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 | ||
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| FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003 | ||||
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
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| FOR THE TRANSITION PERIOD FROM ________ TO ________. | ||||
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| Commission File Number 20418 | ||||
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| KENNEDY-WILSON, INC. | ||||
| (Exact name of registrant as specified in its charter) | ||||
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| Delaware |
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95-4364537 | ||
| (State or other jurisdiction of incorporation or organization) |
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(I.R.S Employer Identification No.) | ||
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| 9601 Wilshire Blvd., Suite 220 Beverly Hills, CA |
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90210 | ||
| (Address of principal executive offices) |
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(Zip Code) | ||
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| (310) 887-6400 | ||||
| (Registrant’s telephone number, including area code) | ||||
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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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
| Yes o |
No x |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common stock, $.01 par value; 9,616,165 shares outstanding at May 12, 2003.
KENNEDY-WILSON, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 2003
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Page |
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| PART I |
Financial Information |
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| Item 1. |
Financial Statements |
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Consolidated Balance Sheets as of March 31, 2003 (Unaudited) and December 31, 2002 |
3 |
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4 | |
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5 | |
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6 | |
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| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
15 |
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| Item 3. |
19 | |
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| Item 4. |
19 | |
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| Item 6. |
19 | |
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| 21 | ||
2
Kennedy-Wilson, Inc. and Subsidiaries
Consolidated Balance Sheets
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March 31, 2003 |
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December 31, |
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| Assets |
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| Cash and cash equivalents |
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$ |
6,374,000 |
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$ |
11,852,000 |
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| Cash – restricted |
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959,000 |
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42,000 |
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| Accounts receivable |
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4,272,000 |
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4,788,000 |
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| Investment in Kennedy-Wilson Japan |
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10,991,000 |
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13,286,000 |
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| Notes receivable |
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24,765,000 |
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15,662,000 |
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| Real estate |
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16,740,000 |
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— |
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| Investments in joint ventures |
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47,959,000 |
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48,458,000 |
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| Contracts and other assets, net |
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10,542,000 |
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11,022,000 |
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| Goodwill, net |
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23,965,000 |
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23,965,000 |
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| Total Assets |
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$ |
146,567,000 |
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$ |
129,075,000 |
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| Liabilities and Stockholders’ Equity |
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| Liabilities |
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| Accounts payable |
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$ |
522,000 |
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$ |
861,000 |
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| Accrued expenses and other liabilities |
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3,027,000 |
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2,850,000 |
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| Accrued salaries and benefits |
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2,157,000 |
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2,713,000 |
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| Deferred and accrued income taxes |
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2,331,000 |
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2,367,000 |
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| Notes payable |
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22,534,000 |
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15,983,000 |
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| Joint venture financing |
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5,580,000 |
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— |
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| Borrowings under lines of credit |
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22,443,000 |
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24,224,000 |
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| Mortgage loans payable |
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11,120,000 |
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— |
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| Senior unsecured notes |
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14,805,000 |
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14,606,000 |
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| Subordinated debt |
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2,773,000 |
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2,773,000 |
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| Total liabilities |
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87,292,000 |
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66,377,000 |
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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 December 31, 2002 and 2001 |
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— |
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— |
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| Common stock, $0.01 par value: 50,000,000 shares authorized; 10,277,392 and 11,215,992 shares issued and outstanding as of March 31, 2003 and December 31, 2002, respectively |
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103,000 |
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112,000 |
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| Additional paid-in capital |
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53,095,000 |
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57,473,000 |
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| Restricted stock – deferred compensation |
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(7,380,000 |
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(7,633,000 |
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| Retained earnings |
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13,207,000 |
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12,461,000 |
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| Accumulated other comprehensive income |
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250,000 |
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285,000 |
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| Total stockholders’ equity |
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59,275,000 |
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62,698,000 |
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| Total Liabilities and Stockholders’ Equity |
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$ |
146,567,000 |
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$ |
129,075,000 |
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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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Three months ended March 31, |
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2003 |
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2002 |
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| Revenue |
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| Property management and leasing fees |
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$ |
3,696,000 |
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$ |
5,772,000 |
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| Property management and leasing fees –related party |
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996,000 |
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894,000 |
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| Commissions |
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644,000 |
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2,674,000 |
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| Commissions – related party |
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139,000 |
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215,000 |
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| Interest and other income |
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532,000 |
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487,000 |
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| Total revenue |
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6,007,000 |
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10,042,000 |
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| Operating Expenses |
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| Commissions and marketing expenses |
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879,000 |
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1,127,000 |
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| Compensation and related expenses |
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4,316,000 |
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5,888,000 |
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| General and administrative |
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2,064,000 |
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3,075,000 |
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| Depreciation and amortization |
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694,000 |
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880,000 |
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| Non-recurring, non-cash Japan IPO expense |
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— |
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1,100,000 |
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| Total operating expenses |
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7,953,000 |
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12,070,000 |
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| Equity income |
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567,000 |
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594,000 |
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| Total operating loss |
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(1,379,000 |
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(1,434,000 |
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| Non-operating income (expense) |
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| Gain on sale of stock of subsidiary |
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3,514,000 |
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8,822,000 |
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| Interest expense |
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(506,000 |
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(533,000 |
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| Valuation adjustment – warrants |
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35,000 |
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(480,000 |
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| Loss on extinguishment of debt |
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(454,000) |
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— |
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| Income before minority interest and provision for income taxes |
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1,210,000 |
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6,375,000 |
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| Minority interest |
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— |
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(202,000 |
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| Income before provision for income taxes |
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1,210,000 |
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6,173,000 |
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| Provision for income taxes |
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(464,000 |
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(2,208,000 |
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| Net Income |
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$ |
746,000 |
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$ |
3,965,000 |
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| Share Data: |
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| Net income per share, basic |
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$ |
0.08 |
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$ |
0.45 |
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| Basic weighted average shares |
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9,513,581 |
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8,794,449 |
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| Net income per share, diluted |
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$ |
0.08 |
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$ |
0.41 |
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| Diluted weighted average shares |
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9,537,397 |
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9,804,880 |
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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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Three months ended March 31, |
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2003 |
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2002 |
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| Cash flows from operating activities: |
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| Net income |
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$ |
746,000 |
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$ |
3,965,000 |
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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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694,000 |
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880,000 |
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| Loss on extinguishment of debt - non cash |
199,000 |
— |
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| Equity income |
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(567,000 |
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(594,000 |
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| Minority interest in income of subsidiary |
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— |
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202,000 |
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| Gain on sale of stock of subsidiary |
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(3,514,000 |
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(8,822,000 |
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| Non-recurring Japan IPO expense |
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— |
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1,100,000 |
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| Valuation adjustment – warrants |
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(35,000 |
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480,000 |
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| Amortization of deferred compensation |
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253,000 |
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74,000 |
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| Change in assets and liabilities: |
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| Accounts receivable |
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516,000 |
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1,257,000 |
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| Contracts and other assets |
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(214,000 |
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183,000 |
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| Accounts payable |
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(339,000 |
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190,000 |
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| Accrued expenses and other liabilities |
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(380,000 |
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(507,000 |
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| Net cash used in operating activities |
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(2,641,000 |
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(1,592,000 |
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| Cash flows from investing activities: |
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| Purchase of contracts and other assets |
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— |
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(1,869,000 |
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| Settlements of notes receivable |
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1,990,000 |
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1,675,000 |
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| Purchases of notes receivable and redemption of joint venture partner in note receivable venture |
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(11,093,000 |
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(655,000 |
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| Purchases of and additions to real estate |
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(7,520,000 |
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(658,000 |
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| Distributions from joint ventures |
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1,500,000 |
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2,812,000 |
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| Contributions to joint ventures |
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(874,000 |
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(4,298,000 |
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| Proceeds from sale of investment in Kennedy-Wilson Japan |
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6,249,000 |
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18,718,000 |
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| Cash – restricted decrease |
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(917,000 |
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495,000 |
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| Net cash (used in) provided by investing activities |
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(10,665,000 |
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16,220,000 |
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| Cash flow from financing activities: |
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| Borrowings under notes payable |
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8,974,000 |
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1,043,000 |
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| Repayment of notes payable |
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(5,168,000 |
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(2,337,000 |
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| Joint venture financing |
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