   
11,060
     
-
     
11,060
     
69
 
Pompano Beach (6)
Pompano Beach, FL
July - 12
   
12,180
     
-
     
12,180
     
81
 
6 Parcels (2)
Various
July - 12
   
8,111
     
-
     
8,111
     
19
 
Wilton S.C.
Wilton, CT
Aug - 12
   
18,800
     
20,900
     
39,700
     
96
 
Hawthorne Hills S. C.
Vernon Hills, IL
Aug - 12
   
15,974
     
21,563
     
37,537
     
193
 
       
$
349,390
   
$
159,198
   
$
508,588
     
2,493
 
* Gross leasable area ("GLA")
 
 
10

 
 
(1)   These properties were acquired from a joint venture in which the Company has a 15% noncontrolling interest.  The Company evaluated these transactions pursuant to the FASB’s Consolidation guidance and as such recognized an aggregate gain of  $2.0 million from the fair value adjustment associated with its original ownership due to a change in control which is included in Equity in income of joint ventures, net on the Company’s Condensed Consolidated Statements of Income.
(2)   Acquired an aggregate of 67 parcels net leased to restaurants through a consolidated joint venture, in which the Company has a 99.1% controlling interest.  During July 2012, the Company purchased the remaining 0.9% interest for $0.7 million.
(3)   Acquired an aggregate of two parcels net leased to restaurants through a consolidated joint venture, in which the Company has a 92.0% controlling interest.  During July 2012, the Company sold 4% of its interest for $0.1 million.  The Company continues to have a controlling interest in the joint venture and therefore continues to consolidate this investment.
(4)   This property was acquired from a joint venture in which the Company had a 30% noncontrolling interest.  The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance and as such recognized a gain of $12.1 million from the fair value adjustment associated with its original ownership due to a change in control.  In addition, the Company recognized promote income of $1.1 million in connection with this transaction.  The gain and promote income are included in Equity in income of joint ventures, net on the Company’s Condensed Consolidated Statements of Income.   Additionally, the debt assumed in connection with this transaction of $57.6 million was repaid in May 2012.
(5)   The Company acquired this property from a preferred equity investment in which the Company held a noncontrolling interest. The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance.  This transaction resulted in a change in control with no gain or loss recognized.
(6)   This property was acquired from a joint venture in which the Company had a 50% noncontrolling interest.  The Company evaluated this transaction pursuant to the FASB’s Consolidation guidance.  This transaction resulted in a change in control with no gain or loss recognized.
 
The aggregate purchase price of the properties acquired during the nine months ended September 30, 2012 has been allocated as follows (in thousands):
 
Land
 
$
164,990
 
Buildings
   
250,505
 
Above Market Rents
   
12,556
 
Below Market Rents
   
(35,735
)
In-Place Leases
   
26,128
 
Building Improvements
   
78,687
 
Tenant Improvements
   
15,615
 
Mortgage Fair Value Adjustment
   
(4,158
)
   
$
508,588
 

Additionally, during the nine months ended September 30, 2012, the Company acquired, in separate transactions, the remaining interest in four separate consolidated joint ventures for $8.7 million.  There was no change in control as a result of these transactions and as such the purchase of the remaining interest in these joint ventures resulted in a decrease in noncontrolling interest of $7.4 million and an increase to the Company’s Paid-in capital of $0.2 million.

FNC Realty Corporation

During the nine months ended September 30, 2012, the Company acquired an additional 13.00% interest in FNC Realty Corporation (“FNC”) for $14.6 million, which increased the Company’s total ownership interest to 82.08%.  The Company had previously and continues to consolidate FNC.

Dispositions –

During the nine months ended September 30, 2012, the Company disposed of 30 operating properties and two outparcels, in separate transactions, for an aggregate sales price of $234.0 million. These transactions, which are included in Discontinued Operations, resulted in an aggregate gain of $36.5 million and impairment charges of $14.3 million.

Additionally, during the nine months ended September 30, 2012, the Company disposed of four land parcels and two outparcels for an aggregate sales price of $7.1 million and recognized an aggregate gain of $2.0 million and impairment charges of $0.3 million related to these transactions. The gains from these transactions are recorded as other income, which is included in Other expense, net, and the impairment charges have been recorded as Impairment charges in the Company’s Condensed Consolidated Statements of Income.  The Company provided seller financing in connection with the sale of one of the land parcels for $1.75 million, which bears interest at a rate of 6.5% for the first six months and 7.5% for the remaining term, and is scheduled to mature in November 2012.  The Company evaluated this transaction pursuant to the FASB’s real estate sales guidance and concluded that the criteria for sale recognition was met.  
 
 
11

 

Also, during the nine months ended September 30, 2012, the Company sold a land parcel in San Juan del Rio, Mexico for a sales price of 24.3 million Mexican Pesos (“MXN”) (USD $1.9 million).  The Company recognized a gain of MXN 5.7 million (USD $0.4 million) on this transaction.   The gain from this transaction is recorded as other income, which is included in Other expense, net, in the Company’s Condensed Consolidated Statements of Income.

During the nine months ended September 30, 2012, the Company sold a previously consolidated operating property to a newly formed unconsolidated joint venture in which the Company has a 20% noncontrolling interest for a sales price of $55.5 million.  This transaction resulted in a pre-tax gain of $10.0 million, of which the Company deferred $2.0 million due to its continued involvement.  This gain has been recorded as Gain on sale of operating properties, net of tax in the Company’s Condensed Consolidated Statements of Income.

Impairment Charges -

In addition to the impairment charges described above, during the nine months ended September 30, 2012, the Company recognized an aggregate impairment charge of $22.2 million relating to its investment in three operating properties, which are included in Operating expenses in the Company’s Condensed Consolidated Statements of Income.  The aggregate book value of these properties was $38.3 million. The estimated aggregate fair value of these properties is based upon purchase price offers and comparable sales information aggregating $16.1 million.  These impairment charges resulted from the Company’s efforts to market certain assets and management’s assessment as to the likelihood and timing of such potential transactions (see Footnote 14).
 
3. Discontinued Operations

The Company reports as discontinued operations, properties held-for-sale as of the end of the current period and assets sold during the period. The results of these discontinued operations are included as a separate component of income on the Condensed Consolidated Statements of Income under the caption Discontinued operations.  This reporting has resulted in certain reclassifications of 2011 financial statement amounts.

The components of income and expense relating to discontinued operations for the three and nine months ended September 30, 2012 and 2011 are shown below. These include the results of operations through the date of each respective sale for properties sold during 2012 and 2011 and the operations for the applicable period for those assets classified as held-for-sale as of September 30, 2012 (in thousands):
 
   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2012
   
2011
   
2012
   
2011
 
Discontinued operations:
                       
Revenues from rental property
  $ 3,524     $ 12,669     $ 15,515     $ 39,593  
Rental property expenses
    (1,391 )     (4,266 )     (7,246 )     (14,042 )
Depreciation and amortization
    (1,143 )     (3,656 )     (10,125 )     (12,647 )
Interest expense
    (199 )     (403 )     (589 )     (1,348 )
Income from other real estate investments
    -       1,430       13       1,945  
Other expense, net
    (35 )     (124 )     (178 )     (57 )
Income/(loss) from discontinued operating properties, before income taxes
    756       5,650       (2,610 )     13,444  
Impairment charges
    (2,582 )     (289 )     (15,201 )     (8,919 )
Gain on disposition of operating properties
    13,278       4,535       36,520       8,722  
(Provision)/benefit for income taxes, net
    (1,993 )     28       (1,697 )     77  
Income from discontinued operating properties
    9,459       9,924       17,012       13,324  
Net loss/(income) attributable to noncontrolling interests
    886       25       (1,365 )     (202 )
Income from discontinued operations attributable to the Company
  $ 10,345     $ 9,949     $ 15,647     $ 13,122  

During the nine months ended September 30, 2012, the Company classified as held-for-sale 17 operating properties, comprising 1.9 million square feet of GLA.  The book value of these properties was $69.8 million, net of accumulated depreciation of $51.1 million.  The Company recognized impairment charges of $4.2 million on three of these properties. The book value of the other properties did not exceed its estimated fair value, less costs to sell, and as such no impairment charges were recognized.  The Company’s determination of the fair value of these properties, aggregating $98.6 million, was based upon executed contracts of sale with third parties (see Footnote 14).   In addition, the Company completed the sale of three operating properties during the nine months ended September 30, 2012 for which two were classified as held-for-sale during 2011 (these dispositions are included in Footnote 2 above).  The remaining 16 properties held-for-sale, aggregating $59.1 million, net of accumulated depreciation of $46.4 million, are included in Other assets on the Company’s Condensed Consolidated Balance Sheets.
 
 
12

 
 
4. Ground-Up Development

The Company is engaged in ground-up development projects which will be held as long-term investments by the Company.  The ground-up development projects generally have significant pre-leasing prior to the commencement of construction. As of September 30, 2012, the Company had a total of three ground-up development projects, consisting of two projects located in the U.S. and one project located in Peru.
 
5. Investments and Advances in Real Estate Joint Ventures

The Company and its subsidiaries have investments in and advances to various real estate joint ventures.  These joint ventures are engaged primarily in the operation of shopping centers which are either owned or held under long-term operating leases. The Company and the joint venture partners have joint approval rights for major decisions, including those regarding property operations.  As such, the Company holds noncontrolling interests in these joint ventures and accounts for them under the equity method of accounting.  The table below presents joint venture investments for which the Company held an ownership interest at September 30, 2012 and December 31, 2011 and the Company’s share of income/(loss) for the nine months ended September 30, 2012 and 2011 (in millions, except number of properties):

As of and for the nine months ended September 30, 2012
 
Venture
 
Average
Ownership
Interest
   
Number of
Properties
   
Total
GLA
   
Gross
Investment
In Real
Estate
   
The
Company's
Investment
   
The Company's
Share of
Income/(Loss)
 
Prudential Investment Program (“KimPru” and “KimPru II”) (1) (2)
    15.00 %     61       10.7     $ 2,741.1     $ 157.6     $ 5.6  
Kimco Income Opportunity Portfolio (“KIR”) (2)
    45.00 %     58       12.4       1,541.9       140.3       17.2  
UBS Programs (2)*
    17.90 %     40       5.7       1,258.2       58.4       (0.3 )
BIG Shopping Centers (2)*
    37.60 %     22       3.6       555.9       33.8       (2.1 )
The Canada Pension Plan Investment Board (“CPP”) (2)
    55.00 %     6       2.4       434.2       149.8       4.0  
Kimco Income Fund (2)
    15.20 %     12       1.5       284.7       12.3       1.4  
SEB Immobilien (2)
    15.00 %     13       1.8       361.2       1.8       0.5  
Other Institutional Programs (2) (5) (8)
 
Various
      61       3.1       556.2       20.7       18.7  
RioCan (10)
    50.00 %     45       9.3       1,388.8       122.0       24.2  
Intown (3)
    -       138       N/A       839.3       86.7       2.4  
Latin America
 
Various
      131       18.1       1,184.8       333.8       11.1  
Other Joint Venture Programs (4) (6) (7) (9) (11)
 
Various
      91       13.4       1,845.7       316.3       21.0  
Total
            678       82.0     $ 12,992.0     $ 1,433.5     $ 103.7  

As of December 31, 2011
   
For the
nine months ended September 30,
2011
 
Venture
 
Average
Ownership
Interest
   
Number of
Properties
   
Total
GLA
   
Gross
Investment
In Real
Estate
   
The
Company's
Investment
   
The Company's
Share of Income/(Loss)
 
Prudential Investment Program (“KimPru” and “KimPru II”) (1) (2)
    15.00 %     63       10.9     $ 2,781.4     $ 151.9     $ (1.4 )
Kimco Income Opportunity Portfolio (“KIR”) (2)