KKR Financial Holdings LLC Announces Second Quarter 2012 Financial Results and a Quarterly Distribution of $0.21 per Common Share PR Newswire SAN FRANCISCO, July 26, 2012 SAN FRANCISCO, July 26, 2012 /PRNewswire/ --KKR Financial Holdings LLC (NYSE: KFN) ("KFN" or the "Company") today announced its results for the second quarter ended June 30, 2012. Second Quarter 2012 Highlights oNet income for the second quarter ended June 30, 2012 totaled $71.2 million, or $0.39 per diluted common share. oDeclared a quarterly cash distribution of $0.21 per common share for the second quarter of 2012. oBook value per common share of $9.79 as of June 30, 2012 as compared to book value per common share of $9.81 as of March 31, 2012. For the three and six months ended June 30, 2012, KFN reported net income of $71.2 million, or $0.39 per diluted common share, and $159.3 million, or $0.87 per diluted common share, respectively. Comparatively, for the three and six months ended June 30, 2011, KFN reported net income of $107.5 million, or $0.59 per diluted common share, and $201.3 million, or $1.10 per diluted common share, respectively. KFN's second quarter 2012 results included net investment income of $85.6 million, other income of $19.5 million and non-investment expenses of $33.6 million. Comparatively, KFN's second quarter 2011 results reflected net investment income of $88.7 million, other income of $62.6 million and non-investment expenses of $36.4 million. Net investment income decreased $3.1million from the second quarter ended June 30, 2011 to 2012 primarily due to a $9.7 million increase in interest expense, partially offset by a $4.9 million increase in interest income generated from our corporate loan portfolio. Other income decreased $43.1 million from the second quarter ended June 30, 2011 to 2012 largely due to a $40.2 million decrease in net realized and unrealized gains on investments primarily as the result of a partial sale of one of our largest debt security holdings in the second quarter of 2011. Portfolio Activity Natural Resources Strategy During the second quarter of 2012, the Company completed the following transactions: (i) closed the acquisition of working interests in oil and gas properties located in North Texas for approximately $69.6 million, of which $30.2 million was financed through the Company's non-recourse natural resources credit facility; (ii) funded $29.8 million of the previously announced $90 million commitment to a partnership with Chesapeake Energy Corporation to invest in mineral interests and overriding royalty interests in key oil and gas basins in the United States and (iii) completed the acquisition of additional oil and gas working interests in acreage located in North Texas for approximately $14.8 million. Commercial Real Estate Strategy During the second quarter of 2012, the Company invested $36.8 million in Yorktown Center, a major shopping and entertainment center in the Chicago area, through its commercial real estate strategy. Book Value Book value per share decreased to $9.79 as of June 30, 2012 from $9.81 as of March 31, 2012. The decrease in book value per share from March 31, 2012 was primarily driven by (i) an increase in the Company's accumulated other comprehensive loss, a component of shareholders' equity, of $0.24 per share partially as a result of declines in value of certain interest rate swaps designated as cash flow hedges and (ii) the Company's distribution to shareholders for the first quarter 2012 of $0.18 per common share, partially offset by (iii) the Company's earnings for the second quarter of $0.40 per basic common share. Distributions On July 26, 2012, the Company's board of directors declared a cash distribution of $0.21 per common share. The distribution is payable on August 23, 2012 to common shareholders of record as of the close of business on August 9, 2012. Information for Investors: Conference Call and Webcast The Company will host a conference call and audio webcast to review its results for the second quarter ended June 30, 2012 on July 26, 2012, at 2:00p.m. PT (5:00p.m. ET). The conference call may be accessed by dialing (888) 801-6507 (domestic) or +1(913) 312-0963 (international); a pass code is not required. A telephonic replay of the call will be available through August 9, 2012 by dialing (888) 203-1112 (domestic) and +1 (719) 457-0820 (international), pass code 4076832. Supplemental materials that will be discussed during the call and the live audio webcast 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 webcast 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 Section27A of the Securities Act of 1933, as amended, and Section21E of the Securities Exchange Act of 1934, as amended, including statements with regards to commitments to deploy capital. 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 Form10-K for the fiscal year ended December31, 2011, filed with the SEC on February28, 2012 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, filed with the SEC on May 9, 2012. Schedule I KKR Financial Holdings LLC CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Amounts in thousands, except per share information) Forthe Forthe Forthe Forthe three three six six months months months months ended ended ended ended June30, June30, June30, June30, 2012 2011 2012 2011 Net investment income: Loan interest income $ 107,602 $ 102,656 $ 211,696 $ 212,301 Securities interest income 20,813 22,073 43,389 44,629 Other investment income 12,135 11,114 23,399 14,243 Total investment income 140,550 135,843 278,484 271,173 Interest expense 42,655 32,978 83,370 65,099 Interest expense to 12,318 14,142 25,177 26,238 affiliates Provision for loan losses — — 46,498 11,661 Net investment income 85,577 88,723 123,439 168,175 Other income: Net realized and unrealized 18,382 58,541 81,970 97,725 gain on investments Net realized and unrealized (loss) gain on (3,630) 1,241 5,519 7,308 derivativesand foreign exchange Net realized and unrealized gain (loss) on residentialmortgage-backed 3,016 609 6,063 (129) securities, atestimated fair value Net loss on restructuring — — (445) — and extinguishment ofdebt Other income 1,701 2,187 5,293 4,110 Total other income 19,469 62,578 98,400 109,014 Non-investment expenses: Related party management 12,804 24,315 30,917 45,516 compensation General, administrative and 19,526 10,367 32,330 18,538 directors expenses Professional services 1,308 1,691 3,204 3,123 Total non-investment 33,638 36,373 66,451 67,177 expenses Income before income tax 71,408 114,928 155,388 210,012 expense (benefit) Income tax expense (benefit) 203 7,424 (3,865) 8,741 Net income $ 71,205 $ 107,504 $ 159,253 $ 201,271 Net income per common share: Basic $ 0.40 $ 0.60 $ 0.89 $ 1.13 Diluted $ 0.39 $ 0.59 $ 0.87 $ 1.10 Weighted-average number of common shares outstanding: Basic 177,809 177,674 177,792 177,376 Diluted 181,642 182,393 181,944 181,844 Schedule II KKR Financial Holdings LLC CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Amounts in thousands, except share information) June30, December31, 2012 2011 Assets Cash and cash equivalents $ 473,789 $ 392,154 Restricted cash and cash equivalents 414,814 399,620 Securities 813,777 922,603 Corporate loans, net (includes $183,934 and $317,332 loans held for sale as of June30, 2012 5,945,230 6,443,399 and December31, 2011, respectively) Equity investments, at estimated fair value ($16,418 and $12,222 pledged as collateral as of 157,677 189,845 June30, 2012 and December31, 2011, respectively) Derivative assets 32,319 28,463 Interest and principal receivable 38,223 62,124 Other assets 483,808 209,020 Total assets $ 8,359,637 $ 8,647,228 Liabilities Collateralized loan obligation secured debt $ 5,063,406 $ 5,540,037 Collateralized loan obligation junior secured notes 322,348 365,848 to affiliates Credit facilities 100,000 38,300 Convertible senior notes 277,408 299,830 Senior notes 362,132 250,676 Junior subordinated notes 283,517 283,517 Accounts payable, accrued expenses and other 44,097 24,680 liabilities Accrued interest payable 25,043 25,536 Accrued interest payable to affiliates 6,921 6,561 Related party payable 7,967 11,078 Derivative liabilities 120,072 125,333 Total liabilities 6,612,911 6,971,396 Shareholders' Equity Preferred shares, no par value, 50,000,000 shares authorized and none issued and outstanding at - - June30, 2012 and December31, 2011 Common shares, no par value, 500,000,000 shares authorized, and 178,393,521 and 178,145,482 shares - - issued and outstanding at June30, 2012 and December31, 2011, respectively Paid-in-capital 2,760,628 2,759,478 Accumulated other comprehensive loss (46,633) (35,619) Accumulated deficit (967,269) (1,048,027) Total shareholders' equity 1,746,726 1,675,832 Total liabilities and shareholders' equity $ 8,359,637 $ 8,647,228 Investor Relations Contact: Pam Testani 415-315-6597 firstname.lastname@example.org Media Contact: Kristi Huller 212-750-8300 email@example.com SOURCE KKR Financial Holdings LLC Website: http://www.kkrkfn.com
KKR Financial Holdings LLC Announces Second Quarter 2012 Financial Results and a Quarterly Distribution of $0.21 per Common
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