1
EXHIBIT INDEX ON PAGE 1415
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: MARCH 31,JUNE 30, 2000
-------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------------------------------------
Commission File Number: 1-6064
ALEXANDER'S, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 51-0100517
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
PARK 80 WEST, PLAZA II, SADDLE BROOK,210 ROUTE 4 EAST, PARAMUS, NEW JERSEY 07663
- --------------------------------------------------------------------------------07652
(Address of principal executive offices) (Zip Code)
(201)587-8541
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------PARK 80 WEST, PLAZA II, SADDLE BROOK, NJ 07663
(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.
[X] Yes [ ] No
As of May 1,July 21, 2000 there were 5,000,850 common shares outstanding.
2
ALEXANDER'S, INC.
AND SUBSIDIARIES
INDEX
Page Number
-----------
PART I. FINANCIAL INFORMATION:
----------------------
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31,June 30, 2000
and December 31, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . .1999........................................... 3
Consolidated Statements of Income for the Three and Six
Months Ended March 31,June 30, 2000 and March 31, 1999 . . . . . . . . . . . . . .June 30, 1999.................... 4
Consolidated Statements of Cash Flows for the ThreeSix Months
Ended March 31,June 30, 2000 and March 31, 1999 . . . . . . . . . . . . . .June 30, 1999........................... 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . .Statements...................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 8Operations............................. 9
Item 3. Quantitative and Qualitative
Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . 11Risk................................... 12
PART II. OTHER INFORMATION:
-----------------
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Proceedings............................................... 13
Item 5. Other Information............................................... 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 128-K................................ 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13......................................................... 14
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14......................................................... 15
2
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALEXANDER'S, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share amounts)
MARCH 31,JUNE 30, DECEMBER 31,
2000 1999
--------- -------------
ASSETS:
Real estate, at cost:
Land . . . . . . . . . . . . . . . . . . .Land......................................... $ 83,957 $ 83,957
Buildings, leaseholds and improvements . . 161,779improvements....... 168,804 155,899
Capitalized expenses and predevelopment
costs . . . . . . . . . . . . . . . . . 102,566development
costs.................................... 115,942 87,148
--------------------- -----------
Total . . . . . . . . . . . . . . 348,302Total.............................. 368,703 327,004
Less accumulated depreciation and
amortization . . . . . . . . . . . . . (56,105)amortization............................. (57,010) (55,199)
---------------------- -----------
Real estate, net . . . . . . . . . . . . . 292,197net............................. 311,693 271,805
Cash and cash equivalents . . . . . . . . . . 14,886equivalents......................... 2,762 26,053
Restricted cash . . . . . . . . . . . . . . . 15,037cash................................... 12,603 20,685
Accounts receivable, net of allowance for
doubtful accounts of $290$382 in 2000 and $314 in
1999 . . . . . . . . . . . . . . . . . . 1,9451999......................................... 1,740 3,353
Receivable arising from the straight-lining of
rents, net . . . . . . . . . . . . . . . 12,442net................................... 13,304 11,575
Deferred lease and other property costs . . . 24,363costs........... 24,277 24,788
Deferred debt expense . . . . . . . . . . . . 3,859expense............................. 3,785 4,206
Other assets . . . . . . . . . . . . . . . . 4,917assets...................................... 2,663 4,031
--------------------- -----------
TOTAL ASSETSASSETS...................................... $ 369,646372,827 $ 366,496
===================== ===========
MARCH 31,JUNE 30, DECEMBER 31,
2000 1999
--------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Debt (including $95,000 due to Vornado) . . . . . $339,325............... $ 341,409 $ 329,161
Amounts due to Vornado Realty Trust and
its affiliate . . . . . . . . . . . . . . . . 2,267affiliate.................................... 2,905 3,821
Accounts payable and accrued liabilities . . . . . 9,973liabilities.............. 10,180 10,804
Other liabilities . . . . . . . . . . . . . . . . 4,156.................................... 4,175 10,212
-------- ----------
355,721-------------- -----------
358,669 353,998
-------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock; no par value;
authorized 3,000,000 shares
issued, none
Common stock; $1.00 par value per share;
authorized, 10,000,0000 shares;
issued 5,173,450 . . . . . . . . . . . . . .5,173,450................................. 5,174 5,174
Additional capital . . . . . . . . . . . . . . . .capital.................................... 24,843 24,843
Deficit . . . . . . . . . . . . . . . . . . . . . (15,132)Deficit............................................... (14,899) (16,559)
-------- ------------------------- -----------
15,118 13,458
Less treasury shares, 172,600 shares
at cost . . . . . . . . . . . . . . . . . . .cost......................................... (960) (960)
-------- ------------------------ -----------
Total stockholders' equity . . . . . . . . . . . . 13,925equity............................ 14,158 12,498
-------- ------------------------ -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY . . . . . . . . . . . . $369,646EQUITY............................. $ 372,827 $ 366,496
======== ======================== ===========
3
See notes to consolidated financial statements.
4
ALEXANDER'S, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOMEOPERATIONS
(amounts in thousands except per share amounts)
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED MARCH 31,
------------------------------------ENDED
----------------------- -----------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 1999 ----------------- -------------------2000 1999
-------- -------- -------- --------
Revenues:
Property rentals . . . . . . . . . . . . . . . . . . . . . ................................................... $ 10,51210,655 $ 11,38810,758 $ 21,167 $ 22,146
Expense reimbursements . . . . . . . . . . . . . . . . . . . 4,574 5,235
----------- ----------............................................ 5,433 5,279 10,007 10,514
-------- -------- -------- --------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . 15,086 16,623
----------- ----------......................................................... 16,088 16,037 31,174 32,660
-------- -------- -------- --------
Expenses:
Operating (including management fee to Vornado of $335$333
and $327$347 each for the three months ended in 2000 and
1999; $668 and $674 each for the six months ended in
2000 and 1999) . . . . . . . . . . . . . . . 6,614 8,996................................................ 7,395 7,455 14,009 16,800
General and administrative (including management fee to Vornado
of $540 and $1,080 each for the three and six months ended in
each three month period) . . . . . . . . . . . . 851 9792000........................................................... 1,903 942 2,755 1,921
Depreciation and amortization . . . . . . . . . . . . . . . 1,353 1,338
----------- ----------..................................... 1,364 1,292 2,717 2,630
-------- -------- -------- --------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . 8,818 11,313
----------- ----------......................................................... 10,662 9,689 19,481 21,351
-------- -------- -------- --------
Operating income . . . . . . . . . . . . . . . . . . . . . . . . 6,268 5,310....................................................... 5,426 6,348 11,693 11,309
Interest and debt expense (including interest on loan from Vornado) . . . . . . . . . (5,233) (3,761).... (5,449) (4,339) (10,681) (8,100)
Interest and other income, (expense), net . . . . . . . . . . . . 392 (74)
----------- ----------......................................... 256 327 648 602
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .............................................................. $ 1,427233 $ 1,475
=========== ==========2,336 $ 1,660 $ 3,811
======== ======== ======== ========
Net income per share - basic . . . . . . . . . . . . . . . . . .and diluted ............................... $ .29.05 $ .29
=========== ==========
Net income per share - diluted . . . . . . . . . . . . . . . . ..47 $ .28.33 $ .29
=========== ==========.76
======== ======== ======== ========
See notes to consolidated financial statements.
4
5
ALEXANDER'S, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
FOR THE THREESIX MONTHS ENDED MARCH 31,
------------------------------------JUNE 30,
---------------------------------
2000 1999
------------------- ------------------------ --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................. $ 1,4271,660 $ 1,4753,811
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization (including debt issuance costs). 1,805 1,749 .... 3,610 3,709
Straight-lining of rental income . . . . . . . . . . . . . . . (913) (1,024)................................. (1,729) (1,727)
Write-off of the asset arising from the straight-lining of rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 3,000
Change in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . 1,408 (762)............................................... 1,613 3,187
Amounts due to Vornado Realty Trust and its affiliate . . . . . (1,554) (427)............. (916) (716)
Accounts payable and accrued liabilities . . . . . . . . . . . (831) 241.......................... (624) (844)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . (184)................................................. 747 (50)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (861) (340)
---------- ---------............................................................. 969 199
-------- --------
Net cash (used in) provided by operating activities . . . . . . . 297 3,862
---------- ---------............................ 5,330 10,569
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate . . . . . . . . . . . . . . . . . . . (21,298) (4,096).......................................... (41,699) (8,017)
Cash restricted for construction and development . . . . . . . 5,861 469.................. 7,995 2,668
Cash restricted for operating liabilities . . . . . . . . . . . (213) (79)
---------- ---------......................... 87 (21)
-------- --------
Net cash used in investing activities . . . . . . . . . . . . . (15,650) (3,706)
---------- ---------................................. (33,617) (5,370)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt . . . . . . . . . . . . . . . . . . . . . . . 10,329 --.................................................. 12,470 82,000
Debt repayments . . . . . . . . . . . . . . . . . . . . . . . . (166) (151)................................................... (222) (85,306)
Deferred debt expense . . . . . . . . . . . . . . . . . . . . . (105) (292)............................................. (468) (2,147)
Payment of acquisition obligation . . . . . . . . . . . . . . (5,872)................................. (6,784) --
---------- ----------------- --------
Net cash provided by (used in) financing activities . . . . . . . 4,186 (443)
---------- ---------................... 4,996 (5,453)
-------- --------
Net decrease in cash and cash equivalents . . . . . . . . . . . . (11,167) (287)............................. (23,291) (254)
Cash and cash equivalents at beginning of period . . . . . . . ....................... 26,053 15,363
---------- ----------------- --------
Cash and cash equivalents at end of period . . . . . . . . . . ............................. $ 14,8862,762 $ 15,076
========== =========15,109
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest (including capitalized interest of
$3,338$6,962 and $2,245) . . . . . . . . . . . . . . . . . . . . . .$4,458) ............................................... $ 8,11814,606 $ 5,595
========== =========10,999
======== ========
See notes to consolidated financial statements.
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ALEXANDER'S, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Balance Sheet as of March 31,June 30, 2000, the Consolidated
Statements of Income for the three and six months ended March 31,June 30, 2000 and March
31,June
30, 1999, and the Consolidated Statements of Cash Flows for the threesix months ended
March 31,June 30, 2000 and March 31,June 30, 1999 are unaudited. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and changes in cash
flows have been made. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
annual report on Form 10-K for the year ended December 31, 1999 as filed with
the Securities and Exchange Commission. The results of operations for the three
and six months ended March 31,June 30, 2000 are not necessarily indicative of the
operating results for the full year.
Management has made estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Certain amounts in the prior year's financial statements have been
reclassified to conform to the current year presentation.
2. RELATIONSHIP WITH VORNADO REALTY TRUST ("VORNADO")
Vornado owns 32.9%33.1% of the Company's Common Stock at March 31,June 30, 2000, of
which 41,500 shares were acquired on March 31, 2000. Additionally,2000 and 10,400 shares were
acquired on April 11, 2000, Vornado acquired 10,400 shares of the Company's stock increasing its
ownership from 32.9% to 33.1%.2000.
The Company is managed by and its properties are redeveloped and leased by
Vornado, pursuant to agreements with a one-year term expiring in March of each
year which are automatically renewable. Under these agreements, the Company
incurred fees of $1,687,000$ 1,686,000 and $1,679,000$1,700,000 in the three month periods ended
March 31,June 30, 2000 and March 31,June 30, 1999 and $3,373,000 and $3,380,000 in the six months
periods ended June 30, 2000 and June 30, 1999. In addition, Vornado is due
$1,166,000$562,000 at March 31,June 30, 2000 under the leasing agreement, subject to the payment of
rents by tenants.
At March 31,June 30, 2000 the Company is indebted to Vornado in the amount of
$95,000,000, the subordinated tranche of a $115,000,000 secured financing. The
Company incurred interest on its loan from Vornado of $3,474,000 and $1,561,000$1,613,000
in the three months ended March 31,June 30, 2000 and March 31,June 30, 1999 and $7,249,000 and
$3,174,000 in the six months period ended June 30, 2000 and June 30, 1999.
3. LEASES
InDEBT
A mortgage loan of $21,263,000, an obligation of a wholly-owned subsidiary
of the Company collateralized by the Fordham Road property, was scheduled to
mature on February 24, 2000. The mortgage loan has been extended for an
additional three-years to April 17, 2003. Under the terms of the extension,
interest accrues at LIBOR plus 1.50% in the first quartertwo years and LIBOR plus 1.75%
in year three which is a reduction of 1999, Caldor closed allthe original terms of its stores. Caldor
previously sub-leased its Flushing store fromLIBOR plus 4.25%.
Interest is payable at LIBOR for the Company. Caldor rejectedentire term. The spread over LIBOR accrues
during the Flushing lease effective March 29, 1999. In connection therewithextended term and increases the Company
wrote-off the $3,000,000 asset arising from the straight-lining of Caldor's
rent.principal balance.
6
7
4. COMMITMENTS AND CONTINGENCIES
During 1999, theThe Company let a contractcontracts for $20,000,000$28,000,000 to undertake the excavation and
laying the foundation for its Lexington Avenue property as part of the proposed
development of a large multi-use building. As of March 31,June 30, 2000, $11,107,000$17,748,000 has
been paid.
6
7
In June 1997, the Kings Plaza Regional Shopping Center (the "Center"),
commissioned an Environmental Study and Contamination Assessment Site
Investigation (the Phase II "Study") to evaluate and delineate environmental
conditions disclosed in a Phase I study. The results of the Study indicate the
presence of petroleum and bis (2-ethylhexyl) phthalate contamination in the soil
and groundwater. The Company has delineated the contamination and has developed
a remediation approach. The New York State Department of Environmental
Conservation ("NYDEC") has not yet approved the finalization of the approach. In
1997, the Center accrued $1,500,000 for its estimated obligation with respect to
the clean up of the site, which includes costs of (i) remedial investigation,
(ii) feasibility study, (iii) remedial design, (iv) remedial action and (v)
professional fees. Based upon revised estimates the Company accrued an
additional $500,000 in the second quarter of 1999 ($822,000915,000 has been paid as of
March 31,June 30, 2000). If the NYDEC insists on a more extensive remediation approach,
the Company could incur additional obligations.
The majority of the contamination may have resulted from activities of
third parties; however, the sources of the contamination have not been fully
identified. Although the Company intends to pursue all available remedies
against any potentially responsible third parties, there can be no assurance
that such parties will be identified, or if identified, whether these
potentially responsible third parties will be solvent. In addition, the costs
associated with pursuing any potentially responsible parties may be cost
prohibitive. The Company has not recorded an asset as of March 31,June 30, 2000 for
potential recoveries of environmental remediation costs from other parties.
Letters of Credit
Approximately $900,000 in standby letters of credit were issued at
March 31,June 30, 2000.
5. INCOME PER SHARE
The following table sets for the computation of basic and diluted
income per share:
FOR THE THREE MONTHS ENDED MARCH 31,
-----------------------------------------FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 --------------------- ------------------2000 1999
(amounts in thousands except per share amounts)
Numerator:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................... $ 1,427 $ 1,475
============== =============233 $2,336 $1,660 $3,811
====== ====== ====== ======
Denominator:
Denominator for basic income per share -share-
weighted average shares . . . . . . . . . . . . . . . . . . . . ................................. 5,001 5,001 5,001 5,001
Effect of dilutive securities:
Employee stock options . . . . . . . . . . . . . . . . . . . . . 58 1
-------------- -------------................................. -- 20 6 8
------ ------ ------ ------
Denominator for diluted income per share -share-
adjusted weighted average shares and assumed conversions . . . . . 5,059 5,002
============== =============5,001 5,021 5,007 5,009
====== ====== ====== ======
Net Incomeincome per share - basic . . . . . . . . . . . . . . . . . . .and diluted ................... $ .2905 $ .29
============== =============
Net Income per share - diluted . . . . . . . . . . . . . . . . . ..47 $ .28.33 $ .29
============== =============.76
====== ====== ====== ======
7
8
6. STOCK APPRECIATION RIGHTS
On June 5, 2000, the Board of Directors approved the conversion of 850,000
stock options of two officers/directors into equivalent stock appreciation
rights (SARs). The SARs have the same vesting terms and strike prices as the
options. Accounting for SARs is reflected in the statement of operations,
whereas the accounting for stock options is not, accordingly a charge of
$983,000 has been recorded in the second quarter of this year. SARs, unlike
options, are not aggregated under the REIT rules.
7. SUBSEQUENT EVENT
On August 1, 2000, the Company obtained a $50,000,000 secured line of
credit from Vornado under the same terms and conditions as the existing
$95,000,000 loan from Vornado, including the interest rate of 15.72%. The
outstanding mortgage loan of $21,263,000, an obligation of a
wholly-owned subsidiarymaturity date of the Company, is collateralized by a mortgage on its
Fordham Road property. Thisexisting $95,000,000 loan which was scheduled to mature on February
24, 2000, has been extended for an additional three-years to April 17, 2003.
UnderMarch 15,
2002, which is also the termsmaturity date of the extension,new line of credit. The interest
accruesrate on the loan and line of credit will reset on March 15, 2001, using the same
spread to treasuries as presently exists. The Company plans to use the proceeds
for general corporate purposes including continuing to fund the real estate
development costs at LIBOR plus 1.50% inits Lexington Avenue property. It is expected that a
construction loan will be obtained to finance the first two years and LIBOR plus 1.75% in year three which is a reduction of the
original terms of LIBOR plus 4.25%. Interest is payable at LIBOR for the
entire term. The spread over LIBOR accrues during the extended term and
increases the principal balance.
7Lexington Avenue property.
8
89
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements contained herein constitute forward-looking statements
as such term is defined in Section 27A of the Securities Act of 1933, as
amended, and Section 21 E of the Securities Exchange Act of 1934, as amended.
Certain factors could cause actual results to differ materially from those in
the forward- lookingforward-looking statements. Factors that might cause such a material
difference include, but are not limited to, (a) changes in the general economic
climate, (b) local conditions such as an oversupply of space or a reduction in
demand for real estate in the area, (c) conditions of tenants, (d) competition
from other available space, (e) increased operating costs and interest expense,
(f) the timing of and costs associated with property improvements, (g) changes
in taxation or zoning laws, (h) government regulations, (i) failure of
Alexander's to continue to qualify as a REIT, (j) availability of financing on
acceptable terms, (k) potential liability under environmental or other laws or
regulations, (l) general competitive factors, (m) dependence upon Vornado Realty
Trust and (n) possible conflicts of interest with Vornado Realty Trust.
RESULTS OF OPERATIONS
The Company had a net income of $1,427,000$233,000 in the quarter ended March
31,June 30,
2000, compared to $1,475,000$2,336,000 in the quarter ended March 31,June 30, 1999, a decrease of
$48,000.$2,103,000 and $1,660,000 for the six months ended June 30, 2000, compared to
$3,811,000 for the six months ended June 30, 1999 a decrease of $2,151,000.
Property rentals were $10,512,000$10,655,000 in quarter ended March 31,2000,June 30,2000, compared
to $11,388,000$10,758,000 in the quarter ended March 31,June 30, 1999, a decrease of $876,000. This$103,000 and
$21,167,000 for the six months ended June 30, 2000, compared to $22,146,000 for
the six months ended June 30, 1999 a decrease of $979,000. The decrease for the
six months is primarily from Caldor's rejection of its Flushing lease effective
March 29,1999.
Tenant expense reimbursements were $4,574,000$5,433,000 in the quarter ended March 31,June 30,
2000, compared to $5,235,000$5,279,000 in the prior year's quarter, an increase of
$154,000 and $10,007,000 for the six months ended June 30, 2000, compared to
$10,514,000 for the six months ended June 30, 1999 a decrease $507,000. The
increase for the three months ended June 30, 2000 resulted from higher
reimbursements for increased fuel costs of $661,000.the utility plan at the Company's
King's Plaza Regional Shopping Center. This decrease resultsincrease was offset for the six
months primarily from a change made in the first quarter of 2000, in the method
of allocating an anchor tenant's share of parking lot expenses at a shopping
center and covered a number of years.
Operating expenses were $6,614,000$7,395,000 in the quarter ended March 31,June 30, 2000,
compared to $8,996,000$7,455,000 in the prior year's quarter, a decrease of $2,382,000.$60,000. This
decrease results primarily from lower repairs and maintenance, offset by an
increase in expenses of the utility plant at the Company's Kings Plaza Regional
Shopping Center resulting primarily from higher fuel costs. Operating expenses
were $14,009,000 for the six months ended June 30, 2000, compared to $16,800,000
for the six months ended June 30, 1999 a decrease of $2,791,000. Operating
expenses for the threesix months ended March 31,June 30, 1999 included $3,000,000 resulting
from the write-off of the asset arising from the straight-lining of rents due to
Caldor's rejection of its Flushing lease. This amount is partially offset by an
increase in expenses of the utility plant at the Company's Kings Plaza Regional
Shopping Center resulting primarily from an
increase inhigher fuel costs.
General and administrative expenses were $851,000$1,903,000 in the quarter ended
March 31,June 30, 2000, compared to $979,000 in the prior year's quarter, a decrease of
$128,000. This decrease resulted primarily from lower professional fees.
Interest and debt expense was $5,233,000 in the quarter ended March
31, 2000, compared to $3,761,000$942,000 in the prior year's quarter, an increase of
$1,472,000. This$961,000 and $2,755,000 for the six months ended June 30, 2000, compared to
$1,921,000 for the six months ended June 30, 1999, an increase of $834,000.
These increases resulted from an increase in compensation expense of $983,000
relating to stock appreciation rights granted on June 5, 2000.
Interest and debt expense was $5,449,000 in the quarter ended June 30,
2000, compared to $4,339,000 in the prior year's quarter, an increase of
$1,110,000 and $10,681,000 for the six months ended June 30, 2000, compared to
$8,100,000 for the six months ended June 30, 1999 an increase of $2,581,000.
These increases resulted from (i) an increase in average debt outstanding of
$62,400,000,approximately $58,000,000, and (ii) an increase in average interest rates from
8.03%8.1% to 9.61%10.0%, partially offset by (iii) an increase in capitalized interest
relating to the Company's development properties.
Interest and other income (expense) was $392,000 in the quarter ended
March 31, 2000, compared to an expense of $74,000 in the prior year's quarter,
an increase of $466,000. Results for the prior year's quarter included the
write-off of certain deferred costs.9
10
LIQUIDITY AND CAPITAL RESOURCES
In the aggregate, Alexander's operating properties do not generate
sufficient cash flow to pay all of its expenses. The Company's three
non-operating properties (Lexington Avenue, Paramus, and Rego Park II) are in
various stages of development. As rents commence from portions of the
development property(s) and from the vacant property(s) the Company expects that
cash flow will become positive.
The Company estimates that capital expenditure requirementslet contracts for the
development of its Paramus property, will approximate $100,000,000.
8
9
The Company is currently undertaking$28,000,000 to undertake the excavation and
laying the foundation for its Lexington Avenue property as part of the proposed
development of a large multi-use building. As of June 30, 2000, $17,748,000 has
been paid. The additional capital required for the proposed building will be in
excess of $400,000,000.
On August 1, 2000, the Company obtained a $50,000,000 secured line of
credit from Vornado under the same terms and conditions as the existing
$95,000,000 loan from Vornado, including the interest rate of 15.72%. The
outstandingmaturity date of the existing $95,000,000 loan has been extended to March 15,
2002, which is also the maturity date of the new line of credit. The interest
rate on the loan and line of credit will reset on March 15, 2001, using the same
spread to treasuries as presently exists. The Company plans to use the proceeds
for general corporate purposes including continuing to fund the real estate
development costs at its Lexington Avenue property. It is expected that a
construction loan will be obtained to finance the Lexington Avenue property.
The Company estimates that capital expenditure requirements for the
development of its Paramus property, will approximate $100,000,000.
A mortgage loan of $21,263,000, an obligation of a wholly-owned subsidiary
of the Company is collateralized by a mortgage on itsthe Fordham Road property. This loan, whichproperty, was scheduled to
mature on February 24, 2000,2000. The mortgage loan has been extended for an
additional three-years to April 17, 2003. Under the terms of the extension,
interest accrues at LIBOR plus 1.50% in the first two years and LIBOR plus 1.75%
in year three which is a reduction of the original terms of LIBOR plus 4.25%.
Interest is payable at LIBOR for the entire term. The spread over LIBOR accrues
during the extended term and increases the principal balance.
The Company estimates that the fair market values of its assets are
substantially in excess of their historical costcosts and that it has additional
borrowing capacity. Alexander's continues to evaluate its needs for capital
which may be raised through (a) property specific or corporate borrowing, (b)
the sale of securities and (c) asset sales. Although there can be no assurance,
the Company believes that these cash sources will be adequate to fund cash
requirements until its operations generate adequate cash flow.
CASH FLOWS
ThreeSix Months Ended March 31,June 30, 2000
Cash provided by operating activities of $297,000$5,330,000 was comprised of (i)
net income of $1,427,000,$1,660,000, (ii) non-cash items of $892,000, offset by$1,881,000, and (iii) the net
change in operating assets and liabilities of $2,022,000.$1,789,000. The adjustments for
non-cash items are comprised of (i) depreciation and amortization of $1,805,000,$3,610,000,
offset by (ii) the effect of straight-lining of rental income of $913,000.$1,729,000.
Net cash used in investing activities of $15,650,000$33,617,000 was comprised of
capital expenditures of $21,298,000$41,699,000, partially offset by the release of
restricted cash of $5,648,000.$8,082,000.
Net cash provided by financing activities of $4,186,000$4,996,000 resulted primarily
from an increase in debt of $10,329,000$12,470,000 partially offset by the payment of
acquisition debt of $5,872,000.
Three$6,784,000.
10
11
Six Months Ended March 31,June 30, 1999
Cash provided by operating activities of $3,862,000$10,569,000 was comprised of (i)
net income of $1,475,000,$3,811,000, (ii) non-cash items of $3,725,000, offset by$4,982,000, and (iii) the net
change in operating assets and liabilities of $1,338,000.$1,776,000. The adjustments for
non-cash items are comprised of (i) the write-off of the asset arising from the
straight-lining of rents of $3,000,000 and (ii) depreciation and amortization of
$1,749,000,$3,709,000, offset by (iii) the effect of straight-lining of rental income of
$1,024,000.$1,727,000.
Net cash used in investing activities of $3,706,000$5,370,000 was primarily comprised
of capital expenditures.
Net cash used in financing activities of $443,000 was comprised primarily$5,453,000 resulted from proceeds
of $82,000,000 from the refinancing of its subsidiary's Rego Park I property
offset by (i) the repayment of the then existing $75,000,000 debt on the
property, (ii) repayment of the $10,000,000 debt on the Paramus property and
(iii) an increase in debt issuance costs of $292,000 and (ii) repayments of debt of $151,000.
9
10$2,147,000.
Funds from Operations for the Three and Six Months Ended March 31,June 30, 2000 and March 31,June
30, 1999
Funds from operations were $1,297,000was $105,000 in the quarter ended March 31,June 30, 2000,
compared to $4,679,000$2,146,000 in the prior year's quarter, a decrease of $3,382,000.$2,041,000 and
$1,402,000 in the six months ended June 30, 2000 compared to $6,825,000 in the
prior year's six months, a decrease of $5,423,000. The following table
reconciles net income to funds from operations:
For The Three Months Ended March 31,
-----------------------------------For The Six Months Ended
June 30, June 30,
2000 1999 ------------------ ---------------2000 1999
Net income . . . . . . . . . . . . . . . . . . . . ........................... $ 1,427,000233,000 $ 1,475,0002,336,000 $ 1,660,000 $ 3,811,000
Depreciation and amortization of
real property . . . . . . . . . . . . . . . . . 1,353,000 1,338,000................. 1,364,000 1,292,000 2,717,000 2,630,000
Straight-lining of property rentals
for rent escalations . . . . . . . . . . . . . (893,000) (1,024,000).......... (888,000) (930,000) (1,781,000) (1,954,000)
Leasing fees paid in excess
of expense recognized . . . . . . . . . . . . . (590,000) (110,000)......... (604,000) (552,000) (1,194,000) (662,000)
Write-off of asset arising from the
straight-lining of rents . . . . . . . . . . .rent ....... -- -- -- 3,000,000
----------- ----------------------- ----------- -----------
$ 1,297,000105,000 $ 4,679,0002,146,000 $ 1,402,000 $ 6,825,000
=========== ======================= =========== ===========
Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles and is
not necessarily indicative of cash available to fund cash needs, which is
disclosed in the Consolidated Statements of Cash Flows for the applicable
periods. There are no material legal or functional restrictions on the use of
funds from operations. Funds from operations should not be considered as an
alternative to net income as an indicator of the Company's operating performance
or as an alternative to cash flows as a measure of liquidity. Management
considers funds from operations a relevant supplemental measure of operating
performance because it provides a basis for comparison among REITs; however,
funds from operations may not be comparable to similarly titled measures
reported by other REITs since the Company's method of calculating funds from
operations is different from that used by NAREIT. Funds from operations, as
defined by NAREIT, represents net income before depreciation and amortization,
extraordinary items and gains or losses on sales of real estate. Funds from
operations as disclosed above has been modified to adjust for the effect of
straight-lining of property rentals for rent escalations and leasing fee
expenses. Below are the cash flows provided by (used in) operating, investing
and financing activities:
11
12
For The Three Months Ended March 31,
-----------------------------------------For The Six Months Ended
June 30, June 30,
2000 1999 ----------------------- ----------------2000 1999
Operating activities . . . . . . . . . ........ $ 297,0005,033,000 $ 3,862,000
=================== =============6,707,000 $ 5,330,000 $ 10,569,000
============ ============ ============ ============
Investing activities . . . . . . . . . ........ $(17,967,000) $ (15,650,000)(1,664,000) $(33,617,000) $ (3,706,000)
=================== =============(5,370,000)
============ ============ ============ ============
Financing activities . . . . . . . . . ........ $ 4,186,000810,000 $ (443,000)
=================== =============(5,010,000) $ 4,996,000 $ (5,453,000)
============ ============ ============ ============
10
11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At March 31,June 30, 2000, the Company had $162,325,000$164,409,000 of variable rate of debt at
a weighted average interest rate of 7.93%7.95% and $177,000,000 of fixed rate of debt
bearing interest at a weighted average interest rate of 11.80%. A one percent
increase in the base used to determine the interest rate of the variable rate
debt would result in a $1,623,000$1,644,000 decrease in the Company's annual net income
($.32.33 per basic and diluted share).
1112
1213
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is a party to, nor is their
property the subject of, any material pending legal proceeding other than
routine litigation incidental to their businesses. The Company believes that
these legal actions will not be material to the Company's financial condition or
results of operations.
ITEM 5. OTHER INFORMATION
Michael D. Fascitelli was elected Alexander's new President by its Board,
effective August 1, 2000. Mr. Fascitelli has been a Director of Alexander's
since December, 1996. Mr. Fascitelli has also been the President and a Trustee
of Vornado Realty Trust, Alexander's managing agent, since December 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits required by Item 601 of Regulation of S-K are filed herewith and
are listed in the attached Exhibit Index.
(b) Reports on Form 8-K:
None
1213
1314
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALEXANDER'S, INC.
------------------------------------------
(Registrant)
Date: May 4,August 1, 2000 /s/ Joseph Macnow
------------------------------------------
Joseph Macnow, Vice President,
Chief Financial Officer
1314
1415
EXHIBIT INDEX
EXHIBIT
NO. PAGE
- --------------- ----
3(i) -- Certificate of Incorporation, as amended. Incorporated
herein by reference from Exhibit 3.0 to the Registrant's
Current Report on Form 8-K dated September 21, 1993 ........................ *
3(ii) -- Amended and Restated By-laws, .............................................................as amended. Incorporated herein by reference from
Exhibit 10.1 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 2000 ..................... *
10(i)(A)(1) -- Agreement, dated as of December 4, 1985, among Seven Thirty
One Limited Partnership ("731 Limited Partnership"),
Alexander's Department Stores of Lexington Avenue, Inc., the
Company, Emanuel Gruss, Riane Gruss and Elizabeth Goldberg
(collectively, the "Partners"). Incorporated herein by
reference from Exhibit 10(i)(F)(1) to the Registrant's Form
10-K for the fiscal year ended July 26, 1986 .......................................................................................................... *
10(i)(A)(2) -- Amended and Restated Agreement of Limited Partnership in the
731 Limited Partnership, dated as of August 21, 1986, among
the Partners. Incorporated herein by reference from Exhibit
1 to the Registrant's Current Report on Form 8-K, dated
August 21, 1986 ................................................................................................................................ *
10(i)(A)(3) -- Third Amendment to Amended and Restated Agreement of Limited
Partnership dated December 30, 1994, among the Partners.
Incorporated herein by reference from Exhibit 10(i)(A)(3) to
the Registrant's Form 10-K for the fiscal year ended
December 31, 1994 ............................................................................................................................ *
10(i)(B)(1) -- Promissory Note Modification Agreement, dated October 4,
1993, between Alexander's Department Stores of New Jersey,
Inc. and New York Life Insurance Company ("New York Life").
Incorporated herein by reference from Exhibit 10(i)(3)(a) to
the Registrant's Form 10-K for the Transition Period August
1, 1993 to December 31, 1993 .............................................................................................................................. *
10(i)(B)(2) -- Mortgage Modification Agreement, dated October 4, 1993, by
Alexander's Department Stores of New Jersey, Inc. and New
York Life Incorporated herein by reference from Exhibit
10(i)(E)(3)(a) to the Registrant's Form 10-K for the
Transition Period August 1, 1993 to December 31, 1993 ...................................................................... *
10(i)(C) -- Credit Agreement, dated March 15, 1995, among the Company
and Vornado Lending Corp. Incorporated herein by reference
from Exhibit 10(i)(C) to the Registrant's Form 10-K for the
fiscal year ended December 31, 1994 .................................. *
10(i)(C)(1) -- Modification and Extension of Credit Agreement, dated as of
March 13, 2000, between Vornado Lending L.L.C., as Lender,
and Alexander's Inc., as Borrower .................................... *
10(i)(D) -- Credit Agreement, dated March 15, 1995, among the Company
and First Union Bank, National Association. Incorporated
herein by reference from Exhibit 10(i)(D) to the
Registrant's Form 10-K for the fiscal year ended December
31, 1994 ................................................................................ *
10(i)(D)(1) -- Modification and Extension of Credit Agreement, dated as of
April 14, 2000, between First Union National Bank, as
lender, and Alexander's Inc., as borrower ..........borrower. Incorporated
herein by reference from Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2000 ....................................................... *
- --------
* Incorporated by reference
15
16
EXHIBIT
NO. PAGE
10(i)(D)(2) -- Pledge and Security Agreement for Transferable
Development Rights, dated as of April 14, 2000, between
First Union National Bank, as secured party, 731
Limited Partnership, as assignor, and Alexander's, Inc.
as borrower, ..............................
- ---------------------------------
* Incorporated by reference
14
15
EXHIBIT
NO. PAGE
- --------------- ----
10(i)(E) -- Building Loan Agreement, dated as of March 29, 1995, among the Company, Union Bank
of Switzerland ("UBS") (New York Branch), as Lender, and UBS (New York Branch), as
Agent. Incorporated by reference from Exhibit 10(i)(E) to the Registrant's Form
10-K for the fiscal year ended December 31, 1994 ......................................... *
10(i)(F) -- Project Loan Agreement, dated as of March 29,1995, among the Company, UBS (New
York Branch), as Lender, and UBS (New York Branch), as Agent. Incorporated herein by reference from
Exhibit 10(i)(F)10.1 to the Registrant's Quarterly Report on
Form 10-K10-Q for the fiscal yearquarter ended DecemberMarch 31, 1994 .............................................................2000 ............ *
10(i)(E) -- Amended, Restated and Consolidated Mortgage and
Security Agreement, dated May 12, 1999, between The
Chase Manhattan Bank, as mortgagee, and Alexander's
Rego Shopping Center Inc., as mortgagor ..........................
10(i)(G)(1) -- Real Estate Retention Agreement dated as of July 20,
1992, between Vornado Realty Trust and Keen Realty
Consultants, Inc., each as special real estate
consultants, and the Company. Incorporated herein by
reference from Exhibit 10(i)(O) to the Registrant's
Form 10-K for the fiscal year ended July 25, 1992 ........................................... *
10(i)(G)(2) -- Extension Agreement to the Real Estate Retention
Agreement, dated as of February 6, 1995, between the
Company and Vornado Realty Trust. Incorporated herein
by reference from Exhibit 10(i)(G)(2) to the
Registrant's Form 10-K for the fiscal year ended
December 31, 1994 ............................................................................................................. *
10(i)(H) -- Management and Development Agreement, dated as of
February 6, 1995, between Vornado Realty Trust and the
Company, on behalf of itself and each subsidiary listed
therein. Incorporated herein by reference from Exhibit
10.1 to the Registrant's Current Report on Form 8-K
dated February 6, 1995 ...................................................................... *
10(i)(I) -- Commitment letter, dated as of February 6, 1995,
between Vornado Realty Trust and the Company.
Incorporated herein by reference from Exhibit 10.3 to
the Registrant's Current Report on Form 8-K dated
February 6, 1995 ............................................................................ *
10(i)(J)(1) -- First Amendment to Mortgage and Security Agreement,
dated as of February 24, 2000, between Banc of America
Commercial Finance Corporation, as mortgagee, and
Alexander's of Fordham Road, Inc., as mortgagor ..........................................mortgagor.
Incorporated herein by reference from Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2000 .............................. *
10(i)(J)(2) -- Amended and Restated Promissory Note (Secured), dated
as of February 24, 2000, between Banc of America
Commercial Finance Corporation, as lender, and
Alexander's of Fordham Road, Inc., as borrower .......................................................borrower.
Incorporated herein by reference from Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2000 .............................. *
10(i)(J)(3) -- Trigger Agreement, dated as of February 24, 2000,
between Banc of America Commercial Finance Corporation,
as lender, and Alexander's, Inc., as guarantor ...........guarantor.
Incorporated herein by reference from Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2000 .............................. *
10(i)(K) -- Term Loan Agreement dated as of June 18, 1998 among
Alexanders' Kings Plaza Center, Inc., Kings Plaza
Corp., and Alexander's Department Stores of Brooklyn,
Inc., as Borrower, Union Bank of Switzerland, as
Lender. Incorporated herein by reference from Exhibit
10 to the Registrant's Form 10-Q for the quarter ended
June 30, 1998 ............................................................ *
- ---------------------------------
* Incorporated by reference
15
16
EXHIBIT
NO. PAGE
- --------------- ----
10(ii)(A)(3) -- Agreement of Lease for Rego Park, Queens, New York,
between Alexander's, Inc. and Sears Roebuck & Co.
Incorporated herein by reference from Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1994 ................................................................................................................... *
16
17
EXHIBIT
NO. PAGE
10(ii)(A)(4)(a) -- Lease for Roosevelt Avenue, Flushing, New York, dated
as of December 1, 1992, between the Company, as
landlord, and Caldor, as tenant. Incorporated herein by
reference from Exhibit (ii)(E)(7) to the Registrant's
Form 10-K for the fiscal year ended July 25, 1992 ................................................................................. *
10(ii)(A)(4)(b) -- First Amendment to Sublease for Roosevelt Avenue,
Flushing, New York, dated as of February 22, 1995
between the Company, as sublandlord, and Caldor, as
tenant. Incorporated herein by reference from Exhibit
10(ii)(A)(8)(b) to the Registrant's Form 10-K for the
fiscal year ended December 31, 1994 .................................................................. *
10(ii)(A)(5) -- Lease Agreement, dated March 1, 1993 by and between the
Company and Alex Third Avenue Acquisition Associates.
Incorporated by reference from Exhibit 10(ii)(F) to the
Registrant's Form 10-K for the fiscal year ended July
31, 1993 ............................................................................. *
10(ii)(A)(6) -- Agreement of Lease for Rego Park, Queens, New York,
between the Company and Marshalls of Richfield, MN.,
Inc., dated as of March 1, 1995. Incorporated herein by
reference from Exhibit 10(ii)(A)(12)(a) to the
Registrant's Form 10-K for the fiscal year ended
December 31, 1994 ...................................................................................................... *
10(ii)(A)(7) -- Guaranty, dated March 1, 1995, of the Lease described
in Exhibit 10(ii)(A)(6)(a) above by the Company.
Incorporated herein by reference from Exhibit
10(ii)(A)(12)(b) to the Registrant's Form 10-K for the
fiscal year ended December 31, 1994 ............................................................................................................... *
10(iii)(B) -- Employment Agreement, dated February 9, 1995, between
the Company and Stephen Mann. Incorporated herein by
reference from Exhibit 10(iii)(B) to the Registrant's
Form 10-K for the fiscal year ended December 31, 1994 ................................... *
10(iv)(A) -- Registrant's Omnibus Stock Plan, as amended, dated May
28, 1997. Incorporated herein by reference from Exhibit
10 to the Registrant's Form 10-Q for the fiscal quarter
ended June 30, 1997...............................................................1997 .............................................. *
27 -- Financial Data Schedule
- -----------------------------------------
* Incorporated by reference
1617