UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
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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 20418
KENNEDY-WILSON, INC.
(Exact name of registrant as specified in its charter)
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95-4364537 |
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| 9601 Wilshire Blvd., Suite 220 |
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| (310) 887-6400 | ||
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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 x No o
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common stock, $.01 par value; 9,896,476 shares outstanding at November 11, 2002.
KENNEDY-WILSON, INC.
FORM 10-Q
TABLE OF CONTENTS
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Page |
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| PART I |
Financial Information |
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| Item 1. |
Financial Statements |
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Consolidated Balance Sheets as of September 30, 2002 (Unaudited) and December 31, 2001 |
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5 | |
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7 | |
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| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 |
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| Item 3. |
18 | |
| Item 4. | Controls and Procedures | 18 |
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| PART II |
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| Item 2. | Changes in Securities and Use of Proceeds | 19 |
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| Item 5. |
19 | |
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| Item 6. |
19 |
2
KENNEDY-WILSON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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September 30, |
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December 31, |
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| Assets |
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| Cash and cash equivalents |
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$ |
5,629,000 |
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$ |
11,121,000 |
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| Cash - restricted |
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145,000 |
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628,000 |
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| Accounts receivable |
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6,495,000 |
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7,653,000 |
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| Notes receivable |
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10,383,000 |
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15,130,000 |
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| Real estate |
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— |
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4,649,000 |
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| Investments in joint ventures |
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46,529,000 |
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47,124,000 |
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| Investment in stock of Kennedy Wilson Japan |
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17,132,000 |
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— |
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| Contracts and other assets, net |
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11,281,000 |
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19,243,000 |
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| Goodwill |
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23,965,000 |
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23,965,000 |
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| Total assets |
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$ |
121,559,000 |
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$ |
129,513,000 |
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| Liabilities and Stockholders’ Equity |
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| Liabilities |
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| Accounts payable |
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$ |
616,000 |
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$ |
484,000 |
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| Accrued expenses and other liabilities |
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3,796,000 |
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5,560,000 |
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| Accrued salaries and benefits |
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956,000 |
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3,843,000 |
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| Deferred and accrued income taxes |
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6,276,000 |
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3,932,000 |
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| Notes payable |
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7,533,000 |
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10,022,000 |
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| Borrowings under lines of credit |
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21,534,000 |
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29,907,000 |
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| Mortgage loans payable |
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— |
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1,993,000 |
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| Senior unsecured notes |
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14,458,000 |
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14,286,000 |
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| Convertible subordinated debt |
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— |
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7,500,000 |
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| Subordinated debt |
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2,773,000 |
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— |
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Total liabilities |
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57,942,000 |
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77,527,000 |
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| Commitments and contingencies |
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| Stockholders’ equity |
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| Preferred stock, $0.01 par value: 5,000,000 shares authorized; none issued as of September 30, 2002 and December 31, 2001 |
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— |
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— |
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| Common stock, $0.01 par value: 50,000,000 shares authorized; 9,896,476 and 8,789,288 shares issued and outstanding as of September 30, 2002 and December 31, 2001, respectively |
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100,000 |
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88,000 |
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| Additional paid-in capital |
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58,196,000 |
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47,853,000 |
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| Restricted stock - deferred compensation |
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(7,887,000 |
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(2,677,000 |
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| Retained earnings |
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12,923,000 |
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6,722,000 |
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| Accumulated other comprehensive income |
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285,000 |
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— |
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Total stockholders’ equity |
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63,617,000 |
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51,986,000 |
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| Total liabilities and stockholders’ equity |
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$ |
121,559,000 |
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$ |
129,513,000 |
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See accompanying notes to consolidated financial statements.
3
KENNEDY-WILSON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
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For the three months ended |
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For the nine months ended |
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2002 |
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2001 |
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2002 |
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2001 |
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| Revenue |
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| Property management and leasing fees |
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$ |
7,449,000 |
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$ |
8,600,000 |
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$ |
20,703,000 |
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$ |
24,650,000 |
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| Commissions |
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5,408,000 |
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2,668,000 |
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11,512,000 |
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9,642,000 |
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| Sales of residential real estate |
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— |
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1,620,000 |
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— |
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10,178,000 |
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| Equity in joint venture income |
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1,608,000 |
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1,308,000 |
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4,034,000 |
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3,929,000 |
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| Gain on sale of commercial real estate |
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— |
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— |
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— |
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281,000 |
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| Gain on restructured notes receivable |
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902,000 |
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130,000 |
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2,733,000 |
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177,000 |
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| Interest and other income |
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212,000 |
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454,000 |
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743,000 |
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1,052,000 |
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| Total revenue |
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15,579,000 |
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14,780,000 |
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39,725,000 |
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49,909,000 |
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| Operating expenses |
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| Commissions and marketing expenses |
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1,872,000 |
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2,018,000 |
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4,370,000 |
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5,740,000 |
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| Cost of residential real estate sold |
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35,000 |
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1,594,000 |
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220,000 |
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9,879,000 |
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| Compensation and related expenses |
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6,240,000 |
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5,721,000 |
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18,569,000 |
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17,880,000 |
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| General and administrative |
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2,850,000 |
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2,776,000 |
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8,198,000 |
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8,389,000 |
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| Depreciation and amortization |
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801,000 |
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978,000 |
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2,283,000 |
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2,904,000 |
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| Non-cash write-down of investment |
1,467,000 |
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1,467,000 |
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| Non-recurring, non-cash Japan IPO expense |
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— |
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— |
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1,100,000 |
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— |
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| Total operating expenses |
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13,265,000 |
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13,087,000 |
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36,207,000 |
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44,792,000 |
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| Total operating income |
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2,314,000 |
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1,693,000 |
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3,518,000 |
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5,117,000 |
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| Non-operating income (expense) |
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Gain on sale of stock of subsidiary |
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4,077,000 |
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— |
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12,899,000 |
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— |
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Interest expense |
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(670,000 |
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(659,000 |
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(1,926,000 |
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(2,441,000 |
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Valuation adjustment - warrants |
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333,000 |
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— |
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48,000 |
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— |
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Write-down of technology investment |
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(2,500,000 |
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— |
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(2,500,000 |
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Gain on extinguishment of debt |
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— |
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— |
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750,000 |
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— |
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| Income before minority interest and provision for income taxes |
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3,554,000 |
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1,034,000 |
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12,789,000 |
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2,676,000 |
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| Minority interest |
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(2,209,000 |
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— |
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(4,091,000 |
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— |
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| Income before provision for income taxes |
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1,345,000 |
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1,034,000 |
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8,698,000 |
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2,676,000 |
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| Provision for income taxes |
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(510,000 |
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(394,000 |
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(2,497,000 |
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(1,018,000 |
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| Net income |
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$ |
835,000 |
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$ |
640,000 |
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$ |
6,201,000 |
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$ |
1,658,000 |
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| Share data: |
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| Basic net income per share |
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$ |
0.09 |
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$ |
0.07 |
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$ |
0.67 |
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$ |
0.19 |
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| Basic weighted average shares |
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9,819,399 |
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8,701,924 |
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9,186,853 |
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8,693,047 |
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| Diluted net income per share |
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$ |
0.08 |
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$ |
0.07 |
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$ |
0.65 |
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$ |
0.19 |
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| Diluted weighted average shares |
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9,924,409 |
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8,915,770 |
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9,503,417 |
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8,843,712 |
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See accompanying notes to consolidated financial statements.
4
KENNEDY-WILSON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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For the nine months ended |
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2002 |
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2001 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Net income |
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$ |
6,201,000 |
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$ |
1,658,000 |
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| Adjustments to reconcile net income to net cash used in operating activities: |
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Depreciation and amortization |
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2,283,000 |
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2,904,000 |
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Equity in joint venture income |
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(4,034,000 |
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(3,929,000 |
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Minority interest in income of subsidiary |
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4,091,000 |
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— |
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Compensation expense for restricted stock |
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540,000 |
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223,000 |
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