Press Release
November 7, 2000
BEVERLY HILLS, CA -- Kennedy-Wilson, Inc. (Nasdaq: KWIC), an international real estate services and investment
company, reported today financial results for the quarter ended September 30, 2000.
William J. McMorrow, Chairman and Chief Executive Officer stated that ``We are pleased to report that Kennedy-Wilson
is progressing well in all aspects of our business. We achieved $76 million in revenue for the first three quarters
of 2000, a record for our company. Our property management and brokerage divisions both had record revenues by
a wide margin. Kennedy Wilson Japan is also having a record year and has now invested about $400 million on behalf
of our joint venture partners. Our residential division, in spite of having a slow third quarter, will also have
a very good year. Our $250 million KWI Property Fund I, L.P., which was only formed in August, has already acquired
two properties and has several others under review which are expected to close by year end.''
Total revenues for the third quarter ended September 30, 2000 were $15,522,000 compared to $32,535,000 for the
same period in 1999. Property management and leasing fees and commission income increased 10% and 19% respectively
in the third quarter of 2000 over the third quarter of 1999 as a result of continued expansion in both of these
core businesses. The decline in total consolidated revenue resulted from the high sales of residential real estate
in the third quarter of 1999, which was attributable to the sale of a $16 million company owned apartment building
in Los Angeles. The third quarter of 2000 included no revenue from the sale of residential real estate due to labor
shortages in the strong economy that delayed the completion of the Desert Princess project in Palm Desert, CA.
This profitable project is expected to be completed and closed out in the fourth quarter of 2000. In addition,
the third quarter of 2000 included no gain on sale of commercial properties. Several commercial properties are
under contract and are expected to close in the fourth quarter of 2000.
Total expenses declined 51% in the third quarter of 2000 compared to the same period in 1999. Compensation and
related expenses increased in the third quarter of 2000 compared to the same period in 1999 due to the acquisition
of two property management companies, as well as non-recurring severance expenses for departed employees. When
compared to the first and second quarter of 2000, compensation and related expenses have decreased 19% and 11%
respectively, as a result of our on-going program to more efficiently manage our company. General and administrative
expenses for the third quarter of 2000 increased compared to the same period in 1999 primarily as a result of the
same acquisitions. But when compared to the first quarter of 2000, general and administrative expenses have actually
declined by about 7%. The full benefit of the reductions in compensation and related expenses and general and administrative
expenses will occur in 2001. The decline in total expenses in the third quarter of 2000 compared to the third quarter
of 1999 included the reduced cost of residential real estate sold, which corresponds with the revenue decline discussed
above. Net income for the third quarter of 2000 was $948,000 or $0.10 per share diluted, versus $2,501,000 or $0.25
per share diluted in the same quarter of 1999.
Freeman A. Lyle, Executive Vice President and Chief Financial Officer commented that, ``Our record revenue through
the first three quarters of year 2000, underscores the success of our continued growth in real estate services.
In addition, the strategic expense reduction programs that we implemented this year are showing strong results
that are only beginning to be realized. From a balance sheet prospective, Kennedy-Wilson is in the strongest financial
position in the company's history. With the additional capital from the asset sales referred to above that are
expected in the fourth quarter, we will end the year with substantial financial resources to take full advantage
of all opportunities, including the continuation of our one million share stock buy-back program.''
Total revenue for the nine months ended September 30, 2000 increased 22% to a record $75,904,000 compared to $62,270,000
for the same period in 1999. The increase was due to increased property management and leasing fees and commission
income of 46% and 87% respectively, which resulted from our continued aggressive expansion in both of these core
businesses. As for expenses, if we use the third quarter 2000 compensation and related expenses and general and
administrative expenses as the actual quarterly ``run rate'', total expenses for the first three quarters of 2000
would have been approximately $2.7 million lower than reported. The Company continues to focus on the reduction
of corporate overhead expenses and cost reductions in the field offices as a result of consolidating back office
functions. For example, the number of employees in the company's information systems department have been reduced
from 18 to 8 in the last year. Also, as noted above, the full benefit of these cost reductions will not occur until
2001.
Pre-tax earnings were $5,481,000 for the first nine months of 2000 versus $6,782,000 for the same period in 1999.
Net income for the three quarters ended September 30, 2000 was $3,812,000 or $0.40 per share diluted compared with
$4,601,000 or $0.50 per share for the same period in 1999. There were approximately 700,000 more diluted weighted
average shares outstanding in the first three quarters of 2000 compared to the same period in 1999 due primarily
to the Company's sale of common stock and convertible debentures in the second quarter of 1999.
Founded in 1977, Kennedy-Wilson provides real estate property management and leasing services, investment sales
and marketing, construction management, development and acquisition, and technical consulting services worldwide
through its offices in Beverly Hills, New York, Chicago, Washington D.C., Dallas, Houston, Austin, Atlanta, Seattle,
Minneapolis, Tokyo and Hong Kong. As the premier U.S. based real estate services firm in Japan, Kennedy-Wilson
provides brokerage, management and investment services to Japanese and international investors from its five offices
throughout the country, including Tokyo, which serves as its national headquarters.
This release contains forward-looking statements as well as historical information. Statements of goals and strategies
and words such as ``plan'', ``believe'', ``anticipate'', ``expect'', ``objectives'', ``forecast'', and ``predict'',
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 release.
Kennedy-Wilson, Inc.
Consolidated Statements of Income
Unaudited
Nine Month Period Ended Three Month Period Ended
September 30, September 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
Revenues:
Property management
and leasing fees $31,050,000 $21,245,000 $9,413,000 $8,527,000
Commission income 11,370,000 6,082,000 3,944,000 3,314,000
Sales of residential
real estate 25,692,000 23,927,000 - 17,049,000
Equity in income of
investments with
related parties
and non-affiliates 2,691,000 1,801,000 686,000 747,000
Gain on sale of
commercial real
estate - 1,106,000 - -
Income on restructured
notes receivable 2,803,000 2,100,000 516,000 609,000
Rental income, net 77,000 4,769,000 - 1,653,000
Interest income and
other 2,221,000 1,240,000 963,000 636,000
---------- ---------- ---------- ----------
Total Revenue 75,904,000 62,270,000 15,522,000 32,535,000
---------- ---------- ---------- ----------
Operating Expenses:
Commissions and
marketing expenses 6,788,000 663,000 1,955,000 298,000
Cost of residential
real estate sold 22,855,000 22,349,000 - 15,822,000
Compensation and
related expenses 22,025,000 12,679,000 6,602,000 5,177,000
General and
administrative 12,697,000 7,963,000 4,058,000 2,815,000
Depreciation and
amortization 3,046,000 2,413,000 1,313,000 1,007,000
Interest expense 3,012,000 9,421,000 158,000 3,837,000
---------- ---------- ---------- ----------
Total Operating
Expenses 70,423,000 55,488,000 14,086,000 28,956,000
---------- ---------- ---------- ----------
Income Before Provision
for Income Taxes 5,481,000 6,782,000 1,436,000 3,579,000
Provision for
Income Taxes 1,669,000 2,181,000 488,000 1,078,000
---------- ---------- ---------- ----------
Net Income $ 3,812,000 $ 4,601,000 $ 948,000 $ 2,501,000
=========== =========== ========== ===========
Basic net income
per share $0.42 $0.58 $0.11 $0.28
Basic weighted
average shares 9,063,667 7,933,318 9,010,536 9,066,662
Diluted net income
per share $0.40 $0.50 $0.10 $0.25
Diluted weighted
average shares 10,202,068 9,521,312 10,154,688 10,393,787
Kennedy-Wilson Inc.
Consolidated Balance Sheets
September 30, December 31,
2000 1999
(Unaudited)
------------- -------------
Assets
Cash and cash equivalents $ 2,481,000 $ 5,243,000
Cash - restricted 21,000 2,101,000
Accounts receivable 9,742,000 8,534,000
Notes receivable 23,453,000 30,643,000
Real estate held for sale 25,749,000 25,733,000
Investments with related
parties and non-affiliates 36,808,000 23,484,000
Contracts, furniture, fixtures,
and equipment and other assets 17,995,000 16,237,000
Goodwill, net 23,685,000 23,175,000
------------- -------------
Total Assets $ 139,934,000 $135,150,000
============= =============
Liabilities and Stockholders' Equity
Liabilities
Accounts payable $ 1,496,000 $ 2,403,000
Accrued expenses and
other liabilities 14,505,000 20,602,000
Deferred income taxes 812,000 812,000
Notes payable 12,228,000 9,213,000
Mortgage notes payable 11,001,000 11,401,000
Borrowing under lines of credit 27,622,000 27,533,000
Senior debt 14,514,000 -
Subordinated debt 7,500,000 16,500,000
------------- -------------
Total liabilities 89,678,000 88,464,000
------------- -------------
Stockholders' Equity
Preferred stock, $.01 par value;
shares authorized 5,000,000;
none issued - -
Common stock $.01 par value;
shares authorized: 50,000,000;
shares issued 9,066,662 in 1999
and 8,961,718 in 2000 90,000 91,000
Additional paid-in capital 46,862,000 47,156,000
Accumulated retained
earnings (deficit) 3,450,000 (361,000)
Notes receivable from
stockholders (146,000) (200,000)
------------- -------------
Total stockholders' equity 50,256,000 46,686,000
------------- -------------
Total Liabilities and
Stockholders' Equity $ 139,934,000 $ 135,150,000
============= =============
-------------------------------------------------
Contact:
Kennedy-Wilson, Inc., Beverly Hills
Freeman A. Lyle, Executive Vice President,
Chief Financial Officer
John L. Collins, Vice President, Investor Relations
310/887-6400 (tel)
310/887-6454 (fax)
flyle@kennedywilson.com
www.kennedywilson.com