<PAGE> 1
THIS DOCUMENT IS A COPY OF THE FORM 10-Q FILED ON MAY 14, 1996 PURSUANT TO
A RULE 201 TEMPORARY HARDSHIP EXEMPTION
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
/ / 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 O-20418
KENNEDY-WILSON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4364537
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
530 WILSHIRE BOULEVARD, # 101 90401
SANTA MONICA, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(310) 314-8400
(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 OF THE PAST 90 DAYS.
YES /X/ NO / /
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;
1,343,099 SHARES OUTSTANDING AT APRIL 30, 1996.
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KENNEDY-WILSON, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 1996
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. - FINANCIAL INFORMATION..................................................................................... 3
ITEM 1. FINANCIAL STATEMENTS:
CONSOLIDATED CONDENSED BALANCE SHEETS AS OF MARCH 31, 1996 AND DECEMBER 31, 1995.................... 3
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995............................................................................. 4
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995............................................................................. 5
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS................................................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................ 7
PART II. - OTHER INFORMATION........................................................................................ 8
ITEM 1. LEGAL PROCEEDINGS.................................................................................... 8
ITEM 2. CHANGES IN SECURITIES................................................................................ 8
ITEM 3. DEFAULTS UPON SENIOR SECURITIES...................................................................... 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................................................. 8
ITEM 5. OTHER INFORMATION.................................................................................... 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..................................................................... 8
</TABLE>
2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
KENNEDY-WILSON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Cash $ 1,868,000 $ 2,192,000
Cash - restricted 534,000 179,000
Accounts and notes receivable 1,900,000 1,980,000
Real estate held for sale 29,914,000 31,919,000
Other assets 1,235,000 1,381,000
------------ ------------
$ 35,451,000 $ 37,651,000
============ ============
LIABILITIES:
Accounts payable $ 1,386,000 $ 1,084,000
Accrued salaries and commissions 97,000 477,000
Accrued expenses and other liabilities 1,890,000 2,583,000
Accrued expenses--related parties 167,000 97,000
Borrowings under lines of credit 554,000 775,000
Note payable--related parties -- 250,000
Mortgage notes payable 21,986,000 24,449,000
------------ ------------
Total Liabilities 26,080,000 29,715,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 5,000,000 shares
authorized, 1995 and 1994: none issued -- --
Common stock, $.01 par value; 20,000,000 shares
authorized, 1,400,599 shares issued and
outstanding at March 31, 1996 and
December 31, 1995, 14,000 14,000
Additional paid-in capital 22,730,000 22,730,000
Accumulated deficit (13,375,000) (14,799,000)
Accumulated translation adjustments 2,000 (9,000)
------------ ------------
Total stockholders' equity 9,371,000 7,936,000
$ 35,451,000 $ 37,651,000
============ ============
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE> 4
KENNEDY-WILSON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
REVENUES:
Commissions $ 1,420,000 $ 2,231,000
Commissions--related parties -- 31,000
Sales of real estate 5,977,000 1,655,000
Other income 1,055,000 14,000
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8,452,000 3,931,000
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OPERATING EXPENSES:
Commissions and marketing expenses 221,000 964,000
Cost of real estate sold 4,803,000 1,655,000
Cost of real estate sold - related parties 167,000 --
Compensation and related expenses 916,000 1,790,000
General and administrative 494,000 1,536,000
Depreciation and amortization 71,000 202,000
Interest expense 306,000 100,000
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6,978,000 6,247,000
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INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES 1,474,000 (2,316,000)
Provision for income taxes 50,000 20,000
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NET INCOME (LOSS) $ 1,424,000 $(2,336,000)
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Net income (loss) per common share $ 1.02 (1.66)
=========== ===========
Weighted average common shares outstanding 1,400,599 1,405,593
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE> 5
KENNEDY-WILSON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
1996 1995
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(UNAUDITED)
<S> <C> <C>
NET CASH PROVIDED BY (USED) IN OPERATING ACTIVITIES: $ 2,612,000 $ (675,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of furniture, fixtures and equipment (9,000) --
Investments in partnerships -- (167,000)
------------ ------------
Net cash used in investing activities (9,000) (167,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations (4,000) (32,000)
Issuance of mortgage notes payable 7,978,000 2,900,000
Repayment of mortgage notes payable (10,441,000) (4,326,000)
Repayment of notes payable (471,000) --
------------ ------------
Net cash used in financing activities (2,938,000) (1,458,000)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 11,000 (93,000)
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NET DECREASE IN CASH (324,000) (2,393,000)
CASH, beginning of period 2,192,000 5,599,000
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CASH, end of period $ 1,868,000 $ 3,206,000
============ ============
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE> 6
KENNEDY-WILSON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
NOTE 1 - FINANCIAL STATEMENT PRESENTATION
The above condensed financial statements have been prepared by
Kennedy-Wilson, Inc. a Delaware corporation, and subsidiaries (the Company)
without audit by independent public accountants, pursuant to the Rules and
Regulations of the Securities and Exchange Commission. The statements, in the
opinion of the Company, present fairly the financial position and results of
operations for the dates and periods indicated. The results of operations for
interim periods are not necessarily indicative of results to be expected for
full fiscal years. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the Rules and
Regulations of the Securities and Exchange Commission. The Company believes that
the disclosures contained in the condensed financial statements are adequate to
make the information presented not misleading. These condensed financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
Certain reclassifications have been made to prior year balances to
conform to the current year presentation. In addition, earnings per share have
been adjusted to give effect to the ten to one reverse stock split, which
transpired in November, 1995.
NOTE 2 - MORTGAGE NOTES PAYABLE
In February, 1996, two mortgage notes in the amounts of $600,000 and
$5,436,000 were repaid with the proceeds from a new loan in the amount of $6
million, which matures in 2003 and bears interest at a fixed rate of 7.9%. In
addition, during the three months ended March 31, 1996, approximately $4.4
million of mortgage notes were paid down with the proceeds from sales of real
estate held for sale. In addition, mortgage notes were increased by
approximately $2 million to fund construction improvements to real estate held
for sale.
In March 1996, the Company entered into a new loan agreement which will
provide the Company with a $6.0 million credit facility (the "facility") which
includes up to $5.0 million in an acquisition facility and up to $1.0 million in
a working capital facility. The facility is to be secured by existing real
estate owned by the Company and the actual availability under the facility is to
be limited based on the equity in such real estate. The Company believes that
the availability will be the maximum of $6.0 million. The facility will bear
interest at the prime rate plus 1%. The working capital facility will be due in
full June 1997 and the acquisition facility will be due 18 months from the date
of each advance. As of March 31, 1996, none of the facility was drawn.
NOTE 3 - SUBSEQUENT EVENTS
Subsequent to March 31, 1996, the Company refinanced a mortgage note
payable in the amount of $5,100,000 with a new mortgage note in the amount of
$5,880,000, with a fixed interest rate of 8.875%, due in April 2001.
Also subsequent to the close of the quarter ended March 31, 1996, the
Company purchased 57,500 shares of its outstanding stock in two private
transactions. One was for $40,000 for 7,500 shares. The other was for $285,000
for 50,000 shares from a former officer of the Company. Both transactions were
approved by the Board of Directors.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Revenue for the three months ended March 31, 1996 increased 115%
compared to the three months ended March 31, 1995 due primarily to increased
sales of real estate held for sale, consisting mostly of condominium units in
Hawaii and Los Angeles. Commission revenue declined 37% due to reduced auction
activity, offset by increased single asset brokerage commissions. Other income
includes net rental income and proceeds from investments in notes receivables.
Operating expenses increased 12% for the quarter ended March 31, 1996
compared to the same period in 1995. The change consisted primarily of a 190%
increase in costs of real estate sold, offset by a 49% decline in compensation
and related expenses, and a 68% decline in general and administrative expenses.
Reduced expenses reflect the reduced cost structure of the Company resulting
from the restructuring of operating activities and the sale of subsidiaries that
occurred in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that its cash balance of approximately $2.4
million at March 31, 1996, combined with cash generated from operations, will
provide funds sufficient to meet its present and reasonably foreseeable
obligations. The Company's liquidity has been significantly enhanced by the
reduced cost structure resulting from the restructuring of the Company that was
implemented in 1995. In addition, the new credit facility discussed in Note 2
includes a $1 million working capital component, none of which was used at March
31, 1996.
The Company's activities as a principal in real estate transactions
requires larger capital resources than has been required by its marketing and
brokerage operations. As a result, the Company may periodically need to obtain
third party financing for such transactions. The Company has been successful in
obtaining such financing as needed and at competitive terms. In addition, the
new $5 million acquisition facility discussed in Note 2 has increased the
Company's ability to respond to strategic opportunities. None of this
acquisition facility was used at March 31, 1996.
7
<PAGE> 8
PART II - OTHER INFORMATION
Items 1, 2, 3, 4 and 5 are omitted as not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None being filed herewith.
(b) Reports on Form 8-K
The registrant did not file any Reports on Form 8-K during the
quarter ended March 31, 1996.
SIGNATURE
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.
Date: May 14, 1996 KENNEDY-WILSON, INC.
--------------------------------------------------
Registrant
/s/ Freeman A. Lyle
--------------------------------------------------
Freeman A. Lyle
Executive Vice President & Chief Financial Officer
(Principal Financial and Accounting Officer)
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND
THE NOTES THERETO.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,402,000
<SECURITIES> 0
<RECEIVABLES> 1,900,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 31,149,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 35,451,000
<CURRENT-LIABILITIES> 3,540,000
<BONDS> 22,540,000
0
0
<COMMON> 14,000
<OTHER-SE> 9,357,000
<TOTAL-LIABILITY-AND-EQUITY> 35,451,000
<SALES> 8,452,000
<TOTAL-REVENUES> 0
<CGS> 5,191,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,481,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 306,000
<INCOME-PRETAX> 1,474,000
<INCOME-TAX> 50,000
<INCOME-CONTINUING> 1,424,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,424,000
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
</TABLE>
