The Carlyle Group Announces Second Quarter 2013 Financial Results

The Carlyle Group Announces Second Quarter 2013 Financial Results

• $163 million of Distributable Earnings on a pre-tax basis in Q2 2013 , or $0.53 per common unit on a post-tax basis

• $6.9 billion in new capital raised in Q2 2013 and $19.7 billion raised over the past twelve months

• $3.9 billion in realized proceeds in Q2 2013, with $19.9 billion realized over the past twelve months

• $1.3 billion in equity invested in Q2 2013, and $8.8 billion invested over the past twelve months

• 3% portfolio appreciation in Q2 2013, driving Economic Net Income of $156 million on a pre-tax basis

• Declared quarterly distribution of $0.16 per common unit for Q2 2013

• U.S. GAAP net income/(loss) attributable to The Carlyle Group L.P. of ($3.3) million, or ($0.07) per common unit on a diluted basis, in Q2 2013

WASHINGTON--(BUSINESS WIRE)-- Global alternative asset manager The Carlyle Group L.P. (NAS: CG) today reported its unaudited results for the second quarter of 2013, which ended on June 30, 2013.

Carlyle Co-CEO David M. Rubenstein said, "We had a solid quarter across the firm and continued to demonstrate our ability to produce cash distributions for unitholders. Fundraising strengthened across the board, and we continue to invest in growth initiatives to build our capabilities."

Carlyle Co-CEO William E. Conway, Jr. said, "Our global portfolio is in great shape and our pace of producing realized proceeds continues to be brisk. I am particularly pleased with the state of our U.S. buyout portfolio which is producing large amounts of cash carry and accrued carry for future distributions."

U.S. GAAP results for Q2 2013 included income before provision for income taxes of $286 million and net income/(loss) attributable to the common unitholders through The Carlyle Group L.P. of ($3.3) million, or net income/(loss) per common unit of ($0.07) on a diluted basis. Total balance sheet assets were $33.8 billion as of June 30, 2013.

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 August 19, 2013, payable on August 30, 2013.

Year-to-date, the Board of Directors has declared $0.32 in distributions per common unit. Carlyle has generated $1.00 in year-to-date after-tax Distributable Earnings per common unit.

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.

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 Q2 2013, year-to-date (YTD) and for the last twelve months (LTM)¹.

During Q2 2013, within its carry funds, Carlyle generated net realized proceeds of $3.9 billion from 144 different investments across 29 carry funds. Carlyle deployed $1.3 billion of equity in 75 new or follow-on investments across 19 carry funds. On an LTM basis, Carlyle realized proceeds of $19.9 billion and invested $8.8 billion.

¹ LTM, or last twelve months, refers to the period Q3 2012 through Q2 2013. Prior LTM, or the prior rolling twelve month period, refers to the period Q3 2011 through Q2 2012.

• Distributable Earnings (DE): $163 million for Q2 2013 and $729 million on an LTM basis

  • Pre-tax Distributable Earnings were $163 million for Q2 2013, or $0.53 per common unit on a post-tax basis. On a year-to-date basis, pre-tax Distributable Earnings were $334 million, 13% higher than the first half of 2012, and Distributable Earnings per common unit were $1.00 on a post-tax basis. Distributable Earnings were $729 million on an LTM basis, which is 7% lower than the prior rolling twelve month period.

    • During Q2 2013, the definition of DE was modified to exclude all equity-based compensation expense. All prior periods have been recast to conform to the new definition.

  • Fee-Related Earnings were $26 million for Q2 2013 and declined by $10 million from $36 million in Q2 2012 due to higher fundraising costs and fee and basis step downs of several funds exiting their investment periods, offset by higher Fee-Earning Assets Under Management. Fee-Related Earnings were $163 million on an LTM basis, up 36% compared with the prior rolling twelve month period.

  • Realized Net Performance Fees were $118 million for Q2 2013, compared to $76 million in Q2 2012. For Q2 2013, Realized Net Performance Fees were positively impacted by exits in The Hertz Corporation, The Nielsen Company, CommScope Inc, SS&C Technologies Inc, Wesco Holdings Inc., Cobalt International Energy, Boston Private Financial Holdings Inc., among others. Realized Net Performance Fees were $543 million on an LTM basis, which was 14% lower than the prior rolling twelve month period.

  • Realized Investment Income was $15 million in Q2 2013, largely driven by gains on a single debt investment, with some additional gains on other balance sheet investments.

• Economic Net Income (ENI): $156 million for Q2 2013 and $950 million on an LTM basis

  • Economic Net Income was $156 million for Q2 2013 and $950 million on an LTM basis. On a post-tax basis, Carlyle generated $0.39 in ENI per Adjusted Unit for Q2 2013.

  • Q2 2013 ENI was impacted by appreciation of 3% in Carlyle's carry fund portfolio. Corporate Private Equity carry funds were up 5%, Global Market Strategies carry funds increased 8%, while Real Assets carry funds declined 2% compared to the end of Q1 2013. Carry fund appreciation was 16% on an LTM basis, compared to 9% in the prior twelve month period.

• Total Assets Under Management: $180.4 billion as of Q2 2013 (+16% LTM)

  • Major drivers of change versus Q1 2013: New capital commitments (+$4.7 billion), market appreciation ($+3.5 billion) and net subscriptions to our hedge funds and open end structured credit funds (+$0.9 billion), offset by net distributions (-$6.0 billion).

  • Total Dry Powder of $49.0 billion as of Q2 2013, comprised of $20.1 billion in Corporate Private Equity, $1.8 billion in Global Market Strategies, $9.2 billion in Real Assets and $17.9 billion in Global Solutions.

• Fee-Earning Assets Under Management: $132.0 billion as of Q2 2013 (+18% LTM)

  • Major drivers of change versus Q1 2013: Asset inflows including commitments (+$14.9 billion), net subscriptions (+$0.8 billion), and change in CLO collateral balances (+$508 million), offset by net distributions and outflows (-$7.2 billion).

  • Fee-Earning AUM was positively impacted by the addition of inception to date fundraising in Carlyle Partners VI (+$9.4 billion) and Carlyle Asia Partners IV (+$1.1 billion), and negatively impacted by the step down in basis in Carlyle Partners V and Carlyle Asia Partners III.

• Remaining Fair Value of Capital (carry funds only) as of Q2 2013: $61.1 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 2009 or earlier: 50% of total fair value.

  • AUM in-carry ratio as of the end of Q2 2013: 61%.

Carlyle's non-GAAP results for Q2 2013 are provided in the table below:

• Distributable Earnings (DE): $84 million for Q2 2013 and $417 million on an LTM basis. The following components impacted Distributable Earnings in Q2 2013:

  • Fee-Related Earnings were ($6) million in Q2 2013 and were $31 million on an LTM basis, compared to $10 million in Q2 2012, with the decline driven by higher fundraising costs and fee and basis step downs in two CPE funds during 2012.

  • Realized Net Performance Fees were $86 million for Q2 2013 and were $377 million on an LTM basis, compared to $50 million for Q2 2012.

• Economic Net Income (ENI): $106 million for Q2 2013

  • Economic Net Income/(Loss) of $106 million for Q2 2013 and $645 million on an LTM basis, compared to ($65) million for Q2 2012.

  • CPE carry fund valuations increased 5% in Q2 2013 and 24% on an LTM basis, compared with (2%) in Q2 2012.

  • Net Performance Fees of $109 million for Q2 2013 and $602 million on an LTM basis, compared to ($80) million for Q2 2012.

• Total Assets Under Management (AUM): $57.9 billion as of Q2 2013

  • Total AUM increased 10% to $57.9 billion from $52.5 billion as of Q2 2012.

  • Funds Raised of $3.8 billion were driven by additional closings of our latest vintage U.S. and Asia buyout funds, closings in our Financial Services fund and various co-investments.

  • Fee-Earning Assets Under Management were $38.5 billion as of Q2 2013, up 4% from $37.1 billion as of Q2 2012, with the increase driven by $11.3 billion in inflows, and partially offset by $9.2 billion in outflows, including distributions and basis step downs.