ITASCA, IL, May 30, 2019 /CNW/ - (NYSE: KFS) Kingsway
Financial Services Inc. ("Kingsway" or the "Company") today
provided a further update related to the delayed filing of its
Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
The Company originally issued a press release dated March 14, 2019 reporting certain unaudited 2018
fourth quarter and year-end financial results. The Company
subsequently issued a press release dated April 16, 2019 announcing that its outside
independent auditors required more time to complete their work and
stating that certain of its limited liability investments,
previously accounted for under the equity method of accounting,
will now be accounted for on a consolidated basis. In its
April 16, 2019 press release, the
Company described, among other things, adjustments expected to
increase shareholders' equity by approximately $4 million; improve net loss by approximately
$1.2 million; and improve net loss
attributable to common shareholders by approximately $0.8 million. The Company's estimates of
those adjustments have not changed.
Since its April 16, 2019 press
release, the Company has identified the following two additional
adjustments related to the consolidation of certain of its limited
liability investments, which it intends to reflect in its 2018 Form
10-K, compared to the unaudited 2018 fourth quarter and year-end
financial results released on March
14, 2019. Kingsway expects to reduce by $0.3 million, in order to reflect a fair value
adjustment, the carrying value related to one of the underlying
equity investments held by one of the limited liability companies
being consolidated. Kingsway also expects to reclassify
$0.3 million related to a fair value
adjustment to another one of the underlying equity investments held
by one of the limited liability companies being consolidated.
This item was originally recorded in other comprehensive income by
the limited liability company but will now be recorded as a
reduction of investment income. The Company anticipates that
the effect of these two additional adjustments will be to reduce
investment income by $0.6 million and
reduce shareholders' equity by $0.3
million.
The Company also identified an adjustment related to the
accounting for its Class A preferred stock and Series C warrants
issued February 3, 2014.
Kingsway has determined that some of the proceeds from that capital
raise should have been allocated to the Series C warrants and to a
beneficial conversion feature related to the embedded conversion
option in the Class A preferred stock. The allocated proceeds
should have been recorded as additional paid in capital in
shareholders' equity with an offsetting discount to the carrying
value of the Class A preferred stock, which discount would then
have been amortized into shareholders' equity through the Class A
preferred stock mandatory redemption date of April 1, 2021. As a result, Kingsway
expects the effect on the Company's consolidated balance sheet at
December 31, 2018 from this
adjustment will be an increase in shareholders' equity and an
offsetting decrease to the carrying value of the Class A preferred
stock compared to the unaudited 2018 fourth quarter and year-end
financial results released on March
14, 2019. Kingsway expects the effect on the Company's
consolidated statement of operations for the year ended
December 31, 2018 as a result of this
adjustment to the Class A preferred stock carrying value will be
negligible compared to the unaudited 2018 fourth quarter and
year-end financial results released on March
14, 2019.
The Company notes that all of these adjustments represent
non-recurring, non-cash adjustments and that the adjustments are
unrelated to its operating segments with the exception of the
$0.2 million revenue reclassification
in its Extended Warranty segment between the years ended
December 31, 2018 and December 31, 2017 that was described in its
April 16, 2019 press release.
Kingsway's auditors have not completed their audit procedures,
so, until such time that the Company's auditors have completed
their audit procedures, there remains the possibility of additional
adjustments to the financial results released by Kingsway on
March 14, 2019. Kingsway will
continue to work with its auditors with the objective of filing its
Annual Report on Form 10-K for the fiscal year ended December 31, 2018 as soon as practicable.
About the Company
Kingsway is a holding company that
owns or controls subsidiaries primarily in the extended warranty,
asset management and real estate industries. The common
shares of Kingsway are listed on the New York Stock Exchange under
the trading symbol "KFS."
Forward-Looking Statements
This press release includes
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 that are not historical facts, and involve
risks and uncertainties that could cause actual results to differ
materially from those expected and projected. Words such as
"expects," "believes," "anticipates," "intends," "estimates,"
"seeks" and variations and similar words and expressions are
intended to identify such forward-looking statements. Such
forward-looking statements relate to future events or future
performance, but reflect Kingsway management's current beliefs,
based on information currently available. These statements
include the Company's expectations as to the timing and outcome of
its audit and the filing of its 2018 Form 10-K. A number of
factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in
the forward-looking statements. For information identifying
important factors that could cause actual results to differ
materially from those anticipated in the forward-looking
statements, please refer to the section entitled "Risk Factors" in
the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 2018. Except as
expressly required by applicable securities law, the Company
disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information,
future events or otherwise.
Additional Information
Additional information about
Kingsway, including a copy of its 2017 Annual Report and filings on
Forms 10-Q and 8-K, can be accessed on the Canadian Securities
Administrators' website at www.sedar.com, on the EDGAR section of
the U.S. Securities and Exchange Commission's website at
www.sec.gov or through the Company's website at
www.kingsway-financial.com.
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SOURCE Kingsway Financial Services Inc.