Business & Finance
Business and Finance
Business and Finance
Wed, November 10, 2010
Tue, November 9, 2010 Kennedy Wilson Reports Third Quarter 2010 and YTD Earnings
BEVERLY HILLS, Calif.--([ BUSINESS WIRE ])--Kennedy-Wilson Holdings, Inc. (NYSE: KW) (aKennedy Wilsona or the aCompanya), an international real estate investment and services company, today reported a third quarter 2010 net income adjusted for the amortization of non-cash compensation and loss from non-recurring extinguishment of corporate debt of $0.1 million (or $0.00 per basic share and diluted share). The Companya™s net loss attributable to Kennedy-Wilson Holdings, Inc. common shareholders was $6.7 million (or $0.17 per basic and diluted share). The Companya™s earnings before interest, taxes and depreciation (aEBITDAa) for the third quarter were $13.6 million (or $0.35 per basic share, $0.27 per diluted share).
"Our success is due largely to the hard work and dedication of the many talented people at the Company combined with the financial support that we have received from our partners and investors."
Kennedy Wilsona™s YTD net income adjusted for the amortization of merger-related and non-cash compensation and loss from non-recurring extinguishment of corporate debt was $11.6 million (or $0.30 per basic share, $0.25 per diluted share). The Companya™s YTD net loss attributable to Kennedy-Wilson Holdings, Inc. common shareholders was $1.4 million (or $0.03 per basic and diluted share). The Companya™s EBITDA YTD was $44.1 million (or $1.13 per basic share, $0.96 per diluted share).
The Company is approaching the one year anniversary of its listing on the AMEX, which occurred on November 13, 2009. Subsequently, in March of 2010 the Company moved to the NYSE. Below are some key achievements since Kennedy Wilsona™s initial listing:
Company Highlights Since Public Listing
- Strengthened balance sheet
- Book equity increased by 180% to $310 million at 9/30/10 from $111 million at 9/30/09.
- Consolidated cash position increased by 392% to $51 million at 9/30/10 from $10 million at 9/30/09.
- Investment account (Kennedy Wilsona™s share of equity invested in real estate and loans) increased by 80% to $337 million at 9/30/10 from $187 million at 9/30/09.
- Line of credit facility increased to $75 million at 9/30/10 from $30 million at 9/30/09.
- Debt to book equity decreased to 0.5x at 9/30/10 from 1.3x at 9/30/09, with a long term strategy of maintaining modest leverage
- Repurchased 19.2 million warrants at an average purchase price of $0.86, reducing total warrants outstanding to 11.1 million.
- Increase in recurring income
- Added approximately $45 million of annual run rate EBITDA through acquisition activities and increased service revenues.
- 3Q annual run rate management and leasing fees increased by 35% to $25 million at 9/30/10 from $18 million at 9/30/09 driven primarily by increased asset management fees earned through the Companya™s acquisition activities.
- 3Q annual run rate commissions increased by 81% to $16 million at 9/30/10 from $9 million at 9/30/09 driven primarily by increased acquisition fees and auction commissions.
- Capital raising success
- Raised $221 million of equity for Kennedy Wilson and over $1 billion of third-party equity (including commitments) for the Companya™s acquisition program, including $382 million from Fairfax Financial Holdings Limited.
- Closed KW Property Fund III at $125 million, adding new investors such as the Tennessee Valley Authority, the Illinois Student Assistance Commission and Wake Forest University.
- Robust acquisition program
- Closed over $2 billion of opportunistic real estate and debt acquisitions through direct and joint venture investments including approximately $875 million in the third quarter.
- Acquisitions were all in Kennedy Wilsona™s target markets and consisted primarily of multifamily assets and debt secured by real estate.
- Total multifamily units owned directly and through joint ventures on the West Coast of the U.S. and Japan are now in excess of 10,000.
- Increased investment in Japanese subsidiary to 41.5% through acquisition; subsidiarya™s portfolio is currently 95% occupied and has a currency gain in excess of $50 million.
- Accessed debt financing
- Took advantage of the historically low interest rate environment to reduce cost of debt at corporate and joint venture levels.
- Borrowed in excess of $750 million of joint venture debt through acquisition financing and strategic property refinancing.
- In the third quarter, refinanced approximately $235 million of joint venture debt, lowering interest rates on the related properties to a weighted average rate of 3.8% and decreasing interest payments by over $4 million per year.
- Expansion of third-party service business
- Auctioned and conventionally sold over 40 projects in CA, OR, WA, TX, NV, FL, CO, NC and HI.
- Conducted commercial auctions, signaling the transition of the current real estate cycle.
- Added numerous new accounts to the Companya™s property management business through organic growth and the acquisition of Sachse Real Estate.
- Sourced several key acquisitions for the investment division through relationships with bank clients.
aWe are proud of the results achieved over the past 12 months,a commented William McMorrow, chairman and CEO of Kennedy Wilson. aOur success is due largely to the hard work and dedication of the many talented people at the Company combined with the financial support that we have received from our partners and investors.a
Conference Call and Webcast Details
The Company will hold a live conference call and webcast to discuss results at 7:00 a.m. Pacific Time / 10:00 a.m. Eastern Time on Wednesday, November 10th.
The direct dial-in number for the conference call is (877) 536-5544 for callers from the U.S. and Canada and (702) 894-2274 for international callers. A replay of the call will be available for one week beginning two hours after the live call and can be accessed at (800) 642-1687 for callers from the U.S. and Canada and (706) 645-9291 for international callers. The access code for the live call and the replay is 22366668.
The webcast will be available at: [ http://us.meeting-stream.com/kennedywilson_111010 ]. A replay of the webcast will be available 24 hours after the original webcast on the Companya™s web site for 90 days.
About Kennedy Wilson
Founded in 1977, Kennedy Wilson is an international real estate investment and services company headquartered in Beverly Hills, CA with 21 offices in the U.S. and Japan. The company offers a comprehensive array of real estate services including property and asset management, brokerage and auction services, and construction and trust management. Through its fund management and separate account businesses, Kennedy Wilson is a strategic investor and manager of real estate investments in the U.S. and Japan. For further information on Kennedy Wilson, please visit [ www.kennedywilson.com ].
Forward-Looking Statements
This news release contains forward-looking statements as well as historical information. Statements of goals and strategies and words such as aplan,a abelieve,a aanticipate,a aexpect,a aobjectives,a aforecast,a apredicta and other similar words are intended to identify forward-looking statements. These forward-looking statements are included in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and involve risks, uncertainties and other factors that may cause the Company's actual results, performance, or financial condition to be materially different from any results, performance, or financial condition suggested by the statements in this news release. These risks and uncertainties may include the risk factors described in the Companya™s filings with the Securities and Exchange Commission (the aSECa), including in the Item1A. aRisk Factorsa section of the Companya™s annual report on Form 10-K for the year ended December31, 2009. Any such forward-looking statements, whether made in this news release or elsewhere, should be considered in the context of the various disclosures made by the Company about its business including, without limitation, the risk factors discussed in the Companya™s filings with the SEC. Except as required under the federal securities laws and the rules and regulations of the SEC, the Company does not have any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events, changes in assumptions, or otherwise.
Non-GAAP Financial Information
In addition to the results reported in accordance with U.S. generally accepted accounting principles (GAAP) included within this press release, Kennedy Wilson has provided certain information, which includes non-GAAP financial measures (proforma statement of income, adjusted earnings per share and EBITDA). Such information is reconciled to its closest GAAP measure in accordance with the SEC rules and is included in the attached supplemental data. Management believes that these non-GAAP financial measures are useful to both management and the Companya™s shareholders in their analysis of the business and operating performance of the Company. Management also uses this information for operational planning and decision-making purposes. Non-GAAP financial measures are not and should not be considered a substitute for any GAAP measures. Additionally, non-GAAP financial measures as presented by Kennedy Wilson may not be comparable to similarly titled measures reported by other companies.
Kennedy-Wilson Holdings, Inc. Consolidated Balance Sheets (Unaudited) | |||||||||||||||
September 30, | December 31, | ||||||||||||||
2010 | 2009 | ||||||||||||||
| Assets | |||||||||||||||
| Cash and cash equivalents | $ | 50,713,000 | $ | 57,784,000 | |||||||||||
| Accounts receivable | 2,376,000 | 887,000 | |||||||||||||
| Accounts receivable - related parties | 7,232,000 | 4,278,000 | |||||||||||||
| Income tax receivable | - | 6,848,000 | |||||||||||||
| Notes receivable | 27,661,000 | 541,000 | |||||||||||||
| Notes receivable - related parties | 1,898,000 | 6,644,000 | |||||||||||||
| Real estate, net | 130,077,000 | 40,581,000 | |||||||||||||
| Real estate available for sale | - | 2,472,000 | |||||||||||||
Investments in joint ventures ($23,710,000 and $19,612,000 carried at fair value as of September 30, 2010 and December 31, 2009, respectively) | 242,298,000 | 185,252,000 | |||||||||||||
| Investments in loan pool participation | 15,947,000 | - | |||||||||||||
| Goodwill and other assets | 35,132,000 | 30,970,000 | |||||||||||||
| Total assets | $ | 513,334,000 | $ | 336,257,000 | |||||||||||
| Liabilities and equity | |||||||||||||||
| Liabilities | |||||||||||||||
| Accounts payable and other liabilities | $ | 41,645,000 | $ | 29,348,000 | |||||||||||
| Line of credit, notes payable, mortgages and other long-term debt | 161,985,000 | 127,573,000 | |||||||||||||
| Total liabilities | $ | 203,630,000 | $ | 156,921,000 | |||||||||||
| Equity | |||||||||||||||
Cumulative Preferred stock, $0.0001 par value, 1,000,000 shares authorized, $1,000 per share liquidation preference: | |||||||||||||||
6.00% Series A, 100,000 and 0 shares issued and outstanding as of September 30, 2010 and December 31, 2009, respectively, mandatorily convertible on May 19, 2015 | - | - | |||||||||||||
6.452% Series B, 32,550 and 0 shares issued and outstanding as of September 30, 2010 and December 31, 2009, respectively, mandatorily convertible on November 3, 2018 | - | - | |||||||||||||
Common stock, $0.0001 par value, 125,000,000 shares authorized, 41,295,158 and 41,177,658 shares issued as of September 30, 2010 and December 31, 2009, respectively, 40,295,158 and 41,177,658 outstanding as of September 30, 2010 and December 31, 2009, respectively | 4,000 | 4,000 | |||||||||||||
| Additional paid-in capital | 285,458,000 | 155,878,000 | |||||||||||||
| Retained earnings | 17,469,000 | 18,829,000 | |||||||||||||
| Accumulated other comprehensive income | 7,701,000 | 2,603,000 | |||||||||||||
Shares held in treasury at cost, $0.0001 par value, 1,000,000 and 0 held at September 30, 2010 and December 31, 2009, respectively | (10,180,000 | ) | - | ||||||||||||
| Total Kennedy-Wilson Holdings, Inc. shareholders' equity | 300,452,000 | 177,314,000 | |||||||||||||
| Non-controlling interests | 9,252,000 | 2,022,000 | |||||||||||||
| Total equity | 309,704,000 | 179,336,000 | |||||||||||||
| Total liabilities and equity | $ | 513,334,000 | $ | 336,257,000 | |||||||||||
Kennedy-Wilson Holdings, Inc. Statement of Income and Proforma Statement of Income (Unaudited) | ||||||||||||||||||||||||||||||||||||
| Three months ended September 30, 2010 | Nine months ended September 30, 2010 | |||||||||||||||||||||||||||||||||||
| Pro Rata | Pro Rata | |||||||||||||||||||||||||||||||||||
| Consolidated | Unconsolidated | Proforma | Consolidated | Unconsolidated | Proforma | |||||||||||||||||||||||||||||||
| GAAP | Investments | Total | GAAP | Investments | Total | |||||||||||||||||||||||||||||||
| Management and leasing fees and commissions | $ | 10,136,000 | $ | $ | 10,136,000 | $ | 24,774,000 | $ | $ | 24,774,000 | ||||||||||||||||||||||||||
| Sales of real estate | 1,173,000 | 1,173,000 | 3,937,000 | 1,422,000 | 5,359,000 | |||||||||||||||||||||||||||||||
| Rental income and other income | 1,637,000 | 15,205,000 | 16,842,000 | 2,934,000 | 27,590,000 | 30,524,000 | ||||||||||||||||||||||||||||||
| Interest income | 4,932,000 | 4,932,000 | 11,019,000 | 11,019,000 | ||||||||||||||||||||||||||||||||
| Total revenue | 11,773,000 | 21,310,000 | 33,083,000 | 31,645,000 | 40,031,000 | 71,676,000 | ||||||||||||||||||||||||||||||
| Commission, marketing, compensation and related expenses | 12,677,000 | 12,677,000 | 31,432,000 | 31,432,000 | ||||||||||||||||||||||||||||||||
| Cost of real estate sold | 874,000 | 874,000 | 2,714,000 | 1,049,000 | 3,763,000 | |||||||||||||||||||||||||||||||
| General, administrative, depreciation and amortization | 4,073,000 | 3,049,000 | 7,122,000 | 9,460,000 | 7,203,000 | 16,663,000 | ||||||||||||||||||||||||||||||
| Rental operating expense | 897,000 | 3,671,000 | 4,568,000 | 1,421,000 | 9,641,000 | 11,062,000 | ||||||||||||||||||||||||||||||
Total operating expenses | 17,647,000 | 7,594,000 | 25,241,000 | 45,027,000 | 17,893,000 | 62,920,000 | ||||||||||||||||||||||||||||||
| Equity in joint venture income | 5,191,000 | (5,191,000 | ) | 5,162,000 | (5,162,000 | ) | ||||||||||||||||||||||||||||||
| Income from loan pool participation | 3,199,000 | (3,199,000 | ) | 6,335,000 | (6,335,000 | ) | ||||||||||||||||||||||||||||||
| Interest on note investments | 1,010,000 | (1,010,000 | ) | 1,615,000 | (1,615,000 | ) | ||||||||||||||||||||||||||||||
| Total operating income (loss) | 3,526,000 | 4,316,000 | 7,842,000 | (270,000 | ) | 9,026,000 | 8,756,000 | |||||||||||||||||||||||||||||
| Non-operating income (expense) | ||||||||||||||||||||||||||||||||||||
| Interest income | 144,000 | (144,000 | ) | 645,000 | (645,000 | ) | ||||||||||||||||||||||||||||||
| Remeasurement gain | 2,108,000 | 2,108,000 | ||||||||||||||||||||||||||||||||||
| Gain on extinguishment of debt | 16,670,000 | 16,670,000 | ||||||||||||||||||||||||||||||||||
| Interest expense | (2,198,000 | ) | (4,172,000 | ) | (6,370,000 | ) | (6,492,000 | ) | (8,381,000 | ) | (14,873,000 | ) | ||||||||||||||||||||||||
| Loss on extinguishment of debt | (4,788,000 | ) | (4,788,000 | ) | (4,788,000 | ) | (4,788,000 | ) | ||||||||||||||||||||||||||||
| Income (loss) before income taxes | (3,316,000 | ) | (3,316,000 | ) | 7,873,000 | 7,873,000 | ||||||||||||||||||||||||||||||
| (Provision for) benefit from income taxes | (383,000 | ) | (383,000 | ) | (4,335,000 | ) | (4,335,000 | ) | ||||||||||||||||||||||||||||
| Net income (loss) | (3,699,000 | ) | (3,699,000 | ) | 3,538,000 | 3,538,000 | ||||||||||||||||||||||||||||||
| Net income attributable to the non-controlling interests | (1,215,000 | ) | (1,215,000 | ) | (2,374,000 | ) | (2,374,000 | ) | ||||||||||||||||||||||||||||
| Preferred stock dividend | (1,804,000 | ) | (1,804,000 | ) | (2,524,000 | ) | (2,524,000 | ) | ||||||||||||||||||||||||||||
Net income attributable to Kennedy-Wilson | ||||||||||||||||||||||||||||||||||||
| Holdings, Inc. common shareholders | (6,718,000 | ) | (6,718,000 | ) | (1,360,000 | ) | (1,360,000 | ) | ||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | 2,912,000 | 2,912,000 | 5,098,000 | 5,098,000 | ||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | $ | (3,806,000 | ) | $ | $ | (3,806,000 | ) | $ | 3,738,000 | $ | $ | 3,738,000 | ||||||||||||||||||||||||
Kennedy-Wilson Holdings, Inc. Earnings Per Share and Adjusted Earnings Per Share (Unaudited) | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
| Net income (loss) attributable to Kennedy Wilson common shareholders | $ | (6,718,000 | ) | $ | (1,360,000 | ) | ||||||||||
| Basic shares outstanding | 38,961,822 | 39,062,570 | ||||||||||||||
| GAAP earnings per share | $ | (0.17 | ) | $ | (0.03 | ) | ||||||||||
| Net income (loss) attributable to Kennedy Wilson common shareholders | (6,718,000 | ) | (1,360,000 | ) | ||||||||||||
| Non-GAAP adjustments: | ||||||||||||||||
| Plus: Amortization of merger-related and non-cash compensation | 2,060,000 | 8,201,000 | ||||||||||||||
| Plus: Non-recurring loss from extinguishment of corporate debt | 4,788,000 | 4,788,000 | ||||||||||||||
| Adjusted net income | 130,000 | 11,629,000 | ||||||||||||||
| Non-GAAP adjusted basic earnings per share | $ | 0.00 | $ | 0.30 | ||||||||||||
| Diluted shares outstanding | 49,466,817 | 45,785,551 | ||||||||||||||
| Non-GAAP adjusted diluted earnings per share | $ | 0.00 | $ | 0.25 | ||||||||||||
Kennedy-Wilson Holdings, Inc. Proforma EBITDA (Unaudited) | ||||||||||||||||||||||||||||||||
| Three months ended September 30, 2010 | Nine months ended September 30, 2010 | |||||||||||||||||||||||||||||||
Pro Rata | Pro Rata | |||||||||||||||||||||||||||||||
| Consolidated | Unconsolidated | Proforma | Consolidated | Unconsolidated | Proforma | |||||||||||||||||||||||||||
| GAAP | Investments | Total | GAAP | Investments | Total | |||||||||||||||||||||||||||
| EBITDA: | ||||||||||||||||||||||||||||||||
| Net income (loss) | $ | (3,699,000 | ) | $ | $ | (3,699,000 | ) | $ | 5,579,000 | $ | $ | 5,579,000 | ||||||||||||||||||||
| Add back: | ||||||||||||||||||||||||||||||||
| Interest expense | 2,198,000 | 4,172,000 | 6,370,000 | 6,492,000 | 8,381,000 | 14,873,000 | ||||||||||||||||||||||||||
| Non-recurring loss from extinguishment of corporate debt | 4,788,000 | 4,788,000 | 4,788,000 | 4,788,000 | ||||||||||||||||||||||||||||
| Income taxes | 383,000 | 383,000 | 4,335,000 | 4,335,000 | ||||||||||||||||||||||||||||
| Depreciation and amortization | 616,000 | 3,049,000 | 3,665,000 | 1,197,000 | 7,203,000 | 8,400,000 | ||||||||||||||||||||||||||
| Amortization of merger-related and non-cash compensation | 2,060,000 | 2,060,000 | 8,201,000 | 8,201,000 | ||||||||||||||||||||||||||||
| Proforma EBITDA | 13,567,000 | 44,135,000 | ||||||||||||||||||||||||||||||
Basic shares | 38,961,822 | 39,062,570 | ||||||||||||||||||||||||||||||
Diluted shares | 49,466,817 | 45,785,551 | ||||||||||||||||||||||||||||||
Proforma EBITDA | $ | 0.35 | $ | 1.13 | ||||||||||||||||||||||||||||
Proforma EBITDA | $ | 0.27 | $ | 0.96 | ||||||||||||||||||||||||||||
