The Carlyle Group Announces Third Quarter 2012 Earnings Results

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The Carlyle Group Announces Third Quarter 2012 Earnings Results

  • $0.63 per common unit in Distributable Earnings in Q3 2012, $0.91 per common unit in Distributable Earnings since The Carlyle Group IPO
  • $5.1 billion of carry fund realizations in Q3 2012 continues strong pace of exit activity, with $11.9 billion in realized proceeds year to date
  • $3.4 billion in new capital raised during Q3 2012 and $9.4 billion in new capital raised year to date
  • $1.6 billion in carry fund equity invested in Q3 2012 with more than $4.0 billion in additional equity committed to transactions expected to close in upcoming quarters
  • Quarterly distribution of $0.16 per unit declared for common unitholders
  • U.S. GAAP net income attributable to The Carlyle Group L.P. of $19 million, or $0.40 per common unit on a fully diluted basis for Q3 2012


WASHINGTON--(BUSINESS WIRE)-- Global alternative asset manager The Carlyle Group L.P. (NAS: CG) , today reported its unaudited third quarter 2012 results.

David M. Rubenstein, Co-Chief Executive Officer of Carlyle, said, "Every component of the Carlyle engine is running strong. Third quarter fundraising was solid, our investment pace was active, portfolio valuations were up and we generated substantial cash returns for our fund investors. These returns drove robust distributable earnings for the third quarter. Additionally, this quarter we raised $3.4 billion in fresh capital, reflective of strong investor confidence in our global model and investment performance."

William E. Conway, Jr., Co-Chief Executive Officer of Carlyle, said, "Our purpose is to invest wisely and create value for our fund investors, which in turn benefits our public investors, and we worked hard at each this quarter. Our active third quarter is a culmination of several factors, including the scope of our global operation, various tactical advantages we had, strong capital markets and many months and years of work. We believe that the United States, Europe and emerging markets - from Brazil to Turkey to China - are great places to invest right now."

U.S. GAAP results for Q3 2012 included income before provision for income taxes of $603 million and net income attributable to the public unitholders through The Carlyle Group L.P. of $19 million, or net income per common unit of $0.40 on a fully diluted basis. For Q3 2011, Carlyle was still a private partnership, and the net loss before provision for income taxes was $(619) million. For Q3 2012, total revenue was $859 million, compared with revenue of $(60) million in Q3 2011. Total balance sheet assets were $30.0 billion as of September 30, 2012 compared with $24.7 billion as of December 31, 2011.

Third Quarter Distribution

The Board of Directors has declared a quarterly distribution of $0.16 per common unit to holders of record at the close of business on November 19, 2012, payable on November 30, 2012. Since the pricing of its IPO on May 2, 2012, Carlyle has announced $0.27 per common unit in distributions to public unitholders.

Carlyle intends to distribute $0.16 per full quarter to common unitholders for each of the first three quarters of the calendar year, and to announce a year-end catch-up distribution in its fourth quarter earnings release. As noted in Carlyle's Registration Statement on Form S-1, Carlyle intends to make the year-end catch-up distribution in an amount that, taken together with the other quarterly distributions, represents substantially all of its Distributable Earnings in excess of the amount determined by the General Partner to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and its funds or to comply with applicable law or any of its financing agreements. Carlyle anticipates that the aggregate amount of its distributions for most years will be less than its total Distributable Earnings for that year. The declaration and payment of any distribution is at the sole discretion of the General Partner, which may change the distribution policy at any time.

The Carlyle Engine

Carlyle evaluates the performance of its business on four key metrics, known as the Carlyle engine (funds raised, equity invested, fund valuations and realized proceeds for fund investors). The table below highlights the results of those metrics for Q3 2012, as well as on a year-to-date (YTD) and last twelve months (LTM) basis.

    
Funds RaisedEquity Invested

Q3 

$3.4 billion

Q3 

$1.6 billion

YTD: $9.4 bn

 LTM: $10.8 bnYTD: $4.6 bn LTM: $7.5 bn
 
  
Realized ProceedsCarry Fund Returns

Q3 

$5.1 billion

Q3 

3%
YTD: $11.9 bn LTM: $15.1 bnYTD: 11% LTM: 18%
    
Note: Equity Invested and Realized Proceeds reflect carry funds only.

During Q3 2012, Carlyle generated net realized proceeds of $5.1 billion from 117 different investments across 34 carry funds in its portfolio. Carlyle deployed $1.6 billion of equity in Q3 2012 in 86 new or follow on investments across 24 carry funds. In addition, Carlyle has committed to invest more than $4.0 billion in equity across 10 transactions that were announced in Q3 2012 and are expected to close in upcoming quarters.

      
SegmentRealized ProceedsEquity Invested
 

# of
Investments

 # of Funds $ mn

# of
Investments

 # of Funds $ mn
Q3Corporate Private Equity33 16 $3,70717 11 $863
Global Market Strategies346$8174$237
Real Assets 53 12 $1,319 64 9 $544
Carlyle 117 34 $5,107 86 24 $1,644
 
YTD

Corporate Private Equity

7120$7,4053714$1,798
Global Market Strategies506$543195$471
Real Assets 88 13 $3,994 111 10 $2,311
Carlyle 203 39 $11,942 164 29 $4,580
 
 
Note: The columns may not sum as some investments cross segment lines, but are only counted one time for Carlyle results.

Carlyle All Segment Results for Third Quarter 2012

  • Distributable Earnings (DE): $206 million
    • Pre-tax Distributable Earnings of $206 million equated to $0.63 per common unit on a post-tax basis. Distributable Earnings increased 79% from Q2 2012 primarily due to period-over-period changes in our realized net performance fees. On an LTM basis, Distributable Earnings are $748 million compared to $752 million over the prior 12-month period.
    • Fee-Related Earnings of $46 million increased 28% from Q2 2012 due to declines in operating expenses. On an LTM basis, Fee-Related Earnings declined 14% compared to the prior 12-month period.
    • Realized Net Performance Fees of $156 million increased 106% from Q2 2012. For the current quarter, our revenues were positively impacted by public equity exits in China Pacific Life, Kinder Morgan, Dunkin Brands, and SS&C, as well as multiple private company sales. On an LTM basis, realized net performance fees are $591 million, up 7% from the prior 12-month period.
    • Realized Investment Income of $5 million increased slightly from Q2 2012.
  • Economic Net Income (ENI): $219 million
    • Economic Net Income of $219 million in Q3 2012 compared to an Economic Net Loss of ($57) million in Q2 2012. On an after-tax basis, Carlyle generated $0.66 in ENI per unit. On an LTM basis, ENI decreased 34% compared to the prior 12-month period due to significant portfolio appreciation over the period following the financial crisis.
    • ENI was positively impacted in Q3 2012 by 3% appreciation in Carlyle's carry fund portfolio, which excludes structured credit, hedge funds and Fund of Funds Solutions vehicles. The fund appreciation was driven by increases in Buyout, Real Estate and Global Market Strategies carry funds, offset by a decline in Energy funds, and flat performance in Growth funds.
    • The public carry fund portfolio increased 8% in Q3 2012 while our private carry fund portfolio increased 1%.
All Segments Period LTM % Change
$ in millions, except where noted3Q2011 4Q2011 1Q2012 2Q2012 3Q2012 4Q11 - 3Q12 QoQ YoY YTD
      
Revenues(263)666894615842,204851%322%4%
 
Expenses (72) 411 501 119 365 1,397 208% 608% 9%
Economic Net Income (191) 254 392 (57) 219 808 482% 214% (4%)
Fee-Related Earnings 37 14 34 36 46 129 28% 24% 7%
Net Performance Fees (223) 223 335 (107) 165 616 254% 174% (4%)
Realized Net Performance Fees 194 216 143 76 156 591 106% (20%) (19%)
Distributable Earnings 244 247 179 115 206 748 79% (15%) (19%)
 
Total Assets Under Management ($ billion) 148.6 147.0 159.2 156.2 157.4   1% 6%  
Fee-Earning Assets Under Management ($ billion) 112.6 111.0 117.0 112.0 115.1   3% 2%  
Note: Totals may not sum due to rounding.
 
 

Assets Under Management and Remaining Fair Value of Capital

  • Total Assets Under Management: $157.4 billion
    • Changes versus Q2 2012: Market appreciation (+$2.9 billion), new capital commitments (+$2.4 billion), foreign exchange impact (+$847 million), changes in par value of CLO collateral (+$506 million), hedge fund net subscriptions (+$379 million) and net distributions (-$5.5 billion).
    • Increases versus year-end 2011 were primarily due to fundraising, portfolio appreciation, increases in Global Market Strategies due to CLO creation, new carry funds, and acquisitions. The increases across Carlyle were offset by significant levels of distributions to fund investors.
    • Total Dry Powder of $39.4 billion, comprised of Corporate Private Equity ($15.6 billion), Global Market Strategies ($1.3 billion), Real Assets ($7.0 billion), and Fund of Funds Solutions ($15.5 billion).
  • Fee-Earning Assets Under Management: $115.1 billion
    • Changes versus Q2 2012: Fee earning asset inflows (+$3.8 billion), foreign exchange impact (+$679 million), hedge fund net subscriptions (+$407 million), change in the par value of CLO collateral (+$171 million), and net distributions and outflows (-$1.7 billion).
    • Carlyle Partners VI will not increase Fee-Earning AUM until the predecessor fund (Carlyle Partners V) is substantially invested, which is expected to occur in the first half of 2013.
  • Remaining Fair Value of Capital (carry funds only): $62 billion
    • Changes versus Q2 2012: Equity invested (+$1.6 billion), distributions (-$4.8 billion) and market appreciation (3%).
    • Current MOIC of remaining fair value of capital: 1.2x.
    • Remaining fair value of capital in the ground in investments made in 2008 or earlier: 51%.
    • AUM in-carry ratio as of the end of Q3 2012: 68%.

    Please see accompanying multimedia.

Non-GAAP Operating Results

Carlyle's non-GAAP results for Q3 2012 are provided in the table below:

$ in millions, except unit and per unit amounts
   
Economic Net income   Q3 2012
 
Economic Net Income (pre-tax)$  

218.5

 

Less: Provision for income taxes (1)   14.9 
Economic Net Income, After Taxes$  203.6 
 
Fully diluted units (in millions)307.7
 
Economic Net Income, After Taxes per Adjusted Unit$0.66
 
Distributable Earnings    
 
Distributable Earnings$206.3
Less: Estimated foreign, state, and local taxes (2)   10.6 
Distributable Earnings, After Taxes$  195.7 
 
Allocating Distributable Earnings for only public unitholders of The Carlyle Group L.P.
 
Distributable Earnings to The Carlyle Group L.P.$27.8
Less: Estimated current corporate income taxes (3)   0.7 
Distributable Earnings to The Carlyle Group L.P. net of corporate income taxes$  27.1 
 
Units in public float (in millions)43.2
 
Distributable Earnings, net, per The Carlyle Group L.P. common unit outstanding   $  0.63 

(1) Represents the implied provision for income taxes that was calculated using a similar methodology applied in calculating the tax provision for The Carlyle Group L.P., without any reduction for noncontrolling interests.

(2) Represents the implied provision for current income taxes that was calculated using a similar methodology applied in calculating the current tax provision for The Carlyle Group L.P., without any reduction for noncontrolling interests.

(3) Represents current corporate income taxes payable upon distributable earnings allocated to Carlyle Holdings I GP Inc.
 
 

Corporate Private Equity (CPE)

       
Funds RaisedEquity InvestedRealized ProceedsCarry Fund Returns

Q3 

$2.0 bn

Q3 

$0.9 bn

Q3 

$3.7 bn

Q3 

5%
YTD: $4.8 bn LTM: $5.2 bnYTD: $1.8 bn LTM: $3.5 bnYTD: $7.4 bn LTM: $9.3 bnYTD: 12% LTM: 20%
  • Distributable Earnings (DE): $145 million. The following components impacted Distributable Earnings in Q3 2012:
    • Fee Related Earnings of $19 million increased 88% from Q2 2012 due to higher fee revenue and lower operating expenses.
    • Realized Net Performance Fees of $126 million increased $76 million from Q2 2012 as realizations in CPE funds were robust in Q3 2012.
    • Realized Investment Income of ($0.2) million compared to $1.5 million in Q2 2012.
  • Economic Net Income (ENI): $177 million
    • Economic Net Income of $177 million was up from a loss of ($65) million in Q2 2012.
    • CPE carry funds valuations increased 5% in Q3 2012, and 12% year-to-date, which drove positive Economic Net Income in the CPE segment, compared to a portfolio value decline of 2% and 6%, respectively, in Q2 2012 and Q3 2011.
    • Net Performance Fees of $159 million compared to a loss of ($80) million in Q2 2012, driven by an increase in CPE carry fund valuations in Q3 2012 versus a decrease in Q2 2012.
  • Assets Under Management (AUM): $53.2 billion
    • Total AUM increased 1% versus Q2 2012 while Fee-Earning AUM of $36.9 billion was relatively flat versus $37.1 billion at the end of Q2 2012.
    • Funds Raised of $2.0 billion was driven by the second closing of Carlyle Partners VI, as well as closings in our U.S. mid-market buyout fund and various coinvestments. Year-to-date, funds raised of $4.8 billion compares to $1.3 billion for the same period in 2011.
         
Corporate Private Equity PeriodLTM% Change
$ in millions, except where noted3Q2011 4Q2011 1Q2012 2Q2012 3Q20124Q11 - 3Q12QoQ YoY YTD
Economic Net Income (185) 162 244 (65) 177 518 375% 196% 1%
Net Performance Fees (186) 152 215 (80) 159 446 300% 186% 13%
Realized Net Performance Fees 157 130 105 50 126 Read Full Story

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