The Carlyle Group Announces First Quarter 2013 Financial Results

The Carlyle Group Announces First Quarter 2013 Financial Results

  • $0.47 per common unit in Distributable Earnings in Q1 2013, or $168 million on a pre-tax basis

  • $4.9 billion in new capital raised in Q1 2013 and $16.9 billion raised over the past twelve months

  • 7% portfolio appreciation in Q1 2013, driving Economic Net Income of $394 million on a pre-tax basis

  • $4.1 billion in realized proceeds in Q1 2013, with $19.1 billion realized over the past twelve months

  • Declared quarterly distribution of $0.16 per common unit for Q1 2013

  • U.S. GAAP net income attributable to The Carlyle Group L.P. of $34 million, or $0.66 per common unit on a diluted basis, in Q1 2013

WASHINGTON--(BUSINESS WIRE)-- Global alternative asset manager The Carlyle Group L.P. (NAS: CG) today reported its unaudited results for the first quarter of 2013, which ended on March 31, 2013.

David M. Rubenstein, Co-Chief Executive Officer of Carlyle, said, "Our first quarter results continue to demonstrate strength in the Carlyle Engine. Fundraising was particularly strong, with $5 billion in new capital raised, and we generated $4 billion in realized proceeds. We continue to invest in Carlyle's growing operational capabilities, notably the build-out of our international energy team, the launch of our new business development corporation, and an expanded retail strategy."


William E. Conway, Jr., Co-Chief Executive Officer of Carlyle, said, "Our carry funds had a strong showing, appreciating 7% during the quarter, and our Global Market Strategies business continued to grow and perform well across all metrics. Distributable Earnings were solid and ENI more than doubled quarter over quarter. Our $142 million in realized net performance fees shows how our product diversity and geographic scope deliver results. We are focused on the long-term growth and profitability of the firm, which we believe will benefit our fund and public investors alike."

U.S. GAAP results for Q1 2013 included income before provision for income taxes of $452 million and net income attributable to the common unitholders through The Carlyle Group L.P. of $34 million, or net income per common unit of $0.66 on a diluted basis. Total balance sheet assets were $32.7 billion as of March 31, 2013.

First 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 May 20, 2013, payable on May 31, 2013.

The Carlyle Group Distribution Policy

As further discussed in its Annual Report on Form 10-K for the year ended December 31, 2012, Carlyle currently anticipates that it will cause Carlyle Holdings to make quarterly distributions to its partners, including The Carlyle Group L.P.'s wholly owned subsidiaries, that will enable The Carlyle Group L.P. to pay a quarterly distribution of $0.16 per common unit for each of the first three quarters of each year, and, for the fourth quarter of each year, to pay a distribution of at least $0.16 per common unit, that, taken together with the prior quarterly distributions in respect of that year, represents its share, net of taxes and amounts payable under the tax receivable agreement, of Carlyle's 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 Distributable Earnings for that year due to these funding requirements. The declaration and payment of any distributions 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 these metrics for Q1 2013, year-to-date (YTD) and for the last twelve months (LTM)1.

Funds Raised

Equity Invested

Q1

$4.9 billion

Q1

$2.5 billion

YTD: $4.9 bn

LTM: $16.9 bn

YTD: $2.5 bn

LTM: $8.8 bn

Realized Proceeds

Carry Fund Returns

Q1

$4.1 billion

Q1

7%

YTD: $4.1 bn

LTM: $19.1 bn

YTD: 7%

LTM: 11%

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

During Q1 2013, Carlyle generated net realized proceeds of $4.1 billion from 128 different investments across 35 carry funds. Carlyle deployed $2.5 billion of equity in Q1 2013 in 84 new or follow-on investments across 19 carry funds. Carlyle realized proceeds of $19.1 billion and invested $8.8 billion on an LTM basis.

Segment

Realized Proceeds

Equity Invested

# of Investments

# of Funds

$ in millions

# of Investments

# of Funds

$ in millions

Q1

Corporate Private Equity

45

19

$2,990

14

7

$1,911

Global Market Strategies

36

5

$391

5

3

$71

Real Assets

52

11

$741

66

9

$515

Carlyle

128

35

$4,121

84

19

$2,497

Note: The columns may not sum as some investments cross segment lines, but are only counted one time for Carlyle results.

1 LTM, or last twelve months, refers to the period Q2 2012 through Q1 2013. Prior LTM, or the prior rolling twelve month period, refers to the period Q2 2011 through Q1 2012.

Carlyle All Segment Results

  • Distributable Earnings (DE): $168 million for Q1 2013 and $678 million on an LTM basis

    • Pre-tax Distributable Earnings were $168 million for Q1 2013, or $0.47 per common unit on a post-tax basis. Distributable Earnings were $678 million on an LTM basis, which is 11% lower than the prior rolling twelve month period. A realized investment loss on a balance sheet investment in our Real Assets segment had a ($15) million impact on Distributable Earnings, equivalent to ($0.03) per common unit on a post-tax basis.

    • Fee Related Earnings were $36 million for Q1 2013 and increased by $2 million from $34 million in Q1 2012 due to an increase in Fee-earning AUM and our acquisition of an equity interest in NGP Energy Capital Management, offset by higher fundraising costs and fee and basis step downs of several funds exiting their investment periods. Fee Related Earnings were $172 million on an LTM basis, up 49% compared with the prior rolling twelve month period.

    • Realized Net Performance Fees were $142 million for Q1 2013 compared to $143 million in Q1 2012. For Q1 2013, Realized Net Performance Fees were positively impacted by exits in China Pacific Insurance Group, Hertz Global Holdings, Nielsen Holdings, Cobalt International Energy, Qualicaps and SS&C Technologies Holding, among others. Realized Net Performance Fees were $501 million on an LTM basis, which was 17% lower than the prior rolling twelve month period.

    • Realized Investment Income/(Loss) was ($9) million in Q1 2013, driven by the ($15) million realized investment loss on a balance sheet investment in our Real Assets segment.

  • Economic Net Income (ENI): $394 million for Q1 2013 and $737 million on an LTM basis

    • Economic Net Income was $394 million for Q1 2013 and $737 million on an LTM basis. On a post-tax basis, Carlyle generated $1.02 in ENI per Adjusted Unit for Q1 2013.

    • Q1 2013 ENI was impacted by appreciation of 7% in Carlyle's carry fund portfolio, which excludes structured credit, hedge funds, NGP management fee funds and fund of funds vehicles. Corporate Private Equity and Global Market Strategies carry funds were both up 9% while Real Assets carry funds were up 3% compared to the end of Q4 2012. Carry fund appreciation was 11% on an LTM basis, compared to 15% in the prior rolling twelve month period.

    • Carlyle's public carry fund portfolio increased 13% during Q1 2013 while the private carry fund portfolio increased 5% during the same period.

The Carlyle Group L.P. - All Segments (Actual Results)

Period

LTM

% Change

$ in millions, except where noted

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

Q2 12 - Q1 13

QoQ

YoY

Revenues

894

61

584

505

852

2,003

69%

(5%)

Expenses

501

119

365

323

458

1,265

42%

(9%)

Economic Net Income

392

(57)

219

182

394

737

116%

0%

Fee-Related Earnings

34

36

46

55

36

172

(34%)

6%

Net Performance Fees

335

(107)

165

132

355

545

169%

6%

Realized Net Performance Fees

143

76

156

127

142

501

11%

(1%)

Distributable Earnings

179

115

206

188

168

678

(10%)

(6%)

Total Assets Under Management ($ in billions)

159.2

156.2

157.4

170.2

176.3

4%

11%

Fee-Earning Assets Under Management ($ in billions)

117.0

112.0

115.1

123.1

122.9

(0%)

5%

Note: Totals may not sum due to rounding.

Assets Under Management and Remaining Fair Value of Capital

  • Total Assets Under Management: $176.3 billion as of Q1 2013 (+11% LTM)

  • Major drivers of change versus Q4 2012: Market appreciation (+$6.2 billion), new capital commitments (+$6.0 billion), offset by net distributions (-$4.8 billion) and foreign exchange impact (-$1.5 billion).

    • Total Dry Powder of $46.2 billion as of Q1 2013, comprised of $17.1 billion in Corporate Private Equity, $1.8 billion in Global Market Strategies, $9.5 billion in Real Assets and $17.9 billion in Solutions.

  • Fee-earning Assets Under Management: $122.9 billion as of Q1 2013 (+5% LTM)

    • Major drivers of change versus Q4 2012: Asset inflows (+$2.0 billion), market appreciation (+$745 million), change in CLO collateral balances (+$296 million), offset by net distributions and outflows (-$1.8 billion) and foreign exchange impact (-$1.4 billion).

    • As of March 31, 2013, Carlyle had raised limited partner commitments of $6.1 billion in the aggregate to several of its latest vintage funds in U.S. Buyout, Asia Buyout and Financial Services funds, which are not yet included in Fee-earning Assets Under Management as the predecessor funds have not yet exited their investment periods.

  • Remaining Fair Value of Capital (carry funds only) as of Q1 2013: $62.2 billion

    • Current Multiple of Invested Capital (MOIC) of remaining fair value of capital: 1.3x.

    • Remaining fair value of capital in the ground in investments made in 2008 or earlier: 44% of total fair value.

    • AUM in-carry ratio as of the end of Q1 2013: 66%.

Non-GAAP Operating Results

Carlyle's non-GAAP results for Q1 2013 are provided in the table below:

Carlyle Group Summary

$ in millions, except unit and per unit amounts

Economic Net income

Q1 2013

Economic Net Income (pre-tax)

$ 393.9

Less: Provision for income taxes (1)

74.3

Economic Net Income, After Taxes

$ 319.6

Fully diluted units (in millions)

313.9

Economic Net Income, After Taxes per Adjusted Unit

$ 1.02

Distributable Earnings

Distributable Earnings

$ 168.4

Less: Estimated foreign, state, and local taxes (2)

11.0

Distributable Earnings, After Taxes

$ 157.4

Allocating Distributable Earnings for only public unitholders of The Carlyle Group L.P.

Distributable Earnings to The Carlyle Group L.P.

$ 23.5

Less: Estimated current corporate income taxes (3)

1.9

Distributable Earnings to The Carlyle Group L.P. net of corporate income taxes

$ 21.6

Units in public float (in millions)(4)

46.1

Distributable Earnings, net, per The Carlyle Group L.P. common unit outstanding

$ 0.47

(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 non-controlling 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 non-controlling 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.

(4) Includes 2.9 million common units issued in May 2013 related to vested DRUs. These units are included in this calculation

because these newly-issued units will participate in the unitholder distribution that will be paid on May 31, 2013.

Corporate Private Equity (CPE)

Funds Raised

Equity Invested

Realized Proceeds

Carry Fund Returns

Q1

$1.4 bn

Q1

$1.9 bn

Q1

$3.0 bn

Q1

9%

YTD: $1.4 bn

LTM: $8.9 bn

YTD: $1.9 bn

LTM: $5.4 bn

YTD: $3.0 bn

LTM: $13.0 bn

YTD: 9%

LTM: 16%

  • Distributable Earnings (DE): $112 million for Q1 2013 and $392 million on an LTM basis. The following components impacted Distributable Earnings in Q1 2013:

    • Fee Related Earnings were $0 in Q1 2013 ($47 million on an LTM basis), compared to $14 million in Q1 2012, with the decline driven by higher fundraising costs and fee and basis step downs in two CPE funds (Carlyle Europe Partners III and Carlyle Japan Partners II) that exited their original investment periods during 2012.

    • Realized Net Performance Fees were $111 million for Q1 2013 ($340 million on an LTM basis), compared to $105 million for Q1 2012.

  • Economic Net Income (ENI): $239 million for Q1 2013

    • Economic Net Income of $239 million for Q1 2013 ($474 million on an LTM basis) compared to $244 million for Q1 2012.

    • CPE carry fund valuations increased 9% in Q1 2013 (16% on an LTM basis), compared with 8% in Q1 2012.

    • Net Performance Fees of $235 million for Q1 2013 ($414 million on an LTM basis), compared to $215 million for Q1 2012.

  • Total Assets Under Management (AUM): $55.1 billion as of Q1 2013

    • Total AUM increased 3% to $55.1 billion from $53.3 billion at Q1 2012.

    • Funds Raised of $1.4 billion were driven by additional closings of our latest vintage U.S. and Asia buyout funds, closings in our Peru and Sub-Saharan Africa regional buyout funds, as well as various co-investments.

    • Fee-earning Assets Under Management were $33.2 billion as of Q1 2013, down 12% from $37.8 billion as of Q1 2012, with the decline driven by $5.5 billion in distributions and basis step-downs, and partially offset by $1.4 billion in new commitments and inflows.

Corporate Private Equity (Actual Results)

Period

LTM

% Change

$ in millions, except where noted

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

Q2 12 - Q1 13

QoQ

YoY

Economic Net Income

244

(65)

177

122

239

474

95%

(2%)

Fee-Related Earnings

14

10

19

18

(0)

47

(101%)

(101%)

Net Performance Fees

215

(80)

159

100

235

414

136%