The Carlyle Group Announces Fourth Quarter and Full Year 2012 Earnings Results

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The Carlyle Group Announces Fourth Quarter and Full Year 2012 Earnings Results

  • $0.49 per common unit in Distributable Earnings in Q4 2012 and $1.39 per common unit in Distributable Earnings since The Carlyle Group IPO in May 2012
  • Quarterly distribution of $0.85 per common unit declared, aggregate distributions of $1.12 per common unit for 2012, which represents 80% of post-IPO, after-tax Distributable Earnings
  • $18.7 billion of carry fund realizations in 2012 and more than $36 billion in carry fund realizations over the past two years
  • $14.0 billion in new capital raised in 2012, including $4.6 billion in Q4 2012, which was more than double the 2011 level
  • $7.9 billion in carry fund equity invested in 2012, including $3.3 billion in Q4 2012
  • Acquired equity interests in NGP Energy Capital Management and Vermillion Asset Management during Q4 2012
  • U.S. GAAP net income attributable to The Carlyle Group L.P. of $12 million, which was $0.25 per common unit on a fully diluted basis, for Q4 2012

WASHINGTON--(BUSINESS WIRE)-- Global alternative asset manager The Carlyle Group L.P. (NAS: CG) , today reported its unaudited results for the fourth quarter and the year ended December 31, 2012.


David M. Rubenstein, Co-Chief Executive Officer of Carlyle, said, "We had another excellent year. Our performance over the past two years was marked by steady, continuous progress across our business. Most notably, in 2012 we raised twice as much capital as we did in 2011, with over $14 billion of new capital commitments into our funds. As a strong reflection of our cash earnings, we are announcing an attractive fourth quarter distribution of $0.85 per unit to our common unitholders."

William E. Conway, Jr., Co-Chief Executive Office of Carlyle, said, "I am optimistic about investment opportunities globally, in developed and emerging markets alike. We deployed and harvested capital at a solid pace in the fourth quarter, which is a reflection of the scope of the Carlyle global platform. In the fourth quarter alone, we invested $3.3 billion in equity in 96 investments in 19 countries across 24 carry funds. In the same period, we achieved $6.8 billion in realized proceeds from 155 investments across 39 carry funds. Our performance in 2012 has built a strong foundation for producing significant returns for our fund investors and Distributable Earnings for our common unitholders in 2013 and beyond."

U.S. GAAP results for Q4 2012 included income before provision for income taxes of $146 million and net income attributable to the public unitholders through The Carlyle Group L.P. of $12 million, or net income per common unit of $0.25 on a fully diluted basis. For the year ended December 31, 2012, income before provision for income taxes was $2.4 billion, compared to $1.2 billion in 2011. Total balance sheet assets were $31.6 billion as of December 31, 2012 compared with $24.7 billion as of December 31, 2011.

Fourth Quarter Distribution

The Board of Directors has declared a quarterly distribution of $0.85 per common unit to holders of record at the close of business on March 4, 2013, payable on March 13, 2013. Since its IPO in May 2012, Carlyle has announced an aggregate of $1.12 per common unit in distributions to common unitholders.

The Carlyle Group Distribution Policy

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 underlying performance of its business on four key metrics, known as the Carlyle Engine: funds raised, equity invested, carry fund returns and realized proceeds for fund investors. The table below highlights the results of those metrics for Q4 2012, and for 2012 and 2011.

   
Funds RaisedEquity Invested
Q4$4.6 billion Q4$3.3 billion 

2012: $14.0 bn

 2011: $6.6 bn

2012: $7.9 bn

 2011: $11.3 bn
 
  
Realized ProceedsCarry Fund Returns
Q4$6.8 billion Q44% 

2012: $18.7 bn

 2011: $17.6 bn

2012: 14%

 2011: 16%
  
Note: Equity Invested and Realized Proceeds reflect carry funds only.
 

During Q4 2012, Carlyle generated net realized proceeds of $6.8 billion from 155 different investments across 39 carry funds. Carlyle deployed $3.3 billion of equity in Q4 2012 in 96 new or follow-on investments across 24 carry funds. For 2012, Carlyle realized proceeds of $18.7 billion, compared to $17.6 billion in 2011, and invested $7.9 billion in 2012 compared to $11.3 billion in 2011.

In 2012, 78% of realized proceeds were from sale activities, versus 88% in 2011. In addition, 58% of realized proceeds in 2012 were produced by funds actively realizing performance fees versus 64% in 2011.

      
SegmentRealized ProceedsEquity Invested

# of
Investments

 

 

# of Funds

 

 

$ mn

# of
Investments

 

 

# of Funds

 

 

$ mn

     

Q4

Corporate Private Equity5018$4,7391810$2,369
 
Global Market Strategies426$58494$106
 
Real Assets6715$1,4777010$861
             
Carlyle 155 39 $6,801 96 24 $3,336
 

YTD

Corporate Private Equity9421$12,1484916$4,170
 
Global Market Strategies586$1,127265$577
 
Real Assets 106 15 $5,444 126 11 $3,172
Carlyle 250 42 $18,719 197 32 $7,919
 
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 Fourth Quarter and Full Year 2012

  • Distributable Earnings (DE): $188 million for Q4 2012 and $688 million for 2012
    • Pre-tax Distributable Earnings of $188 million for Q4 2012 equates to $0.49 per common unit on a post-tax basis. Post-IPO and after-tax Distributable Earnings per common unit for 2012 was $1.39. Distributable Earnings of $688 million in 2012 compares to $864 million in 2011.
    • Fee-Related Earnings were $55 million for Q4 2012 and increased from $14 million in Q4 2011 due to an increase in fee earning assets under management, lower general and administrative expenses and $18 million in proceeds from an insurance settlement. Fee-Related Earnings of $170 million in 2012 increased 40% from $121 million in 2011.
    • Realized Net Performance Fees of $127 million for Q4 2012 compares to $216 million in Q4 2011. For the current quarter, realized net performance fees were positively impacted by public equity exits in Hertz, Housing Development Finance Corporation (HDFC) and Kinder Morgan in Corporate Private Equity and the sale of Metaldyne in Global Market Strategies, among other full and partial realization events. Realized net performance fees of $502 million in 2012 compared to $678 million in 2011.
    • Realized Investment Income was $6 million in Q4 2012. Realized investment income was $16 million in 2012.
  • Economic Net Income (ENI): $182 million for Q4 2012 and $736 million for 2012
    • Economic Net Income was $182 million for Q4 2012 and $736 million for 2012. On an after-tax basis, Carlyle generated $0.47 in ENI per Adjusted Unit for Q4 2012.
    • Q4 2012 ENI was positively impacted by appreciation of 4% in Carlyle's carry fund portfolio, which excludes structured credit, hedge funds and Fund of Funds Solutions vehicles. Corporate Private Equity and Global Market Strategies carry funds were up an average of 5%, while Real Asset funds were up 1% compared to the end of Q3 2012. Carry fund appreciation was 14% in 2012 compared to 16% in 2011.
    • Carlyle's public carry fund portfolio increased 4% during Q4 2012 while the private carry fund portfolio increased 3%.
       
The Carlyle Group L.P. - All Segments (Actual Results)PeriodLTM% Change
$ in millions, except where notedQ4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 12 - Q4 12 QoQ YoY YTD
 
Revenues666894615845052,044(14%)(24%)(5%)
 
Expenses411 501 119 365 323 1,308 (12%) (21%) (1%)
Economic Net Income254 392 (57) 219 182 736 (17%) (28%) (12%)
Fee-Related Earnings14 34 36 46 55 170 20% 289% 39%
Net Performance Fees223 335 (107) 165 132 525 (20%) (41%) (17%)
Realized Net Performance Fees216 143 76 156 127 502 (18%) (41%) (26%)
Distributable Earnings247 179 115 206 188 688 (9%) (24%) (20%)
 
Total Assets Under Management ($ billion)147.0 159.2 156.2 157.4 170.2   8% 16%  
Fee-Earning Assets Under Management ($ billion)111.0 117.0 112.0 115.1 123.1   7% 11%  
Note: Totals may not sum due to rounding.
 
 

Assets Under Management and Remaining Fair Value of Capital

  • Total Assets Under Management: $170.2 billion as of Q4 2012 (+16% in 2012)
    • Changes versus Q3 2012: Acquisitions of equity interests in NGP Energy Capital Management and Vermillion Asset Management (+$14.4 billion), new capital commitments (+$3.5 billion), market appreciation (+$2.9 billion), foreign exchange impact (+$640 million), changes in par value of CLO collateral (-$383 million) and net distributions (-$8.0 billion).
    • Increases versus year end 2011 primarily were due to acquisitions, portfolio appreciation, fundraising and foreign exchange impacts. Partially offsetting these additions was a significant level of distributions to fund investors.
    • Total Dry Powder of $43.9 billion as of Q4 2012, comprised of Corporate Private Equity $17.6 billion, Global Market Strategies $1.8 billion, Real Assets $9.9 billion and Fund of Funds Solutions $14.5 billion.
  • Fee-Earning Assets Under Management: $123.1 billion as of Q4 2012 (+11% in 2012)
    • Changes versus Q3 2012: Acquisitions (+$12.6 billion), asset inflows (+$2.8 billion), foreign exchange impact (+$968 million), market appreciation (+$394 million), change in the par value of CLO collateral (-$364 million) and net distributions and outflows (-$8.4 billion).
    • As of December 31, 2012, Carlyle had raised Limited Partner commitments of $5.0 billion to several of its latest vintage funds, including our U.S. Buyout, Asia Buyout and Financial Services funds, which are not yet included in Fee-Earning Assets Under Management.
  • Remaining Fair Value of Capital (carry funds only) as of Q4 2012: $60 billion
    • Current Multiple of Invested Capital (MOIC) of remaining fair value of capital: 1.2x.
    • Remaining fair value of capital in the ground in investments made in 2008 or earlier: 48% of total fair value.
    • AUM in-carry ratio as of the end of Q4 2012: 67%.

Non-GAAP Operating Results

Carlyle's non-GAAP results for Q4 2012 are provided in the table below:

  
Carlyle Group Summary
$ in millions, except unit and per unit amounts
 
Economic Net income Q4 2012
Economic Net Income (pre-tax)$182.2
Less: Provision for income taxes (1) 36.6
Economic Net Income, After Taxes$145.6
Fully diluted units (in millions)311.8
 
Economic Net Income, After Taxes per Adjusted Unit$0.47
 
Distributable Earnings  
Distributable Earnings$187.5
Less: Estimated foreign, state, and local taxes (2) 12.5
Distributable Earnings, After Taxes$175.0
 
Allocating Distributable Earnings for only public unitholders of The Carlyle Group L.P.
 
Distributable Earnings to The Carlyle Group L.P.$24.7
Less: Estimated current corporate income taxes (3) 3.6
Distributable Earnings to The Carlyle Group L.P. net of corporate income taxes$21.1
 
Units in public float (in millions)43.2
 
Distributable Earnings, net, per The Carlyle Group L.P. common unit outstanding 

$

0.49

(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. and estimated current Tax Receivable Agreement payments owed

 

Corporate Private Equity (CPE)

       
Funds RaisedEquity InvestedRealized ProceedsCarry Fund Returns
Q4$3.0 bn Q4$2.4 bn Q4$4.7 bn Q45% 

2012: $7.8 bn

 2011: $1.6 bn

2012: $4.2 bn

 2011: $7.5 bn

2012: $12.1 bn

 2011: $11.4 bn

2012: 16%

 2011: 16%
    
  • Distributable Earnings (DE): $74 million for Q4 2012 and $399 million for 2012. The following components impacted Distributable Earnings in Q4 and 2012:
    • Fee Related Earnings were $18 million in Q4 2012 and $61 million for 2012, compared to $(4) million in Q4 2011 and $57 million in 2011.
    • Realized Net Performance Fees were $54 million for Q4 2012 and $335 million for 2012, compared to $130 million for Q4 2011 and $465 million for 2011. In 2012, realized proceeds of $12.1 billion compared to $11.4 billion in 2011.
  • Economic Net Income (ENI): $122 million for Q4 2012 and $479 million for 2012
    • Economic Net Income of $122 million for Q4 2012 and $479 million for 2012 compared to $162 million for Q4 2011 and $514 million for 2011.
    • CPE carry fund valuations increased 5% in Q4 2012, compared with 7% in Q4 2011. For 2012, carry fund valuations increased 16%, in line with 16% appreciation in 2011.
    • Net Performance Fees of $100 million for Q4 2012 and $394 million for 2012, compared to $152 million for Q4 2011 and $413 million for 2011. The composition of funds experiencing appreciation was different year-over-year, resulting in a lower increase in unrealized performance fees in 2012 versus 2011.
  • Assets Under Management (AUM): $53.3 billion as of Q4 2012
    • Total AUM increased 4% during 2012 to $53.3 billion.
    • Funds Raised of $3.0 billion was driven by an additional closing of our latest vintage U.S. buyout fund, a first closing in our latest vintage Asia buyout fund, as well as closings in our U.S. mid-market buyout fund, regional funds and various co-investments. For 2012, corporate private equity funds raised of $7.8 billion compared to $1.6 billion for 2011.
    • Fee Earning Assets Under Management were $33.8 billion as of Q4 2012, down from $38.0 billion as of Q4 2011, with the decline driven by $5.2 billion in outflows, which are partially offset by fundraising.
        
Corporate Private Equity (Actual Results)PeriodLTM% Change
$ in millions, except where notedQ4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012Q1 12 - Q4 12QoQ YoY YTD
 
Economic Net Income162 244 (65) 177 122 479 (31%) (24%) (7%)
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