SAN FRANCISCO, Feb. 6, 2012 /PRNewswire/ -- KKR Financial
Holdings LLC (NYSE: KFN) ("KFN" or the "Company") today announced
its results for the fourth quarter and year ended December 31, 2011.
Fourth Quarter and Full Year 2011 Highlights
- Net income for the fourth quarter and year ended
December 31, 2011 totaled $77.0
million, or $0.43 per diluted
common share, and $318.1 million, or
$1.75 per diluted common share,
respectively.
- Declared a quarterly cash distribution of $0.18 per common share for the fourth quarter of
2011 and an annual special cash distribution of $0.08 per common share for the year ended
December 31, 2011.
- Book value per common share of $9.41 as of December 31,
2011 as compared to book value per common share of
$9.14 as of September 30, 2011 and $9.24 as of December 31,
2010.
- Completed a $258.8 million
30-year 8.375% senior note offering that generated $250.7 million of net proceeds for the
Company.
For the fourth quarter and full year ended December 31, 2011, KFN reported net income of
$77.0 million, or $0.43 per diluted common share, and $318.1 million, or $1.75 per diluted common share, respectively.
Comparatively, for the fourth quarter and year ended December 31, 2010, KFN reported net income of
$78.2 million, or $0.48 per diluted common share, and $371.1 million, or $2.32 per diluted common share, respectively.
KFN's fourth quarter 2011 results included net investment income
of $90.0 million, other income of
$13.7 million and non-investment
expenses of $27.1 million.
Comparatively, KFN's fourth quarter 2010 results reflected net
investment income of $81.0 million, other income of $22.4 million and non-investment expenses of
$25.0 million. Net investment income
increased $9.0 million from the
fourth quarter ended December 31,
2010 to 2011 primarily due to an increase in net revenue
earned on the Company's working and royalty interests in oil and
gas properties of $10.0 million, as
well as the absence of a provision for loan losses recorded in the
fourth quarter of 2010. These two factors were partially offset by
a reduction in accelerated accretion income, included in loan and
securities interest income, from prepayments on the Company's
corporate debt portfolio of $14.2
million. Other income decreased $8.7
million from the fourth quarter ended December 31, 2010 to 2011 primarily due to a
reduction in net realized and unrealized gains on investments of
$9.7 million.
KFN's results for the full year ended December 31, 2011 included net investment income
of $344.8 million, other income of
$93.4 million and non-investment
expenses of $112.1 million.
Comparatively, KFN's results for the year ended December 31,
2010 included net investment income of $319.4 million, other income of $143.4 million and non-investment expenses
of $91.0 million. The $25.4 million year over year increase in net
investment income was primarily driven by an increase in net
revenue earned on the Company's oil and gas properties of
$28.8 million. Correspondingly, the
$21.2 million increase in
non-investment expenses year over year was primarily driven by
expenses incurred on the Company's oil and gas properties,
including acquisition related costs, of $20.2 million during 2011. Other income for
the year ended December 31, 2010
compared to 2011 decreased $49.9
million primarily due to an aggregate one-time gain on
extinguishment of debt totaling $38.7
million recorded during 2010, related to the purchase of
certain mezzanine and subordinated notes issued by two of the
Company's CLO subsidiaries.
Portfolio Activity
Natural Resources Strategy
During the fourth quarter of 2011, the Company deployed or
committed to deploy approximately $120
million of capital to three transactions through the
Company's natural resources strategy. The first was an approximate
$65 million investment in a joint
venture with Quicksilver Resources to form a midstream partnership
dedicated to the acquisition of existing pipelines, and
construction and operation of additional natural gas midstream
pipelines and treatment facilities in the Horn River basin in
Western Canada. This investment
carries with it a 15% contractual return including return of
principal over ten years plus the terminal value in year ten of the
pipelines and treatment plant.
Second, during the fourth quarter of 2011, the Company committed
approximately $70 million to acquire
working interests in conventional oil and gas properties located in
East Texas, Louisiana and Mississippi. The assets consist of interests
in over 625 active producing wells across over 48,000 acres in over
20 distinct fields. The acquisition of these working interests was
completed in January 2012 and was
partially funded with approximately $41.5
million of cash and $28.5
million of borrowings through the Company's non-recourse
asset-based natural resources credit facility.
Finally, during the fourth quarter of 2011, the Company deployed
$15.0 million of capital to acquire a
private equity investment in Samson Investment Company, one of the
largest private exploration and production companies in
the United States.
Special Situations Strategy
During the fourth quarter of 2011, the Company deployed or
committed to deploy approximately $45
million to several different special situations distressed
opportunities, predominantly in Europe. In addition, during the quarter, the
Company recorded a $5.0 million gain
from the exit of a $13.6 million
special situations investment made in the distressed senior debt of
an Australian headquartered scrap metal recycling business. The
$5.0 million gain combined with
interest income received during the holding period of the debt
resulted in a 75% internal rate of return from the date of
acquisition in March 2011 through the
exit date.
Senior Notes Offering
During the fourth quarter ended December
31, 2011, following the receipt of a BBB rating from Fitch
Ratings and a BBB- rating from Standard & Poor's, the Company
issued $225.0 million par amount of
8.375% Senior Notes due November 15,
2041 ("8.375% Notes"), resulting in net proceeds of
$218.0 million. The Company also
granted the underwriters an option to purchase up to an additional
$33.8 million par amount of 8.375%
Notes solely to cover over-allotments, which was exercised in full,
resulting in net proceeds of $32.7
million. The total net proceeds from this offering of
$250.7 million will be used to
repurchase or repay a portion of the Company's existing senior
indebtedness and for general corporate purposes.
Book Value
Book value per share increased to $9.41 from $9.14 as
of September 30, 2011 and $9.24
as of December 31, 2010. The increase
in book value per share from September 30,
2011 was primarily driven by the Company's earnings for the
fourth quarter of $0.43 per diluted
common share, primarily offset by the Company's distribution to
shareholders for the third quarter of 2011 of $0.18 per common share.
Distributions
On February 2, 2012, the Company's
board of directors declared a cash distribution of $0.18 per common share for the quarter ended
December 31, 2011. The distribution
is payable on March 1, 2012 to common
shareholders of record as of the close of business on February 16, 2012.
In addition, on February 2, 2012,
the Company's board of directors declared an annual special
distribution of $0.08 per common
share for the year ended December 31,
2011. The distribution is payable on March 29, 2012 to common shareholders of record
as of the close of business on March 15,
2012. Consistent with the Company's distribution policy, the
Company's board of directors considered a number of factors in
determining to declare this special distribution, including current
market conditions, existing restrictions in the Company's borrowing
agreements, the amount of ordinary taxable income or loss earned by
the Company, gains or losses the Company recognized on the
disposition of assets and the Company's liquidity.
Information for Investors: Conference Call and
Webcast
The Company will host a conference call and audio webcast to
review its results for the fourth quarter ended December 31, 2011 on February 6, 2012, at 2:00 p.m. PT
(5:00 p.m. ET). The conference call may be accessed by dialing
(888) 215-6894 (Domestic) or +1 (913) 981-4905
(International); a pass code is not required. A telephonic replay
of the call will be available through February 20, 2012 by dialing (888) 203-1112
(Domestic) and +1 (719) 457-0820 (International) / pass code
6184837. 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 December
31, 2011. 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, 2010,
filed with the SEC on February 28, 2011 and its Quarterly
Report on Form 10-Q for the quarter ended September 30, 2011, filed with the SEC on
November 3, 2011.
Schedule I
KKR
Financial Holdings LLC
CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in
thousands, except per share information)
|
|
|
For the three
months ended December 31, 2011
|
For the three
months ended December 31, 2010
|
For the year
ended December 31, 2011
|
For the year
ended December 31, 2010
|
|
Net investment
income:
|
|
|
|
|
|
Loan interest income
|
$101,644
|
$114,822
|
$418,142
|
$397,634
|
|
Securities interest
income
|
23,079
|
25,328
|
87,851
|
104,395
|
|
Other investment
income
|
11,685
|
1,244
|
36,028
|
3,330
|
|
Total investment
income
|
136,408
|
141,394
|
542,021
|
505,359
|
|
Interest expense
|
35,906
|
31,298
|
133,609
|
131,700
|
|
Interest expense to
affiliates
|
10,532
|
8,080
|
49,458
|
25,152
|
|
Provision for loan
losses
|
—
|
21,034
|
14,194
|
29,121
|
|
Net investment income
|
89,970
|
80,982
|
344,760
|
319,386
|
|
Other income:
|
|
|
|
|
|
Net realized and unrealized gain
on investments
|
15,761
|
25,506
|
88,955
|
108,553
|
|
Net realized and unrealized loss
on derivatives and foreign exchange
|
(3,517)
|
(1,257)
|
(3,812)
|
(4,694)
|
|
Net realized and unrealized gain
(loss) on residential mortgage-backed securities,
residential mortgage loans, and residential mortgage-backed
securities issued, carried at estimated fair value
|
680
|
(3,632)
|
2,825
|
(11,396)
|
|
Net (loss) gain on restructuring
and extinguishment of debt
|
—
|
—
|
(1,736)
|
39,999
|
|
Other income
|
815
|
1,805
|
7,215
|
10,890
|
|
Total other income
|
13,739
|
22,422
|
93,447
|
143,352
|
|
Non-investment
expenses:
|
|
|
|
|
|
Related party management
compensation
|
14,471
|
16,607
|
68,185
|
69,125
|
|
General, administrative and
directors expenses
|
10,649
|
6,389
|
37,741
|
16,516
|
|
Professional services
|
1,941
|
1,996
|
6,198
|
5,331
|
|
Total non-investment
expenses
|
27,061
|
24,992
|
112,124
|
90,972
|
|
Income from before income tax
expense
|
76,648
|
78,412
|
326,083
|
371,766
|
|
Income tax (benefit)
expense
|
(333)
|
213
|
8,011
|
702
|
|
Net income
|
$76,981
|
$78,199
|
$318,072
|
$371,064
|
|
Net income per common
share:
|
|
|
|
|
|
Basic
|
$0.43
|
$0.48
|
$1.79
|
$2.33
|
|
Diluted
|
$0.43
|
$0.48
|
$1.75
|
$2.32
|
|
Weighted average number of
common shares outstanding:
|
|
|
|
|
|
Basic
|
177,759
|
160,662
|
177,560
|
157,936
|
|
Diluted
|
179,675
|
163,173
|
180,897
|
158,771
|
|
|
|
|
|
|
|
|
Schedule II
KKR
Financial Holdings LLC
CONSOLIDATED
BALANCE SHEETS (UNAUDITED)
(Amounts in
thousands, except share information)
|
|
|
December
31, 2011
|
December
31, 2010
|
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$392,154
|
$313,829
|
|
Restricted cash and cash
equivalents
|
399,620
|
571,425
|
|
Securities
|
922,603
|
932,823
|
|
Corporate loans, net (includes
$317,332 and $463,628 loans held for sale as of December 31,
2011 and December 31, 2010, respectively)
|
6,443,399
|
6,321,444
|
|
Equity investments, at estimated
fair value ($12,222 and $12,036 pledged as collateral as of
December 31, 2011 and December 31, 2010,
respectively)
|
189,845
|
99,955
|
|
Derivative assets
|
28,463
|
19,519
|
|
Interest and principal
receivable
|
62,124
|
57,414
|
|
Other assets
|
209,020
|
102,003
|
|
Total
assets
|
$8,647,228
|
$8,418,412
|
|
Liabilities
|
|
|
|
Collateralized loan obligation
secured notes
|
$5,540,037
|
$5,630,272
|
|
Collateralized loan obligation
junior secured notes to affiliates
|
365,848
|
366,124
|
|
Credit facilities
|
38,300
|
18,400
|
|
Convertible senior
notes
|
299,830
|
344,142
|
|
Senior notes
|
250,676
|
—
|
|
Junior subordinated
notes
|
283,517
|
283,517
|
|
Accounts payable, accrued
expenses and other liabilities
|
24,680
|
14,193
|
|
Accrued interest
payable
|
25,536
|
22,846
|
|
Accrued interest payable to
affiliates
|
6,561
|
6,316
|
|
Related party payable
|
11,078
|
12,988
|
|
Derivative
liabilities
|
125,333
|
76,566
|
|
Total
liabilities
|
6,971,396
|
6,775,364
|
|
Shareholders'
Equity
|
|
|
|
Preferred shares, no par value,
50,000,000 shares authorized and none issued and outstanding at
December 31, 2011 and December 31, 2010
|
—
|
—
|
|
Common shares, no par value,
500,000,000 shares authorized, and 178,145,482 and 177,848,565
shares issued and outstanding at December 31, 2011 and
December 31, 2010, respectively
|
—
|
—
|
|
Paid-in-capital
|
2,759,478
|
2,756,200
|
|
Accumulated other comprehensive
(loss) income
|
(35,619)
|
133,596
|
|
Accumulated deficit
|
(1,048,027)
|
(1,246,748)
|
|
Total
shareholders' equity
|
1,675,832
|
1,643,048
|
|
Total
liabilities and shareholders' equity
|
$8,647,228
|
$8,418,412
|
|
|
|
|
|
|
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