SAN FRANCISCO, May 10 /PRNewswire-FirstCall/ -- KKR Financial Corp.
(NYSE:KFN) ("KFN" or the "Company") today announced its results for
the first quarter of 2006. Highlights of KKR Financial Corp.'s
performance include: * Distribution of $0.45 per common share
declared for the quarter ended March 31, 2006. * Book value of
$21.20, an increase of 3.0% from December 31, 2005, and a 5.4%
increase from September 30, 2005. * Net income for the quarter
ended March 31, 2006 of $30.4 million, or $0.38 per diluted common
share. * Net income adjusted for share-based compensation, a
non-GAAP financial measurement, for the quarter ended March 31,
2006 of $37.2 million, or $0.47 per diluted common share. * REIT
taxable income, a non-GAAP financial measurement, for the quarter
ended March 31, 2006 of $47.7 million, or $0.60 per diluted common
share. * Investment portfolio of $15.4 billion as of March 31,
2006, a 2.7% increase from $15.0 billion as of December 31, 2005. *
Weighted average cost of investment portfolio, as a percentage of
par value, of 99.94% as of March 31, 2006, compared to 99.96% as of
December 31, 2005. * Closed KKR Atlantic Funding Trust, the
Company's second $5 billion asset-backed commercial paper conduit.
* Issued $50.0 million of 30-year trust preferred securities at par
with an initial fixed interest rate based on ten-year LIBOR plus
2.45%. * Closed and funded the Company's fifth private equity
investment totaling $50.9 million. The Company's aggregate private
equity portfolio totaled $101.0 million as of quarter-end. *
Subsequent to quarter-end, committed to a $40.0 million private
equity co-investment on a pari passu basis with Kohlberg Kravis
Roberts & Co. L.P. in Capmark Financial Group Inc. KKR
Financial Corp. ("KFN" or the "Company") reported net income for
the first quarter ended March 31, 2006 of $30.4 million, or $0.38
per diluted common share. Current quarter results compare with net
income of $6.1 million, or $0.15 per diluted common share, for the
quarter ended March 31, 2005. The change from 2005 to 2006 is
primarily attributable to the increase in our investment portfolio
since March 31, 2005. Net income includes share-based compensation
expense for the quarter ended March 31, 2006 totaling $6.8 million,
or $0.09 per diluted common share. Net income adjusted for
share-based compensation, a non-GAAP financial measurement
consisting of GAAP net income plus GAAP share-based compensation
expense, for the quarter ended March 31, 2006 totaled $37.2
million, or $0.47 per diluted common share. Net income adjusted for
share-based compensation is an important non-GAAP measure because
it is an indicative measurement of cash flow generated from
operations that is available to make distributions to common
stockholders. REIT taxable income, a non-GAAP financial
measurement, for the first quarter ended March 31, 2006 totaled
$47.7 million, or $0.60 per diluted common share. The non-GAAP
financial measurement of REIT taxable income is important because
the Company is structured as a REIT and the Internal Revenue Code
requires that the Company pay substantially all of its taxable
income in the form of distributions to its stockholders. REIT
taxable income is critical in the determination of the amount of
the minimum distributions that the Company must pay to its
stockholders so as to comply with the rules set forth in the
Internal Revenue Code. Attached to this release is a schedule
reconciling this measure to net income. The Company filed its Form
10-Q for the quarterly period ended March 31, 2006 with the
Securities and Exchange Commission today, May 10, 2006. KFN
encourages investors to carefully read the Company's Form 10-Q
which contains condensed consolidated financial statements and
footnotes and Management's Discussion and Analysis of Financial
Condition and Results of Operations. Investment Portfolio During
the quarter ended March 31, 2006, the Company's investment
portfolio increased by 2.7% from $15.0 billion as of December 31,
2005 to $15.4 billion as of March 31, 2006. As of March 31, 2006,
the aggregate amortized cost of the Company's investment portfolio
exceeded the estimated fair value of its investment portfolio by
$63.6 million and, as of the same date, the Company had unrealized
gains totaling $92.6 million related to its cash flow hedges, as
defined under SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. In comparison, as of December 31, 2005, the
aggregate amortized cost of the Company's investment portfolio
exceeded the estimated fair value of its investment portfolio by
$54.1 million and, as of the same date, the Company had unrealized
gains totaling $45.6 million related to its cash flow hedges. As of
March 31, 2006, the aggregate net unamortized purchase discount
(i.e., the amount by which aggregate purchase discounts exceed
aggregate purchase premiums on the Company's investment portfolio)
related to the investment portfolio was $8.7 million and the
weighted average amortized cost, as a percentage of aggregate par
value, of the investment portfolio was 99.94%. Management has been
able to maintain the aggregate amortized cost value of the
investment portfolio below aggregate par value due to the Company's
ability to make a substantial amount of its residential real
estate, corporate, and commercial real estate investments in
primary market transactions at a cost of par or below. Since the
Company's formation, management has positioned the Company so as
not to be negatively impacted by either an overall higher interest
rate environment or a flatter, or inverted, interest rate curve
environment by investing in floating rate and hybrid rate
investments, which as of March 31, 2006 totaled 57.2% and 40.2% of
the investment portfolio, respectively. Fixed rate loans and
securities total 2.3% of the Company's investment portfolio as of
March 31, 2006. Additionally, the Company's adjustable rate
residential loans and residential adjustable rate mortgage ("ARM")
securities reset monthly and substantially all of its floating rate
corporate and commercial real estate loans and securities reset at
least quarterly. The Company has also fixed borrowings used to fund
hybrid ARM security investments using interest rate swaps and
interest rate corridors, which are accounted for as cash flow
hedges under GAAP. The Company made $1.8 billion and $4.0 billion
par amount of investments during the first quarter ended March 31,
2006 and 2005, respectively. The table below summarizes investment
portfolio purchases for the periods indicated and includes the par
amount, or face amount, of the securities and loans that were
purchased. Investment Portfolio Purchases (Amounts in thousands)
Three Months Ended Three Months Ended March 31, 2006 March 31, 2005
Par Amount % Par Amount % Securities: Residential ARM Securities
$1,063,776 58.1% $665,782 16.7% Residential Hybrid ARM Securities
-- -- 2,636,492 66.0 Corporate Debt Securities 127,769 7.0 112,005
2.8 Commercial Real Estate Debt Securities -- -- 10,000 0.2 Total
1,191,545 65.1 3,424,279 85.7 Loans: Residential ARM Loans 99,498
5.4 246,720 6.2 Corporate Loans 538,883 29.5 324,551 8.1 Total
638,381 34.9 571,271 14.3 Grand Total $1,829,926 100.0% $3,995,550
100.0% The table above excludes purchases of $10.4 million of
marketable equity securities and $50.9 million of non-marketable
equity securities during the quarter ended March 31, 2006 and $15.9
million of marketable equity securities during the quarter ended
March 31, 2005. Distribution On May 3, 2006, the Company's Board of
Directors declared a distribution of $0.45 per common share for the
quarter ended March 31, 2006, to stockholders of record on May 17,
2006, and payable on May 31, 2006. Because the distribution was
declared subsequent to March 31, 2006, the aggregate distribution
payable of $36.2 million is not reflected in the Company's
consolidated balance sheet as of March 31, 2006. Book Value Per
Common Share The Company's book value per common share was $21.20
and $20.59 as of March 31, 2006 and December 31, 2005,
respectively, exclusive of the distributions declared subsequent to
the end of the first quarter of 2006 of $0.45 and the fourth
quarter of 2005 of $0.40. The Company's book value per common share
as of March 31, 2006 and December 31, 2005, computed on a pro forma
basis inclusive of distributions declared subsequent to the
respective quarter ended, was $20.75 and $20.19, respectively. KKR
Atlantic Funding Trust On March 30, 2006, the Company closed KKR
Atlantic Funding Trust, its second $5.0 billion asset-backed
secured liquidity note facility. This facility provides the Company
with an alternative source of funding its investments in
residential mortgage loans and mortgage-backed securities by
issuing asset-backed secured liquidity notes that are rated A-1+,
P-1, and F1+, by Standard & Poor's Ratings Services, Moody's
Investors Service Inc., and Fitch Inc., respectively. Trust
Preferred Securities During March 2006, the Company formed KKR
Financial Capital Trust I for the sole purpose of issuing trust
preferred securities. On March 28, 2006, KKR Financial Capital
Trust I issued preferred securities to unaffiliated investors for
gross proceeds of $50.0 million. Interest is payable quarterly at a
fixed rate of 7.635% (ten-year LIBOR plus 2.45%) per annum through
March 2016 and thereafter at a floating rate equal to three-month
LIBOR plus 2.65%. Private Equity Investments During the first
quarter of 2006, the Company closed and funded a 6 billion yen, or
$50.9 million, private equity investment in a conglomerate based in
Asia. A condition to the Company's participation in the transaction
was a requirement that the Company enter into a non-disclosure
agreement which prohibits the Company from releasing the name of
the investee company. During May 2006, the Company committed to
make a private equity co- investment on a pari passu basis with
Kohlberg Kravis Roberts & Co. L.P. totaling $40.0 million in
Capmark Financial Group Inc ("Capmark"). Capmark, formerly known as
GMAC Commercial Holding Corp., is an industry leader in real estate
finance, investments and services. Information for Investors:
Conference Call and Webcast The Company will host a conference call
and audio web cast to review its first quarter 2006 results on
Thursday, May 11, 2006, at 11:00 a.m. EDT. The conference call can
be accessed by dialing 888-802-2278 (Domestic) or 913-312-1264
(International); a pass code is not required. A replay will be
available through May 25, 2006 by dialing 888-203-1112 (Domestic)
and 719-457-0820 (International) / pass code 8165334. A live web
cast of the call will be accessible on the Company's website, at
http://www.kkrfinancial.com/, via a link from the Investor
Relations section. A replay of the audio web cast will be archived
in the Investor Relations section of the Company's website. About
KKR Financial Corp. KKR Financial Corp. is a specialty finance
company that invests in multiple asset classes and uses leverage to
generate competitive leveraged risk-adjusted returns. The Company
currently makes investments in the following asset classes: (i)
residential mortgage loans and mortgage-backed securities; (ii)
corporate loans and debt securities; (iii) commercial real estate
loans and debt securities; (iv) asset-backed securities; and (v)
marketable and non-marketable equity securities. The Company also
makes opportunistic investments in other asset classes from time to
time. The Company was organized as a Maryland corporation on July
7, 2004, and commenced operations on August 12, 2004. The Company
is structured as a real estate investment trust and KKR Financial
Advisors LLC manages the Company pursuant to a management
agreement. KKR Financial Corp. and KKR Financial Advisors LLC are
affiliates of Kohlberg Kravis Roberts & Co. L.P. Statements in
this press release which are not historical fact may be deemed
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. Although KKR Financial Corp. believes the expectations
reflected in any forward-looking statements are based on reasonable
assumptions, the Company can give no assurance that its
expectations will be attained. Factors that could cause actual
results to differ materially from the Company's expectations
include completion of pending investments, continued ability to
originate new investments, the mix of originations and prepayment
levels, the availability and cost of capital for future
investments, competition within the specialty finance sector,
economic conditions, credit loss experience, and other risks
disclosed from time to time in the Company's filings with the SEC.
Investor Contact Media Contact Laurie Poggi Roanne Kulakoff and
Joseph Kuo KKR Financial LLC Kekst and Company 415-315-3718
212-521-4837 and 212-521-4863 Schedule I KKR Financial Corp.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the
Three For the Three Months Months (amounts in thousands, Ended
Ended except per share amounts) March 31, March 31, 2006 2005 Net
investment income: Securities interest income $79,964 $23,869 Loan
interest income 125,106 10,888 Dividend income 883 534 Other
interest income 1,845 255 Total investment income 207,798 35,546
Interest expense (156,563) (20,449) Net investment income 51,235
15,097 Other income: Net realized and unrealized gain on
derivatives and foreign exchange 10 127 Net realized gain on
investments 1,448 343 Fee and other income 215 368 Total other
income 1,673 838 Non-investment expenses: Related party management
compensation 14,440 8,008 Professional services 947 397 Loan
servicing expense 3,996 267 Insurance expense 224 217 Directors
expenses 373 199 General and administrative expenses 2,228 619
Total non-investment expenses 22,208 9,707 Income before income tax
expense 30,700 6,228 Income tax expense 312 112 Net income $30,388
$6,116 Net income per common share: Basic $0.39 $0.15 Diluted $0.38
$0.15 Weighted-average number of common shares outstanding: Basic
77,675 39,796 Diluted 79,314 40,301 Distributions per common share
$0.40 $-- Schedule II KKR Financial Corp. CONDENSED CONSOLIDATED
BALANCE SHEETS (UNAUDITED) (amounts in thousands, March 31,
December 31, except share information) 2006 2005 Assets: Cash and
cash equivalents $19,853 $16,110 Restricted cash and cash
equivalents 127,673 80,223 Securities available-for-sale,
$6,286,793 and $5,910,399 pledged as collateral as of March 31,
2006 and December 31, 2005, respectively 6,842,052 6,149,506 Loans,
net of allowance of $1,500, as of March 31, 2006 and December 31,
2005 8,521,380 8,846,341 Derivative assets 103,428 58,898 Interest
receivable 64,932 59,993 Principal receivable 4,513 7,108
Non-marketable equity securities 101,032 52,500 Other assets 30,676
19,861 Total assets $15,815,539 $15,290,540 Liabilities: Repurchase
agreements $8,774,319 $9,761,258 Collateralized loan obligation
senior secured notes 1,500,000 1,500,000 Asset-backed secured
liquidity notes 3,033,868 2,008,069 Secured revolving credit
facility 57,634 54,000 Secured demand loan 40,511 40,511 Junior
subordinated notes 51,550 -- Payable for securities purchases
562,555 196,315 Accounts payable, accrued expenses and other
liabilities 62,509 45,925 Accrued interest payable 21,777 21,415
Related party payable 5,180 3,673 Income tax liability 1,275 2,763
Derivative liabilities 544 1,465 Total liabilities 14,111,722
13,635,394 Stockholders' equity: Preferred stock, $0.01 par value,
50,000,000 shares authorized and none issued and outstanding at
March 31, 2006 and December 31, 2005 -- -- Common stock, $0.01 par
value, 250,000,000 shares authorized and 80,374,061 shares issued
and outstanding at March 31, 2006 and December 31, 2005 804 804
Additional paid-in-capital 1,646,779 1,639,996 Accumulated other
comprehensive income 61,994 18,344 Accumulated deficit (5,760)
(3,998) Total stockholders' equity 1,703,817 1,655,146 Total
liabilities and stockholders' equity $15,815,539 $15,290,540
Schedule III KKR Financial Corp. SUMMARY FINANCIAL DATA (UNAUDITED)
Three Months Three Months Ended Ended (amounts in thousands, March
31, March 31, except per share amounts) 2006 2005 Net Income:
$30,388 $6,116 Earnings per diluted common share $0.38 $0.15 Net
Income + Share-Based Compensation (1): $37,171 $10,862 Net income,
adjusted for share-based compensation, per diluted common share
$0.47 $0.27 REIT Taxable Income (2): $47,694 $15,314 REIT taxable
income per diluted common share $0.60 $0.38 Profitability Ratio
Information (3): Return on equity 7.4% 3.3% Return on assets 0.8%
0.5% Efficiency ratio 10.6% 26.7% Share Information: Common shares
outstanding 80,374 41,004 Basic EPS common shares outstanding
77,675 39,796 Diluted EPS common shares outstanding 79,314 40,301
Investment Portfolio Information March 31, December 31, 2006 2005
Residential mortgage securities $6,114,874 $5,537,838 Residential
loans 6,142,324 6,428,822 Total residential 12,257,198 11,966,660
Corporate securities 600,879 481,754 Corporate loans 2,066,139
1,897,277 Total corporate 2,667,018 2,379,031 Commercial real
estate securities 69,978 82,912 Commercial real estate loans
314,417 521,742 Total commercial real estate 384,395 604,654
Marketable equity securities 56,321 47,002 Total investment
portfolio 15,364,932 14,997,347 Balance Sheet Information March 31,
December 31, 2006 2005 Investment portfolio $15,364,932 $14,997,347
Non-marketable equity securities 101,032 52,500 Total assets
15,815,539 15,290,540 Total borrowings 13,457,882 13,363,838 Total
liabilities 14,111,722 13,635,394 Stockholders' equity 1,703,817
1,655,146 Book value per common share 21.20 20.59 Leverage 7.9x
8.1x Three Months Three Months Ended Ended Statement of Operations
Information March 31, March 31, 2006 2005 Investment income
$207,798 $35,546 Other income 1,673 838 Total income 209,471 36,384
Interest expense (156,563) (20,449) Share-based compensation
expense (6,783) (4,746) Management compensation (7,830) (3,336)
Loan servicing expense (3,996) (267) Other expenses (3,599) (1,358)
Total non-investment expenses (22,208) (9,707) Income before income
tax expense 30,700 6,228 Income tax expense 312 112 Net income
30,388 6,116 (1) Non-GAAP financial measurement consisting of GAAP
net income plus GAAP share-based compensation expense. (2) Non-GAAP
financial measurement. (3) All ratios computed on an annualized
basis. The efficiency ratio is defined as non-interest expense
divided by total income. Schedule IV KKR Financial Corp. INVESTMENT
PORTFOLIO BY INTEREST RATE TYPE AS OF MARCH 31, 2006 (UNAUDITED)
Estimated Portfolio (amounts in Carrying Amortized Fair Mix % by
thousands) (1)(2) Value Cost Value Fair Value Floating Rate:
Residential ARM Loans $2,011,296 $2,011,296 $2,006,260 13.1%
Residential ARM Securities 4,038,675 4,031,312 4,038,675 26.4
Corporate Loans 2,041,139 2,041,139 2,063,278 13.5 Corporate Debt
Securities 320,177 313,801 320,177 2.1 Commercial Real Estate Loans
278,707 278,707 277,499 1.8 Commercial Real Estate Debt Securities
62,512 62,665 62,512 0.4 Total Floating Rate 8,752,506 8,738,920
8,768,401 57.3 Hybrid Rate: Residential Hybrid ARM Loans 4,131,028
4,131,028 4,082,764 26.8 Residential Hybrid ARM Securities
2,076,199 2,126,865 2,076,199 13.6 Total Hybrid Rate 6,207,227
6,257,893 6,158,963 40.4 Fixed Rate: Corporate Loans 25,000 25,000
25,000 0.2 Corporate Debt Securities 280,702 274,357 280,702 1.8
Commercial Real Estate Loans 35,710 35,710 35,154 0.2 Commercial
Real Estate Debt Securities 7,466 7,150 7,466 0.1 Total Fixed Rate
348,878 342,217 348,322 2.3 Total $15,308,611 $15,339,030
$15,275,686 100.0% (1) The schedule excludes (i) marketable equity
securities with a fair value of $56.3 million and amortized cost of
$56.5 million, and (ii) non-marketable equity securities with a
fair value of $101.0 million and amortized cost of $101.0 million
as of March 31, 2006. As of March 31, 2006, the aggregate amortized
cost value of the Company's investment portfolio exceeded the
aggregate fair value of its portfolio by $63.6 million and, as of
the same date, the Company had unrealized gains totaling $92.6
million related to its cash flow hedges, as defined under SFAS No.
133. As of March 31, 2006, the aggregate net unamortized purchase
discount related to the Company's investment portfolio was $8.7
million. (2) The schedule summarizes the carrying value, amortized
cost, and fair value of the Company's investment portfolio as of
March 31, 2006, classified by interest rate type. Carrying value is
the value that investments are recorded on the Company's
consolidated balance sheet and is fair value for securities and
amortized cost for loans. Estimated fair values set forth in the
schedule are as of March 31, 2006 and are based on dealer quotes
and/or nationally recognized pricing services and using management
estimates for investment positions for which dealer quotes and/or
nationally recognized pricing data is not available. Schedule V KKR
Financial Corp. RECONCILATION OF REPORTED GAAP NET INCOME TO TOTAL
TAXABLE INCOME AND REIT TAXABLE INCOME (UNAUDITED) Estimates for
the For the three (in thousands, except three months ended months
ended per share amounts) March 31, 2006 March 31, 2005 Amount Per
Share Amount Per Share Reported net income $30,388 $0.38 $6,116
$0.15 Interest income and expense 2,093 0.03 110 -- Share-based
compensation 6,783 0.09 4,746 0.12 Foreign currency translation
(gains) and losses (374) -- 192 0.01 Gains on sales of investments
to affiliates 888 0.01 4,253 0.11 Realized and unrealized
derivative gains and losses 1,416 0.02 (488) (0.01) Book/tax year
end difference adjustment for CLOs/CDOs 8,168 0.10 -- -- Other 204
-- 52 -- Income tax expense 312 -- 112 -- Total taxable income (1)
$49,878 $0.63 $15,093 $0.38 Undistributed taxable (income) and loss
of domestic taxable REIT subsidiary (2,184) (0.03) 221 -- REIT
taxable income (loss)(1) $47,694 $0.60 $15,314 $0.38
Weighted-average diluted common shares outstanding during the
period 79,314 40,301 (1) Total taxable income and REIT taxable
income are non-GAAP financial measurements and do not purport to be
an alternative to net income determined in accordance with GAAP as
a measure of operating performance or to cash flows from operating
activities determined in accordance with GAAP as a measure of
liquidity. Total taxable income is the aggregate amount of taxable
income generated by the Company and by its domestic and foreign
taxable REIT subsidiaries. REIT taxable income excludes the
undistributed taxable income of the Company's domestic taxable REIT
subsidiary, which is not included in REIT taxable income until
distributed to the Company. There is no requirement that the
Company's domestic taxable REIT subsidiary distribute its earnings
to the Company. REIT taxable income, however, includes the taxable
income of the Company's foreign taxable REIT subsidiaries because
the Company will generally be required to recognize and report its
taxable income on a current basis. These non-GAAP financial
measurements are important to the Company because the Company is
structured as a REIT and the Internal Revenue Code requires that
the Company pay substantially all of its taxable income in the form
of distributions to its stockholders. The non-GAAP financial
measurements of total taxable income and REIT taxable income are
critical in the determination of the amount of the minimum
distributions that the Company must pay to its stockholders so as
to comply with the rules set forth in the Internal Revenue Code of
1986, as amended. Because not all companies use identical
calculations, this presentation of total taxable income and REIT
taxable income may not be comparable to other similarly titled
measures prepared and reported by of other companies. DATASOURCE:
KKR Financial Corp. CONTACT: investors, Laurie Poggi of KKR
Financial LLC, +1-415-315-3718; or media, Roanne Kulakoff,
+1-212-521-4837, or Joseph Kuo, +1-212-521-4863, both of Kekst and
Company, for KKR Financial LLC Web site:
http://www.kkrfinancial.com/
Copyright
Kkr Financial (NYSE:KFN)
Historical Stock Chart
From Jun 2024 to Jul 2024
Kkr Financial (NYSE:KFN)
Historical Stock Chart
From Jul 2023 to Jul 2024