Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Revenues
Revenues from rental properties		$	237,079			$	217,809			$	467,371			$	429,892
Management and other fee income			9,049				8,710				17,442				18,136
Total revenues			246,128				226,519				484,813				448,028
Operating expenses
Rent			3,380				2,924				6,705				6,187
Real estate taxes			28,858				27,985				58,306				55,592
Operating and maintenance			31,445				26,756				59,567				52,413
General and administrative expenses			31,420				30,908				65,535				65,314
Provision for doubtful accounts			3,266				2,551				5,199				5,624
Impairment charges			35,366				92				35,764				325
Depreciation and amortization			63,409				59,731				125,136				118,299
Total operating expenses			197,144				150,947				356,212				303,754
Operating income			48,984				75,572				128,601				144,274
Other income/(expense)
Mortgage financing income			1,430				1,985				2,416				3,991
Interest, dividends and other investment income			6,500				350				9,163				512
Other (expense)/income, net			(2,526	)			538				(6,002	)			(3,058	)
Interest expense			(55,423	)			(56,776	)			(108,970	)			(113,757	)
Income from other real estate investments			555				416				958				1,143
Income/(loss) from continuing operations before income taxes, equity in income of joint ventures, gain/(loss) on change in control of interests and equity in income from other real estate investments			(480	)			22,085				26,166				33,105
Benefit/(provision) for income taxes, net			11,830				(3,302	)			(3,937	)			(8,089	)
Equity in income of joint ventures, net			59,504				30,352				83,616				65,090
Gain/(loss) on change in control of interests, net			(1,459	)			12,147				21,711				14,156
Equity in income of other real estate investments, net			8,200				14,074				19,363				25,101
Income from continuing operations			77,595				75,356				146,919				129,363
Discontinued operations
Income/(loss) from discontinued operating properties, net of tax			1,652				(180	)			2,631				1,906
Impairment/loss on operating properties sold, net of tax			(27,844	)			(18,111	)			(30,675	)			(27,035	)
Gain on disposition of operating properties			1,869				11,263				4,365				23,242
Loss from discontinued operations			(24,323	)			(7,028	)			(23,679	)			(1,887	)
Gain on sale of operating properties, net of tax			-				4,059				540				4,059
Net income			53,272				72,387				123,780				131,535
Net income attributable to noncontrolling interests			(2,133	)			(3,275	)			(4,871	)			(8,785	)
Net income attributable to the Company			51,139				69,112				118,909				122,750
Preferred stock dividends			(14,573	)			(20,841	)			(29,147	)			(36,415	)
Net income available to the Company's common shareholders		$	36,566			$	48,271			$	89,762			$	86,335
Per common share:
Income from continuing operations:
-Basic		$	0.15			$	0.14			$	0.28			$	0.22
-Diluted		$	0.15			$	0.14			$	0.28			$	0.22
Net income attributable to the Company:
-Basic		$	0.09			$	0.12			$	0.22			$	0.21
-Diluted		$	0.09			$	0.12			$	0.22			$	0.21
Weighted average shares:
-Basic			407,640				405,560				407,154				405,916
-Diluted			408,831				406,476				408,163				406,827
Amounts attributable to the Company's common shareholders:
Income from continuing operations		$	60,889			$	55,394			$	113,458			$	90,615
Income from discontinued operations			(24,323	)			(7,123	)			(23,696	)			(4,280	)
Net income		$	36,566			$	48,271			$	89,762			$	86,335

The accompanying notes are an integral part of these condensed consolidated financial statements.  

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Net income		$	53,272			$	72,387			$	123,780			$	131,535
Other comprehensive income:
Change in unrealized (loss)/gain on marketable securities, net			(540	)			(231	)			6,228				928
Change in unrealized gain on interest rate swaps, net			-				179				-				372
Change in foreign currency translation adjustment, net			(35,515	)			(44,606	)			(2,504	)			9,572
Other comprehensive(loss)/ income			(36,055	)			(44,658	)			3,724				10,872
Comprehensive income			17,217				27,729				127,504				142,407
Comprehensive income attributable to noncontrolling interests			(200	)			(3,109	)			(4,211	)			(11,886	)
Comprehensive income attributable to the Company		$	17,017			$	24,620			$	123,293			$	130,521

 

 

		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, 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:
Change in 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
Surrender of common stock			-				-				-				-				(84	)			-				(1,555	)			(1,555	)			-				(1,555	)
Repurchase of common stock			-				-				-				-				(1,536	)			(16	)			(28,942	)			(28,958	)			-				(28,958	)
Issuance of preferred stock			-				-				16				16				-				-				387,214				387,230				-				387,230
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
Balance, January 1, 2013		$	(824,008	)		$	(66,182	)			102			$	102				407,782			$	4,078			$	5,651,170			$	4,765,160			$	167,320			$	4,932,480
Contributions from noncontrolling interests			-				-				-				-				-				-				-				-				858				858
Comprehensive income:
Net income			118,909				-				-				-				-				-				-				118,909				4,871				123,780
Other comprehensive income, net of tax:																															-								-
Change in unrealized gain on marketable securities			-				6,228				-				-				-				-				-				6,228				-				6,228
Change in foreign currency translation adjustment			-				(1,844	)			-				-				-				-				-				(1,844	)			(660	)			(2,504	)
																																							-
Redeemable noncontrolling interests			-				-				-				-				-				-				-				-				(3,222	)			(3,222	)
Dividends ($0.42 per common share; $0.8625 per Class H Depositary Share and $0.7500 per Class I Depositary Share, and $0.6875 per Class J Depositary Share. and $0.7032 per Class K Depositary Share, respectively)			(200,971	)							-				-				-				-				-				(200,971	)			-				(200,971	)
Distributions to noncontrolling interests			-								-				-				-				-				-				-				(5,063	)			(5,063	)
Issuance of common stock			-								-				-				560				5				9,208				9,213				-				9,213
Surrender of restricted stock			-								-				-				(212	)			(2	)			(3,174	)			(3,176	)			-				(3,176	)
Exercise of common stock options			-								-				-				1,487				15				27,927				27,942				-				27,942
Acquisition of noncontrolling interests			-								-				-				-				-				(5,430	)			(5,430	)			(20,096	)			(25,526	)
Amortization of equity awards			-								-				-				-				-				6,242				6,242				-				6,242
Balance, June 30, 2013		$	(906,070	)		$	(61,798	)			102			$	102				409,617			$	4,096			$	5,685,943			$	4,722,273			$	144,008			$	4,866,281

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

		Six Months Ended June 30,
		2013				2012
Cash flow from operating activities:
Net income		$	123,780			$	131,535
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			127,042				131,191
Impairment charges			81,546				34,570
Gain on sale of operating properties			(5,446	)			(31,318	)
Equity in income of joint ventures, net			(83,616	)			(65,090	)
Gains on change in control of interests			(21,711	)			(14,156	)
Equity in income from other real estate investments, net			(19,363	)			(25,103	)
Distributions from joint ventures and other real estate investments			82,245				115,627
Change in accounts and notes receivable			11,142				18,320
Change in accounts payable and accrued expenses			6,755				114
Change in other operating assets and liabilities			(36,846	)			(20,258	)
Net cash flow provided by operating activities			265,528				275,432
Cash flow from investing activities:
Acquisition of operating real estate			(145,303	)			(267,427	)
Improvements to operating real estate			(49,497	)			(61,593	)
Improvements to real estate under development			(326	)			(1,749	)
Investment in marketable securities			(33,588	)			-
Proceeds from sale/repayments of marketable securities			10,758				118
Investments and advances to real estate joint ventures			(239,903	)			(121,242	)
Reimbursements of investments and advances to real estate joint ventures			295,186				80,023
Investment in other real estate investments			(23,227	)			(4,123	)
Reimbursements of investments and advances to other real estate investments			1,200				6,906
Investment in mortgage loans receivable			(11,017	)			(25	)
Collection of mortgage loans receivable			8,779				9,733
Investment in other investments			(21,366	)			(762	)
Reimbursements of other investments			463				9,151
Proceeds from sale of operating properties			110,389				206,107
Net cash flow used for investing activities			(97,452	)			(144,883	)
Cash flow from financing activities:
Principal payments on debt, excluding normal amortization of rental property debt			(66,206	)			(200,312	)
Principal payments on rental property debt			(12,094	)			(11,651	)
Proceeds from mortgage/construction loan financings			17,374				6,276
Repayments under unsecured revolving credit facility, net			(62,966	)			(226,220	)
Borrowings under unsecured term loan/notes			428,118				400,000
Repayments under unsecured term loan/notes			(253,225	)			-
Financing origination costs			(6,096	)			(1,391	)
Redemption of/distributions to noncontrolling interests			(27,184	)			(7,548	)
Dividends paid			(199,164	)			(184,307	)
Proceeds from issuance of stock			27,942				394,409
Repurchase of common stock			-				(28,958	)
Net cash flow (used for) provided by financing activities			(153,501	)			140,298
Change in cash and cash equivalents			14,575				270,847
Cash and cash equivalents, beginning of period			141,875				112,882
Cash and cash equivalents, end of period		$	156,450			$	383,729
Interest paid during the period (net of capitalized interest of $579 and $926, respectively)		$	108,906			$	113,411
Income taxes paid during the period		$	798			$	1,584

The accompanying notes are an integral part of these condensed consolidated financial statements.

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 2012 Annual Report on Form 10-K for the year ended December 31, 2012 ("10-K"), as certain disclosures in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013 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 9).

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.  

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 February 2013, the FASB issued new guidance regarding liabilities, Accounting Standards Update ("ASU") 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (“ASU 2013-04”), effective retrospectively for fiscal years beginning after December 15, 2013 and interim periods within those years. The amendments require an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of the guidance is fixed at the reporting date, as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. In addition, the amendments require an entity to disclose the nature and amount of the obligation, as well as other information about the obligations. The adoption of ASU 2013-04 is not expected to have a material impact on the Company’s financial position or results of operations.

In January 2013, the FASB released ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). This guidance is the culmination of the board’s redeliberation on reporting reclassification adjustments from accumulated other comprehensive income. The standard requires that companies present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source (e.g., the release due to cash flow hedges from interest rate contracts) and the income statement line items affected by the reclassification (e.g., interest income or interest expense). If a component is not required to be reclassified to net income in its entirety (e.g., the net periodic pension cost), companies would instead cross reference to the related footnote for additional information (e.g., the pension footnote). The new requirements were effective for public companies in interim and annual reporting periods beginning after December 15, 2012. The adoption of ASU 2013-02 did not have a material impact on the Company’s financial statement presentation or disclosures.  

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 did not have a material impact on the Company’s financial statement disclosures.

Reclassifications –

Certain reclassifications have been made to previously recorded amounts to conform to the current year presentation, Specifically, the Company is presenting on its Condensed Consolidated Statements of Income its Provision for doubtful accounts as a separate line item included in Operating expenses, which during 2012 was included in Revenues from rental properties. Additionally, the Company made certain other immaterial reclassifications to the Company’s Condensed Consolidated Balance Sheets as of December 31, 2012 to conform to the current year presentation.

2. Operating Property Activities

* Gross leasable area ("GLA")

The aggregate purchase price of the properties acquired during the six months ended June 30, 2013 has been allocated as follows (in thousands):

During the six months ended June 30, 2013, the Company acquired the remaining ownership interest in FNC Realty Corporation (“FNC”) of 17.3% for $20.3 million. As a result of this transaction the Company now owns 100% of FNC. The Company had previously and continues to consolidate FNC. Since there was no change in control from this transaction, the purchase of the additional interest resulted in a decrease in noncontrolling interest of $19.6 million and a decrease in the Company’s Paid-in capital of $0.7 million during 2013.

Additionally, during the six months ended June 30, 2013, the Company acquired the remaining interest in three previously consolidated joint ventures for $6.5 million. The Company continues to consolidate these entities as there was no change in control from these transactions. The purchase of the remaining partnership interests resulted in an aggregate decrease in noncontrolling interest of $0.4 million and an aggregate decrease of $4.8 million, after income taxes, to the Company’s Paid-in capital, during the six months ended June 30, 2013.

Dispositions –

During the six months ended June 30, 2013, the Company disposed of 13 operating properties, in separate transactions, for an aggregate sales price of $100.8 million. These transactions, which are included in Discontinued Operations, resulted in an aggregate gain of $4.4 million and impairment charges of $20.8 million, after income taxes.

Additionally, during the six months ended June 30, 2013, the Company disposed of two land parcels for an aggregate sales price of $10.9 million and recognized impairment charges of $0.3 million related to these transactions.

Impairment Charges -

During the six months ended June 30, 2013, the Company recognized aggregate impairment charges of $35.5 million, which are included in Impairment charges under Operating expenses on the Company’s Condensed Consolidated Statements of Income, relating to (i) two land parcels and four operating properties based upon purchase price offers aggregating $39.5 million, and (ii) a cost method investment, based upon a fair value estimate of $7.0 million using a discounted cash flow model (see Footnote 12). The operating property impairments resulted from the Company’s efforts to market certain assets and management’s assessment as to the likelihood and timing of such potential transactions. The impairment of the cost method investment was based upon a review of the underlying cause of the decline in value, as well as the severity and duration of the decline. As a result of such review, the Company determined that the decline was deemed to be other-than-temporary.

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 2012 financial statement amounts.

The components of income and expense relating to discontinued operations for the three and six months ended June 30, 2013 and 2012 are shown below. These include the results of operations through the date of each respective sale for properties sold during 2013 and 2012 and the operations for the applicable period for those assets classified as held-for-sale as of June 30, 2013 (in thousands):

During the six months ended June 30, 2013, the Company classified as held-for-sale five operating properties, comprising 163,381 square feet of GLA.  The aggregate book value of these properties was $38.1 million, net of accumulated depreciation of $5.4 million.   The Company recognized impairment charges of $9.9 million, after income taxes, on three of these properties. The book value of the other properties did not exceed their 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 $27.6 million, was based upon executed contracts of sale with a third parties (see Footnote 12).   In addition, the Company completed the sale of two held-for-sale operating properties during the six months ended June 30, 2013, one of which was classified as held-for-sale during 2012 (these dispositions are included in Footnote 2 above).  At June 30, 2013, the Company had four operating properties classified as held-for-sale at a carrying amount of $21.4 million, net of accumulated depreciation of $4.5 million, which are included in Other assets on the Company’s Condensed Consolidated Balance Sheets.

4. 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, 2013 and December 31, 2012 (in millions, except number of properties):