KKR Financial Holdings LLC Announces Second Quarter 2012 Financial Results and a Quarterly Distribution of $0.21 per Common Share
SAN FRANCISCO, July 26, 2012 /PRNewswire/ -- KKR Financial Holdings LLC (NYSE: KFN) ("KFN" or the "Company") today announced its results for the second quarter ended June 30, 2012.
Second Quarter 2012 Highlights
- Net income for the second quarter ended June 30, 2012 totaled $71.2 million, or $0.39 per diluted common share.
- Declared a quarterly cash distribution of $0.21 per common share for the second quarter of 2012.
- Book value per common share of $9.79 as of June 30, 2012 as compared to book value per common share of $9.81 as of March 31, 2012.
For the three and six months ended June 30, 2012, KFN reported net income of $71.2 million, or $0.39 per diluted common share, and $159.3 million, or $0.87 per diluted common share, respectively. Comparatively, for the three and six months ended June 30, 2011, KFN reported net income of $107.5 million, or $0.59 per diluted common share, and $201.3 million, or $1.10 per diluted common share, respectively.
KFN's second quarter 2012 results included net investment income of $85.6 million, other income of $19.5 million and non-investment expenses of $33.6 million. Comparatively, KFN's second quarter 2011 results reflected net investment income of $88.7 million, other income of $62.6 million and non-investment expenses of $36.4 million. Net investment income decreased $3.1 million from the second quarter ended June 30, 2011 to 2012 primarily due to a $9.7 million increase in interest expense, partially offset by a $4.9 million increase in interest income generated from our corporate loan portfolio. Other income decreased $43.1 million from the second quarter ended June 30, 2011 to 2012 largely due to a $40.2 million decrease in net realized and unrealized gains on investments primarily as the result of a partial sale of one of our largest debt security holdings in the second quarter of 2011.
Portfolio Activity
Natural Resources Strategy
During the second quarter of 2012, the Company completed the following transactions: (i) closed the acquisition of working interests in oil and gas properties located in North Texas for approximately $69.6 million, of which $30.2 million was financed through the Company's non-recourse natural resources credit facility; (ii) funded $29.8 million of the previously announced $90 million commitment to a partnership with Chesapeake Energy Corporation to invest in mineral interests and overriding royalty interests in key oil and gas basins in the United States and (iii) completed the acquisition of additional oil and gas working interests in acreage located in North Texas for approximately $14.8 million.
Commercial Real Estate Strategy
During the second quarter of 2012, the Company invested $36.8 million in Yorktown Center, a major shopping and entertainment center in the Chicago area, through its commercial real estate strategy.
Book Value
Book value per share decreased to $9.79 as of June 30, 2012 from $9.81 as of March 31, 2012. The decrease in book value per share from March 31, 2012 was primarily driven by (i) an increase in the Company's accumulated other comprehensive loss, a component of shareholders' equity, of $0.24 per share partially as a result of declines in value of certain interest rate swaps designated as cash flow hedges and (ii) the Company's distribution to shareholders for the first quarter 2012 of $0.18 per common share, partially offset by (iii) the Company's earnings for the second quarter of $0.40 per basic common share.
Distributions
On July 26, 2012, the Company's board of directors declared a cash distribution of $0.21 per common share. The distribution is payable on August 23, 2012 to common shareholders of record as of the close of business on August 9, 2012.
Information for Investors: Conference Call and Webcast
The Company will host a conference call and audio webcast to review its results for the second quarter ended June 30, 2012 on July 26, 2012, at 2:00 p.m. PT (5:00 p.m. ET). The conference call may be accessed by dialing (888) 801-6507 (domestic) or +1 (913) 312-0963 (international); a pass code is not required. A telephonic replay of the call will be available through August 9, 2012 by dialing (888) 203-1112 (domestic) and +1 (719) 457-0820 (international), pass code 4076832. Supplemental materials that will be discussed during the call and the live audio webcast will be available in the Investor Relations section of the Company's website at http://ir.kkr.com/kfn_ir/kfn_events.cfm. An audio replay of the webcast will be archived in the Investor Relations section of the Company's website at http://ir.kkr.com/kfn_ir/kfn_events.cfm.
From time to time the Company may use its website as a channel of distribution of material company information. Financial and other important information regarding the Company is routinely posted on and accessible at the Investor Relations section for KFN at www.kkr.com. In addition, you may automatically receive email alerts and other information about the Company by enrolling your email by visiting the "Email Alerts" area in KFN's Investor Relations section.
About KKR Financial Holdings LLC
KKR Financial Holdings LLC is a specialty finance company with expertise in a range of asset classes. KFN's core business strategy is to leverage the proprietary resources of its manager with the objective of generating both current income and capital appreciation. KFN executes its core business strategy through its majority-owned subsidiaries. KFN is externally managed by KKR Financial Advisors LLC, a wholly-owned subsidiary of KKR Asset Management LLC, which is a wholly-owned subsidiary of Kohlberg Kravis Roberts & Co. L.P. Additional information regarding KFN is available at http://www.kkr.com.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements with regards to commitments to deploy capital. These forward-looking statements are based on information available to the Company as of the date of this press release and actual results may differ. These forward-looking statements involve known and unknown risks, uncertainties and other factors beyond the Company's control. Any forward-looking statements speak only as of the date of this press release and the Company expressly disclaims any obligation to update or revise any of them to reflect actual results, any changes in expectations or any change in events. If the Company does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements. For additional information concerning risks, uncertainties and other factors that may cause actual results to differ from those anticipated in the forward-looking statements, and risks to the Company's business in general, please refer to the Company's SEC filings, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2011, filed with the SEC on February 28, 2012 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, filed with the SEC on May 9, 2012.
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Schedule I | ||||||||||||
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KKR Financial Holdings LLC | ||||||||||||
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | ||||||||||||
|
(Amounts in thousands, except per share information) | ||||||||||||
|
For the three months ended June 30, 2012 |
For the three months ended June 30, 2011 |
For the six months ended June 30, 2012 |
For the six months ended June 30, 2011 | |||||||||
|
Net investment income: |
||||||||||||
|
Loan interest income |
$ 107,602 |
$ 102,656 |
$ 211,696 |
$ 212,301 | ||||||||
|
Securities interest income |
20,813 |
22,073 |
43,389 |
44,629 | ||||||||
|
Other investment income |
12,135 |
11,114 |
23,399 |
14,243 | ||||||||
|
Total investment income |
140,550 |
135,843 |
278,484 |
271,173 | ||||||||
|
Interest expense |
42,655 |
32,978 |
83,370 |
65,099 | ||||||||
|
Interest expense to affiliates |
12,318 |
14,142 |
25,177 |
26,238 | ||||||||
|
Provision for loan losses |
— |
— |
46,498 |
11,661 | ||||||||
|
Net investment income |
85,577 |
88,723 |
123,439 |
168,175 | ||||||||
|
Other income: |
||||||||||||
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Net realized and unrealized gain on investments |
18,382 |
58,541 |
81,970 |
97,725 | ||||||||
|
Net realized and unrealized (loss) gain on derivatives and foreign exchange |
(3,630) |
1,241 |
5,519 |
7,308 | ||||||||
|
Net realized and unrealized gain (loss) on residential mortgage-backed securities, at estimated fair value |
3,016 |
609 |
6,063 |
(129) | ||||||||
|
Net loss on restructuring and extinguishment of debt |
— |
— |
(445) |
— | ||||||||
|
Other income |
1,701 |
2,187 |
5,293 |
4,110 | ||||||||
|
Total other income |
19,469 |
62,578 |
98,400 |
109,014 | ||||||||
|
Non-investment expenses: |
||||||||||||
|
Related party management compensation |
12,804 |
24,315 |
30,917 |
45,516 | ||||||||
|
General, administrative and directors expenses |
19,526 |
10,367 |
32,330 |
18,538 | ||||||||
|
Professional services |
1,308 |
1,691 |
3,204 |
3,123 | ||||||||
|
Total non-investment expenses |
33,638 |
36,373 |
66,451 |
67,177 | ||||||||
|
Income before income tax expense (benefit) |
71,408 |
114,928 |
155,388 |
210,012 | ||||||||
|
Income tax expense (benefit) |
203 |
7,424 |
(3,865) |
8,741 | ||||||||
|
Net income |
$ 71,205 |
$ 107,504 |
$ 159,253 |
$ 201,271 | ||||||||
|
Net income per common share: |
||||||||||||
|
Basic |
$ 0.40 |
$ 0.60 |
$ 0.89 |
$ 1.13 | ||||||||
|
Diluted |
$ 0.39 |
$ 0.59 |
$ 0.87 |
$ 1.10 | ||||||||
|
Weighted-average number of common shares outstanding: |
||||||||||||
|
Basic |
177,809 |
177,674 |
177,792 |
177,376 | ||||||||
|
Diluted |
181,642 |
182,393 |
181,944 |
181,844 | ||||||||
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Schedule II | ||||||
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KKR Financial Holdings LLC | ||||||
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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||
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(Amounts in thousands, except share information) | ||||||
|
June 30, 2012 |
December 31, 2011 | |||||
|
Assets |
||||||
|
Cash and cash equivalents |
$ 473,789 |
$ 392,154 | ||||
|
Restricted cash and cash equivalents |
414,814 |
399,620 | ||||
|
Securities |
813,777 |
922,603 | ||||
|
Corporate loans, net (includes $183,934 and $317,332 loans held for sale as of June 30, 2012 and December 31, 2011, respectively) |
5,945,230 |
6,443,399 | ||||
|
Equity investments, at estimated fair value ($16,418 and $12,222 pledged as collateral as of June 30, 2012 and December 31, 2011, respectively) |
157,677 |
189,845 | ||||
|
Derivative assets |
32,319 |
28,463 | ||||
|
Interest and principal receivable |
38,223 |
62,124 | ||||
|
Other assets |
483,808 |
209,020 | ||||
|
Total assets |
$ 8,359,637 |
$ 8,647,228 | ||||
|
Liabilities |
||||||
|
Collateralized loan obligation secured debt |
$ 5,063,406 |
$ 5,540,037 | ||||
|
Collateralized loan obligation junior secured notes to affiliates |
322,348 |
365,848 | ||||
|
Credit facilities |
100,000 |
38,300 | ||||
|
Convertible senior notes |
277,408 |
299,830 | ||||
|
Senior notes |
362,132 |
250,676 | ||||
|
Junior subordinated notes |
283,517 |
283,517 | ||||
|
Accounts payable, accrued expenses and other liabilities |
44,097 |
24,680 | ||||
|
Accrued interest payable |
25,043 |
25,536 | ||||
|
Accrued interest payable to affiliates |
6,921 |
6,561 | ||||
|
Related party payable |
7,967 |
11,078 | ||||
|
Derivative liabilities |
120,072 |
125,333 | ||||
|
Total liabilities |
6,612,911 |
6,971,396 | ||||
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Shareholders' Equity |
||||||
|
Preferred shares, no par value, 50,000,000 shares authorized and none issued and outstanding at June 30, 2012 and December 31, 2011 |
- |
- | ||||
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Common shares, no par value, 500,000,000 shares authorized, and 178,393,521 and 178,145,482 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively |
- |
- | ||||
|
Paid-in-capital |
2,760,628 |
2,759,478 | ||||
|
Accumulated other comprehensive loss |
(46,633) |
(35,619) | ||||
|
Accumulated deficit |
(967,269) |
(1,048,027) | ||||
|
Total shareholders' equity |
1,746,726 |
1,675,832 | ||||
|
Total liabilities and shareholders' equity |
$ 8,359,637 |
$ 8,647,228 | ||||
Investor Relations Contact:
Pam Testani
415-315-6597
[email protected]
Media Contact:
Kristi Huller
212-750-8300
[email protected]
SOURCE KKR Financial Holdings LLC
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