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Carlyle intends to distribute $0.16 per full quarter to common unitholders for each of the first three quarters of the calendar year, and to announce a year-end catch-up distribution in its fourth quarter earnings release. As noted in Carlyle’s Registration Statement on Form S-1, Carlyle intends to make the year-end catch-up distribution in an amount that, taken together with the other quarterly distributions, represents substantially all of its Distributable Earnings in excess of the amount determined by the General Partner to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and its funds or to comply with applicable law or any of its financing agreements. Carlyle anticipates that the aggregate amount of its distributions for most years will be less than its total Distributable Earnings for that year. The declaration and payment of any distribution is at the sole discretion of the General Partner, which may change the distribution policy at any time.

The Carlyle Engine

Carlyle evaluates the performance of its business on four key metrics, known as the Carlyle engine (funds raised, equity invested, fund valuations and realized proceeds for fund investors). The table below highlights the results of those metrics for Q3 2012, as well as on a year-to-date (YTD) and last twelve months (LTM) basis.

       
Funds Raised Equity Invested

Q3 

$3.4 billion

Q3 

$1.6 billion

YTD: $9.4 bn

  LTM: $10.8 bn YTD: $4.6 bn   LTM: $7.5 bn
 
   
Realized Proceeds Carry Fund Returns

Q3 

$5.1 billion

Q3 

3%
YTD: $11.9 bn   LTM: $15.1 bn YTD: 11%   LTM: 18%
       
Note: Equity Invested and Realized Proceeds reflect carry funds only.

During Q3 2012, Carlyle generated net realized proceeds of $5.1 billion from 117 different investments across 34 carry funds in its portfolio. Carlyle deployed $1.6 billion of equity in Q3 2012 in 86 new or follow on investments across 24 carry funds. In addition, Carlyle has committed to invest more than $4.0 billion in equity across 10 transactions that were announced in Q3 2012 and are expected to close in upcoming quarters.

           
Segment Realized Proceeds Equity Invested
 

# ofInvestments

  # of Funds   $ mn

# ofInvestments

  # of Funds   $ mn
Q3 Corporate Private Equity 33   16   $3,707 17   11   $863
Global Market Strategies 34 6 $81 7 4 $237
Real Assets   53   12   $1,319   64   9   $544
Carlyle   117   34   $5,107   86   24   $1,644
 
YTD

Corporate Private Equity

71 20 $7,405 37 14 $1,798
Global Market Strategies 50 6 $543 19 5 $471
Real Assets   88   13   $3,994   111   10   $2,311
Carlyle   203   39   $11,942   164   29   $4,580
 
 
Note: The columns may not sum as some investments cross segment lines, but are only counted one time for Carlyle results.

Carlyle All Segment Results for Third Quarter 2012

  • Distributable Earnings (DE): $206 million
    • Pre-tax Distributable Earnings of $206 million equated to $0.63 per common unit on a post-tax basis. Distributable Earnings increased 79% from Q2 2012 primarily due to period-over-period changes in our realized net performance fees. On an LTM basis, Distributable Earnings are $748 million compared to $752 million over the prior 12-month period.
    • Fee-Related Earnings of $46 million increased 28% from Q2 2012 due to declines in operating expenses. On an LTM basis, Fee-Related Earnings declined 14% compared to the prior 12-month period.
    • Realized Net Performance Fees of $156 million increased 106% from Q2 2012. For the current quarter, our revenues were positively impacted by public equity exits in China Pacific Life, Kinder Morgan, Dunkin Brands, and SS&C, as well as multiple private company sales. On an LTM basis, realized net performance fees are $591 million, up 7% from the prior 12-month period.
    • Realized Investment Income of $5 million increased slightly from Q2 2012.
  • Economic Net Income (ENI): $219 million
    • Economic Net Income of $219 million in Q3 2012 compared to an Economic Net Loss of ($57) million in Q2 2012. On an after-tax basis, Carlyle generated $0.66 in ENI per unit. On an LTM basis, ENI decreased 34% compared to the prior 12-month period due to significant portfolio appreciation over the period following the financial crisis.
    • ENI was positively impacted in Q3 2012 by 3% appreciation in Carlyle’s carry fund portfolio, which excludes structured credit, hedge funds and Fund of Funds Solutions vehicles. The fund appreciation was driven by increases in Buyout, Real Estate and Global Market Strategies carry funds, offset by a decline in Energy funds, and flat performance in Growth funds.
    • The public carry fund portfolio increased 8% in Q3 2012 while our private carry fund portfolio increased 1%.
All Segments   Period   LTM   % Change
$ in millions, except where noted 3Q2011   4Q2011   1Q2012   2Q2012   3Q2012   4Q11 - 3Q12   QoQ   YoY   YTD
           
Revenues (263) 666 894 61 584 2,204 851% 322% 4%
 
Expenses   (72)   411   501   119   365   1,397   208%   608%   9%
Economic Net Income   (191)   254   392   (57)   219   808   482%   214%   (4%)
Fee-Related Earnings   37   14   34   36   46   129   28%   24%   7%
Net Performance Fees   (223)   223   335   (107)   165   616   254%   174%   (4%)
Realized Net Performance Fees   194   216   143   76   156   591   106%   (20%)   (19%)
Distributable Earnings   244   247   179   115   206   748   79%   (15%)   (19%)
 
Total Assets Under Management ($ billion)   148.6   147.0   159.2   156.2   157.4       1%   6%    
Fee-Earning Assets Under Management ($ billion)   112.6   111.0   117.0   112.0   115.1       3%   2%    
Note: Totals may not sum due to rounding.
 
 

Assets Under Management and Remaining Fair Value of Capital

  • Total Assets Under Management: $157.4 billion
    • Changes versus Q2 2012: Market appreciation (+$2.9 billion), new capital commitments (+$2.4 billion), foreign exchange impact (+$847 million), changes in par value of CLO collateral (+$506 million), hedge fund net subscriptions (+$379 million) and net distributions (-$5.5 billion).
    • Increases versus year-end 2011 were primarily due to fundraising, portfolio appreciation, increases in Global Market Strategies due to CLO creation, new carry funds, and acquisitions. The increases across Carlyle were offset by significant levels of distributions to fund investors.
    • Total Dry Powder of $39.4 billion, comprised of Corporate Private Equity ($15.6 billion), Global Market Strategies ($1.3 billion), Real Assets ($7.0 billion), and Fund of Funds Solutions ($15.5 billion).
  • Fee-Earning Assets Under Management: $115.1 billion
    • Changes versus Q2 2012: Fee earning asset inflows (+$3.8 billion), foreign exchange impact (+$679 million), hedge fund net subscriptions (+$407 million), change in the par value of CLO collateral (+$171 million), and net distributions and outflows (-$1.7 billion).
    • Carlyle Partners VI will not increase Fee-Earning AUM until the predecessor fund (Carlyle Partners V) is substantially invested, which is expected to occur in the first half of 2013.
  • Remaining Fair Value of Capital (carry funds only): $62 billion
    • Changes versus Q2 2012: Equity invested (+$1.6 billion), distributions (-$4.8 billion) and market appreciation (3%).
    • Current MOIC of remaining fair value of capital: 1.2x.
    • Remaining fair value of capital in the ground in investments made in 2008 or earlier: 51%.
    • AUM in-carry ratio as of the end of Q3 2012: 68%.

    Please see accompanying multimedia.

Non-GAAP Operating Results

Carlyle’s non-GAAP results for Q3 2012 are provided in the table below:

$ in millions, except unit and per unit amounts
     
Economic Net income       Q3 2012
 
Economic Net Income (pre-tax) $    

218.5

 

Less: Provision for income taxes (1)       14.9  
Economic Net Income, After Taxes $     203.6  
 
Fully diluted units (in millions) 307.7
 
Economic Net Income, After Taxes per Adjusted Unit $ 0.66
 
Distributable Earnings        
 
Distributable Earnings $ 206.3
Less: Estimated foreign, state, and local taxes (2)       10.6  
Distributable Earnings, After Taxes $     195.7  
 
Allocating Distributable Earnings for only public unitholders of The Carlyle Group L.P.
 
Distributable Earnings to The Carlyle Group L.P. $ 27.8
Less: Estimated current corporate income taxes (3)       0.7  
Distributable Earnings to The Carlyle Group L.P. net of corporate income taxes $     27.1  
 
Units in public float (in millions) 43.2
 
Distributable Earnings, net, per The Carlyle Group L.P. common unit outstanding       $     0.63  

(1) Represents the implied provision for income taxes that was calculated using a similar methodology applied in calculating the tax provision for The Carlyle Group L.P., without any reduction for noncontrolling interests.

(2) Represents the implied provision for current income taxes that was calculated using a similar methodology applied in calculating the current tax provision for The Carlyle Group L.P., without any reduction for noncontrolling interests.

(3) Represents current corporate income taxes payable upon distributable earnings allocated to Carlyle Holdings I GP Inc.
 
 

Corporate Private Equity (CPE)

             
Funds Raised Equity Invested Realized Proceeds Carry Fund Returns

Q3 

$2.0 bn

Q3 

$0.9 bn

Q3 

$3.7 bn

Q3 

5%
YTD: $4.8 bn   LTM: $5.2 bn YTD: $1.8 bn   LTM: $3.5 bn YTD: $7.4 bn   LTM: $9.3 bn YTD: 12%   LTM: 20%
  • Distributable Earnings (DE): $145 million. The following components impacted Distributable Earnings in Q3 2012:
    • Fee Related Earnings of $19 million increased 88% from Q2 2012 due to higher fee revenue and lower operating expenses.
    • Realized Net Performance Fees of $126 million increased $76 million from Q2 2012 as realizations in CPE funds were robust in Q3 2012.
    • Realized Investment Income of ($0.2) million compared to $1.5 million in Q2 2012.
  • Economic Net Income (ENI): $177 million
    • Economic Net Income of $177 million was up from a loss of ($65) million in Q2 2012.
    • CPE carry funds valuations increased 5% in Q3 2012, and 12% year-to-date, which drove positive Economic Net Income in the CPE segment, compared to a portfolio value decline of 2% and 6%, respectively, in Q2 2012 and Q3 2011.
    • Net Performance Fees of $159 million compared to a loss of ($80) million in Q2 2012, driven by an increase in CPE carry fund valuations in Q3 2012 versus a decrease in Q2 2012.
  • Assets Under Management (AUM): $53.2 billion
    • Total AUM increased 1% versus Q2 2012 while Fee-Earning AUM of $36.9 billion was relatively flat versus $37.1 billion at the end of Q2 2012.
    • Funds Raised of $2.0 billion was driven by the second closing of Carlyle Partners VI, as well as closings in our U.S. mid-market buyout fund and various coinvestments. Year-to-date, funds raised of $4.8 billion compares to $1.3 billion for the same period in 2011.
                 
Corporate Private Equity   Period LTM % Change
$ in millions, except where noted 3Q2011   4Q2011   1Q2012   2Q2012   3Q2012 4Q11 - 3Q12 QoQ   YoY   YTD
Economic Net Income   (185)   162   244   (65)   177   518   375%   196%   1%
Net Performance Fees   (186)   152   215   (80)   159   446   300%   186%   13%
Realized Net Performance Fees   157   130   105   50   126   411   154%   (20%)   (16%)
Distributable Earnings   173   134   120   61   145   460   136%   (16%)   (25%)
 
Total Assets Under Management ($ in billions)   51.0   51.1   53.3   52.5   53.2       1%   4%    
Fee-Earning Assets Under Management ($ in billions)   38.6   38.0   37.8   37.1   36.9       (0%)   (4%)    
Note: Totals may not sum due to rounding.
 
 

Global Market Strategies (GMS)

             
Funds Raised

Equity Invested

Realized Proceeds

Carry Fund Returns

Q3 

$1.2 bn

Q3 

$0.2 bn

Q3 

$0.1 bn

Q3 

2%
YTD: $4.0 bn   LTM: $4.9 bn YTD: $0.5 bn LTM: $0.8 bn YTD: $0.5 bn LTM: $0.9 bn   YTD: 17% LTM: 23%
 
Note: Equity Invested and Realized Proceeds are for carry funds only. Funds Raised excludes acquisitions, but includes hedge funds and CLOs.
  • Distributable Earnings (DE): $28 million. The following components impacted Distributable Earnings in Q3 2012:
    • Fee Related Earnings of $22 million increased 12% compared to Q2 2012 as operating expenses declined in the quarter.
    • Realized Net Performance Fees of $1 million were flat with Q2 2012.
    • Realized Investment Income of $5 million increased from $3 million in Q2 2012.
  • Economic Net Income (ENI): $36 million
    • Economic Net Income of $36 million increased 13% from $32 million in Q2 2012, and was positively impacted by 2% appreciation in GMS carry funds.
    • Net Performance Fees of $8 million were up 86% compared to Q2 2012.
  • Assets Under Management (AUM): $30.1 billion
    • Total AUM increased 4% versus Q2 2012 while Fee-Earning AUM of $28.5 billion increased 3% versus Q2 2012.
    • Hedge Fund net inflows continued to be strong, with $379 million in Q3 2012 and $1.7 billion in year-to-date net subscriptions, resulting in total hedge fund AUM of $9.8 billion.
    • Raised a third new Collateralized Loan Obligation (CLO) in 2012 with $615 million in assets.
    • GMS Carry Fund AUM ended the quarter at $3.5 billion.
    • Total Structured Credit AUM ended the quarter at $16.9 billion.
    • On October 1, 2012, Carlyle acquired a 55% ownership position in Vermillion Asset Management, a commodities focused investment manager with $2.2 billion in AUM as of September 30, 2012, which will be reflected in Carlyle’s Q4 2012 results and AUM.
Global Markets Strategies   Period   LTM   % Change
$ in millions, except AUM where noted   3Q2011   4Q2011   1Q2012   2Q2012   3Q2012 4Q11 - 3Q12 QoQ   YoY   YTD
Economic Net Income   34   22   38   32   36   128   13%   5%   (24%)
Net Performance Fees   11   3   18   4   8   33   86%   (23%)   (56%)
Realized Net Performance Fees   7   67   15   1   1   83   17%   (90%)   (68%)
Distributable Earnings   32   90   31   23   28   173   18%   (15%)   (20%)
Total Assets Under Management ($ in billions)   23.0   24.5   28.3   29.0   30.1       4%   31%    
Fee-Earning Assets Under Management ($ in billions)   21.4   23.2   26.8   27.7   28.5       3%   33%    
                                     
Funds Raised, excluding hedge funds ($ in billions)   0.8   0.0   0.7   0.8   0.8   2.3   4%   6%    
Hedge Fund Net Inflows ($ in billions)   0.5   0.8   0.7   0.7   0.4   2.6   (41%)   (23%)    
Note: Totals may not sum due to rounding. Funds Raised excludes the impact of acquisitions.
 
 
 

Real Assets (RA)

             
Funds Raised

Equity Invested

Realized Proceeds

Carry Fund Returns

Q3 

$0.1 bn

Q3 

$0.5 bn

Q3 

$1.3 bn

Q3 

0%
YTD: $0.2 bn   LTM: $0.4 bn YTD: $2.3 bn   LTM: $3.2 bn YTD: $4.0 bn   LTM: $4.9 bn YTD: 8%   LTM: 16%
  • Distributable Earnings (DE): $31 million. The following components impacted Distributable Earnings in Q3 2012:
    • Fee Related Earnings of $1 million declined from $3 million in Q2 2012.
    • Realized Net Performance Fees of $29 million increased 15% compared to Q2 2012, primarily due to realizations in the Energy funds.
    • Realized Investment Income of $0.2 million was up $0.5 million versus Q2 2012.
  • Economic Net Income (ENI): $2 million
    • Economic Net Income of $2 million compared to a loss of ($29) million in Q2 2012, as carry fund valuations were flat in Q3 2012 versus a decline of 3% in Q2 2012.
    • During Q3 2012, combined Real Estate and Infrastructure fund valuations increased 5% while Energy fund valuations declined 3%.
    • Net Performance Fees of ($4) million compared to ($33) million in Q2 2012, with the variance driven by mixed portfolio performance during Q3 2012, compared with fund declines in Q2 2012.
  • Assets Under Management (AUM): $29.5 billion
    • Total AUM declined 2% versus Q2 2012, largely due to distributions of $1.3 billion and flat carry fund performance, while Fee-Earning AUM of $19.6 billion was largely flat versus Q2 2012.
                 
Real Assets   Period LTM % Change
$ in millions, except where noted 3Q2011   4Q2011   1Q2012   2Q2012   3Q2012 4Q11 - 3Q12 QoQ   YoY   YTD
Economic Net Income   (48)   64   101   (29)   2   138   106%   103%   (8%)
Net Performance Fees   (47)   67   99   (33)   (4)   130   89%   92%   (21%)
Realized Net Performance Fees   27   17   22   26   29   94   15%   10%   6%
Distributable Earnings   27   14   22   28   31   94   10%   14%   14%
 
Total Assets Under Management ($ in billions)   30.4   30.7   32.2   30.0   29.5       (2%)   (3%)    
Fee-Earning Assets Under Management ($ in billions)   22.4   22.2   22.8   19.5   19.6       0%   (13%)    
Note: Totals may not sum due to rounding.
 
 
 

Fund of Funds Solutions (FoF)

  • Distributable Earnings (DE): $3 million.
    • Fee Related Earnings of $3 million increased 15% compared to Q2 2012.
  • Economic Net Income (ENI): $4 million was flat compared with Q2 2012.
  • Assets Under Management (AUM): $44.6 billion
    • Total AUM was flat versus Q2 2012 while Fee-Earning AUM of $30.2 billion increased 9% versus Q2 2012.
    • The increase in fee-earning AUM in Q3 2012 is attributable to the initiation of fees on several 2012 mandates that made their first investment during the quarter and began charging fees on total investor commitments.
                 
Fund of Funds Solutions   Period LTM % Change
$ in millions, except where noted 3Q2011   4Q2011   1Q2012   2Q2012   3Q2012 4Q11 - 3Q12 QoQ   YoY   YTD
Economic Net Income   7   6   9   4   4   23   (8%)   (49%)   N.A.
Net Performance Fees   (1)   1   4   1   1   6   (54%)   200%   N.A.
Realized Net Performance Fees   4   3   0   0   0   4   200%   (92%)   N.A.
Distributable Earnings   12   9   6   3   3   21   21%   (71%)   N.A.
 
Total Assets Under Management ($ in billions)   44.2   40.7   45.4   44.6   44.6       (0%)   1%   N.A.
Fee-Earning Assets Under Management ($ in billions)   30.2   27.7   29.5   27.6   30.2       9%   (0%)   N.A.
Note: Carlyle acquired a 60% ownership interest in AlpInvest on July 1, 2011. Totals may not sum due to rounding.
 
 
 

Balance Sheet Highlights

The amounts presented below exclude the effect of U.S. GAAP consolidation eliminations on investments and accrued performance fees as well as cash and debt associated with Carlyle’s consolidated funds. All data is as of September 30, 2012.

  • Cash and Cash Equivalents of $769 million.
  • On-balance-sheet investments attributable to unitholders of $216 million.
  • Net Accrued Performance Fees attributable to unitholders of $1,189 million. These performance fees are comprised of Gross Accrued Performance Fees of $2,155 million less $86 million in accrued giveback obligation and $880 million in accrued performance fee compensation and non-controlling interest.
  • Loans payable of $500 million.
  • Carlyle has an undrawn $750 million revolving credit line.

Conference Call

Carlyle will host a conference call on November 8, 2012 at 8:00 a.m. EST to discuss Q3 2012 results and industry trends. Immediately following the prepared remarks, there will be a Question and Answer session for analysts and investors.

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