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The "Street" has SONC coming in at .44 for the Fourth Quarter that should be reported on or about October 15th 2015! All post's welcome! The "Good Dr's In"!
The "Street" has SONC coming in at .44 for the Fourth Quarter that should be reported on or about October 15th 2015! All post's welcome! The "Good Dr's In"!
The "Street" has SONC coming in at .44 for the Fourth Quarter that should be reported on or about October 15th 2015! All post's welcome! The "Good Dr's In"!
The "Street" has NWL coming in at .64 for the quarter that should be reported on or about October 30, 2015! All post's welcome! The "Good Dr's In"!
The "Street" has NWL coming in at .64 for the quarter that should be reported on or about October 30, 2015! All post's welcome! The "Good Dr's In"!
SIFCO Industries, Inc. (“SIFCO”) Announces Second Quarter Fiscal 2015 Financial Results
Business Wire
SIFCO Industries, Inc.
May 5, 2015 2:18 PM
CLEVELAND--(BUSINESS WIRE)--
SIFCO Industries, Inc. (NYSE MKT: SIF) today announced financial results for its second quarter of fiscal year 2015, which ended March 31, 2015.
Second Quarter
• Net sales from continuing operations in second quarter fiscal 2015 decreased 15.3% to $24.6 million, compared to $29.0 million in second quarter fiscal 2014.
• Loss from continuing operations before income tax provision in second quarter fiscal 2015 was $1.2 million compared with income of $2.4 million in second quarter fiscal 2014.
• Loss from continuing operations for second quarter fiscal 2015 was $0.9 million, or $0.16 per diluted share, compared with income of $1.5 million, or $0.28 per diluted share, in second quarter fiscal 2014.
First Six Months
• Net sales from continuing operations in the first six months of fiscal 2015 decreased 19.8% to $44.7 million, compared to $55.7 million in the comparable period in fiscal 2014.
• Loss from continuing operations before income tax provision in the first six months of fiscal 2015 was $3.1 million compared with income of $4.0 million in the comparable period in fiscal 2014.
• Loss from continuing operations in the first six months of fiscal 2015 was $2.2 million, or $0.41 per diluted share, compared with income of $2.7 million, or $0.49 per diluted share, in the comparable period in fiscal 2014.
Chairman and CEO Michael S. Lipscomb stated, “The Company continued to experience the slow start that began in the first quarter of fiscal 2015. The energy business lost a major customer in the first quarter of fiscal 2015 due to the customer moving approximately 10% of SIFCO’s fiscal 2014 revenue to offshore resources. It is anticipated that the expected addition of C Blade will provide the breadth of product and capability to rekindle the energy business. SIFCO also experienced delay in raw material availability, which impacted revenue in the second quarter as it did during the first quarter. Availability of the needed raw material improved late in the second quarter. The Company also completed the sale of the land and building related to the Repair Group’s discontinued operations, the gain on which, was offset by the continued absorption of costs associated with enterprise-wide initiatives, a non-recurring severance payment due to the departure of a former executive officer, and costs associated to the Company’s anticipated acquisition of C Blade S.pA. As such, the above items continued to impact the bottom line. All these efforts, as previously stated, are necessary endeavors to build a platform for the future. Our target markets, aerospace and energy, have fared well overall, and we continue to have a positive outlook for the potential growth of these markets."
Certain statements contained in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to financial results and plans for future business development activities, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions, competition and other uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings.
The Company's Form 10-K for the year ended September 30, 2014 can be accessed through its website: www.sifco.com, or on the Securities and Exchange Commission's website: www.sec.gov.
The Company is engaged in the production of forgings and machined components primarily in the Aerospace and Energy markets. The processes and services and services include heat-treating and machining. The Company operates under one segment.
Second Quarter Ended March 31
(Amounts in thousands, expect per share data)
Three Months Ended Six Months Ended
March 31, March 31,
2015 2014 2015 2014
Net sales $ 24,615 $ 29,044 $ 44,695 $ 55,696
Cost of goods sold 20,914 22,740 37,992 43,822
Gross profit 3,701 6,304 6,703 11,874
Selling, general and administrative expenses 4,486 3,444 8,930 6,902
Amortization of intangible assets 520 545 1,040 1,090
Loss (gain) on disposal of operating assets 2 — 2 (2 )
Operating income (loss) (1,307 ) 2,315 (3,269 ) 3,884
Interest income (3 ) (5 ) (7 ) (9 )
Interest expense 48 51 108 136
Foreign currency exchange (gain) loss, net (48 ) (1 ) (57 ) 6
Other income, net (107 ) (108 ) (214 ) (217 )
Income (loss) from continuing operations before income tax provision (benefit) (1,197 ) 2,378 (3,099 ) 3,968
Income tax provision (benefit) (334 ) 867 (894 ) 1,303
Income (loss) from continuing operations (863 ) 1,511 (2,205 ) 2,665
Income (loss) from discontinued operations, net of tax 799 (85 ) 736 (292 )
Net income (loss) $ (64 ) $ 1,426 $ (1,469 ) $ 2,373
Income (loss) per share from continuing operations
Basic $ (0.16 ) $ 0.28 $ (0.41 ) $ 0.49
Diluted $ (0.16 ) $ 0.28 $ (0.41 ) $ 0.49
Income (loss) per share from discontinued operations, net of tax
Basic $ 0.15 $ (0.02 ) $ 0.14 $ (0.05 )
Diluted $ 0.15 $ (0.02 ) $ 0.14 $ (0.05 )
Net income (loss) per share
Basic $ (0.01 ) $ 0.26 $ (0.27 ) $ 0.44
Diluted $ (0.01 ) $ 0.26 $ (0.27 ) $ 0.44
Weighted-average number of common shares (basic) 5,438 5,407 5,430 5,393
Weighted-average number of common shares (diluted) 5,446 5,423 5,447 5,415
Contact:
SIFCO Industries, Inc.
Thomas R. Kubera, 216-881-8600
www.sifco.com
Entertainment Gaming Asia Inc. Reports Second Quarter 2015 Results
-- Company Achieves Profitability for the Second Quarter of 2015 Driven by Improvements in Both Business Divisions --
PR Newswire
Entertainment Gaming Asia Inc.
August 6, 2015 7:30 AM
HONG KONG, Aug. 6, 2015 /PRNewswire/ -- Entertainment Gaming Asia Inc. (EGT) ("Entertainment Gaming Asia" or "the Company"), a gaming company focused on emerging gaming markets in Pan-Asia, today reported operating results for the second quarter ended June 30, 2015 and reviewed recent corporate progress.
..
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.Entertainment Gaming Asia Inc. Logo
Key Financial Metrics
•Consolidated revenues of $7.6 million for the second quarter of 2015
•Adjusted EBITDA (earnings from continuing operations before interest, taxes, depreciation, amortization and non-cash charges) of $3.3 million for the second quarter of 2015
•Net income of $1.5 million for the second quarter of 2015
•Cash balance of $24.6 million and zero debt as of June 30, 2015
Second Quarter of 2015 Financial Performance
All historical revenues and expenses associated with Dreamworld Pailin, which ceased operation in June 2014, have been reclassified as discontinued operations for the presented periods. Historical share amounts have been proportionally adjusted to reflect the impact of the Company's 1:4 reverse stock split effected on February 26, 2015 for the presented periods.
The Company's second quarter of 2015 consolidated revenue was $7.6 million, an increase of 54% compared to $4.9 million in the second quarter of 2014 due to increases in both the gaming operations and gaming products business divisions.
Gaming operations revenue was $4.9 million for the second quarter of 2015, an increase of 11% compared to $4.4 million in the second quarter of 2014 due to improvement in the Cambodia operations partially offset by a decline in the Philippines operations. Average consolidated daily net win per unit was $131 for the second quarter of 2015, an increase of 17% compared to $112 in the second quarter of 2014 due to the higher revenue and a slight reduction of machine seats in operation during the second quarter of 2015.
Cambodia average daily net win per unit was $165 for the second quarter of 2015, an increase of 27% compared to $130 in the prior year period primarily due to improved performance at NagaWorld. NagaWorld average daily net win per unit increased to $248 for the second quarter of 2015 compared to $203 in the prior year period primarily due to an increase in VIP player traffic.
Philippines average daily net win per unit was $65 for the second quarter of 2015, a decrease of 14% compared to $76 in the prior year period. The decrease was primarily due to increased competition from new integrated casino resorts in Manila, one of which opened in March 2013 and another which soft opened in December 2014. While Philippines average daily net win per unit declined on a year-over-year basis, it has remained relatively stable in recent quarters as the Company continues its proactive marketing strategies in efforts to stabilize performance in the increasingly competitive landscape.
Revenue from gaming products was $2.7 million for the second quarter of 2015 compared to $524,000 in the second quarter of 2014. The increase was primarily a result of higher sales of gaming chips and plaques due to strong reorder levels from existing customers. The Company achieved a gross profit of $395,000 for this division for the second quarter of 2015 compared to a gross margin loss of $401,000 in the prior year period. The gross margin increase was primarily due to higher production volumes and continued efforts to improve production efficiencies.
Selling, general and administrative, or SG&A, expenses were $1.3 million for the second quarter of 2015 compared to $1.1 million in the second quarter of 2014. The lower expenses in the second quarter of 2014 were mainly due to a reversal of a previously accrued one-time other tax liability of $485,000 related to the Philippines operations. Excluding this benefit to the second quarter of 2014, SG&A expenses for the second quarter of 2015 declined $280,000 compared to the prior year period, which was primarily due to cost control efforts.
Entertainment Gaming Asia reported adjusted EBITDA of $3.3 million in the second quarter of 2015 compared to $2.1 million in the second quarter of 2014.
The Company reported net income of $1.5 million, or $0.10 per share, on a weighted average diluted share count of 14.5 million shares for the second quarter of 2015. This compared to a net loss of $22,000, or breakeven per share, on a weighted average diluted share count of 7.5 million shares for the second quarter of 2014. The second quarter of 2014 net loss included a net loss of $239,000 from discontinued operations related to Dreamworld Pailin. Excluding the discontinued operations, the Company reported net income from continuing operations of $217,000, or $0.03 per share, for the second quarter of 2014.
Clarence Chung, Chairman and Chief Executive Officer of Entertainment Gaming Asia, commented, "We are pleased to report that the strong top and bottom-line year-over-year improvement achieved in the first quarter continued in the second quarter of 2015. The primary drivers of our performance were the significant improvements in gaming products sales and gross margin as well as the growth in gaming operations revenue. Gaming products benefitted from an attractive reorder pipeline from existing customers and our efforts to improve profitability while growth in gaming operations was largely due to strong performance from NagaWorld.
"We are focused on continuing to improve our operating performance. Through proactive marketing and machine management, we aim to maximize performance and return potential for our slot operations. For gaming products, we continue efforts to expand our market presence and build on our present confirmed order pipeline of $4.5 million for the second half of 2015.
"In addition, we are actively pursuing new projects that would drive long-term growth for the Company. With over $24.0 million in net cash and the benefits of being an indirect, majority-owned subsidiary of Melco International Development Limited, we believe we have greatly improved our ability to secure new projects that could enhance our existing operations and provide the opportunity to expand into new businesses and markets."
Entertainment Gaming Asia is hosting a conference call and simultaneous webcast at 8:30 a.m. ET today, August 6, 2015, both of which are open to the general public. The conference call number is 800/734-8582 or 212/231-2906. Questions and answers will be reserved for call-in analysts and investors. Interested parties may also access the live call on the Internet at www.EGT-Group.com. Please allow 15 minutes to register and download and install any necessary software. Following its completion, a replay of the call can be accessed for thirty days on the Internet at www.EGT-Group.com.
About Entertainment Gaming Asia Inc.
Entertainment Gaming Asia Inc. (EGT), an indirect, majority-owned subsidiary of Melco International Development Limited, is a gaming company in Pan-Asia engaged in the leasing of electronic gaming machines on a revenue sharing basis to the gaming industry in Cambodia and the Philippines and the development and operation of gaming venues in Asia under its "Dreamworld" brand. The Company also manufactures and sells RFID and traditional gaming chips and plaques to major casinos under its "Dolphin" brand.
Forward Looking Statements
This press release contains forward-looking statements concerning Entertainment Gaming Asia within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Those forward-looking statements include statements regarding expectations for the Company's slot operations business model, growth of the gaming industry in Asia, the Company's ability to secure new gaming projects and fund those projects, expectations for the increasing profitability of the Company's gaming chips and plaques operations and expectations for expanding its business model to new gaming platforms and markets. Such statements are subject to certain risks and uncertainties, and actual circumstances, events or results may differ materially from those projected in such forward-looking statements. Factors that could cause or contribute to differences include, but are not limited to, risks related to the Company's ability to: place gaming machines at significant levels and generate the expected amount of net win from the gaming machines placed; identify and implement successful marketing and promotional strategies for the Company's gaming projects and identify and successfully develop additional projects; acquire additional capital as and when needed; identify and implement successful marketing and promotional strategies and obtain and fulfill significant purchase orders from the customers for the Company's gaming chips and plaques; successfully improve manufacturing processes and enhance production efficiencies for the Company's gaming chips and plaques; adapt to potential changes in gaming policies and political stability in the countries in which the Company operates and those other risks set forth in the Company's annual report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 26, 2015 and subsequently filed quarterly reports on Form 10-Q. The Company cautions readers not to place undue reliance on any forward-looking statements. The Company does not undertake, and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur.
- financial tables follow -
Entertainment Gaming Asia Inc.
Consolidated Statements of Comprehensive Income/Loss
(Unaudited)
Three-Month Periods
Ended June 30,
Six-Month Periods
Ended June 30,
(amounts in thousands, except per share data)
2015
2014
2015
2014
Revenues:
Gaming operations
4,914
4,420
8,924
8,303
Gaming products
2,723
524
6,995
1,335
Total revenues
7,637
4,944
15,919
9,638
Operating costs and expenses:
Cost of gaming operations
Gaming property and equipment depreciation
782
908
1,601
1,789
Casino contract amortization
611
612
1,222
1,222
Other gaming related intangibles amortization
63
63
126
126
Other operating costs
969
895
1,791
1,740
Cost of gaming products
2,328
925
5,990
2,413
Selling, general and administrative expenses
1,323
1,167
2,935
2,720
Gain on disposition of assets
(17)
(8)
(22)
(8)
Impairment of assets
—
19
—
19
Product development expenses
34
101
69
156
Depreciation and amortization
52
50
106
99
Total operating costs and expenses
6,145
4,732
13,818
10,276
Income/(loss) from operations
1,492
212
2,101
(638)
Other (expenses)/income:
Interest expense and finance fees
(2)
—
(3)
(2)
Interest income
3
—
6
—
Foreign currency (losses)/gains
(25)
16
(54)
1
Other
10
4
19
12
Total other (expenses)/income
(14)
20
(32)
11
Income/(loss) from continuing operations before income tax
1,478
232
2,069
(627)
Income tax expenses
(17)
(15)
(37)
(30)
Net income/(loss) from continuing operations
1,461
217
2,032
(657)
Net loss from discontinued operations, net of tax
—
(239)
—
(395)
Net income/(loss) attributable to EGT stockholders
$
1,461
$
(22)
$
2,032
$
(1,052)
Other comprehensive (loss)/income:
Foreign currency translation
(16)
99
(15)
58
Total other comprehensive (loss)/income, net of tax
(16)
99
(15)
58
Comprehensive income/(loss) attributable to EGT stockholders
$
1,445
$
77
$
2,017
$
(994)
Per share data (basic and diluted):
Earnings/(loss)
$
0.10
$
—
$
0.14
$
(0.14)
Earnings/(loss) from continuing operations
$
0.10
$
0.03
$
0.14
$
(0.09)
Loss from discontinued operations, net of tax
$
—
$
(0.03)
$
—
$
(0.05)
Weighted average common shares outstanding:
Basic
14,458
7,503
14,454
7,500
Diluted
14,477
7,537
14,474
7,500
Entertainment Gaming Asia Inc.
Consolidated Balance Sheets
June 30,
2015
December 31, 2014
(amounts in thousands, except per share data)
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
24,638
$
17,301
Accounts receivable, net
493
830
Amounts due from related parties
1,686
2,112
Other receivables
128
316
Inventories
3,731
2,617
Prepaid expenses and other current assets
592
1,447
Total current assets
31,268
24,623
Gaming equipment, net
4,872
5,624
Casino contracts
1,755
2,982
Property and equipment, net
8,782
8,895
Goodwill
346
351
Intangible assets, net
441
595
Contract amendment fees
72
126
Deferred tax asset
140
142
Prepaids, deposits and other assets
1,061
1,316
Total assets
$
48,737
$
44,654
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
1,282
$
645
Amounts due to related parties
108
47
Accrued expenses
1,378
2,009
Income tax payable
8
—
Customer deposits and other current liabilities
2,229
306
Total current liabilities
5,005
3,007
Other liabilities
863
845
Deferred tax liability
107
107
Total liabilities
5,975
3,959
Stockholders' equity:
Common stock, $.001 par value, 18,750,000 shares authorized;14,464,220 and 14,471,095 shares issued and outstanding, respectively
14
14
Additional paid-in-capital
47,730
47,680
Accumulated other comprehensive income
738
753
Accumulated losses
(5,721)
(7,753)
Total EGT stockholders' equity
42,761
40,694
Non-controlling interest
1
1
Total stockholders' equity
42,762
40,695
Total liabilities and stockholders' equity
$
48,737
$
44,654
Entertainment Gaming Asia Inc.
Adjusted EBITDA from Continuing Operations
(Unaudited)
Three-Month Periods
Ended June 30,
Six-Month Periods
Ended June 30,
(amounts in thousands)
2015
2014
2015
2014
Net income/(loss) from continuing operations – GAAP basis
$
1,461
$
217
$
2,032
$
(657)
Interest expense and finance fees
2
—
3
2
Interest income
(3)
—
(6)
—
Income tax expenses
17
15
37
30
Depreciation and amortization
1,796
1,824
3,605
3,570
Stock-based compensation expenses
20
69
50
141
Impairment of assets
—
19
—
19
Gain on dispositions of assets
(17)
(8)
(22)
(8)
Adjusted EBITDA from continuing operations
$
3,276
$
2,136
$
5,699
$
3,097
Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, stock-based compensation, and other non-cash operating income and expenses. Adjusted EBITDA is presented exclusively as a supplemental disclosure because management believes that it is widely used to measure the performance, and as a basis for valuation, of gaming companies. Management uses Adjusted EBITDA as a measure of the operating performance of its segments and to compare the operating performance of its operations with those of its competitors. The Company also presents Adjusted EBITDA because it is used by some investors as a way to measure a company's ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming companies have historically reported EBITDA as a supplement to financial measures in accordance with generally accepted accounting principles in the United States ("GAAP"). Adjusted EBITDA should not be considered as an alternative to operating income as an indicator of the Company's performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income/(loss), Adjusted EBITDA does not include depreciation or interest expense and, therefore, does not reflect current or future capital expenditures or the cost of capital. The Company compensates for these limitations by using Adjusted EBITDA as only one of several comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include operating income, net income/(loss), cash flows from operations and cash flow data. The Company has significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, taxes and other non-recurring charges, which are not reflected in Adjusted EBITDA. Entertainment Gaming Asia's calculation of Adjusted EBITDA may be different from the calculation methods used by other companies and, therefore, comparability may be limited.
Entertainment Gaming Asia Inc.
Gaming Operations Performance Metrics
Slot Operations
Net Revenue to EGT (in thousands)
Q2:15
Q2:14
Y/Y ?
1H:15
1H:14
Y/Y ?
Cambodia
$3,992
$3,350
19%
$7,110
$6,280
13%
Philippines
$650
$787
-17%
$1,320
$1,515
-13%
Service revenue(1)
$272
$283
-4%
$494
$508
-3%
Consolidated
$4,914
$4,420
11%
$8,924
$8,303
7%
Average Daily Net Win Per Unit
Q2:15
Q2:14
Y/Y ?
1H:15
1H:14
Y/Y ?
Cambodia
$165
$130
27%
$147
$124
19%
Philippines
$65
$76
-14%
$67
$73
-8%
Consolidated
$131
$112
17%
$120
$107
12%
EGM Seats in Operation
6/30/15
6/30/14
Y/Y ?
Cambodia
1,018
1,126
-10%
Philippines
540
568
-5%
Consolidated
1,558
1,694
-8%
(1) Service revenue represents reimbursements of certain expenses, which for accounting purposes, are included in the revenue and grossed up in the cost of gaming operations.
Stanley Black & Decker's Q2 Earnings Beat, Outlook Raised - Analyst Blog
Zacks
By Zacks Equity Research
July 30, 2015 11:48 AM
Industrial tool maker Stanley Black & Decker SWK reported better-than-expected results for second-quarter 2015. The company’s earnings from continuing operations of $1.54 per share exceeded the Zacks Consensus Estimate of $1.53. Also, the bottom line came 10.8% above the year-ago tally of $1.39.
Stanley Black & Decker's Q2 Earnings Beat, Outlook Raised - Analyst Blog
.
Zacks
By Zacks Equity Research
July 30, 2015 11:48 AM
Industrial tool maker Stanley Black & Decker SWK reported better than-expected results for second-quarter 2015. The company’s earnings from continuing operations of $1.54 per share exceeded the Zacks Consensus Estimate of $1.53. Also, the bottom line came 10.8% above the year-ago tally of $1.39.
RCI Hospitality Holdings, Inc. Reports Fiscal 3Q15 Results
GAAP EPS of $0.78 Up 11x YoY on Gain from Tax Settlement
RCI Hospitality Holdings, Inc.
21 hours ago
HOUSTON, Aug. 10, 2015 /PRNewswire/ -- RCI Hospitality Holdings, Inc. (RICK) today announced results for the fiscal 2015 third quarter ended June 30, 2015.
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.RCI HOSPITALITY HOLDINGS INC
3Q15 Highlights
•GAAP EPS diluted of $0.78 includes the previously announced gain from the settlement of the Patron Tax issue with the State of Texas. This compares to $0.07 in 3Q14.
•Non-GAAP EPS* diluted of $0.32 increased 6.7% from $0.30 in 3Q14. Non-GAAP EPS excludes the above mentioned tax settlement as well as other items from both periods for comparability.
•Total revenues of $35.8 million grew 7.3% year over year.
•$2.3 million used to buy back shares in the open market in the first nine months of Fiscal 2015.
•Company on track for a solid FY15 and another year of growth in FY16.
Conference Call
A conference call to discuss these results, outlook and related matters will be held today, August 10, 2015, at 4:30 PM ET:
•Live Participant Dial In (Toll Free): 877-407-9210
•Live Participant Dial In (International): 201-689-8049
•Webcast URL: http://www.investorcalendar.com/event/174217
Meet Management
Eric Langan, President and CEO, invites investors for a "Due Diligence Ball" to meet, talk and tour one of RCI's top revenue generating clubs.
•When: Monday, August 10, 2015, 6:00 PM to 8:00 PM ET
•Where: Vivid Cabaret New York, 61 W 37th St, NY, NY 10018, bet. 5th and 6th avenues
•RSVP: By 5:00 PM ET, August 10, 2015, with your contact information, to gary.fishman@anreder.com
CEO Comment
"We're pleased to have generated a 6.7% year over year increase in non-GAAP EPS on a 7.3% year over year in total revenues in 3Q15 despite particularly bad weather in Texas that affected sales there," said Mr. Langan.
"This underscores the soundness of our bar/restaurant strategy, reflecting Bombshells sales up more than threefold year over year; the success of new clubs and our recent acquisitions; and the elimination of some underperforming clubs last year.
"We are particularly pleased to have settled the Texas Patron Tax issue. This resulted in a pre-tax gain of $8.2 million, increasing GAAP EPS to $0.78. This gain will cover close to 80% of 2Q15's New York federal wage and hour class action settlement, which is being implemented as planned.
"Also during 3Q15, we continued to repurchase stock in the open market, reflecting confidence in our favorable outlook, combined with the market's undervaluation of our shares.
"We are on track for a solid Fiscal 2015. Year to date, total revenues are up 14.7%, adjusted EBITDA is up 16.9%, and GAAP EPS and non-GAAP EPS are both up 23.2%. With better weather, same store sales have begun to rebound in 4Q15. Recently, we acquired the retail plaza in Florida where Tootsie's Cabaret, our largest adult club subsidiary and the plaza's largest tenant, is located. We expect this transaction to also be accretive.
"We look forward to Fiscal 2016 as another year of continued growth. With all major outstanding issues behind us, we'll have the ability to apply even more cash generated toward the repurchase of shares."
3Q15 Analysis (all comparisons to 3Q14 unless otherwise noted)
Total Revenues
•Total revenues of $35.8 million compared to $33.3 million, up 7.3%.
•46 units in operation versus 43, up 7.0%.
•Same store sales declined 5.3% due to unusually severe rain and flooding in Texas that affected our nightclub segment, in particular, as previously announced.
•Units opened less than a year added $5.2 million from new adult clubs – Rick's Cabaret in Odessa, TX, the January acquisition of Down in Texas Saloon in Austin, TX, and the May acquisition of The Seville Club of Minneapolis, plus new Bombshells in Austin, Spring, and Houston, TX.
Operating Margin & Costs (as % of revenues)
•GAAP operating margin was 39.6% compared to 8.7%. 3Q15 benefitted from the $8.2 million gain from the settlement of the Texas Patron Tax. 3Q14 was adversely affected by $3.2 million from the settlement of lawsuits and other one-time costs.
•As reported, in May RCI reached a settlement with the State of Texas over payment of a Patron Tax on adult club customers. RCI agreed to pay $10.0 million in taxes owed in 84 equal monthly installments without interest and to remit the tax on a monthly basis going forward. Because RCI had accrued more than the $10 million owed, the company recorded an $8.2 million pre-tax gain in 3Q15.
•Non-GAAP operating margin, which excludes the gain and certain other non-operating items from both periods for more meaningful analysis, was 18.3% compared to 19.6%. 3Q14 primarily reflects growth of the Bombshells segment, whose margins, while growing, are less than that of the nightclub segment.
Adjusted EBITDA
•RCI's cash generating power for the quarter, as reflected by adjusted EBITDA, amounted to $8.2 million, up 6.1% from $7.7 million in the year ago quarter.
Business Segments (all comparisons to 3Q14 unless otherwise noted)
Nightclubs
•Includes 41 units, the same as in the year ago quarter.
•Sales of $30.6 million compared to $31.5 million, a 2.9% decline.
•Operating income of $17.3 million compared to $8.5 million.
•Adjusted operating income, which excludes the previously mentioned gain and certain other non-operating items from both periods for more meaningful analysis, was $9.1 million (29.8% of sales) compared to $11.8 million (37.3% of sales).
•In May, RCI subsidiaries acquired The Seville Club, a popular gentlemen's club in Minneapolis, for total consideration of $8.5 million.
•In August, an RCI subsidiary acquired the Miami Gardens Square retail plaza in Florida, where Tootsie's Cabaret is located. Total consideration of $15.3 million consisted of $3.975 million in cash and a 5.45%, $11.325 million bank loan.
Bombshells
•Includes five Bombshells, all in Texas, compared to two in the year ago quarter.
•Sales totaled $4.8 million, up from $1.6 million.
•Operating income improved to a profit of $369,000 compared to a loss of $170,000, a $539,000 turnaround.
•Operating margin expanded to 7.7% of revenues from (10.7%) and should increase as revenues continue to build and training costs subside.
Balance Sheet (June 30, 2015 compared to March 31, 2015)
•Assets increased 1.7% to $265.0 million, primarily due to the acquisition of The Seville Club and related real estate.
•Current liabilities declined 37.6% to $28.8 million and long-term debt increased 15.9% to $72.9 million, primarily due to the Texas Patron Tax settlement.
•Total permanent stockholders' equity increased 6.7% to $129.0 million, primarily reflecting the after-tax benefit of the gain from the Patron Tax Settlement and core profits.
Stock Buy Backs
•The Board of Directors increased its stock repurchase authorization to $10.0 million in May 2014.
•During 3Q15, RCI purchased 32,853 shares in the open market for an aggregate cost of $370,799, leaving $6.6 million of remaining authorization.
•For the nine months ended June 30, 2015, RCI purchased 225,280 shares at a cost of $2.3 million.
*Non-GAAP Financial Measures
In addition to our financial information presented in accordance with GAAP, management uses certain "non-GAAP financial measures" within the meaning of the SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company's operating performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with GAAP. We monitor non-GAAP financial measures because it describes the operating performance of the company and helps management and investors gauge our ability to generate cash flow, excluding some recurring charges that are included in the most directly comparable measures calculated and presented in accordance with GAAP. Relative to each of the non-GAAP financial measures, we further set forth our rationale as follows:
•Non-GAAP Operating Income and Non-GAAP Operating Margin. We exclude from non-GAAP operating income and non-GAAP operating margin amortization of intangibles, gain on settlement of patron tax case, pre-opening costs, gains and losses from asset sales, stock-based compensation charges, litigation and other one-time legal settlements and acquisition costs. We believe that excluding these items assists investors in evaluating period-over-period changes in our operating income and operating margin without the impact of items that are not a result of our day-to-day business and operations. While we were in litigation in the patron tax case, we also included patron taxes as an exclusion, but after settlement of the case, we no longer exclude patron taxes from operating income.
•Non-GAAP Net Income and Non-GAAP Net Income per Basic Share and per Diluted Share. We exclude from non-GAAP net income and non-GAAP net income per diluted share and per basic share amortization of intangibles, gain on settlement of patron tax case, pre-opening costs, income tax expense, impairment charges, gains and losses from asset sales, stock-based compensation, litigation and other one-time legal settlements and acquisition costs, and include the Non-GAAP provision for income taxes, calculated as the tax-effect at 35% effective tax rate of the pre-tax non-GAAP income before taxes less stock-based compensation, because we believe that excluding such measures helps management and investors better understand our operating activities. While we were in litigation in the patron tax case, we also included patron taxes as an exclusion, but after settlement of the case, we no longer exclude patron taxes from net income.
•Adjusted EBITDA. We exclude from Adjusted EBITDA depreciation expense, amortization of intangibles, income tax, interest expense, interest income, gains and losses from asset sales, acquisition costs, litigation and other one-time legal settlements, gain on settlement of patron tax case and impairment charges because we believe that adjusting for such items helps management and investors better understand operating activities. Adjusted EBITDA provides a core operational performance measurement that compares results without the need to adjust for Federal, state and local taxes which have considerable variation between domestic jurisdictions. Also, we exclude interest cost in our calculation of Adjusted EBITDA. The results are, therefore, without consideration of financing alternatives of capital employed. We use Adjusted EBITDA as one guideline to assess our unleveraged performance return on our investments. Adjusted EBITDA is also the target benchmark for our acquisitions of nightclubs.
Full Financial Tables
RCI's Form 10Q for the fiscal third quarter ended June 30, 2015 with full financial tables can be found on the company's corporate site at http://www.rcihospitality.com.
About RCI Hospitality Holdings, Inc. (RICK)
With 46 units, RCI Hospitality Holdings, Inc., through its subsidiaries, is the country's leading company in adult gentlemen clubs and sports bars/restaurants. Adult clubs in New York City, Miami, Philadelphia, Charlotte, Dallas/Ft. Worth, Houston, Minneapolis, Indianapolis and other cities operate under brand names, such as "Rick's Cabaret," "XTC," "Club Onyx," "Vivid Cabaret," "Jaguars" and "Tootsie's Cabaret." Sports bars/restaurants operate under the brand name "Bombshells." Please visit http://www.rcihospitality.com/
RCI Hospitality in 2015 is celebrating the 20th anniversary of its IPO – two decades of innovation in the adult club segment of the hospitality industry.
Forward-Looking Statements
This press release may contain forward-looking statements that involve a number of risks and uncertainties that could cause the company's actual results to differ materially from those indicated in this press release, including the risks and uncertainties associated with operating and managing an adult business, the business climates in cities where it operates, the success or lack thereof in launching and building the company's businesses, risks and uncertainties related to the operational and financial results of its Web sites, conditions relevant to real estate transactions, and numerous other factors such as laws governing the operation of adult entertainment businesses, competition and dependence on key personnel. The company has no obligation to update or revise the forward-looking statements to reflect the occurrence of future events or circumstances.
RCI HOSPITALITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS
FOR THE NINE MONTHS
ENDED JUNE 30,
ENDED JUNE 30,
2015
2014
2015
2014
(in thousands, except per share data)
(UNAUDITED)
(UNAUDITED)
Revenues:
Sales of alcoholic beverages
$
15,148
$
13,626
$
45,963
$
38,300
Sales of food and merchandise
5,049
4,076
15,515
11,478
Service revenues
13,870
14,035
42,623
41,112
Other
1,694
1,606
5,557
4,746
Total revenues
35,761
33,343
109,658
95,636
Operating expenses:
Cost of goods sold
5,033
4,295
15,525
12,083
Salaries and wages
8,176
7,219
24,323
20,650
Stock compensation
120
2
360
156
Other general and administrative:
Taxes and permits
5,444
5,150
16,546
14,707
Charge card fees
562
479
1,653
1,356
Rent
1,189
1,315
3,514
3,699
Legal and professional
939
1,206
2,962
2,420
Advertising and marketing
1,506
1,420
4,185
4,111
Insurance
866
1,014
2,487
2,785
Utilities
727
650
2,169
1,891
Depreciation and amortization
1,923
1,532
5,454
4,438
Loss on sale of property
178
334
160
248
Impairment of assets
-
-
1,358
-
Settlement of lawsuits and other one-time costs
10
3,233
10,560
3,503
Gain on settlement of patron tax
(8,167)
-
(8,167)
-
Other
3,103
2,602
8,893
7,624
Total operating expenses
21,609
30,451
91,982
79,671
Operating income
14,152
2,892
17,676
15,965
Other income (expense):
Interest income
-
-
39
112
Interest expense
(1,630)
(2,060)
(5,032)
(5,996)
Gain from original investment in Drink Robust
-
-
577
-
Income before income taxes
12,522
832
13,260
10,081
Income taxes
4,442
203
5,023
3,448
Net income
8,080
629
8,237
6,633
Less: net loss attributable to noncontrolling interests
187
62
549
183
Net income attributable to RCI Hospitality Holdings, Inc.
$
8,267
$
691
$
8,786
$
6,816
Basic earnings per share attributable to RCIHH's shareholders:
Net income
$
0.81
$
0.07
$
0.86
$
0.70
Diluted earnings per share attributable to RCIHH's shareholders:
Net income
$
0.78
$
0.07
$
0.85
$
0.69
Weighted average number of common shares outstanding:
Basic
10,245
9,883
10,262
9,695
Diluted
10,707
9,968
10,724
9,922
RCI HOSPITALITY HOLDINGS, INC. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
For the Three Months
For the Nine Months
Ended June 30,
Ended June 30,
(in thousands, except per share data)
2015
2014
2015
2014
Reconciliation of GAAP net income to Adjusted EBITDA
GAAP net income attributable to RCIHH
$8,267
$691
$8,786
$6,816
Income tax expense
4,442
203
5,023
3,448
Interest expense and income
1,630
2,060
4,993
5,884
Litigation and other one-time legal settlements
10
3,233
10,560
3,503
Gain on settlement of Patron tax case
(8,167)
-
(8,167)
-
Impairment of assets
-
-
1,358
-
Acquisition costs
105
22
283
111
Depreciation and amortization
1,923
1,532
5,454
4,438
Adjusted EBITDA
$8,210
$7,741
$28,290
$24,200
Reconciliation of GAAP net income to non-GAAP net income
GAAP net income attributable to RCIHH
$8,267
$691
$8,786
$6,816
Amortization of intangibles
312
82
892
254
Stock-based compensation
120
2
360
156
Litigation and other one-time settlements
10
3,233
10,560
3,503
Gain on settlement of Patron tax case
(8,167)
-
(8,167)
-
Pre-opening costs
-
306
328
743
Income tax expense
4,442
203
5,023
3,448
Impairment of assets
-
-
1,358
-
Acquisition costs
105
22
283
111
Non-GAAP provision for income taxes
(1,739)
(1,588)
(6,672)
(5,206)
Non-GAAP net income
$3,350
$2,951
$12,751
$9,825
Reconciliation of GAAP diluted net income per share to non-GAAP diluted net income per share
Fully diluted shares
10,707
9,968
10,724
9,922
GAAP net income attributable to RCIHH
$0.78
$0.07
$0.85
$0.69
Amortization of intangibles
0.03
0.01
0.08
0.03
Stock-based compensation
0.01
0.00
0.03
0.02
Litigation and other one-time settlements
0.00
0.32
0.99
0.35
Gain on settlement of Patron tax case
(0.76)
-
(0.76)
-
Pre-opening costs
-
0.03
0.03
0.07
Impairment of assets
-
-
0.13
-
Income tax expense
0.41
0.02
0.47
0.35
Acquisition costs
0.01
0.00
0.03
0.01
Non-GAAP provision for income taxes
(0.16)
(0.16)
(0.62)
(0.52)
Non-GAAP diluted net income per share
$0.32
$0.30
$1.22
$0.99
RCI HOSPITALITY HOLDINGS, INC. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
For the Three Months
For the Nine Months
Ended June 30,
Ended June 30,
(in thousands, except per share data)
2015
2014
2015
2014
Reconciliation of GAAP operating income to non-GAAP operating income
GAAP operating income
$14,152
$2,892
$17,676
$15,965
Amortization of intangibles
312
82
892
254
Stock-based compensation
120
2
360
156
Litigation and other one-time settlements
10
3,233
10,560
3,503
Gain on settlement of Patron tax case
(8,167)
-
(8,167)
-
Impairment of assets
-
-
1,358
-
Pre-opening costs
-
306
328
743
Acquisition costs
105
22
283
111
Non-GAAP operating income
$6,532
$6,537
$23,290
$20,732
Reconciliation of GAAP operating margin to non-GAAP operating margin
GAAP operating income
39.6%
8.7%
16.1%
16.7%
Amortization of intangibles
0.9%
0.2%
0.8%
0.3%
Stock-based compensation
0.3%
0.0%
0.3%
0.2%
Litigation and other one-time settlements
0.0%
9.7%
9.6%
3.7%
Gain on settlement of Patron tax case
-22.8%
0.0%
-7.4%
0.0%
Impairment of assets
0.0%
0.0%
1.2%
0.0%
Pre-opening costs
0.0%
0.9%
0.3%
0.8%
Acquisition costs
0.3%
0.1%
0.3%
0.1%
Non-GAAP operating margin
18.3%
19.6%
21.2%
21.7%
RCI HOSPITALITY HOLDINGS, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
For the Three Months
For the Nine Months
Ended June 30,
Ended June 30,
(in thousands)
2015
2014
2015
2014
Business segment sales:
Nightclubs
$
30,568
$
31,486
$
93,564
$
91,037
Bombshells
4,789
1,585
14,510
3,668
Other
404
272
1,584
931
$
35,761
$
33,343
$
109,658
$
95,636
Business segment operating income:
Nightclubs
$
17,271
$
8,526
$
26,000
$
25,947
Bombshells
369
(170)
1,480
(268)
Other
(682)
(220)
(1,995)
(521)
General corporate
(2,806)
(5,244)
(7,809)
(9,193)
$
14,152
$
2,892
$
17,676
$
15,965
Reconciliation of Nightclubs GAAP operating income to non-GAAP operating income
Nightclubs operating income
$
17,271
$
8,526
$
26,000
$
25,947
Gain on settlement of Patron tax case
(8,167)
-
(8,167)
-
Litigation and other one-time settlements
10
3,233
10,560
3,503
Impairment of assets
-
-
1,358
-
Nightclubs non-GAAP operating income
$
9,114
$
11,759
$
29,751
$
29,450
Nightclubs non-GAAP operating margin
29.8%
37.3%
31.8%
32.3%
The "Street" has TTC coming in at .92 for the 2nd quarter that should be reported on or about August 20, 2015!
All post's welcome!
The "Good Dr's In"!
The "Street" has TTC coming in at .92 for the 2nd quarter that should be reported on or about August 20, 2015!
All post's welcome!
The "Good Dr's In"!
The "Street" has TTC coming in at .92 for the 2nd quarter that should be reported on or about August 20, 2015!
All post's welcome!
The "Good Dr's In"!
The "Street" has AZZ coming in at .73 for the 2nd quarter that should be reported on or about September 29, 2015!
All post's welcome!
The "Good Dr's In"!
The "Street" has AZZ coming in at .73 for the 2nd quarter that should be reported on or about September 29, 2015!
All post's welcome!
The "Good Dr's In"!
Stanley Black & Decker Reports 2Q 2015 Results
.
PR Newswire
Stanley Black & Decker
July 30, 2015 6:00 AM
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NEW BRITAIN, Conn., July 30, 2015 /PRNewswire/ -- Stanley Black & Decker (SWK) today announced second quarter 2015 financial results.
•2Q'15 Revenues Totaled $2.9 Billion, Flat To Prior Year, As Robust Organic Growth Of 8% Was Offset By An 8% Currency Impact
•2Q'15 Operating Margin Rate Expanded 70 Basis Points To A Post-Merger Record 14.4% Despite $50 Million Of Currency Headwinds
•2Q'15 Diluted GAAP EPS Was $1.54 Up 11% From 2Q'14 On Strong Operational Performance
•Raising 2015 Full Year GAAP EPS Guidance Range To $5.70 To $5.90 From $5.65 To $5.85, Up 6% To 10% Versus 2014, Despite $1.00 To $1.10 Per Share Of Foreign Currency EPS Pressure
2Q'15 Key Points:
•Net sales for the period were $2.9 billion, flat to prior year, as positive volume (+7%) and price (+1%) were offset by currency (-8%).
•Gross margin rate for the quarter was 36.9%, up 20 basis points from the prior year rate of 36.7% as a result of favorable volume leverage, price, productivity and cost actions which more than offset unfavorable currency.
•SG&A expenses were 22.5% of sales compared to 22.9% in 2Q'14 reflecting volume leverage and cost control.
•Operating margin rate was 14.4% up 70 basis points from 2Q'14, reflecting actions to improve profitability and generate solid operating leverage which more than offset unfavorable currency.
•Restructuring charges for the quarter were $5.0 million compared to a restructuring credit of $1.7 million in 2Q'14.
•Tax rate was 25.0% equal to the 2Q'14 rate.
•Average diluted shares outstanding for the quarter were 152.7 million versus 159.7 million a year ago, reflecting the cumulative impact of our recent share repurchase program, including the repurchase of approximately $100 million of shares during the quarter.
•Working capital turns for the quarter were 7.0, up 0.2 turns from 2Q'14. Free cash flow for the quarter was $247 million versus $376 million for 2Q'14 reflecting an increased level of working capital to support higher organic growth.
Stanley Black & Decker's Chairman and CEO, John F. Lundgren, commented, "Our results from the second quarter and first half of 2015, combined with our recently increased dividend, reflect the continued successful execution of the strategy we communicated at our Investor Day in May: leveraging our world-class franchises and brands to deliver substantial organic growth and margin expansion, while generating strong free cash flow and maintaining a shareholder friendly capital allocation program. Organic growth and operating leverage were strong across most of the business, innovation is robust, and the organization remains agile, giving us confidence in our ability to navigate the uncertain currency and macro conditions we expect to continue to face in the back half of this year, and positioning us to meet our updated full year financial commitments."
2Q'15 Segment Results
($ in M)
2Q'15 Segment Results
Sales
Profit
Profit
Rate
Tools & Storage
$1,840
$301.6
16.4%
Security
$533
$55.2
10.4%
Industrial
$494
$94.3
19.1%
•Tools & Storage net sales increased 4% versus 2Q'14 as volume (+10%) and price (+1%), were partially offset by currency (-7%). Organic growth was strong across the board with North America, Europe and emerging markets up 14%, 7% and 5%, respectively. North America, which posted its fourth consecutive quarter of double-digit organic growth, continued to benefit from healthy underlying tool demand, share gains from new products and brand extensions, along with a favorable outdoor season. Europe maintained its trend of strong organic growth as new products, an expanded retail footprint, and solid commercial momentum continued to generate share gains in many markets amid a challenged growth environment. Emerging markets organic growth resulted from mid-price-point product launches and pricing actions, most notably in Latin America, which offset steep declines in Russia and slow market conditions in China. Overall Tools & Storage segment profit rate was a post-merger record 16.4%, up from the 2Q'14 rate of 15.6%, as volume leverage, price, productivity and cost management more than offset currency pressures.
•Security net sales decreased 7% versus 2Q'14 as organic growth of 1%, driven by slightly positive volume and price, was significantly impacted by currency (-8%). Organic growth within North America & emerging markets ("NA & EM") was flat as organic growth across the NA businesses was offset by declines in EM due to a slow China market. Europe's organic growth accelerated in the quarter (+3%), as higher installation revenues led to the region's third consecutive quarter of flat or positive organic growth, with growth in all major countries. Order rates in Europe were also strong, up double digits for the quarter, with attrition remaining within the target range of 10-12%. Overall Security segment profit rate was 10.4%, 170 basis points below 2Q'14. The year-over-year decrease in the rate relates primarily to the impact of project mix within the NA electronics business and sluggish EM volumes which more than offset improved operating performance within Europe and the NA mechanical business.
In addition, the Company completed the sale of Security Europe's Spain and Italy operations in July. The results of these operations have been reported as discontinued operations beginning in 4Q'14.
•Industrial net sales decreased 4% versus 2Q'14 as volume (+3%) and price (+1%) were more than offset by currency (-8%). Engineered Fastening achieved 4% organic growth driven by strong global automotive and electronics revenues, which more than offset weaker North American industrial volumes. Infrastructure organic revenues increased 3% as higher Oil & Gas volume, which benefited from a large international equipment sale during the quarter, more than offset lower Hydraulic Tools volume due to difficult market dynamics related to scrap steel. Overall Industrial segment profit rate was 19.1%, up 140 basis points from the 2Q'14 rate of 17.7%, as favorable volume leverage from Engineered Fastening and Oil & Gas, productivity gains and cost control more than offset the impact from currency and lower Hydraulic Tools volume.
President and Chief Operating Officer, James M. Loree, commented, "Our second quarter represented the fourth successive quarter of organic growth at or above 6% -- a sign that our efforts to build a culture geared towards organic growth are gaining traction. This impressive growth was once again led by our Tools & Storage platform, which has averaged 10% organic growth over this time period, while emerging markets in total despite weakness in China and Engineered Fastening also showed strength.
"Security's top-line performance was solid and we are encouraged by order rate trends, which reflect the impact of commercial actions aimed at driving growth in both North America and Europe. We were particularly pleased with the organic growth and operating margin results in Europe, which continues to perform to expectations, as well as within the North America mechanical access business. Security's overall margin performance fell short of our expectations for the quarter, however, as we have previously communicated, the multi-year growth and margin rate recovery trajectory of this business will not necessarily be linear. We still believe Security will achieve its growth and profitability objectives and remain committed to completing our assessment of its strategic fit by the second half of 2016. "
Updated 2015 Outlook
Donald Allan Jr., Senior Vice President and CFO, commented, "We are raising the range of our 2015 EPS outlook to $5.70 to $5.90 from $5.65 to $5.85 on a GAAP basis. We are maintaining our free cash flow outlook of at least $1 billion, however, we are closely monitoring the relatively higher working capital levels experienced in the first half of the year to ensure our working capital is adequate to service the higher organic growth expectations, which could modestly pressure free cash flow. Our current 2015 EPS outlook reflects the strong first half performance and improved full-year organic outlook within Tools & Storage and to a lesser extent our Engineered Fastening business, combined with additional indirect cost actions which, in the aggregate, are expected to more than offset Security's slower improvement. It is also important to note that since the beginning of the fourth quarter of 2014 we have reduced our share count by the equivalent of ~$1 billion of shares utilizing a combination of cash as well as equity derivatives, achieving our share repurchase plan announced in late 2013.
"We are encouraged by our overall first half performance despite difficult currency and market conditions and remain confident that 2015 will be another step forward in achieving our 2018 financial objectives that we communicated in May."
The Company will host a conference call with investors today, July 30, at 8:00 am ET. A slide presentation which will accompany the call will be available at www.stanleyblackanddecker.com and will remain available after the call.
You can also access the slides via the Stanley Black & Decker Investor Relations iPad & iPhone app from the Apple App Store by searching for "SWK Investor Relations".
The call will be accessible by telephone within the U.S. at (877) 930-8285, from outside the U.S. at +1 (253) 336-8297, and via the Internet at www.stanleyblackanddecker.com. To participate, please register on the web site at least fifteen minutes prior to the call and download and install any necessary audio software. Please use the conference identification number 77039075. A replay will also be available two hours after the call and can be accessed at (855) 859-2056 or +1 (404) 537-3406 using the passcode 77039075. The replay will also be available as a podcast within 24 hours and can be accessed on our website and via iTunes.
Stanley Black & Decker, an S&P 500 company, is a diversified global provider of hand tools, power tools and related accessories, mechanical access solutions and electronic security solutions, healthcare solutions, engineered fastening systems, and more. Learn more at www.stanleyblackanddecker.com.
Contact:
Greg Waybright
Vice President, Investor & Government Relations
greg.waybright@sbdinc.com
(860) 827-3833
These results reflect the Company's continuing operations. In 4Q'14, the Company classified the results of the Security segment's Spain and Italy operations as held for sale based on management's intention to sell these operations. In July 2015, the Company completed the sale of these operations. The operating results of Security Spain and Italy have been reported as discontinued operations for 2Q'15 and 2Q'14. In 3Q'13, the Company classified two small businesses within the Security and Industrial segments as held for sale based on management's intention to sell these businesses; these businesses were sold during 2014. The operating results of these businesses have been reported as discontinued operations for 2Q'14. Total sales reported as discontinued operations were $17.6 million and $33.4 million for 2Q'15 and 2Q'14, respectively.
In the first quarter of 2015, the Company combined the Construction & Do-It-Yourself ("CDIY") business with certain complementary elements of the Industrial and Automotive Repair ("IAR") and Healthcare businesses (formerly part of the Industrial and Security segments, respectively) to form one Tools & Storage business. As a result of this change, the legacy CDIY segment was renamed Tools & Storage. The Company recast segment net sales and profit for 2Q'14 to align with this change in organizational structure. There is no impact to the consolidated financial statements of the Company as a result of this change.
Organic sales growth is defined as total sales growth less the sales of companies acquired in the past twelve months and any foreign currency impacts. Operating margin is defined as sales less cost of sales and selling, general and administrative expenses. Management uses operating margin and its percentage of net sales as key measures to assess the performance of the Company as a whole, as well as the related measures at the segment level. Free cash flow is defined as cash flow from operations less capital and software expenditures. Management considers free cash flow an important indicator of its liquidity, as well as its ability to fund future growth and to provide a return to the shareowners. Free cash flow does not include deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company's common stock and business acquisitions, among other items. Normalized free cash flow, as reconciled from the associated GAAP measures on page 10 for 2Q'15 and 2Q'14 is considered a meaningful pro forma metric to aid the understanding of the Company's cash flow performance aside from the material impact of M&A-related payments and charges.
CAUTIONARY STATEMENTS
Under the Private Securities Litigation Reform Act of 1995
Statements in this press release that are not historical, including but not limited to those regarding the Company's ability to: (i) achieve full year 2015 EPS of $5.70 - $5.90 on a GAAP basis (including $50 million or $0.25 EPS in restructuring charges); (ii) generate free cash flow of at least $1.0 billion for 2015; (iii) maintain Security margin rates relatively flat to the prior year during 2015; and (iv) achieve its 2018 financial objectives as communicated at the Investor Day conference in May (collectively, the "Results"); are "forward looking statements" and subject to risk and uncertainty.
The Company's ability to deliver the Results as described above is based on current expectations and involves inherent risks and uncertainties, including factors listed below and other factors that could delay, divert, or change any of them, and could cause actual outcomes and results to differ materially from current expectations. In addition to the risks, uncertainties and other factors discussed in this press release, the risks, uncertainties and other factors that could cause or contribute to actual results differing materially from those expressed or implied in the forward looking statements include, without limitation, those set forth under Item 1A Risk Factors of the Company's Annual Report on Form 10-K and any material changes thereto set forth in any subsequent Quarterly Reports on Form 10-Q, or those contained in the Company's other filings with the Securities and Exchange Commission, and those set forth below.
The Company's ability to deliver the Results is dependent, or based, upon: (i) the Company's ability to deliver sufficient working capital turns expansion to achieve at least $1 billion of free cash flow for 2015; (ii) the Company's ability to deliver organic growth of approximately 6% (iii) the Company's ability to successfully execute upon indirect cost actions and to benefit from pricing and cost deflation; (iv) the Company's ability to sufficiently lower its average share count in 2015; (v) foreign exchange headwinds being approximately $200-$220 million in 2015; (vi) the Company's ability to achieve a tax rate relatively consistent with the 2014 tax rate; (vii) the Company's ability to limit restructuring charges to approximately $50 million in 2015: (viii) successful integration of acquisitions completed during the year, as well as integration of existing businesses and formation of new business platforms; (ix) the continued acceptance of technologies used in the Company's products and services; (x) the Company's ability to manage existing Sonitrol franchisee and Mac Tools relationships; (xi) the Company's ability to minimize costs associated with any sale or discontinuance of a business or product line, including any severance, restructuring, legal or other costs; (xii) the proceeds realized with respect to any business or product line disposals; (xiii) the extent of any asset impairments with respect to any businesses or product lines that are sold or discontinued; (xiv) the success of the Company's efforts to manage freight costs, steel and other commodity costs as well as capital expenditures; (xv) the Company's ability to sustain or increase prices in order to, among other things, offset or mitigate the impact of steel, freight, energy, non-ferrous commodity and other commodity costs and any inflation increases and/or currency impacts; (xvi) the Company's ability to generate free cash flow and maintain a strong debt to capital ratio; (xvii) the Company's ability to identify and effectively execute productivity improvements and cost reductions, while minimizing any associated restructuring charges; (xviii) the Company's ability to obtain favorable settlement of tax audits; (xix) the ability of the Company to generate earnings sufficient to realize future income tax benefits during periods when temporary differences become deductible, including realizing tax credit carry forward amounts within the allowable carry forward periods; (xx) the continued ability of the Company to access credit markets under satisfactory terms; (xxi) the Company's ability to negotiate satisfactory price and payment terms under which the Company buys and sells goods, services, materials and products; (xxii) the Company's ability to successfully develop, market and achieve sales from new products and services; and (xxiii) the availability of cash to repurchase shares when conditions are right.
The Company's ability to deliver the Results is also dependent upon: (i) the success of the Company's marketing and sales efforts, including the ability to develop and market new and innovative products at the right price points in both existing and new markets; (ii) the ability of the Company to maintain or improve production rates in the Company's manufacturing facilities, respond to significant changes in product demand and fulfill demand for new and existing products; (iii) the Company's ability to continue improvements in working capital through effective management of accounts receivable and inventory levels; (iv) the ability to continue successfully managing and defending claims and litigation; (v) the success of the Company's efforts to mitigate any adverse earnings impact resulting from increases generated by, for example, increases in the cost of energy or significant Euro, Canadian Dollar, Chinese Renminbi or other currency fluctuations; (vi) the geographic distribution of the Company's earnings; (vii) the commitment to and success of the Stanley Fulfillment System; and (viii) successful implementation with expected results of cost reduction programs.
The Company's ability to achieve the Results will also be affected by external factors. These external factors include: challenging global geopolitical and macroeconomic environment; the economic environment of emerging markets, particularly Latin America, Russia and Turkey; pricing pressure and other changes within competitive markets; the continued consolidation of customers particularly in consumer channels; inventory management pressures on the Company's customers; the impact the tightened credit markets may have on the Company or its customers or suppliers; the extent to which the Company has to write off accounts receivable or assets or experiences supply chain disruptions in connection with bankruptcy filings by customers or suppliers; increasing competition; changes in laws, regulations and policies that affect the Company, including, but not limited to trade, monetary, tax and fiscal policies and laws; the timing and extent of any inflation or deflation; the impact of poor weather conditions on sales; currency exchange fluctuations; the impact of dollar/foreign currency exchange and interest rates on the competitiveness of products and the Company's debt program; the strength of the U.S. and European economies; the extent to which world-wide markets associated with homebuilding and remodeling stabilize and rebound; the impact of events that cause or may cause disruption in the Company's supply, manufacturing, distribution and sales networks such as war, terrorist activities, and political unrest; and recessionary or expansive trends in the economies of the world in which the Company operates. The Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date hereof.
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
SECOND QUARTER
YEAR TO DATE
2015
2014
2015
2014
NET SALES
$ 2,866.9
$ 2,860.1
$ 5,496.9
$ 5,477.2
COSTS AND EXPENSES
Cost of sales
1,809.7
1,811.5
3,466.1
3,472.2
Gross margin
1,057.2
1,048.6
2,030.8
2,005.0
% of Net Sales
36.9%
36.7%
36.9%
36.6%
Selling, general and administrative
644.5
655.9
1,267.5
1,296.5
% of Net Sales
22.5%
22.9%
23.1%
23.7%
Operating margin
412.7
392.7
763.3
708.5
% of Net Sales
14.4%
13.7%
13.9%
12.9%
Other - net
50.5
57.3
114.2
118.2
Restructuring charges (credits)
5.0
(1.7)
29.9
(5.4)
Income from operations
357.2
337.1
619.2
595.7
Interest - net
43.2
40.3
83.9
81.0
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
314.0
296.8
535.3
514.7
Income tax expense on continuing operations
78.5
74.1
133.8
122.1
NET EARNINGS FROM CONTINUING OPERATIONS
235.5
222.7
401.5
392.6
Less: net (loss) earnings attributable to non-controlling interests
(0.2)
0.9
(1.0)
1.1
NET EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE
TO COMMON SHAREOWNERS
235.7
221.8
402.5
391.5
NET LOSS FROM DISCONTINUED OPERATIONS
(8.5)
(5.3)
(13.0)
(13.1)
NET EARNINGS ATTRIBUTABLE TO COMMON SHAREOWNERS
$ 227.2
$ 216.5
$ 389.5
$ 378.4
BASIC EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Continuing operations
$ 1.59
$ 1.42
$ 2.68
$ 2.51
Discontinued operations
(0.06)
(0.03)
(0.09)
(0.08)
Total basic earnings per share of common stock
$ 1.53
$ 1.38
$ 2.59
$ 2.42
DILUTED EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Continuing operations
$ 1.54
$ 1.39
$ 2.60
$ 2.46
Discontinued operations
(0.06)
(0.03)
(0.08)
(0.08)
Total diluted earnings per share of common stock
$ 1.49
$ 1.36
$ 2.51
$ 2.37
DIVIDENDS PER SHARE
$ 0.52
$ 0.50
$ 1.04
$ 1.00
AVERAGE SHARES OUTSTANDING (in thousands)
Basic
148,059
156,316
150,339
156,097
Diluted
152,663
159,666
154,881
159,354
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
July 4,
January 3,
2015
2015
ASSETS
Cash and cash equivalents
$ 391.9
$ 496.6
Accounts and notes receivable, net
1,645.9
1,396.7
Inventories, net
1,839.6
1,562.7
Assets held for sale
19.1
29.5
Other current assets
448.3
463.3
Total current assets
4,344.8
3,948.8
Property, plant and equipment, net
1,419.2
1,454.1
Goodwill and other intangibles, net
9,798.7
10,027.2
Other assets
436.1
419.0
Total assets
$ 15,998.8
$ 15,849.1
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings
$ 440.5
$ 7.5
Accounts payable
1,764.6
1,579.2
Accrued expenses
1,158.9
1,221.9
Liabilities held for sale
21.0
23.4
Total current liabilities
3,385.0
2,832.0
Long-term debt
3,823.2
3,839.8
Other long-term liabilities
2,924.1
2,665.4
Stanley Black & Decker, Inc. shareowners' equity
5,784.2
6,429.1
Non-controlling interests' equity
82.3
82.8
Total liabilities and equity
$ 15,998.8
$ 15,849.1
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)
SECOND QUARTER
YEAR TO DATE
2015
2014
2015
2014
OPERATING ACTIVITIES
Net earnings from continuing operations
$ 235.5
$ 222.7
$ 401.5
$ 392.6
Net loss from discontinued operations
(8.5)
(5.3)
(13.0)
(13.1)
Depreciation and amortization
102.0
114.4
204.5
224.8
Changes in working capital1
(50.5)
55.9
(428.4)
(274.4)
Other
34.1
49.5
(49.5)
(44.7)
Net cash provided by operating activities
312.6
437.2
115.1
285.2
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures
(65.7)
(61.4)
(111.6)
(119.2)
Proceeds from issuances of common stock
31.7
14.4
74.7
27.6
Net short-term (repayments) borrowings
(180.2)
(199.7)
418.7
82.6
Net investment hedge settlements
33.5
(29.5)
63.9
(35.8)
Cash dividends on common stock
(76.8)
(78.4)
(159.5)
(159.1)
Purchases of common stock for treasury
(100.0)
-
(448.0)
(19.4)
Effect of exchange rate changes on cash
3.5
10.3
(42.1)
3.2
Other
(2.2)
(9.8)
(15.9)
(45.6)
Net cash used in investing and financing activities
(356.2)
(354.1)
(219.8)
(265.7)
(Decrease) Increase in Cash and Cash Equivalents
(43.6)
83.1
(104.7)
19.5
Cash and Cash Equivalents, Beginning of Period
435.5
432.6
496.6
496.2
Cash and Cash Equivalents, End of Period
$ 391.9
$ 515.7
$ 391.9
$ 515.7
Free Cash Flow Computation2
Operating cash inflow
$ 312.6
$ 437.2
$ 115.1
$ 285.2
Less: capital and software expenditures
(65.7)
(61.4)
(111.6)
(119.2)
Free cash inflow (before dividends)
$ 246.9
$ 375.8
$ 3.5
$ 166.0
Merger & Acquisition-related charges and payments4
28.5
34.8
48.3
86.6
Free cash inflow, normalized (before dividends)3
$ 275.4
$ 410.6
$ 51.8
$ 252.6
1
Working capital is comprised of accounts receivable, inventory, accounts payable and deferred revenue.
2,3
Free cash flow is defined as cash flow from operations less capital and software expenditures. Management considers free cash flow an important measure of its liquidity, as well as its ability to fund future growth and to provide a return to the shareowners. Free cash flow does not include deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company's common stock and business acquisitions, among other items. Normalized free cash flow, as reconciled above, is considered a meaningful pro forma metric to aid the understanding of the Company's cash flow performance aside from the material impact of merger and acquisition-related activities.
4
Merger & Acquisition-related charges and payments relate primarily to the Black & Decker merger and Niscayah and Infastech acquisitions, including facility closure-related charges, employee-related charges and integration costs.
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
SECOND QUARTER
YEAR TO DATE
2015
2014
2015
2014
NET SALES
Tools & Storage
$ 1,839.5
$ 1,771.8
$ 3,471.6
$ 3,346.6
Security
533.3
571.6
1,042.9
1,116.5
Industrial
494.1
516.7
982.4
1,014.1
Total
$ 2,866.9
$ 2,860.1
$ 5,496.9
$ 5,477.2
SEGMENT PROFIT
Tools & Storage
$ 301.6
$ 276.9
$ 558.4
$ 489.7
Security
55.2
69.4
110.0
122.2
Industrial
94.3
91.5
169.0
178.2
Segment Profit
451.1
437.8
837.4
790.1
Corporate Overhead
(38.4)
(45.1)
(74.1)
(81.6)
Total
$ 412.7
$ 392.7
$ 763.3
$ 708.5
Segment Profit as a Percentage of Net Sales
Tools & Storage
16.4%
15.6%
16.1%
14.6%
Security
10.4%
12.1%
10.5%
10.9%
Industrial
19.1%
17.7%
17.2%
17.6%
Segment Profit
15.7%
15.3%
15.2%
14.4%
Corporate Overhead
(1.3%)
(1.6%)
(1.3%)
(1.5%)
Total
14.4%
13.7%
13.9%
12.9%
Newell Rubbermaid Announces Sale of Rubbermaid Medical Cart Business to Capsa Solutions
.
Business Wire
Newell Rubbermaid Inc.
15 hours ago
ATLANTA--(BUSINESS WIRE)--
Newell Rubbermaid Inc. (NWL) announced today that it has sold its Rubbermaid medical carts business to Capsa Solutions, a leader in the development and manufacturing of mobile computer workstations, medical carts, health IT mounting solutions and medication management systems, based in Portland, OR.
“Our Growth Game Plan strategy is designed to accelerate performance by setting clear priorities for our business,” said Michael Polk, Newell Rubbermaid President and Chief Executive Officer. “This transaction will further simplify our portfolio as we continue to invest behind our highest-potential global growth opportunities. We believe the medical cart business, while not core to our strategy, will be a strong performer in the hands of an owner who is focused and committed to growing and innovating in this healthcare category.”
About Newell Rubbermaid
Newell Rubbermaid Inc., an S&P 500 company, is a global marketer of consumer and commercial products with 2014 sales of $5.7 billion and a strong portfolio of leading brands, including Sharpie®, Paper Mate®, Rubbermaid Commercial Products®, Irwin®, Lenox®, Parker®, Waterman®, Contigo®, Rubbermaid®, Levolor®, Calphalon®, Goody®, Graco®, Aprica®, Baby Jogger® and Dymo®. As part of the company’s Growth Game Plan, Newell Rubbermaid is making sharper portfolio choices and investing in new marketing and innovation to accelerate performance.
This press release and additional information about Newell Rubbermaid are available on the company’s Web site, www.newellrubbermaid.com.
Caution Concerning Forward-Looking Statements
This news release contains forward-looking information based on management's current views and assumptions. Actual events may differ materially. Factors that may affect actual results include, but are not limited to, whether and when the required regulatory approvals will be obtained, whether and when the closing conditions will be satisfied and whether and when the transaction will close. Please refer to the cautionary statements set forth in the "Forward-Looking Statements" section of the Company's most recently filed Annual Report on Form 10-K as well as the risk factors set forth in Item 1A thereto, for other factors that could affect our business.
View source version on businesswire.com: http://www.businesswire.com/news/home/20150806005679/en/
Contact:
Newell Rubbermaid Inc.
Nancy O’Donnell, 770-418-7723
Vice President, Investor Relations
or
Nicole Quinlan, 770-418-7251
Senior Manager, Global Communications
Nathan's Famous, Inc. Reports First Quarter Results
.
PR Newswire
Nathan's Famous, Inc.
2 hours ago
JERICHO, N.Y., Aug. 5, 2015 /PRNewswire/ -- Nathan's Famous, Inc. (NATH) today reported results for the first quarter of its 2016 fiscal year that ended June 28, 2015.
For the fiscal quarter ended June 28, 2015:
•Revenues increased by 11.1% to $30,654,000, as compared to $27,585,000 during the thirteen weeks ended June 29, 2014;
•Income from operations increased by 12.3% to $7,616,000, as compared to $6,779,000 during the thirteen weeks ended June 29, 2014;
•Adjusted EBITDA, as subsequently defined, increased by 10.9% to $8,257,000 as compared to $7,447,000 for the thirteen weeks ended June 29, 2014;
•Net income was $2,310,000, as compared to $4,071,000 for the thirteen weeks ended June 29, 2014; and
•Earnings per diluted share were $0.50 per share, as compared to $0.89 per share for the thirteen weeks ended June 29, 2014.
The Company reported the following:
•License royalties increased by 17.4% to $6,536,000 during the thirteen weeks ended June 28, 2015, as compared to $5,568,000 during the thirteen weeks ended June 29, 2014. During the thirteen weeks ended June 28, 2015, royalties earned under the John Morrell & Co., agreement increased by 19.7% to $6,095,000 as compared to $5,090,000 of royalties earned during the thirteen weeks ended June 29, 2014.
•Sales from the Branded Product Program, featuring the sale of Nathan's hot dogs to the foodservice industry, increased by 15.6% to $17,415,000 during the thirteen weeks ended June 28, 2015, as compared to sales of $15,064,000 during the thirteen weeks ended June 29, 2014. The increase is substantially attributable to significant organic growth in our consumer packaged hot dog business as a result of more effective sales, marketing and promotional strategies.
•Sales from the Company-operated restaurants were $5,299,000 during the thirteen weeks ended June 28, 2015 as compared to $5,291,000 during the thirteen weeks ended June 29, 2014.
•Revenues from franchise operations decreased to $1,227,000 during the thirteen weeks ended June 28, 2015, as compared to $1,489,000 during the thirteen weeks ended June 29, 2014. Total franchise fee income was $41,000 during the thirteen weeks ended June 28, 2015 as compared to $227,000 during the thirteen weeks ended June 29, 2014, primarily due to store opening variances in our international franchising program. Fifteen new franchised units were opened during the thirteen weeks ended June 28, 2015, including ten Branded Menu Program outlets. Nine new franchised units were opened during the thirteen weeks ended June 29, 2014, including five Branded Menu Program outlets and our first location in Costa Rica.
•On March 10, 2015, Nathan's completed its financing of $135.0 million aggregate principal amount of 10.000% Senior Secured Notes due 2020. As a result of this offering, Nathan's results for the thirteen weeks ended June 28, 2015, include interest expense of approximately $3.7 million which has reduced net income by approximately $2.2 million or $0.47 per diluted share.
Certain Non-GAAP Financial Information:
In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America ("US GAAP"), the Company has provided EBITDA excluding (i) interest expense; (ii) provision for income taxes and (iii) depreciation and amortization expense. The Company has also provided Adjusted EBITDA excluding (i) stock-based compensation and (ii) amortization of bond premium on the Company's available-for sale investments that the Company believes will impact the comparability of its results of operations.
The Company believes that EBITDA and Adjusted EBITDA are useful to investors to assist in assessing and understanding the Company's operating performance and underlying trends in the Company's business because EBITDA and Adjusted EBITDA are (i) among the measures used by management in evaluating performance and (ii) are frequently used by securities analysts, investors and other interested parties as a common performance measure.
EBITDA and Adjusted EBITDA are not recognized terms under US GAAP and should not be viewed as alternatives to net income (loss) or other measures of financial performance or liquidity in conformity with US GAAP. Additionally, our definitions of EBITDA and Adjusted EBITDA may differ from other companies. Analysis of results and outlook on a non-US GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with US GAAP.
About Nathan's Famous
Nathan's currently distributes its products in 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and ten foreign countries through its restaurant system, foodservice sales programs and product licensing activities. Last year, over 500 million Nathan's Famous hot dogs were sold. Nathan's was ranked #22 on the Forbes 2014 list of the Best Small Companies in America and was listed as the Best Small Company in New York State in October 2013. For additional information about Nathan's please visit our website at www.nathansfamous.com.
Except for historical information contained in this news release, the matters discussed are forward looking statements that involve risks and uncertainties. Words such as "anticipate", "believe", "estimate", "expect", "intend", and similar expressions identify forward-looking statements, which are based on the current belief of the Company's management, as well as assumptions made by and information currently available to the Company's management. Among the factors that could cause actual results to differ materially include but are not limited to: the impact of our indebtedness, including the effect on our ability to fund working capital, operations and make new investments; economic; weather (including the three-year drought in the Midwest, along with freezing temperatures during the winter causing a reduced supply of cattle), and continued increases in the price of beef trimmings; our ability to pass on the cost of any price increases in beef and beef trimmings; legislative and business conditions; the collectibility of receivables; changes in consumer tastes; the status of our licensing and supply agreements, including the impact of our supply agreement for hot dogs with John Morrell & Co.; the ability to continue to attract franchisees; no material increases in the minimum wage or other changes in labor laws; our ability to attract competent restaurant and managerial personnel; the enforceability of international franchising agreements; the impact of changes in the economic relationship between the United States and Russia; and the future effects of any food borne illness; such as bovine spongiform encephalopathy, BSE; and the risk factors reported from time to time in the Company's SEC reports. The Company does not undertake any obligation to update such forward-looking statements.
Nathan's Famous, Inc. and Subsidiaries
Financial Highlights
Thirteen weeks ended
June 28, 2015
June 29, 2014
(unaudited)
Total revenues
$ 30,654,000
$ 27,585,000
Income from operations (a)
$ 7,616,000
$ 6,779,000
Net income
$ 2,310,000
$ 4,071,000
Income per share:
Basic
$ 0.50
$ 0.91
Diluted
$ 0.50
$ 0.89
Weighted-average shares used in
computing income per share:
Basic
4,584,000
4,471,000
Diluted
4,621,000
4,593,000
(a) Excludes interest expense, interest income, and other income, net.
Nathan's Famous, Inc. and Subsidiaries
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
Thirteen weeks ended
June 28, 2015
June 29, 2014
(unaudited)
EBITDA
Net income
$ 2,310,000
$ 4,071,000
Interest expense
3,709,000
-0-
Provision for income taxes
1,628,000
2,791,000
Depreciation and amortization
339,000
346,000
EBITDA
$ 7,986,000
$ 7,208,000
Adjusted EBITDA
EBITDA
$ 7,986,000
$ 7,208,000
Stock-based compensation
203,000
191,000
Amortization of bond premium (b)
68,000
48,000
Adjusted EBITDA
$ 8,257,000
$ 7,447,000
(b) Represents the premiums paid on our purchase of available-for-sale securities.
COMPANY
Ronald G. DeVos, Vice President - Finance and CFO
CONTACT:
(516) 338-8500 ext. 229
Nathan's Famous, Inc. Reports First Quarter Results
.
PR Newswire
Nathan's Famous, Inc.
2 hours ago
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.
..
.
.
JERICHO, N.Y., Aug. 5, 2015 /PRNewswire/ -- Nathan's Famous, Inc. (NATH) today reported results for the first quarter of its 2016 fiscal year that ended June 28, 2015.
For the fiscal quarter ended June 28, 2015:
•Revenues increased by 11.1% to $30,654,000, as compared to $27,585,000 during the thirteen weeks ended June 29, 2014;
•Income from operations increased by 12.3% to $7,616,000, as compared to $6,779,000 during the thirteen weeks ended June 29, 2014;
•Adjusted EBITDA, as subsequently defined, increased by 10.9% to $8,257,000 as compared to $7,447,000 for the thirteen weeks ended June 29, 2014;
•Net income was $2,310,000, as compared to $4,071,000 for the thirteen weeks ended June 29, 2014; and
•Earnings per diluted share were $0.50 per share, as compared to $0.89 per share for the thirteen weeks ended June 29, 2014.
The Company reported the following:
•License royalties increased by 17.4% to $6,536,000 during the thirteen weeks ended June 28, 2015, as compared to $5,568,000 during the thirteen weeks ended June 29, 2014. During the thirteen weeks ended June 28, 2015, royalties earned under the John Morrell & Co., agreement increased by 19.7% to $6,095,000 as compared to $5,090,000 of royalties earned during the thirteen weeks ended June 29, 2014.
•Sales from the Branded Product Program, featuring the sale of Nathan's hot dogs to the foodservice industry, increased by 15.6% to $17,415,000 during the thirteen weeks ended June 28, 2015, as compared to sales of $15,064,000 during the thirteen weeks ended June 29, 2014. The increase is substantially attributable to significant organic growth in our consumer packaged hot dog business as a result of more effective sales, marketing and promotional strategies.
•Sales from the Company-operated restaurants were $5,299,000 during the thirteen weeks ended June 28, 2015 as compared to $5,291,000 during the thirteen weeks ended June 29, 2014.
•Revenues from franchise operations decreased to $1,227,000 during the thirteen weeks ended June 28, 2015, as compared to $1,489,000 during the thirteen weeks ended June 29, 2014. Total franchise fee income was $41,000 during the thirteen weeks ended June 28, 2015 as compared to $227,000 during the thirteen weeks ended June 29, 2014, primarily due to store opening variances in our international franchising program. Fifteen new franchised units were opened during the thirteen weeks ended June 28, 2015, including ten Branded Menu Program outlets. Nine new franchised units were opened during the thirteen weeks ended June 29, 2014, including five Branded Menu Program outlets and our first location in Costa Rica.
•On March 10, 2015, Nathan's completed its financing of $135.0 million aggregate principal amount of 10.000% Senior Secured Notes due 2020. As a result of this offering, Nathan's results for the thirteen weeks ended June 28, 2015, include interest expense of approximately $3.7 million which has reduced net income by approximately $2.2 million or $0.47 per diluted share.
Certain Non-GAAP Financial Information:
In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America ("US GAAP"), the Company has provided EBITDA excluding (i) interest expense; (ii) provision for income taxes and (iii) depreciation and amortization expense. The Company has also provided Adjusted EBITDA excluding (i) stock-based compensation and (ii) amortization of bond premium on the Company's available-for sale investments that the Company believes will impact the comparability of its results of operations.
The Company believes that EBITDA and Adjusted EBITDA are useful to investors to assist in assessing and understanding the Company's operating performance and underlying trends in the Company's business because EBITDA and Adjusted EBITDA are (i) among the measures used by management in evaluating performance and (ii) are frequently used by securities analysts, investors and other interested parties as a common performance measure.
EBITDA and Adjusted EBITDA are not recognized terms under US GAAP and should not be viewed as alternatives to net income (loss) or other measures of financial performance or liquidity in conformity with US GAAP. Additionally, our definitions of EBITDA and Adjusted EBITDA may differ from other companies. Analysis of results and outlook on a non-US GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with US GAAP.
About Nathan's Famous
Nathan's currently distributes its products in 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, and ten foreign countries through its restaurant system, foodservice sales programs and product licensing activities. Last year, over 500 million Nathan's Famous hot dogs were sold. Nathan's was ranked #22 on the Forbes 2014 list of the Best Small Companies in America and was listed as the Best Small Company in New York State in October 2013. For additional information about Nathan's please visit our website at www.nathansfamous.com.
Except for historical information contained in this news release, the matters discussed are forward looking statements that involve risks and uncertainties. Words such as "anticipate", "believe", "estimate", "expect", "intend", and similar expressions identify forward-looking statements, which are based on the current belief of the Company's management, as well as assumptions made by and information currently available to the Company's management. Among the factors that could cause actual results to differ materially include but are not limited to: the impact of our indebtedness, including the effect on our ability to fund working capital, operations and make new investments; economic; weather (including the three-year drought in the Midwest, along with freezing temperatures during the winter causing a reduced supply of cattle), and continued increases in the price of beef trimmings; our ability to pass on the cost of any price increases in beef and beef trimmings; legislative and business conditions; the collectibility of receivables; changes in consumer tastes; the status of our licensing and supply agreements, including the impact of our supply agreement for hot dogs with John Morrell & Co.; the ability to continue to attract franchisees; no material increases in the minimum wage or other changes in labor laws; our ability to attract competent restaurant and managerial personnel; the enforceability of international franchising agreements; the impact of changes in the economic relationship between the United States and Russia; and the future effects of any food borne illness; such as bovine spongiform encephalopathy, BSE; and the risk factors reported from time to time in the Company's SEC reports. The Company does not undertake any obligation to update such forward-looking statements.
Nathan's Famous, Inc. and Subsidiaries
Financial Highlights
Thirteen weeks ended
June 28, 2015
June 29, 2014
(unaudited)
Total revenues
$ 30,654,000
$ 27,585,000
Income from operations (a)
$ 7,616,000
$ 6,779,000
Net income
$ 2,310,000
$ 4,071,000
Income per share:
Basic
$ 0.50
$ 0.91
Diluted
$ 0.50
$ 0.89
Weighted-average shares used in
computing income per share:
Basic
4,584,000
4,471,000
Diluted
4,621,000
4,593,000
(a) Excludes interest expense, interest income, and other income, net.
Nathan's Famous, Inc. and Subsidiaries
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
Thirteen weeks ended
June 28, 2015
June 29, 2014
(unaudited)
EBITDA
Net income
$ 2,310,000
$ 4,071,000
Interest expense
3,709,000
-0-
Provision for income taxes
1,628,000
2,791,000
Depreciation and amortization
339,000
346,000
EBITDA
$ 7,986,000
$ 7,208,000
Adjusted EBITDA
EBITDA
$ 7,986,000
$ 7,208,000
Stock-based compensation
203,000
191,000
Amortization of bond premium (b)
68,000
48,000
Adjusted EBITDA
$ 8,257,000
$ 7,447,000
(b) Represents the premiums paid on our purchase of available-for-sale securities.
COMPANY
Ronald G. DeVos, Vice President - Finance and CFO
CONTACT:
(516) 338-8500 ext. 229
Schnitzer Reports Third Quarter 2015 Financial Results
Improved Operating Performance in All Businesses Sequentially
Strong Operating Cash Flow and Progress on Cost Reduction and Productivity Initiatives
.
Business Wire
Schnitzer Steel Industries, Inc.
June 30, 2015 8:30 AM
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PORTLAND, Ore.--(BUSINESS WIRE)--
Schnitzer Steel Industries, Inc. (Nasdaq: SCHN) today reported financial results for its fiscal 2015 third quarter ended May 31, 2015.
Our third quarter results reflected benefits from the cost reduction and productivity initiatives we announced in early April which led to improved sequential operating performance in all of our businesses. In Metals Recycling, ferrous volumes increased 29% and nonferrous sales volumes increased 21% versus the second quarter. Due to the rapid decline in ferrous selling prices in February, which impacted shipments in the third quarter, average inventory costs did not decline as quickly as selling prices, which led to an estimated $14 per ton, or $13 million, adverse impact of average inventory accounting which approximated the adverse impact in the second quarter. In our Auto Parts Business, higher seasonal retail activity and early benefits achieved from productivity improvements led to significantly improved profitability. Our Steel Manufacturing Business generated higher sales volumes and increased operating income due to steadily improving demand in West Coast construction markets.
Consolidated Financial Performance
The Company announced break-even adjusted earnings per share from continuing operations for the third quarter, which compares to second quarter adjusted loss per share of $0.30 and prior year third quarter adjusted earnings per share of $0.19. Adjustments included charges for restructuring and exit-related costs and asset impairments. Third quarter adjusted results included an adverse impact from average inventory accounting of approximately $0.40 per share which compares to a second quarter adverse impact of $0.36 per share and a prior year third quarter adverse impact of $0.09 per share. Based on current market trends, estimated adverse inventory effects are expected to be substantially reduced in the fourth quarter.
The Company reported third quarter loss per share from continuing operations of $0.31, including $6 million in restructuring and exit-related costs and $1 million in asset impairments. This compares to the second quarter reported loss per share of $7.08 and third quarter fiscal 2014 reported earnings per share of $0.13.
Strong Positive Operating Cash Flow and Significant Progress on Cost Reductions and Productivity Initiatives
The Company generated positive operating cash flow in the third quarter of $64 million which enabled the Company to reduce total debt to $263 million, the lowest level since first quarter of fiscal 2011.
During the quarter, the Company made significant progress on the execution of its targeted $60 million in annual cost savings and productivity improvements, generating approximately $10 million in benefits. The Company expects to achieve an additional $5 million of quarterly benefits by the fourth quarter of fiscal 2015, which is ahead of schedule and equates to a targeted quarterly run rate of approximately $15 million.
"Our ability to deliver on a wide range of cost savings and productivity initiatives contributed to improved sequential financial results in the third quarter. We expect the benefits from these initiatives, combined with more stable market conditions, to provide momentum for further improvements in our performance,” said Tamara Lundgren, President and Chief Executive Officer. “In addition, we expect to complete the consolidation of our Auto Parts and Metals Recycling Businesses during the fourth quarter, creating the opportunity to benefit from further commercial and operational synergies,” added Lundgren.
Summary Results
($ in millions, except per share amounts)
Quarter
3Q15 3Q14 Change 2Q15 Change
Revenues $ 467 $ 635 (26 )% $ 437 7 %
Operating Income (Loss) $ (4 ) $ 3 NM $ (201 ) (98 )%
Goodwill impairment charge — — NM 141 NM
Other asset impairment charges 1 1 141 % 44 (97 )%
Restructuring charges and other exit-related costs 6 3 116 % 5 11 %
Resale or modification of previously contracted shipments — — NM 1 NM
Adjusted Operating Income (Loss)(1)(3) $ 3 $ 6 (45 )% $ (9 ) NM
Net Income (Loss) attributable to SSI $ (10 ) $ 3 NM $ (196 ) (95 )%
Net Income (Loss) from continuing operations attributable to SSI $ (8 ) $ 3 NM $ (191 ) (96 )%
Adjusted Net Income (Loss) from continuing operations attributable to SSI(2) $
—
$ 5 NM $ (8 ) (99 )%
Net Income (Loss) per share attributable to SSI $ (0.36 ) $ 0.12 NM $ (7.24 ) (95 )%
Net Income (Loss) per share from continuing operations attributable to SSI $ (0.31 ) $ 0.13 NM $ (7.08 ) (96 )%
Adjusted diluted EPS from continuing operations attributable to SSI(2) $
—
$ 0.19 NM $ (0.30 ) (99 )%
(1) Adjusted operating income excludes the impact of goodwill and other asset impairments, restructuring, other exit-related costs, and the resale or modification of certain previously contracted ferrous bulk shipments. See Non-GAAP Financial Measures for reconciliation to U.S. GAAP.
(2) See Non-GAAP Financial Measures for reconciliation to U.S. GAAP.
(3) May not foot due to rounding.
NM = not meaningful
Metals Recycling Business
Summary of Metals Recycling Business Results
($ in millions, except selling prices and data per ton; Fe volumes 000s long tons; NFe volumes Ms lbs)
Quarter
3Q15 3Q14 Change 2Q15 Change
Total Revenues $ 363 $ 517 (30 )% $ 341 7 %
Ferrous Revenues $ 258 $ 387 (33 )% $ 244 6 %
Ferrous Volumes 971 1,024 (5 )% 750 29 %
Avg. Net Ferrous Sales Prices ($/LT)(1) $ 239 $ 346 (31 )% $ 295 (19 )%
Nonferrous Revenues $ 101 $ 123 (18 )% $ 91 11 %
Nonferrous Volumes 130 139 (6 )% 108 21 %
Avg. Net Nonferrous Sales Prices ($/lb)(1) $ 0.74 $ 0.86 (14 )% $ 0.81 (9 )%
Operating Income (Loss)(2) $ 1 $ 4 (73 )% $ (187 ) NM
Operating Income (Loss) per Fe ton $ 1 $ 4 (71 )% $ (249 ) NM
Adjusted Operating Income (Loss)(3) $ 2 $ 4 (38 )% $ (1 ) NM
Adjusted Operating Income (Loss) per Fe ton $ 2 $ 4 (35 )% $ (2 ) NM
(1) Sales prices are shown net of freight.
(2) Operating income does not include the impact of restructuring charges and other exit-related costs.
(3) Adjusted operating income excludes the impact of goodwill and other asset impairments, and the resale or modification of certain previously contracted ferrous bulk shipments. See Non-GAAP Financial Measures for reconciliation to U.S. GAAP.
NM = not meaningful
Sales Volumes: Ferrous sales volumes of 971 thousand tons in the third quarter increased 29% from the second quarter, primarily due to an increase in export sales and timing of shipments. Nonferrous sales volumes of 130 million pounds increased 21% sequentially, driven by resolution of the labor slowdown at West Coast ports. As compared to the prior year, both ferrous and nonferrous volumes were slightly lower.
In total, export customers accounted for 68% of ferrous sales volumes in the third quarter, an increase from 55% in the second quarter. Ferrous and nonferrous products were shipped to 16 countries, with Turkey, India and South Korea the top export destinations for ferrous shipments.
Pricing: While market prices stabilized during the quarter, average ferrous selling prices declined $56, or 19%, sequentially, primarily due to the sharp drop in ferrous selling prices during February which impacted third quarter shipments. Ferrous prices increased in the second half of the third quarter. As compared to the prior year quarter, average selling prices declined $107 per ton, or 31%, reflecting the weaker export demand and excess steel production globally. Nonferrous prices declined 9% sequentially and 14% as compared to the prior year quarter, similarly reflecting weaker global demand.
Margins: Adjusted operating income per ton of $2 in the third quarter improved sequentially primarily due to benefits from cost reductions and productivity initiatives, as well as higher shipped volumes, partially offset by lower average selling prices. Due to the rapid decline in ferrous selling prices in February which impacted shipments in the third quarter, average inventory costs did not decline as quickly as purchase prices for raw materials, which led to an estimated $14 per ton, or $13 million, adverse impact of average inventory accounting which approximated the adverse impact in the second quarter. Based on current market trends, estimated adverse inventory effects are expected to be substantially reduced in the fourth quarter. Cost reduction and productivity improvement actions commenced during the third quarter benefited results by approximately $5 million and are expected to further benefit operating performance in the fourth quarter of fiscal 2015 and into fiscal 2016.
Auto Parts Business
Summary of Auto Parts Business Results
($ in millions, volume 000s)
Quarter
3Q15 3Q14 Change 2Q15 Change
Revenues $ 60 $ 80 (24 )% $ 66 (9 )%
Operating Income (Loss)(1) $ 3 $ 8 (59 )% $ (2 ) NM
Car Purchase Volumes 79 93 (15 )% 78 1 %
(1) Operating income does not include the impact of restructuring charges and other exit-related costs.
NM = not meaningful
Revenues: Revenues in the third quarter decreased 9% from the second quarter, primarily reflecting the significant impact of lower nonferrous commodity prices, partially offset by seasonally higher retail activity. Compared to the prior year third quarter, revenues declined 24% due to the significant impact of lower commodity prices and the resulting adverse impact on car purchase volumes.
Margins: Operating income of $3 million, or 5% of revenues, improved substantially from the second quarter, primarily due to seasonally higher retail activity and lower operating costs. Operating performance continued to be adversely impacted by an estimated $2 million from average inventory accounting which is expected to be substantially reduced in the fourth quarter based on current market trends. Recently announced cost reduction and productivity initiatives delivered approximately $4 million of benefits in the third quarter and are expected to further improve operating performance in the fourth quarter of fiscal 2015 and into fiscal 2016. The productivity benefits in the third quarter were partially offset by the impact of lower nonferrous commodity prices of $2 million.
Steel Manufacturing Business
Summary of Steel Manufacturing Business Results
($ in millions, except selling prices; volume 000s of short tons)
Quarter
3Q15 3Q14 Change 2Q15 Change
Revenues $ 95 $ 102 (7 )% $ 93 2 %
Operating Income $ 4 $ 5 (5 )% $ 4 14 %
Avg. Net Sales Prices ($/ST) $ 615 $ 686 (10 )% $ 651 (6 )%
Finished Goods Sales Volumes 142 135 5 % 131 8 %
Rolling Mill Utilization 69 % 72 % 76 %
Sales Volumes: Finished steel sales volumes of 142 thousand tons increased 8% from the second quarter and 5% from the prior year third quarter levels, driven by improving nonresidential construction demand which more than offset the impact of imports. Utilization of 69% was lower sequentially due to a scheduled maintenance outage.
Pricing: Average net sales prices for finished steel products decreased by $36 per ton sequentially and $71 per ton as compared to the prior year third quarter, reflecting primarily the sharp drop in scrap prices coming into the quarter.
Margins: Operating income of $4 million increased 14% sequentially due to higher shipped volumes which offset lower average selling prices. As compared to the prior year third quarter, the impact on operating income of the sharp decline in selling prices more than offset the higher sales volumes.
Cost Reduction and Productivity Initiatives
As previously announced, during the third quarter the Company commenced two strategic initiatives:
(i) A cost reduction, capacity reduction and productivity improvement initiative which, in the aggregate, is intended to improve financial performance by $60 million annually by the end of 2016; and
(ii) The integration of the Auto Parts and Metals Recycling Businesses into a single division during the fourth quarter of fiscal 2015 which is intended to further optimize the efficiencies in our operating platform, enable additional synergies to be captured throughout our supply chain and global sales channel, and more effectively leverage our shared services platform.
About half of the approximately $60 million in targeted benefits is expected to come from our Metals Recycling Business through a combination of equipment idling, including reduced depreciation, and SG&A reductions. Another approximately 40% is expected to come from our Auto Parts Business through the closing of seven stores, SG&A reductions and productivity improvement initiatives. The balance is expected to come from our Corporate Shared Services Division through the reduction of organizational layers and leveraging support functions across the Company’s operating platform. We delivered approximately $10 million of benefits in the third quarter and expect a quarter of the total savings target, or $15 million, to be achieved in the fourth quarter of fiscal 2015, with the remainder to be delivered by the end of fiscal 2016.
In connection with our cost reduction initiatives, we expect to incur restructuring charges of approximately $10 million.
Corporate Items
Consolidated SG&A costs were reduced by $6 million, or 12%, as compared to the prior year quarter primarily due to benefits from the cost savings and productivity initiatives and a legal settlement resulting in an insurance reimbursement of $2 million in the third quarter of fiscal 2015.
Operating cash flow of $64 million during the third quarter enabled a continuation in the reduction of debt outstanding while funding our quarterly dividend and capital expenditures. Net debt of $254 million at the end of the third quarter was $51 million lower than at the end of the second quarter.
The Company anticipates a full year effective tax rate of 4%, primarily driven by estimated valuation allowances on deferred tax assets.
Discontinued Operations
In the third quarter of fiscal 2015, the Company closed seven Auto Parts stores, of which six are reported in discontinued operations and one store was absorbed into the operations of existing retail stores nearby. The loss in the fiscal 2015 third quarter from discontinued operations, net of tax, was $1 million, or $0.05 per share, which compares to a loss from discontinued operations of $0.01 per share, in the third quarter of fiscal 2014.
Analysts' Conference Call: Third Quarter of Fiscal 2015
A conference call and slide presentation to discuss results will be held today, June 30, 2015, at 11:30 a.m. EDT hosted by Tamara Lundgren, President and Chief Executive Officer, and Richard Peach, Chief Financial Officer. The call and the slides will be webcast and accessible on the Company's website at www.schnitzersteel.com.
Summary financial data is provided in the following pages. The slides and related materials will be available prior to the call on the website.
SCHNITZER STEEL INDUSTRIES, INC.
FINANCIAL HIGHLIGHTS
(in thousands)
(Unaudited)
For the Three Months Ended For the Nine Months Ended
May 31, 2015 February 28, 2015 May 31, 2014 May 31, 2015 May 31, 2014
REVENUES:
Metal Recycling Business:
Ferrous sales $ 257,635 $ 243,999 $ 386,826 $ 839,212 $ 1,165,487
Nonferrous sales 101,386 91,055 123,407 305,033 357,394
Other sales 4,020 5,489 6,608 15,616 19,959
TOTAL MRB SALES 363,041 340,543 516,841 1,159,861 1,542,840
Auto Parts Business 60,291 65,995 79,602 203,577 227,695
Steel Manufacturing Business 94,939 93,126 102,039 283,284 271,618
Intercompany sales and eliminations (50,962 ) (62,215 ) (63,009 ) (188,340 ) (196,990 )
Total Revenues $ 467,309 $ 437,449 $ 635,473 $ 1,458,382 $ 1,845,163
OPERATING INCOME (LOSS):
Adjusted Metal Recycling Business(1) $ 2,298 $ (1,218 ) $ 3,736 $ 8,583 $ 15,860
Auto Parts Business 3,145 (1,970 ) 7,702 3,812 19,981
Steel Manufacturing Business 4,343 3,799 4,594 14,350 9,912
Adjusted segment operating income(2) 9,786 611 16,032 26,745 45,753
Corporate expense (7,554 ) (8,488 ) (10,393 ) (25,035 ) (29,096 )
Intercompany eliminations 1,007 (1,534 ) 252 (924 ) (966 )
Adjusted operating income (loss) 3,239 (9,411 ) 5,891 786 15,691
Goodwill impairment charge — (141,021 ) — (141,021 ) —
Other asset impairment charges (1,281 ) (43,838 ) (532 ) (45,119 ) (1,460 )
Restructuring charges and other exit-related costs (5,978 ) (5,394 ) (2,762 ) (11,964 ) (6,444 )
Resale or modification of previously contracted shipments — (1,347 ) — (6,928 ) —
Total operating income (loss) $ (4,020 ) $ (201,011 ) $ 2,597 $ (204,246 ) $ 7,787
(1) Adjusted operating income excludes the impact of goodwill and other asset impairments, and the resale or modification of certain previously contracted ferrous bulk shipments. See Non-GAAP Financial Measures for reconciliation to U.S. GAAP.
(2) Segment operating income does not include the impact of restructuring charges and other exit-related costs.
SCHNITZER STEEL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
For the Three Month Ended For the Nine Months Ended
May 31, 2015 February 28, 2015 May 31, 2014 May 31, 2015 May 31, 2014
Revenues $ 467,309 $ 437,449 $ 635,473 $ 1,458,382 $ 1,845,163
Cost of goods sold 424,312 406,649 584,420 1,338,976 1,693,565
Selling, general and administrative 39,798 42,167 45,309 126,696 136,831
Income from joint ventures (40 ) (609 ) (147 ) (1,148 ) (924 )
Goodwill impairment charge — 141,021 — 141,021 —
Other asset impairment charges 1,281 43,838 532 45,119 1,460
Restructuring charges and other exit-related costs 5,978 5,394 2,762 11,964 6,444
Operating income (loss) (4,020 ) (201,011 ) 2,597 (204,246 ) 7,787
Interest expense (2,375 ) (2,295 ) (2,529 ) (7,044 ) (7,944 )
Other income, net 84 1,993 492 3,011 604
Income (loss) from continuing operations before income taxes (6,311 ) (201,313 ) 560 (208,279 ) 447
Income tax benefit (expense) (1,396 ) 9,673 3,894 8,171 3,266
Income (loss) from continuing operations (7,707 ) (191,640 ) 4,454 (200,108 ) 3,713
Loss from discontinued operations, net of tax (1,234 ) (4,242 ) (330 ) (6,314 ) (2,315 )
Net income (loss) (8,941 ) (195,882 ) 4,124 (206,422 ) 1,398
Net (income) loss attributable to noncontrolling interests (687 ) 240 (1,014 ) (1,318 ) (2,726 )
Net income (loss) attributable to SSI $ (9,628 ) $ (195,642 ) $ 3,110 $ (207,740 ) $ (1,328 )
Net income (loss) per share attributable to SSI:
Basic:
Income (loss) per share from continuing operations attributable to SSI $ (0.31 ) $ (7.08 ) $ 0.13 $ (7.46 ) $ 0.04
Loss per share from discontinued operations attributable to SSI
(0.05 )
(0.16
)
(0.01 )
(0.23 )
(0.09 )
Net income (loss) per share attributable to SSI
$ (0.36 ) $ (7.24 ) $ 0.12 $ (7.69 ) $ (0.05 )
Diluted:
Income (loss) per share from continuing operations attributable to SSI $ (0.31 ) $ (7.08 ) $ 0.13 $ (7.46 ) $ 0.04
Loss per share from discontinued operations attributable to SSI
(0.05 )
(0.16 )
(0.01 )
(0.23 )
(0.09 )
Net income (loss) per share attributable to SSI
$ (0.36 ) $ (7.24 ) $ 0.12 $ (7.69 ) $ (0.05 )
Weighted average number of common shares:
Basic 27,043 27,020 26,853 27,003 26,811
Diluted 27,043 27,020 27,017 27,003 26,811
Dividends declared per common share $ 0.1875 $ 0.1875 $ 0.1875 $ 0.5625 0.5625
SCHNITZER STEEL INDUSTRIES, INC.
SELECTED OPERATING STATISTICS
(Unaudited)
Fiscal Fiscal
1Q15 2Q15 3Q15 2015 1Q14 2Q14 3Q14 4Q14 2014
Metals Recycling Business
Ferrous Selling Prices ($/LT)(1)
Domestic $ 344 $ 305 $ 245 $ 300 $ 356 $ 374 $ 354 $ 349 $ 358
Export $ 319 $ 286 $ 236 $ 278 $ 344 $ 361 $ 341 $ 352 $ 350
Average $ 328 $ 295 $ 239 $ 286 $ 348 $ 365 $ 346 $ 351 $ 353
Ferrous Sales Volume (LT)
Domestic 333,798 334,263 307,480 975,541 322,531 328,005 344,526 328,308 1,323,369
Export 604,626 415,765 663,456 1,683,847 655,072 701,259 679,009 763,608 2,798,948
Total 938,424 750,028 970,936 2,659,388 977,603 1,029,264 1,023,535 1,091,916 4,122,317
Nonferrous Average Price ($/LB)(1) $ 0.85 $ 0.81 $ 0.74 $ 0.80 $ 0.89 $ 0.86 $ 0.86 $ 0.85 $ 0.86
Nonferrous Sales Volume (LB, in 000s) 127,473 108,126 130,337
365,936
123,941 135,935 139,273 155,659 554,808
Steel Manufacturing Business
Sales Prices ($/ST)(1)(2)
Average $ 683 $ 651 $ 615 $ 648 $ 657 $ 676 $ 686 $ 688 $ 677
Sales Volume (ST)(2)
Rebar 79,065 74,928 100,413 254,406 83,618 83,838 85,633 101,076 354,165
Coiled Products 40,361 49,403 35,477 125,241 38,322 25,656 41,892 46,682 152,552
Merchant Bar and Other 7,698 6,705 5,659 20,062 6,222 5,305 6,984 7,979 26,490
Total 127,124 131,036 141,549 399,709 128,162 114,799 134,509 155,737 533,207
Rolling Mill Utilization 72 % 76 % 69 % 73 % 65 % 67 % 72 % 76 % 70 %
Auto Parts Business
Car purchase volumes (000) 92 78 79 249 86 80 93 101 360
Number of self-service locations at end of quarter 56 56 55 55 56 55 55 56 56
(1) Price information is shown after a reduction for the cost of freight incurred to deliver the product to the customer
(2) Excludes billet sales
SCHNITZER STEEL INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
May 31, 2015 August 31, 2014
Assets
Current Assets:
Cash and cash equivalents $ 8,929 $ 25,672
Accounts receivable, net 117,311 189,359
Inventories 197,008 216,172
Other current assets 39,089 32,729
Total current assets 362,337 463,932
Property, plant and equipment, net 432,309 523,433
Goodwill and other assets 215,653 367,845
Total assets $ 1,010,299 $ 1,355,210
Liabilities and Equity
Current liabilities:
Short-term borrowings $ 637 $ 523
Other current liabilities 126,848 176,747
Total current liabilities 127,485 177,270
Long-term debt 262,746 318,842
Other long-term liabilities 83,754 83,121
Equity:
Total Schnitzer Steel Industries, Inc. ("SSI") shareholders' equity 532,066 770,784
Noncontrolling interests 4,248 5,193
Total equity 536,314 775,977
Total liabilities and equity $ 1,010,299 $ 1,355,210
Non-GAAP Financial Measures
This press release contains certain non-GAAP financial measures as defined under SEC rules such as adjusted consolidated operating income (loss), adjusted MRB operating income (loss), adjusted net income (loss) from continuing operations attributable to SSI and adjusted diluted earnings per share from continuing operations attributable to SSI. As required by SEC rules, the Company has provided reconciliations of these measures to the most directly comparable U.S. GAAP measures. Management believes that each of the foregoing adjusted non-GAAP financial measures provides a meaningful presentation of the Company's results from its core business operations excluding adjustments for a goodwill impairment charge, other asset impairment charges and restructuring and other exit-related costs that are not related to the Company's ongoing core business operations and improves the period-to-period comparability of the Company's results from its core business operations. In addition, to improve comparability of our operating performance between periods, these measures also exclude the impact on operating results in fiscal 2015 from the resale or modification of the terms during the first and second quarters of 2015 of certain previously contracted ferrous bulk shipments. Due to the sharp decline in selling prices that occurred during the first and second quarters of fiscal 2015, the revised prices associated with these shipments were significantly lower than the prices in the original sales contracts entered into between August and November 2014. Further, management believes that debt, net of cash is a useful measure for investors because, as cash and cash equivalents can be used, among other things, to repay indebtedness, netting this against total debt is a useful measure of our leverage. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, the most directly comparable U.S. GAAP measures.
Operating Income (Loss)
($ in millions) Quarter
3Q15 2Q15 3Q14
Consolidated Operating Income (Loss):
Operating Income (Loss) $ (4 ) $ (201 ) $ 3
Goodwill impairment charge — 141 —
Other asset impairment charges 1 44 1
Restructuring charges and other exit-related costs 6 5 3
Resale or modification of previously contracted shipment — 1 —
Adjusted Operating Income (Loss)(1) $ 3 $ (9 ) $ 6
MRB Operating Income (Loss):
Operating Income (Loss) $ 1 $ (187 ) $ 4
Goodwill impairment charge — 141 —
Other asset impairment charges 1 43 —
Resale or modification of previously contracted shipment — 1 —
Adjusted Operating Income (Loss)(1) $ 2 $ (1 ) $ 4
Net Income (Loss) from continuing operations attributable to SSI
($ in millions) Quarter
3Q15 2Q15 3Q14
Net Income (Loss) from continuing operations attributable to SSI $ (8 ) $ (191 ) $ 3
Goodwill impairment charge, net of tax — 130 —
Other asset impairment charges, net of tax 1 44 —
Restructuring charges and other exit-related costs, net of tax 7 6 1
Resale or modification of previously contracted shipment, net of tax — 3 —
Adjusted Net Income (Loss) from continuing operations attributable to SSI(1) $ — $ (8 ) $ 5
(1) May not foot due to rounding.
Diluted Earnings per share attributable to SSI
($ per share) Quarter
3Q15 2Q15 3Q14
Net Income (Loss) per share attributable to SSI $ (0.36 ) $ (7.24 ) $ 0.12
Less: Loss per share from discontinued operations attributable to SSI (0.05 ) (0.16 ) (0.01 )
Net Income (Loss) per share from continuing operations attributable to SSI(1) (0.31 ) (7.08 ) 0.13
Goodwill impairment charge, net of tax, per share — 4.80 —
Other asset impairment charges, net of tax, per share 0.05 1.63 0.01
Restructuring charges and other exit-related costs, net of tax, per share 0.25 0.23 0.05
Resale or modification of previously contracted shipment, net of tax, per share
—
0.12 —
Adjusted Diluted EPS from continuing operations attributable to SSI(1) $
—
$
(0.30
) $ 0.19
(1) May not foot due to rounding.
Debt, Net of Cash
($ in thousands)
May 31, 2015 August 31, 2014
Short-term borrowings $ 637 $ 523
Long-term debt, net of current maturities 262,746 318,842
Total debt 263,383 319,365
Less: cash and cash equivalents 8,929 25,672
Total debt, net of cash $ 254,454 $ 293,693
About Schnitzer Steel Industries, Inc.
Schnitzer Steel Industries, Inc. is one of the largest manufacturers and exporters of recycled metal products in the United States with operating facilities located in 24 states, Puerto Rico and Western Canada. Schnitzer has seven deep water export facilities located on both the East and West Coasts and in Hawaii and Puerto Rico. The Company's integrated operating platform also includes auto parts stores and steel manufacturing. With an effective annual production capacity of approximately 800,000 tons, the Company's steel manufacturing business produces finished steel products, including rebar, wire rod and other specialty products. The Company began operations in 1906 in Portland, Oregon.
Safe Harbor for Forward-Looking Statements
Statements and information included in this press release that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Except as noted herein or as the context may otherwise require, all references to “we,” “our,” “us” and “SSI” refer to the Company and its consolidated subsidiaries.
Forward-looking statements in this press release include statements regarding our expectations, intentions, beliefs and strategies regarding the future, which may include statements regarding trends, cyclicality and changes in the markets we sell into; strategic direction or initiatives; changes to manufacturing and production processes; the cost of and the status of any agreements or actions related to our compliance with environmental and other laws; expected tax rates, deductions and credits; the realization of deferred tax assets; the anticipated value of goodwill or other intangible assets; planned capital expenditures; liquidity positions; ability to generate cash from continuing operations; the potential impact of adopting new accounting pronouncements; expected results, including pricing, sales volumes and profitability; obligations under our retirement plans; benefits, savings or additional costs from business realignment, cost containment and productivity improvement programs; and the adequacy of accruals.
When used in this report, the words “believes,” “expects,” “anticipates,” “intends,” “assumes,” “estimates,” “evaluates,” “may,” “could,” “opinions,” “forecasts,” “future,” “forward,” “potential,” “probable,” and similar expressions are intended to identify forward-looking statements.
We may make other forward-looking statements from time to time, including in reports filed with the Securities and Exchange Commission, press releases and public conference calls. All forward-looking statements we make are based on information available to us at the time the statements are made, and we assume no obligation to update any forward-looking statements, except as may be required by law. Our business is subject to the effects of changes in domestic and global economic conditions and a number of other risks and uncertainties that could cause actual results to differ materially from those included in, or implied by, such forward-looking statements. Some of these risks and uncertainties are discussed in “Item 1A. Risk Factors” of our most recent annual report on Form 10-K and quarterly report on Form 10-Q. Examples of these risks include: potential environmental cleanup costs related to the Portland Harbor Superfund site; the impact of general economic conditions; volatile supply and demand conditions affecting prices and volumes in the markets for both our products and raw materials we purchase; difficulties associated with acquisitions and integration of acquired businesses; the impact of goodwill impairment charges; the impact of long-lived asset impairment charges; the realization of expected cost reductions related to restructuring initiatives; the benefit of business realignment, cost containment and productivity improvement programs and strategic initiatives; the inability of customers to fulfill their contractual obligations; the impact of foreign currency fluctuations; potential limitations on our ability to access capital resources and existing credit facilities; restrictions on our business and financial covenants under our bank credit agreement; the impact of the consolidation in the steel industry; the impact of imports of foreign steel into the U.S.; inability to realize expected benefits from investments in technology; freight rates and availability of transportation; impact of equipment upgrades and failures on production; product liability claims; the impact of impairment of our deferred tax assets; the impact of a cybersecurity incident; costs associated with compliance with environmental regulations; the adverse impact of climate change; inability to obtain or renew business licenses and permits; compliance with greenhouse gas emission regulations; reliance on employees subject to collective bargaining agreements; and the impact of the underfunded status of multiemployer plans in which we participate.
View source version on businesswire.com: http://www.businesswire.com/news/home/20150630005444/en/
Contact:
Schnitzer Steel Industries, Inc.
Investor Relations:
Alexandra Deignan, 646-278-9711
adeignan@schn.com
or
Company Info:
www.schnitzersteel.com
ir@schn.com
8:34 am Clorox beats by $0.07, beats on revs; guides FY16 EPS below consensus, revs below consensusBriefing.com(Mon, Aug 3)
8:34 am Clorox beats by $0.07, beats on revs; guides FY16 EPS below consensus, revs below consensusBriefing.com(Mon, Aug 3)
7:10 am WisdomTree beats by $0.01, reports revs in-line (WETF) : Reports Q2 (Jun) earnings of $0.18 per share, $0.01 better than the Capital IQ Consensus Estimate of $0.17; revenues rose 85.0% year/year to $81.6 mln vs the $81.42 mln consensus.
•Total revenues increased 84.8% from the second quarter of 2014 and 35.6% compared to the first quarter of 2015 to a record $81.6 million primarily due to higher average AUM from strong inflows.
•Gross margin for our U.S. listed ETFs, which is our total revenues less fund management and administration expenses and third party sharing arrangements, was 86.4% in the second quarter of 2015 as compared to 82.4% in the second quarter of 2014 and 83.2% in the first quarter of 2015. The increase was primarily due to higher average AUM.
7:10 am WisdomTree beats by $0.01, reports revs in-line (WETF) : Reports Q2 (Jun) earnings of $0.18 per share, $0.01 better than the Capital IQ Consensus Estimate of $0.17; revenues rose 85.0% year/year to $81.6 mln vs the $81.42 mln consensus.
•Total revenues increased 84.8% from the second quarter of 2014 and 35.6% compared to the first quarter of 2015 to a record $81.6 million primarily due to higher average AUM from strong inflows.
•Gross margin for our U.S. listed ETFs, which is our total revenues less fund management and administration expenses and third party sharing arrangements, was 86.4% in the second quarter of 2015 as compared to 82.4% in the second quarter of 2014 and 83.2% in the first quarter of 2015. The increase was primarily due to higher average AUM.
7:10 am WisdomTree beats by $0.01, reports revs in-line (WETF) : Reports Q2 (Jun) earnings of $0.18 per share, $0.01 better than the Capital IQ Consensus Estimate of $0.17; revenues rose 85.0% year/year to $81.6 mln vs the $81.42 mln consensus.
•Total revenues increased 84.8% from the second quarter of 2014 and 35.6% compared to the first quarter of 2015 to a record $81.6 million primarily due to higher average AUM from strong inflows.
•Gross margin for our U.S. listed ETFs, which is our total revenues less fund management and administration expenses and third party sharing arrangements, was 86.4% in the second quarter of 2015 as compared to 82.4% in the second quarter of 2014 and 83.2% in the first quarter of 2015. The increase was primarily due to higher average AUM.
6:36 am Newell Rubbermaid beats by $0.02, beats on revs; guides FY15 EPS in-line (NWL) : Reports Q2 (Jun) earnings of $0.64 per share, $0.02 better than the Capital IQ Consensus Estimate of $0.62; revenues rose 4.0% year/year to $1.56 bln vs the $1.54 bln consensus.
•Co raises guidance for FY15, sees EPS of $2.14-2.20 vs. $2.16 Capital IQ Consensus Estimate, up from prior guidance of $2.10-2.18. Raises core sales growth guidance to 4.0-5.0% from 3.5-4.5%.
•"Core sales grew in all five of our segments and in all four geographic regions. Our Win Bigger businesses grew 6.5 percent, led by our global Writing business which grew core sales over ten percent. Momentum continued to build in our Baby & Parenting business, which also had a strong quarter with core growth of 6.0 percent. We are driving accelerated growth and earnings performance as a result of strengthened innovation, increased investment in brands, aggressive cost programs and excellent commercial execution."
Newell Rubbermaid Raises Full Year Guidance on Strong Second Quarter Results5.1% Core Sales Growth and Normalized EPS of $0.64
3.9% Net Sales Growth and Reported EPS of $0.55
Raises Full Year 2015 Core Sales and Normalized EPS Guidance
Second Quarter Executive Summary
5.1 percent core sales growth, excluding a 480 basis point net contribution from acquisitions and planned divestitures and a 600 basis point negative impact from foreign currency; 3.9 percent net sales growth 40.0 percent normalized gross margin, a 10 basis point improvement compared to the prior year; 39.8 percent reported gross margin, a 20 basis point improvement compared to the prior year 150 basis point increase in advertising and promotion while holding normalized operating margin flat at 16.0 percent; 13.8 percent reported operating margin, a 40 basis point decline compared to prior year primarily attributable to increased restructuring and other Project Renewal transformation costs $0.64 normalized EPS compared to $0.59 in the prior year, an 8.5 percent increase despite an $0.11 negative impact from foreign exchange; $0.55 reported EPS compared to $0.54 in the prior year Repurchased 1.3 million shares at a cost of $50.4 million Full year 2015 core sales guidance revised upward to 4 to 5 percent from 3.5 to 4.5 percent; normalized EPS guidance revised upward to $2.14 to $2.20 from $2.10 to $2.18
Newell Rubbermaid 5 hours ago
ATLANTA--(BUSINESS WIRE)--
Newell Rubbermaid ( NWL) announced its second quarter 2015 financial results today.
“We have posted a strong set of second quarter results with core sales growth of 5.1 percent and normalized earnings per share growth of 8.5 percent, despite unprecedented foreign exchange pressure on earnings,” said Michael Polk, President and Chief Executive Officer. “Core sales grew in all five of our segments and in all four geographic regions. Our Win Bigger businesses grew 6.5 percent, led by our global Writing business which grew core sales over ten percent. Momentum continued to build in our Baby & Parenting business, which also had a strong quarter with core growth of 6.0 percent. We are driving accelerated growth and earnings performance as a result of strengthened innovation, increased investment in brands, aggressive cost programs and excellent commercial execution.
“Our strong second quarter results represent another milestone in our journey to establish Newell’s story of both category leading growth and margin development. Our current growth momentum, our plans for strong innovation and increased brand support in the second half and continued cost benefits from Project Renewal give us the confidence to raise our guidance for full year 2015 core sales growth to 4 to 5 percent and normalized EPS to $2.14 to $2.20, or 7 to 10 percent above prior year.”
Second Quarter 2015 Operating Results
Net sales in the second quarter were $1.56 billion compared with $1.50 billion in the prior year. Core sales grew 5.1 percent, excluding a 480 basis point net contribution from acquisitions and planned divestitures and a 600 basis point negative impact from foreign currency.
Reported gross margin was 39.8 percent, a 20 basis point improvement versus prior year.
Normalized gross margin improved 10 basis points to 40.0 percent, as benefits from productivity and pricing more than offset the negative impacts of foreign currency and mix from acquisitions.
Second quarter reported operating margin was 13.8 percent and operating income was $214.7 million, compared with 14.2 percent and $213.3 million, respectively, in the prior year.
Normalized operating margin was 16.0 percent, flat compared with the prior year despite a 150 basis point increase in advertising and promotion expense. Normalized operating income was $249.4 million compared with $239.7 million in the prior year as the benefits of Project Renewal and other cost savings initiatives more than offset increased investment in advertising and promotion and pressure from foreign exchange.
The reported tax rate for the quarter was 22.7 percent compared with 25.8 percent in the prior year. The normalized tax rate was 24.5 percent compared with 27.2 percent in the prior year.
Normalized net income was $174.5 million compared with $165.5 million in the prior year. Normalized diluted earnings per share were $0.64, an increase of 8.5 percent versus $0.59 in the prior year. The improvement in normalized diluted earnings per share was attributable to increased core sales, contribution from prior year acquisitions, gross margin expansion, a lower tax rate and the positive impact of fewer outstanding shares, which more than offset a significant increase in advertising and promotion support, negative foreign currency impacts and increased interest expense related to borrowing in support of prior year acquisitions.
Reported diluted earnings per share were $0.55, compared with $0.54 per diluted share in the prior year. Reported net income was $148.5 million, compared with $150.6 million in the prior year. In addition to the factors cited in the explanation of normalized diluted earnings per share, reported diluted earnings per share were negatively impacted by higher incremental restructuring and other Project Renewal transformation costs in 2015.
Operating cash flow was $102.5 million compared with $96.2 million in the prior year period.
A reconciliation of the “as reported” results to “normalized” results is included in the appendix.
Second Quarter 2015 Operating Segment Results
Writing net sales for the second quarter were $495.9 million, a 1.3 percent increase compared to prior year, reflecting a 950 basis point impact from negative foreign currency. Writing core sales increased 10.8 percent, reflecting strong growth in Latin America and EMEA attributable to excellent Back-to-School sell-in, pricing, increased distribution, and increased marketing support. In North America, solid Back-To-School sell-in drove good growth despite a comparison to the prior year quarter which included a timing-related benefit of approximately $15.0 million. Normalized operating income was $133.0 million compared with $133.1 million in the prior year. Normalized operating margin was 26.8 percent compared with 27.2 percent in the prior year as a result of negative foreign currency impacts and increased advertising and promotion spending.
Home Solutions net sales were $438.5 million, a 14.4 percent increase compared to the prior year, largely attributable to the contribution from the Contigo and bubba brand acquisitions. Core sales increased 1.2 percent, attributable to growth in Rubbermaid Food Storage, partially offset by continued planned contraction of the lower margin Rubbermaid Consumer Storage business and the absence of prior year new customer pipeline fill on Calphalon. Normalized operating income was $69.9 million versus $48.7 million in the prior year. Normalized operating margin expanded by 320 basis points to 15.9 percent of sales as a result of the positive mix effect from Rubbermaid Food storage, input cost deflation, and strong productivity, partially offset by increased advertising and promotion spending and the impact of negative foreign currency.
Tools net sales were $205.2 million, a 7.7 percent decline compared to the prior year reflecting a 900 basis point impact from negative foreign currency. Core sales grew 1.3 percent in comparison with nearly thirteen percent growth in the prior year. Growth in North America, EMEA and APAC was attributable to innovation, distribution gains on the core portfolio and pricing, while Latin America core sales declined modestly versus the 2014 pipeline fill related to a significant product offering expansion. Normalized operating income was $23.4 million versus $29.9 million in the prior year. Normalized operating margin was 11.4 percent of sales compared with 13.5 percent of sales in the prior year, primarily driven by the impact of negative foreign currency and an increase in advertising and promotion spending, partially offset by pricing and strong productivity.
Commercial Products net sales were $210.6 million, a 5.8 percent decline compared to the prior year. Core sales increased 1.6 percent in comparison with about 10 percent growth in the prior year, driven by innovation and pricing in North America and Asia. Core sales exclude the Rubbermaid medical cart business which the company is currently marketing for divestiture. Normalized operating income was $29.0 million compared with $36.2 million in the prior year. Normalized operating margin was 13.8 percent of sales, compared with 16.2 percent of sales in the prior year, primarily driven by an increase in advertising and promotion spending and the impact of negative foreign currency.
Baby & Parenting net sales were $210.7 million, a 14.7 percent increase compared to the prior year, largely attributable to net sales from the 2014 Baby Jogger acquisition which more than offset a 590 basis point impact from negative foreign currency. Core sales grew 6.0 percent driven by robust growth in North America and double digit innovation-led growth in APAC. Normalized operating income was $16.8 million compared to $12.6 million in the prior year. Normalized operating margin was 8.0 percent of sales compared with 6.9 percent in the prior year.
2015 Full Year Outlook
Newell Rubbermaid announced a positive revision to full year 2015 core sales growth and normalized EPS guidance metrics as follows:
Current Guidance
Previous Guidance
Core sales growth 4.0% to 5.0% 3.5% to 4.5%
Currency impact (5.0%) to (6.0%) (4.5% to 5.5%)
Impact of acquisitions, net of planned divestitures
4.0% to 5.0% 4.0% to 5.0%
Net sales growth 3.0% to 4.0% 3.0% to 4.0%
Normalized EPS $2.14 to $2.20 $2.10 to $2.18
The company expects foreign exchange to have a negative impact of about $0.36 to $0.39 per diluted share on normalized EPS in 2015 driven by the stronger U.S. dollar to most currencies.
The 2015 normalized EPS guidance range excludes between $140 and $160 million of Project Renewal restructuring and other Project Renewal transformation costs, discontinued operations, foreign exchange losses and other costs associated with the devaluation of the Venezuelan Bolivar, acquisition and integration costs and costs associated with the Graco recall. A reconciliation of “expected reported” results to “normalized” results is included in the appendix.
Cumulative costs of Project Renewal are expected to be $690 to $725 million pretax, with cash costs of $645 to $675 million. Project Renewal is expected to generate annualized cost savings of approximately $620 to $675 million by the end of 2017. The majority of these savings will be reinvested in new capabilities and incremental brand building investment for accelerated growth in the company’s home markets and the geographic deployment of its Win Bigger portfolio into the faster growing emerging markets.
Conference Call
The company’s second quarter 2015 earnings conference call will be held today, July 31, 2015, at 8:30 a.m. ET. A link to the webcast is provided under Events & Presentations in the Investor Relations section of Newell Rubbermaid’s Web site at www.newellrubbermaid.com. A webcast replay and a supporting slide presentation will be made available in the Investor Relations section on the company’s Web site under Quarterly Earnings.
Non-GAAP Financial Measures
This release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission and includes a reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.
The company uses certain non-GAAP financial measures that are included in this press release and the additional financial information both in explaining its results to stockholders and the investment community and in its internal evaluation and management of its businesses. The company’s management believes that these non-GAAP financial measures and the information they provide are useful to investors since these measures (a) permit investors to view the company’s performance using the same tools that management uses to evaluate the company’s past performance, reportable business segments and prospects for future performance and (b) determine certain elements of management’s incentive compensation.
The company’s management believes that core sales provides a more complete understanding of underlying sales trends by providing sales on a consistent basis as it excludes the impacts of acquisitions, planned or completed divestitures and changes in foreign currency from year-over-year comparisons. As reflected in the Currency Analysis, the effect of foreign currency on reported sales is determined by applying a fixed exchange rate, calculated as the 12-month average in the prior year, to the current and prior year local currency sales amounts (excluding acquisitions and planned divestitures), with the difference in these two amounts being the increase or decrease in core sales, and the difference between the change in as reported sales and the change in core sales reported as the currency impact. The company’s management believes that “normalized” gross margin, “normalized” SG&A expense, “normalized” operating income, “normalized” earnings per share and “normalized” tax rates, which exclude restructuring and other expenses and one-time and other events such as costs related to product recalls, the extinguishment of debt, certain tax benefits and charges, impairment charges, pension settlement charges, discontinued operations, costs related to the acquisition and integration of acquired businesses, advisory costs for process transformation and optimization initiatives, dedicated personnel costs related to transformation initiatives under Project Renewal, asset devaluations resulting from the adoption and continued use of the SICAD Venezuelan Bolivar exchange rate and certain other items, are useful because they provide investors with a meaningful perspective on the current underlying performance of the company’s core ongoing operations. The company also uses core sales, normalized gross margin and normalized earnings per share as the three performance criteria in its management cash bonus plan, and the company uses core sales and normalized earnings per share as two of the three performance criteria in its performance-based equity compensation arrangements.
The company determines the tax effect of the items excluded from normalized diluted earnings per share by applying the estimated effective rate for the applicable jurisdiction in which the pre-tax items were incurred, and for which realization of the resulting tax benefit, if any, is expected. In certain situations in which an item excluded from normalized results impacts income tax expense, the company uses a “with” and “without” approach to determine normalized income tax expense.
While the company believes that these non-GAAP financial measures are useful in evaluating the company’s performance, this information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Additionally, these non-GAAP financial measures may differ from similar measures presented by other companies.
About Newell Rubbermaid
Newell Rubbermaid Inc., an S&P 500 company, is a global marketer of consumer and commercial products with 2014 sales of $5.7 billion and a strong portfolio of leading brands, including Sharpie®, Paper Mate®, Rubbermaid Commercial Products®, Irwin®, Lenox®, Parker®, Waterman®, Contigo®, Rubbermaid®, Levolor®, Calphalon®, Goody®, Graco®, Aprica®, Baby Jogger® and Dymo®. As part of the company’s Growth Game Plan, Newell Rubbermaid is making sharper portfolio choices and investing in new marketing and innovation to accelerate performance.
This press release and additional information about Newell Rubbermaid are available on the company’s Web site, www.newellrubbermaid.com.
Caution Concerning Forward-Looking Statements
Statements in this press release that are not historical in nature constitute forward-looking statements. These forward-looking statements relate to information or assumptions about the effects of sales, income/(loss), earnings per share, operating income, operating margin or gross margin improvements or declines, Project Renewal, capital and other expenditures, cash flow, dividends, restructuring and other project costs, costs and cost savings, inflation or deflation, particularly with respect to commodities such as oil and resin, debt ratings, changes in exchange rates, product recalls, expected benefits and financial results from recently completed acquisitions and planned divestitures and management's plans, projections and objectives for future operations and performance. These statements are accompanied by words such as "anticipate," "expect," "project," "will," "believe," "estimate" and similar expressions. Actual results could differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, our dependence on the strength of retail, commercial and industrial sectors of the economy in light of the continuation or escalation of the global economic slowdown or regional sovereign debt issues; currency fluctuations; competition with other manufacturers and distributors of consumer products; major retailers' strong bargaining power and consolidation of our retail customers; changes in the prices of raw materials and sourced products and our ability to obtain raw materials and sourced products in a timely manner from suppliers; our ability to develop innovative new products and to develop, maintain and strengthen our end-user brands, including the ability to realize anticipated benefits of increased advertising and promotion spend; product liability, product recalls or regulatory actions; our ability to expeditiously close facilities and move operations while managing foreign regulations and other impediments; a failure of one of our key information technology systems or related controls; the potential inability to attract, retain and motivate key employees; future events that could adversely affect the value of our assets and require impairment charges; our ability to improve productivity and streamline operations; changes to our credit ratings; significant increases in the funding obligations related to our pension plans due to declining asset values, declining interest rates or otherwise; the imposition of tax liabilities greater than our provisions for such matters; the risks inherent in our foreign operations, including exchange controls and pricing restrictions; our ability to complete planned acquisitions and divestitures; our ability to realize the expected benefits and financial results from our recently acquired businesses and planned divestitures; and those factors listed in our most recently filed Quarterly Report on Form 10-Q and exhibit 99.1 thereto filed with the Securities and Exchange Commission. Changes in such assumptions or factors could produce significantly different results. The information contained in this news release is as of the date indicated. The company assumes no obligation to update any forward-looking statements contained in this news release as a result of new information or future events or developments.
Newell Rubbermaid Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in millions, except per share data)
Three Months Ended June 30,
YOY
2015 2014 % Change
Net sales $ 1,560.9 $ 1,502.2 3.9 %
Cost of products sold 939.9 906.6
GROSS MARGIN 621.0 595.6 4.3 %
% of sales 39.8 % 39.6 %
Selling, general & administrative expenses
393.0 370.8 6.0 %
% of sales 25.2 % 24.7 %
Restructuring costs 13.3 11.5
OPERATING INCOME 214.7 213.3 0.7 %
% of sales 13.8 % 14.2 %
Nonoperating expenses:
Interest expense, net 18.1 15.0
Other expense (income), net 5.0 (2.6 )
23.1 12.4 86.3 %
INCOME BEFORE INCOME TAXES 191.6 200.9 (4.6 )%
% of sales 12.3 % 13.4 %
Income taxes 43.5 51.9 (16.2 )%
Effective rate 22.7 % 25.8 %
NET INCOME FROM CONTINUING OPERATIONS 148.1 149.0 (0.6 )%
% of sales 9.5 % 9.9 %
Income from discontinued operations, net of tax 0.4 1.6
NET INCOME $ 148.5 $ 150.6 (1.4 )%
9.5 % 10.0 %
EARNINGS PER SHARE:
Basic
Income from continuing operations $ 0.55 $ 0.54
Income from discontinued operations $ - $ 0.01
Net income $ 0.55 $ 0.54
Diluted
Income from continuing operations $ 0.55 $ 0.53
Income from discontinued operations $ - $ 0.01
Net income $ 0.55 $ 0.54
AVERAGE SHARES OUTSTANDING:
Basic 269.7 277.4
Diluted 271.7 279.7
Newell Rubbermaid Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in millions, except per share data)
Six Months Ended June 30,
YOY
2015 2014 % Change
Net sales $ 2,824.9 $ 2,716.5 4.0 %
Cost of products sold 1,716.4 1,663.9
GROSS MARGIN 1,108.5 1,052.6 5.3 %
% of sales 39.2 % 38.7 %
Selling, general & administrative expenses
755.0 711.1 6.2 %
% of sales 26.7 % 26.2 %
Restructuring costs 40.6 23.5
OPERATING INCOME 312.9 318.0 (1.6 )%
% of sales 11.1 % 11.7 %
Nonoperating expenses:
Interest expense, net 37.3 29.4
Other expense, net 5.1 37.4
42.4 66.8 (36.5 )%
INCOME BEFORE INCOME TAXES 270.5 251.2 7.7 %
% of sales 9.6 % 9.2 %
Income taxes 65.5 50.4 30.0 %
Effective rate 24.2 % 20.1 %
NET INCOME FROM CONTINUING OPERATIONS 205.0 200.8 2.1 %
% of sales 7.3 % 7.4 %
(Loss) income from discontinued operations, net of tax (2.4 ) 2.7
NET INCOME $ 202.6 $ 203.5 (0.4 )%
7.2 % 7.5 %
EARNINGS PER SHARE:
Basic
Income from continuing operations $ 0.76 $ 0.72
(Loss) income from discontinued operations $ (0.01 ) $ 0.01
Net income $ 0.75 $ 0.73
Diluted
Income from continuing operations $ 0.75 $ 0.71
(Loss) income from discontinued operations $ (0.01 ) $ 0.01
Net income $ 0.74 $ 0.72
AVERAGE SHARES OUTSTANDING:
Basic 270.1 279.1
Diluted 272.2 281.7
Newell Rubbermaid Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in millions)
June 30, June 30,
Assets: 2015 2014
Cash and cash equivalents $ 238.7 $ 142.7
Accounts receivable, net 1,304.4 1,230.4
Inventories, net 935.6 811.8
Deferred income taxes 129.4 135.5
Prepaid expenses and other 144.9 138.2
Total Current Assets 2,753.0 2,458.6
Property, plant and equipment, net 572.0 543.0
Goodwill 2,491.9 2,358.3
Other intangible assets, net 870.6 596.7
Other assets 271.3 261.5
Total Assets $ 6,958.8 $ 6,218.1
Liabilities and Stockholders' Equity:
Accounts payable $ 756.7 $ 592.9
Accrued compensation 132.3 121.8
Other accrued liabilities 634.9 631.0
Short-term debt 776.6 389.4
Current portion of long-term debt 6.0 251.3
Total Current Liabilities 2,306.5 1,986.4
Long-term debt 2,080.9 1,424.2
Deferred income taxes 235.3 159.4
Other noncurrent liabilities 553.0 544.5
Stockholders' Equity - Parent 1,779.6 2,100.1
Stockholders' Equity - Noncontrolling Interests 3.5 3.5
Total Stockholders' Equity 1,783.1 2,103.6
Total Liabilities and Stockholders' Equity $ 6,958.8 $ 6,218.1
Newell Rubbermaid Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in millions)
Six Months Ended June 30,
2015 2014
Operating Activities:
Net income $ 202.6 $ 203.5
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization 85.5 75.7
Net gain from sale of discontinued operations, including impairments - (4.8 )
Non-cash restructuring costs (0.5 ) 3.7
Deferred income taxes 11.5 6.0
Stock-based compensation expense 14.1 14.5
Other, net 15.4 50.8
Changes in operating assets and liabilities, excluding the effects of acquisitions and divestitures:
Accounts receivable (77.4 ) (122.4 )
Inventories (245.9 ) (123.2 )
Accounts payable 91.6 33.2
Accrued liabilities and other (148.7 ) (132.9 )
Net cash (used in) provided by operating activities $ (51.8 ) $ 4.1
Investing Activities:
Proceeds from sale of discontinued operations and noncurrent assets $ 5.1 $ 3.4
Capital expenditures (85.8 ) (67.0 )
Acquisitions and acquisition-related activity (2.0 ) -
Other 5.7 (0.3 )
Net cash used in investing activities $ (77.0 ) $ (63.9 )
Financing Activities:
Net short-term borrowings $ 386.0 $ 215.4
Repurchase and retirement of shares of common stock (124.0 ) (158.7 )
Cash dividends (104.4 ) (89.8 )
Excess tax benefits related to stock-based compensation 17.5 6.8
Other stock-based compensation activity, net (12.5 ) 29.6
Net cash provided by financing activities $ 162.6 $ 3.3
Currency rate effect on cash and cash equivalents $ 5.5 $ (27.1 )
Increase (decrease) in cash and cash equivalents $ 39.3 $ (83.6 )
Cash and cash equivalents at beginning of period 199.4 226.3
Cash and cash equivalents at end of period $ 238.7 $ 142.7
Newell Rubbermaid Inc.
Financial Worksheet- Segment Reporting
(In Millions)
2015 2014
Reconciliation (1,2,3,4) Reconciliation (1,2) Year-over-year changes
Reported Excluded Normalized Operating Reported Excluded Normalized Operating Net Sales Normalized OI
Net Sales OI Items OI Margin Net Sales OI Items OI Margin $ % $ %
Q1:
Writing $ 341.8 $ 82.4 $ 0.6 $ 83.0 24.3 % $ 348.2 $ 76.1 $ - $ 76.1 21.9 % $ (6.4 ) (1.8 )% $ 6.9 9.1 %
Home Solutions 364.5 38.5 0.1 38.6 10.6 % 316.4 26.8 - 26.8 8.5 % 48.1 15.2 % 11.8 44.0 %
Tools 180.4 22.2 - 22.2 12.3 % 187.8 21.4 - 21.4 11.4 % (7.4 ) (3.9 )% 0.8 3.7 %
Commercial Products 185.2 17.0 0.6 17.6 9.5 % 182.6 13.8 - 13.8 7.6 % 2.6 1.4 % 3.8 27.5 %
Baby & Parenting 192.1 0.5 11.8 12.3 6.4 % 179.3 5.4 11.0 16.4 9.1 % 12.8 7.1 % (4.1 ) (25.0 )%
Restructuring Costs - (27.3 ) 27.3 - - (12.0 ) 12.0 - - -
Corporate - (35.1 ) 14.0 (21.1 ) - (26.8 ) 7.7 (19.1 ) - (2.0 ) (10.5 )%
Total $ 1,264.0 $ 98.2 $ 54.4 $ 152.6 12.1 % $ 1,214.3 $ 104.7 $ 30.7 $ 135.4 11.2 % $ 49.7 4.1 % $ 17.2 12.7 %
2015 2014
Reconciliation (1,2,3,4) Reconciliation (1,2,3) Year-over-year changes
Reported Excluded Normalized Operating Reported Excluded Normalized Operating Net Sales Normalized OI
Net Sales OI Items OI Margin Net Sales OI Items OI Margin $ % $ %
Q2:
Writing $ 495.9 $ 132.5 $ 0.5 $ 133.0 26.8 % $ 489.3 $ 129.1 $ 4.0 $ 133.1 27.2 % $ 6.6 1.3 % $ (0.1 ) (0.1 )%
Home Solutions 438.5 68.7 1.2 69.9 15.9 % 383.4 48.7 - 48.7 12.7 % 55.1 14.4 % 21.2 43.5 %
Tools 205.2 23.4 - 23.4 11.4 % 222.3 29.9 - 29.9 13.5 % (17.1 ) (7.7 )% (6.5 ) (21.7 )%
Commercial Products 210.6 28.9 0.1 29.0 13.8 % 223.5 36.2 - 36.2 16.2 % (12.9 ) (5.8 )% (7.2 ) (19.9 )%
Baby & Parenting 210.7 16.7 0.1 16.8 8.0 % 183.7 12.2 0.4 12.6 6.9 % 27.0 14.7 % 4.2 33.3 %
Restructuring Costs - (13.3 ) 13.3 - - (11.5 ) 11.5 - - -
Corporate - (42.2 ) 19.5 (22.7 ) - (31.3 ) 10.5 (20.8 ) - (1.9 ) (9.1 )%
Total $ 1,560.9 $ 214.7 $ 34.7 $ 249.4 16.0 % $ 1,502.2 $ 213.3 $ 26.4 $ 239.7 16.0 % $ 58.7 3.9 % $ 9.7 4.0 %
2015 2014
Reconciliation (1,2,3,4) Reconciliation (1,2,3) Year-over-year changes
Reported Excluded Normalized Operating Reported Excluded Normalized Operating Net Sales Normalized OI
Net Sales OI Items OI Margin Net Sales OI Items OI Margin $ % $ %
YTD:
Writing $ 837.7 $ 214.9 $ 1.1 $ 216.0 25.8 % $ 837.5 $ 205.2 $ 4.0 $ 209.2 25.0 % $ 0.2 0.0 % $ 6.8 3.3 %
Home Solutions 803.0 107.2 1.3 108.5 13.5 % 699.8 75.5 - 75.5 10.8 % 103.2 14.7 % 33.0 43.7 %
Tools 385.6 45.6 0.0 45.6 11.8 % 410.1 51.3 - 51.3 12.5 % (24.5 ) (6.0 )% (5.7 ) (11.1 )%
Commercial Products 395.8 45.9 0.7 46.6 11.8 % 406.1 50.0 - 50.0 12.3 % (10.3 ) (2.5 )% (3.4 ) (6.8 )%
Baby & Parenting 402.8 17.2 11.9 29.1 7.2 % 363.0 17.6 11.4 29.0 8.0 % 39.8 11.0 % 0.1 0.3 %
Restructuring Costs - (40.6 ) 40.6 - - (23.5 ) 23.5 - - -
Corporate - (77.3 ) 33.5 (43.8 ) - (58.1 ) 18.2 (39.9 ) - (3.9 ) (9.8 )%
Total $ 2,824.9 $ 312.9 $ 89.1 $ 402.0 14.2 % $ 2,716.5 $ 318.0 $ 57.1 $ 375.1 13.8 % $ 108.4 4.0 % $ 26.9 7.2 %
(1) Excluded items include project-related costs and restructuring costs associated with Project Renewal. Project-related costs of $34.9 million and $38.8 million of restructuring costs incurred during 2015 relate to Project Renewal. For 2014, project-related costs of $18.2 million and restructuring costs of $23.5 million relate to Project Renewal.
(2) Baby & Parenting normalized operating income for 2015 and 2014 excludes charges of $10.2 and $11.4 million, respectively, relating to the Graco product recall.
(3) Writing normalized operating income for 2015 and 2014 excludes charges of $0.6 and $4.0 million, respectively associated with Venezuelan inventory resulting from changes in the exchange rate for the Venezuelan Bolivar.
(4) Home Solutions normalized operating income for 2015 excludes $1.1 million of operating costs associated with the acquisition and integration of Ignite Holdings and bubba brands, and Baby & Parenting normalized operating income for 2015 excludes $1.7 million of operating costs associated with the acquisition and integration of Baby Jogger. Restructuring costs include $1.8 million of costs associated with the integration of Ignite Holdings, bubba brands and Baby Jogger.
Newell Rubbermaid Inc.
RECONCILIATION OF GAAP AND NON-GAAP INFORMATION
CERTAIN LINE ITEMS
(in millions, except per share data)
Three Months Ended June 30, 2015
GAAP Measure Project Renewal Costs (1) Inventory charge from Acquisition Charge resulting from Non-GAAP Measure
Advisory Personnel Other Restructuring the devaluation of the and integration the devaluation of the Discontinued Percentage
Reported Costs Costs Costs Costs Venezuelan Bolivar (2) costs (3) Venezuelan Bolivar (4) operations (5) Normalized* of Sales
Cost of products sold $ 939.9 $ - $ (1.6 ) $ (1.3 ) $ - $ (0.3 ) $ (0.1 ) $ - $ - $ 936.6 60.0 %
Gross margin $ 621.0 $ - $ 1.6 $ 1.3 $ - $ 0.3 $ 0.1 $ - $ - $ 624.3 40.0 %
Selling, general & administrative expenses $ 393.0 $ (11.4 ) $ (4.4 ) $ (1.3 ) $ - $ - $ (1.0 ) $ - $ - $ 374.9 24.0 %
Operating income $ 214.7 $ 11.4 $ 6.0 $ 2.6 $ 11.5 $ 0.3 $ 2.9 $ - $ - $ 249.4 16.0 %
Nonoperating expenses $ 23.1 $ - $ - $ - $ - $ - $ - $ (4.7 ) $ - $ 18.4
Income before income taxes $ 191.6 $ 11.4 $ 6.0 $ 2.6 $ 11.5 $ 0.3 $ 2.9 $ 4.7 $ - $ 231.0
Income taxes (6) $ 43.5 $ 4.3 $ 2.3 $ 0.9 $ 2.8 $ 0.1 $ 1.1 $ 1.5 $ - $ 56.5
Net income from continuing operations $ 148.1 $ 7.1 $ 3.7 $ 1.7 $ 8.7 $ 0.2 $ 1.8 $ 3.2 $ - $ 174.5
Net income $ 148.5 $ 7.1 $ 3.7 $ 1.7 $ 8.7 $ 0.2 $ 1.8 $ 3.2 $ (0.4 ) $ 174.5
Diluted earnings per share** $ 0.55 $ 0.03 $ 0.01 $ 0.01 $ 0.03 $ 0.00 $ 0.01 $ 0.01 $ (0.00 ) $ 0.64
Three Months Ended June 30, 2014
GAAP Measure Restructuring and Inventory charge Non-GAAP Measure
Product restructuring-related from the devaluation of the Discontinued Non-recurring Percentage
Reported recall costs (7) costs (1) Venezuelan Bolivar (2) operations (5) tax items (8) Normalized* of Sales
Cost of products sold $ 906.6 $ - $ (0.2 ) $ (4.0 ) $ - $ - $ 902.4 60.1 %
Gross margin $ 595.6 $ - $ 0.2 $ 4.0 $ - $ - $ 599.8 39.9 %
Selling, general & administrative expenses $ 370.8 $ (0.4 ) $ (10.3 ) $ - $ - $ - $ 360.1 24.0 %
Operating income $ 213.3 $ 0.4 $ 22.0 $ 4.0 $ - $ - $ 239.7 16.0 %
Income before income taxes $ 200.9 $ 0.4 $ 22.0 $ 4.0 $ - $ - $ 227.3
Income taxes (6) $ 51.9 $ 0.2 $ 5.0 $ 1.4 $ - $ 3.3 $ 61.8
Net income from continuing operations $ 149.0 $ 0.2 $ 17.0 $ 2.6 $ - $ (3.3 ) $ 165.5
Net income $ 150.6 $ 0.2 $ 17.0 $ 2.6 $ (1.6 ) $ (3.3 ) $ 165.5
Diluted earnings per share** $ 0.54 $ 0.00 $ 0.06 $ 0.01 $ (0.01 ) $ (0.01 ) $ 0.59
* Normalized results are financial measures that are not in accordance with GAAP and exclude the above normalized adjustments. See below for a discussion of each of these adjustments.
**Totals may not add due to rounding.
(1) Costs associated with Project Renewal during the three months ended June 30, 2015 include $20.0 million of project-related costs and $11.5 million of restructuring costs. Project-related costs include advisory and consultancy costs, compensation and related costs of personnel dedicated to transformation projects, and other project-related costs. Restructuring and restructuring-related costs during the three months ended June 30, 2014 include $10.5 million of organizational change implementation and restructuring-related costs and $11.5 million of restructuring costs incurred in connection with Project Renewal.
(2) During the three months ended June 30, 2015 and 2014, the Company recognized an increase of $0.3 million and $4.0 million, respectively, in cost of products sold resulting from increased costs of inventory due to changes in the exchange rate for the Venezuelan Bolivar.
(3) During the three months ended June 30, 2015, the Company incurred $2.9 million (including $1.8 million of restructuring costs) of acquisition and integration costs associated with the acquisitions of Ignite Holdings, bubba brands and Baby Jogger.
(4) During the three months ended June 30, 2015, the Company recognized $4.7 million related to foreign exchange losses resulting from the devaluation of the Venezuelan Bolivar.
(5) During the three months ended June 30, 2015, the Company recognized income of $0.4 million in discontinued operations, primarily associated with Endicia. During the three months ended June 30, 2014, the Company recognized income of $1.6 million, primarily related to the operations of Endicia and certain Culinary businesses and certain gains associated with the sale of the Hardware business.
(6) The Company determined the tax effect of the items excluded from normalized results by applying the estimated effective rate for the applicable jurisdiction in which the pre-tax items were incurred, and for which realization of the resulting tax benefit, if any, is expected. In certain situations in which an item excluded from normalized results impacts income tax expense, the Company uses a “with” and “without” approach to determine normalized income tax expense.
(7) During the three months ended June 30, 2014, the Company recognized a $0.4 million charge associated with the Graco product recall.
(8) During the three months ended June 30, 2014, the Company recognized a non-recurring income tax benefit of $3.3 million resulting from the resolution of various income tax contingencies.
Newell Rubbermaid Inc.
RECONCILIATION OF GAAP AND NON-GAAP INFORMATION
CERTAIN LINE ITEMS
(in millions, except per share data)
Six Months Ended June 30, 2015
GAAP Measure Project Renewal Costs (2) Inventory charge from Acquisition Charge resulting from Non-GAAP Measure
Product Advisory Personnel Other Restructuring the devaluation of the and integration the devaluation of the Discontinued Percentage
Reported recall costs (1) Costs Costs Costs Costs Venezuelan Bolivar (3) cost (4) Venezuelan Bolivar (5) operations (6) Normalized* of Sales
Cost of products sold $ 1,716.4 $ - $ - $ (1.8 ) $ (2.3 ) $ - $ (0.6 ) $ (1.6 ) $ - $ - $ 1,710.1 60.5 %
Gross margin $ 1,108.5 $ - $ - $ 1.8 $ 2.3 $ - $ 0.6 $ 1.6 $ - $ - $ 1,114.8 39.5 %
Selling, general & administrative expenses $ 755.0 $ (10.2 ) $ (22.0 ) $ (6.7 ) $ (2.1 ) $ - $ - $ (1.2 ) $ - $ - $ 712.8 25.2 %
Operating income $ 312.9 $ 10.2 $ 22.0 $ 8.5 $ 4.4 $ 38.8 $ 0.6 $ 4.6 $ - $ - $ 402.0 14.2 %
Nonoperating expenses $ 42.4 $ - $ - $ - $ - $ - $ - $ - $ (4.7 ) $ - $ 37.7
Income before income taxes $ 270.5 $ 10.2 $ 22.0 $ 8.5 $ 4.4 $ 38.8 $ 0.6 $ 4.6 $ 4.7 $ - $ 364.3
Income taxes (7) $ 65.5 $ 3.3 $ 7.7 $ 3.1 $ 1.5 $ 8.3 $ 0.2 $ 1.7 $ 1.5 $ - $ 92.8
Net income from continuing operations $ 205.0 $ 6.9 $ 14.3 $ 5.4 $ 2.9 $ 30.5 $ 0.4 $ 2.9 $ 3.2 $ - $ 271.5
Net income $ 202.6 $ 6.9 $ 14.30 $ 5.40 $ 2.90 $ 30.50 $ 0.40 $ 2.90 $ 3.2 $ 2.4 $ 271.5
Diluted earnings per share** $ 0.74 $ 0.03 $ 0.05 $ 0.02 $ 0.01 $ 0.11 $ 0.00 $ 0.01 $ 0.01 $ 0.01 $ 1.00
Six Months Ended June 30, 2014
GAAP Measure Restructuring and Inventory charge Charge resulting from Non-GAAP Measure
Product restructuring-related from the devaluation of the the devaluation of the Discontinued Non-recurring Percentage
Reported recall costs (1) costs (2) Venezuelan Bolivar (3) Venezuelan Bolivar (5) operations (6) tax items (8) Normalized* of Sales
Cost of products sold $ 1,663.9 $ (8.6 ) $ (0.2 ) $ (4.0 ) $ - $ - $ - $ 1,651.1 60.8 %
Gross margin $ 1,052.6 $ 8.6 $ 0.2 $ 4.0 $ - $ - $ - $ 1,065.4 39.2 %
Selling, general & administrative expenses $ 711.1 $ (2.8 ) $ (18.0 ) $ - $ - $ - $ - $ 690.3 25.4 %
Operating income $ 318.0 $ 11.4 $ 41.7 $ 4.0 $ - $ - $ - $ 375.1 13.8 %
Nonoperating expenses $ 66.8 $ - $ - $ - $ (38.7 ) $ - $ - $ 28.1
Income before income taxes $ 251.2 $ 11.4 $ 41.7 $ 4.0 $ 38.7 $ - $ - $ 347.0
Income taxes (7) $ 50.4 $ 4.2 $ 10.5 $ 1.4 $ 13.9 $ - $ 3.3 $ 83.7
Net income from continuing operations $ 200.8 $ 7.2 $ 31.2 $ 2.6 $ 24.8 $ - $ (3.3 ) $ 263.3
Net income $ 203.5 $ 7.2 $ 31.2 $ 2.6 $ 24.8 $ (2.7 ) $ (3.3 ) $ 263.3
Diluted earnings per share** $ 0.72 $ 0.03 $ 0.11 $ 0.01 $ 0.09 $ (0.01 ) $ (0.01 ) $ 0.93
* Normalized results are financial measures that are not in accordance with GAAP and exclude the above normalized adjustments. See below for a discussion of each of these adjustments.
**Totals may not add due to rounding.
(1) During the six months ended June 30, 2015 and 2014, the Company recognized $10.2 million and $11.4 million, respectively, of charges associated with the Graco product recall.
(2) Costs associated with Project Renewal during the six months ended June 30, 2015 include $34.9 million of project-related costs and $38.8 million of restructuring costs. Project-related costs include advisory and consultancy costs, compensation and related costs of personnel dedicated to transformation projects, and other project-related costs. Restructuring and restructuring-related costs during the six months ended June 30, 2014 include $18.2 million of organizational change implementation and restructuring-related costs and $23.5 million of restructuring costs incurred in connection with Project Renewal.
(3) During the six months ended June 30, 2015 and 2014, the Company recognized an increase of $0.6 million and $4.0 million, respectively, in cost of products sold resulting from increased costs of inventory due to changes in the exchange rate for the Venezuelan Bolivar.
(4) During the six months ended June 30, 2015, the Company incurred $4.6 million (including $1.8 million of restructuring costs) of acquisition and integration costs associated with the acquisition and integration of Ignite Holdings, bubba and Baby Jogger.
(5) During the six months ended June 30, 2015 and 2014, the Company recognized $4.7 million and $38.7 million, respectively, related to foreign exchange losses resulting from the devaluation of the Venezuelan Bolivar.
(6) During the six months ended June 30, 2015, the Company recognized a loss of $2.4 million in discontinued operations, primarily associated with Endicia and certain Culinary businesses. During the six months ended June 30, 2014, the Company recognized net income of $2.7 million, primarily related to the operations of Endicia and certain Culinary businesses and certain gains associated with the sale of the Hardware business.
(7) The Company determined the tax effect of the items excluded from normalized results by applying the estimated effective rate for the applicable jurisdiction in which the pre-tax items were incurred, and for which realization of the resulting tax benefit, if any, is expected. In certain situations in which an item excluded from normalized results impacts income tax expense, the Company uses a “with” and “without” approach to determine normalized income tax expense.
(8) During the six months ended June 30, 2014, the Company recognized a non-recurring income tax benefit of $3.3 million resulting from the resolution of various income tax contingencies.
Newell Rubbermaid Inc.
Three Months Ended June 30, 2015
In Millions
Currency Analysis
By Segment
Net Sales, Core
As Reported Sales (1) Year-Over-Year
Less Less Constant Inc. (Dec.) Excl. Increase (Decrease)
Increase Planned Less 2015 Planned 2014 Currency Planned Divest. & Currency Excluding Including Currency Planned Core Sales
2015 2014 (Decrease) 2015 Divestitures (2) Acquisitions Core Sales 2014 Divestitures (2) Core Sales Inc. (Dec.) Acquisitions Impact Currency Currency Impact Acquisitions Divestitures (2) Growth (1)
Writing $ 495.9 $ 489.3 $ 6.6 $ 540.4 $ - $ - $ 540.4 $ 487.6 $ - $ 487.6 $ 52.8 $ 52.8 $ (46.2 ) 10.8 % 1.3 % (9.5 )% 0.0 % (0.0 )% 10.8 %
Home Solutions 438.5 383.4 55.1 443.3 - 55.4 387.9 383.2 - 383.2 60.1 4.7 (5.0 ) 15.7 % 14.4 % (1.3 )% 14.5 % 0.0 % 1.2 %
Tools 205.2 222.3 (17.1 ) 222.4 - - 222.4 219.5 - 219.5 2.9 2.9 (20.0 ) 1.3 % (7.7 )% (9.0 )% 0.0 % (0.0 )% 1.3 %
Commercial Products 210.6 223.5 (12.9 ) 216.5 12.9 - 203.6 222.6 22.3 200.3 (6.1 ) 3.3 (6.8 ) (2.7 )% (5.8 )% (3.1 )% 0.0 % (4.3 )% 1.6 %
Baby & Parenting 210.7 183.7 27.0 220.0 - 26.7 193.3 182.4 - 182.4 37.6 10.9 (10.6 ) 20.6 % 14.7 % (5.9 )% 14.6 % (0.0 )% 6.0 %
Total Company $ 1,560.9 $ 1,502.2 $ 58.7 $ 1,642.6 $ 12.9 $ 82.1 $ 1,547.6 $ 1,495.3 $ 22.3 $ 1,473.0 $ 147.3 $ 74.6 $ (88.6 ) 9.9 % 3.9 % (6.0 )% 5.6 % (0.8 )% 5.1 %
Win Bigger Businesses Core Sales Growth (3) $ 911.7 $ 935.1 $ (23.4 ) $ 979.3 $ 12.9 $ - $ 966.4 $ 929.7 $ 22.3 $ 907.4 $ 49.6 $ 59.0 $ (73.0 ) 5.3 % (2.5 )% (7.8 )% 0.0 % (1.2 )% 6.5 %
By Geography
United States $ 1,117.5 $ 1,036.1 $ 81.4 $ 1,117.5 $ 12.1 $ 74.2 $ 1,031.2 $ 1,036.1 $ 21.8 $ 1,014.3 $ 81.4 $ 16.9 $ - 7.9 % 7.9 % 0.0 % 7.3 % (1.1 )% 1.7 %
Canada 68.4 76.9 (8.5 ) 76.8 0.8 1.1 74.9 76.6 0.5 76.1 0.2 (1.2 ) (8.7 ) 0.3 % (11.1 )% (11.4 )% 1.5 % 0.4 % (1.6 )%
Total North America 1,185.9 1,113.0 72.9 1,194.3 12.9 75.3 1,106.1 1,112.7 22.3 1,090.4 81.6 15.7 (8.7 ) 7.3 % 6.5 % (0.8 )% 6.9 % (1.0 )% 1.4 %
Europe, Middle East and Africa 167.0 188.4 (21.4 ) 202.0 - 6.8 195.2 183.3 - 183.3 18.7 11.9 (40.1 ) 10.2 % (11.4 )% (21.6 )% 3.7 % (0.0 )% 6.5 %
Latin America 114.6 102.8 11.8 144.0 - - 144.0 102.7 - 102.7 41.3 41.3 (29.5 ) 40.2 % 11.5 % (28.7 )% 0.0 % (0.0 )% 40.2 %
Asia Pacific 93.4 98.0 (4.6 ) 102.3 - - 102.3 96.6 - 96.6 5.7 5.7 (10.3 ) 5.9 % (4.7 )% (10.6 )% 0.0 % (0.0 )% 5.9 %
Total International 375.0 389.2 (14.2 ) 448.3 - 6.8 441.5 382.6 - 382.6 65.7 58.9 (79.9 ) 17.2 % (3.6 )% (20.8 )% 1.8 % 0.0 % 15.4 %
Total Company $ 1,560.9 $ 1,502.2 $ 58.7 $ 1,642.6 $ 12.9 $ 82.1 $ 1,547.6 $ 1,495.3 $ 22.3 $ 1,473.0 $ 147.3 $ 74.6 $ (88.6 ) 9.9 % 3.9 % (6.0 )% 5.6 % (0.8 )% 5.1 %
(1) "Core Sales" is determined by applying a fixed exchange rate, calculated as the 12-month average in 2014, to the current and prior year local currency sales amounts, with the difference between the change in "As Reported" sales and the change in "Core Sales" reported in the table as "Currency Impact". Core Sales Growth excludes the impact of currency, acquisitions and planned divestitures.
(2) Planned divestitures represent the Rubbermaid medical cart business, which the Company plans to divest.
(3) Win Bigger businesses include Writing, Tools, and Commercial Products segments.
Newell Rubbermaid Inc.
Six Months Ended June 30, 2015
In Millions
Currency Analysis
By Segment
Net Sales, Core
As Reported Sales (1) Year-Over-Year
Less Less Constant Inc. (Dec.) Excl. Increase (Decrease)
Increase Planned Less 2015 Planned 2014 Currency Planned Divest. & Currency Excluding Including Currency Planned Core Sales
2015 2014 (Decrease) 2015 Divestitures (2) Acquisitions Core Sales 2014 Divestitures (2) Core Sales Inc. (Dec.) Acquisitions Impact Currency Currency Impact Acquisitions Divestitures (2) Growth (1)
Writing $ 837.7 $ 837.5 $ 0.2 $ 909.8 $ - $ - $ 909.8 $ 826.6 $ - $ 826.6 $ 83.2 $ 83.2 $ (83.0 ) 10.1 % 0.0 % (10.1 )% 0.0 % 0.0 % 10.1 %
Home Solutions 803.0 699.8 103.2 810.9 - 103.8 707.1 699.5 - 699.5 111.4 7.6 (8.2 ) 15.9 % 14.7 % (1.2 )% 14.8 % (0.0 )% 1.1 %
Tools 385.6 410.1 (24.5 ) 415.2 - - 415.2 406.3 - 406.3 8.9 8.9 (33.4 ) 2.2 % (6.0 )% (8.2 )% 0.0 % 0.0 % 2.2 %
Commercial Products 395.8 406.1 (10.3 ) 406.0 22.7 - 383.3 404.1 38.9 365.2 1.9 18.1 (12.2 ) 0.5 % (2.5 )% (3.0 )% 0.0 % (4.5 )% 5.0 %
Baby & Parenting 402.8 363.0 39.8 417.5 - 44.9 372.6 360.3 - 360.3 57.2 12.3 (17.4 ) 15.9 % 11.0 % (4.9 )% 12.5 % 0.0 % 3.4 %
Total Company $ 2,824.9 $ 2,716.5 $ 108.4 $ 2,959.4 $ 22.7 $ 148.7 $ 2,788.0 $ 2,696.8 $ 38.9 $ 2,657.9 $ 262.6 $ 130.1 $ (154.2 ) 9.7 % 4.0 % (5.7 )% 5.6 % (0.8 )% 4.9 %
Win Bigger Businesses Core Sales Growth (3) $ 1,619.1 $ 1,653.7 $ (34.6 ) $ 1,731.0 $ 22.7 $ - $ 1,708.3 $ 1,637.0 $ 38.9 $ 1,598.1 $ 94.0 $ 110.2 $ (128.6 ) 5.7 % (2.1 )% (7.8 )% 0.0 % (1.2 )% 6.9 %
By Geography
United States $ 2,034.7 $ 1,849.8 $ 184.9 $ 2,034.7 $ 21.5 $ 140.8 $ 1,872.4 $ 1,849.8 $ 37.5 $ 1,812.3 $ 184.9 $ 60.1 $ - 10.0 % 10.0 % 0.0 % 7.8 % (1.1 )% 3.3 %
Canada 114.6 129.9 (15.3 ) 128.4 1.2 1.1 126.1 129.4 1.4 128.0 (1.0 ) (1.9 ) (14.3 ) (0.8 )% (11.8 )% (11.0 )% 0.9 % (0.2 )% (1.5 )%
Total North America 2,149.3 1,979.7 169.6 2,163.1 22.7 141.9 1,998.5 1,979.2 38.9 1,940.3 183.9 58.2 (14.3 ) 9.3 % 8.6 % (0.7 )% 7.3 % (1.0 )% 3.0 %
Europe, Middle East and Africa 294.6 352.2 (57.6 ) 352.5 - 6.8 345.7 342.1 - 342.1 10.4 3.6 (68.0 ) 3.0 % (16.4 )% (19.4 )% 1.9 % (0.0 )% 1.1 %
Latin America 204.0 194.8 9.2 250.8 - - 250.8 187.8 - 187.8 63.0 63.0 (53.8 ) 33.5 % 4.7 % (28.8 )% 0.0 % (0.0 )% 33.5 %
Asia Pacific 177.0 189.8 (12.8 ) 193.0 - - 193.0 187.7 - 187.7 5.3 5.3 (18.1 ) 2.8 % (6.7 )% (9.5 )% 0.0 % (0.0 )% 2.8 %
Total International 675.6 736.8 (61.2 ) 796.3 - 6.8 789.5 717.6 - 717.6 78.7 71.9 (139.9 ) 11.0 % (8.3 )% (19.3 )% 1.0 % 0.0 % 10.0 %
Total Company $ 2,824.9 $ 2,716.5 $ 108.4 $ 2,959.4 $ 22.7 $ 148.7 $ 2,788.0 $ 2,696.8 $ 38.9 $ 2,657.9 $ 262.6 $ 130.1 $ (154.2 ) 9.7 % 4.0 % (5.7 )% 5.6 % (0.8 )% 4.9 %
(1) "Core Sales" is determined by applying a fixed exchange rate, calculated as the 12-month average in 2014, to the current and prior year local currency sales amounts, with the difference between the change in "As Reported" sales and the change in "Core Sales" reported in the table as "Currency Impact". Core Sales Growth excludes the impact of currency, acquisitions and planned divestitures.
(2) Planned divestitures represent the Rubbermaid medical cart business, which the Company plans to divest.
(3) Win Bigger businesses include Writing, Tools, and Commercial Products segments.
Newell Rubbermaid Inc.
Reconciliation of Normalized EPS Guidance
Year Ending December 31, 2015
Year Ending
December 31, 2015
Diluted earnings per share $ 1.69 to $ 1.75
Graco product recall $ 0.03
Restructuring and other Project Renewal costs $ 0.35 to $ 0.45
Acquisition and integration costs $ 0.01
Devaluation of the Venezuelan Bolivar $ 0.01
Discontinued operations $ (0.01 ) to $ 0.01
Normalized earnings per share $ 2.14 to $ 2.20
View source version on businesswire.com: http://www.businesswire.com/news/home/20150731005065/en/
Newell Rubbermaidoperating income
Contact:
Newell Rubbermaid
Nancy O’Donnell, 770-418-7723
Vice President, Investor Relations
or
Nicole Quinlan, 770-418-7251
Senior Manager, Global Communication
6:36 am Newell Rubbermaid beats by $0.02, beats on revs; guides FY15 EPS in-line (NWL) : Reports Q2 (Jun) earnings of $0.64 per share, $0.02 better than the Capital IQ Consensus Estimate of $0.62; revenues rose 4.0% year/year to $1.56 bln vs the $1.54 bln consensus.
•Co raises guidance for FY15, sees EPS of $2.14-2.20 vs. $2.16 Capital IQ Consensus Estimate, up from prior guidance of $2.10-2.18. Raises core sales growth guidance to 4.0-5.0% from 3.5-4.5%.
•"Core sales grew in all five of our segments and in all four geographic regions. Our Win Bigger businesses grew 6.5 percent, led by our global Writing business which grew core sales over ten percent. Momentum continued to build in our Baby & Parenting business, which also had a strong quarter with core growth of 6.0 percent. We are driving accelerated growth and earnings performance as a result of strengthened innovation, increased investment in brands, aggressive cost programs and excellent commercial execution."
6:36 am Newell Rubbermaid beats by $0.02, beats on revs; guides FY15 EPS in-line (NWL) : Reports Q2 (Jun) earnings of $0.64 per share, $0.02 better than the Capital IQ Consensus Estimate of $0.62; revenues rose 4.0% year/year to $1.56 bln vs the $1.54 bln consensus.
•Co raises guidance for FY15, sees EPS of $2.14-2.20 vs. $2.16 Capital IQ Consensus Estimate, up from prior guidance of $2.10-2.18. Raises core sales growth guidance to 4.0-5.0% from 3.5-4.5%.
•"Core sales grew in all five of our segments and in all four geographic regions. Our Win Bigger businesses grew 6.5 percent, led by our global Writing business which grew core sales over ten percent. Momentum continued to build in our Baby & Parenting business, which also had a strong quarter with core growth of 6.0 percent. We are driving accelerated growth and earnings performance as a result of strengthened innovation, increased investment in brands, aggressive cost programs and excellent commercial execution."
7:05 am Procter & Gamble beats by $0.05, reports revs in-line; guides FY16 ex-Beauty business (PG) :
•Reports Q4 (Jun) earnings of $1.00 per share, excluding non-recurring items, $0.05 better than the Capital IQ Consensus Estimate of $0.95; revenues fell 9.2% year/year to $17.79 bln vs the $17.95 bln consensus. Organic sales were unchanged for the quarter as a three percentage point benefit from pricing and mix was offset by lower shipment volume.
•P&G said it is projecting organic sales to be in-line to up low-single digits versus fiscal 2015. Foreign exchange is expected to be a four to five percentage point headwind on all-in sales growth. As a result, the Company expects all-in sales to be down low-to-mid single digits versus fiscal 2015 results.
•The Company said it expects core earnings per share to be slightly below to up mid-single digits versus fiscal 2015 restated core EPS of $3.77. Strong operating profit growth is expected to be largely offset by a six to seven percentage point core EPS growth headwind from lower non-operating income and a higher core effective tax rate. P&G noted that foreign exchange is estimated to be a three to four percent negative impact on core EPS growth, with the vast majority of this impact affecting the first-half of fiscal 2016.
Macau Operations
In the second quarter of 2015, net revenues were $617.0 million, a 35.8% decrease from the $960.6 million generated in the second quarter of 2014. Adjusted property EBITDA in the second quarter of 2015 was $173.4 million, down 43.5% from $307.0 million in the second quarter of 2014, due primarily to weakness in the gaming segment.
Table games turnover in the VIP segment was $15.5 billion for the second quarter of 2015, a 41.1% decrease from $26.4 billion in the second quarter of 2014. VIP table games win as a percentage of turnover (calculated before commissions) for the quarter was 2.92%, within the expected range of 2.7% to 3.0% and flat compared to the 2.93% experienced in the second quarter of 2014. The average number of VIP tables decreased to 247 units in the second quarter of 2015 from 263 units in the prior year's second quarter.
The Company has determined that it will now include the amount of cash that is deposited in a gaming table's drop box plus cash chips purchased at the casino cage in the calculation of table drop in accordance with standard Macau industry practice. Table drop in the mass market segment was $1.2 billion in the second quarter of 2015, down 16.5% from the 2014 second quarter. Table games win in the mass market segment decreased by 32.9% to $208.6 million in the second quarter of 2015. The mass market win percentage of 17.5% in the second quarter of 2015 was below the 21.8% in the second quarter of 2014 and below the 20.5% over the trailing twelve months ended June 30, 2015.
Slot machine handle for the second quarter of 2015 declined 29.5% from the 2014 period to $1,027.6 million, and slot win decreased by 22.5%.
For the second quarter of 2015, total non-casino revenues, before promotional allowances, decreased 22.3% during the quarter to $78.1 million. We achieved an average daily rate (ADR) of $321, down 3.9% compared to the $334 reported in the 2014 second quarter. Occupancy at Wynn Macau of 96.4% compares to 98.4% in the prior-year period. Revenue per available room (REVPAR) decreased 5.8% to $310 in the 2015 quarter from $329 in last year’s second quarter.
Wynn Resorts, Limited Reports Second Quarter 2015 Results
Wynn Resorts, Limited 7 hours ago
LAS VEGAS--(BUSINESS WIRE)--
Wynn Resorts, Limited (Nasdaq: WYNN) today reported financial results for the second quarter ended June 30, 2015.
Net revenues for the second quarter of 2015 were $1,040.5 million, compared to $1,412.1 million in the second quarter of 2014. The decline was the result of a 35.8% net revenue decrease from our Macau Operations and a 6.2% decrease in net revenues from our Las Vegas Operations. Adjusted property EBITDA (1) was $295.4 million for the second quarter of 2015, a 36.8% decrease from $467.4 million in the second quarter of 2014.
On a US GAAP basis, net income attributable to Wynn Resorts, Limited for the second quarter of 2015 was $56.5 million, or $0.56 per diluted share, compared to net income attributable to Wynn Resorts, Limited of $203.9 million, or $2.00 per diluted share, in the second quarter of 2014.
Adjusted net income attributable to Wynn Resorts, Limited (2) in the second quarter of 2015 was $75.0 million, or $0.74 per diluted share (adjusted EPS), compared to an adjusted net income attributable to Wynn Resorts, Limited of $215.1 million, or $2.11 per diluted share, in the second quarter of 2014.
Wynn Resorts, Limited also announced today that the Company has approved a cash dividend of $0.50 per common share. This dividend will be payable on August 20, 2015, to stockholders of record on August 11, 2015.
Macau Operations
In the second quarter of 2015, net revenues were $617.0 million, a 35.8% decrease from the $960.6 million generated in the second quarter of 2014. Adjusted property EBITDA in the second quarter of 2015 was $173.4 million, down 43.5% from $307.0 million in the second quarter of 2014, due primarily to weakness in the gaming segment.
Table games turnover in the VIP segment was $15.5 billion for the second quarter of 2015, a 41.1% decrease from $26.4 billion in the second quarter of 2014. VIP table games win as a percentage of turnover (calculated before commissions) for the quarter was 2.92%, within the expected range of 2.7% to 3.0% and flat compared to the 2.93% experienced in the second quarter of 2014. The average number of VIP tables decreased to 247 units in the second quarter of 2015 from 263 units in the prior year's second quarter.
The Company has determined that it will now include the amount of cash that is deposited in a gaming table's drop box plus cash chips purchased at the casino cage in the calculation of table drop in accordance with standard Macau industry practice. Table drop in the mass market segment was $1.2 billion in the second quarter of 2015, down 16.5% from the 2014 second quarter. Table games win in the mass market segment decreased by 32.9% to $208.6 million in the second quarter of 2015. The mass market win percentage of 17.5% in the second quarter of 2015 was below the 21.8% in the second quarter of 2014 and below the 20.5% over the trailing twelve months ended June 30, 2015.
Slot machine handle for the second quarter of 2015 declined 29.5% from the 2014 period to $1,027.6 million, and slot win decreased by 22.5%.
For the second quarter of 2015, total non-casino revenues, before promotional allowances, decreased 22.3% during the quarter to $78.1 million. We achieved an average daily rate (ADR) of $321, down 3.9% compared to the $334 reported in the 2014 second quarter. Occupancy at Wynn Macau of 96.4% compares to 98.4% in the prior-year period. Revenue per available room (REVPAR) decreased 5.8% to $310 in the 2015 quarter from $329 in last year’s second quarter.
Las Vegas Operations
For the quarter ended June 30, 2015, net revenues were $423.5 million, a 6.2% decrease from $451.4 million in the second quarter of 2014. Adjusted property EBITDA was $122.0 million, down 23.9% compared to the prior year.
Net casino revenues in the second quarter of 2015 were $134.7 million, a 26.2% decrease from the second quarter of 2014. Table games drop of $509.3 million was down 19.0% from $629.0 million in the 2014 quarter. Table games win percentage was 19.5%, outside the property’s expected range of 21% to 24% and below the 27.4% reported in the 2014 quarter. Slot machine handle of $712.1 million was 0.7% above the $706.9 million in the comparable period of 2014, and net slot win was up 10.6%.
For the second quarter of 2015, total non-casino revenues, before promotional allowances, increased 5.3% from the second quarter of 2014 to $330.3 million.
Room revenues increased 0.9% to $108.8 million during the quarter, versus $107.9 million in the second quarter of 2014. Occupancy was flat at 88.4% and ADR increased 2.1% to $289 from $283. REVPAR was $255 in the 2015 second quarter, 1.6% above the $251 reported in the prior-year quarter.
Food and beverage revenues in the second quarter of 2015 were $162.0 million, up 8.7% compared to the 2014 second quarter. Entertainment, retail and other revenues improved 4.8% from last year’s quarter to $59.4 million.
Wynn Palace Project in Macau
The Company is currently constructing Wynn Palace, an integrated resort containing a 1,700-room hotel, a performance lake, meeting space, a casino, a spa, retail offerings, and food-and-beverage outlets in the Cotai area of Macau. In July 2013, we signed a $2.6 billion guaranteed maximum price (GMP) contract for the project’s construction costs. The total project budget, including construction costs, capitalized interest, pre-opening expenses, land costs and financing fees, is approximately $4.1 billion. We expect to open our resort on Cotai in the first half of 2016.
During the second quarter of 2015, we invested approximately $431.4 million in our Cotai project, taking the total investment to $2.7 billion through June 30, 2015.
Wynn Project in Massachusetts
In November 2014, we were awarded a gaming license to develop and construct an integrated resort in Everett, Massachusetts, outside of Boston. On January 2, 2015, we purchased 33 acres of land in Everett, along the Mystic River. On this land, we intend to develop and construct an integrated resort containing a hotel, a waterfront boardwalk, meeting space, a casino, a spa, retail offerings, and food-and-beverage outlets.
Balance Sheet and Other
Our cash and cash equivalents, restricted cash and investment securities at June 30, 2015 was $1.8 billion. Total debt outstanding at the end of the quarter was $8.1 billion, including $3.3 billion of Wynn Las Vegas debt, $2.9 billion of Wynn Macau debt and $1.9 billion at the parent company.
Conference Call Information
The Company will hold a conference call to discuss its results on July 29, 2015 at 1:30 p.m. PT (4:30 p.m. ET). Interested parties are invited to join the call by accessing a live audio webcast at http://www.wynnresorts.com.
Forward-looking Statements
This release contains forward-looking statements regarding operating trends and future results of operations. Such forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those we express in these forward-looking statements, including, but not limited to, our dependence on existing management, results of regulatory or enforcement actions and probity investigations, pending or future legal proceedings, uncertainties over the development and success of new gaming and resort properties, adverse tourism trends, general global macroeconomic conditions, changes in gaming laws or regulations, volatility and weakness in world-wide credit and financial markets, and our substantial indebtedness and leverage. Additional information concerning potential factors that could affect the Company’s financial results is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 and the Company’s other periodic reports filed with the Securities and Exchange Commission. The Company is under no obligation to (and expressly disclaims any such obligation to) update or revise its forward-looking statements as a result of new information, future events or otherwise.
Non-GAAP Financial Measures
(1) “Adjusted property EBITDA” is net income before interest, taxes, depreciation, amortization, pre-opening costs, property charges and other, management and license fees, corporate expenses and other, intercompany golf course and water rights leases, stock-based compensation, loss on extinguishment of debt, change in interest rate swap fair value, and other non-operating income and expenses, and includes equity in income from unconsolidated affiliates. Adjusted property EBITDA is presented exclusively as a supplemental disclosure because management believes that it is widely used to measure the performance, and as a basis for valuation, of gaming companies. Management uses adjusted property EBITDA as a measure of the operating performance of its segments and to compare the operating performance of its properties with those of its competitors. The Company also presents adjusted property EBITDA because it is used by some investors as a way to measure a company’s ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming companies have historically reported EBITDA as a supplement to financial measures in accordance with U.S. generally accepted accounting principles (“GAAP”). In order to view the operations of their casinos on a more stand-alone basis, gaming companies, including Wynn Resorts, Limited, have historically excluded from their EBITDA calculations pre-opening expenses, property charges, corporate expenses and stock-based compensation, that do not relate to the management of specific casino properties. However, adjusted property EBITDA should not be considered as an alternative to operating income as an indicator of the Company’s performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income, adjusted property EBITDA does not include depreciation or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital. The Company has significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, taxes and other non-recurring charges, which are not reflected in adjusted property EBITDA. Also, Wynn Resorts’ calculation of adjusted property EBITDA may be different from the calculation methods used by other companies and, therefore, comparability may be limited.
(2) "Adjusted net income attributable to Wynn Resorts, Limited" is net income before pre-opening costs, loss on extinguishment of debt, change in interest rate swap fair value, property charges and other, net of noncontrolling interest and taxes in respective jurisdictions. Adjusted net income attributable to Wynn Resorts, Limited and adjusted net income attributable to Wynn Resorts, Limited per diluted share (“adjusted EPS”) are presented as supplemental disclosures because management believes that these non-GAAP financial measures are widely used to measure the performance, and as a principal basis for valuation, of gaming companies. These measures are used by management and/or evaluated by some investors, in addition to income and EPS computed in accordance with GAAP, as an additional basis for assessing period-to-period results of our business. Adjusted net income attributable to Wynn Resorts, Limited and adjusted net income attributable to Wynn Resorts, Limited per diluted share may be different from the calculation methods used by other companies and, therefore, comparability may be limited. Adjusted net income attributable to Wynn Resorts, Limited for the six months ended June 30, 2015 reflects a revision to the effective tax rate previously applied to the loss on extinguishment of debt, net for the three months ended March 31, 2015 to reflect the same assumed effective U.S. tax rate applied to other adjustments to net income.
The Company has included schedules in the tables that accompany this release that reconcile (i) net income attributable to Wynn Resorts, Limited to adjusted net income attributable to Wynn Resorts, Limited, (ii) operating income to adjusted property EBITDA, and (iii) adjusted property EBITDA to net income attributable to Wynn Resorts, Limited.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2015 2014 2015 2014
Operating revenues:
Casino $ 714,208 $ 1,091,595 $ 1,540,307 $ 2,317,728
Rooms 139,912 141,355 271,967 277,831
Food and beverage 181,016 174,308 317,029 316,145
Entertainment, retail and other 87,459 98,635 177,835 205,495
Gross revenues 1,122,595 1,505,893 2,307,138 3,117,199
Less: promotional allowances (82,137 ) (93,830 ) (174,442 ) (191,523 )
Net revenues 1,040,458 1,412,063 2,132,696 2,925,676
Operating costs and expenses:
Casino 466,535 681,236 990,588 1,464,970
Rooms 37,584 37,659 74,270 73,004
Food and beverage 110,952 100,686 187,358 175,639
Entertainment, retail and other 38,997 39,878 79,291 84,413
General and administrative 113,707 128,520 235,907 239,797
Provision (benefit) for doubtful accounts 4,302 (2,710 ) 10,381 (5,438 )
Pre-opening costs 16,875 5,001 32,966 8,074
Depreciation and amortization 81,913 78,351 164,779 155,010
Property charges and other 472 2,100 2,976 12,034
Total operating costs and expenses 871,337 1,070,721 1,778,516 2,207,503
Operating income 169,121 341,342 354,180 718,173
Other income (expense):
Interest income 1,498 5,505 3,190 10,258
Interest expense, net of amounts capitalized (75,236 ) (81,765 ) (153,219 ) (157,021 )
Decrease in swap fair value (1,114 ) (4,653 ) (5,723 ) (3,811 )
Loss on extinguishment of debt (3,839 ) (2,254 ) (120,033 ) (3,783 )
Equity in income (loss) from unconsolidated affiliates (127 ) 298 70 606
Other 198 693 1,331 396
Other income (expense), net (78,620 ) (82,176 ) (274,384 ) (153,355 )
Income before income taxes 90,501 259,166 79,796 564,818
Provision for income taxes (13,298 ) (764 ) (16,495 ) (3,373 )
Net income 77,203 258,402 63,301 561,445
Less: net income attributable to noncontrolling interest (20,743 ) (54,496 ) (51,442 ) (130,643 )
Net income attributable to Wynn Resorts, Limited $ 56,460 $ 203,906 $ 11,859 $ 430,802
Basic and diluted income per common share:
Net income attributable to Wynn Resorts, Limited:
Basic $ 0.56 $ 2.02 $ 0.12 $ 4.27
Diluted $ 0.56 $ 2.00 $ 0.12 $ 4.22
Weighted average common shares outstanding:
Basic 101,157 100,915 101,146 100,869
Diluted 101,710 102,018 101,795 101,979
Dividends declared per common share: $ 0.50 $ 1.25 $ 2.00 $ 2.50
WYNN RESORTS, LIMITED AND SUBSIDIARIES
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO WYNN RESORTS, LIMITED
TO ADJUSTED NET INCOME ATTRIBUTABLE TO WYNN RESORTS, LIMITED
(in thousands, except per share data)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2015 2014 2015 2014
Net income attributable to Wynn Resorts, Limited $ 56,460 $ 203,906 $ 11,859 $ 430,802
Pre-opening costs, net 13,804 3,615 27,251 5,837
Loss on extinguishment of debt, net 3,839 2,254 120,033 3,783
Decrease in swap fair value, net 804 3,831 4,131 2,754
Property charges and other, net 65 1,536 2,505 8,650
Adjusted net income attributable to Wynn Resorts, Limited (2) $ 74,972 $ 215,142 $ 165,779 $ 451,826
Adjusted net income attributable to Wynn Resorts, Limited per diluted share $ 0.74 $ 2.11 $ 1.63 $ 4.43
Weighted average common shares outstanding - diluted 101,710 102,018 101,795 101,979
WYNN RESORTS, LIMITED AND SUBSIDIARIES
RECONCILIATION OF OPERATING INCOME TO ADJUSTED PROPERTY EBITDA AND ADJUSTED
PROPERTY EBITDA TO NET INCOME ATTRIBUTABLE TO WYNN RESORTS, LIMITED
(in thousands)
(unaudited)
Three Months Ended June 30, 2015
Macau
Operations Las Vegas
Operations Corporate
and Other Total
Operating income $ 93,347 $ 58,502 $ 17,272 $ 169,121
Pre-opening costs 11,041 — 5,834 16,875
Depreciation and amortization 34,357 45,249 2,307 81,913
Property charges and other 1,461 (922 ) (67 ) 472
Management and license fees 23,876 13,323 (37,199 ) —
Corporate expense and other 5,291 5,135 6,412 16,838
Stock-based compensation 4,018 808 5,510 10,336
Equity in loss from unconsolidated affiliates — (58 ) (69 ) (127 )
Adjusted Property EBITDA(1) $ 173,391 $ 122,037 $ — $ 295,428
Three Months Ended June 30, 2014
Macau
Operations Las Vegas
Operations Corporate
and Other Total
Operating income $ 217,710 $ 97,424 $ 26,208 $ 341,342
Pre-opening costs 5,001 — — 5,001
Depreciation and amortization 32,107 44,726 1,518 78,351
Property charges and other 2,033 67 — 2,100
Management and license fees 37,620 6,777 (44,397 ) —
Corporate expense and other 10,946 10,379 10,584 31,909
Stock-based compensation 1,584 909 5,931 8,424
Equity in income from unconsolidated affiliates — 142 156 298
Adjusted Property EBITDA(1) $ 307,001 $ 160,424 $ — $ 467,425
Three Months Ended June 30,
2015 2014
Adjusted Property EBITDA(1) $ 295,428 $ 467,425
Pre-opening costs (16,875 ) (5,001 )
Depreciation and amortization (81,913 ) (78,351 )
Property charges and other (472 ) (2,100 )
Corporate expenses and other (16,838 ) (31,909 )
Stock-based compensation (10,336 ) (8,424 )
Interest income 1,498 5,505
Interest expense, net of amounts capitalized (75,236 ) (81,765 )
Decrease in swap fair value (1,114 ) (4,653 )
Loss on extinguishment of debt (3,839 ) (2,254 )
Other 198 693
Provision for income taxes (13,298 ) (764 )
Net income 77,203 258,402
Less: net income attributable to noncontrolling interests (20,743 ) (54,496 )
Net income attributable to Wynn Resorts, Limited $ 56,460 $ 203,906
WYNN RESORTS, LIMITED AND SUBSIDIARIES
RECONCILIATION OF OPERATING INCOME TO ADJUSTED PROPERTY EBITDA AND ADJUSTED
PROPERTY EBITDA TO NET INCOME ATTRIBUTABLE TO WYNN RESORTS, LIMITED
(in thousands)
(unaudited)
Six Months Ended June 30, 2015
Macau
Operations Las Vegas
Operations Corporate
and Other Total
Operating income $ 224,293 $ 106,102 $ 23,785 $ 354,180
Pre-opening costs 20,540 — 12,426 32,966
Depreciation and amortization 68,558 91,489 4,732 164,779
Property charges and other 1,695 1,109 172 2,976
Management and license fees 50,933 21,454 (72,387 ) —
Corporate expense and other 11,279 11,098 20,103 42,480
Stock-based compensation 8,435 1,472 11,089 20,996
Equity in income (loss) from unconsolidated affiliates — (10 ) 80 70
Adjusted Property EBITDA(1) $ 385,733 $ 232,714 $ — $ 618,447
Six Months Ended June 30, 2014
Macau
Operations Las Vegas
Operations Corporate
and Other Total
Operating income $ 502,640 $ 148,938 $ 66,595 $ 718,173
Pre-opening costs 8,074 — — 8,074
Depreciation and amortization 63,266 88,716 3,028 155,010
Property charges and other 12,213 (179 ) — 12,034
Management and license fees 82,375 12,496 (94,871 ) —
Corporate expense and other 19,867 18,570 17,362 55,799
Stock-based compensation 2,894 1,935 7,516 12,345
Equity in income from unconsolidated affiliates — 236 370 606
Adjusted Property EBITDA(1) $ 691,329 $ 270,712 $ — $ 962,041
Six Months Ended June 30,
2015 2014
Adjusted Property EBITDA(1) $ 618,447 $ 962,041
Pre-opening costs (32,966 ) (8,074 )
Depreciation and amortization (164,779 ) (155,010 )
Property charges and other (2,976 ) (12,034 )
Corporate expenses and other (42,480 ) (55,799 )
Stock-based compensation (20,996 ) (12,345 )
Interest income 3,190 10,258
Interest expense, net of amounts capitalized (153,219 ) (157,021 )
Decrease in swap fair value (5,723 ) (3,811 )
Loss on extinguishment of debt (120,033 ) (3,783 )
Other 1,331 396
Provision for income taxes (16,495 ) (3,373 )
Net income 63,301 561,445
Less: net income attributable to noncontrolling interests (51,442 ) (130,643 )
Net income attributable to Wynn Resorts, Limited $ 11,859 $ 430,802
WYNN RESORTS, LIMITED AND SUBSIDIARIES
SUPPLEMENTAL DATA SCHEDULE
Three Months Ended June 30, Six Months Ended June 30,
2015 2014 2015 2014
Macau Operations:
VIP
Average number of table games 247 263 250 271
VIP turnover $ 15,537,003 $
26,361,791 $ 32,664,669 $ 62,359,507
Table games win $ 453,203 $ 771,152 $ 933,568 $ 1,774,388
VIP win as a % of turnover 2.92 % 2.93 % 2.86 % 2.85 %
Table games win per unit per day (a) $ 20,177 $ 32,176 $ 20,665 $ 36,157
Mass market
Average number of table games 223 192 218 202
Table drop (b) $ 1,193,916 $ 1,429,987 $ 2,474,260 $ 2,799,783
Table games win $ 208,620 $ 311,049 $ 488,180 $ 611,758
Table games win % 17.5 % 21.8 % 19.7 % 21.9 %
Table games win per unit per day (a) $ 10,274 $ 17,852 $ 12,339 $ 16,722
Average number of slot machines 707 624 678 732
Slot machine handle $ 1,027,557 $ 1,457,653 $ 2,067,172 $ 2,856,543
Slot machine win $ 51,138 $ 65,983 $ 98,916 $ 135,420
Slot machine win per unit per day (c) $ 795 $ 1,163 $ 806 $ 1,022
Room statistics
Occupancy 96.4 % 98.4 % 96.9 % 98.3 %
ADR (d) $ 321 $ 334 $ 326 $ 336
REVPAR (e) $ 310 $ 329 $ 316 $ 330
Las Vegas Operations:
Average number of table games 235 233 236 232
Table drop (a) $ 509,309 $ 629,047 $ 1,082,921 $ 1,276,483
Table games win $ 99,313 $ 172,054 $ 234,992 $ 305,788
Table games win % 19.5 % 27.4 % 21.7 % 24.0 %
Table games win per unit per day (a) $ 4,650 $ 8,130 $ 5,501 $ 7,281
Average number of slot machines 1,868 1,837 1,861 1,851
Slot machine handle $ 712,147 $ 706,870 $ 1,474,331 $ 1,450,668
Slot machine win $ 51,010 $ 46,131 $ 99,427 $ 91,632
Slot machine win per unit per day (c) $ 300 $ 276 $ 295 $ 274
Room statistics
Occupancy 88.4 % 88.4 % 85.7 % 88.1 %
ADR (d) $ 289 $ 283 $ 286 $ 279
REVPAR (e) $ 255 $ 251 $ 245 $ 246
(a) Table games win per unit per day is shown before discounts and commissions, as applicable.
(b) In Macau, table drop is the amount of cash that is deposited in a gaming table’s drop box plus cash chips purchased at the casino cage. In Las Vegas, table drop is the amount of cash and net markers issued that are deposited in a gaming table’s drop box.
(c) Slot machine win per unit per day is calculated as gross slot win minus progressive accruals and free play.
(d) ADR is average daily rate and is calculated by dividing total room revenue including the retail value of promotional allowances (less service charges, if any) by total rooms occupied including complimentary rooms.
(e) REVPAR is revenue per available room and is calculated by dividing total room revenue including the retail value of promotional allowances (less service charges, if any) by total rooms available.
View source version on businesswire.com: http://www.businesswire.com/news/home/20150729006598/en/
Professional ServicesWynn MacauWynn Resorts
Contact:
Wynn Resorts, Limited
Mark Strawn, 702-770-7555
investorrelations@wynnresorts.com
4:11 pm Wynn Resorts misses by $0.23, misses on revs (WYNN) : Reports Q2 (Jun) earnings of $0.74 per share, $0.23 worse than the Capital IQ Consensus Estimate of $0.97; revenues fell 26.3% year/year to $1.04 bln vs the $1.07 bln consensus. The decline was the result of a 35.8% net revenue decrease from our Macau Operations and a 6.2% decrease in net revenues from our Las Vegas Operations.
4:11 pm Wynn Resorts misses by $0.23, misses on revs (WYNN) : Reports Q2 (Jun) earnings of $0.74 per share, $0.23 worse than the Capital IQ Consensus Estimate of $0.97; revenues fell 26.3% year/year to $1.04 bln vs the $1.07 bln consensus. The decline was the result of a 35.8% net revenue decrease from our Macau Operations and a 6.2% decrease in net revenues from our Las Vegas Operations.
Newell Rubbermaid Announces Corporate Headquarters Change in Atlanta
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Newell Rubbermaid Inc.? Watchlist
42.32+0.41(0.98%)
NYSE2:00PM EST
Can Newell (NWL) Maintain its Upbeat Earnings Trend in Q2? - Analyst Blog
Zacks 1 day 1 hr ago
Newell Rubbermaid Plans to Relocate Headquarters - Analyst Blog
Zacks 5 days ago
ATLANTA, July 22, 2015 /PRNewswire/ -- Newell Rubbermaid (NWL) today announced it has purchased a building and plans to relocate its corporate headquarters from 3 Glenlake Parkway in Atlanta, Georgia, to 6655 Peachtree Dunwoody Road in Atlanta, Georgia, in early 2016. The new space will reflect the brand–led, innovative company that Newell is and will be purpose-fit for how employees work today and into the future.
"We are transforming Newell into a faster growing, more profitable, more global company," said Newell Rubbermaid President and Chief Executive Officer Michael Polk. "We have made great progress strengthening our brands and accelerating performance, and our new headquarters work space will be collaborative, mobile, technology-enabled and more productive than our current headquarters."
The building will be designed by global architecture and design firm Perkins + Will. The property will be dedicated to Newell and is right-sized for the more mobile, more technically-enabled company that Newell is becoming.
About Newell Rubbermaid
Newell Rubbermaid Inc., an S&P 500 company, is a global marketer of consumer and commercial products with 2014 sales of $5.7 billion and a strong portfolio of leading brands, including Sharpie®, Paper Mate®, Rubbermaid Commercial Products®, Irwin®, Lenox®, Parker®, Waterman®, Contigo®, Rubbermaid®, Levolor®, Calphalon®, Goody®, Graco®, Aprica®, Baby Jogger® and Dymo®. As part of the company's Growth Game Plan, Newell Rubbermaid is making sharper portfolio choices and investing in new marketing and innovation to accelerate performance.
This press release and additional information about Newell Rubbermaid are available on the company's Web site,
Jewett-Cameron Announces 3rd Quarter Financial Results
PR Newswire
Jewett-Cameron Trading Company Ltd.
July 20, 2015 4:35 PM
NORTH PLAINS, Ore., July 20, 2015 /PRNewswire/ -- Jewett-Cameron Trading Company Ltd. (JCTCF) today reported financial results for the third quarter and nine month periods of fiscal 2015 ended May 31, 2015.
Sales for the third quarter of fiscal 2015 totaled $13.3 million compared to sales of $15.3 million for the third quarter of fiscal 2014. Income from operations was $779,340 compared to $1,552,537 for the third quarter ended May 31, 2014. Net income after other items and income taxes for the current quarter was $461,100, or $0.18 per share, compared to net income of $936,329, or $0.33 per share, in the year-ago quarter.
For the nine months ended May 31, 2015, Jewett-Cameron reported sales of $30.7 million compared to sales of $33.1 million for the nine months ended May 31, 2014. Net income was $1,072,447, or $0.41 per share, compared to net income of $1,506,306, or $0.50 per share, in the first nine months of fiscal 2014.
"The extended winter weather and West Coast port slowdowns which adversely affected our results in the second quarter continued in the third quarter," said CEO Don Boone. "These conditions negatively impacted our revenues and margins. However, we launched several new products during the quarter which were well received by the marketplace, particularly by our established customer base."
As of May 31, 2015, the Company's cash position was $1.8 million, and there was no borrowing against its $3.0 million line of credit. The Company has historically utilized its cash position by implementing share repurchase programs as an effective method of enhancing shareholder value. On February 17, 2015, the Company implemented a new share repurchase plan to purchase for cancellation up to 300,000 common shares under Rule 10b5-1 of the U.S. Securities Exchange Act of 1934. During the second quarter, no common shares were repurchased. During the third quarter of fiscal 2015 ended May 31, 2015, the Company repurchased and cancelled 89,051 common shares at a total cost of $1,101,574 which represents an average price of $12.31 per share. Subsequent to the end of the third quarter, the Company re-purchased and is in the process of cancelling a total of 4,778 common shares. The total cost was $54,491 at an average share price of $11.40 per share. Effective July 17, 2015, the Board of Directors terminated the current 10b5-1 share re-purchase plan. The Board of Directors will consider implementing new share repurchase plans in the future as an effective use of the Company's cash position.
About Jewett-Cameron Trading Company Ltd.
Jewett-Cameron Trading Company is a holding company that, through its subsidiaries, operates out of facilities located in North Plains, Oregon. Jewett-Cameron Company's business consists of the manufacturing and distribution of specialty metal products and wholesale distribution of wood products to home centers and other retailers located primarily in the United States. Greenwood Products is a processor and distributor of industrial wood and other specialty building products principally to customers in the marine and transportation industries in the United States. MSI-PRO is an importer and distributor of pneumatic air tools, industrial clamps, and the Avenger Products line of sawblades and other products. Jewett-Cameron Seed Company is a processor and distributor of agricultural seeds. JC USA provides professional and administrative services, including accounting and credit services, to its subsidiary companies.
Forward-looking Statements
The information in this release contains certain forward-looking statements that anticipate future trends and events. These statements are based on certain assumptions that may prove to be erroneous and are subject to certain risks, including but not limited to, the uncertainties of the Company's new product introductions, the risks of increased competition and technological change in the Company's industry, and other factors detailed in the Company's SEC filings. Accordingly, actual results may differ, possibly materially, from predictions contained herein.
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. Dollars)
(Prepared by Management)
(Unaudited)
May 31,
2015
August 31,
2014
ASSETS
Current assets
Cash
$ 1,836,849
$ 4,327,540
Accounts receivable, net of allowance of $Nil (August 31, 2014 - $Nil)
4,926,096
2,442,928
Inventory, net of allowance of $81,249 (August 31, 2014 - $111,756) (note 3)
8,617,284
9,154,129
Note receivable
1,425
15,000
Prepaid expenses
721,339
762,533
Prepaid income taxes
195,484
546,347
Total current assets
16,298,477
17,248,477
Property, plant and equipment, net (note 4)
2,076,263
2,147,387
Intangible assets, net (note 5)
241,426
295,956
Total assets
$ 18,616,166
$ 19,691,820
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
$ 626,523
$ 240,825
Litigation reserve (note 13(a))
97,404
117,387
Accrued liabilities
959,037
1,073,930
Total current liabilities
1,682,964
1,432,142
Deferred tax liability (note 6)
56,100
60,972
Total liabilities
1,739,064
1,493,114
Contingent liabilities and commitments (note 13)
Stockholders' equity
Capital stock (note 8)
Authorized
21,567,564 common shares, without par value
10,000,000 preferred shares, without par value
Issued
2,496,610 common shares (August 31, 2014 – 2,704,630)
1,178,044
1,276,201
Additional paid-in capital
600,804
600,804
Retained earnings
15,098,254
16,321,701
Total stockholders' equity
16,877,102
18,198,706
Total liabilities and stockholders' equity
$ 18,616,166
$ 19,691,820
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)
(Prepared by Management)
(Unaudited)
Three Month
Period Ended
May 31,
Nine Month
Period Ended
May 31,
2015
2014
2015
2014
SALES
$ 13,289,408
$ 15,335,570
$ 30,755,429
$ 33,074,500
COST OF SALES
11,047,607
12,384,976
24,741,485
26,516,458
GROSS PROFIT
2,241,801
2,950,594
6,013,944
6,558,042
OPERATING EXPENSES
Selling, general and administrative expenses
465,864
402,013
1,438,687
1,240,800
Depreciation and amortization
71,211
73,145
210,894
212,694
Wages and employee benefits
925,386
922,899
2,588,420
2,599,270
(1,462,461)
(1,398,057)
(4,238,001)
(4,052,764)
Income from operations
779,340
1,552,537
1,775,943
2,505,278
OTHER ITEMS
Gain on sale of property, plant and equipment
-
-
-
4,109
Interest and other income
8,534
6,734
22,617
20,008
Interest expense
(658)
-
(658)
-
7,876
6,734
21,959
24,117
Income before income taxes
787,216
1,559,271
1,797,902
2,529,395
Income tax expense
(326,116)
(622,942)
(725,455)
(1,023,089)
Net income
$ 461,100
$ 936,329
$ 1,072,447
$ 1,506,306
Basic earnings per common share
$ 0.18
$ 0.33
$ 0.41
$ 0.50
Diluted earnings per common share
$ 0.18
$ 0.33
$ 0.41
$ 0.50
Weighted average number of common shares outstanding:
Basic
2,561,702
2,866,273
2,612,199
3,042,692
Diluted
2,561,702
2,866,273
2,612,199
3,042,692
JEWETT-CAMERON TRADING COMPANY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
(Prepared by Management)
(Unaudited)
Three Month
Period Ended
May 31,
Nine Month
Period Ended
May 31,
2015
2014
2015
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$ 461,100
$ 936,329
$ 1,072,447
$ 1,506,306
Items not involving an outlay of cash:
Depreciation and amortization
71,211
73,145
210,894
212,694
Gain on sale of property, plant and equipment
-
-
-
(4,109)
Deferred income tax expense (recovery)
(2,163)
2,355
(4,872)
(6,011)
Interest income on litigation
(6,734)
(6,734)
(19,983)
(19,982)
Changes in non-cash working capital items:
(Increase) decrease in accounts receivable
107,980
(666,858)
(2,483,168)
(1,578,367)
Decrease in inventory
2,485,712
283,331
536,845
1,275,596
(Increase) decrease in note receivable
275
(15,000)
13,575
-
(Increase) decrease in prepaid expenses
104,098
762,010
41,194
(739,215)
(Increase) decrease in prepaid income taxes
19,133
174,587
350,863
(47,022)
Increase (decrease) in accounts payable and
accrued liabilities
631,547
133,976
270,805
(774,746)
Net cash provided by (used in) operating activities
3,872,159
1,677,141
(11,400)
(174,856)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
(70,543)
(18,899)
(85,240)
(94,274)
Proceeds from sale of property, plant and equipment
-
-
-
4,800
Net cash used in investing activities
(70,543)
(18,899)
(85,240)
(89,474)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank indebtedness
-
-
875,386
-
Repayment of bank indebtedness
(875,386)
-
(875,386)
-
Redemption of common stock
(1,101,574)
(3,234,699)
(2,394,051)
(3,803,718)
Net cash used in financing activities
(1,976,960)
(3,234,699)
(2,394,051)
(3,803,718)
Net increase (decrease) in cash
$ 1,824,656
$ (1,576,457)
$ (2,490,691)
$ (4,068,048)
Cash, beginning of period
$ 12,193
$ 5,816,854
$ 4,327,540
$ 8,308,445
Cash, end of period
$ 1,836,849
$ 4,240,397
$ 1,836,849
$ 4,240,397
Contact: Don Boone, President & CEO, (503) 647-0110
Yahoo Reports Second Quarter 2015 Results
Business Wire
Yahoo! Inc.
July 21, 2015 4:05 PM
SUNNYVALE, Calif.--(BUSINESS WIRE)--
Yahoo! Inc. (YHOO) today reported results for the quarter ended June 30, 2015.
“I’m extremely pleased with our achievements in Q2, with revenue growing 15% year-over-year, marking our most substantial GAAP revenue growth in almost 9 years,” said Marissa Mayer, CEO of Yahoo. “Our Mavens investment businesses across mobile, video, native and social grew to nearly $400 million in revenue this quarter, delivering 60% GAAP growth year-over-year. Further, our display business saw the most substantial revenue growth since 2010. Yahoo’s transformation continues to make great progress.”
Q2 2014 Q2 2015
GAAP revenue $1,084 million $1,243 million
Cost of revenue - TAC $44 million $200 million
Income (loss) from operations $38 million $(45) million
Non-GAAP income from operations $194 million $108 million
Adjusted EBITDA $340 million $262 million
Net earnings (loss) $270 million $(22) million
GAAP net earnings (loss) per diluted share $0.26 ($0.02)
Non-GAAP net earnings per diluted share $0.37 $0.16
Business Highlights
• Search: • Over the past year, Yahoo’s search presence has steadily grown through innovation and partnerships with industry leaders. In Q2, Yahoo introduced a new mobile search experience in the U.S. that connects users immediately to the people, places and things they care about by using context and location cues to deliver the most relevant search results.
• Communications: • In Q2, Yahoo delivered several new features in Mail including Yahoo Mail on Firefox Share which allows users to instantly share web pages when using Firefox; integration of Twitter and LinkedIn information in Contacts; and the addition of breaking news notifications to the Mail news feed tab.
• Digital Content: • In July, the Company launched Daily Fantasy, now available in the Yahoo Fantasy app, giving users the chance to win money every day with new fantasy lineups.
• Yahoo announced a partnership with the NFL to live stream an International Series Game between the Buffalo Bills and the Jacksonville Jaguars from London this fall.
• Yahoo launched new daily live finance, news and entertainment programming including Ultimate DJ, a global Electronic Music competition-style live series that is executive produced by Simon Cowell. The Company also announced 14 new shows across Yahoo’s digital magazine channels including Riding Shotgun with Michelle Rodriguez.
• In Q2, Live Nation and Yahoo continued their partnership by kicking off a music festival live stream series to bring artists’ performances from this year’s most anticipated music festivals to our global audience.
• Ad Technology: • Yahoo announced the availability of independent viewability and fraud measurement for display and video advertising across the Company’s programmatic buying platform, including Yahoo Properties. Advertisers can now choose from leading accredited, third-party measurement solutions to independently validate for viewability and fraud across display and video at every stage of the campaign lifecycle.
• Yahoo introduced new powerful formats to help advertisers reach their audiences: native video and video app-install ads. With native video ads, brand content can be as compelling as video while beautifully integrated into other experiences on Yahoo’s homepage, digital magazines and apps. For marketers and developers looking to drive installs, the Company now offers a format that combines the engagement of video and the performance of install ads.
Second Quarter 2015 Financial Highlights
Mavens Revenue:
Q2 2014 Q2 2015
Mavens revenue $ 249 million $ 399 million
Non-Mavens revenue 742 million 725 million
Total traffic-driven revenue $ 991 million $1,124 million
Non-traffic-driven revenue 93 million 119 million
GAAP revenue $1,084 million $1,243 million
Mavens revenue represented 25 percent of traffic-driven revenue in the second quarter of 2014, and increased to 35 percent in the second quarter of 2015.
Mobile Revenue:
Q2 2014 Q2 2015
Mobile revenue $ 163 million $ 252 million
PC revenue 828 million 872 million
Total traffic-driven revenue $ 991 million $1,124 million
Non-traffic-driven revenue 93 million 119 million
GAAP revenue $1,084 million $1,243 million
Mobile revenue represented 16 percent of traffic-driven revenue in the second quarter of 2014, and increased to 22 percent in the second quarter of 2015.
Gross mobile revenue for the second quarter of 2014 and 2015 was approximately $272 million and $415 million, respectively.
Search Revenue:
• Gross search revenue was $920 million for the second quarter of 2015, an increase of 15 percent compared to the second quarter of 2014.
• GAAP search revenue was $521 million for the second quarter of 2015, an increase of 22 percent compared to the second quarter of 2014.
• Cost of revenue -TAC paid to search partners was $106 million for the second quarter of 2015 compared to less than $1 million in the second quarter of 2014.
• The number of Paid Clicks increased approximately 13 percent compared to the second quarter of 2014.
• Price-per-Click increased approximately 4 percent compared to the second quarter of 2014.
Display Revenue:
• GAAP display revenue was $500 million for the second quarter of 2015, a 15 percent increase compared to the second quarter of 2014.
• Cost of revenue - TAC paid to display partners was $94 million for the second quarter of 2015 compared to $42 million in the second quarter of 2014.
• The number of Ads Sold increased approximately 9 percent compared to the second quarter of 2014.
• Price-per-Ad increased approximately 10 percent compared to the second quarter of 2014.
Cash, Cash Equivalents, and Marketable Securities:
• Cash, cash equivalents, and marketable securities were $7.0 billion as of June 30, 2015 compared to $10.2 billion as of December 31, 2014, a decrease of $3.2 billion. In the first quarter of 2015, the Company satisfied the $3.3 billion income tax liability related to the sale of Alibaba Group ADSs in 2014.
"In addition to revenue outperformance, we reduced $30 million in sequential cash operating expenses driven by strategic headcount and footprint reductions, tight management of our discretionary costs and the benefit from IP monetization," said CFO Ken Goldman. "As we continued to reduce our workforce to fewer than 11,000 full-time employees over the last quarter, we have also continued to realign our resources as we become a more efficient business."
Live Stream
Yahoo will live stream a video broadcast of the Company's second quarter 2015 financial results at 2 p.m. Pacific Time/5 p.m. Eastern Time today. The live stream will be broadcast from Yahoo’s Sunnyvale studio and will be available exclusively on Yahoo Finance at finance.yahoo.com. The Company will provide its business outlook for the third quarter during the presentation. Supplemental financial information can be accessed through the Company’s Investor Relations website at investor.yahoo.net. The video will be archived after the event at investor.yahoo.net and will be available for 90 days following the broadcast.
Non-GAAP Financial Measures
This press release and its attachments include the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission (“SEC”): gross mobile revenue; gross search revenue; revenue ex-TAC; adjusted EBITDA; non-GAAP income from operations; non-GAAP net earnings; non-GAAP net earnings per share - diluted; and free cash flow.
Gross mobile revenue is GAAP mobile revenue plus the related revenue share with third parties. Gross search revenue is GAAP search revenue plus the related revenue share with third parties. Revenue ex-TAC is GAAP revenue less cost of revenue — TAC. Adjusted EBITDA, non-GAAP income from operations, non-GAAP net earnings, and non-GAAP net earnings per share - diluted, exclude from the most comparable GAAP financial measures certain gains, losses, and expenses that we do not believe are indicative of ongoing results, and exclude stock-based compensation expense. Adjusted EBITDA also excludes taxes, depreciation, amortization of intangible assets, other income, net (which includes interest), earnings in equity interests, and net income attributable to noncontrolling interests. Free cash flow is GAAP net cash provided by (used in) operating activities (adjusted to include excess tax benefits from stock-based awards), less acquisition of property and equipment, net and dividends received from equity investees.
These measures may be different than non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles (“GAAP”). Explanations of the Company’s non-GAAP financial measures and reconciliations of these financial measures to the GAAP financial measures the Company considers most comparable are included in the accompanying “Note to Unaudited Condensed Consolidated Financial Statements,” “Supplemental Financial Data and GAAP to Non-GAAP Reconciliations,” and “GAAP to Non-GAAP Reconciliations.”
About Yahoo
Yahoo is a guide focused on informing, connecting, and entertaining our users. By creating highly personalized experiences for our users, we keep people connected to what matters most to them, across devices and around the world. In turn, we create value for advertisers by connecting them with the audiences that build their businesses. Yahoo is headquartered in Sunnyvale, California, and has offices located throughout the Americas, Asia Pacific (APAC) and the Europe, Middle East and Africa (EMEA) regions. For more information, visit the pressroom (pressroom.yahoo.net) or the Company's blog (yahoo.tumblr.com).
“Ads Sold” consist of display ad impressions for paying advertisers on Yahoo Properties and Affiliate sites.
“Affiliates” refers to the third-party entities that have integrated Yahoo’s advertising offerings into their Websites or other offerings (those Websites and other offerings, “Affiliate sites”).
“Alibaba Group” means Alibaba Group Holding Limited.
“Gross mobile revenue” is GAAP mobile revenue plus the related revenue share with third parties.
“Gross search revenue” is GAAP search revenue plus the related revenue share with third parties.
“Mavens revenue” is revenue generated from, without duplication: (i) mobile (as defined below), (ii) video ads and video ad packages, (iii) native ads, and (iv) Tumblr ads and fees.
“Mobile revenue” is revenue generated in connection with user activity on mobile devices, including smartphones and tablets, regardless of whether the device is accessing a mobile-optimized service. Mobile revenue is generated primarily from search and display ads. Mobile revenue also includes leads, listings and fees revenue and ecommerce revenue allocated to user activity on mobile devices.
“Net earnings” means net income attributable to Yahoo! Inc., and “net earnings per diluted share” means net income attributable to Yahoo! Inc. common stockholders per share – diluted.
“Non-Mavens revenue” is revenue generated from search ads and traditional (i.e., non-native, non-video, non-Tumblr) display ads served on PCs and also includes leads, listings and fees revenue and ecommerce revenue allocated to user activity on PCs.
“Non-traffic-driven revenue” is revenue not arising from user activity on Yahoo Properties or Affiliate sites, and includes royalty revenue, license fee revenue, amortization under the technology and intellectual property license agreement with Alibaba Group, and all other revenue that is not traffic-driven.
“Paid Clicks” are clicks by end-users on sponsored search listings (excluding native ads) on Yahoo Properties and Affiliate sites.
“PC” means a desktop computer, and “PC revenue” is revenue generated from search and display ads served on PCs and also includes leads, listings and fees revenue and ecommerce revenue allocated to user activity on PCs.
“Price-per-Ad” is defined as display revenue divided by our total number of Ads Sold.
“Price-per-Click” is defined as Search click-driven revenue divided by our total number of Paid Clicks.
“Search Agreement” refers to the Search and Advertising Services and Sales Agreement between Yahoo and Microsoft Corporation, as amended.
“Search click-driven revenue” is gross search revenue excluding the Microsoft RPS guarantee and search revenue from Yahoo Japan.
“TAC” refers to traffic acquisition costs. TAC consists of payments to Affiliates and payments made to companies that direct consumer and business traffic to Yahoo Properties.
“Yahoo,” “Company,” and “we” refer to Yahoo! Inc. and its consolidated subsidiaries.
“Yahoo Properties” refers to the online properties and services that Yahoo provides to users.
We periodically review, refine and update our methodologies for monitoring, gathering, and counting number of Ads Sold and Paid Clicks, and for calculating Search click-driven revenue, Price-per-Ad, and Price-per-Click.
Additional information about how “Ads Sold,” “Paid Clicks,” “Price-per-Ad,” “Price-per-Click,” and “Search click-driven revenue” are defined and calculated is included under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, which is on file with the SEC and available on the SEC's website at www.sec.gov.
This press release contains forward-looking statements concerning Yahoo's expected financial performance and Yahoo's strategic and operational plans (including, without limitation, the quotations from management). Risks and uncertainties may cause actual results to differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among others, possible delays or failure in satisfying conditions to completion of our proposed spin-off of our remaining stake in Alibaba Group into a newly-formed registered investment company; other factors related to the spin-off, including adverse regulatory developments or determinations or adverse changes in, or interpretations of, U.S. or foreign tax laws, rules or regulations, that could delay or prevent completion of the proposed spin-off or cause the terms of the proposed spin-off to be modified; risks related to realization of the expected benefits of the spin-off to Yahoo and its shareholders; risks related to acceptance by users of new products and services (including, without limitation, products and services for mobile devices and alternative platforms); risks related to Yahoo's ability to compete with new or existing competitors; reduction in spending by, or loss of, advertising customers; risks associated with the Search Agreement with Microsoft Corporation; risks related to acquiring or developing compelling content; risks related to joint ventures and the integration of acquisitions; risks related to possible impairment of goodwill or other assets; risks related to Yahoo’s ability to protect its intellectual property and the value of its brands; adverse results in litigation; security breaches; interruptions or delays in the provision of Yahoo’s services; risks related to Yahoo’s regulatory environment; risks related to fluctuations in foreign currency exchange rates; risks related to Yahoo's international operations; dependence on third parties for technology, services, content, and distribution; risks related to the calculation of our key operational metrics; and general economic conditions. All information set forth in this press release and its attachments is as of July 21, 2015. Yahoo does not intend, and undertakes no duty, to update this information to reflect subsequent events or circumstances. More information about potential factors that could affect the Company's business and financial results is included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the year ended December 31, 2014 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, which are on file with the SEC and available on the SEC's website at www.sec.gov. Additional information will also be set forth in those sections in Yahoo’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, which will be filed with the SEC in the third quarter of 2015.
Yahoo!, the Yahoo family of marks, and the associated logos are trademarks and/or registered trademarks of Yahoo! Inc. Tumblr is a registered trademark of Tumblr, Inc. Other names are trademarks and/or registered trademarks of their respective owners.
Yahoo! Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
December 31, June 30,
2014
2015
ASSETS
Current assets:
Cash and cash equivalents $ 2,664,098 $ 1,188,169
Short-term marketable securities 5,327,412 4,636,152
Accounts receivable, net 1,032,704 999,646
Prepaid expenses and other current assets 671,075 756,965
Total current assets 9,695,289 7,580,932
Long-term marketable securities 2,230,892 1,169,671
Property and equipment, net 1,487,684 1,524,539
Goodwill 5,163,654 5,146,579
Intangible assets, net 470,842 412,235
Other long-term assets and investments 554,616 475,497
Investments in Alibaba Group 39,867,789 31,555,927
Investments in equity interests 2,489,578 2,326,436
Total assets $ 61,960,344 $ 50,191,816
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 238,018 $ 301,433
Income taxes payable related to sale of Alibaba Group ADSs 3,282,293 -
Other accrued expenses and current liabilities 671,307 903,005
Deferred revenue 336,963 202,246
Total current liabilities 4,528,581 1,406,684
Convertible notes 1,170,423 1,201,540
Long-term deferred revenue 20,774 23,442
Other long-term liabilities 143,095 126,138
Deferred tax liabilities related to investment in Alibaba Group 16,154,906 12,768,155
Deferred and other long-term tax liabilities 1,156,973 1,102,007
Total liabilities 23,174,752 16,627,966
Total Yahoo! Inc. stockholders' equity 38,741,837 33,532,602
Noncontrolling interests 43,755 31,248
Total equity 38,785,592 33,563,850
Total liabilities and equity $ 61,960,344 $ 50,191,816
Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2014 2015 2014 2015
Revenue $ 1,084,191 $ 1,243,265 $ 2,216,921 $ 2,469,235
Operating expenses:
Cost of revenue - traffic acquisition costs 43,826 200,230 89,735 383,369
Cost of revenue - other 295,786 295,932 589,389 581,195
Sales and marketing 253,198 274,304 555,523 549,661
Product development 291,778 306,428 560,042 633,175
General and administrative 154,881 180,595 319,504 354,108
Amortization of intangibles 15,164 19,982 33,504 40,055
Gain on sale of patents (61,500 ) (9,100 ) (61,500 ) (11,100 )
Restructuring charges, net 52,621 19,688 62,108 70,920
Total operating expenses 1,045,754 1,288,059 2,148,305 2,601,383
Income (loss) from operations 38,437 (44,794 ) 68,616 (132,148 )
Other expense, net (13,589 ) (11,741 ) (27,042 ) (42,804 )
Income (loss) before income taxes and earnings in equity interests 24,848 (56,535 ) 41,574 (174,952 )
Provision for income taxes (8,143 ) (58,495 ) (12,360 ) (17,595 )
Earnings in equity interests 255,852 95,841 557,254 195,531
Net income (loss) 272,557 (19,189 ) 586,468 2,984
Less: Net income attributable to noncontrolling interests (2,850 ) (2,365 ) (5,183 ) (3,340 )
Net income (loss) attributable to Yahoo! Inc. $ 269,707 $ (21,554 ) $ 581,285 $ (356 )
Net income (loss) attributable to Yahoo! Inc. common stockholders per share - diluted (1) $ 0.26 $ (0.02 ) $ 0.55 $ (0.00 )
Shares used in per share calculation - diluted 1,014,692 937,569 1,023,056 936,159
Stock-based compensation expense by function:
Cost of revenue - other $ 5,356 $ 7,200 $ 30,007 $ 13,209
Sales and marketing 31,233 39,978 81,907 78,099
Product development 39,507 50,762 53,434 98,983
General and administrative 26,349 27,190 46,278 50,535
Restructuring charges, net - - - 2,705
Supplemental Financial Data:
Revenue ex-TAC $ 1,040,365 $ 1,043,035 $ 2,127,186 $ 2,085,866
Adjusted EBITDA $ 340,363 $ 261,703 $ 646,744 $ 492,816
Free cash flow(2) $ 185,915 $ (24,780 ) $ 299,877 $ (3,059,702 )
(1) The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company's diluted earnings per share by $0.01 for the three months ended June 30, 2014, and by $0.02 for the six months ended June 30, 2014.
(2) During the six months ended June 30, 2015, the Company satisfied the $3.3 billion income tax liability related to the sale of Alibaba Group ADSs in September 2014.
Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2014 2015 2014 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 272,557 $ (19,189 ) $ 586,468 $ 2,984
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation 116,446 119,633 239,631 236,694
Amortization of intangible assets 30,414 34,046 64,763 68,524
Accretion of convertible notes discount 14,860 15,660 29,526 31,117
Stock-based compensation expense 102,445 125,130 211,626 243,531
Non-cash restructuring (credits) charges (7,031 ) (74 ) (7,031 ) (933 )
Losses from sale of investments, assets, and other, net 15,117 10,539 18,667 44,847
Gain on sale of patents (61,500 ) (9,100 ) (61,500 ) (11,100 )
(Gain) loss on Hortonworks warrants - (5,449 ) - 6,460
Earnings in equity interests (255,852 ) (95,841 ) (557,254 ) (195,531 )
Tax benefits (detriments) from stock-based awards 19,161 (36,439 ) 76,828 (3,617 )
Excess tax benefits from stock-based awards (19,544 ) 35,620 (79,100 ) (1,850 )
Deferred income taxes (303 ) (30,227 ) 14,185 (13,218 )
Dividends received from equity investee 83,685 141,670 83,685 141,670
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable 55,725 (71,583 ) 154,129 18,340
Prepaid expenses and other assets 22,803 (11,292 ) 13,592 (75,537 )
Accounts payable (29,567 ) 6,892 (10,075 ) 37,505
Accrued expenses and other liabilities 38,033 165,744 (202,142 ) 255,678
Income taxes payable related to sale of Alibaba Group ADSs - - - (3,282,293 )
Deferred revenue (40,035 ) (67,788 ) (79,523 ) (132,790 )
Net cash provided by (used in) operating activities 357,414 307,952 496,475 (2,629,519 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment, net (107,358 ) (155,442 ) (192,013 ) (290,363 )
Purchases of marketable securities (451,739 ) (1,614,068 ) (1,363,836 ) (2,326,886 )
Proceeds from sales of marketable securities 212,028 301,423 380,954 473,775
Proceeds from maturities of marketable securities 408,356 1,224,829 690,018 3,584,596
Purchases of intangible assets (984 ) (3,451 ) (2,174 ) (4,611 )
Proceeds from sales of patents 1,500 - 1,500 20,000
Proceeds from the settlement of derivative hedge contracts 170,457 45,140 173,258 64,767
Payments for the settlement of derivative hedge contracts (4,016 ) (1,731 ) (4,616 ) (3,882 )
Acquisitions, net of cash acquired - 1,782 (21,661 ) (21,291 )
Payments for equity investments in privately held companies - - (10,399 ) -
Other investing activities, net (74 ) (115 ) (640 ) (153 )
Net cash provided by (used in) investing activities 228,170 (201,633 ) (349,609 ) 1,495,952
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 84,760 10,588 163,737 46,777
Repurchases of common stock (718,628 ) - (1,168,206 ) (203,771 )
Excess tax benefits from stock-based awards 19,544 (35,620 ) 79,100 1,850
Tax withholdings related to net share settlements of restricted stock units (34,178 ) (52,534 ) (159,581 ) (149,960 )
Distributions to noncontrolling interests (22,344 ) (15,847 ) (22,344 ) (15,847 )
Other financing activities, net (3,037 ) (4,442 ) (6,130 ) (9,015 )
Net cash used in financing activities (673,883 ) (97,855 ) (1,113,424 ) (329,966 )
Effect of exchange rate changes on cash and cash equivalents 4,869 5,048 3,554 (12,396 )
Net change in cash and cash equivalents (83,430 ) 13,512 (963,004 ) (1,475,929 )
Cash and cash equivalents, beginning of period 1,198,016 1,174,657 2,077,590 2,664,098
Cash and cash equivalents, end of period $ 1,114,586 $ 1,188,169 $ 1,114,586 $ 1,188,169
Yahoo! Inc.
Note to Unaudited Condensed Consolidated Financial Statements
This press release and its attachments include the non-GAAP financial measures of revenue excluding traffic acquisition costs (“revenue ex-TAC”); gross mobile revenue; gross search revenue; adjusted EBITDA; non-GAAP income from operations; non-GAAP net earnings; non-GAAP net earnings per diluted share; and free cash flow, which are reconciled to revenue (in the case of revenue ex-TAC, gross mobile revenue, and gross search revenue); net income (loss) attributable to Yahoo! Inc. (in the case of adjusted EBITDA and non-GAAP net earnings); income (loss) from operations; net income (loss) attributable to Yahoo! Inc. common stockholders per share – diluted; and net cash provided by (used in) operating activities, which we believe are the most comparable GAAP measures. Yahoo! Inc. (together with its consolidated subsidiaries, “Yahoo,” the “Company,” or “we”) uses these non-GAAP financial measures for internal managerial purposes and to facilitate period-to-period comparisons. We describe limitations specific to each non-GAAP financial measure below. Management generally compensates for limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure or measures. Further, management uses non-GAAP financial measures only in addition to and in conjunction with results presented in accordance with GAAP. We believe that these non-GAAP financial measures reflect additional ways of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, revenue, net income (loss) attributable to Yahoo! Inc., income (loss) from operations, net income (loss) attributable to Yahoo! Inc. common stockholders per share – diluted, and net cash provided by (used in) operating activities calculated in accordance with GAAP.
Revenue ex-TAC is a non-GAAP financial measure defined as GAAP revenue less TAC that has been recorded as a cost of revenue. TAC consists of payments made to Affiliates, and payments made to companies that direct consumer and business traffic to Yahoo Properties. Based on applicable accounting principles, TAC is recorded either as a cost of revenue or as a reduction of revenue. We present revenue ex-TAC to provide investors a metric used by the Company for evaluation and decision-making purposes and to provide investors with comparable revenue numbers when comparing to our historical reported financial information. A limitation of revenue ex-TAC is that it is a measure we defined for internal and investor purposes that may be unique to the Company, and therefore it may not enhance the comparability of our results to those of other companies in our industry who have similar business arrangements but address the impact of TAC differently. Management compensates for these limitations by also relying on the comparable GAAP financial measures of revenue and cost of revenue—TAC.
Each of gross mobile revenue and gross search revenue is a non-GAAP financial measure. Gross mobile revenue is defined as GAAP mobile revenue plus the related revenue share with third parties. Gross search revenue is defined as GAAP search revenue plus the related revenue share with third parties. We present these amounts to provide investors with additional metrics used by the Company for evaluation and decision-making purposes and as an indicator of the size of our presence in the relevant business. To this end, gross mobile revenue and gross search revenue report the total receipts generated on Yahoo Properties and Affiliate sites by the specified relevant Yahoo business (i.e., mobile or search), before any TAC or other revenue share is paid to the Affiliates and before any revenue share is allocated to Microsoft or other parties. A limitation of these non-GAAP measures is that they include revenue that is recognized by one or more third parties and not by Yahoo; furthermore, they are measures we defined for internal and investor purposes that may be unique to us, and therefore may not enhance the comparability of our results to those of other companies in our industry who have similar business arrangements but address the impact of TAC and revenue sharing differently. Management compensates for these limitations by also relying on the comparable financial measure GAAP revenue.
Adjusted EBITDA is defined as net income (loss) attributable to Yahoo! Inc. before taxes, depreciation, amortization of intangible assets, stock-based compensation expense, other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and other gains, losses, and expenses that we do not believe are indicative of our ongoing results. We present adjusted EBITDA because the exclusion of certain gains, losses, and expenses facilitates comparisons of the operating performance of the Company on a period to period basis. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for results reported under GAAP. These limitations include: adjusted EBITDA does not reflect tax payments and such payments reflect a reduction in cash available to us; adjusted EBITDA does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses; adjusted EBITDA does not include stock-based compensation expense related to the Company’s workforce; adjusted EBITDA also excludes other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and other gains, losses, and expenses that we do not believe are indicative of our ongoing results, and these items may represent a reduction or increase in cash available to us; and adjusted EBITDA is a measure that may be unique to the Company, and therefore it may not enhance the comparability of our results to other companies in our industry. Management compensates for these limitations by also relying on the comparable GAAP financial measure of net income (loss) attributable to Yahoo! Inc., which includes taxes, depreciation, amortization, stock-based compensation expense, other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and the other gains, losses and expenses that are excluded from adjusted EBITDA.
Non-GAAP income from operations is defined as income from operations excluding certain gains, losses, and expenses that we do not believe are indicative of our ongoing operating results and further adjusted to exclude stock-based compensation expense. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, and the subjective assumptions involved in those determinations, we believe excluding stock-based compensation expense enhances the ability of management and investors to understand the impact of stock-based compensation expense on income from operations. We consider non-GAAP income from operations to be a profitability measure which facilitates the forecasting of our operating results for future periods and allows for the comparison of our results to historical periods. A limitation of non-GAAP income from operations is that it does not include all items that impact our income from operations for the period. Management compensates for this limitation by also relying on the comparable GAAP financial measure of income from operations which includes the gains, losses, and expenses that are excluded from non-GAAP income from operations.
Non-GAAP net earnings is defined as net income (loss) attributable to Yahoo! Inc. (which we sometimes refer to as net earnings) excluding certain gains, losses, expenses, and their related tax effects that we do not believe are indicative of our ongoing results and further adjusted to exclude stock-based compensation expense and its related tax effects. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, and the subjective assumptions involved in those determinations, we believe excluding stock-based compensation expense enhances the ability of management and investors to understand the impact of stock-based compensation expense on net income and net income per share. We consider non-GAAP net earnings and non-GAAP net earnings per diluted share to be profitability measures which facilitate the forecasting of our results for future periods and allow for the comparison of our results to historical periods. A limitation of non-GAAP net earnings and non-GAAP net earnings per diluted share is that they do not include all items that impact our net income and net income per diluted share for the period. Management compensates for this limitation by also relying on the comparable GAAP financial measures of net income (loss) attributable to Yahoo! Inc. and net income attributable to Yahoo! Inc. common stockholders per share - diluted, both of which include the gains, losses, expenses and related tax effects that are excluded from non-GAAP net earnings and non-GAAP net earnings per diluted share.
Free cash flow is a non-GAAP financial measure defined as net cash provided by (used in) operating activities (adjusted to include excess tax benefits from stock-based awards), less acquisition of property and equipment, net and dividends received from equity investees. We consider free cash flow to be a liquidity measure which provides useful information to management and investors about the amount of cash generated by the business after the acquisition of property and equipment, which can then be used for strategic opportunities including, among others, investing in the Company's business, making strategic acquisitions, strengthening the balance sheet, and repurchasing stock. A limitation of free cash flow is that it does not represent the total increase or decrease in the cash balance for the period. Management compensates for this limitation by also relying on the net change in cash and cash equivalents as presented in the Company’s unaudited condensed consolidated statements of cash flows prepared in accordance with GAAP which incorporates all cash movements during the period.
Yahoo! Inc.
Supplemental Financial Data and GAAP to Non-GAAP Reconciliations
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2014 2015 2014 2015
Revenue for groups of similar services:
Search $ 428,418 $ 521,126 $ 873,185 $ 1,052,792
Display 436,053 500,376 889,277 964,109
Other 219,720 221,763 454,459 452,334
Total revenue $ 1,084,191 $ 1,243,265 $ 2,216,921 $ 2,469,235
Revenue excluding traffic acquisition costs recorded as cost of revenue ("revenue ex-TAC") for groups of similar services:
GAAP search revenue $ 428,418 $ 521,126 $ 873,185 $ 1,052,792
TAC associated with search revenue (784 ) (105,876 ) (1,470 ) (205,885 )
Search revenue ex-TAC $ 427,634 $ 415,250 $ 871,715 $ 846,907
GAAP display revenue $ 436,053 $ 500,376 $ 889,277 $ 964,109
TAC associated with display revenue (42,217 ) (93,682 ) (86,579 ) (176,116 )
Display revenue ex-TAC $ 393,836 $ 406,694 $ 802,698 $ 787,993
Other GAAP revenue $ 219,720 $ 221,763 $ 454,459 $ 452,334
TAC associated with other GAAP revenue (825 ) (672 ) (1,686 ) (1,368 )
Other revenue ex-TAC $ 218,895 $ 221,091 $ 452,773 $ 450,966
Revenue ex-TAC:
GAAP revenue $ 1,084,191 $ 1,243,265 $ 2,216,921 $ 2,469,235
TAC (43,826 ) (200,230 ) (89,735 ) (383,369 )
Revenue ex-TAC $ 1,040,365 $ 1,043,035 $ 2,127,186 $ 2,085,866
Revenue ex-TAC by segment:
Americas:
GAAP revenue $ 805,535 $ 992,210 $ 1,672,463 $ 1,976,931
TAC (30,296 ) (180,822 ) (64,390 ) (347,477 )
Revenue ex-TAC $ 775,239 $ 811,388 $ 1,608,073 $ 1,629,454
EMEA:
GAAP revenue $ 97,847 $ 85,830 $ 189,417 $ 166,916
TAC (10,212 ) (12,950 ) (19,405 ) (24,654 )
Revenue ex-TAC $ 87,635 $ 72,880 $ 170,012 $ 142,262
Asia Pacific:
GAAP revenue $ 180,809 $ 165,225 $ 355,041 $ 325,388
TAC (3,318 ) (6,458 ) (5,940 ) (11,238 )
Revenue ex-TAC $ 177,491 $ 158,767 $ 349,101 $ 314,150
Total revenue ex-TAC $ 1,040,365 $ 1,043,035 $ 2,127,186 $ 2,085,866
Direct costs by segment (3):
Americas $ 60,167 $ 76,148 $ 120,977 $ 134,892
EMEA 21,395 20,551 43,339 40,702
Asia Pacific 48,139 51,818 94,967 102,550
Global operating costs (4) 631,801 649,915 1,282,659 1,334,006
Gain on sale of patents (61,500 ) (9,100 ) (61,500 ) (11,100 )
Restructuring charges, net 52,621 19,688 62,108 70,920
Depreciation and amortization 146,860 153,679 304,394 305,218
Stock-based compensation expense 102,445 125,130 211,626 240,826
Income (loss) from operations $ 38,437 $ (44,794 ) $ 68,616 $ (132,148 )
(3) Direct costs for each segment include certain cost of revenue-other and costs associated with the local sales teams. Prior to the fourth quarter of 2014, marketing, media, costs associated with Yahoo Properties and ad operation costs were managed locally and included as direct costs for each segment. Prior period amounts have been revised to conform to the current presentation.
(4) Global operating costs include product development, marketing, real estate workplace, general and administrative, and other corporate expenses that are managed on a global basis and that are not directly attributable to any particular segment. Beginning in the fourth quarter of 2014, marketing, media, costs associated with Yahoo Properties and other ad operation costs are managed globally and included as global costs. Prior period amounts have been revised to conform to the current presentation.
Yahoo! Inc.
Supplemental Financial Data and GAAP to Non-GAAP Reconciliations (continued)
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2014 2015 2014 2015
Reconciliation of net income (loss) attributable to Yahoo! Inc. to adjusted EBITDA:
Net income (loss) attributable to Yahoo! Inc. $ 269,707 $ (21,554 ) $ 581,285 $ (356 )
Advisory fees - 8,000 - 8,000
Depreciation and amortization 146,860 153,679 304,394 305,218
Stock-based compensation expense 102,445 125,130 211,626 240,826
Restructuring charges, net 52,621 19,688 62,108 70,920
Other expense, net 13,589 11,741 27,042 42,804
Provision for income taxes 8,143 58,495 12,360 17,595
Earnings in equity interests (255,852 ) (95,841 ) (557,254 ) (195,531 )
Net income attributable to noncontrolling interests 2,850 2,365 5,183 3,340
Adjusted EBITDA $ 340,363 $ 261,703 $ 646,744 $ 492,816
Reconciliation of net cash provided by (used in) operating activities to free cash flow:
Net cash provided by (used in) operating activities $ 357,414 $ 307,952 $ 496,475 $ (2,629,519 )
Acquisition of property and equipment, net (107,358 ) (155,442 ) (192,013 ) (290,363 )
Dividends received from equity investee
(83,685 ) (141,670 ) (83,685 ) (141,670 )
Excess tax benefits from stock-based awards 19,544 (35,620 ) 79,100 1,850
Free cash flow(2) $ 185,915 $ (24,780 ) $ 299,877 $ (3,059,702 )
Three Months Ended Six Months Ended
June 30, June 30,
2014 2015 2014 2015
Reconciliation of GAAP mobile revenue to gross mobile revenue:
GAAP mobile revenue $ 163,007 $ 251,846 $ 307,679 $ 485,439
Revenue share with third parties 108,634 162,801 195,352 320,678
Gross mobile revenue $ 271,641 $ 414,647 $ 503,031 $ 806,117
Reconciliation of GAAP search revenue to gross search revenue:
GAAP search revenue $ 428,418 $ 521,126 $ 873,185 $ 1,052,792
Revenue share with third parties 368,592 398,710 722,978 822,809
Gross search revenue $ 797,010 $ 919,836 $ 1,596,163 $ 1,875,601
(2) During the six months ended June 30, 2015, the Company satisfied the $3.3 billion income tax liability related to the sale of Alibaba Group ADSs in September 2014.
Yahoo! Inc.
GAAP to Non-GAAP Reconciliations
(in thousands, except per share amounts)
Three Months Ended
June 30,
2014 2015
GAAP income (loss) from operations $ 38,437 $ (44,794 )
(a) Restructuring charges, net 52,621 19,688
(b) Stock-based compensation expense 102,445 125,130
(c) Advisory fees - 8,000
Non-GAAP income (loss) from operations $ 193,503 $ 108,024
GAAP net income (loss) attributable to Yahoo! Inc. $ 269,707 $ (21,554 )
(a) Restructuring charges, net 52,621 19,688
(b) Stock-based compensation expense 102,445 125,130
(c) Advisory fees - 8,000
(d) Gain on Hortonworks warrants - (5,449 )
(e) To adjust the provision for income taxes to reflect an effective tax rate of 35% for the three months ended June 30, 2015 and to exclude the tax impact of items (a) through (d) above for the three months ended June 30, 2014 (43,032 ) 26,703
Non-GAAP net earnings $ 381,741 $ 152,518
GAAP net income (loss) attributable to Yahoo! Inc. common stockholders per share - diluted (1)
$ 0.26 $ (0.02 )
Non-GAAP net earnings per share - diluted (5) $ 0.37 $ 0.16
Shares used in non-GAAP per share calculation - diluted
1,014,692
947,775
Six Months Ended
June 30,
2014 2015
GAAP income (loss) from operations $ 68,616 $ (132,148 )
(a) Restructuring charges, net 62,108 70,920
(b) Stock-based compensation 211,626 240,826
(c) Advisory fees - 8,000
Non-GAAP income from operations $ 342,350 $ 187,598
GAAP net income attributable to Yahoo! Inc. $ 581,285 $ (356 )
(a) Restructuring charges, net 62,108 70,920
(b) Stock-based compensation 211,626 240,826
(c) Advisory fees - 8,000
(d) Loss on Hortonworks warrants - 6,460
(e) To adjust the provision for income taxes to reflect an effective tax rate of 35% in the six months ended June 30, 2015 and to exclude the tax impact of items (a) through (d) above for the six months ended June 30, 2014 (71,654 ) (35,344 )
Non-GAAP net earnings $ 783,365 $ 290,506
GAAP net income attributable to Yahoo! Inc. common stockholders per share - diluted (1) $ 0.55 $ (0.00 )
Non-GAAP net earnings per share - diluted (5) $ 0.74 $ 0.31
Shares used in non-GAAP per share calculation - diluted
1,023,056
947,877
(1) The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company's diluted earnings per share by $0.01 for the three months ended June 30, 2014, and by $0.02 for the six months ended June 30, 2014.
(5) The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company's non-GAAP diluted earnings per share by $0.01 for the three months ended June 30, 2014, and by $0.02 for the six months ended June 30, 2014.
View source version on businesswire.com: http://www.businesswire.com/news/home/20150721006511/en/
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Media Relations Contact:
Yahoo! Inc.
Sarah Meron, 408-349-4040
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Investor Relations Contact:
Yahoo! Inc.
Joon Huh, 408-349-3382
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Lithia Reports Adjusted EPS of $1.86 for Second Quarter of 2015; Revenues Increase 63%
Declares $0.20 per Share Dividend for Second Quarter
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Marketwired
Lithia Motors
July 22, 2015 7:29 AM
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MEDFORD, OR--(Marketwired - Jul 22, 2015) - Lithia Motors, Inc. ( NYSE : LAD ) reported adjusted net income of $49.4 million for the second quarter of 2015, the highest quarterly net income in company history and a 40% increase over the prior year period.
2015 second quarter adjusted net income was $1.86 per diluted share. This compares to 2014 second quarter adjusted net income from continuing operations of $35.2 million, or $1.34 per diluted share.
Unadjusted net income from continuing operations for the second quarter of 2015 was $51.2 million, or $1.93 per diluted share, compared to $35.2 million, or $1.34 per diluted share, for the second quarter of 2014. As shown in the attached non-GAAP reconciliation tables, the 2015 second quarter adjusted results exclude a $0.07 net benefit from non-core items related to a gain on the sale of a store, asset impairment charges related to real estate and a net benefit on an equity investment. The 2014 second quarter adjusted results from continuing operations exclude non-core charges related to acquisition expenses for the pending DCH combination offset by a non-core benefit resulting from a tax attribute, resulting in no change to earnings per share.
Second quarter 2015 revenue from continuing operations increased $775 million, or 63%, to $2.0 billion from $1.2 billion for the second quarter of 2014.
Second Quarter-over-Quarter Operating Highlights:
•Total same store sales increased 11%
•New vehicle same store sales increased 8%
•Used vehicle retail same store sales increased 16%
•Service, body and parts same store sales increased 10%
•Same store F&I per unit increased $78 to $1,280
•Adjusted SG&A expense as a percentage of gross profit was 66.6%
"Our second quarter earnings were the highest quarterly earnings in company history," said Bryan DeBoer, President and CEO. "Total same store sales grew double digits, led by a 16% increase in used vehicle sales. Total revenues increased 63% and adjusted earnings per share increased 39% over the prior year period. Our store leaders remain focused on continuing to capture more new vehicle market share, increasing used vehicle unit volume and growing service revenue while providing an exceptional customer experience. Within both DCH and Lithia, many opportunities remain to improve store performance and to find accretive acquisitions."
For the first six months of 2015, revenue from continuing operations increased 65% to $3.8 billion from $2.3 billion in 2014.
For the first six months of 2015, adjusted net income per diluted share increased 38% to $3.26 from $2.36 for the first six months of 2014. Unadjusted net income from continuing operations was $3.47 per diluted share for the first six months of 2015, compared to $2.27 per diluted share for the first six months of 2014.
Chris Holzshu, SVP and CFO, said, "Adjusted SG&A as a percentage of gross profit was 66.6% in the second quarter of 2015, bringing the first half of the year down to 68.8%. DCH has been able to reduce selling costs more quickly than we anticipated. As we continue to integrate operations, we are targeting consolidated SG&A as a percentage of gross profit in the mid-60s on a full year basis. Additionally, same store F&I per unit was $1,280 per unit, an increase of $78 over the prior year and the best result in company history. We still believe opportunity remains to improve this number given continued focus by our store personnel."
Balance Sheet Update
We ended the second quarter with $23 million in cash and $168 million in available credit on our credit facilities. Additionally, approximately $156 million of our operating real estate is currently unfinanced, which could provide an estimated additional $117 million in available liquidity, for total potential liquidity of $308 million.
Dividend Payment
Our Board of Directors has approved a dividend of $0.20 per share related to second quarter 2015 financial results. We will pay the dividend August 21, 2015 to shareholders of record on August 7, 2015.
2015 Outlook
We project 2015 third quarter earnings of $1.83 to $1.87 per diluted share and 2015 full year earnings of $6.63 to $6.72 per diluted share. Both projections are based on the following annual assumptions:
Continuing Operations Projections
•Total revenues of $7.6 to $7.8 billion
•New vehicle sales increasing 45.0%
•New vehicle gross margin of 5.9% to 6.1%
•Used vehicle sales increasing 40.0%
•Used vehicle gross margin of 12.6% to 12.8%
•Service body and parts sales increasing 42.0%
•Service body and parts gross margin of 48.8% to 49.2%
•Finance and insurance gross profit of $1,200 per unit
•Tax rate of 40.0%
•Average diluted shares outstanding of 26.5 million
Same Store Projections
•Total revenues of $5.7 to $5.9 billion
•New vehicle same store sales increasing 7.0%
•Used vehicle same store sales increasing 12.0%
•Service body and parts same store sales increasing 8.5%
•Finance and insurance gross profit of $1,250 per unit
These projections exclude the impact of future acquisitions, dispositions and non-core items. Actual results may be affected by items described under Forward-Looking Statements below.
Second Quarter Earnings Conference Call and Updated Presentation
The second quarter conference call may be accessed at 10:00 a.m. ET today by telephone at 877-407-8029 . An updated presentation highlighting the second quarter results has been added to www.lithiainvestorrelations.com .
To listen live on our website or for replay, visit www.lithiainvestorrelations.com and click on webcasts.
About Lithia
Lithia Motors, Inc. is one of the largest automotive retailer in the United States. Lithia sells 31 brands of new vehicles and all brands of used vehicles at 129 stores in 14 states. Lithia also arranges finance, warranty, and credit insurance contracts; and provides vehicle parts, maintenance, and repair services at all of its locations.
Sites
www.lithia.com
www.lithiainvestorrelations.com
www.lithiacareers.com
Lithia Motors on Facebook
http://www.facebook.com/LithiaMotors
Lithia Motors on Twitter
http://twitter.com/lithiamotors
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements include statements regarding our goals, plans, projections and guidance regarding our financial position, results of operations, market position, pending and potential future acquisitions and business strategy, and often contain words such as "project," "outlook," "expect," "anticipate," "intend," "plan," "believe," "estimate," "may," "seek," "would," "should," "likely," "goal," "strategy," "future," "maintain," "continue," "remain," "target" or "will" and similar references to future periods. Examples of forward-looking statements in this press release include, among others, statements regarding:
•Future market conditions;
•Expected operating results, such as improved store performance; continued improvement of SG&A as a percentage of gross profit; generating third quarter earnings per share of $1.83 to $1.87 per diluted share and 2015 full year earnings of $6.63 to $6.72 per diluted share; and all projections set forth under the headings "2015 Outlook," "Continuing Operations Projections" and "Same Store Projections";
•Anticipated continued success, integration and growth of DCH;
•Anticipated ability to improve store performance; ability to find accretive acquisitions; and additions of dealership locations to the company's portfolio in the future; and
•Anticipated availability of liquidity from our unfinanced operating real estate.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events that depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance, and our actual results of operations, financial condition and liquidity and development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements in this press release. The risks and uncertainties that could cause actual results to differ materially from estimated or projected results include, without limitation, future economic and financial conditions (both nationally and locally), changes in customer demand, our relationship with, and the financial and operational stability of, vehicle manufacturers and other suppliers, risks associated with our indebtedness (including available borrowing capacity, compliance with financial covenants and ability to refinance or repay indebtedness on favorable terms), government regulations, legislation and others set forth throughout Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and in Part I, Item 1A. Risk Factors of our most recent Annual Report on Form 10-K, and from time to time in our other filings with the SEC. We urge you to carefully consider this information and not place undue reliance on forward-looking statements. We undertake no duty to update our forward-looking statements, including our earnings outlook, which are made as of the date of this release.
Non-GAAP Financial Measures
This press release and the attached financial tables contain non-GAAP financial measures such as adjusted net income and diluted earnings per share from continuing operations, adjusted SG&A as a percentage of revenues and gross profit, adjusted operating margin, adjusted operating profit as a percentage of gross profit, and adjusted pre-tax margin. Non-GAAP measures do not have definitions under GAAP and may be defined differently by and not comparable to similarly titled measures used by other companies. As a result, we review any non-GAAP financial measures in connection with a review of the most directly comparable measures calculated in accordance with GAAP. We caution you not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable GAAP measures. We present cash flows from operations in the attached tables, adjusted to include the change in non-trade floor plan debt to improve the visibility of cash flows related to vehicle financing. As required by SEC rules, we have reconciled these measures to the most directly comparable GAAP measures in the attachments to this release. We believe the non-GAAP financial measures we present improve the transparency of our disclosures; provide a meaningful presentation of our results from core business operations, because they exclude items not related to core business operations and other non-cash items; and improve the period-to-period comparability of our results from core business operations. These presentations should not be considered an alternative to GAAP measures.
Lithia Motors, Inc.
Consolidated Statements of Operations (Unaudited)
(In thousands except per share data)
Three months ended %
June 30, Increase Increase
2015 2014 (Decrease) (Decrease)
Revenues:
New vehicle retail $ 1,149,512 $ 694,484 $ 455,028 65.5 %
Used vehicle retail 488,801 310,475 178,326 57.4
Used vehicle wholesale 66,796 44,286 22,510 50.8
Finance and insurance 72,463 43,838 28,625 65.3
Service, body and parts 182,695 114,337 68,358 59.8
Fleet and other 36,680 14,382 22,298 155.0
Total revenues 1,996,947 1,221,802 775,145 63.4
Cost of sales:
New vehicle retail 1,080,170 648,490 431,680 66.6
Used vehicle retail 426,108 266,408 159,700 59.9
Used vehicle wholesale 65,390 42,782 22,608 52.8
Service, body and parts 91,946 58,155 33,791 58.1
Fleet and other 35,684 13,667 22,017 161.1
Total cost of sales 1,699,298 1,029,502 669,796 65.1
Gross profit 297,649 192,300 105,349 54.8
Asset impairments 6,130 - 6,130 NM
SG&A expense 195,610 125,463 70,147 55.9
Depreciation and amortization 10,287 5,825 4,462 76.6
Income from operations 85,622 61,012 24,610 40.3
Floor plan interest expense (4,655 ) (3,215 ) 1,440 44.8
Other interest expense (4,972 ) (1,869 ) 3,103 166.0
Other (expense) income, net (356 ) 1,146 (1,502 ) NM
Income from continuing operations before income taxes 75,639 57,074 18,565 32.5
Income tax expense (24,416 ) (21,904 ) 2,512 11.5
Income tax rate 32.3 % 38.4 %
Income from continuing operations $ 51,223 $ 35,170 $ 16,053 45.6 %
Income from discontinued operations, net of tax - 3,139 (3,139 ) NM
Net income $ 51,223 $ 38,309 $ 12,914 33.7 %
Diluted net income per share:
Continuing operations $ 1.93 $ 1.34 $ 0.59 44.0 %
Discontinued operations - 0.11 (0.11 ) NM
Net income per share $ 1.93 $ 1.45 $ 0.48 33.1 %
Diluted shares outstanding 26,496 26,331 165 0.6 %
NM - not meaningful
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
Three months ended %
June 30, Increase Increase
2015 2014 (Decrease) (Decrease)
Gross margin
New vehicle retail 6.0 % 6.6 % (60) bps
Used vehicle retail 12.8 14.2 (140) bps
Used vehicle wholesale 2.1 3.4 (130) bps
Finance and insurance 100.0 100.0 - bps
Service, body and parts 49.7 49.1 60 bps
Fleet and other 2.7 5.0 (230) bps
Gross profit margin 14.9 15.7 (80) bps
Unit sales
New vehicle retail 35,112 20,446 14,666 71.7 %
Used vehicle retail 24,689 16,086 8,603 53.5
Total retail units sold 59,801 36,532 23,269 63.7
Used vehicle wholesale 9,439 6,047 3,392 56.1
Average selling price
New vehicle retail $ 32,738 $ 33,967 $ (1,229 ) (3.6) %
Used vehicle retail 19,798 19,301 497 2.6
Used vehicle wholesale 7,077 7,324 (247 ) (3.4 )
Average gross profit per unit
New vehicle retail $ 1,975 $ 2,250 $ (275 ) (12.2) %
Used vehicle retail 2,539 2,739 (200 ) (7.3 )
Used vehicle wholesale 149 249 (100 ) (40.2 )
Finance and insurance 1,212 1,200 12 1.0
Total vehicle (1) 3,443 3,706 (263 ) (7.1 )
Revenue mix
New vehicle retail 57.6 % 56.8 %
Used vehicle retail 24.5 25.4
Used vehicle wholesale 3.3 3.6
Finance and insurance, net 3.6 3.6
Service, body and parts 9.2 9.4
Fleet and other 1.8 1.2
Adjusted As reported
Three months ended
June 30, Three months ended
June 30,
Other metrics 2015 2014 2015 2014
SG&A as a % of revenue 9.9 % 10.3 % 9.8 % 10.3 %
SG&A as a % of gross profit 66.6 65.2 65.7 65.2
Operating profit as a % of revenue 4.5 5.0 4.3 5.0
Operating profit as a % of gross profit 30.0 31.8 28.8 31.7
Pretax margin 4.1 4.7 3.8 4.7
Net profit margin 2.5 2.9 2.6 2.9
(1) - includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail
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Lithia Motors, Inc.
Same Store Operating Highlights (Unaudited)
Three months ended %
June 30, Increase Increase
2015 2014 (Decrease) (Decrease)
Revenues
New vehicle retail $ 742,347 $ 689,006 $ 53,341 7.7 %
Used vehicle retail 357,673 307,616 50,057 16.3
Used vehicle wholesale 49,157 44,043 5,114 11.6
Finance and insurance 50,160 43,508 6,652 15.3
Service, body and parts 124,087 113,252 10,835 9.6
Fleet and other 22,042 14,381 7,661 53.3
Total revenues $ 1,345,466 $ 1,211,806 $ 133,660 11.0
Gross profit
New vehicle retail $ 45,475 $ 45,578 $ (103 ) (0.2 )%
Used vehicle retail 47,933 43,720 4,213 9.6
Used vehicle wholesale 1,369 1,560 (191 ) (12.2 )
Finance and insurance 50,160 43,508 6,652 15.3
Service, body and parts 61,333 55,593 5,740 10.3
Fleet and other 837 714 123 17.2
Total gross profit $ 207,107 $ 190,673 $ 16,434 8.6
Gross margin
New vehicle retail 6.1 % 6.6 % (50) bps
Used vehicle retail 13.4 14.2 (80) bps
Used vehicle wholesale 2.8 3.5 (70) bps
Finance and insurance 100 100.0 - bps
Service, body and parts 49.4 49.1 30 bps
Fleet and other 3.8 5.0 (120) bps
Gross profit margin 15.4 15.7 (30) bps
Unit sales
New vehicle retail 21,411 20,260 1,151 5.7 %
Used vehicle retail 17,769 15,924 1,845 11.6
Total retail units sold 39,180 36,184 2,996 8.3
Used vehicle wholesale 6,259 5,981 278 4.6
Average selling price
New vehicle retail $ 34,671 $ 34,008 $ 663 1.9 %
Used vehicle retail 20,129 19,318 811 4.2
Used vehicle wholesale 7,854 7,364 490 6.7
Average gross profit per unit
New vehicle retail $ 2,124 $ 2,250 $ (126 ) (5.6 )%
Used vehicle retail 2,698 2,746 (48 ) (1.7 )
Used vehicle wholesale 219 261 (42 ) (16.1 )
Finance and insurance 1,280 1,202 78 6.5
Total vehicle(1) 3,699 3,713 (14 ) (0.4 )
(1) - includes the sales and gross profit related to new, used retail, used wholesale and finance and insurance and unit sales for new and used retail
Lithia Motors, Inc.
Consolidated Statements of Operations (Unaudited)
(In thousands except per share data)
Six months ended %
June 30, Increase Increase
2015 2014 (Decrease) (Decrease)
Revenues:
New vehicle retail $ 2,157,328 $ 1,274,006 $ 883,322 69.3 %
Used vehicle retail 951,732 612,368 339,364 55.4
Used vehicle wholesale 129,004 86,979 42,025 48.3
Finance and insurance 137,067 83,469 53,598 64.2
Service, body and parts 356,170 218,954 137,216 62.7
Fleet and other 54,824 24,132 30,692 127.2
Total revenues 3,786,125 2,299,908 1,486,217 64.6
Cost of sales:
New vehicle retail 2,026,212 1,188,988 837,224 70.4
Used vehicle retail 829,597 527,505 302,092 57.3
Used vehicle wholesale 125,437 84,144 41,293 49.1
Service, body and parts 180,982 111,940 69,042 61.7
Fleet and other 52,873 22,970 29,903 130.2
Total cost of sales 3,215,101 1,935,547 1,279,554 66.1
Gross profit 571,024 364,361 206,663 56.7
Asset impairments 10,260 - 10,260 NM
SG&A expense 387,228 247,292 139,936 56.6
Depreciation and amortization 20,013 11,332 8,681 76.6
Income from operations 153,523 105,737 47,786 45.2
Floor plan interest expense (9,304 ) (6,199 ) 3,105 50.1
Other interest expense (9,800 ) (3,843 ) 5,957 155.0
Other income, net (724 ) 2,083 (2,807 ) NM
Income from continuing operations before income taxes 133,695 97,778 35,917 36.7
Income tax expense (41,819 ) (37,914 ) 3,905 10.3
Income tax rate 31.3 % 38.8 %
Income from continuing operations $ 91,876 $ 59,864 $ 32,012 53.5 %
Income from discontinued operations, net of tax - 3,179 (3,179 ) NM
Net income $ 91,876 $ 63,043 $ 28,833 45.7 %
Diluted net income per share:
Continuing operations $ 3.47 $ 2.27 $ 1.20 52.9 %
Discontinued operations - 0.12 (0.12 ) NM
Net income per share $ 3.47 $ 2.39 $ 1.08 45.2 %
Diluted shares outstanding 26,509 26,326 183 0.7 %
NM - not meaningful
Lithia Motors, Inc.
Key Performance Metrics (Unaudited)
Six months ended %
June 30, Increase Increase
2015 2014 (Decrease) (Decrease)
Gross margin
New vehicle retail 6.1 % 6.7 % (60) bps
Used vehicle retail 12.8 13.9 (110) bps
Used vehicle wholesale 2.8 3.3 (50) bps
Finance and insurance 100.0 100.0 - bps
Service, body and parts 49.2 48.9 30 bps
Fleet and other 3.6 4.8 (120) bps
Gross profit margin 15.1 15.8 (70) bps
Unit sales
New vehicle retail 65,735 37,720 28,015 74.3 %
Used vehicle retail 48,893 32,402 16,491 50.9
Total retail units sold 114,628 70,122 44,506 63.5
Used vehicle wholesale 18,583 11,900 6,683 56.2
Average selling price
New vehicle retail $ 32,819 $ 33,775 $ (956 ) (2.8) %
Used vehicle retail 19,466 18,899 567 3.0
Used vehicle wholesale 6,942 7,309 (367 ) (5.0 )
Average gross profit per unit
New vehicle retail $ 1,995 $ 2,254 $ (259 ) (11.5) %
Used vehicle retail 2,498 2,619 (121 ) (4.6 )
Used vehicle wholesale 192 238 (46 ) (19.3 )
Finance and insurance 1,196 1,190 6 0.5
Revenue mix
New vehicle retail 57.0 % 55.4 %
Used vehicle retail 25.1 26.6
Used vehicle wholesale 3.4 3.8
Finance and insurance, net 3.6 3.6
Service, body and parts 9.4 9.5
Fleet and other 1.5 1.1
Adjusted As reported
Six months ended
June 30, Six months ended
June 30,
Other metrics 2015 2014 2015 2014
SG&A as a % of revenue 10.4 % 10.6 % 10.2 % 10.8 %
SG&A as a % of gross profit 68.8 66.7 67.8 67.9
Operating profit as a % of revenue 4.2 4.8 4.1 4.6
Operating profit as a % of gross profit 27.6 30.1 26.9 29.0
Pretax margin 3.7 4.4 3.5 4.3
Net profit margin 2.3 2.7 2.4 2.7
...
Lithia Motors, Inc.
Same Store Operating Highlights (Unaudited)
Six months ended %
June 30, Increase Increase
2015 2014 (Decrease) (Decrease)
Revenues
New vehicle retail $ 1,379,617 $ 1,260,741 $ 118,876 9.4 %
Used vehicle retail 689,918 604,960 84,958 14.0
Used vehicle wholesale 94,161 86,573 7,588 8.8
Finance and insurance 94,133 82,548 11,585 14.0
Contact:
John North
VP Finance and Chief Accounting Officer
(541) 618-5748
KKR & Co. L.P. Announces Second Quarter 2015 Results
Strong Investment Performance Drives Record Economic Net Income
GAAP net income (loss) attributable to KKR & Co. L.P. was $376.3 million and $646.8 million for the quarter and six months ended June 30, 2015, respectively, up from $178.2 million and $388.3 million in the comparable periods of 2014.
Total distributable earnings was $491.4 million and $1,007.9 million for the quarter and six months ended June 30, 2015, respectively, down from $701.0 million and $1,147.8 million in the comparable periods of 2014.
Distribution per common unit was $0.42 and $0.88 for the quarter and six months ended June 30, 2015, respectively, down from $0.67 and $1.10 in the comparable periods of 2014.
Economic net income (“ENI”) was $839.9 million and $1,439.4 million for the quarter and six months ended June 30, 2015, respectively, up from $501.6 million and $1,131.8 million in the comparable periods of 2014.
ENI after taxes per adjusted unit was $0.88 and $1.50 for the quarter and six months ended June 30, 2015, respectively, up from $0.57 and $1.32 in the comparable periods of 2014.
Fee and yield earnings were $180.9 million and $348.9 million for the quarter and six months ended June 30, 2015, respectively, up from $154.2 million and $317.0 million in the comparable periods of 2014.
Book value was $10.9 billion on a total reportable segment basis as of June 30, 2015 or $12.77 per adjusted unit.
Return on equity and cash return on equity were 16.6% and 17.1%, respectively.
Assets under management (“AUM”) and fee paying assets under management (“FPAUM”) totaled $101.6 billion and $83.7 billion, respectively, as of June 30, 2015.
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Business Wire
Kohlberg Kravis Roberts & Co. L.P.
7 hours ago
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NEW YORK--(BUSINESS WIRE)--
KKR & Co. L.P. (KKR) today reported its second quarter 2015 results.
In April 2015, KKR held its final close for Lending Partners II, the successor fund to the predecessor Lending Partners fund. KKR closed this successor fund with over $1.3 billion of capital commitments, which surpassed the predecessor fund that had $460 million in total capital commitments.
In July 2015, KKR held its final close for Global Infrastructure Investors II, the successor fund to the predecessor Global Infrastructure Investors fund. KKR closed this successor fund with over $3.0 billion of capital commitments, which surpassed the predecessor fund that had $1.0 billion in total capital commitments.
“Our strong investment performance resulted in $840 million of Economic Net Income, a record quarterly figure for KKR,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. “Additionally, we continued to scale several growth areas including our infrastructure and alternative credit businesses.”
Note: Certain financial measures, including total distributable earnings, FRE, ENI, ENI after taxes, fee and yield earnings, book value, cash and short-term investments and adjusted units, are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Exhibits B and C for a reconciliation of such measures to financial results prepared in accordance with GAAP.
GAAP RESULTS
GAAP net income (loss) for the quarter and six months ended June 30, 2015, included net income (loss) attributable to KKR & Co. L.P. of $376.3 million and $646.8 million, respectively, and net income (loss) attributable to KKR & Co. L.P. per common unit of $0.78 and $1.35, respectively, on a diluted basis. For the quarter and six months ended June 30, 2014, net income (loss) attributable to KKR & Co. L.P. was $178.2 million and $388.3 million, respectively, and net income (loss) attributable to KKR & Co. L.P. per common unit was $0.43 and $1.06, respectively, on a diluted basis. The increase in both comparable periods was primarily due to (i) an increase in investment income and (ii) an increase in KKR & Co. L.P.’s ownership percentage in the KKR business.
SEGMENT RESULTS
KEY METRICS (UNAUDITED)
(Amounts in millions, except per adjusted unit amounts)
Quarter Ended Six Months Ended
June 30, 2015 June 30, 2014 % Change June 30, 2015 June 30, 2014 % Change
Total Distributable Earnings
Fees $ 272 $ 254 $ 572 $ 582
Realized Cash Carry 252 555 555 749
Net Realized Investment Income 251 282 483 475
Total Cash Revenues $ 775 $ 1,091 (29 )% $ 1,610 $ 1,806 (11 )%
Total Cash Expenses and Other 284 391 601 658
Total Distributable Earnings $ 491 $ 700 (30 )% $ 1,009 $ 1,148 (12 )%
Less: Estimated Current Corporate Income Taxes (26 ) (19 ) (55 ) (52 )
Distributable Earnings, net of taxes $ 465 $ 681 (32 )% $ 954 $ 1,096 (13 )%
Distributable Earnings, net of taxes per KKR & Co. L.P. common unit $ 0.57 $ 0.85 (33 )% $ 1.17 $ 1.44 (19 )%
Distribution per KKR & Co. L.P. common unit $ 0.42 $ 0.67 (37 )% $ 0.88 $ 1.10 (20 )%
Payout ratio 75 % 78 % 76 % 76 %
Economic Net Income
Management, Monitoring and Transaction Fees, Net $ 266 $ 243 $ 560 $ 553
Performance Income 598 429 1,046 785
Investment Income 384 162 604 441
Total Segment Revenues $ 1,248 $ 834 50 % $ 2,210 $ 1,779 24 %
Total Segment Expenses and Other 501 380 937 770
Economic Net Income, After-Taxes $ 747 $ 454 65 % $ 1,273 $ 1,009 26 %
Economic Net Income, After-Taxes per Adjusted Unit $ 0.88 $ 0.57 54 % $ 1.50 $ 1.32 14 %
Fee and Yield Earnings $ 181 $ 154 18 % $ 349 $ 317 10 %
Other
Book Value per Adjusted Unit $ 12.77 $ 12.52 2 %
Last Twelve Months Ended
June 30, 2015 June 30, 2014
Return on Equity 16.6% 28.7%
Cash Return on Equity 17.1% 22.2%
Private Markets
AUM was $63.1 billion as of June 30, 2015, an increase of $1.0 billion, compared to AUM of $62.1 billion as of March 31, 2015. The increase was primarily attributable to the appreciation in the fair value of our private equity portfolio and to a lesser extent new capital raised in European Fund IV and Global Infrastructure Investors II. These increases were offset by distributions to limited partners of our private equity funds arising from realizations.
FPAUM was $46.8 billion as of June 30, 2015, a decrease of $0.4 billion, compared to FPAUM of $47.2 billion as of March 31, 2015. The decrease was primarily attributable to distributions to limited partners of our private equity funds arising from realizations which were partially offset by new capital raised in European Fund IV and Global Infrastructure Investors II.
Total segment revenues were $1,004.9 million for the quarter ended June 30, 2015, an increase of $362.0 million, compared to total segment revenues of $642.9 million for the quarter ended June 30, 2014. Total segment revenues were $1,872.9 million for the six months ended June 30, 2015, an increase of $499.3 million, compared to total segment revenues of $1,373.6 million for the six months ended June 30, 2014. The increase in both comparable periods was principally attributable to (i) a higher level of investment income reflecting a higher level of appreciation in our private equity portfolio and (ii) an increase in performance income due to higher net carried interest resulting from more private equity funds earning carried interest and higher net overall appreciation in our private equity portfolio. For the three and six months ended June 30, 2015, the fair value of our private equity portfolio appreciated 7.4% and 11.8%, respectively.
ENI was $666.2 million for the quarter ended June 30, 2015, an increase of $290.0 million, compared to ENI of $376.2 million for the quarter ended June 30, 2014. The increase was primarily attributable to higher total segment revenues as described above, partially offset by higher allocations to the carry pool resulting from the higher levels of net carried interest.
Public Markets
AUM was $38.4 billion as of June 30, 2015, an increase of $1.4 billion, compared to AUM of $37.0 billion as of March 31, 2015. FPAUM was $37.0 billion as of June 30, 2015, an increase of $1.3 billion, compared to FPAUM of $35.7 billion as of March 31, 2015. For both AUM and FPAUM, the increases were primarily attributable to new capital raised, primarily in our CLOs, offset by distributions and redemptions across multiple strategies.
Total segment revenues were $188.2 million for the quarter ended June 30, 2015, an increase of $31.0 million, compared to total segment revenues of $157.2 million for the quarter ended June 30, 2014. The increase in revenues was primarily attributable to an increase in investment income across multiple strategies and the impact of yielding assets of KKR Financial Holdings LLC (“KFN”), which was acquired on April 30, 2014 but was not contributing to our investment income for one month of the second quarter of 2014.
Total segment revenues were $238.2 million for the six months ended June 30, 2015, a decrease of $64.6 million, compared to total segment revenues of $302.8 million for the six months ended June 30, 2014. The decrease was principally attributable to (i) a decrease in investment income due primarily to net unrealized losses in our CLOs and certain other Public Markets related investments and (ii) lower performance income for the period. These decreases were partially offset by an increase in net interest and dividends relating primarily to the yielding assets of KFN, which was acquired on April 30, 2014 but was not contributing to our investment income for the first four months of 2014.
ENI was $136.6 million for the quarter ended June 30, 2015, an increase of $31.0 million, compared to ENI of $105.6 million for the quarter ended June 30, 2014. The increase was principally attributable to the increase in total segment revenues as described above.
ENI was $139.4 million for the six months ended June 30, 2015, a decrease of $64.0 million, compared to ENI of $203.4 million for the six months ended June 30, 2014. The decrease was principally attributable to the decrease in total segment revenues as described above.
Capital Markets
Total segment revenues were $54.7 million for the quarter ended June 30, 2015, an increase of $20.7 million, compared to total segment revenues of $34.0 million for the quarter ended June 30, 2014. The increase in revenues primarily reflect a higher level of overall capital markets transaction activity for the quarter ended June 30, 2015.
Total segment revenues were $99.1 million for the six months ended June 30, 2015, an decrease of $4.1 million, compared to total segment revenues of $103.2 million for the six months ended June 30, 2014. The decrease in revenues primarily reflects a lower level of overall capital markets transaction activity for the six months ended June 30, 2015.
ENI was $37.2 million for the quarter ended June 30, 2015, an increase of $17.4 million, compared to ENI of $19.8 million for the quarter ended June 30, 2014. The increase primarily reflects the increase in total segment revenues as described above.
ENI was $65.3 million for the six months ended June 30, 2015, a decrease of $1.6 million, compared to ENI of $66.9 million for the six months ended June 30, 2014. The decrease primarily reflects the decrease in total segment revenues as described above, largely offset by lower compensation expense.
CAPITAL AND LIQUIDITY
As of June 30, 2015, KKR had $2.0 billion of cash and short-term investments and $3.0 billion of outstanding debt and preferred share obligations on a total reportable segment basis. This includes KFN’s debt obligations of $657.3 million and KFN’s 7.375% Series A LLC preferred shares of $373.8 million, which are non-recourse to KKR beyond the assets of KFN. As of June 30, 2015, KKR had a $1.0 billion revolving credit facility, which was undrawn. In addition, KKR has a $500.0 million revolving credit facility for use in its capital markets business, which was undrawn as of June 30, 2015.
As of June 30, 2015, KKR’s portion of total uncalled commitments to its investment funds was $1.3 billion. See Exhibit A for details.
DISTRIBUTION
A distribution of $0.42 per common unit has been declared, comprised of (i) $0.07 per common unit from after-tax FRE, (ii) $0.18 per common unit from realized cash carry, (iii) $0.10 per common unit from KKR’s net realized investment income and (iv) $0.07 per common unit from KFN’s net realized investment income. The distribution will be paid on August 18, 2015 to unitholders of record as of the close of business on August 3, 2015.
SUPPLEMENTAL INFORMATION
A slide presentation containing supplemental commentary about the Company's financial results for the fiscal quarter ended June 30, 2015 may be accessed through the KKR Investor Relations section of the KKR website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. The presentation will be referenced on the conference call discussed below.
CONFERENCE CALL
A conference call to discuss KKR's financial results will be held on Thursday, July 23, 2015 at 10:00 a.m. EDT. The conference call may be accessed by dialing (877) 303-2917 (U.S. callers) or +1 (253) 237-1135 (non-U.S. callers); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Investor Center section of KKR's website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. A replay of the live broadcast will be available on KKR's website or by dialing (855) 859-2056 (U.S. callers) or +1 (404) 537-3406 (non-U.S. callers), pass code 80669130, beginning approximately two hours after the broadcast.
From time to time, KKR may use its website as a channel of distribution of material company information. Financial and other important information regarding KKR is routinely posted and accessible on the Investor Center for KKR & Co. L.P. at http://ir.kkr.com/kkr_ir/kkr_events.cfm. In addition, you may automatically receive email alerts and other information about KKR by enrolling your email address at the “Email Alerts” area of the Investor Center on the website.
ABOUT KKR
KKR is a leading global investment firm that manages investments across multiple asset classes including private equity, energy, infrastructure, real estate, credit and hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation at the asset level. KKR invests its own capital alongside its partners' capital and brings opportunities to others through its capital markets business. References to KKR’s investments may include the activities of its sponsored funds. For additional information about KKR & Co. L.P. (KKR), please visit KKR's website at www.kkr.com.
FORWARD-LOOKING STATEMENTS
This release contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements are based on KKR’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or are within its control. If a change occurs, KKR’s business, financial condition, liquidity and results of operations, including but not limited to AUM, FPAUM, FRE, total distributable earnings, ENI, ENI after taxes, fee and yield earnings, fee and yield EBITDA, equity invested and syndicated capital, uncalled commitments, core interest expense, cash and short-term investments, net realized investment income and book value, may vary materially from those expressed in the forward-looking statements. The following factors, among others, could cause actual results to vary from the forward-looking statements: the general volatility of the capital markets; failure to realize the benefits of or changes in KKR’s business strategies including the ability to realize the anticipated synergies from acquisitions or strategic partnerships ; availability, terms and deployment of capital; availability of qualified personnel and expense of recruiting and retaining such personnel; changes in the asset management industry, interest rates or the general economy; underperformance of KKR's investments and decreased ability to raise funds; and the degree and nature of KKR’s competition. KKR does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made except as required by law. In addition, KKR’s business strategy is focused on the long term and financial results are subject to significant volatility. Additional information about factors affecting KKR is available in KKR & Co. L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC on February 27, 2015, quarterly reports on Form 10-Q for subsequent quarters and other filings with the SEC, which are available at www.sec.gov.
KKR
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
Quarter Ended Six Months Ended
June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Revenues
Fees and Other $ 255,874 $ 249,370 $ 547,219 $ 552,296
Expenses
Compensation and Benefits 411,691 358,730 776,690 689,768
Occupancy and Related Charges 16,172 16,059 31,904 31,467
General, Administrative and Other 126,314 210,536 260,616 337,261
Total Expenses 554,177 585,325 1,069,210 1,058,496
Investment Income (Loss)
Net Gains (Losses) from Investment Activities 3,110,604 1,971,850 5,030,429 3,944,030
Dividend Income 360,556 272,902 439,371 369,606
Interest Income 302,985 215,872 599,143 377,832
Interest Expense (139,427 ) (65,997 ) (251,390 ) (100,728 )
Total Investment Income (Loss) 3,634,718 2,394,627 5,817,553 4,590,740
Income (Loss) Before Taxes 3,336,415 2,058,672 5,295,562 4,084,540
Income Taxes 30,547 6,176 46,685 27,878
Net Income (Loss) 3,305,868 2,052,496 5,248,877 4,056,662
Net Income (Loss) Attributable to
Redeemable Noncontrolling Interests (891 ) (6,809 ) 1,042 3,828
Net Income (Loss) Attributable to
Noncontrolling Interests and Appropriated Capital 2,930,453 1,881,090 4,601,022 3,664,578
Net Income (Loss) Attributable to KKR & Co. L.P. $ 376,306 $ 178,215 $ 646,813 $ 388,256
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic $ 0.84 $ 0.47 $ 1.47 $ 1.16
Diluted (a) $ 0.78 $ 0.43 $ 1.35 $ 1.06
Weighted Average Common Units Outstanding
Basic 446,794,950 377,542,161 440,867,813 335,748,498
Diluted (a) 482,651,491 410,179,838 477,467,220 367,877,049
(a) KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit since the exchange of these units would not dilute KKR’s respective ownership interests in the KKR Group Partnerships.
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 181,401 $ 173,780 $ 178,674 $ 355,181 $ 374,067
Monitoring Fees 47,713 97,838 29,610 145,551 65,973
Transaction Fees 92,951 103,286 84,305 196,237 247,821
Fee Credits (56,458 ) (80,494 ) (49,830 ) (136,952 ) (134,498 )
Total Management, Monitoring and Transaction Fees, Net 265,607 294,410 242,759 560,017 553,363
Performance Income
Realized Carried Interest 252,227 302,425 555,488 554,652 749,038
Incentive Fees 5,893 5,665 11,478 11,558 28,497
Unrealized Carried Interest 340,366 139,284 (137,826 ) 479,650 7,821
Total Performance Income 598,486 447,374 429,140 1,045,860 785,356
Investment Income (Loss)
Net Realized Gains (Losses) 176,260 180,667 221,661 356,927 403,389
Net Unrealized Gains (Losses) 131,984 (10,721 ) (119,935 ) 121,263 (34,176 )
Total Realized and Unrealized 308,244 169,946 101,726 478,190 369,213
Net Interest and Dividends 75,406 50,675 60,432 126,081 71,596
Total Investment Income (Loss) 383,650 220,621 162,158 604,271 440,809
Total Segment Revenues 1,247,743 962,405 834,057 2,210,148 1,779,528
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 98,871 107,027 91,444 205,898 200,359
Realized Allocation to Carry Pool 100,891 120,970 222,195 221,861 299,615
Unrealized Allocation to Carry Pool 136,566 55,631 (53,435 ) 192,197 5,255
Total Compensation and Benefits 336,328 283,628 260,204 619,956 505,229
Occupancy and Related Charges 15,475 14,796 14,757 30,271 28,946
Other Operating Expenses 51,613 60,946 54,311 112,559 107,112
Total Segment Expenses 403,416 359,370 329,272 762,786 641,287
Income (Loss) attributable to noncontrolling interests 4,383 3,622 3,206 8,005 6,408
Economic Net Income (Loss) (a) $ 839,944 $ 599,413 $ 501,579 $ 1,439,357 $ 1,131,833
Provision for Income Taxes 44,836 21,235 6,330 66,071 42,911
Equity-based Charges 48,453 52,265 40,877 100,718 80,230
Economic Net Income (Loss), After Taxes (b) $ 746,655 $ 525,913 $ 454,372 $ 1,272,568 $ 1,008,692
Economic Net Income (Loss), After Taxes Per Adjusted Unit $ 0.88 $ 0.62 $ 0.57 $ 1.50 $ 1.32
Weighted Average Adjusted Units (Fully Diluted Basis) (a) 852,128,762 848,061,661 800,747,528 850,106,448 762,873,784
Assets Under Management $ 101,569,600 $ 99,128,000 $ 97,957,900 $ 101,569,600 $ 97,957,900
Fee Paying Assets Under Management $ 83,732,800 $ 82,884,500 $ 79,656,300 $ 83,732,800 $ 79,656,300
Equity Invested and Syndicated Capital $ 2,011,100 $ 2,945,400 $ 2,345,500 $ 4,956,500 $ 5,722,800
Uncalled Commitments $ 25,906,300 $ 21,555,600 $ 19,784,200 $ 25,906,300 $ 19,784,200
Other Information
Fee Related Earnings $ 105,541 $ 117,306 $ 93,725 $ 222,847 $ 245,443
Plus: Net Interest and Dividends 75,406 50,675 60,432 126,081 71,596
Fee and Yield Earnings (a) $ 180,947 $ 167,981 $ 154,157 $ 348,928 $ 317,039
Plus: Depreciation and Amortization 3,918 3,881 4,140 7,799 8,175
Plus: Core Interest Expense 30,750 25,332 19,205 56,082 37,605
Fee and Yield EBITDA (a) $ 215,615 $ 197,194 $ 177,502 $ 412,809 $ 362,819
Total Distributable Earnings (a) $ 491,407 $ 516,531 $ 700,973 $ 1,007,938 $ 1,147,781
GAAP interest expense $ 139,427 $ 111,963 $ 65,997 $ 251,390 $ 100,728
Less: interest expense related to debt obligations
from investment financing arrangements and KFN 108,677 86,631 46,792 195,308 63,123
Core Interest Expense (a) $ 30,750 $ 25,332 $ 19,205 $ 56,082 $ 37,605
(a) See definitions for economic net income (loss), adjusted units, fee and yield earnings, fee and yield EBITDA, total distributable earnings and core interest expense under “Notes to Reportable Segments.”
(b) Represents economic net income (loss) after reductions for income taxes and equity-based charges.
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 115,346 $ 109,276 $ 111,542 $ 224,622 $ 234,581
Monitoring Fees 47,713 97,838 29,610 145,551 65,973
Transaction Fees 40,321 46,599 45,340 86,920 138,360
Fee Credits (53,286 ) (69,906 ) (43,478 ) (123,192 ) (123,816 )
Total Management, Monitoring and Transaction Fees, Net 150,094 183,807 143,014 333,901 315,098
Performance Income
Realized Carried Interest 243,274 302,425 555,488 545,699 724,288
Incentive Fees — — — — —
Unrealized Carried Interest 312,379 126,937 (163,564 ) 439,316 (17,788 )
Total Performance Income 555,653 429,362 391,924 985,015 706,500
Investment Income (Loss)
Net Realized Gains (Losses) 145,817 183,264 207,892 329,081 384,090
Net Unrealized Gains (Losses) 145,094 79,363 (122,729 ) 224,457 (52,056 )
Total Realized and Unrealized 290,911 262,627 85,163 553,538 332,034
Net Interest and Dividends 8,234 (7,831 ) 22,760 403 19,952
Total Investment Income (Loss) 299,145 254,796 107,923 553,941 351,986
Total Segment Revenues 1,004,892 867,965 642,861 1,872,857 1,373,584
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 65,939 73,967 56,522 139,906 123,420
Realized Allocation to Carry Pool 97,310 120,970 222,195 218,280 289,715
Unrealized Allocation to Carry Pool 125,371 50,693 (63,730 ) 176,064 (4,987 )
Total Compensation and Benefits 288,620 245,630 214,987 534,250 408,148
Occupancy and Related Charges 11,832 11,016 11,764 22,848 23,324
Other Operating Expenses 38,125 42,116 39,589 80,241 79,648
Total Segment Expenses 338,577 298,762 266,340 637,339 511,120
Income (Loss) attributable to noncontrolling interests 143 719 335 862 850
Economic Net Income (Loss) $ 666,172 $ 568,484 $ 376,186 $ 1,234,656 $ 861,614
Assets Under Management $ 63,129,200 $ 62,139,400 $ 59,417,000 $ 63,129,200 $ 59,417,000
Fee Paying Assets Under Management $ 46,758,800 $ 47,161,900 $ 46,167,300 $ 46,758,800 $ 46,167,300
Equity Invested $ 1,258,200 $ 2,047,400 $ 1,454,400 $ 3,305,600 $ 4,006,200
Uncalled Commitments $ 21,078,400 $ 18,690,000 $ 17,109,800 $ 21,078,400 $ 17,109,800
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 66,055 $ 64,504 $ 67,132 $ 130,559 $ 139,486
Monitoring Fees — — — — —
Transaction Fees 3,873 13,430 7,350 17,303 13,372
Fee Credits (3,172 ) (10,588 ) (6,352 ) (13,760 ) (10,682 )
Total Management, Monitoring and Transaction Fees, Net 66,756 67,346 68,130 134,102 142,176
Performance Income
Realized Carried Interest 8,953 — — 8,953 24,750
Incentive Fees 5,893 5,665 11,478 11,558 28,497
Unrealized Carried Interest 27,987 12,347 25,738 40,334 25,609
Total Performance Income 42,833 18,012 37,216 60,845 78,856
Investment Income (Loss)
Net Realized Gains (Losses) 31,192 684 14,284 31,876 19,763
Net Unrealized Gains (Losses) (11,988 ) (87,877 ) 3,751 (99,865 ) 18,565
Total Realized and Unrealized 19,204 (87,193 ) 18,035 (67,989 ) 38,328
Net Interest and Dividends 59,390 51,872 33,822 111,262 43,399
Total Investment Income (Loss) 78,594 (35,321 ) 51,857 43,273 81,727
Total Segment Revenues 188,183 50,037 157,203 238,220 302,759
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 22,785 24,005 26,904 46,790 53,649
Realized Allocation to Carry Pool 3,581 — — 3,581 9,900
Unrealized Allocation to Carry Pool 11,195 4,938 10,295 16,133 10,242
Total Compensation and Benefits 37,561 28,943 37,199 66,504 73,791
Occupancy and Related Charges 2,977 3,122 2,544 6,099 4,716
Other Operating Expenses 10,617 14,954 11,474 25,571 19,981
Total Segment Expenses 51,155 47,019 51,217 98,174 98,488
Income (Loss) attributable to noncontrolling interests 478 175 385 653 907
Economic Net Income (Loss) $ 136,550 $ 2,843 $ 105,601 $ 139,393 $ 203,364
Assets Under Management $ 38,440,400 $ 36,988,600 $ 38,540,900 $ 38,440,400 $ 38,540,900
Fee Paying Assets Under Management $ 36,974,000 $ 35,722,600 $ 33,489,000 $ 36,974,000 $ 33,489,000
Equity Invested $ 320,800 $ 649,300 $ 724,400 $ 970,100 $ 1,458,500
Uncalled Commitments $ 4,827,900 $ 2,865,600 $ 2,674,400 $ 4,827,900 $ 2,674,400
Gross Dollars Invested $ 1,110,100 $ 1,210,800 $ 768,200 $ 2,320,900 $ 1,757,900
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ — $ — $ — $ — $ —
Monitoring Fees — — — — —
Transaction Fees 48,757 43,257 31,615 92,014 96,089
Fee Credits — — — — —
Total Management, Monitoring and Transaction Fees, Net 48,757 43,257 31,615 92,014 96,089
Performance Income
Realized Carried Interest — — — — —
Incentive Fees — — — — —
Unrealized Carried Interest — — — — —
Total Performance Income — — — — —
Investment Income (Loss)
Net Realized Gains (Losses) (749 ) (3,281 ) (515 ) (4,030 ) (464 )
Net Unrealized Gains (Losses) (1,122 ) (2,207 ) (957 ) (3,329 ) (685 )
Total Realized and Unrealized (1,871 ) (5,488 ) (1,472 ) (7,359 ) (1,149 )
Net Interest and Dividends 7,782 6,634 3,850 14,416 8,245
Total Investment Income (Loss) 5,911 1,146 2,378 7,057 7,096
Total Segment Revenues 54,668 44,403 33,993 99,071 103,185
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 10,147 9,055 8,018 19,202 23,290
Realized Allocation to Carry Pool — — — — —
Unrealized Allocation to Carry Pool — — — — —
Total Compensation and Benefits 10,147 9,055 8,018 19,202 23,290
Occupancy and Related Charges 666 658 449 1,324 906
Other Operating Expenses 2,871 3,876 3,248 6,747 7,483
Total Segment Expenses 13,684 13,589 11,715 27,273 31,679
Income (Loss) attributable to noncontrolling interests 3,762 2,728 2,486 6,490 4,651
Economic Net Income (Loss) $ 37,222 $ 28,086 $ 19,792 $ 65,308 $ 66,855
Syndicated Capital $ 432,100 $ 248,700 $ 166,700 $ 680,800 $ 258,100
KKR
BALANCE SHEET
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
As of As of
June 30, 2015 December 31, 2014
Cash and short-term investments $ 2,025,779 $ 1,121,385
Investments 9,743,800 (a) 9,807,606
Unrealized carry (b) 1,579,405 (b) 1,283,022 (b)
Other assets 1,025,889 999,654
Total assets $ 14,374,873 $ 13,211,667
Debt obligations - KKR (ex-KFN) $ 2,000,000 $ 1,527,000
Debt obligations - KFN 657,310 657,310
Preferred shares - KFN 373,750 373,750
Other liabilities 334,426 413,808
Total liabilities 3,365,486 2,971,868
Noncontrolling interests 126,140 121,574
Book value $ 10,883,247 $ 10,118,225
Book value per adjusted unit $ 12.77 $ 12.07
(a) See schedule of investments that follows on the next page.
As of As of
(b) Unrealized Carry
June 30, 2015 December 31, 2014
Private Markets $ 1,468,815 $ 1,196,633
Public Markets 110,590 86,389
Total $ 1,579,405 $ 1,283,022
KKR
SCHEDULE OF INVESTMENTS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except percentage amounts)
As of June 30, 2015
Investments Cost Fair
Value
Fair Value as a
Percentage of
Total Investments
Private Equity Co-Investments $ 2,285,974 $ 2,909,238 29.9 %
Private Equity Funds 822,314 1,103,850 11.3 %
Private Equity Total 3,108,288 4,013,088 41.2 %
Energy 969,845 721,413 7.4 %
Real Estate 729,454 775,054 8.0 %
Infrastructure 172,138 180,351 1.9 %
Real Assets Total 1,871,437 1,676,818 17.3 %
Private Markets Total 4,979,725 5,689,906 58.5 %
Special Situations 769,487 832,958 8.5 %
Direct Lending 126,019 124,702 1.3 %
Mezzanine 89,287 96,125 0.9 %
Alternative Credit 984,793 1,053,785 10.7 %
CLOs 1,493,080 1,309,936 13.4 %
Liquid Credit 177,781 181,120 1.9 %
Credit Total 2,655,654 2,544,841 26.0 %
Specialty Finance 282,648 250,893 2.6 %
Public Markets Total 2,938,302 2,795,734 28.6 %
Other 1,251,224 1,258,160 12.9 %
Total Investments $ 9,169,251 $ 9,743,800 100.0 %
Significant Aggregate Portfolio Company Investments: (a)
First Data Corporation $ 1,061,332 $ 1,309,329 13.4 %
Walgreens Boots Alliance 165,776 615,574 6.3 %
HCA Inc. 29,455 226,780 2.3 %
Zimmer Biomet Holdings Inc. 68,572 100,485 1.0 %
U.S. Foodservice, Inc. 80,000 96,000 1.0 %
1,405,135 2,348,168 24.0 %
Other Investments 7,764,116 7,395,632 76.0 %
Total Investments $ 9,169,251 $ 9,743,800 100.0 %
(a) The significant aggregate portfolio company investments include the top five private equity investments in portfolio companies (other than investments expected to be syndicated or transferred in connection with new fundraising) based on their fair market value as of June 30, 2015. The fair value figures include the co-investment and the limited partner and/or general partner interests held by KKR in the underlying portfolio company.
KKR
ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
Private
Markets
Segment
Public
Markets
Segment
Total
Reportable
Segments
Quarter Ended June 30, 2015
March 31, 2015 $ 62,139,400 $ 36,988,600 $ 99,128,000
New Capital Raised 1,142,700 2,201,700 3,344,400
Distributions (3,447,000 ) (1,385,300 ) (b) (4,832,300 )
Change in Value 3,294,100 635,400 3,929,500
June 30, 2015 $ 63,129,200 $ 38,440,400 $ 101,569,600
Six Months Ended June 30, 2015
December 31, 2014 $ 61,505,800 $ 37,106,700 $ 98,612,500
New Capital Raised 2,733,800 4,449,600 7,183,400
Distributions (6,414,000 ) (3,233,900 ) (c) (9,647,900 )
Net Changes in Fee Base of Certain Funds (a) — (238,600 ) (238,600 )
Change in Value 5,303,600 356,600 5,660,200
June 30, 2015 $ 63,129,200 $ 38,440,400 $ 101,569,600
Trailing Twelve Months Ended June 30, 2015
June 30, 2014 $ 59,417,000 $ 38,540,900 $ 97,957,900
New Capital Raised 7,086,700 8,635,800 15,722,500
Distributions (10,504,000 ) (8,117,500 ) (d) (18,621,500 )
Net Changes in Fee Base of Certain Funds (a) — (238,600 ) (238,600 )
Change in Value 7,129,500 (380,200 ) 6,749,300
June 30, 2015 $ 63,129,200 $ 38,440,400 $ 101,569,600
*
Excludes those assets managed by entities where KKR does not hold more than a 50% ownership interest.
(a) Represents the impact of certain funds entering the post-investment period.
(b) Includes $463.7 million of redemptions by fund investors.
(c) Includes $1,116.9 million of redemptions by fund investors.
(d) Includes $3,132.4 million of redemptions by fund investors.
KKR
FEE PAYING ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
Private
Markets
Segment
Public
Markets
Segment
Total
Reportable
Segments
Quarter Ended June 30, 2015
March 31, 2015 $ 47,161,900 $ 35,722,600 $ 82,884,500
New Capital Raised 1,123,600 2,023,200 3,146,800
Distributions (1,723,600 ) (1,193,800 ) (b) (2,917,400 )
Change in Value 196,900 422,000 618,900
June 30, 2015 $ 46,758,800 $ 36,974,000 $ 83,732,800
Six Months Ended June 30, 2015
December 31, 2014 $ 47,262,500 $ 35,783,900 $ 83,046,400
New Capital Raised 2,444,100 4,217,000 6,661,100
Distributions (2,684,700 ) (2,780,200 ) (c) (5,464,900 )
Net Changes in Fee Base of Certain Funds (a) — (325,200 ) (325,200 )
Change in Value (263,100 ) 78,500 (184,600 )
June 30, 2015 $ 46,758,800 $ 36,974,000 $ 83,732,800
Trailing Twelve Months Ended June 30, 2015
June 30, 2014 $ 46,167,300 $ 33,489,000 $ 79,656,300
New Capital Raised 6,385,600 10,371,500 16,757,100
Distributions (5,151,600 ) (5,683,500 ) (d) (10,835,100 )
Net Changes in Fee Base of Certain Funds (a) — (325,200 ) (325,200 )
Change in Value (642,500 ) (877,800 ) (1,520,300 )
June 30, 2015 $ 46,758,800 $ 36,974,000 $ 83,732,800
* Excludes those assets managed by entities where KKR does not hold more than a 50% ownership interest.
(a) Represents the impact of certain funds entering the post-investment period.
(b) Includes $463.7 million of redemptions by fund investors.
(c) Includes $1,116.9 million of redemptions by fund investors.
(d) Includes $3,132.4 million of redemptions by fund investors.
KKR
INVESTMENT VEHICLE SUMMARY (a) (UNAUDITED)
As of June 30, 2015
(Amounts in millions, except percentages)
Investment Period Amount
Commencement
Date
End Date Commitment Uncalled
Commitments
Percentage
Committed
by General
Partner
Invested Realized Remaining
Cost
Remaining Fair
Value
Private Markets
Private Equity Funds
European Fund IV 12/2014 12/2020 $ 2,670.1 $ 2,509.1 7.4% $ 161.0 $ — $ 161.0 $ 206.6
Asian Fund II (b) 4/2013 4/2019 5,825.0 4,045.0 1.3% 2,052.0 272.0 1,779.9 3,032.7
North America Fund XI (b) 9/2012 9/2018 8,718.4 4,512.6 2.9% 5,024.4 1,024.2 4,205.7 6,331.8
China Growth Fund 11/2010 11/2016 1,010.0 448.1 1.0% 561.9 61.1 544.5 782.5
E2 Investors (Annex Fund) 8/2009 11/2013 195.8 — 4.9% 195.8 195.7 18.1 77.2
European Fund III 3/2008 3/2014 6,141.0 789.1 4.6% 5,351.9 4,269.1 3,338.3 4,520.4
Asian Fund 7/2007 4/2013 3,983.3 147.5 2.5% 3,835.8 5,343.1 1,954.9 2,699.1
2006 Fund 9/2006 9/2012 17,642.2 525.6 2.1% 17,116.6 16,154.9 8,760.3 14,972.7
European Fund II 11/2005 10/2008 5,750.8 — 2.1% 5,750.8 6,574.3 841.1 1,722.1
Millennium Fund 12/2002 12/2008 6,000.0 — 2.5% 6,000.0 11,699.6 1,219.7 2,232.2
European Fund 12/1999 12/2005 3,085.4 — 3.2% 3,085.4 8,736.6 — 44.5
Total Private Equity Funds 61,022.0 12,977.0 49,135.6 54,330.6 22,823.5 36,621.8
Co-Investment Vehicles (b) Various Various 5,506.1 2,531.1 Various 3,072.4 1,710.8 2,243.2 3,265.0
Total Private Equity 66,528.1 15,508.1 52,208.0 56,041.4 25,066.7 39,886.8
Real Assets
Energy Income and Growth Fund 9/2013 9/2018 1,974.2 1,217.7 12.8% 756.5 109.9 691.0 582.6
Natural Resources Fund Various Various 887.4 2.9 Various 884.5 96.6 809.9 340.1
Global Energy Opportunities (b) Various Various 1,026.4 809.6 Various 250.2 53.6 218.4 146.0
Global Infrastructure Investors (b) 9/2011 10/2014 1,040.1 132.8 4.8% 935.2 123.8 907.2 975.3
Global Infrastructure Investors II 10/2014 10/2020 2,838.7 2,788.4 4.4% 50.3 — 50.3 53.7
Infrastructure Co-Investments Various Various 1,125.0 — Various 1,125.0 338.3 1,125.0 1,560.2
Real Estate Partners Americas (b) 5/2013 12/2016 1,229.1 618.9 16.3% 718.3 257.3 609.8 688.1
Real Assets 10,120.9 5,570.3 4,720.0 979.5 4,411.6 4,346.0
Private Markets Total 76,649.0 21,078.4 56,928.0 57,020.9 29,478.3 44,232.8
Public Markets
Special Situations Fund 12/2012 12/2015 2,144.0 168.4 11.6% 1,975.6 144.0 1,975.6 2,348.4
Special Situations Fund II 12/2014 (c) 1,694.5 1,609.4 8.9% 85.1 — 85.0 97.6
Mezzanine Fund 3/2010 3/2015 1,022.8 165.5 4.4% 857.3 354.1 708.6 789.1
Lending Partners 12/2011 12/2014 460.2 81.9 15.2% 378.3 140.3 349.5 347.4
Lending Partners II 06/2014 06/2017 1,335.9 902.6 3.7% 433.3 — 433.3 469.1
Lending Partners Europe 03/2015 03/2018 556.6 525.2 7.3% 31.4 — 31.4 36.7
Other Alternative Credit Vehicles Various Various 3,650.3 1,374.9 Various 2,275.4 1,242.8 1,537.6 1,814.9
Public Markets Total 10,864.3 4,827.9 6,036.4 1,881.2 5,121.0 5,903.2
Grand Total $ 87,513.3 $ 25,906.3 $ 62,964.4 $ 58,902.1 $ 34,599.3 $ 50,136.0
(a) Reflects investment vehicles for which KKR has the ability to earn carried interest.
(b) The “Invested” and “Realized” columns include the amounts of any realized investments that restored the unused capital commitments of the fund investors.
(c) Three years from final close.
KKR
DISTRIBUTION CALCULATION (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Cash Revenues
Fees $ 271,500 $ 300,075 $ 254,237 $ 571,575 $ 581,860
Realized cash carry 252,227 302,425 555,488 554,652 749,038
Net realized investment income - KKR (ex-KFN) 195,408 191,477 245,711 386,885 438,603
Net realized investment income - KFN 56,258 39,865 36,382 96,123 36,382
Total Cash Revenues 775,393 833,842 1,091,818 1,609,235 1,805,883
Cash Expenses
Cash compensation and benefits 98,871 107,027 91,444 205,898 200,359
Realized cash carry allocated to carry pool 100,891 120,970 222,195 221,861 299,615
Occupancy and related charges 15,475 14,796 14,757 30,271 28,946
Other operating expenses 51,613 60,946 54,311 112,559 107,112
Total Cash Expenses 266,850 303,739 382,707 570,589 636,032
Cash income (loss) before noncontrolling interests and local taxes 508,543 530,103 709,111 1,038,646 1,169,851
Less: local income taxes (12,753 ) (9,950 ) (4,932 ) (22,703 ) (15,662 )
Less: noncontrolling interests (4,383 ) (3,622 ) (3,206 ) (8,005 ) (6,408 )
Total Distributable Earnings 491,407 516,531 700,973 1,007,938 1,147,781
Less: estimated current corporate income taxes (26,155 ) (28,855 ) (19,025 ) (55,010 ) (52,470 )
Distributable Earnings, net of taxes 465,252 487,676 681,948 952,928 1,095,311
Less: Undistributed net realized investment income - KKR (ex-KFN) (117,245 ) (114,886 ) (147,427 ) (232,131 ) (263,162 )
Distributed Earnings $ 348,007 $ 372,790 $ 534,521 $ 720,797 $ 832,149
Distributable Earnings, net of taxes per KKR & Co. L.P. common unit $ 0.57 $ 0.60 $ 0.85 $ 1.17 $ 1.44
Distribution per KKR & Co. L.P. common unit $ 0.42 $ 0.46 $ 0.67 $ 0.88 $ 1.10
Components of Distribution per KKR & Co. L.P. Common Unit
After-tax FRE $ 0.07 $ 0.10 $ 0.09 $ 0.17 $ 0.24
Realized Cash Carry $ 0.18 $ 0.22 $ 0.41 $ 0.40 $ 0.58
Distributed Net Realized Investment Income - KKR (ex-KFN) $ 0.10 $ 0.09 $ 0.12 $ 0.19 $ 0.23
Distributed Net Realized Investment Income - KFN $ 0.07 $ 0.05 $ 0.05 $ 0.12 $ 0.05
Fee and yield earnings distribution per KKR & Co. L.P. common unit $ 0.15 $ 0.15 $ 0.15 $ 0.30 $ 0.31
Adjusted Units Eligible For Distribution 820,963,434 813,796,584 803,719,050
Payout Ratio 74.8 % 76.4 % 78.4 % 75.6 % 76.0 %
KKR
Notes to Reportable Segments (Unaudited)
The segment key performance measures that follow are used by management in making operating and resource deployment decisions as well as assessing the overall performance of each of KKR’s reportable business segments. The reportable segments for KKR’s business are presented prior to giving effect to the allocation of income (loss) between KKR & Co. L.P. and KKR Holdings L.P. and as such represent the business in total. In addition, KKR’s reportable segments are presented without giving effect to the consolidation of the funds that KKR manages.
KKR discloses the following financial measures in this earnings release that are calculated and presented using methodologies other than in accordance with GAAP. We believe that providing these performance measures on a supplemental basis to our GAAP results is helpful to unitholders in assessing the overall performance of KKR’s businesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP. We caution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included elsewhere within this earnings release.
Fee related earnings (“FRE”) is comprised of (i) total management, monitoring and transaction fees, net, plus incentive fees, less (ii) cash compensation and benefits, occupancy and related charges and other operating expenses. It is a measure of the operating earnings of KKR and its business segments before carried interest and related carry pool allocations and investment income and comprises a portion of KKR's quarterly distribution. We believe this measure is useful to unitholders as it provides additional insight into the operating profitability of our fee generating management companies and capital markets businesses. The components of FRE on a segment basis differ from the equivalent GAAP amounts on a consolidated basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of charges relating to carry pool allocations; (v) the exclusion of non-cash equity-based charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR & Co. L.P. 2010 Equity Incentive Plan (“Equity Incentive Plan”); (vi) the exclusion of certain reimbursable expenses; and (vii) the exclusion of certain non-recurring items. After tax FRE represents FRE after deductions for current corporate and local income taxes and noncontrolling interests.
Economic net income (loss) (“ENI”) is a measure of profitability for KKR’s reportable segments and is used by management as an alternative measurement of the operating and investment earnings of KKR and its business segments. We believe this measure is useful to unitholders as it provides additional insight into the overall profitability of KKR’s businesses inclusive of carried interest and related carry pool allocations and investment income. ENI is comprised of total segment revenues less total segment expenses and certain economic interests in KKR’s segments held by third parties. ENI differs from net income (loss) on a GAAP basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of non-cash equity-based charges and other non-cash compensation charges borne by KKR Holdings or incurred under the Equity Incentive Plan and other securities that are exchangeable for common units of KKR & Co. L.P.; (v) the exclusion of certain non-recurring items; (vi) the exclusion of investment income (loss) relating to noncontrolling interests; and (vii) the exclusion of income taxes.
Fee and Yield Earnings is comprised of FRE and net interest and dividends from KKR’s business segments. This measure is used by management as a measure of the cash earnings of KKR and its business segments’ investment income. We believe this measure is useful to unitholders as it provides insight into the amount of KKR’s cash earnings, significant portions of which tend to be more recurring than realized carried interest and net realized gains from quarter to quarter.
Fee and Yield EBITDA is comprised of Fee and Yield Earnings before the impact of depreciation of fixed assets and core interest expense. This is used by management as another measure of the cash earnings of KKR and its business segments investment income. We believe this measure is also useful to unitholders as it provides insight into the amount of KKR’s cash earnings before the impact of interest expense, significant portions of which tend to be more recurring than realized carried interest and realized investment income from quarter to quarter.
Net realized investment income – KKR (ex-KFN) refers to net cash income from (i) realized investment gains and losses excluding certain realized investment losses to the extent unrealized losses on these investments were recognized prior to the combination with KPE on October 1, 2009, (ii) dividend income, and (iii) interest income net of interest expense in each case generated by KKR (excluding KFN). This term describes a portion of KKR’s quarterly distribution and excludes net realized investment income of KFN.
Net realized investment income – KFN refers to net cash income from (i) realized investment gains and losses, (ii) dividend income and (iii) interest income net of interest expense less certain general and administrative expenses incurred in the generation of net realized investment income in each case generated by KFN. This term describes a portion of KKR’s quarterly distribution.
Investments is a term used solely for purposes of financial presentation of a portion of KKR’s balance sheet and includes majority investments in subsidiaries that operate KKR’s asset management and broker-dealer businesses, including the general partner interests of KKR’s investment funds.
Total distributable earnings is the sum of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool, (iii) net realized investment income — KKR (ex-KFN) and (iv) net realized investment income — KFN; less (i) applicable local income taxes, if any, and (ii) noncontrolling interests. We believe this measure is useful to unitholders as it provides a supplemental measure to assess performance, excluding the impact of mark-to-market gains (losses), and amounts available for distribution to KKR unitholders. However, total distributable earnings is not a measure that calculates actual distributions under KKR’s current distribution policy.
Assets under management (“AUM”) represent the assets from which KKR is entitled to receive fees or a carried interest and general partner capital. We believe this measure is useful to unitholders as it provides additional insight into KKR’s capital raising activities and the overall activity in its investment funds. KKR calculates the amount of AUM as of any date as the sum of: (i) the fair value of the investments of KKR’s investment funds plus uncalled capital commitments from these funds; (ii) the fair value of investments in KKR’s co-investment vehicles; (iii) the net asset value of certain of KKR’s fixed income products; (iv) the value of outstanding CLOs (excluding CLOs wholly-owned by KKR); and (v) the fair value of other assets managed by KKR. AUM excludes those assets managed by entities where KKR does not hold more than a 50% ownership interest. KKR’s definition of AUM is not based on any definition of AUM that may be set forth in the agreements governing the investment funds, vehicles or accounts that it manages or calculated pursuant to any regulatory definitions.
Fee paying AUM (“FPAUM”) represents only those assets under management from which KKR receives management fees. We believe this measure is useful to unitholders as it provides additional insight into the capital base upon which KKR earns management fees. This relates to KKR’s capital raising activities and the overall activity in its investment funds or CLOs, for only those funds or CLOs where KKR receives fees (i.e., excluding vehicles that receive only carried interest or general partner capital). FPAUM is the sum of all of the individual fee bases that are used to calculate KKR’s fees and differs from AUM in the following respects: (i) assets from which KKR does not receive a fee are excluded (i.e., assets with respect to which it receives only carried interest) and (ii) certain assets, primarily in its private equity funds, are reflected based on capital commitments and invested capital as opposed to fair value because fees are not impacted by changes in the fair value of underlying investments.
Equity invested is the aggregate amount of equity capital that has been invested by KKR’s investment funds and carry-yielding co-investment vehicles and is used as a measure of investment activity for KKR and its business segments during a given period. We believe this measure is useful to unitholders as it provides additional insight into KKR’s investments among its investment funds and carry-yielding co-investment vehicles and replaces committed dollars invested. Such amounts include: (i) capital invested by fund investors and co-investors with respect to which KKR is entitled to a carried interest and (ii) capital invested by KKR’s investment funds, including investments made using investment financing arrangements.
Gross dollars invested is the aggregate amount of capital that has been invested by all of KKR’s Public Markets investment vehicles in our private credit non-liquid strategies and is used as a measure of investment activity for a portion of KKR’s Public Markets segment in a given period. We believe this measure is useful to unitholders as it provides additional insight into KKR’s investment of capital across private credit non-liquid strategies for all the investment vehicles in the Public Markets segment. Such amounts include capital invested by fund investors and co-investors with respect to which KKR’s Public Markets business is entitled to a fee or carried interest.
Syndicated capital is generally the aggregate amount of capital in transactions originated by KKR and its investment funds and carry-yielding co-investment vehicles, which has been distributed to third parties in exchange for a fee. It does not include (i) capital invested in such transactions by KKR investment funds and carry-yielding co-investment vehicles, which is instead reported in equity invested and (ii) debt capital that is arranged as part of the acquisition financing of transactions originated by KKR investment funds. Syndicated capital is used as a measure of investment activity for KKR and its business segments during a given period, and we believe that this measure is useful to unitholders as it provides additional insight into levels of syndication activity in KKR's Capital Markets segment and across its investment platform.
Uncalled commitments are used as a measure of unfunded capital commitments that KKR’s investment funds and carry-paying co-investment vehicles have received from partners to contribute capital to fund future investments. We believe this measure is useful to unitholders as it provides additional insight into the amount of capital that is available to KKR’s investment funds to make future investments. Uncalled commitments are not reduced for investments completed using fund-level investment financing arrangements.
Adjusted units are used as a measure of the total equity ownership of KKR that is held by KKR & Co. L.P. (including equity awards issued under the Equity Incentive Plan), KKR Holdings and other holders of securities exchangeable into common units of KKR & Co. L.P. and represent the fully diluted unit count using the if-converted method. We believe this measure is useful to unitholders as it provides an indication of the total equity ownership of KKR as if all outstanding KKR Holdings units, equity awards issued under the Equity Incentive Plan and other exchangeable securities had been exchanged for common units of KKR & Co. L.P.
Core interest expense is used by management as an alternative measurement of interest expense incurred by KKR on a segment basis and excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR’s investment funds, investment vehicles and principal investments and also excludes interest expense incurred by KFN. The financing arrangements excluded from core interest expense are not direct obligations of the general partners of KKR’s private equity funds or its management companies, and in the case of debt obligations of KFN are non-recourse to KKR beyond the assets of KFN. On a segment basis, interest expense is included in net interest and dividends within total investment income. We believe this measure is useful to unitholders as it provides an indication of the amount of interest expense borne by KKR excluding interest expense that is allocated to KKR’s investment funds, other noncontrolling interest holders and KFN. Additionally, we believe this measure is useful for analyzing KKR’s ability to service its debt obligations other than the debt obligations of KFN.
Book value is a measure of the net assets of KKR’s reportable segments and is used by management primarily in assessing the unrealized value of KKR’s investment portfolio, including carried interest, as well as KKR’s overall liquidity position. We believe this measure is useful to unitholders as it provides additional insight into the assets and liabilities of KKR excluding the assets and liabilities that are allocated to noncontrolling interest holders. Book value differs from KKR & Co. L.P. partners’ capital on a GAAP basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings.
Cash and short-term investments represent cash and liquid short-term investments in high-grade, short-duration cash management strategies used by KKR to generate additional yield on our excess liquidity and is used by management in evaluating KKR’s liquidity position. We believe this measure is useful to unitholders as it provides additional insight into KKR’s available liquidity. Cash and short-term investments differ from cash and cash equivalents on a GAAP basis as a result of the inclusion of liquid short-term investments in cash and short-term investments.
Return on equity measures the amount of net income generated as a percentage of capital invested in KKR’s business. Return on equity is calculated by dividing Economic Net Income (Loss), After Taxes on a trailing twelve-month basis by the average book value during the period.
Cash return on equity measures the amount of cash income generated as a percentage of capital invested in KKR’s business. Cash return on equity is calculated by dividing Distributable Earnings, net of taxes on a trailing twelve-month basis by the average book value during the period.
KKR
EXHIBIT A
KKR'S PORTION OF TOTAL UNCALLED COMMITMENTS TO ITS INVESTMENT FUNDS
(Amounts in thousands)
Uncalled
Commitments
Private Markets
European Fund IV $ 184,700
North America Fund XI 166,900
Energy Income and Growth Fund 157,200
Global Infrastructure Investors II 121,600
Real Estate Partners Americas 100,700
European Fund III 63,500
Asian Fund II 51,800
2006 Fund 22,700
Co-Investment Vehicles 69,700
Other Private Markets Funds 13,500
Total Private Markets Commitments 952,300
Public Markets
Special Situations Fund 19,600
Special Situations Fund II 142,900
Mezzanine Fund 7,000
Lending Partners 12,500
Lending Partners II 33,800
Lending Partners Europe 33,800
Other Alternative Credit Vehicles 65,600
Total Public Markets Commitments 315,200
Total Uncalled Commitments $ 1,267,500
KKR
EXHIBIT B
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT - BASIC (GAAP BASIS)
TO ENI AFTER TAXES PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
Quarter Ended
June 30, 2015 March 31, 2015 June 30, 2014
Net income (loss) attributable to KKR & Co. L.P. per common unit - Basic $ 0.84 $ 0.62 $ 0.47
Weighted Average Common Units Outstanding - Basic 446,794,950 434,874,820 377,542,161
Net income (loss) attributable to KKR & Co. L.P. 376,306 270,507 178,215
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
325,703 239,008 186,776
Plus: Non-cash equity-based charges 69,478 76,550 92,957
Plus: Amortization of intangibles and other, net 37,910 (2,790 ) 37,455
Plus: Income taxes 30,547 16,138 6,176
Economic net income (loss) 839,944 599,413 501,579
Less: Provision for income taxes 44,836 21,235 6,330
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 48,453 52,265 40,877
Economic net income (loss) after taxes 746,655 525,913 454,372
Weighted Average Adjusted Units 852,128,762 848,061,661 800,747,528
Economic net income (loss) after taxes per adjusted unit $ 0.88 $ 0.62 $ 0.57
Six Months Ended
June 30, 2015 June 30, 2014
Net income (loss) attributable to KKR & Co. L.P. per common unit - Basic $ 1.47 $ 1.16
Weighted Average Common Units Outstanding - Basic 440,867,813 335,748,498
Net income (loss) attributable to KKR & Co. L.P. 646,813 388,256
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
564,711 487,590
Plus: Non-cash equity-based charges 146,028 170,485
Plus: Amortization of intangibles and other, net 35,120 57,624
Plus: Income taxes 46,685 27,878
Economic net income (loss) 1,439,357 1,131,833
Less: Provision for income taxes 66,071 42,911
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 100,718 80,230
Economic net income (loss) after taxes 1,272,568 1,008,692
Weighted Average Adjusted Units 850,106,448 762,873,784
Economic net income (loss) after taxes per adjusted unit $ 1.50 $ 1.32
KKR
EXHIBIT B (CONTINUED)
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. (GAAP BASIS)
TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS, FEE AND YIELD EARNINGS, FEE AND YIELD EBITDA, TOTAL DISTRIBUTABLE EARNINGS, AND TOTAL EBITDA (UNAUDITED)
(Amounts in thousands)
Quarter Ended
June 30, 2015 March 31, 2015 June 30, 2014
Net income (loss) attributable to KKR & Co. L.P. $ 376,306 $ 270,507 $ 178,215
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
325,703 239,008 186,776
Plus: Non-cash equity-based charges 69,478 76,550 92,957
Plus: Amortization of intangibles and other, net 37,910 (2,790 ) 37,455
Plus: Income taxes 30,547 16,138 6,176
Economic net income (loss) 839,944 599,413 501,579
Plus: Income attributable to segment noncontrolling interests 4,383 3,622 3,206
Less: Total investment income (loss) 383,650 220,621 162,158
Less: Net carried interest 355,136 265,108 248,902
Fee related earnings 105,541 117,306 93,725
Plus: Net interest and dividends 75,406 50,675 60,432
Fee and yield earnings 180,947 167,981 154,157
Plus: Depreciation and amortization 3,918 3,881 4,140
Plus: Core interest expense 30,750 25,332 19,205
Fee and yield EBITDA 215,615 197,194 177,502
Less: Depreciation and amortization 3,918 3,881 4,140
Less: Core interest expense 30,750 25,332 19,205
Less: Net interest and dividends 75,406 50,675 60,432
Plus: Realized cash carry, net of realized cash carry allocated to carry pool 151,336 181,455 333,293
Plus: Net realized investment income - KKR (ex-KFN) 195,408 191,477 245,711
Plus: Net realized investment income - KFN 56,258 39,865 36,382
Less: Local income taxes and noncontrolling interests 17,136 13,572 8,138
Total distributable earnings 491,407 516,531 700,973
Plus: Depreciation and amortization 3,918 3,881 4,140
Plus: Core interest expense 30,750 25,332 19,205
Plus: Local income taxes and noncontrolling interests 17,136 13,572 8,138
Total EBITDA $ 543,211 $ 559,316 $ 732,456
Six Months Ended
June 30, 2015 June 30, 2014
Net income (loss) attributable to KKR & Co. L.P. $ 646,813 $ 388,256
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
564,711 487,590
Plus: Non-cash equity-based charges 146,028 170,485
Plus: Amortization of intangibles and other, net 35,120 57,624
Plus: Income taxes 46,685 27,878
Economic net income (loss) 1,439,357 1,131,833
Plus: Income attributable to segment noncontrolling interests 8,005 6,408
Less: Total investment income (loss) 604,271 440,809
Less: Net carried interest 620,244 451,989
Fee related earnings 222,847 245,443
Plus: Net interest and dividends 126,081 71,596
Fee and yield earnings 348,928 317,039
Plus: Depreciation and amortization 7,799 8,175
Plus: Core interest expense 56,082 37,605
Fee and yield EBITDA 412,809 362,819
Less: Depreciation and amortization 7,799 8,175
Less: Core interest expense 56,082 37,605
Less: Net interest and dividends 126,081 71,596
Plus: Realized cash carry, net of realized cash carry allocated to carry pool 332,791 449,423
Plus: Net realized investment income - KKR (ex-KFN) 386,885 438,603
Plus: Net realized investment income - KFN 96,123 36,382
Less: Local income taxes and noncontrolling interests 30,708 22,070
Total distributable earnings 1,007,938 1,147,781
Plus: Depreciation and amortization 7,799 8,175
Plus: Core interest expense 56,082 37,605
Plus: Local income taxes and noncontrolling interests 30,708 22,070
Total EBITDA $ 1,102,527 $ 1,215,631
KKR
EXHIBIT B (CONTINUED)
RECONCILIATION OF KKR & CO. L.P. PARTNERS' CAPITAL (GAAP BASIS)
TO BOOK VALUE AND BOOK VALUE PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
As of As of
June 30, 2015 December 31, 2014
KKR & Co. L.P. partners’ capital $ 5,947,415 $ 5,382,691
Noncontrolling interests held by KKR Holdings L.P. 4,827,384 4,661,679
Equity impact of KKR Management Holdings Corp. and other 108,448 73,855
Book value 10,883,247 10,118,225
Adjusted units 852,145,905 838,020,974
Book value per adjusted unit $ 12.77 $ 12.07
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS)
TO CASH AND SHORT-TERM INVESTMENTS (UNAUDITED)
(Amounts in thousands)
As of As of
June 30, 2015 December 31, 2014
Cash and cash equivalents $ 1,824,686 $ 918,080
Liquid short-term investments 201,093 203,305
Cash and short-term investments $ 2,025,779 $ 1,121,385
KKR
EXHIBIT C
RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING - BASIC TO WEIGHTED AVERAGE ADJUSTED UNITS (UNAUDITED)
The following table provides a reconciliation of KKR's Weighted Average GAAP Common Units Outstanding to Weighted Average Adjusted Units.
Quarter Ended
June 30, 2015 March 31, 2015 June 30, 2014
Weighted Average GAAP Common Units Outstanding - Basic 446,794,950 434,874,820 377,542,161
Adjustments:
Weighted Average Unvested Common Units and Other Securities (a) 35,856,541 37,350,524 32,637,677
Weighted Average GAAP Common Units Outstanding - Diluted 482,651,491 472,225,344 410,179,838
Adjustments:
Weighted Average KKR Holdings Units (b) 369,477,271 375,836,317 390,567,690
Weighted Average Adjusted Units 852,128,762 848,061,661 800,747,528
Six Months Ended
June 30, 2015 June 30, 2014
Weighted Average GAAP Common Units Outstanding - Basic 440,867,813 335,748,498
Adjustments:
Weighted Average Unvested Common Units and Other Securities (a) 36,599,407 32,128,551
Weighted Average GAAP Common Units Outstanding - Diluted 477,467,220 367,877,049
Adjustments:
Weighted Average KKR Holdings Units (b) 372,639,228 394,996,735
Weighted Average Adjusted Units 850,106,448 762,873,784
RECONCILIATION OF GAAP COMMON UNITS OUTSTANDING - BASIC TO ADJUSTED UNITS AND ADJUSTED UNITS ELIGIBLE FOR DISTRIBUTION (UNAUDITED)
The following table provides a reconciliation of KKR's GAAP Common Units Outstanding to Adjusted Units and Adjusted Units Eligible for Distribution.
As of As of
June 30, 2015 December 31, 2014
GAAP Common Units Outstanding - Basic 450,396,361 433,330,540
Unvested Common Units and Other Securities (a) 34,262,715 27,493,685
GAAP Common Units Outstanding - Diluted 484,659,076 460,824,225
Adjustments:
KKR Holdings Units (b) 367,486,829 377,196,749
Adjusted Units 852,145,905 838,020,974
Adjustments:
Unvested Common Units and Unvested Other Securities (a) (31,182,471 ) (24,373,441 )
Adjusted Units Eligible For Distribution 820,963,434 813,647,533
(a) Represents equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan and other securities that are exchangeable into KKR & Co. L.P common units. The issuance of common units of KKR & Co. L.P. pursuant to such equity awards or other securities dilutes KKR common unitholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business.
(b) Common units that may be issued by KKR & Co. L.P. upon exchange of units in KKR Holdings L.P. for KKR common units.
View source version on businesswire.com: http://www.businesswire.com/news/home/20150723005353/en/
Contact:
Kohlberg Kravis Roberts & Co. L.P.
Investor Relations:
Craig Larson, +1-877-610-4910 (U.S.)
+1-212-230-9410
investor-relations@kkr.com
or
Media:
Kristi Huller, +1-212-750-8300
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KKR & Co. L.P. Announces Second Quarter 2015 Results
Strong Investment Performance Drives Record Economic Net Income
GAAP net income (loss) attributable to KKR & Co. L.P. was $376.3 million and $646.8 million for the quarter and six months ended June 30, 2015, respectively, up from $178.2 million and $388.3 million in the comparable periods of 2014.
Total distributable earnings was $491.4 million and $1,007.9 million for the quarter and six months ended June 30, 2015, respectively, down from $701.0 million and $1,147.8 million in the comparable periods of 2014.
Distribution per common unit was $0.42 and $0.88 for the quarter and six months ended June 30, 2015, respectively, down from $0.67 and $1.10 in the comparable periods of 2014.
Economic net income (“ENI”) was $839.9 million and $1,439.4 million for the quarter and six months ended June 30, 2015, respectively, up from $501.6 million and $1,131.8 million in the comparable periods of 2014.
ENI after taxes per adjusted unit was $0.88 and $1.50 for the quarter and six months ended June 30, 2015, respectively, up from $0.57 and $1.32 in the comparable periods of 2014.
Fee and yield earnings were $180.9 million and $348.9 million for the quarter and six months ended June 30, 2015, respectively, up from $154.2 million and $317.0 million in the comparable periods of 2014.
Book value was $10.9 billion on a total reportable segment basis as of June 30, 2015 or $12.77 per adjusted unit.
Return on equity and cash return on equity were 16.6% and 17.1%, respectively.
Assets under management (“AUM”) and fee paying assets under management (“FPAUM”) totaled $101.6 billion and $83.7 billion, respectively, as of June 30, 2015.
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Business Wire
Kohlberg Kravis Roberts & Co. L.P.
7 hours ago
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NEW YORK--(BUSINESS WIRE)--
KKR & Co. L.P. (KKR) today reported its second quarter 2015 results.
In April 2015, KKR held its final close for Lending Partners II, the successor fund to the predecessor Lending Partners fund. KKR closed this successor fund with over $1.3 billion of capital commitments, which surpassed the predecessor fund that had $460 million in total capital commitments.
In July 2015, KKR held its final close for Global Infrastructure Investors II, the successor fund to the predecessor Global Infrastructure Investors fund. KKR closed this successor fund with over $3.0 billion of capital commitments, which surpassed the predecessor fund that had $1.0 billion in total capital commitments.
“Our strong investment performance resulted in $840 million of Economic Net Income, a record quarterly figure for KKR,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. “Additionally, we continued to scale several growth areas including our infrastructure and alternative credit businesses.”
Note: Certain financial measures, including total distributable earnings, FRE, ENI, ENI after taxes, fee and yield earnings, book value, cash and short-term investments and adjusted units, are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Exhibits B and C for a reconciliation of such measures to financial results prepared in accordance with GAAP.
GAAP RESULTS
GAAP net income (loss) for the quarter and six months ended June 30, 2015, included net income (loss) attributable to KKR & Co. L.P. of $376.3 million and $646.8 million, respectively, and net income (loss) attributable to KKR & Co. L.P. per common unit of $0.78 and $1.35, respectively, on a diluted basis. For the quarter and six months ended June 30, 2014, net income (loss) attributable to KKR & Co. L.P. was $178.2 million and $388.3 million, respectively, and net income (loss) attributable to KKR & Co. L.P. per common unit was $0.43 and $1.06, respectively, on a diluted basis. The increase in both comparable periods was primarily due to (i) an increase in investment income and (ii) an increase in KKR & Co. L.P.’s ownership percentage in the KKR business.
SEGMENT RESULTS
KEY METRICS (UNAUDITED)
(Amounts in millions, except per adjusted unit amounts)
Quarter Ended Six Months Ended
June 30, 2015 June 30, 2014 % Change June 30, 2015 June 30, 2014 % Change
Total Distributable Earnings
Fees $ 272 $ 254 $ 572 $ 582
Realized Cash Carry 252 555 555 749
Net Realized Investment Income 251 282 483 475
Total Cash Revenues $ 775 $ 1,091 (29 )% $ 1,610 $ 1,806 (11 )%
Total Cash Expenses and Other 284 391 601 658
Total Distributable Earnings $ 491 $ 700 (30 )% $ 1,009 $ 1,148 (12 )%
Less: Estimated Current Corporate Income Taxes (26 ) (19 ) (55 ) (52 )
Distributable Earnings, net of taxes $ 465 $ 681 (32 )% $ 954 $ 1,096 (13 )%
Distributable Earnings, net of taxes per KKR & Co. L.P. common unit $ 0.57 $ 0.85 (33 )% $ 1.17 $ 1.44 (19 )%
Distribution per KKR & Co. L.P. common unit $ 0.42 $ 0.67 (37 )% $ 0.88 $ 1.10 (20 )%
Payout ratio 75 % 78 % 76 % 76 %
Economic Net Income
Management, Monitoring and Transaction Fees, Net $ 266 $ 243 $ 560 $ 553
Performance Income 598 429 1,046 785
Investment Income 384 162 604 441
Total Segment Revenues $ 1,248 $ 834 50 % $ 2,210 $ 1,779 24 %
Total Segment Expenses and Other 501 380 937 770
Economic Net Income, After-Taxes $ 747 $ 454 65 % $ 1,273 $ 1,009 26 %
Economic Net Income, After-Taxes per Adjusted Unit $ 0.88 $ 0.57 54 % $ 1.50 $ 1.32 14 %
Fee and Yield Earnings $ 181 $ 154 18 % $ 349 $ 317 10 %
Other
Book Value per Adjusted Unit $ 12.77 $ 12.52 2 %
Last Twelve Months Ended
June 30, 2015 June 30, 2014
Return on Equity 16.6% 28.7%
Cash Return on Equity 17.1% 22.2%
Private Markets
AUM was $63.1 billion as of June 30, 2015, an increase of $1.0 billion, compared to AUM of $62.1 billion as of March 31, 2015. The increase was primarily attributable to the appreciation in the fair value of our private equity portfolio and to a lesser extent new capital raised in European Fund IV and Global Infrastructure Investors II. These increases were offset by distributions to limited partners of our private equity funds arising from realizations.
FPAUM was $46.8 billion as of June 30, 2015, a decrease of $0.4 billion, compared to FPAUM of $47.2 billion as of March 31, 2015. The decrease was primarily attributable to distributions to limited partners of our private equity funds arising from realizations which were partially offset by new capital raised in European Fund IV and Global Infrastructure Investors II.
Total segment revenues were $1,004.9 million for the quarter ended June 30, 2015, an increase of $362.0 million, compared to total segment revenues of $642.9 million for the quarter ended June 30, 2014. Total segment revenues were $1,872.9 million for the six months ended June 30, 2015, an increase of $499.3 million, compared to total segment revenues of $1,373.6 million for the six months ended June 30, 2014. The increase in both comparable periods was principally attributable to (i) a higher level of investment income reflecting a higher level of appreciation in our private equity portfolio and (ii) an increase in performance income due to higher net carried interest resulting from more private equity funds earning carried interest and higher net overall appreciation in our private equity portfolio. For the three and six months ended June 30, 2015, the fair value of our private equity portfolio appreciated 7.4% and 11.8%, respectively.
ENI was $666.2 million for the quarter ended June 30, 2015, an increase of $290.0 million, compared to ENI of $376.2 million for the quarter ended June 30, 2014. The increase was primarily attributable to higher total segment revenues as described above, partially offset by higher allocations to the carry pool resulting from the higher levels of net carried interest.
Public Markets
AUM was $38.4 billion as of June 30, 2015, an increase of $1.4 billion, compared to AUM of $37.0 billion as of March 31, 2015. FPAUM was $37.0 billion as of June 30, 2015, an increase of $1.3 billion, compared to FPAUM of $35.7 billion as of March 31, 2015. For both AUM and FPAUM, the increases were primarily attributable to new capital raised, primarily in our CLOs, offset by distributions and redemptions across multiple strategies.
Total segment revenues were $188.2 million for the quarter ended June 30, 2015, an increase of $31.0 million, compared to total segment revenues of $157.2 million for the quarter ended June 30, 2014. The increase in revenues was primarily attributable to an increase in investment income across multiple strategies and the impact of yielding assets of KKR Financial Holdings LLC (“KFN”), which was acquired on April 30, 2014 but was not contributing to our investment income for one month of the second quarter of 2014.
Total segment revenues were $238.2 million for the six months ended June 30, 2015, a decrease of $64.6 million, compared to total segment revenues of $302.8 million for the six months ended June 30, 2014. The decrease was principally attributable to (i) a decrease in investment income due primarily to net unrealized losses in our CLOs and certain other Public Markets related investments and (ii) lower performance income for the period. These decreases were partially offset by an increase in net interest and dividends relating primarily to the yielding assets of KFN, which was acquired on April 30, 2014 but was not contributing to our investment income for the first four months of 2014.
ENI was $136.6 million for the quarter ended June 30, 2015, an increase of $31.0 million, compared to ENI of $105.6 million for the quarter ended June 30, 2014. The increase was principally attributable to the increase in total segment revenues as described above.
ENI was $139.4 million for the six months ended June 30, 2015, a decrease of $64.0 million, compared to ENI of $203.4 million for the six months ended June 30, 2014. The decrease was principally attributable to the decrease in total segment revenues as described above.
Capital Markets
Total segment revenues were $54.7 million for the quarter ended June 30, 2015, an increase of $20.7 million, compared to total segment revenues of $34.0 million for the quarter ended June 30, 2014. The increase in revenues primarily reflect a higher level of overall capital markets transaction activity for the quarter ended June 30, 2015.
Total segment revenues were $99.1 million for the six months ended June 30, 2015, an decrease of $4.1 million, compared to total segment revenues of $103.2 million for the six months ended June 30, 2014. The decrease in revenues primarily reflects a lower level of overall capital markets transaction activity for the six months ended June 30, 2015.
ENI was $37.2 million for the quarter ended June 30, 2015, an increase of $17.4 million, compared to ENI of $19.8 million for the quarter ended June 30, 2014. The increase primarily reflects the increase in total segment revenues as described above.
ENI was $65.3 million for the six months ended June 30, 2015, a decrease of $1.6 million, compared to ENI of $66.9 million for the six months ended June 30, 2014. The decrease primarily reflects the decrease in total segment revenues as described above, largely offset by lower compensation expense.
CAPITAL AND LIQUIDITY
As of June 30, 2015, KKR had $2.0 billion of cash and short-term investments and $3.0 billion of outstanding debt and preferred share obligations on a total reportable segment basis. This includes KFN’s debt obligations of $657.3 million and KFN’s 7.375% Series A LLC preferred shares of $373.8 million, which are non-recourse to KKR beyond the assets of KFN. As of June 30, 2015, KKR had a $1.0 billion revolving credit facility, which was undrawn. In addition, KKR has a $500.0 million revolving credit facility for use in its capital markets business, which was undrawn as of June 30, 2015.
As of June 30, 2015, KKR’s portion of total uncalled commitments to its investment funds was $1.3 billion. See Exhibit A for details.
DISTRIBUTION
A distribution of $0.42 per common unit has been declared, comprised of (i) $0.07 per common unit from after-tax FRE, (ii) $0.18 per common unit from realized cash carry, (iii) $0.10 per common unit from KKR’s net realized investment income and (iv) $0.07 per common unit from KFN’s net realized investment income. The distribution will be paid on August 18, 2015 to unitholders of record as of the close of business on August 3, 2015.
SUPPLEMENTAL INFORMATION
A slide presentation containing supplemental commentary about the Company's financial results for the fiscal quarter ended June 30, 2015 may be accessed through the KKR Investor Relations section of the KKR website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. The presentation will be referenced on the conference call discussed below.
CONFERENCE CALL
A conference call to discuss KKR's financial results will be held on Thursday, July 23, 2015 at 10:00 a.m. EDT. The conference call may be accessed by dialing (877) 303-2917 (U.S. callers) or +1 (253) 237-1135 (non-U.S. callers); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Investor Center section of KKR's website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. A replay of the live broadcast will be available on KKR's website or by dialing (855) 859-2056 (U.S. callers) or +1 (404) 537-3406 (non-U.S. callers), pass code 80669130, beginning approximately two hours after the broadcast.
From time to time, KKR may use its website as a channel of distribution of material company information. Financial and other important information regarding KKR is routinely posted and accessible on the Investor Center for KKR & Co. L.P. at http://ir.kkr.com/kkr_ir/kkr_events.cfm. In addition, you may automatically receive email alerts and other information about KKR by enrolling your email address at the “Email Alerts” area of the Investor Center on the website.
ABOUT KKR
KKR is a leading global investment firm that manages investments across multiple asset classes including private equity, energy, infrastructure, real estate, credit and hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation at the asset level. KKR invests its own capital alongside its partners' capital and brings opportunities to others through its capital markets business. References to KKR’s investments may include the activities of its sponsored funds. For additional information about KKR & Co. L.P. (KKR), please visit KKR's website at www.kkr.com.
FORWARD-LOOKING STATEMENTS
This release contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements are based on KKR’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or are within its control. If a change occurs, KKR’s business, financial condition, liquidity and results of operations, including but not limited to AUM, FPAUM, FRE, total distributable earnings, ENI, ENI after taxes, fee and yield earnings, fee and yield EBITDA, equity invested and syndicated capital, uncalled commitments, core interest expense, cash and short-term investments, net realized investment income and book value, may vary materially from those expressed in the forward-looking statements. The following factors, among others, could cause actual results to vary from the forward-looking statements: the general volatility of the capital markets; failure to realize the benefits of or changes in KKR’s business strategies including the ability to realize the anticipated synergies from acquisitions or strategic partnerships ; availability, terms and deployment of capital; availability of qualified personnel and expense of recruiting and retaining such personnel; changes in the asset management industry, interest rates or the general economy; underperformance of KKR's investments and decreased ability to raise funds; and the degree and nature of KKR’s competition. KKR does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made except as required by law. In addition, KKR’s business strategy is focused on the long term and financial results are subject to significant volatility. Additional information about factors affecting KKR is available in KKR & Co. L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC on February 27, 2015, quarterly reports on Form 10-Q for subsequent quarters and other filings with the SEC, which are available at www.sec.gov.
KKR
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
Quarter Ended Six Months Ended
June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Revenues
Fees and Other $ 255,874 $ 249,370 $ 547,219 $ 552,296
Expenses
Compensation and Benefits 411,691 358,730 776,690 689,768
Occupancy and Related Charges 16,172 16,059 31,904 31,467
General, Administrative and Other 126,314 210,536 260,616 337,261
Total Expenses 554,177 585,325 1,069,210 1,058,496
Investment Income (Loss)
Net Gains (Losses) from Investment Activities 3,110,604 1,971,850 5,030,429 3,944,030
Dividend Income 360,556 272,902 439,371 369,606
Interest Income 302,985 215,872 599,143 377,832
Interest Expense (139,427 ) (65,997 ) (251,390 ) (100,728 )
Total Investment Income (Loss) 3,634,718 2,394,627 5,817,553 4,590,740
Income (Loss) Before Taxes 3,336,415 2,058,672 5,295,562 4,084,540
Income Taxes 30,547 6,176 46,685 27,878
Net Income (Loss) 3,305,868 2,052,496 5,248,877 4,056,662
Net Income (Loss) Attributable to
Redeemable Noncontrolling Interests (891 ) (6,809 ) 1,042 3,828
Net Income (Loss) Attributable to
Noncontrolling Interests and Appropriated Capital 2,930,453 1,881,090 4,601,022 3,664,578
Net Income (Loss) Attributable to KKR & Co. L.P. $ 376,306 $ 178,215 $ 646,813 $ 388,256
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic $ 0.84 $ 0.47 $ 1.47 $ 1.16
Diluted (a) $ 0.78 $ 0.43 $ 1.35 $ 1.06
Weighted Average Common Units Outstanding
Basic 446,794,950 377,542,161 440,867,813 335,748,498
Diluted (a) 482,651,491 410,179,838 477,467,220 367,877,049
(a) KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit since the exchange of these units would not dilute KKR’s respective ownership interests in the KKR Group Partnerships.
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 181,401 $ 173,780 $ 178,674 $ 355,181 $ 374,067
Monitoring Fees 47,713 97,838 29,610 145,551 65,973
Transaction Fees 92,951 103,286 84,305 196,237 247,821
Fee Credits (56,458 ) (80,494 ) (49,830 ) (136,952 ) (134,498 )
Total Management, Monitoring and Transaction Fees, Net 265,607 294,410 242,759 560,017 553,363
Performance Income
Realized Carried Interest 252,227 302,425 555,488 554,652 749,038
Incentive Fees 5,893 5,665 11,478 11,558 28,497
Unrealized Carried Interest 340,366 139,284 (137,826 ) 479,650 7,821
Total Performance Income 598,486 447,374 429,140 1,045,860 785,356
Investment Income (Loss)
Net Realized Gains (Losses) 176,260 180,667 221,661 356,927 403,389
Net Unrealized Gains (Losses) 131,984 (10,721 ) (119,935 ) 121,263 (34,176 )
Total Realized and Unrealized 308,244 169,946 101,726 478,190 369,213
Net Interest and Dividends 75,406 50,675 60,432 126,081 71,596
Total Investment Income (Loss) 383,650 220,621 162,158 604,271 440,809
Total Segment Revenues 1,247,743 962,405 834,057 2,210,148 1,779,528
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 98,871 107,027 91,444 205,898 200,359
Realized Allocation to Carry Pool 100,891 120,970 222,195 221,861 299,615
Unrealized Allocation to Carry Pool 136,566 55,631 (53,435 ) 192,197 5,255
Total Compensation and Benefits 336,328 283,628 260,204 619,956 505,229
Occupancy and Related Charges 15,475 14,796 14,757 30,271 28,946
Other Operating Expenses 51,613 60,946 54,311 112,559 107,112
Total Segment Expenses 403,416 359,370 329,272 762,786 641,287
Income (Loss) attributable to noncontrolling interests 4,383 3,622 3,206 8,005 6,408
Economic Net Income (Loss) (a) $ 839,944 $ 599,413 $ 501,579 $ 1,439,357 $ 1,131,833
Provision for Income Taxes 44,836 21,235 6,330 66,071 42,911
Equity-based Charges 48,453 52,265 40,877 100,718 80,230
Economic Net Income (Loss), After Taxes (b) $ 746,655 $ 525,913 $ 454,372 $ 1,272,568 $ 1,008,692
Economic Net Income (Loss), After Taxes Per Adjusted Unit $ 0.88 $ 0.62 $ 0.57 $ 1.50 $ 1.32
Weighted Average Adjusted Units (Fully Diluted Basis) (a) 852,128,762 848,061,661 800,747,528 850,106,448 762,873,784
Assets Under Management $ 101,569,600 $ 99,128,000 $ 97,957,900 $ 101,569,600 $ 97,957,900
Fee Paying Assets Under Management $ 83,732,800 $ 82,884,500 $ 79,656,300 $ 83,732,800 $ 79,656,300
Equity Invested and Syndicated Capital $ 2,011,100 $ 2,945,400 $ 2,345,500 $ 4,956,500 $ 5,722,800
Uncalled Commitments $ 25,906,300 $ 21,555,600 $ 19,784,200 $ 25,906,300 $ 19,784,200
Other Information
Fee Related Earnings $ 105,541 $ 117,306 $ 93,725 $ 222,847 $ 245,443
Plus: Net Interest and Dividends 75,406 50,675 60,432 126,081 71,596
Fee and Yield Earnings (a) $ 180,947 $ 167,981 $ 154,157 $ 348,928 $ 317,039
Plus: Depreciation and Amortization 3,918 3,881 4,140 7,799 8,175
Plus: Core Interest Expense 30,750 25,332 19,205 56,082 37,605
Fee and Yield EBITDA (a) $ 215,615 $ 197,194 $ 177,502 $ 412,809 $ 362,819
Total Distributable Earnings (a) $ 491,407 $ 516,531 $ 700,973 $ 1,007,938 $ 1,147,781
GAAP interest expense $ 139,427 $ 111,963 $ 65,997 $ 251,390 $ 100,728
Less: interest expense related to debt obligations
from investment financing arrangements and KFN 108,677 86,631 46,792 195,308 63,123
Core Interest Expense (a) $ 30,750 $ 25,332 $ 19,205 $ 56,082 $ 37,605
(a) See definitions for economic net income (loss), adjusted units, fee and yield earnings, fee and yield EBITDA, total distributable earnings and core interest expense under “Notes to Reportable Segments.”
(b) Represents economic net income (loss) after reductions for income taxes and equity-based charges.
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 115,346 $ 109,276 $ 111,542 $ 224,622 $ 234,581
Monitoring Fees 47,713 97,838 29,610 145,551 65,973
Transaction Fees 40,321 46,599 45,340 86,920 138,360
Fee Credits (53,286 ) (69,906 ) (43,478 ) (123,192 ) (123,816 )
Total Management, Monitoring and Transaction Fees, Net 150,094 183,807 143,014 333,901 315,098
Performance Income
Realized Carried Interest 243,274 302,425 555,488 545,699 724,288
Incentive Fees — — — — —
Unrealized Carried Interest 312,379 126,937 (163,564 ) 439,316 (17,788 )
Total Performance Income 555,653 429,362 391,924 985,015 706,500
Investment Income (Loss)
Net Realized Gains (Losses) 145,817 183,264 207,892 329,081 384,090
Net Unrealized Gains (Losses) 145,094 79,363 (122,729 ) 224,457 (52,056 )
Total Realized and Unrealized 290,911 262,627 85,163 553,538 332,034
Net Interest and Dividends 8,234 (7,831 ) 22,760 403 19,952
Total Investment Income (Loss) 299,145 254,796 107,923 553,941 351,986
Total Segment Revenues 1,004,892 867,965 642,861 1,872,857 1,373,584
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 65,939 73,967 56,522 139,906 123,420
Realized Allocation to Carry Pool 97,310 120,970 222,195 218,280 289,715
Unrealized Allocation to Carry Pool 125,371 50,693 (63,730 ) 176,064 (4,987 )
Total Compensation and Benefits 288,620 245,630 214,987 534,250 408,148
Occupancy and Related Charges 11,832 11,016 11,764 22,848 23,324
Other Operating Expenses 38,125 42,116 39,589 80,241 79,648
Total Segment Expenses 338,577 298,762 266,340 637,339 511,120
Income (Loss) attributable to noncontrolling interests 143 719 335 862 850
Economic Net Income (Loss) $ 666,172 $ 568,484 $ 376,186 $ 1,234,656 $ 861,614
Assets Under Management $ 63,129,200 $ 62,139,400 $ 59,417,000 $ 63,129,200 $ 59,417,000
Fee Paying Assets Under Management $ 46,758,800 $ 47,161,900 $ 46,167,300 $ 46,758,800 $ 46,167,300
Equity Invested $ 1,258,200 $ 2,047,400 $ 1,454,400 $ 3,305,600 $ 4,006,200
Uncalled Commitments $ 21,078,400 $ 18,690,000 $ 17,109,800 $ 21,078,400 $ 17,109,800
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 66,055 $ 64,504 $ 67,132 $ 130,559 $ 139,486
Monitoring Fees — — — — —
Transaction Fees 3,873 13,430 7,350 17,303 13,372
Fee Credits (3,172 ) (10,588 ) (6,352 ) (13,760 ) (10,682 )
Total Management, Monitoring and Transaction Fees, Net 66,756 67,346 68,130 134,102 142,176
Performance Income
Realized Carried Interest 8,953 — — 8,953 24,750
Incentive Fees 5,893 5,665 11,478 11,558 28,497
Unrealized Carried Interest 27,987 12,347 25,738 40,334 25,609
Total Performance Income 42,833 18,012 37,216 60,845 78,856
Investment Income (Loss)
Net Realized Gains (Losses) 31,192 684 14,284 31,876 19,763
Net Unrealized Gains (Losses) (11,988 ) (87,877 ) 3,751 (99,865 ) 18,565
Total Realized and Unrealized 19,204 (87,193 ) 18,035 (67,989 ) 38,328
Net Interest and Dividends 59,390 51,872 33,822 111,262 43,399
Total Investment Income (Loss) 78,594 (35,321 ) 51,857 43,273 81,727
Total Segment Revenues 188,183 50,037 157,203 238,220 302,759
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 22,785 24,005 26,904 46,790 53,649
Realized Allocation to Carry Pool 3,581 — — 3,581 9,900
Unrealized Allocation to Carry Pool 11,195 4,938 10,295 16,133 10,242
Total Compensation and Benefits 37,561 28,943 37,199 66,504 73,791
Occupancy and Related Charges 2,977 3,122 2,544 6,099 4,716
Other Operating Expenses 10,617 14,954 11,474 25,571 19,981
Total Segment Expenses 51,155 47,019 51,217 98,174 98,488
Income (Loss) attributable to noncontrolling interests 478 175 385 653 907
Economic Net Income (Loss) $ 136,550 $ 2,843 $ 105,601 $ 139,393 $ 203,364
Assets Under Management $ 38,440,400 $ 36,988,600 $ 38,540,900 $ 38,440,400 $ 38,540,900
Fee Paying Assets Under Management $ 36,974,000 $ 35,722,600 $ 33,489,000 $ 36,974,000 $ 33,489,000
Equity Invested $ 320,800 $ 649,300 $ 724,400 $ 970,100 $ 1,458,500
Uncalled Commitments $ 4,827,900 $ 2,865,600 $ 2,674,400 $ 4,827,900 $ 2,674,400
Gross Dollars Invested $ 1,110,100 $ 1,210,800 $ 768,200 $ 2,320,900 $ 1,757,900
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ — $ — $ — $ — $ —
Monitoring Fees — — — — —
Transaction Fees 48,757 43,257 31,615 92,014 96,089
Fee Credits — — — — —
Total Management, Monitoring and Transaction Fees, Net 48,757 43,257 31,615 92,014 96,089
Performance Income
Realized Carried Interest — — — — —
Incentive Fees — — — — —
Unrealized Carried Interest — — — — —
Total Performance Income — — — — —
Investment Income (Loss)
Net Realized Gains (Losses) (749 ) (3,281 ) (515 ) (4,030 ) (464 )
Net Unrealized Gains (Losses) (1,122 ) (2,207 ) (957 ) (3,329 ) (685 )
Total Realized and Unrealized (1,871 ) (5,488 ) (1,472 ) (7,359 ) (1,149 )
Net Interest and Dividends 7,782 6,634 3,850 14,416 8,245
Total Investment Income (Loss) 5,911 1,146 2,378 7,057 7,096
Total Segment Revenues 54,668 44,403 33,993 99,071 103,185
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 10,147 9,055 8,018 19,202 23,290
Realized Allocation to Carry Pool — — — — —
Unrealized Allocation to Carry Pool — — — — —
Total Compensation and Benefits 10,147 9,055 8,018 19,202 23,290
Occupancy and Related Charges 666 658 449 1,324 906
Other Operating Expenses 2,871 3,876 3,248 6,747 7,483
Total Segment Expenses 13,684 13,589 11,715 27,273 31,679
Income (Loss) attributable to noncontrolling interests 3,762 2,728 2,486 6,490 4,651
Economic Net Income (Loss) $ 37,222 $ 28,086 $ 19,792 $ 65,308 $ 66,855
Syndicated Capital $ 432,100 $ 248,700 $ 166,700 $ 680,800 $ 258,100
KKR
BALANCE SHEET
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
As of As of
June 30, 2015 December 31, 2014
Cash and short-term investments $ 2,025,779 $ 1,121,385
Investments 9,743,800 (a) 9,807,606
Unrealized carry (b) 1,579,405 (b) 1,283,022 (b)
Other assets 1,025,889 999,654
Total assets $ 14,374,873 $ 13,211,667
Debt obligations - KKR (ex-KFN) $ 2,000,000 $ 1,527,000
Debt obligations - KFN 657,310 657,310
Preferred shares - KFN 373,750 373,750
Other liabilities 334,426 413,808
Total liabilities 3,365,486 2,971,868
Noncontrolling interests 126,140 121,574
Book value $ 10,883,247 $ 10,118,225
Book value per adjusted unit $ 12.77 $ 12.07
(a) See schedule of investments that follows on the next page.
As of As of
(b) Unrealized Carry
June 30, 2015 December 31, 2014
Private Markets $ 1,468,815 $ 1,196,633
Public Markets 110,590 86,389
Total $ 1,579,405 $ 1,283,022
KKR
SCHEDULE OF INVESTMENTS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except percentage amounts)
As of June 30, 2015
Investments Cost Fair
Value
Fair Value as a
Percentage of
Total Investments
Private Equity Co-Investments $ 2,285,974 $ 2,909,238 29.9 %
Private Equity Funds 822,314 1,103,850 11.3 %
Private Equity Total 3,108,288 4,013,088 41.2 %
Energy 969,845 721,413 7.4 %
Real Estate 729,454 775,054 8.0 %
Infrastructure 172,138 180,351 1.9 %
Real Assets Total 1,871,437 1,676,818 17.3 %
Private Markets Total 4,979,725 5,689,906 58.5 %
Special Situations 769,487 832,958 8.5 %
Direct Lending 126,019 124,702 1.3 %
Mezzanine 89,287 96,125 0.9 %
Alternative Credit 984,793 1,053,785 10.7 %
CLOs 1,493,080 1,309,936 13.4 %
Liquid Credit 177,781 181,120 1.9 %
Credit Total 2,655,654 2,544,841 26.0 %
Specialty Finance 282,648 250,893 2.6 %
Public Markets Total 2,938,302 2,795,734 28.6 %
Other 1,251,224 1,258,160 12.9 %
Total Investments $ 9,169,251 $ 9,743,800 100.0 %
Significant Aggregate Portfolio Company Investments: (a)
First Data Corporation $ 1,061,332 $ 1,309,329 13.4 %
Walgreens Boots Alliance 165,776 615,574 6.3 %
HCA Inc. 29,455 226,780 2.3 %
Zimmer Biomet Holdings Inc. 68,572 100,485 1.0 %
U.S. Foodservice, Inc. 80,000 96,000 1.0 %
1,405,135 2,348,168 24.0 %
Other Investments 7,764,116 7,395,632 76.0 %
Total Investments $ 9,169,251 $ 9,743,800 100.0 %
(a) The significant aggregate portfolio company investments include the top five private equity investments in portfolio companies (other than investments expected to be syndicated or transferred in connection with new fundraising) based on their fair market value as of June 30, 2015. The fair value figures include the co-investment and the limited partner and/or general partner interests held by KKR in the underlying portfolio company.
KKR
ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
Private
Markets
Segment
Public
Markets
Segment
Total
Reportable
Segments
Quarter Ended June 30, 2015
March 31, 2015 $ 62,139,400 $ 36,988,600 $ 99,128,000
New Capital Raised 1,142,700 2,201,700 3,344,400
Distributions (3,447,000 ) (1,385,300 ) (b) (4,832,300 )
Change in Value 3,294,100 635,400 3,929,500
June 30, 2015 $ 63,129,200 $ 38,440,400 $ 101,569,600
Six Months Ended June 30, 2015
December 31, 2014 $ 61,505,800 $ 37,106,700 $ 98,612,500
New Capital Raised 2,733,800 4,449,600 7,183,400
Distributions (6,414,000 ) (3,233,900 ) (c) (9,647,900 )
Net Changes in Fee Base of Certain Funds (a) — (238,600 ) (238,600 )
Change in Value 5,303,600 356,600 5,660,200
June 30, 2015 $ 63,129,200 $ 38,440,400 $ 101,569,600
Trailing Twelve Months Ended June 30, 2015
June 30, 2014 $ 59,417,000 $ 38,540,900 $ 97,957,900
New Capital Raised 7,086,700 8,635,800 15,722,500
Distributions (10,504,000 ) (8,117,500 ) (d) (18,621,500 )
Net Changes in Fee Base of Certain Funds (a) — (238,600 ) (238,600 )
Change in Value 7,129,500 (380,200 ) 6,749,300
June 30, 2015 $ 63,129,200 $ 38,440,400 $ 101,569,600
*
Excludes those assets managed by entities where KKR does not hold more than a 50% ownership interest.
(a) Represents the impact of certain funds entering the post-investment period.
(b) Includes $463.7 million of redemptions by fund investors.
(c) Includes $1,116.9 million of redemptions by fund investors.
(d) Includes $3,132.4 million of redemptions by fund investors.
KKR
FEE PAYING ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
Private
Markets
Segment
Public
Markets
Segment
Total
Reportable
Segments
Quarter Ended June 30, 2015
March 31, 2015 $ 47,161,900 $ 35,722,600 $ 82,884,500
New Capital Raised 1,123,600 2,023,200 3,146,800
Distributions (1,723,600 ) (1,193,800 ) (b) (2,917,400 )
Change in Value 196,900 422,000 618,900
June 30, 2015 $ 46,758,800 $ 36,974,000 $ 83,732,800
Six Months Ended June 30, 2015
December 31, 2014 $ 47,262,500 $ 35,783,900 $ 83,046,400
New Capital Raised 2,444,100 4,217,000 6,661,100
Distributions (2,684,700 ) (2,780,200 ) (c) (5,464,900 )
Net Changes in Fee Base of Certain Funds (a) — (325,200 ) (325,200 )
Change in Value (263,100 ) 78,500 (184,600 )
June 30, 2015 $ 46,758,800 $ 36,974,000 $ 83,732,800
Trailing Twelve Months Ended June 30, 2015
June 30, 2014 $ 46,167,300 $ 33,489,000 $ 79,656,300
New Capital Raised 6,385,600 10,371,500 16,757,100
Distributions (5,151,600 ) (5,683,500 ) (d) (10,835,100 )
Net Changes in Fee Base of Certain Funds (a) — (325,200 ) (325,200 )
Change in Value (642,500 ) (877,800 ) (1,520,300 )
June 30, 2015 $ 46,758,800 $ 36,974,000 $ 83,732,800
* Excludes those assets managed by entities where KKR does not hold more than a 50% ownership interest.
(a) Represents the impact of certain funds entering the post-investment period.
(b) Includes $463.7 million of redemptions by fund investors.
(c) Includes $1,116.9 million of redemptions by fund investors.
(d) Includes $3,132.4 million of redemptions by fund investors.
KKR
INVESTMENT VEHICLE SUMMARY (a) (UNAUDITED)
As of June 30, 2015
(Amounts in millions, except percentages)
Investment Period Amount
Commencement
Date
End Date Commitment Uncalled
Commitments
Percentage
Committed
by General
Partner
Invested Realized Remaining
Cost
Remaining Fair
Value
Private Markets
Private Equity Funds
European Fund IV 12/2014 12/2020 $ 2,670.1 $ 2,509.1 7.4% $ 161.0 $ — $ 161.0 $ 206.6
Asian Fund II (b) 4/2013 4/2019 5,825.0 4,045.0 1.3% 2,052.0 272.0 1,779.9 3,032.7
North America Fund XI (b) 9/2012 9/2018 8,718.4 4,512.6 2.9% 5,024.4 1,024.2 4,205.7 6,331.8
China Growth Fund 11/2010 11/2016 1,010.0 448.1 1.0% 561.9 61.1 544.5 782.5
E2 Investors (Annex Fund) 8/2009 11/2013 195.8 — 4.9% 195.8 195.7 18.1 77.2
European Fund III 3/2008 3/2014 6,141.0 789.1 4.6% 5,351.9 4,269.1 3,338.3 4,520.4
Asian Fund 7/2007 4/2013 3,983.3 147.5 2.5% 3,835.8 5,343.1 1,954.9 2,699.1
2006 Fund 9/2006 9/2012 17,642.2 525.6 2.1% 17,116.6 16,154.9 8,760.3 14,972.7
European Fund II 11/2005 10/2008 5,750.8 — 2.1% 5,750.8 6,574.3 841.1 1,722.1
Millennium Fund 12/2002 12/2008 6,000.0 — 2.5% 6,000.0 11,699.6 1,219.7 2,232.2
European Fund 12/1999 12/2005 3,085.4 — 3.2% 3,085.4 8,736.6 — 44.5
Total Private Equity Funds 61,022.0 12,977.0 49,135.6 54,330.6 22,823.5 36,621.8
Co-Investment Vehicles (b) Various Various 5,506.1 2,531.1 Various 3,072.4 1,710.8 2,243.2 3,265.0
Total Private Equity 66,528.1 15,508.1 52,208.0 56,041.4 25,066.7 39,886.8
Real Assets
Energy Income and Growth Fund 9/2013 9/2018 1,974.2 1,217.7 12.8% 756.5 109.9 691.0 582.6
Natural Resources Fund Various Various 887.4 2.9 Various 884.5 96.6 809.9 340.1
Global Energy Opportunities (b) Various Various 1,026.4 809.6 Various 250.2 53.6 218.4 146.0
Global Infrastructure Investors (b) 9/2011 10/2014 1,040.1 132.8 4.8% 935.2 123.8 907.2 975.3
Global Infrastructure Investors II 10/2014 10/2020 2,838.7 2,788.4 4.4% 50.3 — 50.3 53.7
Infrastructure Co-Investments Various Various 1,125.0 — Various 1,125.0 338.3 1,125.0 1,560.2
Real Estate Partners Americas (b) 5/2013 12/2016 1,229.1 618.9 16.3% 718.3 257.3 609.8 688.1
Real Assets 10,120.9 5,570.3 4,720.0 979.5 4,411.6 4,346.0
Private Markets Total 76,649.0 21,078.4 56,928.0 57,020.9 29,478.3 44,232.8
Public Markets
Special Situations Fund 12/2012 12/2015 2,144.0 168.4 11.6% 1,975.6 144.0 1,975.6 2,348.4
Special Situations Fund II 12/2014 (c) 1,694.5 1,609.4 8.9% 85.1 — 85.0 97.6
Mezzanine Fund 3/2010 3/2015 1,022.8 165.5 4.4% 857.3 354.1 708.6 789.1
Lending Partners 12/2011 12/2014 460.2 81.9 15.2% 378.3 140.3 349.5 347.4
Lending Partners II 06/2014 06/2017 1,335.9 902.6 3.7% 433.3 — 433.3 469.1
Lending Partners Europe 03/2015 03/2018 556.6 525.2 7.3% 31.4 — 31.4 36.7
Other Alternative Credit Vehicles Various Various 3,650.3 1,374.9 Various 2,275.4 1,242.8 1,537.6 1,814.9
Public Markets Total 10,864.3 4,827.9 6,036.4 1,881.2 5,121.0 5,903.2
Grand Total $ 87,513.3 $ 25,906.3 $ 62,964.4 $ 58,902.1 $ 34,599.3 $ 50,136.0
(a) Reflects investment vehicles for which KKR has the ability to earn carried interest.
(b) The “Invested” and “Realized” columns include the amounts of any realized investments that restored the unused capital commitments of the fund investors.
(c) Three years from final close.
KKR
DISTRIBUTION CALCULATION (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Cash Revenues
Fees $ 271,500 $ 300,075 $ 254,237 $ 571,575 $ 581,860
Realized cash carry 252,227 302,425 555,488 554,652 749,038
Net realized investment income - KKR (ex-KFN) 195,408 191,477 245,711 386,885 438,603
Net realized investment income - KFN 56,258 39,865 36,382 96,123 36,382
Total Cash Revenues 775,393 833,842 1,091,818 1,609,235 1,805,883
Cash Expenses
Cash compensation and benefits 98,871 107,027 91,444 205,898 200,359
Realized cash carry allocated to carry pool 100,891 120,970 222,195 221,861 299,615
Occupancy and related charges 15,475 14,796 14,757 30,271 28,946
Other operating expenses 51,613 60,946 54,311 112,559 107,112
Total Cash Expenses 266,850 303,739 382,707 570,589 636,032
Cash income (loss) before noncontrolling interests and local taxes 508,543 530,103 709,111 1,038,646 1,169,851
Less: local income taxes (12,753 ) (9,950 ) (4,932 ) (22,703 ) (15,662 )
Less: noncontrolling interests (4,383 ) (3,622 ) (3,206 ) (8,005 ) (6,408 )
Total Distributable Earnings 491,407 516,531 700,973 1,007,938 1,147,781
Less: estimated current corporate income taxes (26,155 ) (28,855 ) (19,025 ) (55,010 ) (52,470 )
Distributable Earnings, net of taxes 465,252 487,676 681,948 952,928 1,095,311
Less: Undistributed net realized investment income - KKR (ex-KFN) (117,245 ) (114,886 ) (147,427 ) (232,131 ) (263,162 )
Distributed Earnings $ 348,007 $ 372,790 $ 534,521 $ 720,797 $ 832,149
Distributable Earnings, net of taxes per KKR & Co. L.P. common unit $ 0.57 $ 0.60 $ 0.85 $ 1.17 $ 1.44
Distribution per KKR & Co. L.P. common unit $ 0.42 $ 0.46 $ 0.67 $ 0.88 $ 1.10
Components of Distribution per KKR & Co. L.P. Common Unit
After-tax FRE $ 0.07 $ 0.10 $ 0.09 $ 0.17 $ 0.24
Realized Cash Carry $ 0.18 $ 0.22 $ 0.41 $ 0.40 $ 0.58
Distributed Net Realized Investment Income - KKR (ex-KFN) $ 0.10 $ 0.09 $ 0.12 $ 0.19 $ 0.23
Distributed Net Realized Investment Income - KFN $ 0.07 $ 0.05 $ 0.05 $ 0.12 $ 0.05
Fee and yield earnings distribution per KKR & Co. L.P. common unit $ 0.15 $ 0.15 $ 0.15 $ 0.30 $ 0.31
Adjusted Units Eligible For Distribution 820,963,434 813,796,584 803,719,050
Payout Ratio 74.8 % 76.4 % 78.4 % 75.6 % 76.0 %
KKR
Notes to Reportable Segments (Unaudited)
The segment key performance measures that follow are used by management in making operating and resource deployment decisions as well as assessing the overall performance of each of KKR’s reportable business segments. The reportable segments for KKR’s business are presented prior to giving effect to the allocation of income (loss) between KKR & Co. L.P. and KKR Holdings L.P. and as such represent the business in total. In addition, KKR’s reportable segments are presented without giving effect to the consolidation of the funds that KKR manages.
KKR discloses the following financial measures in this earnings release that are calculated and presented using methodologies other than in accordance with GAAP. We believe that providing these performance measures on a supplemental basis to our GAAP results is helpful to unitholders in assessing the overall performance of KKR’s businesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP. We caution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included elsewhere within this earnings release.
Fee related earnings (“FRE”) is comprised of (i) total management, monitoring and transaction fees, net, plus incentive fees, less (ii) cash compensation and benefits, occupancy and related charges and other operating expenses. It is a measure of the operating earnings of KKR and its business segments before carried interest and related carry pool allocations and investment income and comprises a portion of KKR's quarterly distribution. We believe this measure is useful to unitholders as it provides additional insight into the operating profitability of our fee generating management companies and capital markets businesses. The components of FRE on a segment basis differ from the equivalent GAAP amounts on a consolidated basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of charges relating to carry pool allocations; (v) the exclusion of non-cash equity-based charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR & Co. L.P. 2010 Equity Incentive Plan (“Equity Incentive Plan”); (vi) the exclusion of certain reimbursable expenses; and (vii) the exclusion of certain non-recurring items. After tax FRE represents FRE after deductions for current corporate and local income taxes and noncontrolling interests.
Economic net income (loss) (“ENI”) is a measure of profitability for KKR’s reportable segments and is used by management as an alternative measurement of the operating and investment earnings of KKR and its business segments. We believe this measure is useful to unitholders as it provides additional insight into the overall profitability of KKR’s businesses inclusive of carried interest and related carry pool allocations and investment income. ENI is comprised of total segment revenues less total segment expenses and certain economic interests in KKR’s segments held by third parties. ENI differs from net income (loss) on a GAAP basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of non-cash equity-based charges and other non-cash compensation charges borne by KKR Holdings or incurred under the Equity Incentive Plan and other securities that are exchangeable for common units of KKR & Co. L.P.; (v) the exclusion of certain non-recurring items; (vi) the exclusion of investment income (loss) relating to noncontrolling interests; and (vii) the exclusion of income taxes.
Fee and Yield Earnings is comprised of FRE and net interest and dividends from KKR’s business segments. This measure is used by management as a measure of the cash earnings of KKR and its business segments’ investment income. We believe this measure is useful to unitholders as it provides insight into the amount of KKR’s cash earnings, significant portions of which tend to be more recurring than realized carried interest and net realized gains from quarter to quarter.
Fee and Yield EBITDA is comprised of Fee and Yield Earnings before the impact of depreciation of fixed assets and core interest expense. This is used by management as another measure of the cash earnings of KKR and its business segments investment income. We believe this measure is also useful to unitholders as it provides insight into the amount of KKR’s cash earnings before the impact of interest expense, significant portions of which tend to be more recurring than realized carried interest and realized investment income from quarter to quarter.
Net realized investment income – KKR (ex-KFN) refers to net cash income from (i) realized investment gains and losses excluding certain realized investment losses to the extent unrealized losses on these investments were recognized prior to the combination with KPE on October 1, 2009, (ii) dividend income, and (iii) interest income net of interest expense in each case generated by KKR (excluding KFN). This term describes a portion of KKR’s quarterly distribution and excludes net realized investment income of KFN.
Net realized investment income – KFN refers to net cash income from (i) realized investment gains and losses, (ii) dividend income and (iii) interest income net of interest expense less certain general and administrative expenses incurred in the generation of net realized investment income in each case generated by KFN. This term describes a portion of KKR’s quarterly distribution.
Investments is a term used solely for purposes of financial presentation of a portion of KKR’s balance sheet and includes majority investments in subsidiaries that operate KKR’s asset management and broker-dealer businesses, including the general partner interests of KKR’s investment funds.
Total distributable earnings is the sum of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool, (iii) net realized investment income — KKR (ex-KFN) and (iv) net realized investment income — KFN; less (i) applicable local income taxes, if any, and (ii) noncontrolling interests. We believe this measure is useful to unitholders as it provides a supplemental measure to assess performance, excluding the impact of mark-to-market gains (losses), and amounts available for distribution to KKR unitholders. However, total distributable earnings is not a measure that calculates actual distributions under KKR’s current distribution policy.
Assets under management (“AUM”) represent the assets from which KKR is entitled to receive fees or a carried interest and general partner capital. We believe this measure is useful to unitholders as it provides additional insight into KKR’s capital raising activities and the overall activity in its investment funds. KKR calculates the amount of AUM as of any date as the sum of: (i) the fair value of the investments of KKR’s investment funds plus uncalled capital commitments from these funds; (ii) the fair value of investments in KKR’s co-investment vehicles; (iii) the net asset value of certain of KKR’s fixed income products; (iv) the value of outstanding CLOs (excluding CLOs wholly-owned by KKR); and (v) the fair value of other assets managed by KKR. AUM excludes those assets managed by entities where KKR does not hold more than a 50% ownership interest. KKR’s definition of AUM is not based on any definition of AUM that may be set forth in the agreements governing the investment funds, vehicles or accounts that it manages or calculated pursuant to any regulatory definitions.
Fee paying AUM (“FPAUM”) represents only those assets under management from which KKR receives management fees. We believe this measure is useful to unitholders as it provides additional insight into the capital base upon which KKR earns management fees. This relates to KKR’s capital raising activities and the overall activity in its investment funds or CLOs, for only those funds or CLOs where KKR receives fees (i.e., excluding vehicles that receive only carried interest or general partner capital). FPAUM is the sum of all of the individual fee bases that are used to calculate KKR’s fees and differs from AUM in the following respects: (i) assets from which KKR does not receive a fee are excluded (i.e., assets with respect to which it receives only carried interest) and (ii) certain assets, primarily in its private equity funds, are reflected based on capital commitments and invested capital as opposed to fair value because fees are not impacted by changes in the fair value of underlying investments.
Equity invested is the aggregate amount of equity capital that has been invested by KKR’s investment funds and carry-yielding co-investment vehicles and is used as a measure of investment activity for KKR and its business segments during a given period. We believe this measure is useful to unitholders as it provides additional insight into KKR’s investments among its investment funds and carry-yielding co-investment vehicles and replaces committed dollars invested. Such amounts include: (i) capital invested by fund investors and co-investors with respect to which KKR is entitled to a carried interest and (ii) capital invested by KKR’s investment funds, including investments made using investment financing arrangements.
Gross dollars invested is the aggregate amount of capital that has been invested by all of KKR’s Public Markets investment vehicles in our private credit non-liquid strategies and is used as a measure of investment activity for a portion of KKR’s Public Markets segment in a given period. We believe this measure is useful to unitholders as it provides additional insight into KKR’s investment of capital across private credit non-liquid strategies for all the investment vehicles in the Public Markets segment. Such amounts include capital invested by fund investors and co-investors with respect to which KKR’s Public Markets business is entitled to a fee or carried interest.
Syndicated capital is generally the aggregate amount of capital in transactions originated by KKR and its investment funds and carry-yielding co-investment vehicles, which has been distributed to third parties in exchange for a fee. It does not include (i) capital invested in such transactions by KKR investment funds and carry-yielding co-investment vehicles, which is instead reported in equity invested and (ii) debt capital that is arranged as part of the acquisition financing of transactions originated by KKR investment funds. Syndicated capital is used as a measure of investment activity for KKR and its business segments during a given period, and we believe that this measure is useful to unitholders as it provides additional insight into levels of syndication activity in KKR's Capital Markets segment and across its investment platform.
Uncalled commitments are used as a measure of unfunded capital commitments that KKR’s investment funds and carry-paying co-investment vehicles have received from partners to contribute capital to fund future investments. We believe this measure is useful to unitholders as it provides additional insight into the amount of capital that is available to KKR’s investment funds to make future investments. Uncalled commitments are not reduced for investments completed using fund-level investment financing arrangements.
Adjusted units are used as a measure of the total equity ownership of KKR that is held by KKR & Co. L.P. (including equity awards issued under the Equity Incentive Plan), KKR Holdings and other holders of securities exchangeable into common units of KKR & Co. L.P. and represent the fully diluted unit count using the if-converted method. We believe this measure is useful to unitholders as it provides an indication of the total equity ownership of KKR as if all outstanding KKR Holdings units, equity awards issued under the Equity Incentive Plan and other exchangeable securities had been exchanged for common units of KKR & Co. L.P.
Core interest expense is used by management as an alternative measurement of interest expense incurred by KKR on a segment basis and excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR’s investment funds, investment vehicles and principal investments and also excludes interest expense incurred by KFN. The financing arrangements excluded from core interest expense are not direct obligations of the general partners of KKR’s private equity funds or its management companies, and in the case of debt obligations of KFN are non-recourse to KKR beyond the assets of KFN. On a segment basis, interest expense is included in net interest and dividends within total investment income. We believe this measure is useful to unitholders as it provides an indication of the amount of interest expense borne by KKR excluding interest expense that is allocated to KKR’s investment funds, other noncontrolling interest holders and KFN. Additionally, we believe this measure is useful for analyzing KKR’s ability to service its debt obligations other than the debt obligations of KFN.
Book value is a measure of the net assets of KKR’s reportable segments and is used by management primarily in assessing the unrealized value of KKR’s investment portfolio, including carried interest, as well as KKR’s overall liquidity position. We believe this measure is useful to unitholders as it provides additional insight into the assets and liabilities of KKR excluding the assets and liabilities that are allocated to noncontrolling interest holders. Book value differs from KKR & Co. L.P. partners’ capital on a GAAP basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings.
Cash and short-term investments represent cash and liquid short-term investments in high-grade, short-duration cash management strategies used by KKR to generate additional yield on our excess liquidity and is used by management in evaluating KKR’s liquidity position. We believe this measure is useful to unitholders as it provides additional insight into KKR’s available liquidity. Cash and short-term investments differ from cash and cash equivalents on a GAAP basis as a result of the inclusion of liquid short-term investments in cash and short-term investments.
Return on equity measures the amount of net income generated as a percentage of capital invested in KKR’s business. Return on equity is calculated by dividing Economic Net Income (Loss), After Taxes on a trailing twelve-month basis by the average book value during the period.
Cash return on equity measures the amount of cash income generated as a percentage of capital invested in KKR’s business. Cash return on equity is calculated by dividing Distributable Earnings, net of taxes on a trailing twelve-month basis by the average book value during the period.
KKR
EXHIBIT A
KKR'S PORTION OF TOTAL UNCALLED COMMITMENTS TO ITS INVESTMENT FUNDS
(Amounts in thousands)
Uncalled
Commitments
Private Markets
European Fund IV $ 184,700
North America Fund XI 166,900
Energy Income and Growth Fund 157,200
Global Infrastructure Investors II 121,600
Real Estate Partners Americas 100,700
European Fund III 63,500
Asian Fund II 51,800
2006 Fund 22,700
Co-Investment Vehicles 69,700
Other Private Markets Funds 13,500
Total Private Markets Commitments 952,300
Public Markets
Special Situations Fund 19,600
Special Situations Fund II 142,900
Mezzanine Fund 7,000
Lending Partners 12,500
Lending Partners II 33,800
Lending Partners Europe 33,800
Other Alternative Credit Vehicles 65,600
Total Public Markets Commitments 315,200
Total Uncalled Commitments $ 1,267,500
KKR
EXHIBIT B
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT - BASIC (GAAP BASIS)
TO ENI AFTER TAXES PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
Quarter Ended
June 30, 2015 March 31, 2015 June 30, 2014
Net income (loss) attributable to KKR & Co. L.P. per common unit - Basic $ 0.84 $ 0.62 $ 0.47
Weighted Average Common Units Outstanding - Basic 446,794,950 434,874,820 377,542,161
Net income (loss) attributable to KKR & Co. L.P. 376,306 270,507 178,215
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
325,703 239,008 186,776
Plus: Non-cash equity-based charges 69,478 76,550 92,957
Plus: Amortization of intangibles and other, net 37,910 (2,790 ) 37,455
Plus: Income taxes 30,547 16,138 6,176
Economic net income (loss) 839,944 599,413 501,579
Less: Provision for income taxes 44,836 21,235 6,330
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 48,453 52,265 40,877
Economic net income (loss) after taxes 746,655 525,913 454,372
Weighted Average Adjusted Units 852,128,762 848,061,661 800,747,528
Economic net income (loss) after taxes per adjusted unit $ 0.88 $ 0.62 $ 0.57
Six Months Ended
June 30, 2015 June 30, 2014
Net income (loss) attributable to KKR & Co. L.P. per common unit - Basic $ 1.47 $ 1.16
Weighted Average Common Units Outstanding - Basic 440,867,813 335,748,498
Net income (loss) attributable to KKR & Co. L.P. 646,813 388,256
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
564,711 487,590
Plus: Non-cash equity-based charges 146,028 170,485
Plus: Amortization of intangibles and other, net 35,120 57,624
Plus: Income taxes 46,685 27,878
Economic net income (loss) 1,439,357 1,131,833
Less: Provision for income taxes 66,071 42,911
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 100,718 80,230
Economic net income (loss) after taxes 1,272,568 1,008,692
Weighted Average Adjusted Units 850,106,448 762,873,784
Economic net income (loss) after taxes per adjusted unit $ 1.50 $ 1.32
KKR
EXHIBIT B (CONTINUED)
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. (GAAP BASIS)
TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS, FEE AND YIELD EARNINGS, FEE AND YIELD EBITDA, TOTAL DISTRIBUTABLE EARNINGS, AND TOTAL EBITDA (UNAUDITED)
(Amounts in thousands)
Quarter Ended
June 30, 2015 March 31, 2015 June 30, 2014
Net income (loss) attributable to KKR & Co. L.P. $ 376,306 $ 270,507 $ 178,215
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
325,703 239,008 186,776
Plus: Non-cash equity-based charges 69,478 76,550 92,957
Plus: Amortization of intangibles and other, net 37,910 (2,790 ) 37,455
Plus: Income taxes 30,547 16,138 6,176
Economic net income (loss) 839,944 599,413 501,579
Plus: Income attributable to segment noncontrolling interests 4,383 3,622 3,206
Less: Total investment income (loss) 383,650 220,621 162,158
Less: Net carried interest 355,136 265,108 248,902
Fee related earnings 105,541 117,306 93,725
Plus: Net interest and dividends 75,406 50,675 60,432
Fee and yield earnings 180,947 167,981 154,157
Plus: Depreciation and amortization 3,918 3,881 4,140
Plus: Core interest expense 30,750 25,332 19,205
Fee and yield EBITDA 215,615 197,194 177,502
Less: Depreciation and amortization 3,918 3,881 4,140
Less: Core interest expense 30,750 25,332 19,205
Less: Net interest and dividends 75,406 50,675 60,432
Plus: Realized cash carry, net of realized cash carry allocated to carry pool 151,336 181,455 333,293
Plus: Net realized investment income - KKR (ex-KFN) 195,408 191,477 245,711
Plus: Net realized investment income - KFN 56,258 39,865 36,382
Less: Local income taxes and noncontrolling interests 17,136 13,572 8,138
Total distributable earnings 491,407 516,531 700,973
Plus: Depreciation and amortization 3,918 3,881 4,140
Plus: Core interest expense 30,750 25,332 19,205
Plus: Local income taxes and noncontrolling interests 17,136 13,572 8,138
Total EBITDA $ 543,211 $ 559,316 $ 732,456
Six Months Ended
June 30, 2015 June 30, 2014
Net income (loss) attributable to KKR & Co. L.P. $ 646,813 $ 388,256
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
564,711 487,590
Plus: Non-cash equity-based charges 146,028 170,485
Plus: Amortization of intangibles and other, net 35,120 57,624
Plus: Income taxes 46,685 27,878
Economic net income (loss) 1,439,357 1,131,833
Plus: Income attributable to segment noncontrolling interests 8,005 6,408
Less: Total investment income (loss) 604,271 440,809
Less: Net carried interest 620,244 451,989
Fee related earnings 222,847 245,443
Plus: Net interest and dividends 126,081 71,596
Fee and yield earnings 348,928 317,039
Plus: Depreciation and amortization 7,799 8,175
Plus: Core interest expense 56,082 37,605
Fee and yield EBITDA 412,809 362,819
Less: Depreciation and amortization 7,799 8,175
Less: Core interest expense 56,082 37,605
Less: Net interest and dividends 126,081 71,596
Plus: Realized cash carry, net of realized cash carry allocated to carry pool 332,791 449,423
Plus: Net realized investment income - KKR (ex-KFN) 386,885 438,603
Plus: Net realized investment income - KFN 96,123 36,382
Less: Local income taxes and noncontrolling interests 30,708 22,070
Total distributable earnings 1,007,938 1,147,781
Plus: Depreciation and amortization 7,799 8,175
Plus: Core interest expense 56,082 37,605
Plus: Local income taxes and noncontrolling interests 30,708 22,070
Total EBITDA $ 1,102,527 $ 1,215,631
KKR
EXHIBIT B (CONTINUED)
RECONCILIATION OF KKR & CO. L.P. PARTNERS' CAPITAL (GAAP BASIS)
TO BOOK VALUE AND BOOK VALUE PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
As of As of
June 30, 2015 December 31, 2014
KKR & Co. L.P. partners’ capital $ 5,947,415 $ 5,382,691
Noncontrolling interests held by KKR Holdings L.P. 4,827,384 4,661,679
Equity impact of KKR Management Holdings Corp. and other 108,448 73,855
Book value 10,883,247 10,118,225
Adjusted units 852,145,905 838,020,974
Book value per adjusted unit $ 12.77 $ 12.07
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS)
TO CASH AND SHORT-TERM INVESTMENTS (UNAUDITED)
(Amounts in thousands)
As of As of
June 30, 2015 December 31, 2014
Cash and cash equivalents $ 1,824,686 $ 918,080
Liquid short-term investments 201,093 203,305
Cash and short-term investments $ 2,025,779 $ 1,121,385
KKR
EXHIBIT C
RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING - BASIC TO WEIGHTED AVERAGE ADJUSTED UNITS (UNAUDITED)
The following table provides a reconciliation of KKR's Weighted Average GAAP Common Units Outstanding to Weighted Average Adjusted Units.
Quarter Ended
June 30, 2015 March 31, 2015 June 30, 2014
Weighted Average GAAP Common Units Outstanding - Basic 446,794,950 434,874,820 377,542,161
Adjustments:
Weighted Average Unvested Common Units and Other Securities (a) 35,856,541 37,350,524 32,637,677
Weighted Average GAAP Common Units Outstanding - Diluted 482,651,491 472,225,344 410,179,838
Adjustments:
Weighted Average KKR Holdings Units (b) 369,477,271 375,836,317 390,567,690
Weighted Average Adjusted Units 852,128,762 848,061,661 800,747,528
Six Months Ended
June 30, 2015 June 30, 2014
Weighted Average GAAP Common Units Outstanding - Basic 440,867,813 335,748,498
Adjustments:
Weighted Average Unvested Common Units and Other Securities (a) 36,599,407 32,128,551
Weighted Average GAAP Common Units Outstanding - Diluted 477,467,220 367,877,049
Adjustments:
Weighted Average KKR Holdings Units (b) 372,639,228 394,996,735
Weighted Average Adjusted Units 850,106,448 762,873,784
RECONCILIATION OF GAAP COMMON UNITS OUTSTANDING - BASIC TO ADJUSTED UNITS AND ADJUSTED UNITS ELIGIBLE FOR DISTRIBUTION (UNAUDITED)
The following table provides a reconciliation of KKR's GAAP Common Units Outstanding to Adjusted Units and Adjusted Units Eligible for Distribution.
As of As of
June 30, 2015 December 31, 2014
GAAP Common Units Outstanding - Basic 450,396,361 433,330,540
Unvested Common Units and Other Securities (a) 34,262,715 27,493,685
GAAP Common Units Outstanding - Diluted 484,659,076 460,824,225
Adjustments:
KKR Holdings Units (b) 367,486,829 377,196,749
Adjusted Units 852,145,905 838,020,974
Adjustments:
Unvested Common Units and Unvested Other Securities (a) (31,182,471 ) (24,373,441 )
Adjusted Units Eligible For Distribution 820,963,434 813,647,533
(a) Represents equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan and other securities that are exchangeable into KKR & Co. L.P common units. The issuance of common units of KKR & Co. L.P. pursuant to such equity awards or other securities dilutes KKR common unitholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business.
(b) Common units that may be issued by KKR & Co. L.P. upon exchange of units in KKR Holdings L.P. for KKR common units.
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Contact:
Kohlberg Kravis Roberts & Co. L.P.
Investor Relations:
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KKR & Co. L.P. Announces Second Quarter 2015 Results
Strong Investment Performance Drives Record Economic Net Income
GAAP net income (loss) attributable to KKR & Co. L.P. was $376.3 million and $646.8 million for the quarter and six months ended June 30, 2015, respectively, up from $178.2 million and $388.3 million in the comparable periods of 2014.
Total distributable earnings was $491.4 million and $1,007.9 million for the quarter and six months ended June 30, 2015, respectively, down from $701.0 million and $1,147.8 million in the comparable periods of 2014.
Distribution per common unit was $0.42 and $0.88 for the quarter and six months ended June 30, 2015, respectively, down from $0.67 and $1.10 in the comparable periods of 2014.
Economic net income (“ENI”) was $839.9 million and $1,439.4 million for the quarter and six months ended June 30, 2015, respectively, up from $501.6 million and $1,131.8 million in the comparable periods of 2014.
ENI after taxes per adjusted unit was $0.88 and $1.50 for the quarter and six months ended June 30, 2015, respectively, up from $0.57 and $1.32 in the comparable periods of 2014.
Fee and yield earnings were $180.9 million and $348.9 million for the quarter and six months ended June 30, 2015, respectively, up from $154.2 million and $317.0 million in the comparable periods of 2014.
Book value was $10.9 billion on a total reportable segment basis as of June 30, 2015 or $12.77 per adjusted unit.
Return on equity and cash return on equity were 16.6% and 17.1%, respectively.
Assets under management (“AUM”) and fee paying assets under management (“FPAUM”) totaled $101.6 billion and $83.7 billion, respectively, as of June 30, 2015.
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Kohlberg Kravis Roberts & Co. L.P.
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NEW YORK--(BUSINESS WIRE)--
KKR & Co. L.P. (KKR) today reported its second quarter 2015 results.
In April 2015, KKR held its final close for Lending Partners II, the successor fund to the predecessor Lending Partners fund. KKR closed this successor fund with over $1.3 billion of capital commitments, which surpassed the predecessor fund that had $460 million in total capital commitments.
In July 2015, KKR held its final close for Global Infrastructure Investors II, the successor fund to the predecessor Global Infrastructure Investors fund. KKR closed this successor fund with over $3.0 billion of capital commitments, which surpassed the predecessor fund that had $1.0 billion in total capital commitments.
“Our strong investment performance resulted in $840 million of Economic Net Income, a record quarterly figure for KKR,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. “Additionally, we continued to scale several growth areas including our infrastructure and alternative credit businesses.”
Note: Certain financial measures, including total distributable earnings, FRE, ENI, ENI after taxes, fee and yield earnings, book value, cash and short-term investments and adjusted units, are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Exhibits B and C for a reconciliation of such measures to financial results prepared in accordance with GAAP.
GAAP RESULTS
GAAP net income (loss) for the quarter and six months ended June 30, 2015, included net income (loss) attributable to KKR & Co. L.P. of $376.3 million and $646.8 million, respectively, and net income (loss) attributable to KKR & Co. L.P. per common unit of $0.78 and $1.35, respectively, on a diluted basis. For the quarter and six months ended June 30, 2014, net income (loss) attributable to KKR & Co. L.P. was $178.2 million and $388.3 million, respectively, and net income (loss) attributable to KKR & Co. L.P. per common unit was $0.43 and $1.06, respectively, on a diluted basis. The increase in both comparable periods was primarily due to (i) an increase in investment income and (ii) an increase in KKR & Co. L.P.’s ownership percentage in the KKR business.
SEGMENT RESULTS
KEY METRICS (UNAUDITED)
(Amounts in millions, except per adjusted unit amounts)
Quarter Ended Six Months Ended
June 30, 2015 June 30, 2014 % Change June 30, 2015 June 30, 2014 % Change
Total Distributable Earnings
Fees $ 272 $ 254 $ 572 $ 582
Realized Cash Carry 252 555 555 749
Net Realized Investment Income 251 282 483 475
Total Cash Revenues $ 775 $ 1,091 (29 )% $ 1,610 $ 1,806 (11 )%
Total Cash Expenses and Other 284 391 601 658
Total Distributable Earnings $ 491 $ 700 (30 )% $ 1,009 $ 1,148 (12 )%
Less: Estimated Current Corporate Income Taxes (26 ) (19 ) (55 ) (52 )
Distributable Earnings, net of taxes $ 465 $ 681 (32 )% $ 954 $ 1,096 (13 )%
Distributable Earnings, net of taxes per KKR & Co. L.P. common unit $ 0.57 $ 0.85 (33 )% $ 1.17 $ 1.44 (19 )%
Distribution per KKR & Co. L.P. common unit $ 0.42 $ 0.67 (37 )% $ 0.88 $ 1.10 (20 )%
Payout ratio 75 % 78 % 76 % 76 %
Economic Net Income
Management, Monitoring and Transaction Fees, Net $ 266 $ 243 $ 560 $ 553
Performance Income 598 429 1,046 785
Investment Income 384 162 604 441
Total Segment Revenues $ 1,248 $ 834 50 % $ 2,210 $ 1,779 24 %
Total Segment Expenses and Other 501 380 937 770
Economic Net Income, After-Taxes $ 747 $ 454 65 % $ 1,273 $ 1,009 26 %
Economic Net Income, After-Taxes per Adjusted Unit $ 0.88 $ 0.57 54 % $ 1.50 $ 1.32 14 %
Fee and Yield Earnings $ 181 $ 154 18 % $ 349 $ 317 10 %
Other
Book Value per Adjusted Unit $ 12.77 $ 12.52 2 %
Last Twelve Months Ended
June 30, 2015 June 30, 2014
Return on Equity 16.6% 28.7%
Cash Return on Equity 17.1% 22.2%
Private Markets
AUM was $63.1 billion as of June 30, 2015, an increase of $1.0 billion, compared to AUM of $62.1 billion as of March 31, 2015. The increase was primarily attributable to the appreciation in the fair value of our private equity portfolio and to a lesser extent new capital raised in European Fund IV and Global Infrastructure Investors II. These increases were offset by distributions to limited partners of our private equity funds arising from realizations.
FPAUM was $46.8 billion as of June 30, 2015, a decrease of $0.4 billion, compared to FPAUM of $47.2 billion as of March 31, 2015. The decrease was primarily attributable to distributions to limited partners of our private equity funds arising from realizations which were partially offset by new capital raised in European Fund IV and Global Infrastructure Investors II.
Total segment revenues were $1,004.9 million for the quarter ended June 30, 2015, an increase of $362.0 million, compared to total segment revenues of $642.9 million for the quarter ended June 30, 2014. Total segment revenues were $1,872.9 million for the six months ended June 30, 2015, an increase of $499.3 million, compared to total segment revenues of $1,373.6 million for the six months ended June 30, 2014. The increase in both comparable periods was principally attributable to (i) a higher level of investment income reflecting a higher level of appreciation in our private equity portfolio and (ii) an increase in performance income due to higher net carried interest resulting from more private equity funds earning carried interest and higher net overall appreciation in our private equity portfolio. For the three and six months ended June 30, 2015, the fair value of our private equity portfolio appreciated 7.4% and 11.8%, respectively.
ENI was $666.2 million for the quarter ended June 30, 2015, an increase of $290.0 million, compared to ENI of $376.2 million for the quarter ended June 30, 2014. The increase was primarily attributable to higher total segment revenues as described above, partially offset by higher allocations to the carry pool resulting from the higher levels of net carried interest.
Public Markets
AUM was $38.4 billion as of June 30, 2015, an increase of $1.4 billion, compared to AUM of $37.0 billion as of March 31, 2015. FPAUM was $37.0 billion as of June 30, 2015, an increase of $1.3 billion, compared to FPAUM of $35.7 billion as of March 31, 2015. For both AUM and FPAUM, the increases were primarily attributable to new capital raised, primarily in our CLOs, offset by distributions and redemptions across multiple strategies.
Total segment revenues were $188.2 million for the quarter ended June 30, 2015, an increase of $31.0 million, compared to total segment revenues of $157.2 million for the quarter ended June 30, 2014. The increase in revenues was primarily attributable to an increase in investment income across multiple strategies and the impact of yielding assets of KKR Financial Holdings LLC (“KFN”), which was acquired on April 30, 2014 but was not contributing to our investment income for one month of the second quarter of 2014.
Total segment revenues were $238.2 million for the six months ended June 30, 2015, a decrease of $64.6 million, compared to total segment revenues of $302.8 million for the six months ended June 30, 2014. The decrease was principally attributable to (i) a decrease in investment income due primarily to net unrealized losses in our CLOs and certain other Public Markets related investments and (ii) lower performance income for the period. These decreases were partially offset by an increase in net interest and dividends relating primarily to the yielding assets of KFN, which was acquired on April 30, 2014 but was not contributing to our investment income for the first four months of 2014.
ENI was $136.6 million for the quarter ended June 30, 2015, an increase of $31.0 million, compared to ENI of $105.6 million for the quarter ended June 30, 2014. The increase was principally attributable to the increase in total segment revenues as described above.
ENI was $139.4 million for the six months ended June 30, 2015, a decrease of $64.0 million, compared to ENI of $203.4 million for the six months ended June 30, 2014. The decrease was principally attributable to the decrease in total segment revenues as described above.
Capital Markets
Total segment revenues were $54.7 million for the quarter ended June 30, 2015, an increase of $20.7 million, compared to total segment revenues of $34.0 million for the quarter ended June 30, 2014. The increase in revenues primarily reflect a higher level of overall capital markets transaction activity for the quarter ended June 30, 2015.
Total segment revenues were $99.1 million for the six months ended June 30, 2015, an decrease of $4.1 million, compared to total segment revenues of $103.2 million for the six months ended June 30, 2014. The decrease in revenues primarily reflects a lower level of overall capital markets transaction activity for the six months ended June 30, 2015.
ENI was $37.2 million for the quarter ended June 30, 2015, an increase of $17.4 million, compared to ENI of $19.8 million for the quarter ended June 30, 2014. The increase primarily reflects the increase in total segment revenues as described above.
ENI was $65.3 million for the six months ended June 30, 2015, a decrease of $1.6 million, compared to ENI of $66.9 million for the six months ended June 30, 2014. The decrease primarily reflects the decrease in total segment revenues as described above, largely offset by lower compensation expense.
CAPITAL AND LIQUIDITY
As of June 30, 2015, KKR had $2.0 billion of cash and short-term investments and $3.0 billion of outstanding debt and preferred share obligations on a total reportable segment basis. This includes KFN’s debt obligations of $657.3 million and KFN’s 7.375% Series A LLC preferred shares of $373.8 million, which are non-recourse to KKR beyond the assets of KFN. As of June 30, 2015, KKR had a $1.0 billion revolving credit facility, which was undrawn. In addition, KKR has a $500.0 million revolving credit facility for use in its capital markets business, which was undrawn as of June 30, 2015.
As of June 30, 2015, KKR’s portion of total uncalled commitments to its investment funds was $1.3 billion. See Exhibit A for details.
DISTRIBUTION
A distribution of $0.42 per common unit has been declared, comprised of (i) $0.07 per common unit from after-tax FRE, (ii) $0.18 per common unit from realized cash carry, (iii) $0.10 per common unit from KKR’s net realized investment income and (iv) $0.07 per common unit from KFN’s net realized investment income. The distribution will be paid on August 18, 2015 to unitholders of record as of the close of business on August 3, 2015.
SUPPLEMENTAL INFORMATION
A slide presentation containing supplemental commentary about the Company's financial results for the fiscal quarter ended June 30, 2015 may be accessed through the KKR Investor Relations section of the KKR website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. The presentation will be referenced on the conference call discussed below.
CONFERENCE CALL
A conference call to discuss KKR's financial results will be held on Thursday, July 23, 2015 at 10:00 a.m. EDT. The conference call may be accessed by dialing (877) 303-2917 (U.S. callers) or +1 (253) 237-1135 (non-U.S. callers); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Investor Center section of KKR's website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. A replay of the live broadcast will be available on KKR's website or by dialing (855) 859-2056 (U.S. callers) or +1 (404) 537-3406 (non-U.S. callers), pass code 80669130, beginning approximately two hours after the broadcast.
From time to time, KKR may use its website as a channel of distribution of material company information. Financial and other important information regarding KKR is routinely posted and accessible on the Investor Center for KKR & Co. L.P. at http://ir.kkr.com/kkr_ir/kkr_events.cfm. In addition, you may automatically receive email alerts and other information about KKR by enrolling your email address at the “Email Alerts” area of the Investor Center on the website.
ABOUT KKR
KKR is a leading global investment firm that manages investments across multiple asset classes including private equity, energy, infrastructure, real estate, credit and hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation at the asset level. KKR invests its own capital alongside its partners' capital and brings opportunities to others through its capital markets business. References to KKR’s investments may include the activities of its sponsored funds. For additional information about KKR & Co. L.P. (KKR), please visit KKR's website at www.kkr.com.
FORWARD-LOOKING STATEMENTS
This release contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements are based on KKR’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or are within its control. If a change occurs, KKR’s business, financial condition, liquidity and results of operations, including but not limited to AUM, FPAUM, FRE, total distributable earnings, ENI, ENI after taxes, fee and yield earnings, fee and yield EBITDA, equity invested and syndicated capital, uncalled commitments, core interest expense, cash and short-term investments, net realized investment income and book value, may vary materially from those expressed in the forward-looking statements. The following factors, among others, could cause actual results to vary from the forward-looking statements: the general volatility of the capital markets; failure to realize the benefits of or changes in KKR’s business strategies including the ability to realize the anticipated synergies from acquisitions or strategic partnerships ; availability, terms and deployment of capital; availability of qualified personnel and expense of recruiting and retaining such personnel; changes in the asset management industry, interest rates or the general economy; underperformance of KKR's investments and decreased ability to raise funds; and the degree and nature of KKR’s competition. KKR does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made except as required by law. In addition, KKR’s business strategy is focused on the long term and financial results are subject to significant volatility. Additional information about factors affecting KKR is available in KKR & Co. L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC on February 27, 2015, quarterly reports on Form 10-Q for subsequent quarters and other filings with the SEC, which are available at www.sec.gov.
KKR
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
Quarter Ended Six Months Ended
June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Revenues
Fees and Other $ 255,874 $ 249,370 $ 547,219 $ 552,296
Expenses
Compensation and Benefits 411,691 358,730 776,690 689,768
Occupancy and Related Charges 16,172 16,059 31,904 31,467
General, Administrative and Other 126,314 210,536 260,616 337,261
Total Expenses 554,177 585,325 1,069,210 1,058,496
Investment Income (Loss)
Net Gains (Losses) from Investment Activities 3,110,604 1,971,850 5,030,429 3,944,030
Dividend Income 360,556 272,902 439,371 369,606
Interest Income 302,985 215,872 599,143 377,832
Interest Expense (139,427 ) (65,997 ) (251,390 ) (100,728 )
Total Investment Income (Loss) 3,634,718 2,394,627 5,817,553 4,590,740
Income (Loss) Before Taxes 3,336,415 2,058,672 5,295,562 4,084,540
Income Taxes 30,547 6,176 46,685 27,878
Net Income (Loss) 3,305,868 2,052,496 5,248,877 4,056,662
Net Income (Loss) Attributable to
Redeemable Noncontrolling Interests (891 ) (6,809 ) 1,042 3,828
Net Income (Loss) Attributable to
Noncontrolling Interests and Appropriated Capital 2,930,453 1,881,090 4,601,022 3,664,578
Net Income (Loss) Attributable to KKR & Co. L.P. $ 376,306 $ 178,215 $ 646,813 $ 388,256
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic $ 0.84 $ 0.47 $ 1.47 $ 1.16
Diluted (a) $ 0.78 $ 0.43 $ 1.35 $ 1.06
Weighted Average Common Units Outstanding
Basic 446,794,950 377,542,161 440,867,813 335,748,498
Diluted (a) 482,651,491 410,179,838 477,467,220 367,877,049
(a) KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit since the exchange of these units would not dilute KKR’s respective ownership interests in the KKR Group Partnerships.
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 181,401 $ 173,780 $ 178,674 $ 355,181 $ 374,067
Monitoring Fees 47,713 97,838 29,610 145,551 65,973
Transaction Fees 92,951 103,286 84,305 196,237 247,821
Fee Credits (56,458 ) (80,494 ) (49,830 ) (136,952 ) (134,498 )
Total Management, Monitoring and Transaction Fees, Net 265,607 294,410 242,759 560,017 553,363
Performance Income
Realized Carried Interest 252,227 302,425 555,488 554,652 749,038
Incentive Fees 5,893 5,665 11,478 11,558 28,497
Unrealized Carried Interest 340,366 139,284 (137,826 ) 479,650 7,821
Total Performance Income 598,486 447,374 429,140 1,045,860 785,356
Investment Income (Loss)
Net Realized Gains (Losses) 176,260 180,667 221,661 356,927 403,389
Net Unrealized Gains (Losses) 131,984 (10,721 ) (119,935 ) 121,263 (34,176 )
Total Realized and Unrealized 308,244 169,946 101,726 478,190 369,213
Net Interest and Dividends 75,406 50,675 60,432 126,081 71,596
Total Investment Income (Loss) 383,650 220,621 162,158 604,271 440,809
Total Segment Revenues 1,247,743 962,405 834,057 2,210,148 1,779,528
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 98,871 107,027 91,444 205,898 200,359
Realized Allocation to Carry Pool 100,891 120,970 222,195 221,861 299,615
Unrealized Allocation to Carry Pool 136,566 55,631 (53,435 ) 192,197 5,255
Total Compensation and Benefits 336,328 283,628 260,204 619,956 505,229
Occupancy and Related Charges 15,475 14,796 14,757 30,271 28,946
Other Operating Expenses 51,613 60,946 54,311 112,559 107,112
Total Segment Expenses 403,416 359,370 329,272 762,786 641,287
Income (Loss) attributable to noncontrolling interests 4,383 3,622 3,206 8,005 6,408
Economic Net Income (Loss) (a) $ 839,944 $ 599,413 $ 501,579 $ 1,439,357 $ 1,131,833
Provision for Income Taxes 44,836 21,235 6,330 66,071 42,911
Equity-based Charges 48,453 52,265 40,877 100,718 80,230
Economic Net Income (Loss), After Taxes (b) $ 746,655 $ 525,913 $ 454,372 $ 1,272,568 $ 1,008,692
Economic Net Income (Loss), After Taxes Per Adjusted Unit $ 0.88 $ 0.62 $ 0.57 $ 1.50 $ 1.32
Weighted Average Adjusted Units (Fully Diluted Basis) (a) 852,128,762 848,061,661 800,747,528 850,106,448 762,873,784
Assets Under Management $ 101,569,600 $ 99,128,000 $ 97,957,900 $ 101,569,600 $ 97,957,900
Fee Paying Assets Under Management $ 83,732,800 $ 82,884,500 $ 79,656,300 $ 83,732,800 $ 79,656,300
Equity Invested and Syndicated Capital $ 2,011,100 $ 2,945,400 $ 2,345,500 $ 4,956,500 $ 5,722,800
Uncalled Commitments $ 25,906,300 $ 21,555,600 $ 19,784,200 $ 25,906,300 $ 19,784,200
Other Information
Fee Related Earnings $ 105,541 $ 117,306 $ 93,725 $ 222,847 $ 245,443
Plus: Net Interest and Dividends 75,406 50,675 60,432 126,081 71,596
Fee and Yield Earnings (a) $ 180,947 $ 167,981 $ 154,157 $ 348,928 $ 317,039
Plus: Depreciation and Amortization 3,918 3,881 4,140 7,799 8,175
Plus: Core Interest Expense 30,750 25,332 19,205 56,082 37,605
Fee and Yield EBITDA (a) $ 215,615 $ 197,194 $ 177,502 $ 412,809 $ 362,819
Total Distributable Earnings (a) $ 491,407 $ 516,531 $ 700,973 $ 1,007,938 $ 1,147,781
GAAP interest expense $ 139,427 $ 111,963 $ 65,997 $ 251,390 $ 100,728
Less: interest expense related to debt obligations
from investment financing arrangements and KFN 108,677 86,631 46,792 195,308 63,123
Core Interest Expense (a) $ 30,750 $ 25,332 $ 19,205 $ 56,082 $ 37,605
(a) See definitions for economic net income (loss), adjusted units, fee and yield earnings, fee and yield EBITDA, total distributable earnings and core interest expense under “Notes to Reportable Segments.”
(b) Represents economic net income (loss) after reductions for income taxes and equity-based charges.
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 115,346 $ 109,276 $ 111,542 $ 224,622 $ 234,581
Monitoring Fees 47,713 97,838 29,610 145,551 65,973
Transaction Fees 40,321 46,599 45,340 86,920 138,360
Fee Credits (53,286 ) (69,906 ) (43,478 ) (123,192 ) (123,816 )
Total Management, Monitoring and Transaction Fees, Net 150,094 183,807 143,014 333,901 315,098
Performance Income
Realized Carried Interest 243,274 302,425 555,488 545,699 724,288
Incentive Fees — — — — —
Unrealized Carried Interest 312,379 126,937 (163,564 ) 439,316 (17,788 )
Total Performance Income 555,653 429,362 391,924 985,015 706,500
Investment Income (Loss)
Net Realized Gains (Losses) 145,817 183,264 207,892 329,081 384,090
Net Unrealized Gains (Losses) 145,094 79,363 (122,729 ) 224,457 (52,056 )
Total Realized and Unrealized 290,911 262,627 85,163 553,538 332,034
Net Interest and Dividends 8,234 (7,831 ) 22,760 403 19,952
Total Investment Income (Loss) 299,145 254,796 107,923 553,941 351,986
Total Segment Revenues 1,004,892 867,965 642,861 1,872,857 1,373,584
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 65,939 73,967 56,522 139,906 123,420
Realized Allocation to Carry Pool 97,310 120,970 222,195 218,280 289,715
Unrealized Allocation to Carry Pool 125,371 50,693 (63,730 ) 176,064 (4,987 )
Total Compensation and Benefits 288,620 245,630 214,987 534,250 408,148
Occupancy and Related Charges 11,832 11,016 11,764 22,848 23,324
Other Operating Expenses 38,125 42,116 39,589 80,241 79,648
Total Segment Expenses 338,577 298,762 266,340 637,339 511,120
Income (Loss) attributable to noncontrolling interests 143 719 335 862 850
Economic Net Income (Loss) $ 666,172 $ 568,484 $ 376,186 $ 1,234,656 $ 861,614
Assets Under Management $ 63,129,200 $ 62,139,400 $ 59,417,000 $ 63,129,200 $ 59,417,000
Fee Paying Assets Under Management $ 46,758,800 $ 47,161,900 $ 46,167,300 $ 46,758,800 $ 46,167,300
Equity Invested $ 1,258,200 $ 2,047,400 $ 1,454,400 $ 3,305,600 $ 4,006,200
Uncalled Commitments $ 21,078,400 $ 18,690,000 $ 17,109,800 $ 21,078,400 $ 17,109,800
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 66,055 $ 64,504 $ 67,132 $ 130,559 $ 139,486
Monitoring Fees — — — — —
Transaction Fees 3,873 13,430 7,350 17,303 13,372
Fee Credits (3,172 ) (10,588 ) (6,352 ) (13,760 ) (10,682 )
Total Management, Monitoring and Transaction Fees, Net 66,756 67,346 68,130 134,102 142,176
Performance Income
Realized Carried Interest 8,953 — — 8,953 24,750
Incentive Fees 5,893 5,665 11,478 11,558 28,497
Unrealized Carried Interest 27,987 12,347 25,738 40,334 25,609
Total Performance Income 42,833 18,012 37,216 60,845 78,856
Investment Income (Loss)
Net Realized Gains (Losses) 31,192 684 14,284 31,876 19,763
Net Unrealized Gains (Losses) (11,988 ) (87,877 ) 3,751 (99,865 ) 18,565
Total Realized and Unrealized 19,204 (87,193 ) 18,035 (67,989 ) 38,328
Net Interest and Dividends 59,390 51,872 33,822 111,262 43,399
Total Investment Income (Loss) 78,594 (35,321 ) 51,857 43,273 81,727
Total Segment Revenues 188,183 50,037 157,203 238,220 302,759
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 22,785 24,005 26,904 46,790 53,649
Realized Allocation to Carry Pool 3,581 — — 3,581 9,900
Unrealized Allocation to Carry Pool 11,195 4,938 10,295 16,133 10,242
Total Compensation and Benefits 37,561 28,943 37,199 66,504 73,791
Occupancy and Related Charges 2,977 3,122 2,544 6,099 4,716
Other Operating Expenses 10,617 14,954 11,474 25,571 19,981
Total Segment Expenses 51,155 47,019 51,217 98,174 98,488
Income (Loss) attributable to noncontrolling interests 478 175 385 653 907
Economic Net Income (Loss) $ 136,550 $ 2,843 $ 105,601 $ 139,393 $ 203,364
Assets Under Management $ 38,440,400 $ 36,988,600 $ 38,540,900 $ 38,440,400 $ 38,540,900
Fee Paying Assets Under Management $ 36,974,000 $ 35,722,600 $ 33,489,000 $ 36,974,000 $ 33,489,000
Equity Invested $ 320,800 $ 649,300 $ 724,400 $ 970,100 $ 1,458,500
Uncalled Commitments $ 4,827,900 $ 2,865,600 $ 2,674,400 $ 4,827,900 $ 2,674,400
Gross Dollars Invested $ 1,110,100 $ 1,210,800 $ 768,200 $ 2,320,900 $ 1,757,900
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ — $ — $ — $ — $ —
Monitoring Fees — — — — —
Transaction Fees 48,757 43,257 31,615 92,014 96,089
Fee Credits — — — — —
Total Management, Monitoring and Transaction Fees, Net 48,757 43,257 31,615 92,014 96,089
Performance Income
Realized Carried Interest — — — — —
Incentive Fees — — — — —
Unrealized Carried Interest — — — — —
Total Performance Income — — — — —
Investment Income (Loss)
Net Realized Gains (Losses) (749 ) (3,281 ) (515 ) (4,030 ) (464 )
Net Unrealized Gains (Losses) (1,122 ) (2,207 ) (957 ) (3,329 ) (685 )
Total Realized and Unrealized (1,871 ) (5,488 ) (1,472 ) (7,359 ) (1,149 )
Net Interest and Dividends 7,782 6,634 3,850 14,416 8,245
Total Investment Income (Loss) 5,911 1,146 2,378 7,057 7,096
Total Segment Revenues 54,668 44,403 33,993 99,071 103,185
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 10,147 9,055 8,018 19,202 23,290
Realized Allocation to Carry Pool — — — — —
Unrealized Allocation to Carry Pool — — — — —
Total Compensation and Benefits 10,147 9,055 8,018 19,202 23,290
Occupancy and Related Charges 666 658 449 1,324 906
Other Operating Expenses 2,871 3,876 3,248 6,747 7,483
Total Segment Expenses 13,684 13,589 11,715 27,273 31,679
Income (Loss) attributable to noncontrolling interests 3,762 2,728 2,486 6,490 4,651
Economic Net Income (Loss) $ 37,222 $ 28,086 $ 19,792 $ 65,308 $ 66,855
Syndicated Capital $ 432,100 $ 248,700 $ 166,700 $ 680,800 $ 258,100
KKR
BALANCE SHEET
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
As of As of
June 30, 2015 December 31, 2014
Cash and short-term investments $ 2,025,779 $ 1,121,385
Investments 9,743,800 (a) 9,807,606
Unrealized carry (b) 1,579,405 (b) 1,283,022 (b)
Other assets 1,025,889 999,654
Total assets $ 14,374,873 $ 13,211,667
Debt obligations - KKR (ex-KFN) $ 2,000,000 $ 1,527,000
Debt obligations - KFN 657,310 657,310
Preferred shares - KFN 373,750 373,750
Other liabilities 334,426 413,808
Total liabilities 3,365,486 2,971,868
Noncontrolling interests 126,140 121,574
Book value $ 10,883,247 $ 10,118,225
Book value per adjusted unit $ 12.77 $ 12.07
(a) See schedule of investments that follows on the next page.
As of As of
(b) Unrealized Carry
June 30, 2015 December 31, 2014
Private Markets $ 1,468,815 $ 1,196,633
Public Markets 110,590 86,389
Total $ 1,579,405 $ 1,283,022
KKR
SCHEDULE OF INVESTMENTS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except percentage amounts)
As of June 30, 2015
Investments Cost Fair
Value
Fair Value as a
Percentage of
Total Investments
Private Equity Co-Investments $ 2,285,974 $ 2,909,238 29.9 %
Private Equity Funds 822,314 1,103,850 11.3 %
Private Equity Total 3,108,288 4,013,088 41.2 %
Energy 969,845 721,413 7.4 %
Real Estate 729,454 775,054 8.0 %
Infrastructure 172,138 180,351 1.9 %
Real Assets Total 1,871,437 1,676,818 17.3 %
Private Markets Total 4,979,725 5,689,906 58.5 %
Special Situations 769,487 832,958 8.5 %
Direct Lending 126,019 124,702 1.3 %
Mezzanine 89,287 96,125 0.9 %
Alternative Credit 984,793 1,053,785 10.7 %
CLOs 1,493,080 1,309,936 13.4 %
Liquid Credit 177,781 181,120 1.9 %
Credit Total 2,655,654 2,544,841 26.0 %
Specialty Finance 282,648 250,893 2.6 %
Public Markets Total 2,938,302 2,795,734 28.6 %
Other 1,251,224 1,258,160 12.9 %
Total Investments $ 9,169,251 $ 9,743,800 100.0 %
Significant Aggregate Portfolio Company Investments: (a)
First Data Corporation $ 1,061,332 $ 1,309,329 13.4 %
Walgreens Boots Alliance 165,776 615,574 6.3 %
HCA Inc. 29,455 226,780 2.3 %
Zimmer Biomet Holdings Inc. 68,572 100,485 1.0 %
U.S. Foodservice, Inc. 80,000 96,000 1.0 %
1,405,135 2,348,168 24.0 %
Other Investments 7,764,116 7,395,632 76.0 %
Total Investments $ 9,169,251 $ 9,743,800 100.0 %
(a) The significant aggregate portfolio company investments include the top five private equity investments in portfolio companies (other than investments expected to be syndicated or transferred in connection with new fundraising) based on their fair market value as of June 30, 2015. The fair value figures include the co-investment and the limited partner and/or general partner interests held by KKR in the underlying portfolio company.
KKR
ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
Private
Markets
Segment
Public
Markets
Segment
Total
Reportable
Segments
Quarter Ended June 30, 2015
March 31, 2015 $ 62,139,400 $ 36,988,600 $ 99,128,000
New Capital Raised 1,142,700 2,201,700 3,344,400
Distributions (3,447,000 ) (1,385,300 ) (b) (4,832,300 )
Change in Value 3,294,100 635,400 3,929,500
June 30, 2015 $ 63,129,200 $ 38,440,400 $ 101,569,600
Six Months Ended June 30, 2015
December 31, 2014 $ 61,505,800 $ 37,106,700 $ 98,612,500
New Capital Raised 2,733,800 4,449,600 7,183,400
Distributions (6,414,000 ) (3,233,900 ) (c) (9,647,900 )
Net Changes in Fee Base of Certain Funds (a) — (238,600 ) (238,600 )
Change in Value 5,303,600 356,600 5,660,200
June 30, 2015 $ 63,129,200 $ 38,440,400 $ 101,569,600
Trailing Twelve Months Ended June 30, 2015
June 30, 2014 $ 59,417,000 $ 38,540,900 $ 97,957,900
New Capital Raised 7,086,700 8,635,800 15,722,500
Distributions (10,504,000 ) (8,117,500 ) (d) (18,621,500 )
Net Changes in Fee Base of Certain Funds (a) — (238,600 ) (238,600 )
Change in Value 7,129,500 (380,200 ) 6,749,300
June 30, 2015 $ 63,129,200 $ 38,440,400 $ 101,569,600
*
Excludes those assets managed by entities where KKR does not hold more than a 50% ownership interest.
(a) Represents the impact of certain funds entering the post-investment period.
(b) Includes $463.7 million of redemptions by fund investors.
(c) Includes $1,116.9 million of redemptions by fund investors.
(d) Includes $3,132.4 million of redemptions by fund investors.
KKR
FEE PAYING ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
Private
Markets
Segment
Public
Markets
Segment
Total
Reportable
Segments
Quarter Ended June 30, 2015
March 31, 2015 $ 47,161,900 $ 35,722,600 $ 82,884,500
New Capital Raised 1,123,600 2,023,200 3,146,800
Distributions (1,723,600 ) (1,193,800 ) (b) (2,917,400 )
Change in Value 196,900 422,000 618,900
June 30, 2015 $ 46,758,800 $ 36,974,000 $ 83,732,800
Six Months Ended June 30, 2015
December 31, 2014 $ 47,262,500 $ 35,783,900 $ 83,046,400
New Capital Raised 2,444,100 4,217,000 6,661,100
Distributions (2,684,700 ) (2,780,200 ) (c) (5,464,900 )
Net Changes in Fee Base of Certain Funds (a) — (325,200 ) (325,200 )
Change in Value (263,100 ) 78,500 (184,600 )
June 30, 2015 $ 46,758,800 $ 36,974,000 $ 83,732,800
Trailing Twelve Months Ended June 30, 2015
June 30, 2014 $ 46,167,300 $ 33,489,000 $ 79,656,300
New Capital Raised 6,385,600 10,371,500 16,757,100
Distributions (5,151,600 ) (5,683,500 ) (d) (10,835,100 )
Net Changes in Fee Base of Certain Funds (a) — (325,200 ) (325,200 )
Change in Value (642,500 ) (877,800 ) (1,520,300 )
June 30, 2015 $ 46,758,800 $ 36,974,000 $ 83,732,800
* Excludes those assets managed by entities where KKR does not hold more than a 50% ownership interest.
(a) Represents the impact of certain funds entering the post-investment period.
(b) Includes $463.7 million of redemptions by fund investors.
(c) Includes $1,116.9 million of redemptions by fund investors.
(d) Includes $3,132.4 million of redemptions by fund investors.
KKR
INVESTMENT VEHICLE SUMMARY (a) (UNAUDITED)
As of June 30, 2015
(Amounts in millions, except percentages)
Investment Period Amount
Commencement
Date
End Date Commitment Uncalled
Commitments
Percentage
Committed
by General
Partner
Invested Realized Remaining
Cost
Remaining Fair
Value
Private Markets
Private Equity Funds
European Fund IV 12/2014 12/2020 $ 2,670.1 $ 2,509.1 7.4% $ 161.0 $ — $ 161.0 $ 206.6
Asian Fund II (b) 4/2013 4/2019 5,825.0 4,045.0 1.3% 2,052.0 272.0 1,779.9 3,032.7
North America Fund XI (b) 9/2012 9/2018 8,718.4 4,512.6 2.9% 5,024.4 1,024.2 4,205.7 6,331.8
China Growth Fund 11/2010 11/2016 1,010.0 448.1 1.0% 561.9 61.1 544.5 782.5
E2 Investors (Annex Fund) 8/2009 11/2013 195.8 — 4.9% 195.8 195.7 18.1 77.2
European Fund III 3/2008 3/2014 6,141.0 789.1 4.6% 5,351.9 4,269.1 3,338.3 4,520.4
Asian Fund 7/2007 4/2013 3,983.3 147.5 2.5% 3,835.8 5,343.1 1,954.9 2,699.1
2006 Fund 9/2006 9/2012 17,642.2 525.6 2.1% 17,116.6 16,154.9 8,760.3 14,972.7
European Fund II 11/2005 10/2008 5,750.8 — 2.1% 5,750.8 6,574.3 841.1 1,722.1
Millennium Fund 12/2002 12/2008 6,000.0 — 2.5% 6,000.0 11,699.6 1,219.7 2,232.2
European Fund 12/1999 12/2005 3,085.4 — 3.2% 3,085.4 8,736.6 — 44.5
Total Private Equity Funds 61,022.0 12,977.0 49,135.6 54,330.6 22,823.5 36,621.8
Co-Investment Vehicles (b) Various Various 5,506.1 2,531.1 Various 3,072.4 1,710.8 2,243.2 3,265.0
Total Private Equity 66,528.1 15,508.1 52,208.0 56,041.4 25,066.7 39,886.8
Real Assets
Energy Income and Growth Fund 9/2013 9/2018 1,974.2 1,217.7 12.8% 756.5 109.9 691.0 582.6
Natural Resources Fund Various Various 887.4 2.9 Various 884.5 96.6 809.9 340.1
Global Energy Opportunities (b) Various Various 1,026.4 809.6 Various 250.2 53.6 218.4 146.0
Global Infrastructure Investors (b) 9/2011 10/2014 1,040.1 132.8 4.8% 935.2 123.8 907.2 975.3
Global Infrastructure Investors II 10/2014 10/2020 2,838.7 2,788.4 4.4% 50.3 — 50.3 53.7
Infrastructure Co-Investments Various Various 1,125.0 — Various 1,125.0 338.3 1,125.0 1,560.2
Real Estate Partners Americas (b) 5/2013 12/2016 1,229.1 618.9 16.3% 718.3 257.3 609.8 688.1
Real Assets 10,120.9 5,570.3 4,720.0 979.5 4,411.6 4,346.0
Private Markets Total 76,649.0 21,078.4 56,928.0 57,020.9 29,478.3 44,232.8
Public Markets
Special Situations Fund 12/2012 12/2015 2,144.0 168.4 11.6% 1,975.6 144.0 1,975.6 2,348.4
Special Situations Fund II 12/2014 (c) 1,694.5 1,609.4 8.9% 85.1 — 85.0 97.6
Mezzanine Fund 3/2010 3/2015 1,022.8 165.5 4.4% 857.3 354.1 708.6 789.1
Lending Partners 12/2011 12/2014 460.2 81.9 15.2% 378.3 140.3 349.5 347.4
Lending Partners II 06/2014 06/2017 1,335.9 902.6 3.7% 433.3 — 433.3 469.1
Lending Partners Europe 03/2015 03/2018 556.6 525.2 7.3% 31.4 — 31.4 36.7
Other Alternative Credit Vehicles Various Various 3,650.3 1,374.9 Various 2,275.4 1,242.8 1,537.6 1,814.9
Public Markets Total 10,864.3 4,827.9 6,036.4 1,881.2 5,121.0 5,903.2
Grand Total $ 87,513.3 $ 25,906.3 $ 62,964.4 $ 58,902.1 $ 34,599.3 $ 50,136.0
(a) Reflects investment vehicles for which KKR has the ability to earn carried interest.
(b) The “Invested” and “Realized” columns include the amounts of any realized investments that restored the unused capital commitments of the fund investors.
(c) Three years from final close.
KKR
DISTRIBUTION CALCULATION (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Cash Revenues
Fees $ 271,500 $ 300,075 $ 254,237 $ 571,575 $ 581,860
Realized cash carry 252,227 302,425 555,488 554,652 749,038
Net realized investment income - KKR (ex-KFN) 195,408 191,477 245,711 386,885 438,603
Net realized investment income - KFN 56,258 39,865 36,382 96,123 36,382
Total Cash Revenues 775,393 833,842 1,091,818 1,609,235 1,805,883
Cash Expenses
Cash compensation and benefits 98,871 107,027 91,444 205,898 200,359
Realized cash carry allocated to carry pool 100,891 120,970 222,195 221,861 299,615
Occupancy and related charges 15,475 14,796 14,757 30,271 28,946
Other operating expenses 51,613 60,946 54,311 112,559 107,112
Total Cash Expenses 266,850 303,739 382,707 570,589 636,032
Cash income (loss) before noncontrolling interests and local taxes 508,543 530,103 709,111 1,038,646 1,169,851
Less: local income taxes (12,753 ) (9,950 ) (4,932 ) (22,703 ) (15,662 )
Less: noncontrolling interests (4,383 ) (3,622 ) (3,206 ) (8,005 ) (6,408 )
Total Distributable Earnings 491,407 516,531 700,973 1,007,938 1,147,781
Less: estimated current corporate income taxes (26,155 ) (28,855 ) (19,025 ) (55,010 ) (52,470 )
Distributable Earnings, net of taxes 465,252 487,676 681,948 952,928 1,095,311
Less: Undistributed net realized investment income - KKR (ex-KFN) (117,245 ) (114,886 ) (147,427 ) (232,131 ) (263,162 )
Distributed Earnings $ 348,007 $ 372,790 $ 534,521 $ 720,797 $ 832,149
Distributable Earnings, net of taxes per KKR & Co. L.P. common unit $ 0.57 $ 0.60 $ 0.85 $ 1.17 $ 1.44
Distribution per KKR & Co. L.P. common unit $ 0.42 $ 0.46 $ 0.67 $ 0.88 $ 1.10
Components of Distribution per KKR & Co. L.P. Common Unit
After-tax FRE $ 0.07 $ 0.10 $ 0.09 $ 0.17 $ 0.24
Realized Cash Carry $ 0.18 $ 0.22 $ 0.41 $ 0.40 $ 0.58
Distributed Net Realized Investment Income - KKR (ex-KFN) $ 0.10 $ 0.09 $ 0.12 $ 0.19 $ 0.23
Distributed Net Realized Investment Income - KFN $ 0.07 $ 0.05 $ 0.05 $ 0.12 $ 0.05
Fee and yield earnings distribution per KKR & Co. L.P. common unit $ 0.15 $ 0.15 $ 0.15 $ 0.30 $ 0.31
Adjusted Units Eligible For Distribution 820,963,434 813,796,584 803,719,050
Payout Ratio 74.8 % 76.4 % 78.4 % 75.6 % 76.0 %
KKR
Notes to Reportable Segments (Unaudited)
The segment key performance measures that follow are used by management in making operating and resource deployment decisions as well as assessing the overall performance of each of KKR’s reportable business segments. The reportable segments for KKR’s business are presented prior to giving effect to the allocation of income (loss) between KKR & Co. L.P. and KKR Holdings L.P. and as such represent the business in total. In addition, KKR’s reportable segments are presented without giving effect to the consolidation of the funds that KKR manages.
KKR discloses the following financial measures in this earnings release that are calculated and presented using methodologies other than in accordance with GAAP. We believe that providing these performance measures on a supplemental basis to our GAAP results is helpful to unitholders in assessing the overall performance of KKR’s businesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP. We caution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included elsewhere within this earnings release.
Fee related earnings (“FRE”) is comprised of (i) total management, monitoring and transaction fees, net, plus incentive fees, less (ii) cash compensation and benefits, occupancy and related charges and other operating expenses. It is a measure of the operating earnings of KKR and its business segments before carried interest and related carry pool allocations and investment income and comprises a portion of KKR's quarterly distribution. We believe this measure is useful to unitholders as it provides additional insight into the operating profitability of our fee generating management companies and capital markets businesses. The components of FRE on a segment basis differ from the equivalent GAAP amounts on a consolidated basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of charges relating to carry pool allocations; (v) the exclusion of non-cash equity-based charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR & Co. L.P. 2010 Equity Incentive Plan (“Equity Incentive Plan”); (vi) the exclusion of certain reimbursable expenses; and (vii) the exclusion of certain non-recurring items. After tax FRE represents FRE after deductions for current corporate and local income taxes and noncontrolling interests.
Economic net income (loss) (“ENI”) is a measure of profitability for KKR’s reportable segments and is used by management as an alternative measurement of the operating and investment earnings of KKR and its business segments. We believe this measure is useful to unitholders as it provides additional insight into the overall profitability of KKR’s businesses inclusive of carried interest and related carry pool allocations and investment income. ENI is comprised of total segment revenues less total segment expenses and certain economic interests in KKR’s segments held by third parties. ENI differs from net income (loss) on a GAAP basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of non-cash equity-based charges and other non-cash compensation charges borne by KKR Holdings or incurred under the Equity Incentive Plan and other securities that are exchangeable for common units of KKR & Co. L.P.; (v) the exclusion of certain non-recurring items; (vi) the exclusion of investment income (loss) relating to noncontrolling interests; and (vii) the exclusion of income taxes.
Fee and Yield Earnings is comprised of FRE and net interest and dividends from KKR’s business segments. This measure is used by management as a measure of the cash earnings of KKR and its business segments’ investment income. We believe this measure is useful to unitholders as it provides insight into the amount of KKR’s cash earnings, significant portions of which tend to be more recurring than realized carried interest and net realized gains from quarter to quarter.
Fee and Yield EBITDA is comprised of Fee and Yield Earnings before the impact of depreciation of fixed assets and core interest expense. This is used by management as another measure of the cash earnings of KKR and its business segments investment income. We believe this measure is also useful to unitholders as it provides insight into the amount of KKR’s cash earnings before the impact of interest expense, significant portions of which tend to be more recurring than realized carried interest and realized investment income from quarter to quarter.
Net realized investment income – KKR (ex-KFN) refers to net cash income from (i) realized investment gains and losses excluding certain realized investment losses to the extent unrealized losses on these investments were recognized prior to the combination with KPE on October 1, 2009, (ii) dividend income, and (iii) interest income net of interest expense in each case generated by KKR (excluding KFN). This term describes a portion of KKR’s quarterly distribution and excludes net realized investment income of KFN.
Net realized investment income – KFN refers to net cash income from (i) realized investment gains and losses, (ii) dividend income and (iii) interest income net of interest expense less certain general and administrative expenses incurred in the generation of net realized investment income in each case generated by KFN. This term describes a portion of KKR’s quarterly distribution.
Investments is a term used solely for purposes of financial presentation of a portion of KKR’s balance sheet and includes majority investments in subsidiaries that operate KKR’s asset management and broker-dealer businesses, including the general partner interests of KKR’s investment funds.
Total distributable earnings is the sum of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool, (iii) net realized investment income — KKR (ex-KFN) and (iv) net realized investment income — KFN; less (i) applicable local income taxes, if any, and (ii) noncontrolling interests. We believe this measure is useful to unitholders as it provides a supplemental measure to assess performance, excluding the impact of mark-to-market gains (losses), and amounts available for distribution to KKR unitholders. However, total distributable earnings is not a measure that calculates actual distributions under KKR’s current distribution policy.
Assets under management (“AUM”) represent the assets from which KKR is entitled to receive fees or a carried interest and general partner capital. We believe this measure is useful to unitholders as it provides additional insight into KKR’s capital raising activities and the overall activity in its investment funds. KKR calculates the amount of AUM as of any date as the sum of: (i) the fair value of the investments of KKR’s investment funds plus uncalled capital commitments from these funds; (ii) the fair value of investments in KKR’s co-investment vehicles; (iii) the net asset value of certain of KKR’s fixed income products; (iv) the value of outstanding CLOs (excluding CLOs wholly-owned by KKR); and (v) the fair value of other assets managed by KKR. AUM excludes those assets managed by entities where KKR does not hold more than a 50% ownership interest. KKR’s definition of AUM is not based on any definition of AUM that may be set forth in the agreements governing the investment funds, vehicles or accounts that it manages or calculated pursuant to any regulatory definitions.
Fee paying AUM (“FPAUM”) represents only those assets under management from which KKR receives management fees. We believe this measure is useful to unitholders as it provides additional insight into the capital base upon which KKR earns management fees. This relates to KKR’s capital raising activities and the overall activity in its investment funds or CLOs, for only those funds or CLOs where KKR receives fees (i.e., excluding vehicles that receive only carried interest or general partner capital). FPAUM is the sum of all of the individual fee bases that are used to calculate KKR’s fees and differs from AUM in the following respects: (i) assets from which KKR does not receive a fee are excluded (i.e., assets with respect to which it receives only carried interest) and (ii) certain assets, primarily in its private equity funds, are reflected based on capital commitments and invested capital as opposed to fair value because fees are not impacted by changes in the fair value of underlying investments.
Equity invested is the aggregate amount of equity capital that has been invested by KKR’s investment funds and carry-yielding co-investment vehicles and is used as a measure of investment activity for KKR and its business segments during a given period. We believe this measure is useful to unitholders as it provides additional insight into KKR’s investments among its investment funds and carry-yielding co-investment vehicles and replaces committed dollars invested. Such amounts include: (i) capital invested by fund investors and co-investors with respect to which KKR is entitled to a carried interest and (ii) capital invested by KKR’s investment funds, including investments made using investment financing arrangements.
Gross dollars invested is the aggregate amount of capital that has been invested by all of KKR’s Public Markets investment vehicles in our private credit non-liquid strategies and is used as a measure of investment activity for a portion of KKR’s Public Markets segment in a given period. We believe this measure is useful to unitholders as it provides additional insight into KKR’s investment of capital across private credit non-liquid strategies for all the investment vehicles in the Public Markets segment. Such amounts include capital invested by fund investors and co-investors with respect to which KKR’s Public Markets business is entitled to a fee or carried interest.
Syndicated capital is generally the aggregate amount of capital in transactions originated by KKR and its investment funds and carry-yielding co-investment vehicles, which has been distributed to third parties in exchange for a fee. It does not include (i) capital invested in such transactions by KKR investment funds and carry-yielding co-investment vehicles, which is instead reported in equity invested and (ii) debt capital that is arranged as part of the acquisition financing of transactions originated by KKR investment funds. Syndicated capital is used as a measure of investment activity for KKR and its business segments during a given period, and we believe that this measure is useful to unitholders as it provides additional insight into levels of syndication activity in KKR's Capital Markets segment and across its investment platform.
Uncalled commitments are used as a measure of unfunded capital commitments that KKR’s investment funds and carry-paying co-investment vehicles have received from partners to contribute capital to fund future investments. We believe this measure is useful to unitholders as it provides additional insight into the amount of capital that is available to KKR’s investment funds to make future investments. Uncalled commitments are not reduced for investments completed using fund-level investment financing arrangements.
Adjusted units are used as a measure of the total equity ownership of KKR that is held by KKR & Co. L.P. (including equity awards issued under the Equity Incentive Plan), KKR Holdings and other holders of securities exchangeable into common units of KKR & Co. L.P. and represent the fully diluted unit count using the if-converted method. We believe this measure is useful to unitholders as it provides an indication of the total equity ownership of KKR as if all outstanding KKR Holdings units, equity awards issued under the Equity Incentive Plan and other exchangeable securities had been exchanged for common units of KKR & Co. L.P.
Core interest expense is used by management as an alternative measurement of interest expense incurred by KKR on a segment basis and excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR’s investment funds, investment vehicles and principal investments and also excludes interest expense incurred by KFN. The financing arrangements excluded from core interest expense are not direct obligations of the general partners of KKR’s private equity funds or its management companies, and in the case of debt obligations of KFN are non-recourse to KKR beyond the assets of KFN. On a segment basis, interest expense is included in net interest and dividends within total investment income. We believe this measure is useful to unitholders as it provides an indication of the amount of interest expense borne by KKR excluding interest expense that is allocated to KKR’s investment funds, other noncontrolling interest holders and KFN. Additionally, we believe this measure is useful for analyzing KKR’s ability to service its debt obligations other than the debt obligations of KFN.
Book value is a measure of the net assets of KKR’s reportable segments and is used by management primarily in assessing the unrealized value of KKR’s investment portfolio, including carried interest, as well as KKR’s overall liquidity position. We believe this measure is useful to unitholders as it provides additional insight into the assets and liabilities of KKR excluding the assets and liabilities that are allocated to noncontrolling interest holders. Book value differs from KKR & Co. L.P. partners’ capital on a GAAP basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings.
Cash and short-term investments represent cash and liquid short-term investments in high-grade, short-duration cash management strategies used by KKR to generate additional yield on our excess liquidity and is used by management in evaluating KKR’s liquidity position. We believe this measure is useful to unitholders as it provides additional insight into KKR’s available liquidity. Cash and short-term investments differ from cash and cash equivalents on a GAAP basis as a result of the inclusion of liquid short-term investments in cash and short-term investments.
Return on equity measures the amount of net income generated as a percentage of capital invested in KKR’s business. Return on equity is calculated by dividing Economic Net Income (Loss), After Taxes on a trailing twelve-month basis by the average book value during the period.
Cash return on equity measures the amount of cash income generated as a percentage of capital invested in KKR’s business. Cash return on equity is calculated by dividing Distributable Earnings, net of taxes on a trailing twelve-month basis by the average book value during the period.
KKR
EXHIBIT A
KKR'S PORTION OF TOTAL UNCALLED COMMITMENTS TO ITS INVESTMENT FUNDS
(Amounts in thousands)
Uncalled
Commitments
Private Markets
European Fund IV $ 184,700
North America Fund XI 166,900
Energy Income and Growth Fund 157,200
Global Infrastructure Investors II 121,600
Real Estate Partners Americas 100,700
European Fund III 63,500
Asian Fund II 51,800
2006 Fund 22,700
Co-Investment Vehicles 69,700
Other Private Markets Funds 13,500
Total Private Markets Commitments 952,300
Public Markets
Special Situations Fund 19,600
Special Situations Fund II 142,900
Mezzanine Fund 7,000
Lending Partners 12,500
Lending Partners II 33,800
Lending Partners Europe 33,800
Other Alternative Credit Vehicles 65,600
Total Public Markets Commitments 315,200
Total Uncalled Commitments $ 1,267,500
KKR
EXHIBIT B
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT - BASIC (GAAP BASIS)
TO ENI AFTER TAXES PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
Quarter Ended
June 30, 2015 March 31, 2015 June 30, 2014
Net income (loss) attributable to KKR & Co. L.P. per common unit - Basic $ 0.84 $ 0.62 $ 0.47
Weighted Average Common Units Outstanding - Basic 446,794,950 434,874,820 377,542,161
Net income (loss) attributable to KKR & Co. L.P. 376,306 270,507 178,215
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
325,703 239,008 186,776
Plus: Non-cash equity-based charges 69,478 76,550 92,957
Plus: Amortization of intangibles and other, net 37,910 (2,790 ) 37,455
Plus: Income taxes 30,547 16,138 6,176
Economic net income (loss) 839,944 599,413 501,579
Less: Provision for income taxes 44,836 21,235 6,330
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 48,453 52,265 40,877
Economic net income (loss) after taxes 746,655 525,913 454,372
Weighted Average Adjusted Units 852,128,762 848,061,661 800,747,528
Economic net income (loss) after taxes per adjusted unit $ 0.88 $ 0.62 $ 0.57
Six Months Ended
June 30, 2015 June 30, 2014
Net income (loss) attributable to KKR & Co. L.P. per common unit - Basic $ 1.47 $ 1.16
Weighted Average Common Units Outstanding - Basic 440,867,813 335,748,498
Net income (loss) attributable to KKR & Co. L.P. 646,813 388,256
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
564,711 487,590
Plus: Non-cash equity-based charges 146,028 170,485
Plus: Amortization of intangibles and other, net 35,120 57,624
Plus: Income taxes 46,685 27,878
Economic net income (loss) 1,439,357 1,131,833
Less: Provision for income taxes 66,071 42,911
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 100,718 80,230
Economic net income (loss) after taxes 1,272,568 1,008,692
Weighted Average Adjusted Units 850,106,448 762,873,784
Economic net income (loss) after taxes per adjusted unit $ 1.50 $ 1.32
KKR
EXHIBIT B (CONTINUED)
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. (GAAP BASIS)
TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS, FEE AND YIELD EARNINGS, FEE AND YIELD EBITDA, TOTAL DISTRIBUTABLE EARNINGS, AND TOTAL EBITDA (UNAUDITED)
(Amounts in thousands)
Quarter Ended
June 30, 2015 March 31, 2015 June 30, 2014
Net income (loss) attributable to KKR & Co. L.P. $ 376,306 $ 270,507 $ 178,215
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
325,703 239,008 186,776
Plus: Non-cash equity-based charges 69,478 76,550 92,957
Plus: Amortization of intangibles and other, net 37,910 (2,790 ) 37,455
Plus: Income taxes 30,547 16,138 6,176
Economic net income (loss) 839,944 599,413 501,579
Plus: Income attributable to segment noncontrolling interests 4,383 3,622 3,206
Less: Total investment income (loss) 383,650 220,621 162,158
Less: Net carried interest 355,136 265,108 248,902
Fee related earnings 105,541 117,306 93,725
Plus: Net interest and dividends 75,406 50,675 60,432
Fee and yield earnings 180,947 167,981 154,157
Plus: Depreciation and amortization 3,918 3,881 4,140
Plus: Core interest expense 30,750 25,332 19,205
Fee and yield EBITDA 215,615 197,194 177,502
Less: Depreciation and amortization 3,918 3,881 4,140
Less: Core interest expense 30,750 25,332 19,205
Less: Net interest and dividends 75,406 50,675 60,432
Plus: Realized cash carry, net of realized cash carry allocated to carry pool 151,336 181,455 333,293
Plus: Net realized investment income - KKR (ex-KFN) 195,408 191,477 245,711
Plus: Net realized investment income - KFN 56,258 39,865 36,382
Less: Local income taxes and noncontrolling interests 17,136 13,572 8,138
Total distributable earnings 491,407 516,531 700,973
Plus: Depreciation and amortization 3,918 3,881 4,140
Plus: Core interest expense 30,750 25,332 19,205
Plus: Local income taxes and noncontrolling interests 17,136 13,572 8,138
Total EBITDA $ 543,211 $ 559,316 $ 732,456
Six Months Ended
June 30, 2015 June 30, 2014
Net income (loss) attributable to KKR & Co. L.P. $ 646,813 $ 388,256
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
564,711 487,590
Plus: Non-cash equity-based charges 146,028 170,485
Plus: Amortization of intangibles and other, net 35,120 57,624
Plus: Income taxes 46,685 27,878
Economic net income (loss) 1,439,357 1,131,833
Plus: Income attributable to segment noncontrolling interests 8,005 6,408
Less: Total investment income (loss) 604,271 440,809
Less: Net carried interest 620,244 451,989
Fee related earnings 222,847 245,443
Plus: Net interest and dividends 126,081 71,596
Fee and yield earnings 348,928 317,039
Plus: Depreciation and amortization 7,799 8,175
Plus: Core interest expense 56,082 37,605
Fee and yield EBITDA 412,809 362,819
Less: Depreciation and amortization 7,799 8,175
Less: Core interest expense 56,082 37,605
Less: Net interest and dividends 126,081 71,596
Plus: Realized cash carry, net of realized cash carry allocated to carry pool 332,791 449,423
Plus: Net realized investment income - KKR (ex-KFN) 386,885 438,603
Plus: Net realized investment income - KFN 96,123 36,382
Less: Local income taxes and noncontrolling interests 30,708 22,070
Total distributable earnings 1,007,938 1,147,781
Plus: Depreciation and amortization 7,799 8,175
Plus: Core interest expense 56,082 37,605
Plus: Local income taxes and noncontrolling interests 30,708 22,070
Total EBITDA $ 1,102,527 $ 1,215,631
KKR
EXHIBIT B (CONTINUED)
RECONCILIATION OF KKR & CO. L.P. PARTNERS' CAPITAL (GAAP BASIS)
TO BOOK VALUE AND BOOK VALUE PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
As of As of
June 30, 2015 December 31, 2014
KKR & Co. L.P. partners’ capital $ 5,947,415 $ 5,382,691
Noncontrolling interests held by KKR Holdings L.P. 4,827,384 4,661,679
Equity impact of KKR Management Holdings Corp. and other 108,448 73,855
Book value 10,883,247 10,118,225
Adjusted units 852,145,905 838,020,974
Book value per adjusted unit $ 12.77 $ 12.07
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS)
TO CASH AND SHORT-TERM INVESTMENTS (UNAUDITED)
(Amounts in thousands)
As of As of
June 30, 2015 December 31, 2014
Cash and cash equivalents $ 1,824,686 $ 918,080
Liquid short-term investments 201,093 203,305
Cash and short-term investments $ 2,025,779 $ 1,121,385
KKR
EXHIBIT C
RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING - BASIC TO WEIGHTED AVERAGE ADJUSTED UNITS (UNAUDITED)
The following table provides a reconciliation of KKR's Weighted Average GAAP Common Units Outstanding to Weighted Average Adjusted Units.
Quarter Ended
June 30, 2015 March 31, 2015 June 30, 2014
Weighted Average GAAP Common Units Outstanding - Basic 446,794,950 434,874,820 377,542,161
Adjustments:
Weighted Average Unvested Common Units and Other Securities (a) 35,856,541 37,350,524 32,637,677
Weighted Average GAAP Common Units Outstanding - Diluted 482,651,491 472,225,344 410,179,838
Adjustments:
Weighted Average KKR Holdings Units (b) 369,477,271 375,836,317 390,567,690
Weighted Average Adjusted Units 852,128,762 848,061,661 800,747,528
Six Months Ended
June 30, 2015 June 30, 2014
Weighted Average GAAP Common Units Outstanding - Basic 440,867,813 335,748,498
Adjustments:
Weighted Average Unvested Common Units and Other Securities (a) 36,599,407 32,128,551
Weighted Average GAAP Common Units Outstanding - Diluted 477,467,220 367,877,049
Adjustments:
Weighted Average KKR Holdings Units (b) 372,639,228 394,996,735
Weighted Average Adjusted Units 850,106,448 762,873,784
RECONCILIATION OF GAAP COMMON UNITS OUTSTANDING - BASIC TO ADJUSTED UNITS AND ADJUSTED UNITS ELIGIBLE FOR DISTRIBUTION (UNAUDITED)
The following table provides a reconciliation of KKR's GAAP Common Units Outstanding to Adjusted Units and Adjusted Units Eligible for Distribution.
As of As of
June 30, 2015 December 31, 2014
GAAP Common Units Outstanding - Basic 450,396,361 433,330,540
Unvested Common Units and Other Securities (a) 34,262,715 27,493,685
GAAP Common Units Outstanding - Diluted 484,659,076 460,824,225
Adjustments:
KKR Holdings Units (b) 367,486,829 377,196,749
Adjusted Units 852,145,905 838,020,974
Adjustments:
Unvested Common Units and Unvested Other Securities (a) (31,182,471 ) (24,373,441 )
Adjusted Units Eligible For Distribution 820,963,434 813,647,533
(a) Represents equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan and other securities that are exchangeable into KKR & Co. L.P common units. The issuance of common units of KKR & Co. L.P. pursuant to such equity awards or other securities dilutes KKR common unitholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business.
(b) Common units that may be issued by KKR & Co. L.P. upon exchange of units in KKR Holdings L.P. for KKR common units.
View source version on businesswire.com: http://www.businesswire.com/news/home/20150723005353/en/
Contact:
Kohlberg Kravis Roberts & Co. L.P.
Investor Relations:
Craig Larson, +1-877-610-4910 (U.S.)
+1-212-230-9410
investor-relations@kkr.com
or
Media:
Kristi Huller, +1-212-750-8300
media@kkr.com
..
Utah Medical Products, Inc. Reports Financial Performance for First Quarter 2015
Marketwired
Utah Medical Products, Inc.
April 23, 2015 9:00 AM
SALT LAKE CITY, UT--(Marketwired - Apr 23, 2015) - In the first calendar quarter (1Q) of 2015, Utah Medical Products, Inc. (NASDAQ: UTMD) achieved results representing a solid start to meeting its previously announced goals for 2015, despite significant foreign currency exchange (FX) rate headwinds. The headwinds in U.S. Dollar terms reduced consolidated sales and had a leveraged negative effect on profits.
The following is a summary comparison of 1Q 2015 with 1Q 2014 income statement measures:
Sales: +4%
Gross Profit: +1%
Operating Income: +1%
Net Income: (2%)
Earnings Per Share: (2%)
As UTMD states in its quarterly SEC Form 10-Q disclosures, 'Because of the relatively short span of time, results for any given three month period in comparison with any previous three month period may not be indicative of comparative results for the year as a whole.'
Currencies in this release are denoted as $ or USD = U.S. Dollars; AUD = Australia Dollars; GBP = UK Pound Sterling; and Euro = Euros. Currency amounts throughout this report are in thousands, except per share amounts and where noted.
UTMD's FX rates for income statement purposes are transaction-weighted averages. The average rates from the applicable foreign currency to USD during 1Q 2015 and 1Q 2014 follow:
1Q 2015 1Q 2014 Change
GBP 1.514 1.655 (8.5%)
Euro 1.119 1.372 (18.5%)
AUD 0.784 0.899 (12.8%)
UTMD's FX rates for balance sheet purposes are the applicable rates at the end of each reporting period. The FX rates from the applicable foreign currency to USD for assets and liabilities at the end of 1Q 2015 and the end of 1Q 2014 follow:
1Q 2015 1Q 2014 Change
GBP 1.485 1.667 (11.0%)
Euro 1.074 1.377 (22.0%)
AUD 0.763 0.927 (17.8%)
UTMD's profit margins remained strong despite the negative FX on about one-third of sales:
1Q 2015
(JAN - MAR) 1Q 2014
(JAN - MAR)
Gross Profit Margin (gross profits/ sales): 59.7% 61.6%
Operating Profit Margin (operating profits/ sales): 37.9% 39.1%
EBT Margin (profits before income taxes/ sales): 35.8% 38.5%
Net Profit Margin (profit after taxes/ sales): 26.1% 27.7%
Sales.
Total consolidated 1Q 2015 UTMD sales were $406 higher than in 1Q 2014 (up 4%). In brief, comparing 1Q 2015 to 1Q 2014, U.S. domestic sales were much stronger and UK domestic GBP sales were much weaker, further leveraged down in USD terms by a stronger USD. Approximately one-third of UTMD's sales are invoiced in foreign currencies. If 1Q 2015 foreign currency sales were converted to USD at the same FX rates as in 1Q 2014, 1Q 2015 total consolidated sales would have been an additional $397 higher, or up 8% overall compared to 1Q 2014.
Total international sales in 1Q 2015 were $130 lower (3%) than in 1Q 2014 because of the weaker foreign currencies. Using 1Q 2014 FX rates, 1Q 2015 international sales would have been $267 higher (+5%) rather than $130 lower. As a result of the FX rate changes, international sales were only 47% of total consolidated sales compared to 51% in 1Q 2014. International sales exported from the U.S. in fixed USD terms were up 16%, while international sales by UTMD's foreign subsidiaries converted to USD terms were down 9%. International sales by UTMD foreign subsidiaries in USD terms using the same FX rates as in 2014 would have been up 2% rather than down 9%.
Trade sales are sales to third parties, excluding sales from one UTMD entity to another. Ireland subsidiary 1Q 2015 trade sales were up $547 (+91%). The large increase resulted from $342 sales of blood pressure monitoring (BPM) kits to UTMD's China distributor, and $387 in shipments of Filshie Sterishot kits, now manufactured by UTMD Ireland, directly to international customers located outside the UK, neither of which occurred in 1Q 2014 Ireland trade sales. Although Ireland domestic sales were up 9% in Euro terms, they were down 11% in USD terms because of the weaker Euro.
Trade sales by UTMD's UK subsidiary, Femcare-Nikomed Ltd, were down overall by $493 (14% lower). Sales of Sterishot kits to international customers outside the UK which were included in UK sales in 1Q 2014 were shipped directly from Ireland in 1Q 2015. UK domestic sales were down $236 (22% lower) in part due to the 9% weaker GBP, and sales to Femcare's U.S. distributor of the Filshie Clip System (which are included in the U.S. domestic sales category) were up $270 (22% higher).
Sales by UTMD's Australia subsidiary, Femcare Australia Pty Ltd, in 1Q 2015 were 5% lower in AUD terms than in 1Q 2014, but because of the weaker AUD, were down $121 (17% lower) in USD.
U.S. domestic sales were up $536 (11% higher) in 1Q 2015 compared to 1Q 2014. Direct sales of devices to U.S. user facilities were up $115 (4% higher). In addition to Filshie Clip System sales to its U.S. distributor up $270 (22% higher), UTMD's sales of components and finished devices to other U.S. companies for use in their products (OEM customers) were up $150 (31% higher).
Gross Profit.
UTMD's gross profit margin (GPM), gross profits divided by consolidated sales, at 61.6% in 1Q 2014 was higher than for the full year of 2014 at 60.5%. With a stronger USD, the consolidated GPM is squeezed, assuming that unit prices invoiced in foreign currencies are kept constant, because raw materials and finished devices sold to UTMD's foreign subsidiaries in fixed USD increase the cost of goods sold by the foreign subsidiary. In addition, 1Q 2015 product mix was less favorable than 1Q 2014. BPM kits sales to UTMD's China distributor, at a low GPM, were 3.3% of total consolidated sales in 1Q 2015 compared to none in 1Q 2014. Given the substantially lower FX rates and less favorable product mix, the 1Q 2015 GPM of 59.7% was better than expected.
Operating Income.
Operating expenses, comprised of general and administrative (G&A), sales and marketing (S&M) and product development (R&D) expenses, were $2,235 in 1Q 2015 (21.8% of sales) compared to $2,207 in 1Q 2014 (22.5% of sales). The lower ratio of operating expenses to sales was due to about the same consolidated USD expenses with higher consolidated sales. In this case, the lower FX rates were helpful, as 1Q 2015 operating expenses of UTMD's foreign subsidiaries in the aggregate would have been $115 higher using 1Q 2014 FX rates.
Consolidated G&A expenses were $1,507 (14.7% of sales) in 1Q 2015 compared to $1,542 (15.7% of sales) in 1Q 2014. The G&A expenses in 1Q 2015 included $611 (6.0% of sales) of non-cash expense from the amortization of identifiable intangible assets resulting from the Femcare acquisition, which were $668 (6.8% of sales) in 1Q 2014. The lower USD amortization expense was the result of a stronger USD, as the amortization expense was GBP 404 in both periods.
S&M expenses were $573 (5.6% of sales) in 1Q 2015 compared to $542 (5.5% of sales) in 1Q 2014. S&M expenses in 1Q 2015 included $68 MDET, $2 higher than in 1Q 2014 due to higher U.S. domestic sales of medical devices. The U.S. Medical Device Excise Tax (MDET), imposed as a component of the Patient Protection and Affordable Care Act (Obamacare), is levied as 2.3% of domestic sales of medical devices.
R&D expenses were $156 (1.5% of sales) compared to $123 (1.2% of sales) in 1Q 2014.
Operating income in 1Q 2015 was $3,877 compared to $3,843 in 1Q 2014 (0.9% higher), despite a GPM that was 1.8 percentage points lower than in the previous year's 1Q period. UTMD's 1Q 2015 operating profit margin (OPM), operating income divided by sales, was 37.9% compared to 39.1% in 1Q 2014.
Income Before Tax.
Income before taxes (EBT) results from subtracting net non-operating expense (NOE) from operating income. Consolidated 1Q 2015 EBT was $3,668 compared to $3,782 in 1Q 2014. The $114 lower EBT can be attributed to a $177 loss on the remeasured value of Euro cash balances in the UK, which dropped by more than 11% in value relative to the USD at the end of 1Q 2015 from the end of 4Q 2014. Consolidated UTMD EBT margins (EBT divided by sales) were 35.8% in 1Q 2015 compared to 38.5% in 1Q 2014. The lower EBT margin is due to the lower GPM and the remeasured currency loss.
NOE includes 1) loan interest, 2) bank fees and 3) losses from remeasuring the value of Euro cash bank balances in the UK, and GBP cash balances in Ireland, in USD terms, minus non-operating income from 1) rent of underutilized property, 2) investment income and 3) royalties received from licensing the Company's technology. Net NOE in 1Q 2015 was $209 compared to $61 in 1Q 2014. The total loss on remeasured foreign currency balances in 1Q 2015 was $168 compared to none in 1Q 2014. The loans obtained to help finance the acquisition of Femcare in 1Q 2011 were fully repaid in 1Q 2015 at an expense of $65 including accrued interest and bank fees. Looking forward to the remainder of 2015, this portion of NOE will be zero. In 1Q 2014, the interest expense on bank debt was $87.
The EBT of Utah Medical Products, Ltd (Ireland) was Euro 751 in 1Q 2015 compared to Euro 88 in 1Q 2014. The EBT of Femcare Group Ltd (Femcare-Nikomed, Ltd., UK and Femcare Australia) was GBP 945 in 1Q 2015 compared to GBP 1,159 in 1Q 2014. The respective EBT margins of UTMD Ltd. (Ireland) were 43.5% in 1Q 2015 and 18.6% in 1Q 2014, and of Femcare Group were 37.6% in 1Q 2015 and 41.2% in 1Q 2014.
Excluding the noncash effects of depreciation, amortization of intangible assets and stock option expense, 1Q 2015 consolidated EBT excluding the remeasured bank balance currency loss and interest expense ("adjusted consolidated EBITDA") were $4,698, about the same as the $4,713 consolidated EBITDA in 1Q 2014 despite the significant FX headwinds. Management believes that this operating performance provides a good start to achieving its financial objectives for the year 2015, as previously provided in its 2014 SEC 10-K Report.
Net Income.
Net Income in 1Q 2015 of $2,667 was also close to the net income of $2,722 in 1Q 2014, despite the impact of FX rates on sales and GPM, and the remeasured foreign currency loss. UTMD's net profit margin (NPM), net income divided by consolidated sales, was 26.1% in 1Q 2015 and 27.7% in 1Q 2014. The average consolidated income tax provisions (as a % of EBT) in 1Q 2015 and 1Q 2014 were 27.3% and 28.0%, respectively.
UTMD's combined state and federal income tax provision rate in the U.S. after all allowable deductions was 34.2% in 1Q 2015 compared to 33.9% in 1Q 2014. The corporate income tax rate in the UK was 21% in 1Q 2015 compared to 23% in 1Q 2014. As of April 1, 2015, the UK corporate tax rate will be reduced again, from 21% to 20%, which will further benefit UTMD's NPM during the remainder of 2015. The income tax rate in Australia remained 30% in both periods. The UTMD Ltd (Ireland) tax rate on export profits remains 12.5%.
Earnings per share (EPS).
EPS in 1Q 2015 were about one cent lower than in 1Q 2014. Earnings per share for the most recent twelve months were $3.00. Diluted shares used to calculate EPS decreased to 3,776,400 in 1Q 2015 from 3,786,700 in 1Q 2014 despite a higher average share price and employee option exercises which are factors that increase dilution, as a result of 22,200 shares repurchased after the end of 1Q 2014. The number of shares added as a dilution factor in 1Q 2015 was 26,100 compared to 37,000 in 1Q 2014.
Outstanding shares at the end of 1Q 2015 were 3,752,600. The number of shares used for calculating earnings per share was higher than ending shares because of a time-weighted calculation of average outstanding shares plus dilution from unexercised employee and director options. The total number of outstanding unexercised employee and outside director options at March 31, 2015 was 83,900 shares at an average exercise price of $37.29/ share, including shares awarded but not vested. This compares to 74,900 unexercised option shares outstanding at March 31, 2014 at an average exercise price of $27.94/ share.
During both 1Q 2015 and 1Q 2014, UTMD did not repurchase its shares in the open market. The Company retains the financial ability for repurchasing its shares when they seem undervalued. The closing share price at the end of 1Q 2015 was $59.86 compared to $60.05 at the end of calendar year 2014, and $57.83 at the end of 1Q 2014.
Balance Sheet.
As of March 31, 2015, UTMD is debt free, four years after borrowing $26.9 million to help finance the acquisition of Femcare Group, Ltd. Compared to a year earlier, in addition to paying off $8.1 million of debt, cash and investments increased $1.1 million to $16.2 million, and Stockholders' Equity increased $0.9 million after cash payments of dividends to shareholders of $3.8 million (which reduce Stockholders' Equity). At March 31, 2015, net Intangible Assets were 54.2% of total consolidated assets compared to 57.5% a year earlier.
Foreign subsidiary assets and liabilities, when consolidated in USD terms, were reduced 11%-22% compared to a year ago, according to the table above.
Financial ratios as of March 31, 2015 which may be of interest to shareholders follow:
1) Current Ratio = 5.0
2) Days in Trade Receivables (based on 1Q 2015 sales activity) = 37
3) Average Inventory Turns (based on 1Q 2015 CGS) = 3.4
4) 2015 YTD ROE (before dividends) = 17%
Investors are cautioned that this press release contains forward looking statements and that actual events may differ from those projected. Risk factors that could cause results to differ materially from those projected include market acceptance of products, timing of regulatory approval of new products, regulatory intervention in current operations, government healthcare "reforms", the Company's ability to efficiently manufacture, market, and sell its products, and foreign currency exchange rates, among other factors that have been and will be outlined in UTMD's public disclosure filings with the SEC.
Utah Medical Products, Inc., with particular interest in health care for women and their babies, develops, manufactures and markets a broad range of disposable and reusable specialty medical devices recognized by clinicians in hundreds of countries around the world as the standard for obtaining optimal long term outcomes for their patients. For more information about Utah Medical Products, Inc., visit UTMD's website at www.utahmed.com.
Utah Medical Products, Inc.
INCOME STATEMENT, First Quarter ended March 31 (in thousands except earnings per share):
1Q 2015 1Q 2014 Percent Change
Net Sales $ 10,233 $ 9,827 +4.1 %
Gross Profit 6,112 6,050 +1.0 %
Operating Income 3,877 3,843 +0.9 %
Income Before Tax 3,668 3,782 (3.0 %)
Net Income 2,667 2,722 (2.0 %)
Earnings Per Share $ 0.706 $ 0.719 (1.8 %)
Shares Outstanding (diluted) 3,776 3,787
BALANCE SHEET
(in thousands) (unaudited)
MAR 31, 2015 (audited)
DEC 31, 2014 (unaudited)
MAR 31, 2014
Assets
Cash & Investments $ 16,157 $ 19,332 $ 15,089
Accounts & Other Receivables, Net 5,013 4,703 5,075
Inventories 4,850 4,872 5,292
Other Current Assets 769 768 876
Total Current Assets 26,789 29,675 26,332
Property & Equipment, Net 7,728 8,236 8,904
Intangible Assets, Net 40,858 43,165 47,658
Total Assets $ 75,375 $ 81,076 $ 82,894
Liabilities & Stockholders' Equity
A/P & Accrued Liabilities $ 5,359 $ 5,077 $ 4,478
Current Portion of Notes Payable -0- 3,894 4,068
Total Current Liabilities 5,359 8,971 8,546
Notes Payable (excluding current portion) -0- 973 4,067
Deferred Tax Liability - Intangibles 5,190 5,581 6,394
Deferred Revenue and Income Taxes 985 995 949
Stockholders' Equity 63,841 64,556 62,938
Total Liabilities & Stockholders' Equity $ 75,375 $ 81,076 $ 82,894
Contact:
Paul Richins
(801) 566-1200