krc_10q-063012.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 June 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 July 25, 2012, the registrant had 406,954,653 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 June 30, 2012 and December 31, 2011
3
     
 
Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2012 and 2011
4
     
 
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2012 and 2011
5
     
 
Condensed Consolidated Statements of Changes in Equity for the Six Months Ended June 30, 2012 and 2011
6
     
 
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 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
23
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
32
     
Item 4.
Controls and Procedures
33
     
PART II
OTHER INFORMATION
   
Item 1.
Legal Proceedings
34
   
Item 1A.
Risk Factors
34
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
34
     
Item 6.
Exhibits
34
   
Signatures
35
 
 
2

 
 
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share information)
 
   
June 30,
2012
   
December 31,
2011
 
Assets:
           
Operating real estate, net of accumulated depreciation of $1,743,276 and $1,693,090, respectively   $ 7,087,796     $ 6,898,445  
Investments and advances in real estate joint ventures
    1,436,038       1,404,214  
Real estate under development
    129,877       179,722  
Other real estate investments
    340,325       344,131  
Mortgages and other financing receivables
    96,150       102,972  
Cash and cash equivalents
    383,729       112,882  
Marketable securities
    34,439       33,540  
Accounts and notes receivable
    131,487       149,807  
Other assets
    390,230       388,803  
Total assets
  $ 10,030,071     $ 9,614,516  
                 
                 
Liabilities:
               
Notes payable
  $ 3,161,028     $ 2,983,886  
Mortgages payable
    990,586       1,085,371  
Construction loans payable
    40,002       45,128  
Dividends payable
    98,883       92,159  
Other liabilities
    439,424       432,755  
Total liabilities
    4,729,923       4,639,299  
Redeemable noncontrolling interests
    95,059       95,074  
                 
Stockholders' equity:
               
Preferred Stock, $1.00 par value, authorized 5,109,200 and 5,146,000 shares, respectively
               
Class F Preferred Stock, $1.00 par value, authorized 700,000 shares issued and
outstanding 700,000 shares Aggregate liquidation preference $175,000
    700       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       -  
Common Stock, $.01 par value, authorized 750,000,000 shares issued and outstanding
406,891,427 and 406,937,830 shares, respectively
    4,069       4,069  
Paid-in capital
    5,880,740       5,492,022  
Cumulative distributions in excess of net income
    (771,282 )     (702,999 )
      5,114,497       4,794,046  
Accumulated other comprehensive income
    (99,889 )     (107,660 )
Total stockholders' equity
    5,014,608       4,686,386  
Noncontrolling interests
    190,481       193,757  
Total equity
    5,205,089       4,880,143  
Total liabilities and equity
  $ 10,030,071     $ 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 June 30,
   
Six Months Ended June 30,
 
   
2012
   
2011
   
2012
   
2011
 
Revenues
                       
Revenues from rental property
  $ 226,709     $ 211,637     $ 447,054     $ 425,607  
Management and other fee income
    8,710       8,437       18,135       18,100  
                                 
Total revenues
    235,419       220,074       465,189       443,707  
                                 
Operating expenses
                               
Rent     2,932       3,807       6,201       7,101  
Real estate taxes
    29,632       28,141       59,175       57,562  
Operating and maintenance
    28,980       26,868       56,938       59,432  
General and administrative expenses
    30,973       29,612       65,404       59,358  
Impairment charges
    24,495       3,721       25,948       3,721  
Depreciation and amortization
    63,124       59,131       124,917       121,963  
                                 
Total operating expenses
    180,136       151,280       338,583       309,137  
                                 
Operating income
    55,283       68,794       126,606       134,570  
                                 
Other income/(expense)
                               
Mortgage and other financing income
    1,985       1,940       3,992       3,769  
Interest, dividends and other investment income
    349       8,932       510       13,797  
Other income/(expense), net
    511       772       (3,077 )     479  
Interest expense
    (57,387 )     (55,601 )     (114,881 )     (110,941 )
Income from other real estate investments
    416       447       1,143       612  
                                 
Income from continuing operations before income taxes, equity in income of joint ventures and equity in income from other real estate investments
    1,157       25,284       14,293       42,286  
                                 
Benefit/(provision) for income taxes, net
    4,656       (5,640 )     616       (9,893 )
Equity in income of joint ventures, net
    42,500       17,824       79,246       30,169  
Equity in income of other real estate investments, net
    14,074       4,831       25,103       10,335  
Income from continuing operations
    62,387       42,299       119,258       72,897  
                                 
Discontinued operations
                               
(Loss)/income from discontinued operating properties, net of tax
    (4,285 )     487       (6,283 )     4,940  
Impairment/loss on operating properties sold, net of tax
    (1,037 )     (5,496 )     (8,741 )     (8,689 )
Gain on disposition of operating properties
    11,263       4,025       23,242       4,188  
Income/(loss) from discontinued operations
    5,941       (984 )     8,218       439  
                                 
Gain on sale of operating properties, net of tax
    4,059       -       4,059       -  
                                 
Net income
    72,387       41,315       131,535       73,336  
                                 
Net income attributable to noncontrolling interests
    (3,275 )     (2,606 )     (8,785 )     (5,665 )
                                 
Net income attributable to the Company
    69,112       38,709       122,750       67,671  
                                 
Preferred stock dividends
    (20,841 )     (14,841 )     (36,415 )     (29,681 )
Net income available to the Company's common shareholders
  $ 48,271     $ 23,868     $ 86,335     $ 37,990  
                                 
Per common share:
                               
Income from continuing operations:
                               
-Basic
  $ 0.10     $ 0.06     $ 0.20     $ 0.09  
-Diluted
  $ 0.10     $ 0.06     $ 0.20     $ 0.09  
Net income:
                               
-Basic
  $ 0.12     $ 0.06     $ 0.21     $ 0.09  
-Diluted
  $ 0.12     $ 0.06     $ 0.21     $ 0.09  
                                 
Weighted average shares:
                               
-Basic
    405,560       406,559       405,916       406,500  
-Diluted
    406,476       407,562       406,827       407,472  
                                 
Amounts available to the Company's common shareholders:
                               
Income from continuing operations, net of tax
  $ 42,381     $ 24,970     $ 80,399     $ 37,778  
Income/(loss) from discontinued operations
    5,890       (1,102 )     5,936       212  
Net income
  $ 48,271     $ 23,868     $ 86,335     $ 37,990  
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 June 30,
   
Six Months Ended June 30,
 
         
 
             
   
2012
   
2011
   
2012
   
2011
 
                         
Net income
  $ 72,387     $ 41,315     $ 131,535     $ 73,336  
Other comprehensive income:
                               
Change in unrealized (loss)/gain on marketable securities
    (231 )     1,914       928       (2,129 )
Change in unrealized gain on interest rate swaps
    179       128       372       259  
Change in unrealized gain on foreign currency hedge agreements
    -       1,073       -       -  
Foreign currency translation adjustment
    (44,606 )     35,003       9,572       58,032  
Other comprehensive income
    (44,658 )     38,118       10,872       56,162  
                                 
Comprehensive income
    27,729       79,433       142,407       129,498  
                                 
Comprehensive income attributable to noncontrolling interests
    (3,109 )     (5,354 )     (11,886 )     (9,985 )
                                 
Comprehensive income attributable to the Company
  $ 24,620     $ 74,079     $ 130,521     $ 119,513  
 
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 Six Months Ended June 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
    -       -       -       -       -       -       -       -       952       952  
                                                                                 
Comprehensive income:
                                                                               
Net income
    67,671       -       -       -       -       -       -       67,671       5,665       73,336  
Other comprehensive income, net of tax:
                                                                               
Unrealized loss on marketable securities
    -       (2,129 )     -       -       -       -       -       (2,129 )     -       (2,129 )
Change in unrealized gain on interest rate swaps
    -       259       -       -       -       -       -       259       -       259  
Change in foreign currency translation adjustment
    -       53,712       -       -       -       -       -       53,712       4,320       58,032  
                                                                                 
Redeemable noncontrolling interests
    -       -       -       -       -       -       -       -       (3,161 )     (3,161 )
Dividends ($0.36 per common share; $0.8312 per
Class F Depositary Share, $0.9688 per Class G Depositary Share and $0.8625 per Class H Depositary Share, respectively)
    (176,636 )     -       -       -       -       -       -       (176,636 )     -       (176,636 )
Distributions to noncontrolling interests
    -       -       -       -       -       -       -       -       (4,272 )     (4,272 )
Issuance of common stock
    -       -       -       -       438       5       4,935       4,940       -       4,940  
Surrender of common stock
    -       -       -       -       (13 )     -       (244 )     (244 )     -       (244 )
Repurchase of common stock
    -       -       -       -       (74 )     (1 )     (1,414 )     (1,415 )     -       (1,415 )
Exercise of common stock options
    -       -       -       -       184       2       2,826       2,828       -       2,828  
Acquisition of noncontrolling interests
    -       -       -       -       -       -       887       887       (10,589 )     (9,702 )
Amortization of equity awards
    -       -       -       -       -       -       7,571       7,571       -       7,571  
Balance, June 30, 2011
  $ (624,129 )   $ 27,989       954     $ 954       406,959     $ 4,070     $ 5,484,402     $ 4,893,286     $ 218,359     $ 5,111,645  
                                                                                 
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
    -       -       -       -       -       -       -       -       1,201       1,201  
                                                                                 
Comprehensive income:
                                                                               
Net income
    122,750       -       -       -       -       -       -       122,750       8,785       131,535  
Other comprehensive income, net of tax:
                                                                               
Unrealized gain on marketable securities
    -       928       -       -       -       -       -       928       -       928  
Change in unrealized gain on interest rate swaps
    -       372       -       -       -       -       -       372       -       372  
Change in foreign currency translation adjustment
    -       6,471       -       -       -       -       -       6,471       3,101       9,572  
                                                                                 
Redeemable noncontrolling interests
    -       -       -       -       -       -       -       -       (3,148 )     (3,148 )
Dividends ($0.38 per common share; $0.8312 per
Class F Depositary Share, $0.9688 per Class G Depositary Share, $0.8625 per Class H Depositary Share, and $0.4208 per Class I Depositary Share, respectively)
    (191,033 )     -       -       -       -       -       -       (191,033 )     -       (191,033 )
Distributions to noncontrolling interests
    -       -       -       -       -       -       -       -       (8,823 )     (8,823 )
Issuance of common stock
    -       -       -       -       1,093       11       18,055       18,066       -       18,066  
Issuance of preferred stock
    -       -       16       16       -       -       387,214       387,230       -       387,230  
Surrender of common stock
    -       -       -       -       (84 )     -       (1,555 )     (1,555 )     -       (1,555 )
Repurchase of common stock
    -       -       -       -       (1,536 )     (16 )     (28,942 )     (28,958 )     -       (28,958 )
Exercise of common stock options
    -       -       -       -       480       5       7,174       7,179       -       7,179  
Acquisition of noncontrolling interests
                                                    (1,244 )     (1,244 )     (4,392 )     (5,636 )
Amortization of equity awards
    -       -       -       -       -       -       8,016       8,016       -       8,016  
Balance, June 30, 2012
  $ (771,282 )   $ (99,889 )     970     $ 970       406,891     $ 4,069     $ 5,880,740     $ 5,014,608     $ 190,481     $ 5,205,089  
 
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)
 
 
 
Six Months Ended June 30,
 
   
2012
   
2011
 
             
Cash flow from operating activities:
           
Net income
  $ 131,535     $ 73,336  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    131,191       128,286  
Impairment charges
    34,570       12,352  
Gain on sale of operating properties
    (31,318 )     (4,188 )
Equity in income of joint ventures, net
    (79,246 )     (30,169 )
Equity in income from other real estate investments, net
    (25,103 )     (10,335 )
Distributions from joint ventures and other real estate investments
    115,627       57,134  
Cash retained from excess tax benefits
    -       (69 )
Change in accounts and notes receivable
    18,320       (4,450 )
Change in accounts payable and accrued expenses
    114       (5,622 )
Change in other operating assets and liabilities
    (20,258 )     (440 )
Net cash flow provided by operating activities
    275,432       215,835  
                 
Cash flow from investing activities:
               
Acquisition of and improvements to operating real estate
    (329,020 )     (79,401 )
Acquisition of and improvements to real estate under development
    (1,749 )     (16,655 )
Proceeds from sale/repayments of marketable securities
    118       178,279  
Investments and advances to real estate joint ventures
    (121,242 )     (71,219 )
Reimbursements of investments and advances to real estate joint ventures
    80,023       25,480  
Other real estate investments
    (4,123 )     (3,709 )
Reimbursements of investments and advances to other real estate investments
    6,906       20,586  
Investment in mortgage loans receivable
    (25 )     -  
Collection of mortgage loans receivable
    9,733       3,170  
Other investments
    (762 )     (730 )
Reimbursements of other investments
    9,151       10,914  
Proceeds from sale of operating properties
    206,107       39,523  
Proceeds from sale of development properties
    -       7,373  
Net cash flow (used for)/provided by investing activities
    (144,883 )     113,611  
                 
Cash flow from financing activities:
               
Principal payments on debt, excluding normal amortization of rental property debt
    (200,312 )     (20,331 )
Principal payments on rental property debt
    (11,651 )     (11,256 )
Principal payments on construction loan financings
    -       (272 )
Proceeds from mortgage/construction loan financings
    6,276       9,023  
Repayment under unsecured revolving credit facilities, net
    (226,220 )     (101,425 )
Proceeds from issuance of unsecured term loan
    400,000       -  
Financing origination costs
    (1,391 )     (402 )
Redemption of non-controlling interests
    (7,548 )     (9,702 )
Dividends paid
    (184,307 )     (177,580 )
Cash retained from excess tax benefits
    -       69  
Proceeds from issuance of stock
    394,409       2,758  
Repurchase of common stock
    (28,958 )     (1,415 )
Net cash flow provided/(used for) financing activities
    140,298       (310,533 )
                 
Change in cash and cash equivalents
    270,847       18,913  
                 
Cash and cash equivalents, beginning of period
    112,882       125,154  
Cash and cash equivalents, end of period
  $ 383,729     $ 144,067  
                 
Interest paid during the period (net of capitalized interest of $926 and $5,151, respectively)
  $ 113,411     $ 108,049  
                 
Income taxes paid during the period
  $ 1,584     $ 851  
 
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 (see Footnote 21).

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
June 30,
   
Six Months Ended
June 30,
 
   
2012
   
2011
   
2012
   
2011
 
Computation of Basic Earnings Per Share:
                   
                         
Income from continuing operations
  $ 62,387     $ 42,299     $ 119,258     $ 72,897  
Gain on sale of operating properties, net of tax
    4,059       -       4,059       -  
Net income attributable to noncontrolling interests
    (3,275 )     (2,606 )     (8,785 )     (5,665 )
Discontinued operations attributable to noncontrolling interests
    51       118       2,282       227  
Preferred stock dividends
    (20,841 )     (14,841 )     (36,415 )     (29,681 )
Income from continuing operations available to the common shareholders
    42,381       24,970       80,399       37,778  
Earnings attributable to unvested restricted shares
    (313 )     (166 )     (627 )     (331 )
Income from continuing operations attributable to common shareholders
    42,068       24,804       79,772       37,447  
Income/(loss) from discontinued operations attributable to the Company
    5,890       (1,102 )     5,936       212  
Net income attributable to the Company’s common shareholders for basic earnings per share
  $ 47,958     $ 23,702     $ 85,708     $ 37,659  
                                 
Weighted average common shares outstanding
    405,560       406,559       405,916       406,500  
                                 
Basic Earning Per Share Attributable to the Company’s Common Shareholders:
               
Income from continuing operations
  $ 0.10     $ 0.06     $ 0.20     $ 0.09  
Income from discontinued operations
    0.02       -       0.01       -  
Net income
  $ 0.12     $ 0.06     $ 0.21     $ 0.09  
                                 
Computation of Diluted Earnings Per Share:
                         
Income from continuing operations attributable to common shareholders
  $ 42,068     $ 24,804     $ 79,772     $ 37,447  
Income/(loss) from discontinued operations attributable to the Company
    5,890       (1,102 )     5,936       212  
Net income attributable to the Company’s common shareholders for diluted earnings per share
  $ 47,958     $ 23,702     $ 85,708     $ 37,659  
                                 
Weighted average common shares  outstanding – basic
    405,560       406,559       405,916       406,500  
Effect of dilutive securities (a):
                               
Equity awards
    916        1,003        911        972   
Shares for diluted earnings per common share
    406,476       407,562       406,827       407,472  
                                 
Diluted Earnings Per Share Attributable to the Company’s Common Shareholders:
               
Income from continuing operations
  $ 0.10     $ 0.06     $ 0.20     $ 0.09  
Income from discontinued operations
    0.02       -       0.01       -  
Net income
  $ 0.12     $ 0.06     $ 0.21     $ 0.09  


 
(a)
For the three and six months ended June 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 14,343,058 and 13,663,959 stock options that were not dilutive at June 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 is not expected to 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 reclassifications 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 six months ended June 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 parcels (3)
Duncan, SC
Jan-12
   
1,048
     
-
     
1,048
     
3
 
30 parcels (2)
Various
Mar-12
   
39,493
     
-
     
39,493
     
107
 
1 parcels (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
 
       
$
270,715
   
$
116,735
   
$
387,450
     
1,863
 
* Gross leasable area ("GLA")

(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 and is included in Equity in income of joint ventures, net on the Company’s Condensed Consolidated Statements of Income.
(2)
Acquired an aggregate of 61 parcels net leased to restaurants through a consolidated joint venture, in which the Company has a 99.1% controlling interest.
(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.
(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.
 
10

 
 
The aggregate purchase price of the properties acquired during the six months ended June 30, 2012 has been allocated as follows (in thousands):
 
Land
 
$
122,461
 
Buildings
   
197,756
 
Above Market Rents
   
9,118
 
Below Market Rents
   
(31,879
)
In-Place Leases
   
20,514
 
Building Improvements
   
60,544
 
Tenant Improvements
   
12,169
 
Mortgage Fair Value Adjustment
   
(3,233
)
   
$
387,450
 

Additionally, during the six months ended June 30, 2012, the Company acquired the remaining interest in a consolidated joint venture for $2.2 million.  Since there was no change in control from this transaction, the purchase of the additional interest resulted in a decrease to the Company’s Paid-in capital of $1.2 million.

FNC Realty Corporation

During the six months ended June 30, 2012, the Company acquired an additional 3.1% interest in FNC Realty Corporation (“FNC”) for $3.4 million, which increased the Company’s total ownership interest to 72.17%.  The Company had previously and continues to consolidate FNC.

Dispositions –

During the six months ended June 30, 2012, the Company disposed of 23 operating properties and two outparcels, in separate transactions, for an aggregate sales price of $157.2 million. These transactions, which are included in Discontinued Operations, resulted in an aggregate gain of $23.2 million and impairment charges of $8.6 million.

Additionally, during the six months ended June 30, 2012, the Company disposed of four land parcels and one out parcel for an aggregate sales price of $6.4 million and recognized an aggregate gain of $1.8 million and impairment charges of $0.3 million related to these transactions. The gains from these transactions are recorded as Other income/(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.  

Also, during the six months ended June 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/(expense), net in the Company’s Condensed Consolidated Statements of Income.

During the six months ended June 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 -

During the six months ended June 30, 2012, the Company recognized aggregate impairment charges of $25.6 million relating to its investment in four operating properties.  The aggregate book value of these properties was $54.3 million. The estimated aggregate fair value of these properties is based upon purchase price offers and a third party appraisal value aggregating $28.7 million (see Footnote 14).
 
 
11

 

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 six months ended June 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 June 30, 2012 (in thousands):
   
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2012
   
2011
   
2012
   
2011
 
Discontinued operations:
                       
Revenues from rental property
  $ (370 )   $ 6,292     $ 2,478     $ 17,459  
Rental property expenses
    (744 )     (3,063 )     (2,530 )     (6,509 )
Depreciation and amortization
    (3,182 )     (2,823 )     (6,274 )     (6,323 )
Interest expense
    (25 )     (203 )     (25 )     (419 )
Income from other real estate investments
    10       240       13       514  
Other (expense)/income, net
    (13 )     (8 )     (104 )     107  
(Loss)/income from discontinued operating properties, before income taxes
    (4,324 )     435       (6,442 )     4,829  
Impairment charges
    (513 )     (5,438 )     (8,622 )     (8,631 )
Gain on disposition of operating properties
    11,263       4,025       23,242       4,188  
(Provision)/benefit for income taxes, net
    (485 )     (6 )     40       53  
Income/(loss) from discontinued operating properties
    5,941       (984 )     8,218       439  
Net income attributable to noncontrolling interests
    (51 )     (118 )     (2,282 )     (227 )
Income/(loss) from discontinued operations attributable to the Company
  $ 5,890     $ (1,102 )   $ 5,936     $ 212  

During the six months ended June 30, 2012, the Company classified as held-for-sale two operating properties, comprising 0.2 million square feet of GLA.  The book value of these properties was $14.8 million, net of accumulated depreciation of $6.3 million.  The Company recognized an impairment charge of $3.4 million on one of these properties. The book value of the other property did not exceed its estimated fair value, less costs to sell, and as such no impairment charge was recognized.  The Company’s determination of the fair value of these properties, aggregating $8.6 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 and one land parcel during the six months ended June 30, 2012 which were classified as held for sale during 2011 and 2012 (these dispositions are included in Footnote 2 above).  The remaining property held-for-sale aggregating $2.8 million, net of accumulated depreciation of $1.7 million, is included in Other assets on the Company’s Condensed Consolidated Balance Sheets.

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 June 30, 2012, the Company had a total of four ground-up development projects, consisting of (i) two projects located in the U.S., (ii) one project located in Mexico and (iii) 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 June 30, 2012 and December 31, 2011 and the Company’s share of income/(loss) for the six months ended June 30, 2012 and 2011 (in millions, except number of properties):
 
 
12

 
As of and for the six months ended June 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%       62       10.7     $ 2,752.7     $ 158.0     $ 4.1  
Kimco Income Opportunity Portfolio (“KIR”) (2)
    45.00%       59       12.6       1,561.2       141.1       11.9  
UBS Programs (2)*
    17.90%       41       5.8       1,303.8       60.6       0.4  
BIG Shopping Centers (2)*
    37.70%       23       3.8       557.9       37.6       (1.4 )
The Canada Pension Plan Investment Board
    (“CPP”) (2)
    55.00%       6       2.4       432.1       150.5       2.5  
Kimco Income Fund (2)
    15.20%       12       1.5       282.6       12.3       1.0  
SEB Immobilien (2)
    15.00%       13       1.8       360.9       1.8       0.3  
Other Institutional Programs (2) (5) (8)
 
Various
      62       3.3       577.9       21.2       18.4  
RioCan (10)
    50.00%       45       9.3       1,340.9       94.6       17.8  
Intown (3)
    -       138       N/A       835.8       88.1       0.8  
Latin America
 
Various
      131       18.1       1,183.3       321.3       6.5  
Other Joint Venture Programs (4) (6) (7) (9) (11)
 
Various
      92       13.6       2,010.3       348.9       16.9  
Total
            684       82.9     $ 13,199.4     $ 1,436.0     $ 79.2  
 
As of December 31, 2011
   
For the six months ended June 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     $ (1.7 )
Kimco Income Opportunity Portfolio (“KIR”) (2)
    45.00%       59       12.6       1,556.6       151.4       10.6  
UBS Programs (2)*
    17.90%       42       5.9       1,330.5       61.3       1.0  
BIG Shopping Centers (2)*
    37.60%       23       3.7       557.4       41.2       (1.5 )
The Canada Pension Plan Investment Board
     (“CPP”) (2)
    55.00%       6       2.4       430.0       140.6       2.8  
Kimco Income Fund (2)
    15.20%       12       1.5       281.1       12.1       0.6  
SEB Immobilien (2)
    15.00%       13       1.8       360.5       2.1       0.1  
Other Institutional Programs (2)
 
Various
      67       4.7       804.4       33.7       0.7  
RioCan
    50.00%       45       9.3       1,367.0       62.2       10.0  
Intown (3)
    -       138       N/A       829.9       90.8       (2.1 )
Latin America
 
Various
      130       17.9       1,145.8       318.0       5.4  
Other Joint Venture Programs
 
Various
      92       13.7       2,016.5       338.9       4.3  
Total
            690       84.4     $ 13,461.1     $ 1,404.2     $ 30.2  

 
Ownership % is a blended rate
 
 
(1)
This venture represents four separate joint ventures, with four separate accounts managed by Prudential Real Estate Investors (“PREI”), three of these ventures are collectively referred to as KimPru and the remaining venture is referred to as KimPru II.
 
(2)
The Company manages these joint venture investments and, where applicable, earns acquisition fees, leasing commissions, property management fees, assets management fees and construction management fees.
 
(3)
The Company’s share of this investment is subject to fluctuation and is dependent upon property cash flows.
 
(4)
During the six months ended June 30, 2012, two joint ventures in which the Company holds noncontrolling interests sold two properties for an aggregate sales price of $118.0 million. The Company received distributions of $18.5 million and recognized an aggregate gain of $8.3 million.
 
(5)
During the six months ended June 30, 2012, a joint venture in which the Company holds a noncontrolling interest sold two encumbered operating properties to the Company for an aggregate sales price of $75.5 million. The Company recognized promote income of $2.6 million.
 
(6)
During 2012, the Company amended one of its Canadian preferred equity investment agreements to restructure the investment as a pari passu joint venture in which the Company holds a noncontrolling interest. As a result of this transaction, the Company continues to account for its investment in this joint venture under the equity method of accounting and includes this investment in Investments and advances to real estate joint ventures within the Company’s Condensed Consolidated Balance Sheets.
 
(7)
During the six months ended June 30, 2012, a joint venture in which the Company holds a noncontrolling interest sold an operating property for a sales price of $62.0 million, which resulted in no gain or loss recognized.
 
(8)
During the six months ended June 30, 2012, a joint venture in which the Company held a noncontrolling interest sold an operating property to the Company for a sales price of $127.0 million. 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.
 
(9)
During the six months ended June 30, 2012, the Company sold an operating property to a newly formed unconsolidated joint venture in which the Company has a noncontrolling interest for a sales price of $55.5 million.
 
(10)
During the six months June 30, 2012, the Company recognized income of $7.5 million, before taxes of $1.5 million, from the sale of certain air rights at one of the properties in this portfolio.
 
(11)
During the six months ended June 30, 2012, a joint venture in which the Company holds a noncontrolling interest acquired an operating property in Alberta, Canada for a purchase price of $41.7 million. The Company’s capital contribution was $14.2 million.
 
 
13

 
 
 The table below presents debt balances within the Company’s unconsolidated joint venture investments for which the Company held noncontrolling ownership interests at June 30, 2012 and December 31, 2011 (in millions, except weighted average remaining term):

   
As of June 30, 2012
   
As of December 31, 2011
 
Venture
 
Mortgages
and
Notes
Payable
   
Weighted
Average
Interest Rate
   
Weighted
Average
Remaining
Term
(months)**
   
Mortgages
and
Notes
Payable
   
Weighted
Average
Interest Rate
   
Weighted
Average
Remaining
Term
(months)**
 
KimPru and KimPru II
 
$
         1,109.9
     
5.54
%
   
49.9
   
$
1,185.2
     
5.59
%
   
52.6
 
KIR
   
              941.9
     
5.73
%
   
62.8
     
911.5
     
5.89
%
   
75.6
 
UBS Programs
   
              705.4
     
5.67
%
   
41.6
     
718.9
     
5.66
%
   
47.4
 
BIG Shopping Centers
   
              444.1
     
5.52
%
   
51.5
     
444.5
     
5.52
%
   
57.4
 
CPP
   
              143.0
     
5.20
%
   
37.0
     
166.3
     
4.45
%
   
27.0
 
Kimco Income Fund
   
163.1
     
5.45
%
   
26.7
     
164.7
     
5.45
%
   
32.7
 
SEB Immobilien
   
              243.7
     
5.34
%
   
55.9
     
243.7
     
5.34
%
   
61.9
 
RioCan
   
              937.2
     
5.52
%
   
40.1
     
925.0
     
5.66
%