KKR Financial Holdings LLC : Announces First Quarter 2012 Financial Results and a Quarterly Distribution of $0.18 per Common Share
04/25/2012| 08:25am US/Eastern
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SAN FRANCISCO, April 25, 2012 /PRNewswire/ -- KKR Financial Holdings LLC (NYSE: KFN) ("KFN" or the "Company") today announced its results for the first quarter ended March 31, 2012.
First Quarter 2012 Highlights
-- Net income for the first quarter ended March 31, 2012 totaled $88.0
million, or $0.48 per diluted common share.
-- Declared a quarterly cash distribution of $0.18 per common share for the
first quarter of 2012.
-- Book value per common share of $9.81 as of March 31, 2012 as compared to
book value per common share of $9.41 as of December 31, 2011.
-- Completed a $115.0 million 30-year 7.500% senior note offering that
generated $111.4 million of net proceeds for the Company.
For the first quarter ended March 31, 2012, KFN reported net income of $88.0 million, or $0.48 per diluted common share, as compared to net income of $93.8 million, or $0.51 per diluted common share, for the first quarter ended March 31, 2011.
KFN's first quarter 2012 results included net investment income of $37.9 million, other income of $78.9 million and non-investment expenses of $32.8 million. Comparatively, KFN's first quarter 2011 results reflected net investment income of $79.5 million, other income of $46.4 million and non-investment expenses of $30.8 million. Net investment income decreased $41.6 million from the first quarter ended March 31, 2011 to 2012 primarily due to a $34.8 million increase in provision for loan losses and an $8.6 million increase in interest expense. Other income increased $32.5 million from the first quarter ended March 31, 2011 to 2012 largely due to a $24.4 million increase in net realized and unrealized gains on investments primarily as the result of sales and paydowns of certain investments, as well as a $3.1 million increase in net realized and unrealized gains on derivatives and foreign exchange.
Portfolio Activity
Natural Resources Strategy
During the first quarter of 2012, the Company executed several transactions including the following: i) the acquisition of oil and gas working interests in acreage located in Louisiana, Mississippi and Texas for $69.8 million, of which $28.5 million was financed through the Company's non-recourse natural resources credit facility; ii) a commitment to acquire working interests in oil and gas properties located in North Texas for approximately $69 million, of which approximately $29 million will be financed through the Company's non-recourse natural resources credit facility; iii) a commitment of approximately $90 million to invest in 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 iv) a commitment of approximately $12 million to a consortium alongside Schlumberger and Tecpetrol, which will re-develop and provide services to optimize production of certain wells in Ecuador in return for a fixed dollar fee per barrel of incremental production.
Special Situations Strategy
During the first quarter of 2012, the Company deployed or committed to deploy approximately $35 million to several different special situations distressed opportunities, predominantly in Europe.
Senior Notes Offering
During the first quarter ended March 31, 2012, the Company received net proceeds totaling $111.4 million through the issuance of $115.0 million of 7.500% Senior Notes due March 20, 2042. The net proceeds from this offering will be used for general corporate purposes.
Book Value
Book value per share increased to $9.81 from $9.41 as of December 31, 2011. The increase in book value per share from December 31, 2011 was primarily driven by the Company's earnings for the first quarter of $0.48 per diluted common share and an increase in the Company's accumulated other comprehensive income, a component of shareholders' equity, of $0.18 per share primarily as a result of increases in value of certain securities-available-for sale and interest rate swaps designated as cash flow hedges, slightly offset by the Company's distribution to shareholders for the fourth quarter and year ended 2011 of $0.26 per common share.
Distributions
On April 24, 2012, the Company's board of directors declared a cash distribution of $0.18 per common share. The distribution is payable on May 22, 2012 to common shareholders of record as of the close of business on May 8, 2012.
Information for Investors: Conference Call and Webcast
The Company will host a conference call and audio webcast to review its results for the first quarter ended March 31, 2012 on April 25, 2012, at 6:00 a.m. PT (9:00 a.m. ET). The conference call may be accessed by dialing (888) 215-6918 (Domestic) or +1 (913) 312-0650 (International); a pass code is not required. A telephonic replay of the call will be available through May 9, 2012 by dialing (888) 203-1112 (Domestic) and +1 (719) 457-0820 (International) / pass code 6864908. Supplemental materials that will be discussed during the call and the live audio web cast 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 web cast 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 the use of proceeds from the Company's debt offering in the quarter ended March 31, 2012 and 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.
Schedule I
KKR Financial Holdings LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in thousands, except per share information)
For the three For the three
months ended months ended
March 31, March 31,
2012 2011
---- ----
Net investment
income:
Loan interest
income $104,094 $109,645
Securities
interest income 22,576 22,556
Other investment
income 11,264 3,129
------ -----
Total investment
income 137,934 135,330
Interest expense 40,715 32,121
Interest expense
to affiliates 12,859 12,096
Provision for
loan losses 46,498 11,661
------ ------
Net investment
income 37,862 79,452
------ ------
Other income:
Net realized and
unrealized gain
on investments 63,588 39,184
Net realized and
unrealized gain
on derivatives
and foreign
exchange 9,149 6,067
Net realized and
unrealized gain
(loss) on
residential
mortgage-
backed
securities, at
estimated fair
value 3,047 (738)
Net loss on
restructuring
and
extinguishment
of debt (445) -
Other income 3,592 1,923
----- -----
Total other
income 78,931 46,436
------ ------
Non-investment
expenses:
Related party
management
compensation 18,113 21,201
General,
administrative
and directors
expenses 12,804 8,171
Professional
services 1,896 1,432
----- -----
Total non-
investment
expenses 32,813 30,804
------ ------
Income before
income tax
(benefit)
expense 83,980 95,084
Income tax
(benefit)
expense (4,068) 1,317
------ -----
Net income $88,048 $93,767
======= =======
Net income per
common share:
Basic $0.49 $0.53
===== =====
Diluted $0.48 $0.51
===== =====
Weighted-
average number
of common
shares
outstanding:
Basic 177,775 177,075
======= =======
Diluted 182,247 181,292
======= =======
Schedule II
KKR Financial Holdings LLC
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Amounts in thousands, except share information)
March 31, December 31,
2012 2011
---- ----
Assets
Cash and cash equivalents $526,846 $392,154
Restricted cash and cash
equivalents 823,950 399,620
Securities 865,759 922,603
Corporate loans, net
(includes $297,708 and
$317,332 loans held for sale 5,972,943 6,443,399
as of March 31, 2012 and December 31,
2011, respectively)
Equity investments, at
estimated fair value
($15,528 and $12,222 pledged
as 203,642 189,845
collateral as of March 31, 2012 and
December 31, 2011, respectively)
Derivative assets 31,109 28,463
Interest and principal
receivable 38,336 62,124
Other assets 309,605 209,020
Total assets $8,772,190 $8,647,228
========== ==========
Liabilities
Collateralized loan
obligation secured debt $5,496,488 $5,540,037
Collateralized loan
obligation junior secured
notes to affiliates 347,855 365,848
Credit facilities 66,800 38,300
Convertible senior notes 277,091 299,830
Senior notes 362,109 250,676
Junior subordinated notes 283,517 283,517
Accounts payable, accrued
expenses and other
liabilities 35,325 24,680
Accrued interest payable 20,659 25,536
Accrued interest payable to
affiliates 7,102 6,561
Related party payable 16,827 11,078
Derivative liabilities 108,164 125,333
Total liabilities 7,021,937 6,971,396
--------- ---------
Shareholders' Equity
Preferred shares, no par
value, 50,000,000 shares
authorized and none issued
and outstanding at March 31,
2012 and December 31, 2011 - -
Common shares, no par value,
500,000,000 shares
authorized, and 178,393,521
and 178,145,482 shares
issued and outstanding at
March 31, 2012 and December
31, 2011, respectively - -
Paid-in-capital 2,759,996 2,759,478
Accumulated other
comprehensive loss (3,380) (35,619)
Accumulated deficit (1,006,363) (1,048,027)
Total shareholders' equity 1,750,253 1,675,832
--------- ---------
Total liabilities and
shareholders' equity $8,772,190 $8,647,228
========== ==========
Investor Relations Contact:
Angela Yang
415-315-6567
investor-relations@kkr.com
Media Contact:
Kristi Huller
212-750-8300
media@kkr.com
SOURCE KKR Financial Holdings LLC
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