ITASCA, Ill., May 12, 2021 /PRNewswire/ - (NYSE: KFS) Kingsway
Financial Services Inc. ("Kingsway" or the "Company") today
announced its operating results for the three months ended
March 31, 2021, which includes the
following highlights:
- Net income was $0.9 million
for the three months ended March
31, 2021, compared to a net loss of
($0.4) million for the same period in
2020;
- Non-GAAP adjusted income was $4.3
million for the three months ended March 31, 2021, compared to Non-GAAP adjusted
loss of ($1.1) million for the same
period in 2020;
- Extended Warranty operating income increased to $5.3 million for the three months ended
March 31, 2021 compared to
$0.9 million for the same period in
2020, while non-GAAP adjusted EBITDA increased to $5.4 million for the three months ended
March 31, 2021, compared to
$1.2 million for the same
period for 2019.
- The results above are inclusive of a benefit from loan
forgiveness under the Paycheck Protection Program ("PPP"), as
described more fully below.
"The three months ended March 31,
2021 include a full quarter of PWI results for the first
time since we acquired it in December
2020," said JT Fitzgerald, Kingsway CEO. He continued,
"while early, we are very pleased with the results Edmund and his
leadership team have delivered to date. We are also pleased
with the solid results delivered by Kingsway's other extended
warranty businesses as they continued to navigate an uncertain
environment."
Non-GAAP Adjusted (Loss) Income
For the three months ended March 31,
2021, non-GAAP adjusted (loss) income improved from a loss
of ($1.1) million in 2020 to income
of $4.3 million in 2021.
Included in 2021 is a benefit from the PPP loan forgiveness of
$2.5 million and three months of PWI
results.
Reconciliations of net (loss) income to non-GAAP adjusted (loss)
income are presented in the attached schedules.
Extended Warranty
The Extended Warranty service fee and commission revenue
increased 66% (or $7.4 million) to
$18.6 million for the three months
ended March 31, 2021 compared with $11.2 million for the three months ended
March 31, 2020. The increase is primarily due to the
inclusion of PWI ($7.4 million) for
the first quarter of 2021 following its acquisition effective
December 1, 2020.
The Extended Warranty operating income was $5.3 million for the three months ended
March 31, 2021 compared with $0.9
million for the three months ended March 31,
2020. The increase in operating income is primarily due to
the following:
- $2.2 million of PPP loan
forgiveness related to Extended Warranty companies included in
2021;
- $1.1 million due to the inclusion
of PWI in 2021 following its acquisition effective December 1, 2020;
- A $0.4 million increase at IWS to
$0.8 million for the three months
ended March 31, 2021, primarily due to a decrease in claims
authorized on vehicle service agreements and lower general and
administrative expenses that was partially offset by a slight
decrease in revenue;
- A $0.3 million increase at
Trinity to $0.3 million for the three
months ended March 31, 2021, driven by increased revenues in
its equipment breakdown and maintenance support services, as well
as increased margin on the extended warranty services product,
partially offset by a related increase in cost of services sold,
compared to the same period in 2020;
- A $0.2 million increase at
Geminus for the three months ended March 31, 2021 to
$0.5 million, primarily due to lower
general and administrative expenses that was partially offset by a
slight decrease in revenue compared with the three months ended
March 31, 2020; and
- A $0.2 million increase at PWSC
to $0.4 million for the three months
ended March 31, 2021, primarily due to a slight increase in
revenue and lower general and administrative expenses.
Extended Warranty Non-GAAP adjusted EBITDA increased by
$4.2 million to $5.4 million for the three months ended
March 31, 2021, compared with
$1.2 million for the same period in
2020, primarily due to the increase in Extended Warranty operating
income as explained above.
Reconciliations of operating income to Extended Warranty
Non-GAAP adjusted EBITDA are presented in the attached
schedules.
Leased Real Estate
The Leased Real Estate contractually-fixed rental income was
$3.3 million for the three months
ended March 31, 2021 and
2020.
Leased Real Estate operating income was $1.3 million for the three months ended
March 31, 2021 compared with $0.6
million for the three months ended March 31,
2020. The increase was primarily due to a $0.6 million benefit recorded in 2021 related to
the finalization of management fees and legal expenses associated
with the settlement of CMC litigation. Leased Real Estate
operating income includes interest expense of $1.5 million for each of the quarters ended
March 31, 2021 and March 31, 2020. See Note 27,
"Commitments and Contingent Liabilities", to our 2020 Annual Report
on Form 10-K, for further information on the settlement.
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."
Non U.S. GAAP Financial Measure
Company's operating results and enhances the overall ability to
assess the Company's financial performance. The Company uses
non-GAAP adjusted net earnings (loss) and non-GAAP adjusted EBITDA,
together with other measures of performance under GAAP, to compare
the relative performance of operations in planning, budgeting and
reviewing the performance of its business. Non-GAAP adjusted net
earnings (loss) and non-GAAP adjusted EBITDA allow investors to
make a more meaningful comparison between the Company's core
business operating results over different periods of time. The
Company believes that non-GAAP adjusted net earnings (loss) and
non-GAAP adjusted EBITDA, when viewed with the Company's results
under GAAP and the accompanying reconciliations, provide useful
information about the Company's business without regard to
potential distortions. By eliminating potential differences in
results of operations between periods caused by the factors listed
in the attached schedules, the Company believes that non-GAAP
adjusted net earnings (loss) and non-GAAP adjusted EBITDA can
provide useful additional basis for comparing the current
performance of the underlying operations being evaluated.
Investors should consider these non GAAP measures in addition to,
not as a substitute for or as superior to, financial reporting
measures prepared in accordance with GAAP. Investors are encouraged
to review the Company's financial results prepared in accordance
with GAAP to understand the Company's performance taking into
account all relevant factors.
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; however, the absence of any such words does not mean
that a statement is a not a forward-looking statement. Such
forward-looking statements relate to future events or future
performance, but reflect Kingsway management's current beliefs,
based on information currently available. 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, including as a result of the COVID 19
pandemic. 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 2020 Annual Report on Form
10-K and subsequent Form 10-Qs and Form 8-Ks filed with the
Securities and Exchange Commission. 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
Annual Reports can be accessed on the EDGAR section of the U.S.
Securities and Exchange Commission's website at
www.sec.gov, on the Canadian Securities Administrators'
website at www.sedar.com, or through the Company's website at
www.kingsway-financial.com.
Kingsway Financial Services Inc.
Consolidated Balance Sheets
(in thousands, except share data)
|
|
March 31,
2021
|
|
December 31,
2020
|
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
|
Investments:
|
|
|
|
|
Fixed maturities, at
fair value (amortized cost of $19,699 and $20,488,
respectively)
|
|
$
|
19,864
|
|
|
$
|
20,716
|
|
Equity investments, at
fair value (cost of $1,147 and $1,157, respectively)
|
|
270
|
|
|
444
|
|
Limited liability
investments
|
|
3,683
|
|
|
3,692
|
|
Limited liability
investments, at fair value
|
|
19,654
|
|
|
32,811
|
|
Investments in private
companies, at adjusted cost
|
|
790
|
|
|
790
|
|
Real estate
investments, at fair value (cost of $10,225 and $10,225,
respectively)
|
|
10,662
|
|
|
10,662
|
|
Other investments, at
cost which approximates fair value
|
|
299
|
|
|
294
|
|
Short-term investments,
at cost which approximates fair value
|
|
157
|
|
|
157
|
|
Total
investments
|
|
55,379
|
|
|
69,566
|
|
Cash and cash
equivalents
|
|
15,489
|
|
|
14,374
|
|
Restricted
cash
|
|
29,542
|
|
|
30,571
|
|
Accrued investment
income
|
|
800
|
|
|
757
|
|
Service fee
receivable, net of allowance for doubtful accounts of $289 and
$478, respectively
|
|
4,963
|
|
|
3,928
|
|
Other receivables,
net of allowance for doubtful accounts of $201 and $201,
respectively
|
|
18,187
|
|
|
16,323
|
|
Deferred acquisition
costs, net
|
|
8,843
|
|
|
8,835
|
|
Property and
equipment, net of accumulated depreciation of $25,492 and $24,441,
respectively
|
|
94,192
|
|
|
95,015
|
|
Right-of-use
asset
|
|
2,760
|
|
|
2,960
|
|
Goodwill
|
|
121,286
|
|
|
121,130
|
|
Intangible assets,
net of accumulated amortization of $15,930 and $15,433,
respectively
|
|
83,636
|
|
|
84,133
|
|
Other
assets
|
|
4,744
|
|
|
4,882
|
|
Total
Assets
|
|
$
|
439,821
|
|
|
$
|
452,474
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
Liabilities:
|
|
|
|
|
Accrued expenses and
other liabilities
|
|
$
|
42,716
|
|
|
$
|
42,502
|
|
Income taxes
payable
|
|
3,143
|
|
|
2,859
|
|
Deferred service
fees
|
|
86,871
|
|
|
87,945
|
|
Unpaid loss and loss
adjustment expenses
|
|
1,414
|
|
|
1,449
|
|
Bank loan
|
|
24,089
|
|
|
25,303
|
|
Notes
payable
|
|
179,271
|
|
|
192,057
|
|
Subordinated debt, at
fair value
|
|
53,668
|
|
|
50,928
|
|
Lease
liability
|
|
3,008
|
|
|
3,213
|
|
Net deferred income
tax liabilities
|
|
27,037
|
|
|
27,555
|
|
Total
Liabilities
|
|
421,217
|
|
|
433,811
|
|
|
|
|
|
|
Redeemable Class A
preferred stock, no par value; 1,000,000 and 1,000,000 authorized
at March 31, 2021
and December 31, 2020, respectively; 182,876 and 182,876 issued and
outstanding at March 31, 2021 and
December 31, 2020, respectively; redemption amount of $6,742 and
$6,658 at March 31, 2021 and
December 31, 2020, respectively
|
|
6,742
|
|
|
6,504
|
|
|
|
|
|
|
Shareholders'
Equity:
|
|
|
|
|
Common stock, no par
value; 50,000,000 and 50,000,000 authorized at March 31, 2021 and
December 31,
2020, respectively; 22,365,631 and 22,211,069 issued and
outstanding at March 31, 2021 and December
31, 2020, respectively
|
|
—
|
|
|
—
|
|
Additional paid-in
capital
|
|
355,999
|
|
|
355,242
|
|
Treasury stock, at
cost; 247,450 and 247,450 outstanding at March 31, 2021 and
December 31, 2020, respectively
|
|
(492)
|
|
|
(492)
|
|
Accumulated
deficit
|
|
(394,167)
|
|
|
(394,807)
|
|
Accumulated other
comprehensive income
|
|
36,279
|
|
|
38,059
|
|
Shareholders' equity
attributable to common shareholders
|
|
(2,381)
|
|
|
(1,998)
|
|
Noncontrolling
interests in consolidated subsidiaries
|
|
14,243
|
|
|
14,157
|
|
Total Shareholders'
Equity
|
|
11,862
|
|
|
12,159
|
|
Total Liabilities,
Class A preferred stock and Shareholders' Equity
|
|
$
|
439,821
|
|
|
$
|
452,474
|
|
Kingsway Financial Services Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
|
|
Three months ended
March 31,
|
|
|
2021
|
|
2020
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Service fee and
commission revenue
|
|
$
|
18,574
|
|
|
$
|
11,186
|
|
Rental
revenue
|
|
3,341
|
|
|
3,341
|
|
Other
revenue
|
|
105
|
|
|
142
|
|
Total
revenues
|
|
22,020
|
|
|
14,669
|
|
Operating
expenses:
|
|
|
|
|
Claims authorized on
vehicle service agreements
|
|
4,667
|
|
|
2,380
|
|
Loss and loss
adjustment expenses
|
|
8
|
|
|
13
|
|
Commissions
|
|
1,504
|
|
|
1,303
|
|
Cost of services
sold
|
|
980
|
|
|
403
|
|
General and
administrative expenses
|
|
12,466
|
|
|
10,693
|
|
Leased real estate
segment interest expense
|
|
1,468
|
|
|
1,499
|
|
Total operating
expenses
|
|
21,093
|
|
|
16,291
|
|
Operating income
(loss)
|
|
927
|
|
|
(1,622)
|
|
Other revenues
(expenses), net:
|
|
|
|
|
Net investment
income
|
|
421
|
|
|
719
|
|
Net realized
gains
|
|
51
|
|
|
208
|
|
Loss on change in fair
value of equity investments
|
|
(151)
|
|
|
(597)
|
|
(Loss) gain on change
in fair value of limited liability investments, at fair
value
|
|
(202)
|
|
|
1,899
|
|
Net change in
unrealized loss on private company investments
|
|
—
|
|
|
(670)
|
|
Other-than-temporary
impairment loss
|
|
—
|
|
|
(117)
|
|
Non-operating other
revenue
|
|
2
|
|
|
39
|
|
Interest expense not
allocated to segments
|
|
(1,552)
|
|
|
(2,153)
|
|
Amortization of
intangible assets
|
|
(497)
|
|
|
(574)
|
|
(Loss) gain on change
in fair value of debt
|
|
(1,019)
|
|
|
2,645
|
|
Gain on extinguishment
of debt
|
|
2,494
|
|
|
—
|
|
Total other
(expenses) revenues, net
|
|
(453)
|
|
|
1,399
|
|
Income (loss) before
income tax (benefit) expense
|
|
474
|
|
|
(223)
|
|
Income tax (benefit)
expense
|
|
(425)
|
|
|
170
|
|
Net income
(loss)
|
|
899
|
|
|
(393)
|
|
Less: net income
attributable to noncontrolling interests in consolidated
subsidiaries
|
|
259
|
|
|
721
|
|
Less: dividends on
preferred stock
|
|
238
|
|
|
377
|
|
Net income (loss)
attributable to common shareholders
|
|
$
|
402
|
|
|
$
|
(1,491)
|
|
Earnings (loss) per
share – net income (loss) attributable to common
shareholders:
|
|
|
|
|
Basic:
|
|
$
|
0.02
|
|
|
$
|
(0.07)
|
|
Diluted:
|
|
$
|
0.02
|
|
|
$
|
(0.07)
|
|
Weighted-average
shares outstanding (in '000s):
|
|
|
|
|
Basic:
|
|
22,218
|
|
|
22,069
|
|
Diluted:
|
|
22,219
|
|
|
22,069
|
|
Kingsway Financial Services Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
|
|
|
|
|
Three months ended
March 31,
|
|
|
2021
|
|
2020
|
Cash provided by
(used in):
|
|
|
|
|
Operating
activities:
|
|
|
|
|
Net income
(loss)
|
|
$
|
899
|
|
|
$
|
(393)
|
|
Adjustments to
reconcile net income (loss) to net cash (used in) provided by
operating activities:
|
|
|
|
|
Equity in net loss
(income) of limited liability investments
|
|
9
|
|
|
(23)
|
|
Depreciation and
amortization expense
|
|
1,548
|
|
|
1,667
|
|
Stock-based
compensation expense (benefit), net of forfeitures
|
|
1,699
|
|
|
(38)
|
|
Net realized
gains
|
|
(51)
|
|
|
(208)
|
|
Loss on change in
fair value of equity investments
|
|
151
|
|
|
597
|
|
Loss (gain) on change
in fair value of limited liability investments, at fair
value
|
|
202
|
|
|
(1,899)
|
|
Net change in
unrealized loss on private company investments
|
|
—
|
|
|
670
|
|
Loss (gain) on change
in fair value of debt
|
|
1,019
|
|
|
(2,645)
|
|
Deferred income
taxes
|
|
(518)
|
|
|
131
|
|
Other-than-temporary
impairment loss
|
|
—
|
|
|
117
|
|
Amortization of fixed
maturities premiums and discounts
|
|
44
|
|
|
31
|
|
Amortization of note
payable premium
|
|
(218)
|
|
|
(225)
|
|
Gain on
extinguishment of debt
|
|
(2,494)
|
|
|
—
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Service fee
receivable, net
|
|
(1,035)
|
|
|
138
|
|
Other receivables,
net,
|
|
(1,864)
|
|
|
2,274
|
|
Deferred acquisition
costs, net
|
|
(8)
|
|
|
(140)
|
|
Unpaid loss and loss
adjustment expenses
|
|
(35)
|
|
|
(83)
|
|
Deferred service
fees
|
|
(1,074)
|
|
|
(33)
|
|
Other, net
|
|
(143)
|
|
|
675
|
|
Net cash (used in)
provided by operating activities
|
|
(1,869)
|
|
|
613
|
|
Investing
activities:
|
|
|
|
|
Proceeds from sales
and maturities of fixed maturities
|
|
1,970
|
|
|
8,646
|
|
Proceeds from sales
of equity investments
|
|
23
|
|
|
—
|
|
Purchases of fixed
maturities
|
|
(1,214)
|
|
|
(1,549)
|
|
Net proceeds from
limited liability investments
|
|
—
|
|
|
87
|
|
Net proceeds from
limited liability investments, at fair value
|
|
12,977
|
|
|
77
|
|
Net proceeds from
investments in private companies
|
|
17
|
|
|
60
|
|
Net (purchases of)
proceeds from other investments
|
|
(5)
|
|
|
52
|
|
Net purchases of from
short-term investments
|
|
—
|
|
|
(1)
|
|
Acquisition of
business, net of cash acquired
|
|
(50)
|
|
|
—
|
|
Net purchases of
property and equipment
|
|
(228)
|
|
|
(40)
|
|
Net cash provided by
investing activities
|
|
13,490
|
|
|
7,332
|
|
Financing
activities:
|
|
|
|
|
Distributions to
noncontrolling interest holders
|
|
(169)
|
|
|
(43)
|
|
Taxes paid related to
net share settlements of restricted stock awards
|
|
(38)
|
|
|
(83)
|
|
Principal payments on
bank loan
|
|
(1,235)
|
|
|
(562)
|
|
Principal payments on
notes payable
|
|
(10,093)
|
|
|
(991)
|
|
Net cash used in
financing activities
|
|
(11,535)
|
|
|
(1,679)
|
|
Net increase in cash
and cash equivalents and restricted cash
|
|
86
|
|
|
6,266
|
|
Cash and cash
equivalents and restricted cash at beginning of period
|
|
44,945
|
|
|
25,661
|
|
Cash and cash
equivalents and restricted cash at end of period
|
|
$
|
45,031
|
|
|
$
|
31,927
|
|
Kingsway Financial Services Inc.
Reconciliation of GAAP Net Loss to Non-GAAP Adjusted Loss
(in thousands)
(UNAUDITED)
|
Twelve Months
Ended
|
|
|
|
For the Three
Months Ended
|
|
|
|
3/31/21
|
|
3/31/21
|
|
12/31/20
|
|
9/30/20
|
|
6/30/20
|
GAAP Net (Loss)
Income
|
$
(4,123)
|
|
$
899
|
|
$
(2,478)
|
|
$
(1,124)
|
|
$
(1,421)
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
(Gain) Loss on sale
of non-core investments (1)
|
(359)
|
|
(22)
|
|
(425)
|
|
88
|
|
-
|
Change in fair value
of investments (2)
|
(3,583)
|
|
353
|
|
(2,193)
|
|
(1,377)
|
|
(366)
|
Change in fair value
of debt (3)
|
2,491
|
|
1,019
|
|
767
|
|
503
|
|
202
|
Litigation expenses
(5)
|
1,895
|
|
344
|
|
997
|
|
535
|
|
19
|
Acquisition and
disposition related expenses (6)
|
377
|
|
-
|
|
238
|
|
139
|
|
-
|
Employee termination
and recruiting expenses (7)
|
216
|
|
160
|
|
-
|
|
11
|
|
46
|
Stock-based
compensation expense (8)
|
3,063
|
|
1,699
|
|
1,106
|
|
127
|
|
131
|
Net loss from
discontinued operations, net of taxes (9)
|
(6)
|
|
-
|
|
-
|
|
-
|
|
(6)
|
Extraordinary audit
and audit-related expenses (10)
|
381
|
|
-
|
|
-
|
|
76
|
|
305
|
Loss on
extinguishment of debt (11)
|
851
|
|
-
|
|
851
|
|
-
|
|
-
|
CMC Settlement
(12)
|
958
|
|
(645)
|
|
1,603
|
|
-
|
|
-
|
Amortization
expense
|
2,214
|
|
497
|
|
572
|
|
572
|
|
573
|
Total Non-GAAP
Adjustments
|
8,499
|
|
3,405
|
|
3,516
|
|
674
|
|
904
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjusted (Loss) Income (14)
|
$
4,376
|
|
$
4,304
|
|
$
1,038
|
|
$
(450)
|
|
$
(517)
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended
|
|
|
|
For the Three
Months Ended
|
|
|
|
3/31/20
|
|
3/31/20
|
|
12/31/19
|
|
9/30/19
|
|
6/30/19
|
GAAP Net
Loss
|
$
(7,895)
|
|
$
(393)
|
|
$
(3,098)
|
|
$
(4,006)
|
|
$
(398)
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
(Gain) Loss on sale
of non-core investments (1)
|
(585)
|
|
(147)
|
|
(32)
|
|
(1,004)
|
|
598
|
Change in fair value
of investments (2)
|
(983)
|
|
(632)
|
|
(1,803)
|
|
3,736
|
|
(2,284)
|
Change in fair value
of debt (3)
|
(3,121)
|
|
(2,645)
|
|
1,052
|
|
(610)
|
|
(918)
|
Equity in net (gain)
loss of investee (4)
|
(202)
|
|
-
|
|
(127)
|
|
126
|
|
(201)
|
Redomestication
expenses (13)
|
41
|
|
-
|
|
-
|
|
-
|
|
41
|
Litigation expenses
(5)
|
1,434
|
|
1,141
|
|
124
|
|
65
|
|
104
|
Acquisition and
disposition related expenses (6)
|
64
|
|
35
|
|
-
|
|
23
|
|
6
|
Employee termination
and recruiting expenses (7)
|
1,158
|
|
295
|
|
715
|
|
63
|
|
85
|
Stock-based
compensation expense (8)
|
604
|
|
171
|
|
145
|
|
145
|
|
143
|
Net loss from
discontinued operations, net of taxes (9)
|
1,544
|
|
-
|
|
1,544
|
|
-
|
|
-
|
Extraordinary audit
and audit-related expenses (10)
|
1,276
|
|
390
|
|
149
|
|
359
|
|
378
|
Impairment of
assets
|
117
|
|
117
|
|
-
|
|
-
|
|
-
|
Amortization
expense
|
2,600
|
|
573
|
|
676
|
|
675
|
|
676
|
Total Non-GAAP
Adjustments
|
3,947
|
|
(702)
|
|
2,443
|
|
3,578
|
|
(1,372)
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjusted Loss
|
$
(3,948)
|
|
$
(1,095)
|
|
$
(655)
|
|
$
(428)
|
|
$
(1,770)
|
|
|
(1)
|
Represents realized
gains and losses on the Company's non-core investments.
|
(2)
|
The Company has
investments in several entities that are not essential to the
ongoing operations and strategy
of the Company. The investments are recorded at fair value and changes to fair value are recorded as unrealized
gains or losses.
|
|
Twelve Months
Ended
|
|
For the Three
Months Ended
|
|
|
3/31/21
|
|
3/31/21
|
|
12/31/20
|
|
9/30/20
|
|
6/30/20
|
|
(Gain) loss on change
in fair value of limited liability investments,
at fair value
|
$
(1,945)
|
|
$
202
|
|
$
(1,995)
|
|
$
(274)
|
|
$
123
|
|
Net change in
unrealized (gain) loss on private company
investments
|
74
|
|
-
|
|
-
|
|
74
|
|
-
|
|
(Gain) loss on change
in fair value of equity securities
|
(1,713)
|
|
151
|
|
(198)
|
|
(1,177)
|
|
(489)
|
|
Total
|
$
(3,583)
|
|
$
353
|
|
$
(2,193)
|
|
$
(1,377)
|
|
$
(366)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended
|
|
For the Three
Months Ended
|
|
|
3/31/20
|
|
3/31/20
|
|
12/31/19
|
|
9/30/19
|
|
6/30/19
|
|
(Gain) loss on change
in fair value of limited liability investments,
at fair value
|
$
(2,109)
|
|
$
(1,899)
|
|
$
(1,219)
|
|
$
3,356
|
|
$
(2,347)
|
|
Net change in
unrealized (gain) loss on private company
investments
|
1,013
|
|
670
|
|
-
|
|
343
|
|
-
|
|
(Gain) loss on change
in fair value of equity securities
|
113
|
|
597
|
|
(584)
|
|
37
|
|
63
|
|
Total
|
$
(983)
|
|
$
(632)
|
|
$
(1,803)
|
|
$
3,736
|
|
$
(2,284)
|
|
|
|
(3)
|
The Company records
its subordinated debt at fair value and changes to fair value (net
of the portion of the change attributable to
instrument-specific credit risk) are recorded as unrealized gains
or losses.
|
(4)
|
Represents the
Company's investment in the common stock of Itasca Capital Ltd.
("ICL"). The Company fully disposed of its investment in ICL during
Q4 2019.
|
(5)
|
Legal expenses
associated with the Company's defense against significant
litigation matters.
|
(6)
|
Expenses related to
legal, accounting and other expenses associated with completed and
contemplated acquisitions and disposals.
|
(7)
|
Includes charges
relating to severance and consulting agreements pertaining to
former key employees. 2019 also includes key employee
recruiting expenses.
|
(8)
|
Non-cash expense
arising from the grant and modification of stock-based awards to
employees. Q1 2021 includes new grants to certain officers of
the Company, a portion of which vested upon grant. In Q4
2020, the Company modified an award previously granted to the
President of one of its subsidiaries, resulting in additional
non-cash compensation expense associated with the change in fair
value of the award.
|
(9)
|
Includes losses
relating to Assigned Risk Solutions Ltd. and the October 2018
completed sale of the Mendota group of companies. Refer to Note 5,
Disposal and Discontinued Operations, to the Company's 2020 Annual
Report on Form 10-K for further information.
|
(10)
|
Extraordinary audit
and audit-related expenses incurred as a result of the delayed
filing of the 2018 and 2019 Kingsway audited financial statements
and related quarterly filings.
|
(11)
|
Early termination
fees and write-off of unamortized debt issuance costs and discount
associated with the early extinguishment of the 2019 KWH loan as
part of the Company's purchase of PWI.
|
(12)
|
In March 2021, DGI,
TRT LeaseCo, LLC and various other entities affiliated with each of
them entered into a settlement agreement with respect to such
litigation and certain other matters ("CMC Settlement
Agreement"). As part of the settlement, the Company made a
one-time fee payment to DGI of which $1.6 million relates to rental
income collected in periods prior to 2020. In 2021, the
Company recorded a benefit related to the finalization of
management fees and legal expenses associated with the settlement
of CMC
litigation.
|
(13)
|
Expenses incurred as
part of redomesticating Kingsway Financial Services Inc. from a
Canadian registered company to be a Delaware registered company as
of December 31,
2018.
|
(14)
|
Includes a benefit of
$2.5 million and $0.4 million from PPP loan forgiveness for the
three months ended March 31, 2021 and December 31, 2020,
respectively.
|
Kingsway Financial Services
Inc.
Reconciliation of Extended Warranty Segment
Operating Income to Non-GAAP Adjusted EBITDA
and Pro Forma Non-GAAP Adjusted EBITDA
(in thousands)
(UNAUDITED)
|
Twelve
Months Ended
|
|
For the Three Months
Ended
|
|
3/31/21
|
|
3/31/21
|
|
12/31/20
|
|
9/30/20
|
|
6/30/20
|
GAAP Operating
Income for Extended Warranty segment (1)
|
$
11,063
|
|
$
5,309
|
|
$
3,264
|
|
$
1,205
|
|
$
1,285
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
Investment
income (2)
|
294
|
|
43
|
|
51
|
|
100
|
|
100
|
Gain (loss) on
sale of core investments (3)
|
64
|
|
29
|
|
(3)
|
|
29
|
|
8
|
Depreciation
|
237
|
|
12
|
|
112
|
|
58
|
|
55
|
Total Non-GAAP
Adjustments
|
594
|
|
84
|
|
160
|
|
187
|
|
163
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
adjusted EBITDA for Extended Warranty segment
|
$
11,657
|
|
$
5,393
|
|
$
3,424
|
|
$
1,392
|
|
$
1,448
|
PWI operating income
(4)
|
4,223
|
|
-
|
|
914
|
|
1,096
|
|
2,214
|
PWI depreciation
(4)
|
56
|
|
-
|
|
30
|
|
13
|
|
13
|
Pro forma Non-GAAP
adjusted EBITDA for Extended Warranty segment
|
$
15,936
|
|
$
5,393
|
|
$
4,367
|
|
$
2,501
|
|
$
3,675
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve
Months Ended
|
|
For the Three Months
Ended
|
|
3/31/20
|
|
3/31/20
|
|
12/31/19
|
|
9/30/19
|
|
6/30/19
|
GAAP Operating
Income for Extended Warranty segment (1)
|
$
4,895
|
|
$
850
|
|
$
1,431
|
|
$
1,579
|
|
$
1,035
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
Investment
income (2)
|
629
|
|
144
|
|
177
|
|
163
|
|
145
|
Gain (loss) on
sale of core investments (3)
|
90
|
|
61
|
|
4
|
|
(3)
|
|
28
|
Impairment of
assets
|
117
|
|
117
|
|
|
|
|
|
|
Depreciation
|
216
|
|
55
|
|
55
|
|
57
|
|
49
|
Total Non-GAAP
Adjustments
|
1,052
|
|
377
|
|
236
|
|
217
|
|
222
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
adjusted EBITDA for Extended Warranty segment
|
$
5,947
|
|
$
1,227
|
|
$
1,667
|
|
$
1,796
|
|
$
1,257
|
PWI operating income
(4)
|
3,612
|
|
1,250
|
|
1,086
|
|
447
|
|
828
|
PWI depreciation
(4)
|
50
|
|
13
|
|
13
|
|
12
|
|
12
|
Pro forma Non-GAAP
adjusted EBITDA for Extended Warranty segment
|
$
9,609
|
|
$
2,490
|
|
$
2,765
|
|
$
2,255
|
|
$
2,098
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes one month of
PWI operating income for the three months ended December 31, 2020
and excludes PWI for prior periods. Excludes the impact of
final purchase accounting adjustments for PWI, which will be
completed in 2021. Also includes a benefit of $2.2 million
and $0.4 million from PPP loan forgiveness for the three months
ended March 31, 2021 and December 31, 2020,
respectively.
|
(2)
|
Investment income
arising as part of Extended Warranty segment's minimum
holding requirements
|
(3)
|
Realized Gains
(losses) resulting from investments held in trust as part of
Extended Warranty segment's minimum
holding requirements
|
(4)
|
Includes amounts
related to PWI prior to acquisition (April 2019 through November
2020).
|
View original
content:http://www.prnewswire.com/news-releases/kingsway-reports-first-quarter-2021-results-301289682.html
SOURCE Kingsway Financial Services Inc.