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Table Of Contents

 



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

Form 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2016

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                 to                

 

Commission File Number:   1-10899

 

Kimco Realty Corporation

(Exact name of registrant as specified in its charter)

 

Maryland

  

13-2744380

(State or other jurisdiction 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 ☒   No ☐

 

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 (§ 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 ☒   No ☐

 

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

Accelerated filer

Non-accelerated filer

Smaller reporting company

(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 ☐ No ☒

 

As of July 19, 2016, the registrant had 420,051,589 shares of common stock outstanding.

 



 

  

PART I FINANCIAL INFORMATION

 

Item 1.

Financial Statements of Kimco Realty Corporation and Subsidiaries (Unaudited)

  

  

  

  

Condensed Consolidated Financial Statements -

  

  

  

  

  

Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015

3

  

  

  

  

Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2016 and 2015

4

  

  

  

  

Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2016 and 2015

5

  

  

  

  

Condensed Consolidated Statements of Changes in Equity for the Six Months Ended June 30, 2016 and 2015

6

  

  

  

  

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015

7

  

  

  

Notes to Condensed Consolidated Financial Statements

8

  

  

  

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

  

  

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

  

  

 

Item 4.

Controls and Procedures

31

  

  

  

PART II

OTHER INFORMATION

  

  

Item 1.

Legal Proceedings

32

  

 

Item 1A.

Risk Factors

32

  

 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 32
     

Item 6.

Exhibits

33

  

 

Signatures

34

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share information)

 

 

   

June 30,

   

December 31,

 
   

2016

   

2015

 

Assets:

               

Operating real estate, net of accumulated depreciation of $2,199,725 and $2,115,320, respectively

  $ 9,171,988     $ 9,274,299  

Investments and advances in real estate joint ventures

    519,268       742,559  

Real estate under development

    293,306       179,190  

Other real estate investments

    204,062       215,836  

Mortgages and other financing receivables

    23,815       23,824  

Cash and cash equivalents

    337,815       189,534  

Marketable securities

    7,006       7,565  

Accounts and notes receivable

    172,702       175,252  

Other assets

    662,470       536,112  

Total assets

  $ 11,392,432     $ 11,344,171  
                 
                 

Liabilities:

               

Notes payable

  $ 3,728,629     $ 3,761,328  

Mortgages payable

    1,460,188       1,614,982  

Dividends payable

    116,857       115,182  

Other liabilities

    555,299       584,019  

Total liabilities

    5,860,973       6,075,511  

Redeemable noncontrolling interests

    86,774       86,709  
                 

Commitments and Contingencies

               
                 

Stockholders' equity:

               

Preferred stock, $1.00 par value, authorized 6,029,100 shares 32,000 shares issued and outstanding (in series) Aggregate liquidation preference $800,000

    32       32  

Common stock, $.01 par value, authorized 750,000,000 shares issued and outstanding 419,997,765 and 413,430,756 shares, respectively

    4,200       4,134  

Paid-in capital

    5,768,093       5,608,881  

Cumulative distributions in excess of net income

    (465,348 )     (572,335 )

Accumulated other comprehensive income

    7,150       5,588  

Total stockholders' equity

    5,314,127       5,046,300  

Noncontrolling interests

    130,558       135,651  

Total equity

    5,444,685       5,181,951  

Total liabilities and equity

  $ 11,392,432     $ 11,344,171  

 

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

 

 

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,

 
   

2016

   

2015

   

2016

   

2015

 
                                 

Revenues

                               

Revenues from rental properties

  $ 287,115     $ 289,080     $ 580,206     $ 564,586  

Management and other fee income

    4,373       4,981       8,484       12,931  
                                 

Total revenues

    291,488       294,061       588,690       577,517  
                                 

Operating expenses

                               

Rent

    2,728       3,012       5,546       6,566  

Real estate taxes

    35,791       36,700       70,263       72,772  

Operating and maintenance

    33,223       36,109       67,776       70,011  

General and administrative expenses

    29,928       29,307       61,857       62,012  

Provision for doubtful accounts

    1,185       1,107       4,660       3,404  

Impairment charges

    52,213       15,459       58,053       21,850  

Depreciation and amortization

    82,753       80,155       167,609       154,724  

Total operating expenses

    237,821       201,849       435,764       391,339  
                                 

Operating income

    53,667       92,212       152,926       186,178  
                                 

Other income/(expense)

                               

Mortgage financing income

    414       916       824       2,052  

Interest, dividends and other investment income

    644       32,102       350       32,319  

Other (expense)/income, net

    (2,070 )     470       (2,356 )     (515 )

Interest expense

    (50,479 )     (56,130 )     (102,930 )     (108,708 )
                                 

Income from continuing operations before income taxes, equity in income of joint ventures, gain on change in control of interests and equity in income of other real estate investments

    2,176       69,570       48,814       111,326  
                                 

Benefit/(provision) for income taxes, net

    246       3,628       (11,866 )     (9,089 )

Equity in income of joint ventures, net

    108,685       22,364       178,618       119,914  

Gain on change in control of interests, net

    46,512       -       46,512       139,801  

Equity in income of other real estate investments, net

    7,959       5,548       18,758       19,917  
                                 

Income from continuing operations

    165,578       101,110       280,836       381,869  
                                 

Discontinued operations

                               

Loss from discontinued operating properties, net of tax

    -       -       -       (15 )

Impairment/loss on operating properties, net of tax

    -       -       -       (60 )

Loss from discontinued operations

    -       -       -       (75 )
                                 

Gain on sale of operating properties, net of tax

    39,268       26,499       66,164       58,554  
                                 

Net income

    204,846       127,609       347,000       440,348  
                                 

Net income attributable to noncontrolling interests

    (1,437 )     (609 )     (2,878 )     (3,006 )
                                 

Net income attributable to the Company

    203,409       127,000       344,122       437,342  
                                 

Preferred dividends

    (11,555 )     (14,573 )     (23,110 )     (29,146 )
                                 

Net income available to the Company's common shareholders

  $ 191,854     $ 112,427     $ 321,012     $ 408,196  
                                 

Per common share:

                               

Income from continuing operations:

                               

-Basic

  $ 0.46     $ 0.27     $ 0.77     $ 0.99  

-Diluted

  $ 0.46     $ 0.27     $ 0.77     $ 0.98  

Net income attributable to the Company:

                               

-Basic

  $ 0.46     $ 0.27     $ 0.77     $ 0.99  

-Diluted

  $ 0.46     $ 0.27     $ 0.77     $ 0.98  
                                 

Weighted average shares:

                               

-Basic

    417,748       411,317       415,189       411,057  

-Diluted

    419,302       413,086       416,732       413,148  
                                 

Amounts attributable to the Company's common shareholders:

                               

Income from continuing operations

  $ 191,854     $ 112,427     $ 321,012     $ 408,271  

Loss from discontinued operations

    -       -       -       (75 )

Net income

  $ 191,854     $ 112,427     $ 321,012     $ 408,196  

 

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

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands)

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
   

2016

   

2015

   

2016

   

2015

 
                                 

Net income

  $ 204,846     $ 127,609     $ 347,000     $ 440,348  

Other comprehensive income:

                               

Change in unrealized gain on marketable securities

    (35 )     (54,265 )     (33 )     (38,547 )

Change in unrealized loss on interest rate swaps

    (155 )     406       (759 )     55  

Change in foreign currency translation adjustment, net

    (156 )     997       2,354       (8,536 )

Other comprehensive (loss)/income:

    (346 )     (52,862 )     1,562       (47,028 )
                                 

Comprehensive income

    204,500       74,747       348,562       393,320  
                                 

Comprehensive income attributable to noncontrolling interests

    (1,437 )     (609 )     (2,878 )     (3,006 )
                                 

Comprehensive income attributable to the Company

  $ 203,063     $ 74,138     $ 345,684     $ 390,314  

 

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

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

(in thousands)

 

   

Cumulative

Distributions

in Excess of

   

Accumulated

Other

Comprehensive

   

Preferred Stock

   

Common Stock

   

Paid-in

   

Total

Stockholders'

   

Noncontrolling

   

Total

 
   

Net Income

   

Income

   

Issued

   

Amount

   

Issued

   

Amount

   

Capital

   

Equity

   

Interests

   

Equity

 
                                                                                 

Balance, January 1, 2015

  $ (1,006,578 )   $ 45,122       102     $ 102       411,820     $ 4,118     $ 5,732,021     $ 4,774,785     $ 126,980     $ 4,901,765  
                                                                                 

Contributions from noncontrolling interests

    -       -       -       -       -       -       -       -       66,163       66,163  
                                                                                 

Comprehensive income:

                                                                               

Net income

    437,342       -       -       -       -       -       -       437,342       3,006       440,348  

Other comprehensive income, net of tax:

                                                                               

Change in unrealized gain on marketable securities

    -       (38,547 )     -       -       -       -       -       (38,547 )     -       (38,547 )

Change in unrealized loss on interest rate swaps

    -       55       -       -       -       -       -       55       -       55  

Change in foreign currency translation adjustment, net

    -       (8,536 )     -       -       -       -       -       (8,536 )     -       (8,536 )
                                                                                 

Redeemable noncontrolling interests income

    -       -       -       -       -       -       -       -       (3,045 )     (3,045 )

Dividends ($0.48 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)

    (227,335 )                                                     (227,335 )     -       (227,335 )

Distributions to noncontrolling interests

    -       -       -       -       -       -       -       -       (6,093 )     (6,093 )

Issuance of common stock, net

    -       -       -       -       781       8       480       488       -       488  

Surrender of restricted stock

    -       -       -       -       (214 )     (2 )     (5,290 )     (5,292 )     -       (5,292 )

Exercise of common stock options

    -       -       -       -       732       7       13,465       13,472       -       13,472  

Sale of interests in investments, net of tax of $16.0 million

    -       -       -       -       -       -       23,993       23,993       -       23,993  

Acquisition of noncontrolling interests

    -       -       -       -       -       -       (6,080 )     (6,080 )     (25,083 )     (31,163 )

Amortization of equity awards

    -       -       -       -       -       -       9,241       9,241       -       9,241  

Balance, June 30, 2015

  $ (796,571 )   $ (1,906 )     102     $ 102       413,119     $ 4,131     $ 5,767,830     $ 4,973,586     $ 161,928     $ 5,135,514  
                                                                                 

Balance, January 1, 2016

  $ (572,335 )   $ 5,588       32     $ 32       413,431     $ 4,134     $ 5,608,881     $ 5,046,300     $ 135,651     $ 5,181,951  
                                                                                 

Contributions from noncontrolling interests

    -       -       -       -       -       -       -       -       475       475  
                                                                                 

Comprehensive income:

                                                                               

Net income

    344,122       -       -       -       -       -       -       344,122       2,878       347,000  

Other comprehensive income, net of tax:

                                                                               

Change in unrealized gain on marketable securities

    -       (33 )     -       -       -       -       -       (33 )     -       (33 )

Change in unrealized loss on interest rate swaps

    -       (759 )     -       -       -       -       -       (759 )     -       (759 )

Change in foreign currency translation adjustment, net

    -       2,354       -       -       -       -       -       2,354       -       2,354  
                                                              -                  

Redeemable noncontrolling interests income

    -       -       -       -       -       -       -       -       (2,147 )     (2,147 )

Dividends ($0.510 per common share; $0.7500 per

                                                                               

Class I Depositary Share, and $0.6875 per

                                                                               

Class J Depositary Share. and $0.7032 per

                                                                               

Class K Depositary Share, respectively)

    (237,135 )     -       -       -       -       -       -       (237,135 )     -       (237,135 )

Distributions to noncontrolling interests

    -       -       -       -       -       -       -       -       (6,299 )     (6,299 )

Issuance of common stock, net

    -       -       -       -       5,839       59       139,068       139,127       -       139,127  

Surrender of restricted stock

    -       -       -       -       (251 )     (3 )     (6,439 )     (6,442 )     -       (6,442 )

Exercise of common stock options

    -       -       -       -       979       10       17,462       17,472       -       17,472  

Amortization of equity awards

    -       -       -       -       -       -       9,121       9,121       -       9,121  

Balance, June 30, 2016

  $ (465,348 )   $ 7,150       32     $ 32       419,998     $ 4,200     $ 5,768,093     $ 5,314,127     $ 130,558     $ 5,444,685  

 

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

 

 

KIMCO REALTY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

   

Six Months Ended June 30,

 
   

2016

   

2015

 

Cash flow from operating activities:

               

Net income

  $ 347,000     $ 440,348  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation and amortization

    167,609       154,724  

Impairment charges

    58,053       21,931  

Equity award expense

    11,552       12,154  

Gain on sale of operating properties

    (72,101 )     (58,731 )

Gain on sale of marketable securities

    -       (32,435 )

Gain on change in control of interests, net

    (46,512 )     (139,801 )

Equity in income of joint ventures, net

    (178,618 )     (119,914 )

Equity in income from other real estate investments, net

    (18,758 )     (19,917 )

Distributions from joint ventures and other real estate investments

    54,029       66,076  

Change in accounts and notes receivable

    2,551       (5,383 )

Change in accounts payable and accrued expenses

    (4,697 )     (381 )

Change in Canadian withholding tax receivable

    (66,911 )     (6,743 )

Change in other operating assets and liabilities

    (37,350 )     (25,933 )

Net cash flow provided by operating activities

    215,847       285,995  
                 

Cash flow from investing activities:

               

Acquisition of operating real estate and other related net assets

    (95,801 )     (586,321 )

Improvements to operating real estate

    (70,333 )     (72,642 )

Acquisition of real estate under development

    (50,778 )     -  

Improvements to real estate under development

    (18,448 )     (4,362 )

Investment in marketable securities

    (1,325 )     (257 )

Proceeds from sale/repayments of marketable securities

    1,850       59,318  

Investments and advances to real estate joint ventures

    (26,160 )     (57,148 )

Reimbursements of investments and advances to real estate joint ventures

    56,431       41,380  

Distributions from liquidation of real estate joint ventures

    136,005       53,450  

Return of investment from liquidation of real estate joint ventures

    149,296       20,889  

Investment in other real estate investments

    (233 )     (458 )

Reimbursements of investments and advances to other real estate investments

    10,475       22,887  

Collection of mortgage loans receivable

    461       50,729  

Investment in other investments

    -       (190,278 )

Reimbursements of other investments

    500       -  

Proceeds from sale of operating properties

    214,858       183,332  

Proceeds from sale of development properties

    4,551       -  

Net cash flow provided by/(used for) investing activities

    311,349       (479,481 )
                 

Cash flow from financing activities:

               

Principal payments on debt, excluding normal amortization of rental property debt

    (233,303 )     (308,728 )

Principal payments on rental property debt

    (10,380 )     (14,628 )

Proceeds under the unsecured revolving credit facility, net

    100,019       125,000  

Proceeds from issuance of unsecured term loan/notes

    150,000       1,000,000  

Repayments under unsecured term loan/notes

    (300,000 )     (500,000 )

Financing origination costs

    (4,697 )     (10,218 )

Change in tenants' security deposits

    963       1,315  

Contributions from noncontrolling interests

    -       106,154  

Redemption of noncontrolling interests

    (2,572 )     (33,348 )

Dividends paid

    (235,458 )     (227,023 )

Proceeds from issuance of stock, net

    156,513       13,472  

Net cash flow (used for)/provided by financing activities

    (378,915 )     151,996  
                 

Change in cash and cash equivalents

    148,281       (41,490 )
                 

Cash and cash equivalents, beginning of period

    189,534       187,322  

Cash and cash equivalents, end of period

  $ 337,815     $ 145,832  
                 

Interest paid during the period (net of capitalized interest of $3,762, and $2,424, respectively)

  $ 111,761     $ 112,582  
                 

Income taxes paid during the period (net of refunds received of $18,723 and $0, respectively)

  $ 94,639     $ 10,829  

 

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 include 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”) 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 presented 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 2015 Annual Report on Form 10-K for the year ended December 31, 2015 (the “10-K”), as certain disclosures in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016, 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 condensed consolidated financial statements (see Footnote 8).

 

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, with respect to each taxable year, the Company must distribute at least 90 percent of its taxable income (excluding capital gain) and will not pay federal income taxes on the amount distributed to its shareholders.  The Company is not generally 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 (“TRSs”), which permit the Company to engage in certain business activities which the REIT may not conduct directly.  The Company’s TRSs include Kimco Realty Services Inc. ("KRS"), Kimco Insurance Company (“KIC,” and together with KRS, “KRS Consolidated”) and the consolidated entity, Blue Ridge Real Estate Company/Big Boulder Corporation.  A TRS is subject to federal and state income taxes on its income, 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. These investments are held by the Company at the REIT level and not in the Company’s taxable REIT subsidiaries. Accordingly, the Company does not expect a U.S. income tax impact associated with the repatriation of undistributed earnings from the Company’s foreign subsidiaries.

 

As part of the Company’s overall strategy to simplify its business model and transfer ownership of desirable long-term shopping center assets as well as the Company’s investment in Albertsons to the REIT, the Company, effective August 1, 2016, will merge KRS into a wholly-owned Limited Liability Company (“LLC”) of the Company (the “Merger”). The Company analyzed the individual assets of KRS and determined that substantially all of KRS’s assets constitute real estate assets and investments that can be directly owned by the Company without adversely affecting the Company’s status as a REIT.  Any non-REIT qualifying assets or activities will be transferred to and would reside in a newly formed TRS. 

 

Under generally accepted accounting principles in the United States of America a reduction of the carrying amounts of deferred tax assets by a valuation allowance is required, if, based on the evidence available, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized.  The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. As a result of the Merger, the realization of the Company’s net deferred tax asset is not deemed likely and as such, the Company will be required to record a full valuation allowance on the net deferred tax asset that exists at the time of the Merger. As of June 30, 2016, the Company had a net deferred tax asset of $66.4 million.

 

  

The Company has also analyzed each investment within KRS to determine which assets the Company intends to hold as long- term investments and which assets the Company would consider disposing of in the short term. As a result of this evaluation, the Company has identified four KRS operating properties which will be marketed for sale over the next 12 months and for which the book basis exceeded the estimated fair value. Due to the re-evaluation of the anticipated hold period for these four assets the Company has recorded an aggregate impairment charge of $50.7 million, before income taxes of $21.1 million, for the three months ended June 30, 2016 (see Footnote 2).   

 

In connection with the Merger, the Company has also prepared an analysis of the estimated built-in tax gains and built-in tax losses inherent in each asset.  Property that becomes REIT property in a merger transaction is subject to tax during a recognition period, and, as a result, the REIT is subject to corporate-level taxation up to the net built-in gain amount resulting from the sale of KRS investments within five years from the merger date (the recognition period). The Company compared estimated values to tax basis for each property to determine the built-in tax gain (value over basis) or the built-in tax loss (basis over value) and determined KRS’s share based on its ownership percentage, which could be subject to corporate level taxes if the Company disposes of any assets previously held by KRS during the five years following the Merger date.

 

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):