SAN FRANCISCO, Aug. 2 /PRNewswire-FirstCall/ -- KKR Financial Corp.
(NYSE:KFN) ("KFN" or the "Company") today announced its results for
the second quarter of 2006. Highlights of KKR Financial Corp.'s
performance include: -- Distribution of $0.49 per common share
declared for the quarter ended June 30, 2006. -- Book value of
$21.58 per common share, an increase of 1.8% from March 31, 2006,
and a 4.8% increase from December 31, 2005. -- Net income for the
quarter ended June 30, 2006 of $34.9 million, or $0.44 per diluted
common share. -- Net income adjusted for share-based compensation,
a non-GAAP financial measurement, for the quarter ended June 30,
2006 of $40.1 million, or $0.50 per diluted common share. -- REIT
taxable income, a non-GAAP financial measurement, for the quarter
ended June 30, 2006 of $41.7 million, or $0.52 per diluted common
share. -- Investment portfolio of $15.9 billion as of June 30,
2006, a 6.0% increase from $15.0 billion as of December 31, 2005.
-- Closed a $375.0 million three year senior secured revolving
credit facility with Bank of America, N.A., Citigroup North
America, Inc., and J.P. Morgan Chase Bank N.A. -- 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%. To
date, the Company has issued $100 million of trust preferred
securities. -- Closed and funded the Company's sixth private equity
investment totaling $40.7 million in Capmark Financial Group Inc.
The Company's aggregate private equity portfolio, consisting of
common and preferred stock, totaled $139.4 million as of
quarter-end. Subsequent to quarter-end the Company completed its
seventh private equity investment in Brambles Industrial Services,
consisting of $20.0 million in equity and $40.0 million in
subordinated zero-coupon debt securities. KFN reported net income
for the three and six months ended June 30, 2006 of $34.9 million
and $65.3 million, respectively, or $0.44 and $0.82 per diluted
common share, respectively. Current period results compare with net
income of $8.5 million and $14.6 million, respectively, or $0.21
and $0.36 per diluted common share, respectively, for the three and
six months ended June 30, 2005. These figures reflect growth of net
income by 310.6% and 347.3%, respectively, for the three and six
month periods ended June 30, 2006 over the same periods in the
prior year. The change from 2005 to 2006 is primarily attributable
to the increase in our investment portfolio subsequent to June 30,
2005. Net income includes share-based compensation expense for the
three and six months ended June 30, 2006 totaling $5.1 million and
$11.9 million, respectively, or $0.06 and $0.15 per diluted common
share, respectively. 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
three and six months ended June 30, 2006 totaled $40.1 million and
$77.2 million, respectively, or $0.50 and $0.97 per diluted common
share, respectively. 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 second
quarter ended June 30, 2006 totaled $41.7 million, or $0.52 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 June 30,
2006 with the Securities and Exchange Commission today, August 2,
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 period ended June 30, 2006, the Company's investment portfolio
increased by 6.0% from $15.0 billion as of December 31, 2005 to
$15.9 billion as of June 30, 2006. As of June 30, 2006, the
aggregate amortized cost of the Company's investment portfolio
exceeded the estimated fair value of its investment portfolio by
$89.1 million and, as of the same date, the Company had unrealized
gains totaling $118.0 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
June 30, 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 $14.9 million and the
weighted average amortized cost, as a percentage of aggregate par
value, of the investment portfolio was 99.91%. 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 materially 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 June 30, 2006 totaled 58.3% and 37.2% of
the investment portfolio, respectively. Fixed rate loans and
securities total 3.2% of the Company's investment portfolio as of
June 30, 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 invested $1.7 billion and $3.5
billion during the three and six months ended June 30, 2006,
respectively, compared to $1.4 billion and $5.4 billion par amount
of assets during the three and six months ended June 30, 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
Three months ended June 30, 2006 ended June 30, 2005 Par Amount %
Par Amount % Securities: Residential ARM Securities $800,491 47.5%
$73,423 5.3% Residential Hybrid ARM Securities -- -- 299,040 21.9
Corporate Debt Securities 212,247 12.6 106,500 7.8 Commercial Real
Estate Debt Securities -- -- -- -- Total Securities Principal
Balance 1,012,738 60.1 478,963 35.0 Loans: Residential ARM Loans
26,054 1.5 189,781 13.9 Corporate Loans 647,619 38.4 592,150 43.3
Commercial Real Estate Loans -- -- 106,750 7.8 Total Loans
Principal Balance 673,673 39.9 888,681 65.0 Grand Total Principal
Balance $1,686,411 100.0% $1,367,644 100.0% Six months ended Six
months ended June 30, 2006 June 30, 2005 Par Amount % Par Amount %
Securities: Residential ARM Securities $1,864,267 53.0% $739,205
13.8% Residential Hybrid ARM Securities -- -- 2,935,532 54.7
Corporate Debt Securities 340,016 9.7 218,505 4.1 Commercial Real
Estate Debt Securities -- -- 10,000 0.2 Total Securities Principal
Balance 2,204,283 62.7 3,903,242 72.8 Loans: Residential ARM Loans
125,552 3.6 436,501 8.1 Corporate Loans 1,186,502 33.7 916,701 17.1
Commercial Real Estate Loans -- -- 106,750 2.0 Total Loans
Principal Balance 1,312,054 37.3 1,459,952 27.2 Grand Total
Principal Balance $3,516,337 100.0% $5,363,194 100.0% The table
above excludes purchases of $16.8 million (purchase cost) of
marketable equity securities and $40.7 million of non-marketable
equity securities during the three months ended June 30, 2006, and
$27.2 million (purchase cost) of marketable equity securities and
$91.6 million (purchase cost) of non-marketable equity securities
during the six months ended June 30, 2006. The table also excludes
$8.8 million (purchase cost) and $24.7 million (purchase cost) of
marketable equity securities during the three and six months ended
June 30, 2005, respectively. Distribution On August 2, 2006, the
Company's Board of Directors declared a distribution of $0.49 per
common share for the quarter ended June 30, 2006, to stockholders
of record on August 16, 2006, and payable on August 30, 2006.
Because the distribution was declared subsequent to June 30, 2006,
the aggregate distribution payable of $39.4 million is not
reflected in the Company's consolidated balance sheet as of June
30, 2006. Book Value Per Common Share The Company's book value per
common share was $21.58 and $20.59 as of June 30, 2006 and December
31, 2005, respectively, exclusive of the distributions declared
subsequent to the end of the second quarter of 2006 of $0.49 and
the fourth quarter of 2005 of $0.40. The Company's book value per
common share as of June 30, 2006 and December 31, 2005, computed on
a pro forma basis inclusive of distributions declared subsequent to
the respective quarter ended, was $21.09 and $20.19, respectively.
Credit Facility During June 2006, the Company's $275.0 million
secured revolving credit facility matured and was replaced with a
$375.0 million three year senior secured revolving credit facility.
The Company has the option to increase the senior secured revolving
credit facility size up to $550.0 million at any time so long as no
default or event of default on the facility has occurred and
subject to addition of new lenders, increases in the commitments of
existing lenders, or a combination thereof. The senior secured
revolving credit facility matures in June 2009 and consists of two
tranches. Outstanding borrowings under the senior secured revolving
credit facility bear interest at either (i) an alternate base rate
per annum equal to the greater of (a) the prime rate in effect on
such day, and (b) the federal funds in effect on such day plus
0.50%, or (ii) an interest rate per annum equal to the LIBOR rate
for the applicable interest period plus 0.50% for borrowings under
tranche A of the facility and 0.75% for borrowings under tranche B
of the facility. As of June 30, 2006 the Company had $112.6 million
of borrowings outstanding under this facility. Trust Preferred
Securities During June 2006, the Company formed KKR Financial
Capital Trust II ("Trust II") for the sole purpose of issuing trust
preferred securities. On June 2, 2006, Trust II issued preferred
securities to unaffiliated investors for gross proceeds of $50.0
million and common securities to the Company for $1.6 million.
Interest is payable quarterly at a fixed rate of 8.09% (ten-year
LIBOR plus 2.45%) through July 2016 and thereafter at a floating
rate equal to three-month LIBOR plus 2.65%. The trust preferred
securities can be called at par on or after five years. Private
Equity Investments During the second quarter of 2006, the Company
made a private equity co- investment on a pari passu basis with
Kohlberg Kravis Roberts & Co. L.P. totaling $40.7 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. Subsequent to
quarter-end, the Company made a $20.0 million private equity
investment in Brambles Industrial Services ("Brambles") during July
2006 and simultaneously invested $40.0 million in subordinated
zero-coupon debt securities issued by Brambles. Brambles is based
in Australia and is a leading provider of on-site and off-site
support services, primarily to blue chip companies operating in the
coal, metals and minerals, and steel industries. Information for
Investors: Conference Call and Webcast The Company will host a
conference call and audio webcast to review its second quarter 2006
results on Thursday, August 3, 2006, at 8:00 a.m. EDT. The
conference call can be accessed by dialing 800-665-0430 (Domestic)
or 913-312-1300 (International); a pass code is not required. A
replay will be available through August 17, 2006 by dialing
888-203-1112 (Domestic) and 719-457-0820 (International)/pass code
9454137. 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)
(amounts in thousands, except per share information) For the three
For the three For the six For the six months ended months ended
months ended months ended June 30, 2006 June 30, 2005 June 30, 2006
June 30, 2005 Net investment income: Securities interest income
$94,010 $46,048 $173,974 $69,918 Loan interest income 130,098
21,102 255,204 31,990 Dividend income 912 933 1,795 1,467 Other
interest income 1,807 943 3,652 1,197 Total investment income
226,827 69,026 434,625 104,572 Interest expense (175,094) (48,281)
(331,657) (68,730) Net investment income 51,733 20,745 102,968
35,842 Other income: Net realized and unrealized gain (loss) on
derivatives and foreign exchange 3,299 (176) 3,309 (49) Net
realized gain on investments 691 790 2,139 1,151 Fee and other
income 458 1,245 673 1,595 Total other income 4,448 1,859 6,121
2,697 Non-investment expenses: Related party management
compensation 13,778 10,731 28,218 18,739 Professional services 548
788 1,495 1,185 Loan servicing expense 3,720 363 7,716 630
Insurance expense 274 216 498 433 Directors expenses 375 152 748
351 General and administrative expenses 2,436 858 4,664 1,477 Total
non- investment expenses 21,131 13,108 43,339 22,815 Income before
income tax expense 35,050 9,496 65,750 15,724 Income tax expense
119 994 431 1,106 Net income $34,931 $8,502 $65,319 $14,618 Net
income per common share: Basic $0.45 $0.21 $0.84 $0.37 Diluted
$0.44 $0.21 $0.82 $0.36 Weighted-average number of common shares
outstanding: Basic 77,675 40,212 77,675 40,004 Diluted 79,410
40,994 79,237 40,689 Distributions declared per common share $0.45
$0.40 $0.85 $0.65 Schedule II KKR Financial Corp. CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (amounts in thousands,
except share information) June 30, December 31, 2006 2005 Assets
Cash and cash equivalents $21,684 $16,110 Restricted cash and cash
equivalents 105,254 80,223 Securities available-for-sale,
$6,856,963 and $5,910,399 pledged as collateral as of June 30, 2006
and December 31, 2005, respectively 7,268,047 6,149,506 Loans, net
of allowance for loan losses of $1,500 as of June 30, 2006 and
December 31, 2005 8,423,645 8,846,341 Loans held for sale 107,262
-- Derivative assets 129,588 58,898 Interest receivable 75,001
59,993 Principal receivable 1,258 7,108 Non-marketable equity
securities 139,429 52,500 Income tax receivable 908 -- Other assets
34,859 19,861 Total assets $16,306,935 $15,290,540 Liabilities
Repurchase agreements $5,146,903 $9,761,258 Collateralized loan
obligation senior secured notes 1,525,000 1,500,000 Asset-backed
secured liquidity notes 7,292,844 2,008,069 Secured revolving
credit facility 112,594 54,000 Secured demand loan 41,658 40,511
Junior subordinated notes 103,100 -- Payable for securities
purchases 212,299 196,315 Accounts payable, accrued expenses and
other liabilities 104,347 45,925 Accrued interest payable 27,287
21,415 Related party payable 5,276 3,673 Income tax liability 622
2,763 Derivative liabilities 188 1,465 Total liabilities 14,572,118
13,635,394 Stockholders' Equity Preferred stock, $0.01 par value,
50,000,000 shares authorized and none issued and outstanding at
June 30, 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 June 30, 2006 and December 31, 2005 804 804
Additional paid-in-capital 1,651,922 1,639,996 Accumulated other
comprehensive income 89,087 18,344 Accumulated deficit (6,996)
(3,998) Total stockholders' equity 1,734,817 1,655,146 Total
liabilities and stockholders' equity $16,306,935 $15,290,540
Schedule III KKR Financial Corp. SUMMARY FINANCIAL DATA (UNAUDITED)
(amounts in thousands, except share information) Three Months Three
Months Six Months Six Months Ended Ended Ended Ended June 30, 2006
June 30, 2005 June 30, 2006 June 30, 2005 Net Income: $34,931
$8,502 $65,319 $14,618 Earnings per diluted common share $0.44
$0.21 $0.82 $0.36 Net Income + Share-Based Compensation (1):
$40,074 $15,836 $77,245 $26,698 Net income, adjusted for
share-based compensation, per diluted common share $0.50 $0.39
$0.97 $0.66 REIT Taxable Income (2): $41,684 $16,895 $89,378
$32,209 REIT taxable income per diluted common share $0.52 $0.41
$1.12 $0.79 Profitability Ratio Information (3): Return on equity
8.1% 4.6% 7.8% 3.9% Return on assets 0.9% 0.5% 0.8% 0.5% Efficiency
ratio 9.1% 18.5% 9.8% 21.3% Share Information: Common shares
outstanding 80,374 78,471 80,374 78,471 Basic EPS common shares
outstanding 77,675 40,212 77,675 40,004 Diluted EPS common shares
outstanding 79,410 40,994 79,237 40,689 Investment Portfolio
Information June 30, 2006 December 31, 2005 Residential mortgage
securities $6,385,732 $5,537,838 Residential loans 5,742,956
6,428,822 Total residential 12,128,688 11,966,660 Corporate
securities 746,288 481,754 Corporate loans 2,478,459 1,897,277
Total corporate 3,224,747 2,379,031 Commercial real estate
securities 69,543 82,912 Commercial real estate loans 310,992
521,742 Total commercial real estate 380,535 604,654 Marketable
equity securities 66,484 47,002 Non-marketable equity securities
139,429 52,500 Total investment portfolio 15,939,883 15,049,847
Balance Sheet Information June 30, 2006 December 31, 2005
Investment portfolio $15,939,883 $15,049,847 Total assets
16,306,935 15,290,540 Total borrowings 14,222,099 13,363,838 Total
liabilities 14,572,118 13,635,394 Stockholders' equity 1,734,817
1,655,146 Book value per common share 21.58 20.59 Leverage 8.2x
8.1x Statement of Operations Information Three Months Three Months
Six Months Six Months Ended Ended Ended Ended June 30, 2006 June
30, 2005 June 30, 2006 June 30, 2005 Investment income $226,827
$69,026 $434,625 $104,572 Other income 4,448 1,859 6,121 2,697
Total income 231,275 70,885 440,746 107,269 Interest expense
(175,094) (48,281) (331,657) (68,730) Share-based compensation
expense (5,143) (7,334) (11,926) (12,080) Management compensation
(8,810) (3,383) (16,641) (6,719) Loan servicing expense (3,720)
(363) (7,716) (630) Other expenses (3,458) (2,028) (7,056) (3,386)
Total non- investment expenses (21,131) (13,108) (43,339) (22,815)
Income before income tax expense 35,050 9,496 65,750 15,724 Income
tax expense 119 994 431 1,106 Net income 34,931 8,502 65,319 14,618
(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 JUNE 30, 2006 (UNAUDITED) (amounts in
thousands) Carrying Amortized Estimated Portfolio Mix Value Cost
Fair Value % by Fair Value Floating Rate: Residential ARM Loans
$1,779,419 $1,779,419 $1,774,532 11.2% Residential ARM Securities
4,387,857 4,378,482 4,387,857 27.6 Corporate Loans 2,440,722
2,440,722 2,449,724 15.4 Corporate Debt Securities 345,979 336,374
345,979 2.2 Commercial Real Estate Loans 232,515 232,515 232,294
1.5 Commercial Real Estate Debt Securities 62,312 62,503 62,312 0.4
Total Floating Rate 9,248,804 9,230,015 9,252,698 58.3 Hybrid Rate:
Residential Hybrid ARM Loans 3,963,537 3,963,537 3,899,597 24.6
Residential Hybrid ARM Securities 1,997,875 2,048,441 1,997,875
12.6 Total Hybrid Rate 5,961,412 6,011,978 5,897,472 37.2 Fixed
Rate: Corporate Loans 37,737 37,737 37,698 0.2 Corporate Debt
Securities 400,309 395,791 400,309 2.5 Commercial Real Estate Loans
78,477 78,477 78,374 0.4 Commercial Real Estate Debt Securities
7,231 6,714 7,231 0.1 Total Fixed Rate 523,754 518,719 523,612 3.2
Marketable and Non- Marketable Equity Securities: Common and
Preferred Stock 66,484 68,608 66,484 0.4 Non-Marketable Equity
Securities 139,429 139,429 139,429 0.9 Total Marketable and
Non-Marketable Equity Securities 205,913 208,037 205,913 1.3 Total
$15,939,883 $15,968,749 $15,879,695 100.0% (1) As of June 30, 2006,
the aggregate amortized cost value of the Company's investment
portfolio exceeded the aggregate fair value of its portfolio by
$89.1 million and, as of the same date, the Company had unrealized
gains totaling $118.0 million related to its cash flow hedges, as
defined under SFAS No. 133. As of June 30, 2006, the aggregate net
unamortized purchase discount related to the Company's investment
portfolio was $14.9 million. (2) The schedule summarizes the
carrying value, amortized cost, and fair value of the Company's
investment portfolio as of June 30, 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 June 30, 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. RECONCILIATION OF
REPORTED GAAP NET INCOME TO TOTAL TAXABLE INCOME AND REIT TAXABLE
INCOME (UNAUDITED) Estimated for the Three months three months
ended June 30, ended June 30, 2006 2005 (amounts in thousands,
except per share information) Amount Per Share Amount Per Share
Reported net income $34,931 $0.44 $8,502 $0.21 Interest income and
expense 3,199 0.04 (21) -- Share- based compensation 5,143 0.06
7,334 0.18 Tax gains on sales of assets to affiliates 670 0.01 52
-- Realized and unrealized derivative gains and losses (1,955)
(0.02) 119 -- Foreign currency translations (gains) and losses
(826) (0.01) 2,344 0.06 Book/tax year end difference adjustment for
CLOs/CDOs -- -- -- -- Other 227 -- 57 -- Income tax expense 119 --
994 0.02 Total taxable income 41,508 0.52 19,381 0.47 Undistributed
taxable (income) and loss of domestic taxable REIT subsidiary 176
-- (2,486) (0.06) REIT taxable income $41,684 $0.52 $16,895 $0.41
Number of common shares outstanding: Weighted-average diluted
common shares outstanding during the period 79,410 40,994 Estimated
for the Six months six months ended ended June 30, 2006 June 30,
2005 Amount Per Share Amount Per Share Reported net income $65,319
$0.82 $14,618 $0.36 Interest income and expense 5,292 0.07 89 --
Share-based compensation 11,926 0.15 12,080 0.30 Tax gains on sales
of assets to affiliates 1,558 0.02 4,305 0.11 Realized and
unrealized derivative gains and losses (539) (0.01) (369) (0.01)
Foreign currency translations (gains) and losses (1,200) (0.02)
2,536 0.06 Book/tax year end difference adjustment for CLOs/CDOs
8,168 0.10 -- -- Other 431 0.01 109 -- Income tax expense 431 0.01
1,106 0.03 Total taxable income 91,386 1.15 34,474 0.85
Undistributed taxable (income) and loss of domestic taxable REIT
subsidiary (2,008) (0.03) (2,265) (0.06) REIT taxable income
$89,378 $1.12 $32,209 $0.79 Number of common shares outstanding:
Weighted-average diluted common shares outstanding during the
period 79,237 40,689 (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 LLC 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/
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Kkr Financial (NYSE:KFN)
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Kkr Financial (NYSE:KFN)
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