ITASCA, Ill., Aug. 5, 2021 /CNW/ - (NYSE: KFS) Kingsway
Financial Services Inc. ("Kingsway" or the "Company") today
announced its operating results for the three and six months ended
June 30, 2021, which includes the
following highlights:
- Net loss improved to ($0.3)
million for the three months ended June 30, 2021, from a net loss of ($1.4) million for the same period in 2020
- Non-GAAP adjusted income grew to $1
million for the three months ended June 30, 2021, compared to a non-GAAP adjusted
loss of ($0.5) million for the same
period in 2020
- Extended Warranty segment operating income increased to
$2.6 million for the three months
ended June 30, 2021 compared to
$1.3 million for the same period in
2020,
- Extended Warranty segment non-GAAP adjusted EBITDA improved to
$2.7 million for the three months
ended June 30, 2021, from
$1.4 million for the same period in
2020
Refer to "Second Quarter Cash Flows" below for an explanation
regarding a one-time, $11.7 million
current quarter cash outflow to operating cash flows. Refer to
"Leased Real Estate" below for further explanation regarding a
$2.9 million non-cash, non-recurring
increase in other (expense) income and tax benefit.
Non-GAAP Adjusted Income Loss
For the three months ended June 30,
2021, non-GAAP adjusted income (loss) improved to income of
$1 million in 2021, from a loss of
($0.5) million in 2020. Included in
2021 are three months of PWI results following its
acquisition effective December 1,
2020.
Reconciliations of net (loss) income to non-GAAP adjusted income
(loss) are presented in the attached schedules.
Second Quarter Cash Flows
The Company reported year-to-date net cash used in operating
activities of ($11.5) million,
compared to net cash used in operating activities of ($1) million for the prior period. A majority of
the increase in net cash used in operating activities is related to
the monetization of future rental proceeds from the Company's
Leased Real Estate segment.
During the second quarter of 2021, the Company borrowed
$15.0 million, at an interest rate of
3.2%, against future rental proceeds that were not being used to
service the existing mortgage. As a result of this borrowing, the
Company paid $11.7 million in
management and guarantee fees as per the settlement of CMC
litigation, of which $10.6 million is
shown as an operating cash outflow in the statement of cash flows.
Had the Company not executed the borrowing, this amount would not
have been due or paid. See Note 27, "Commitments and Contingent
Liabilities", to our 2020 Annual Report on Form 10-K, for further
information on the settlement.
As a result of this monetization, the Company retained
$2.7 million, which it believes it
can deploy and earn a return in excess of the stated interest rate
on the borrowed funds.
Extended Warranty
The Extended Warranty service fee and commission revenue
increased 80.8% (or $8.4 million) to
$18.8 million for the three months
ended June 30, 2021 compared with
$10.4 million for the three months
ended June 30, 2020. The increase is
primarily due to the inclusion of PWI for the three months ended
June 30, 2021 following its
acquisition effective December 1,
2020. PWI service fee and commission revenue was
$7.4 million for the three ended
June 30, 2021.
The Extended Warranty operating income improved to $2.6 million for the three months ended
June 30, 2021 compared with
$1.3 million for the three months
ended June 30, 2020. The increase in
operating income is primarily due to the following:
- $0.8 million due to the inclusion
of PWI in 2021 following its acquisition effective December 1, 2020;
- A $0.2 million increase at IWS to
$0.6 million for the three months
ended June 30, 2021, 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 $0.2 million increase at
Trinity to $0.3 million for the three
months ended June 30, 2021, driven by
increased revenues in its equipment breakdown and maintenance
support services, as well as an increase in revenue and gross
profit 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 $0.3 million increase at PWSC
to $0.5 million for the three months
ended June 30, 2021, due to an
increase in revenue and lower general and administrative expenses;
and
- A $0.2 million decrease at
Geminus to $0.4 million for the three
months ended June 30, 2021 due to a
decrease in revenue that was partially offset by lower general and
administrative expenses compared with the three months ended
June 30, 2020.
Extended Warranty Non-GAAP adjusted EBITDA improved to
$2.7 million for the three months
ended June 30, 2021, compared with
$1.5 million for the same period in
2020, primarily due to the increase in Extended Warranty operating
income as explained above.
Reconciliations of Extended Warranty 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 June 30, 2021 and 2020.
Leased Real Estate operating loss was ($2.3) million for the three months ended
June 30, 2021 compared with operating
income of $0.8 million for the three
months ended June 30, 2020. The
operating loss is primarily the result of a non-recurring
$2.9 million non-cash expense
recorded during the second quarter of 2021 to reverse an
indemnification receivable that is recorded in other (expense)
income in the consolidated statements of operations. This expense
is offset by a tax benefit of $2.9
million that is recorded in the consolidated statements of
operations. The decrease is also attributable to management fee
expense of $0.2 million as a result
of the settlement of CMC litigation.
As a result of the monetization explained above, future
management fees have been prepaid and will be a non-cash expense
going forward. 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
The Company believes that non-GAAP adjusted net income (loss)
and non-GAAP adjusted EBITDA, when presented in conjunction with
comparable GAAP measures, provide useful information about the
Company's operating results and enhances the overall ability to
assess the Company's financial performance. The Company uses
non-GAAP adjusted net income (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
income (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 income (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
income (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)
|
June 30,
2021
|
December 31,
2020
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
|
Investments:
|
|
|
|
|
Fixed maturities, at
fair value (amortized cost of $21,470 and $20,488,
respectively)
|
$
|
21,602
|
$
|
20,716
|
Equity investments, at
fair value (cost of $1,147 and $1,157, respectively)
|
|
225
|
|
444
|
Limited liability
investments
|
|
3,568
|
|
3,692
|
Limited liability
investments, at fair value
|
|
20,362
|
|
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
|
|
288
|
|
294
|
Short-term
investments, at cost which approximates fair value
|
|
157
|
|
157
|
Total
investments
|
|
57,654
|
|
69,566
|
Cash and cash
equivalents
|
|
17,093
|
|
14,374
|
Restricted
cash
|
|
27,540
|
|
30,571
|
Accrued investment
income
|
|
900
|
|
757
|
Service fee
receivable, net of allowance for doubtful accounts of $258 and
$478, respectively
|
|
5,021
|
|
3,928
|
Other receivables,
net of allowance for doubtful accounts of $201 and $201,
respectively
|
|
14,144
|
|
16,323
|
Deferred acquisition
costs, net
|
|
9,106
|
|
8,835
|
Property and
equipment, net of accumulated depreciation of $26,557 and $24,441,
respectively
|
|
93,376
|
|
95,015
|
Right-of-use
asset
|
|
2,560
|
|
2,960
|
Goodwill
|
|
121,289
|
|
121,130
|
Intangible assets,
net of accumulated amortization of $16,426 and $15,433,
respectively
|
|
83,140
|
|
84,133
|
Other
assets
|
|
15,668
|
|
4,882
|
Total
Assets
|
$
|
447,491
|
$
|
452,474
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
Liabilities:
|
|
|
|
|
Accrued expenses and
other liabilities
|
$
|
40,671
|
$
|
42,502
|
Income taxes
payable
|
|
188
|
|
2,859
|
Deferred service
fees
|
|
88,446
|
|
87,945
|
Unpaid loss and loss
adjustment expenses
|
|
1,407
|
|
1,449
|
Bank loan
|
|
23,182
|
|
25,303
|
Notes
payable
|
|
191,143
|
|
192,057
|
Subordinated debt, at
fair value
|
|
58,218
|
|
50,928
|
Lease
liability
|
|
2,814
|
|
3,213
|
Net deferred income
tax liabilities
|
|
26,503
|
|
27,555
|
Total
Liabilities
|
|
432,572
|
|
433,811
|
Redeemable Class A
preferred stock, no par value; 1,000,000 and 1,000,000 authorized
at June 30, 2021
and December 31, 2020, respectively; 182,876 and 182,876 issued and
outstanding at June 30, 2021 and
December 31, 2020, respectively; redemption amount of $6,828 and
$6,658 at June 30, 2021 and
December 31, 2020, respectively
|
|
6,828
|
|
6,504
|
Shareholders'
Equity:
|
|
|
|
|
Common stock, no par
value; 50,000,000 and 50,000,000 authorized at June 30, 2021 and
December 31,
2020, respectively; 22,365,631 and 22,211,069 issued and
outstanding at June 30, 2021 and December
31, 2020, respectively
|
|
—
|
|
—
|
Additional paid-in
capital
|
|
356,331
|
|
355,242
|
Treasury stock, at
cost; 247,450 and 247,450 outstanding at June 30, 2021 and December
31, 2020, respectively
|
|
(492
|
|
(492)
|
Accumulated
deficit
|
|
(394,851
|
|
(394,807)
|
Accumulated other
comprehensive income
|
|
32,434
|
|
38,059
|
Shareholders' equity
attributable to common shareholders
|
|
(6,578
|
|
(1,998)
|
Noncontrolling
interests in consolidated subsidiaries
|
|
14,669
|
|
14,157
|
Total Shareholders'
Equity
|
|
8,091
|
|
12,159
|
Total Liabilities,
Class A preferred stock and Shareholders' Equity
|
$
|
447,491
|
$
|
452,474
|
Kingsway Financial Services Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
|
|
Three months ended
June 30,
|
|
|
Six months ended June
30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service fee and
commission revenue
|
|
$
|
18,755
|
|
|
$
|
10,438
|
|
|
$
|
37,329
|
|
|
$
|
21,624
|
|
Rental
revenue
|
|
|
3,341
|
|
|
|
3,341
|
|
|
|
6,682
|
|
|
|
6,682
|
|
Total
revenues
|
|
|
22,096
|
|
|
|
13,779
|
|
|
|
44,011
|
|
|
|
28,306
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claims authorized on
vehicle service agreements
|
|
|
5,251
|
|
|
|
2,347
|
|
|
|
9,918
|
|
|
|
4,727
|
|
Loss and loss
adjustment expenses
|
|
|
(4)
|
|
|
|
2
|
|
|
|
4
|
|
|
|
15
|
|
Commissions
|
|
|
1,576
|
|
|
|
1,279
|
|
|
|
3,080
|
|
|
|
2,582
|
|
Cost of services
sold
|
|
|
952
|
|
|
|
347
|
|
|
|
1,932
|
|
|
|
750
|
|
General and
administrative expenses
|
|
|
12,043
|
|
|
|
8,388
|
|
|
|
24,509
|
|
|
|
19,081
|
|
Leased real estate
segment interest expense
|
|
|
1,500
|
|
|
|
1,491
|
|
|
|
2,968
|
|
|
|
2,990
|
|
Total operating
expenses
|
|
|
21,318
|
|
|
|
13,854
|
|
|
|
42,411
|
|
|
|
30,145
|
|
Operating income
(loss)
|
|
|
778
|
|
|
|
(75)
|
|
|
|
1,600
|
|
|
|
(1,839)
|
|
Other revenues
(expenses), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
income
|
|
|
403
|
|
|
|
681
|
|
|
|
824
|
|
|
|
1,400
|
|
Net realized
gains
|
|
|
187
|
|
|
|
8
|
|
|
|
238
|
|
|
|
216
|
|
(Loss) gain on change
in fair value of equity investments
|
|
|
(45)
|
|
|
|
489
|
|
|
|
(196)
|
|
|
|
(108)
|
|
Gain (loss) on change
in fair value of limited liability investments, at fair
value
|
|
|
731
|
|
|
|
(123)
|
|
|
|
529
|
|
|
|
1,776
|
|
Net change in
unrealized loss on private company investments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(670)
|
|
Other-than-temporary
impairment loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(117)
|
|
Other (expenses)
income
|
|
|
(2,741)
|
|
|
|
65
|
|
|
|
(2,634)
|
|
|
|
246
|
|
Interest expense not
allocated to segments
|
|
|
(1,593)
|
|
|
|
(1,997)
|
|
|
|
(3,145)
|
|
|
|
(4,150)
|
|
Amortization of
intangible assets
|
|
|
(496)
|
|
|
|
(573)
|
|
|
|
(993)
|
|
|
|
(1,147)
|
|
(Loss) gain on change
in fair value of debt
|
|
|
(738)
|
|
|
|
(202)
|
|
|
|
(1,757)
|
|
|
|
2,443
|
|
Gain on extinguishment
of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
2,494
|
|
|
|
—
|
|
Total other expenses,
net
|
|
|
(4,292)
|
|
|
|
(1,652)
|
|
|
|
(4,640)
|
|
|
|
(111)
|
|
Loss from continuing
operations before income tax benefit
|
|
|
(3,514)
|
|
|
|
(1,727)
|
|
|
|
(3,040)
|
|
|
|
(1,950)
|
|
Income tax
benefit
|
|
|
(3,258)
|
|
|
|
(300)
|
|
|
|
(3,683)
|
|
|
|
(130)
|
|
(Loss) income from
continuing operations
|
|
|
(256)
|
|
|
|
(1,427)
|
|
|
|
643
|
|
|
|
(1,820)
|
|
Gain on disposal of
discontinued operations, net of taxes
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
6
|
|
Net (loss)
income
|
|
|
(256)
|
|
|
|
(1,421)
|
|
|
|
643
|
|
|
|
(1,814)
|
|
Less: net income
attributable to noncontrolling interests in consolidated
subsidiaries
|
|
|
428
|
|
|
|
108
|
|
|
|
687
|
|
|
|
829
|
|
Less: dividends on
preferred stock
|
|
|
85
|
|
|
|
224
|
|
|
|
323
|
|
|
|
601
|
|
Net loss attributable
to common shareholders
|
|
$
|
(769)
|
|
|
$
|
(1,753)
|
|
|
$
|
(367)
|
|
|
$
|
(3,244)
|
|
Loss per share –
continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
$
|
(0.03)
|
|
|
$
|
(0.08)
|
|
|
$
|
(0.02)
|
|
|
$
|
(0.15)
|
|
Diluted:
|
|
$
|
(0.03)
|
|
|
$
|
(0.08)
|
|
|
$
|
(0.02)
|
|
|
$
|
(0.15)
|
|
Earnings per share –
discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Diluted:
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Loss per share – net
loss attributable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
$
|
(0.03)
|
|
|
$
|
(0.08)
|
|
|
$
|
(0.02)
|
|
|
$
|
(0.15)
|
|
Diluted:
|
|
$
|
(0.03)
|
|
|
$
|
(0.08)
|
|
|
$
|
(0.02)
|
|
|
$
|
(0.15)
|
|
Weighted-average
shares outstanding (in '000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
22,366
|
|
|
|
22,211
|
|
|
|
22,292
|
|
|
|
22,140
|
|
Diluted:
|
|
|
22,366
|
|
|
|
22,211
|
|
|
|
22,292
|
|
|
|
22,140
|
|
Kingsway Financial Services Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
|
|
Six months ended June
30,
|
|
|
|
2021
|
|
|
2020
|
|
Cash provided by
(used in):
|
|
|
|
|
|
|
|
|
Operating
activities:
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
643
|
|
|
$
|
(1,814)
|
|
Adjustments to
reconcile net income (loss) to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Gain on disposal of
discontinued operations, net of taxes
|
|
|
—
|
|
|
|
(6)
|
|
Equity in net income
of limited liability investments
|
|
|
(45)
|
|
|
|
(12)
|
|
Depreciation and
amortization expense
|
|
|
3,138
|
|
|
|
3,335
|
|
Stock-based
compensation expense, net of forfeitures
|
|
|
2,407
|
|
|
|
82
|
|
Net realized
gains
|
|
|
(238)
|
|
|
|
(216)
|
|
Loss on change in
fair value of equity investments
|
|
|
196
|
|
|
|
108
|
|
Gain on change in
fair value of limited liability investments, at fair
value
|
|
|
(529)
|
|
|
|
(1,776)
|
|
Net change in
unrealized loss on private company investments
|
|
|
—
|
|
|
|
670
|
|
Loss (gain) on change
in fair value of debt
|
|
|
1,757
|
|
|
|
(2,443)
|
|
Loss on change in
fair value of derivatives
|
|
|
73
|
|
|
|
—
|
|
Deferred income
taxes
|
|
|
(1,052)
|
|
|
|
(272)
|
|
Other-than-temporary
impairment loss
|
|
|
—
|
|
|
|
117
|
|
Amortization of fixed
maturities premiums and discounts
|
|
|
88
|
|
|
|
58
|
|
Amortization of notes
payable premium, discounts and debt issue costs
|
|
|
(430)
|
|
|
|
(447)
|
|
Gain on
extinguishment of debt
|
|
|
(2,494)
|
|
|
|
—
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Service fee
receivable, net
|
|
|
(1,093)
|
|
|
|
118
|
|
Other receivables,
net
|
|
|
2,179
|
|
|
|
1,776
|
|
Deferred acquisition
costs, net
|
|
|
(271)
|
|
|
|
(146)
|
|
Other
assets
|
|
|
(10,786)
|
|
|
|
62
|
|
Unpaid loss and loss
adjustment expenses
|
|
|
(42)
|
|
|
|
(277)
|
|
Deferred service
fees
|
|
|
501
|
|
|
|
(887)
|
|
Other, net
|
|
|
(5,510)
|
|
|
|
954
|
|
Net cash used in
operating activities
|
|
|
(11,508)
|
|
|
|
(1,016)
|
|
Investing
activities:
|
|
|
|
|
|
|
|
|
Proceeds from sales
and maturities of fixed maturities
|
|
|
2,894
|
|
|
|
10,269
|
|
Proceeds from sales
of equity investments
|
|
|
23
|
|
|
|
—
|
|
Purchases of fixed
maturities
|
|
|
(3,952)
|
|
|
|
(7,405)
|
|
Net proceeds from
limited liability investments
|
|
|
168
|
|
|
|
134
|
|
Net proceeds from
limited liability investments, at fair value
|
|
|
13,188
|
|
|
|
77
|
|
Net proceeds from
investments in private companies
|
|
|
89
|
|
|
|
60
|
|
Net proceeds from
other investments
|
|
|
6
|
|
|
|
103
|
|
Net purchases of
short-term investments
|
|
|
—
|
|
|
|
(2)
|
|
Acquisition of
business, net of cash acquired
|
|
|
(50)
|
|
|
|
—
|
|
Net purchases of
property and equipment
|
|
|
(506)
|
|
|
|
(105)
|
|
Net cash provided by
investing activities
|
|
|
11,860
|
|
|
|
3,131
|
|
Financing
activities:
|
|
|
|
|
|
|
|
|
Distributions to
noncontrolling interest holders
|
|
|
(170)
|
|
|
|
(43)
|
|
Taxes paid related to
net share settlements of restricted stock awards
|
|
|
(323)
|
|
|
|
(83)
|
|
Principal payments on
bank loans
|
|
|
(2,161)
|
|
|
|
(687)
|
|
Principal proceeds
from notes payable, net of debt issuance costs of $1,685 in
2021
|
|
|
13,270
|
|
|
|
2,858
|
|
Principal payments on
notes payable
|
|
|
(11,280)
|
|
|
|
(2,012)
|
|
Net cash (used in)
provided by financing activities
|
|
|
(664)
|
|
|
|
33
|
|
Net (decrease)
increase in cash and cash equivalents and restricted
cash
|
|
|
(312)
|
|
|
|
2,148
|
|
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
|
|
$
|
44,633
|
|
|
$
|
27,809
|
|
Kingsway Financial Services Inc.
Reconciliation of GAAP Net (Loss) Income to Non-GAAP Adjusted
Income (Loss)
(in thousands)
(UNAUDITED)
|
|
Twelve
Months
Ended
|
|
|
For the Three
Months Ended
|
|
|
|
6/30/2021
|
|
|
6/30/2021
|
|
|
3/31/2021
|
|
|
12/31/2020
|
|
|
9/30/2020
|
|
GAAP Net (Loss)
Income
|
|
$
|
(2,957)
|
|
|
$
|
(256)
|
|
|
$
|
899
|
|
|
$
|
(2,478)
|
|
|
$
|
(1,124)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) Loss on sale
of non-core investments (1)
|
|
|
(21)
|
|
|
|
(71)
|
|
|
|
-
|
|
|
|
(51)
|
|
|
|
101
|
|
Change in fair value
of investments (2)
|
|
|
(3,903)
|
|
|
|
(686)
|
|
|
|
353
|
|
|
|
(2,193)
|
|
|
|
(1,377)
|
|
Change in fair value
of debt (3)
|
|
|
3,027
|
|
|
|
738
|
|
|
|
1,019
|
|
|
|
767
|
|
|
|
503
|
|
Litigation expenses
(5)
|
|
|
1,876
|
|
|
|
-
|
|
|
|
344
|
|
|
|
997
|
|
|
|
535
|
|
Acquisition and
disposition related expenses (6)
|
|
|
377
|
|
|
|
-
|
|
|
|
-
|
|
|
|
238
|
|
|
|
139
|
|
Employee termination
and recruiting expenses (7)
|
|
|
171
|
|
|
|
-
|
|
|
|
160
|
|
|
|
-
|
|
|
|
11
|
|
Stock-based
compensation expense (8)
|
|
|
3,667
|
|
|
|
735
|
|
|
|
1,699
|
|
|
|
1,106
|
|
|
|
127
|
|
Extraordinary audit
and audit-related expenses (10)
|
|
|
76
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
76
|
|
Loss on
extinguishment of debt (11)
|
|
|
851
|
|
|
|
-
|
|
|
|
-
|
|
|
|
851
|
|
|
|
-
|
|
CMC Settlement
(12)
|
|
|
958
|
|
|
|
-
|
|
|
|
(645)
|
|
|
|
1,603
|
|
|
|
-
|
|
Amortization
expense
|
|
|
2,137
|
|
|
|
496
|
|
|
|
497
|
|
|
|
572
|
|
|
|
572
|
|
Total Non-GAAP
Adjustments
|
|
|
9,216
|
|
|
|
1,212
|
|
|
|
3,427
|
|
|
|
3,890
|
|
|
|
687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
Income (Loss) (13)
|
|
$
|
6,259
|
|
|
$
|
956
|
|
|
$
|
4,326
|
|
|
$
|
1,414
|
|
|
$
|
(437)
|
|
|
|
Twelve
Months
Ended
|
|
|
For the Three
Months Ended
|
|
|
|
6/30/2020
|
|
|
6/30/2020
|
|
|
3/31/2020
|
|
|
12/31/2019
|
|
|
9/30/2019
|
|
GAAP Net
Loss
|
|
$
|
(8,919)
|
|
|
$
|
(1,421)
|
|
|
$
|
(393)
|
|
|
$
|
(3,098)
|
|
|
$
|
(4,006)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) Loss on sale
of non-core investments (1)
|
|
|
(353)
|
|
|
|
-
|
|
|
|
(60)
|
|
|
|
-
|
|
|
|
(293)
|
|
Change in fair value
of investments (2)
|
|
|
934
|
|
|
|
(366)
|
|
|
|
(632)
|
|
|
|
(1,803)
|
|
|
|
3,736
|
|
Change in fair value
of debt (3)
|
|
|
(2,001)
|
|
|
|
202
|
|
|
|
(2,645)
|
|
|
|
1,052
|
|
|
|
(610)
|
|
Equity in net (gain)
loss of investee (4)
|
|
|
(1)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(127)
|
|
|
|
126
|
|
Litigation expenses
(5)
|
|
|
1,349
|
|
|
|
19
|
|
|
|
1,141
|
|
|
|
124
|
|
|
|
65
|
|
Acquisition and
disposition related expenses (6)
|
|
|
58
|
|
|
|
-
|
|
|
|
35
|
|
|
|
-
|
|
|
|
23
|
|
Employee termination
and recruiting expenses (7)
|
|
|
1,119
|
|
|
|
46
|
|
|
|
295
|
|
|
|
715
|
|
|
|
63
|
|
Stock-based
compensation expense (8)
|
|
|
592
|
|
|
|
131
|
|
|
|
171
|
|
|
|
145
|
|
|
|
145
|
|
Net loss from
discontinued operations, net of taxes (9)
|
|
|
1,538
|
|
|
|
(6)
|
|
|
|
-
|
|
|
|
1,544
|
|
|
|
-
|
|
Extraordinary audit
and audit-related expenses (10)
|
|
|
1,203
|
|
|
|
305
|
|
|
|
390
|
|
|
|
149
|
|
|
|
359
|
|
Impairment of
assets
|
|
|
117
|
|
|
|
-
|
|
|
|
117
|
|
|
|
-
|
|
|
|
-
|
|
Amortization
expense
|
|
|
2,498
|
|
|
|
573
|
|
|
|
573
|
|
|
|
676
|
|
|
|
675
|
|
Total Non-GAAP
Adjustments
|
|
|
7,053
|
|
|
|
904
|
|
|
|
(615)
|
|
|
|
2,475
|
|
|
|
4,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
(Loss) Income
|
|
$
|
(1,866)
|
|
|
$
|
(518)
|
|
|
$
|
(1,009)
|
|
|
$
|
(623)
|
|
|
$
|
283
|
|
(1)
|
Represents realized
gains and losses on the Company's non-core investments. The Company
has determined that realized gains and losses relating to its Argo
investment fund are core to its strategic operations; therefore,
Argo realized gains and losses have been removed from this line
item, resulting in immaterial increases to prior period
amounts.
|
(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
|
|
|
|
6/30/2021
|
|
|
6/30/2021
|
|
|
3/31/2021
|
|
|
12/31/2020
|
|
|
9/30/2020
|
|
(Gain) loss on change
in fair value of limited liability investments, at fair
value
|
|
$
|
(2,798)
|
|
|
$
|
(731)
|
|
|
$
|
202
|
|
|
$
|
(1,995)
|
|
|
$
|
(274)
|
|
Net change in
unrealized (gain) loss on private company investments
|
|
|
74
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
74
|
|
(Gain) loss on change
in fair value of equity securities
|
|
|
(1,179)
|
|
|
|
45
|
|
|
|
151
|
|
|
|
(198)
|
|
|
|
(1,177)
|
|
Total
|
|
$
|
(3,903)
|
|
|
$
|
(686)
|
|
|
$
|
353
|
|
|
$
|
(2,193)
|
|
|
$
|
(1,377)
|
|
|
|
Twelve
Months Ended
|
|
|
For the Three
Months Ended
|
|
|
|
6/30/2020
|
|
|
6/30/2020
|
|
|
3/31/2020
|
|
|
12/31/2019
|
|
|
9/30/2019
|
|
(Gain) loss on change
in fair value of limited liability investments, at fair
value
|
|
$
|
361
|
|
|
$
|
123
|
|
|
$
|
(1,899)
|
|
|
$
|
(1,219)
|
|
|
$
|
3,356
|
|
Net change in
unrealized (gain) loss on private company investments
|
|
|
1,013
|
|
|
|
-
|
|
|
|
670
|
|
|
|
-
|
|
|
|
343
|
|
(Gain) loss on change
in fair value of equity securities
|
|
|
(439)
|
|
|
|
(489)
|
|
|
|
597
|
|
|
|
(584)
|
|
|
|
37
|
|
Total
|
|
$
|
935
|
|
|
$
|
(366)
|
|
|
$
|
(632)
|
|
|
$
|
(1,803)
|
|
|
$
|
3,736
|
|
(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 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)
|
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
|
|
|
|
6/30/2021
|
|
|
6/30/2021
|
|
|
3/31/2021
|
|
|
12/31/2020
|
|
|
9/30/2020
|
|
GAAP Operating
Income for Extended Warranty
segment (1)
|
|
$
|
12,378
|
|
|
$
|
2,600
|
|
|
$
|
5,309
|
|
|
$
|
3,264
|
|
|
$
|
1,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income
(2)
|
|
|
236
|
|
|
|
42
|
|
|
|
43
|
|
|
|
51
|
|
|
|
100
|
|
Gain (loss) on sale of
core investments (3)
|
|
|
39
|
|
|
|
1
|
|
|
|
12
|
|
|
|
(3)
|
|
|
|
29
|
|
Depreciation
|
|
|
234
|
|
|
|
53
|
|
|
|
12
|
|
|
|
112
|
|
|
|
58
|
|
Total Non-GAAP
Adjustments
|
|
|
509
|
|
|
|
95
|
|
|
|
67
|
|
|
|
160
|
|
|
|
187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA for Extended Warranty
segment
|
|
$
|
12,887
|
|
|
$
|
2,695
|
|
|
$
|
5,376
|
|
|
$
|
3,424
|
|
|
$
|
1,392
|
|
PWI operating income
(4)
|
|
|
2,010
|
|
|
|
-
|
|
|
|
-
|
|
|
|
914
|
|
|
|
1,096
|
|
PWI depreciation
(4)
|
|
|
43
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30
|
|
|
|
13
|
|
Pro forma Non-GAAP
adjusted EBITDA for Extended
Warranty segment
|
|
$
|
14,940
|
|
|
$
|
2,695
|
|
|
$
|
5,376
|
|
|
$
|
4,368
|
|
|
$
|
2,501
|
|
|
|
Twelve
Months
Ended
|
|
|
For the Three
Months Ended
|
|
|
|
6/30/2020
|
|
|
6/30/2020
|
|
|
3/31/2020
|
|
|
12/31/2019
|
|
|
9/30/2019
|
|
GAAP Operating
Income for Extended Warranty
segment (1)
|
|
$
|
5,144
|
|
|
$
|
1,285
|
|
|
$
|
850
|
|
|
$
|
1,431
|
|
|
$
|
1,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income
(2)
|
|
|
584
|
|
|
|
100
|
|
|
|
144
|
|
|
|
177
|
|
|
|
163
|
|
Gain (loss) on sale of
core investments (3)
|
|
|
70
|
|
|
|
8
|
|
|
|
61
|
|
|
|
4
|
|
|
|
(3)
|
|
Impairment of
assets
|
|
|
117
|
|
|
|
-
|
|
|
|
117
|
|
|
|
-
|
|
|
|
-
|
|
Depreciation
|
|
|
222
|
|
|
|
55
|
|
|
|
55
|
|
|
|
55
|
|
|
|
57
|
|
Total Non-GAAP
Adjustments
|
|
|
993
|
|
|
|
163
|
|
|
|
377
|
|
|
|
236
|
|
|
|
217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted
EBITDA for Extended Warranty
segment
|
|
$
|
6,137
|
|
|
$
|
1,448
|
|
|
$
|
1,227
|
|
|
$
|
1,667
|
|
|
$
|
1,796
|
|
PWI operating income
(4)
|
|
|
4,997
|
|
|
|
2,214
|
|
|
|
1,250
|
|
|
|
1,086
|
|
|
|
447
|
|
PWI depreciation
(4)
|
|
|
51
|
|
|
|
13
|
|
|
|
13
|
|
|
|
13
|
|
|
|
12
|
|
Pro forma Non-GAAP
adjusted EBITDA for Extended
Warranty segment
|
|
$
|
11,186
|
|
|
$
|
3,675
|
|
|
$
|
2,490
|
|
|
$
|
2,765
|
|
|
$
|
2,255
|
|
(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:https://www.prnewswire.com/news-releases/kingsway-reports-second-quarter-2021-results-301348983.html
SOURCE Kingsway Financial Services Inc.