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KKR portfolio ...way over a hundred businesses WORLDWIDE including China, and pays 4.5%
KKR$$
This stocks volatility and dividend are excellent for traders and long investors alike!$
Certainly has shown the strength of late but that can not be helped. :) KKR
35$ is our firm's target.
Many eggs in the basket here, solid pick imo
Many have eyes for those Targets . KKR
Great movement. We know where this is heading. KKR
Wants to go so bad, KKR$$ $16, $17, $18
In Agreement and Nessisary.
Next few days should be Coil & Jump
$KKR
Nice consolidation, chart reset lately KKR$$
Peeps will notice KKR is breaking out from even long moving averages, analyst upgrades, etc and won't be afraid to play. Counting to 20 here IMO, now $15, next comes $16...
Like the hum I hear
Time for a lower Gear. Sooner or later
KKR
I think we have a 15 handle today IMO, and wanting to count to 20 here.
Consolidate then jump.
Agreed. Looking good
c'mon KKR is going to break out IMO
KKR$$$ This is easily an undervalued stock!!!!!!!!
I am in agreement. $$$
20 is too conservative for Henry and George!!!!$$$
I bought KKR today ahead of nice dividend no less. Also think going over $20
Things will change soon.imo
KKR & Co. L.P. Reports First Quarter 2016 Results
Business Wire KKR & Co. L.P.
April 25, 2016 6:30 AM
????
NEW YORK--(BUSINESS WIRE)--
KKR & Co. L.P. (KKR) today reported its first quarter 2016 results.
This Smart News Release features multimedia. View the full release here: http://www.businesswire.com/news/home/20160425005372/en/
KKR has issued a presentation of its first quarter 2016 results, which can be viewed at http://ir.kkr.com/kkr_ir/kkr_events.cfm.
A conference call to discuss KKR’s financial results will be held on Monday, April 25, 2016 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. A slide presentation containing supplemental commentary will be referenced on the call and may also be accessed through this website in advance of the call.
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 86559359, beginning approximately two hours after the broadcast.
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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
KKR & Co. L.P. Reports Fourth Quarter and Full Year 2015 Results
Business Wire KKR & Co. L.P.
February 11, 2016 6:45 AM
????
NEW YORK--(BUSINESS WIRE)--
KKR & Co. L.P. (KKR) today reported GAAP net income for the fourth quarter and full year 2015 of $32.3 million and $488.5 million, respectively.
For the full year 2015, After-tax Economic Net Income and After-tax Economic Net Income per adjusted unit were $1.0 billion and $1.21, respectively, compared to $1.5 billion and $1.84 for the full year 2014. After-tax Cash Earnings and After-tax Cash Earnings per adjusted unit eligible for distribution were $1.5 billion and $1.78, respectively, for the full year 2015 compared to $1.9 billion and $2.47 for the full year 2014. Return on equity and cash return on equity were 10% and 14%, respectively, for 2015.
For the quarter ended December 31, 2015, After-tax Economic Net Income and After-tax Economic Net Income per adjusted unit were $70.5 million and $0.08, respectively, compared to $46.0 million and $0.05 for the quarter ended December 31, 2014. After-tax Cash Earnings and After-tax Cash Earnings per adjusted unit eligible for distribution were $168.6 million and $0.21, respectively, for the quarter ended December 31, 2015 compared to $361.2 million and $0.44 for the quarter ended December 31, 2014.
Annual Highlights
For the full year 2015, KKR's private equity portfolio appreciated 14.2% and the investments on KKR's balance sheet appreciated 3.3% compared to the total return for the S&P 500 and MSCI World indices of 1.4% and -0.3%, respectively.
Book value per adjusted unit was $11.78 as of December 31, 2015 compared to $12.07 per adjusted unit as of December 31, 2014.
Assets Under Management and Fee Paying Assets Under Management were $120 billion and $92 billion, respectively, up 12% and 7% compared to December 31, 2014. (1)
Since the announcement of KKR's unit repurchase program on October 27, 2015, KKR has repurchased and canceled 17.5 million outstanding common units for $270 million. In addition, 1.7 million granted equity awards were canceled for approximately $27 million to satisfy tax obligations in connection with their vesting. In total, 19.2 million common units have been retired on a fully-diluted basis over this period.
KKR's regular distribution per common unit of $0.16 was declared for the quarter ended December 31, 2015.
___________________________
“KKR delivered strong investment results in 2015 as our private equity portfolio appreciated 14.2%, outperforming the S&P 500 by over 1,200 basis points despite challenging markets,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. “We capitalized on attractive opportunities across our segments in the fourth quarter including record deployment within our Credit and Infrastructure businesses. Our ability to take advantage of volatile market environments stems from the long-dated capital entrusted to us by a growing base of limited partners across our diverse set of strategies. With $20 billion of new capital raised in 2015, we ended the year with record dry powder and over $10 billion of cash and investments on our balance sheet to invest as attractive opportunities arise.”
Note: Certain financial measures, including ENI, After-tax ENI, After-tax cash 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 C and D for a reconciliation of such measures to financial results prepared in accordance with GAAP.
(1) AUM and FPAUM reflect the inclusion of KKR's pro rata portion of AUM or FPAUM, as applicable, managed by other asset managers in which KKR holds a minority stake. In addition, AUM reflects the inclusion of capital commitments for which KKR is eligible to receive fees or carried interest upon deployment of capital. See "Notes to Reportable Segments" for the definitions of AUM and FPAUM.
GAAP RESULTS
GAAP net income (loss) for the quarter and year ended December 31, 2015, included net income (loss) attributable to KKR & Co. L.P. of $32.3 million and $488.5 million, respectively, and net income (loss) attributable to KKR & Co. L.P. per common unit of $0.07 and $1.01, respectively, on a diluted basis. For the quarter and year ended December 31, 2014, net income (loss) attributable to KKR & Co. L.P. was $(0.6) million and $477.6 million, respectively, and net income (loss) attributable to KKR & Co. L.P. per common unit was $0.00 and $1.16, respectively, on a diluted basis. The increase in both comparable periods was primarily due to an increase in KKR & Co. L.P.'s ownership percentage in the KKR business, and for the quarter ended December 31, 2015, an increase in income before taxes.
TOTAL REPORTABLE SEGMENT RESULTS
KEY FINANCIAL METRICS (UNAUDITED)
(Amounts in millions, except per adjusted unit amounts)
Quarter Ended Year Ended
December 31,
2015
December 31,
2014
%
Change
December 31,
2015
December 31,
2014
%
Change
Cash Earnings
Management, Monitoring and Transaction Fees, Net $ 337 $ 244 $ 1,142 $ 1,099
Realized Performance Income (Loss) 215 210 1,047 1,242
Realized Investment Income (Loss) (48 )
(1)
182 547 (1) 902
Total Cash Segment Revenues 504 636 (21 )% 2,736 3,243 (16 )%
Less: Total Cash Segment Expenses and Other 297 250 1,142 1,180
Less: Corporate and Local Income Taxes Paid 38 25 141 131
After-tax Cash Earnings $ 169
(1)
$ 361
(53
)%
$ 1,453
(1)
$ 1,932 (25 )%
After-tax Cash Earnings Per Adjusted Units
Eligible for Distribution
$ 0.21 $ 0.44 (52 )% $ 1.78 $ 2.47 (28 )%
Quarter Ended Year Ended
Economic Net Income (Loss)
December 31,
2015
December 31,
2014
%
Change
December 31,
2015
December 31,
2014
%
Change
Management, Monitoring and Transaction Fees, Net $ 337 $ 244 $ 1,142 $ 1,099
Performance Income (Loss) 327 256 1,210 1,352
Investment Income (Loss) (176 ) (143 ) 154 505
Total Segment Revenues 488 357 37 % 2,506 2,956 (15 )%
Less: Total Segment Expenses and Other 343 270 1,208 1,229
Economic Net Income (Loss) 145 87 67 % 1,298 1,727 (25 )%
Less: Equity-based Compensation 38 37 186 159
Pre-tax Economic Net Income (Loss) 107 50 114 % 1,112 1,568 (29 )%
Less: Provision for Income Tax (Benefit) 36 4 84 94
After-tax Economic Net Income (Loss) $ 71 $ 46 54 % $ 1,028 $ 1,474 (30 )%
After-tax Economic Net Income (Loss) Per
Adjusted Unit
$ 0.08 $ 0.05 60 % $ 1.21 $ 1.84 (34 )%
Book Value Per Unit
December 31, 2015 December 31, 2014
Book Value Per Outstanding Adjusted Unit $ 12.18 $ 12.48 (2 )%
Book Value Per Adjusted Unit $ 11.78 $ 12.07 (2 )%
Year Ended
December 31, 2015 December 31, 2014
Return on Equity 10% 16%
Cash Return on Equity 14% 21%
(1) Amount includes a $100.0 million realized loss on a segment basis relating to the write off of an investment which had previously been marked at zero on an unrealized basis. Accordingly, this write off had no impact on our Economic Net Income during the fourth quarter and full year of 2015.
TOTAL REPORTABLE SEGMENTS
Total segment revenues were $487.6 million for the quarter ended December 31, 2015, an increase of $130.1 million, compared to total segment revenues of $357.5 million for the quarter ended December 31, 2014. The increase was principally attributable to (i) a non-recurring increase in monitoring fees in our Private Markets segment, which increased segment revenues by $55.5 million net of associated fee credits, (ii) an increase in transaction fees primarily reflecting larger transaction sizes in both our Private Markets segment and Capital Markets segment and (iii) higher performance income from increased carried interest primarily reflecting more favorable performance in our carry earning Private Markets funds. These increases were partially offset by lower total investment income driven primarily by a lower level of net interest and dividends in the current period.
Total segment revenues were $2,505.9 million for the year ended December 31, 2015, a decrease of $449.7 million, compared to total segment revenues of $2,955.6 million for the year ended December 31, 2014. The decrease was principally attributable to (i) lower total investment income driven primarily by a lower level of realized and unrealized investment income which represented a net loss in the current year and (ii) lower performance income during the year reflecting a lower level of net carried interest in our Public Markets segment as well as a decrease in incentive fees.
ENI was $144.7 million for the quarter ended December 31, 2015, an increase of $58.1 million, compared to ENI of $86.6 million for the quarter ended December 31, 2014. The increase was primarily attributable to higher total segment revenues as described above partially offset by an increase in cash compensation and benefits resulting from the higher levels of management, monitoring and transaction fees.
ENI was $1,298.0 million for the year ended December 31, 2015, a decrease of $429.2 million, compared to ENI of $1,727.2 million for the year ended December 31, 2014. The decrease was primarily attributable to lower total segment revenues as described above.
AUM(1) was $119.5 billion as of December 31, 2015, an increase of $7.1 billion, compared to AUM of $112.4 billion as of September 30, 2015. The increase was primarily attributable to (i) an increase in our pro rata portion of AUM managed by other asset managers in which KKR holds a minority stake, primarily reflecting our long-term strategic partnership with Marshall Wace, (ii) an increase in the fair value of our private equity portfolio (our private equity portfolio appreciated by 4.8% and 14.2% for the quarter and year ended December 31, 2015, respectively) and (iii) new capital raised primarily in Special Situations Fund II, our hedge-fund-of-funds platform and our CLOs. These increases were partially offset by distributions to limited partners of our private equity funds arising from realizations and distributions and redemptions in our alternative credit funds and other separately managed accounts in our Public Markets segment.
FPAUM(1) was $91.7 billion as of December 31, 2015, an increase of $5.8 billion, compared to FPAUM of $85.9 billion as of September 30, 2015. The increase was primarily attributable to (i) an increase in our pro rata portion of FPAUM managed by other asset managers in which KKR holds a minority stake, primarily reflecting our long-term strategic partnership with Marshall Wace, (ii) new capital raised primarily in our hedge-fund-of-funds platform and our CLOs and (iii) capital invested across various investment strategies for which KKR was not eligible to receive a fee until deployment of such capital. These increases were partially offset by distributions to limited partners of our private equity funds arising from realizations and distributions and redemptions in our alternative credit funds and other separately managed accounts in our Public Markets segment.
CAPITAL AND LIQUIDITY
As of December 31, 2015, KKR had $1.3 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 December 31, 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 December 31, 2015.
As of December 31, 2015, KKR’s portion of total uncalled commitments to its investment funds was $1.4 billion. See Exhibit B for details.
DISTRIBUTION
A distribution of $0.16 per common unit has been declared, which will be paid on March 8, 2016 to unitholders of record as of the close of business on February 22, 2016. Under KKR's distribution policy, KKR intends to make equal quarterly distributions to holders of common units in an amount of $0.16 per common unit per quarter.
The declaration and payment of any distributions are subject to the discretion of the board of directors of the general partner of KKR, and the terms of its limited partnership agreement. There can be no assurance that distributions will be made as intended or at all, that unitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR or that any particular distribution policy will be maintained.
(1) AUM and FPAUM reflect the inclusion of KKR's pro rata portion of AUM or FPAUM, as applicable, managed by other asset managers in which KKR holds a minority stake. In addition, AUM reflects the inclusion of capital commitments for which KKR is eligible to receive fees or carried interest upon deployment of capital. See "Notes to Reportable Segments" for the definitions of AUM and FPAUM.
SUPPLEMENTAL INFORMATION
A slide presentation containing supplemental commentary about the Company's financial results for the fiscal quarter and year ended December 31, 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, February 11, 2016 at 10:00 a.m. ET. 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 38906590, 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.
2015 SCHEDULE K-1 DISTRIBUTION
The 2015 K-1 tax information is expected to be available by the end of March 2016. For the quickest access to your K-1, we encourage you to register for e-mail notification and electronic K-1 delivery at our dedicated website https://www.taxpackagesupport.com/kkr. Unitholders who do not register for electronic delivery will receive a hard copy K-1 with delivery expected in April 2016.
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 and on Twitter @KKR_Co.
FORWARD-LOOKING STATEMENTS
This release contains certain forward-looking statements, including the statements with respect to the strategic partnership with Marshall Wace LLP, the declaration and payment of distributions on common units of KKR and the timing, manner and volume of repurchases of common units pursuant to a repurchase program. 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, 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, ENI, ENI after taxes, after-tax cash earnings, equity invested and syndicated capital, uncalled commitments, 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. All forward looking statements speak only as of the date hereof. 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
CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
Quarter Ended Year Ended
December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014
Revenues
Fees and Other $ 307,923 $ 212,944 $ 1,043,768 $ 1,110,008
Expenses
Compensation and Benefits 306,942 253,661 1,180,591 1,263,852
Occupancy and Related Charges 17,295 15,596 65,683 62,564
General, Administrative and Other 200,858 363,904 624,951 869,651
Total Expenses 525,095 633,161 1,871,225 2,196,067
Investment Income (Loss)
Net Gains (Losses) from Investment Activities 1,197,879 535,943 4,672,627 4,778,232
Dividend Income 140,397 205,875 850,527 1,174,501
Interest Income 320,569 271,083 1,219,197 909,207
Interest Expense (170,282 ) (119,846 ) (573,226 ) (317,192 )
Total Investment Income (Loss) 1,488,563 893,055 6,169,125 6,544,748
Income (Loss) Before Taxes 1,271,391 472,838 5,341,668 5,458,689
Income Tax (Benefit) 27,341 6,524 66,636 63,669
Net Income (Loss) 1,244,050 466,314 5,275,032 5,395,020
Net Income (Loss) Attributable to
Redeemable Noncontrolling Interests 7,371 (4,707 ) (4,512 ) (3,341 )
Net Income (Loss) Attributable to
Noncontrolling Interests and Appropriated Capital 1,204,422 471,604 4,791,062 4,920,750
Net Income (Loss) Attributable to KKR & Co. L.P. $ 32,257 $ (583 ) $ 488,482 $ 477,611
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic $ 0.07 $ 0.00 $ 1.09 $ 1.25
Diluted (a) $ 0.07 $ 0.00 $ 1.01 $ 1.16
Weighted Average Common Units Outstanding
Basic 461,374,013 431,432,521 448,884,185 381,092,394
Diluted (a) 489,704,787 458,982,859 482,699,194 412,049,275
(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 Year Ended
December 31, 2015 September 30, 2015 December 31, 2014 December 31, 2015 December 31, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 195,072 $ 181,780 $ 178,064 $ 732,033 $ 726,043
Monitoring Fees 94,128 24,964 38,738 264,643 135,160
Transaction Fees 107,320 61,437 53,292 364,994 459,677
Fee Credits (59,375 ) (23,293 ) (25,728 ) (219,620 ) (222,037 )
Total Management, Monitoring and Transaction Fees, Net 337,145 244,888 244,366 1,142,050 1,098,843
Performance Income
Realized Incentive Fees 7,209 880 11,301 19,647 47,807
Realized Carried Interest 207,211 265,291 198,597 1,027,154 1,193,661
Unrealized Carried Interest 112,388 (428,493 ) 46,120 163,545 110,133
Total Performance Income 326,808 (162,322 ) 256,018 1,210,346 1,351,601
Investment Income (Loss)
Net Realized Gains (Losses) (81,343 ) 61,439 62,219 337,023 628,403
Net Unrealized Gains (Losses) (128,765 ) (384,460 ) (324,416 ) (391,962 ) (396,425 )
Total Realized and Unrealized (210,108 ) (323,021 ) (262,197 ) (54,939 ) 231,978
Interest Income and Dividends 85,907 101,318 165,856 411,536 408,084
Interest Expense (52,174 ) (52,681 ) (46,531 ) (203,085 ) (134,909 )
Net Interest and Dividends 33,733 48,637 119,325 208,451 273,175
Total Investment Income (Loss) (176,375 ) (274,384 ) (142,872 ) 153,512 505,153
Total Segment Revenues 487,578 (191,818 ) 357,512 2,505,908 2,955,597
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 121,036 87,680 86,035 409,992 380,581
Realized Performance Income Compensation 85,766 106,469 83,960 418,718 496,589
Unrealized Performance Income Compensation 45,351 (170,621 ) 21,508 66,927 49,459
Total Compensation and Benefits 252,153 23,528 191,503 895,637 926,629
Occupancy and Related Charges 16,666 15,720 14,383 62,657 57,787
Other Operating Expenses 68,978 52,081 61,685 233,618 229,069
Total Segment Expenses 337,797 91,329 267,571 1,191,912 1,213,485
Income (Loss) attributable to noncontrolling interests 5,100 2,902 3,349 16,007 14,946
Economic Net Income (Loss) (a) 144,681 (286,049 ) 86,592 1,297,989 1,727,166
Equity-based Compensation 37,376 48,252 36,607 186,346 158,927
Pre-tax Economic Net Income (Loss) (b) 107,305 (334,301 ) 49,985 1,111,643 1,568,239
Provision for Income Tax (Benefit) 36,797 (19,505 ) 3,951 83,363 94,223
After-tax Economic Net Income (Loss) (c) $ 70,508 $ (314,796 ) $ 46,034 $ 1,028,280 $ 1,474,016
After-tax Economic Net Income (Loss) Per Adjusted Unit $ 0.08 $ (0.37 ) $ 0.05 $ 1.21 $ 1.84
Weighted Average Adjusted Units (Fully Diluted Basis) (a) 852,446,702 851,704,303 838,067,975 851,099,066 800,247,988
Assets Under Management $ 119,544,300 $ 112,414,500 $ 107,119,300 $ 119,544,300 $ 107,119,300
Fee Paying Assets Under Management $ 91,720,500 $ 85,861,800 $ 85,857,200 $ 91,720,500 $ 85,857,200
Equity Invested and Syndicated Capital $ 2,192,100 $ 1,462,900 $ 2,343,900 $ 8,611,500 $ 12,818,100
Uncalled Commitments $ 29,457,100 $ 26,892,300 $ 21,113,700 $ 29,457,100 $ 21,113,700
Fee Related Earnings (d) $ 180,848 $ 127,523 $ 126,416 $ 610,496 $ 631,344
(a) See definitions for Economic Net Income (Loss) and adjusted units under "Notes to Reportable Segments."
(b) Represents Economic Net Income (Loss) after equity-based compensation.
(c) Represents Economic Net Income (Loss) after equity-based compensation and income taxes.
(d) See Exhibit A "Other Information" for the definition and calculation of Fee Related Earnings.
KKR
SCHEDULE OF SEGMENT REVENUES AND OTHER SELECTED FINANCIAL INFORMATION (UNAUDITED)
(Amounts in thousands)
PRIVATE MARKETS
Quarter Ended Year Ended
December 31, 2015 September 30, 2015 December 31, 2014 December 31, 2015 December 31, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 122,703 $ 118,250 $ 111,186 $ 465,575 $ 453,210
Monitoring Fees 94,128 24,964 38,738 264,643 135,160
Transaction Fees 40,000 17,732 8,480 144,652 214,612
Fee Credits (51,567 ) (20,266 ) (16,054 ) (195,025 ) (198,680 )
Total Management, Monitoring and Transaction Fees, Net 205,264 140,680 142,350 679,845 604,302
Performance Income
Realized Incentive Fees — — — — —
Realized Carried Interest 207,211 265,291 198,597 1,018,201 1,159,011
Unrealized Carried Interest 137,438 (394,126 ) 34,070 182,628 70,058
Total Performance Income 344,649 (128,835 ) 232,667 1,200,829 1,229,069
Investment Income (Loss)
Net Realized Gains (Losses) — — — — —
Net Unrealized Gains (Losses) — — — — —
Total Realized and Unrealized — — — — —
Interest Income and Dividends — — — — —
Interest Expense — — — — —
Net Interest and Dividends — — — — —
Total Investment Income (Loss) — — — — —
Total Segment Revenues $ 549,913 $ 11,845 $ 375,017 $ 1,880,674 $ 1,833,371
Assets Under Management $ 66,028,600 $ 66,776,600 $ 64,611,300 $ 66,028,600 $ 64,611,300
Fee Paying Assets Under Management $ 45,307,400 $ 46,399,800 $ 47,262,500 $ 45,307,400 $ 47,262,500
Equity Invested $ 1,355,300 $ 867,000 $ 828,000 $ 5,527,900 $ 7,223,400
Uncalled Commitments $ 22,766,300 $ 21,610,400 $ 18,272,400 $ 22,766,300 $ 18,272,400
PUBLIC MARKETS
Quarter Ended Year Ended
December 31, 2015 September 30, 2015 December 31, 2014 December 31, 2015 December 31, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 72,369 $ 63,530 $ 66,878 $ 266,458 $ 272,833
Monitoring Fees — — — — —
Transaction Fees 8,183 3,386 10,511 28,872 27,145
Fee Credits (7,808 ) (3,027 ) (9,674 ) (24,595 ) (23,357 )
Total Management, Monitoring and Transaction Fees, Net 72,744 63,889 67,715 270,735 276,621
Performance Income
Realized Incentive Fees 7,209 880 11,301 19,647 47,807
Realized Carried Interest — — — 8,953 34,650
Unrealized Carried Interest (25,050 ) (34,367 ) 12,050 (19,083 ) 40,075
Total Performance Income (17,841 ) (33,487 ) 23,351 9,517 122,532
Investment Income (Loss)
Net Realized Gains (Losses) — — — — —
Net Unrealized Gains (Losses) — — — — —
Total Realized and Unrealized — — — — —
Interest Income and Dividends — — — — —
Interest Expense — — — — —
Net Interest and Dividends — — — — —
Total Investment Income (Loss) — — — — —
Total Segment Revenues $ 54,903 $ 30,402 $ 91,066 $ 280,252 $ 399,153
Assets Under Management $ 53,515,700 $ 45,637,900 $ 42,508,000 $ 53,515,700 $ 42,508,000
Fee Paying Assets Under Management $ 46,413,100 $ 39,462,000 $ 38,594,700 $ 46,413,100 $ 38,594,700
Equity Invested $ 661,200 $ 583,400 $ 1,126,700 $ 2,214,700 $ 3,027,400
Uncalled Commitments $ 6,690,800 $ 5,281,900 $ 2,841,300 $ 6,690,800 $ 2,841,300
Gross Dollars Invested $ 1,742,600 $ 1,181,400 $ 1,545,600 $ 5,244,900 $ 4,425,600
KKR
SCHEDULE OF SEGMENT REVENUES AND OTHER SELECTED FINANCIAL INFORMATION (UNAUDITED)
(Amounts in thousands)
CAPITAL MARKETS
Quarter Ended Year Ended
December 31, 2015 September 30, 2015 December 31, 2014 December 31, 2015 December 31, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ — $ — $ — $ — $ —
Monitoring Fees — — — — —
Transaction Fees 59,137 40,319 34,301 191,470 217,920
Fee Credits — — — — —
Total Management, Monitoring and Transaction Fees, Net 59,137 40,319 34,301 191,470 217,920
Performance Income
Realized Incentive Fees — — — — —
Realized Carried Interest — — — — —
Unrealized Carried Interest — — — — —
Total Performance Income — — — — —
Investment Income (Loss)
Net Realized Gains (Losses) — — — — —
Net Unrealized Gains (Losses) — — — — —
Total Realized and Unrealized — — — — —
Interest Income and Dividends — — — — —
Interest Expense — — — — —
Net Interest and Dividends — — — — —
Total Investment Income (Loss) — — — — —
Total Segment Revenues $ 59,137 $ 40,319 $ 34,301 $ 191,470 $ 217,920
Syndicated Capital $ 175,600 $ 12,500 $ 389,200 $ 868,900 $ 2,567,300
PRINCIPAL ACTIVITIES
Quarter Ended Year Ended
December 31, 2015 September 30, 2015 December 31, 2014 December 31, 2015 December 31, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ — $ — $ — $ — $ —
Monitoring Fees — — — — —
Transaction Fees — — — — —
Fee Credits — — — — —
Total Management, Monitoring and Transaction Fees, Net — — — — —
Performance Income
Realized Incentive Fees — — — — —
Realized Carried Interest — — — — —
Unrealized Carried Interest — — — — —
Total Performance Income — — — — —
Investment Income (Loss)
Net Realized Gains (Losses)
(81,343
) 61,439 62,219 337,023 628,403
Net Unrealized Gains (Losses) (128,765 ) (384,460 ) (324,416 ) (391,962 ) (396,425 )
Total Realized and Unrealized (210,108 ) (323,021 ) (262,197 ) (54,939 ) 231,978
Interest Income and Dividends 85,907 101,318 165,856 411,536 408,084
Interest Expense (52,174 ) (52,681 ) (46,531 ) (203,085 ) (134,909 )
Net Interest and Dividends 33,733 48,637 119,325 208,451 273,175
Total Investment Income (Loss) (176,375 ) (274,384 ) (142,872 ) 153,512 505,153
Total Segment Revenues $ (176,375 ) $ (274,384 ) $ (142,872 ) $ 153,512 $ 505,153
KKR
BALANCE SHEET
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
As of As of
December 31, 2015 December 31, 2014
Cash and Short-term Investments $ 1,287,650 $ 1,121,385
Investments 8,958,089 (a) 9,807,606
Unrealized Carry 1,415,478 (b) 1,283,022 (b)
Other Assets 1,613,139 999,654
Corporate Real Estate 154,942 —
Total Assets $ 13,429,298 $ 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 291,537 413,808
Total Liabilities 3,322,597 2,971,868
Noncontrolling Interests 127,472 121,574
Book Value $ 9,979,229 $ 10,118,225
Book Value Per Outstanding Adjusted Unit $ 12.18 $ 12.48
Book Value Per Adjusted Unit $ 11.78 $ 12.07
(a) See schedule of investments that follows on the next page.
As of As of
(b) Unrealized Carry
December 31, 2015 December 31, 2014
Private Markets $ 1,340,556 $ 1,196,633
Public Markets 74,922 86,389
Total $ 1,415,478 $ 1,283,022
KKR
SCHEDULE OF INVESTMENTS*
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except percentage amounts)
As of December 31, 2015
Investments Cost Fair
Value
Fair Value as a
Percentage of
Total Investments
Private Equity Co-Investments $ 2,250,079 $ 3,036,805 33.9 %
Private Equity Funds 786,043 1,020,953 11.4 %
Private Equity Total 3,036,122 4,057,758 45.3 %
Energy 977,213 580,680 6.5 %
Real Estate 793,068 846,266 9.4 %
Infrastructure 183,347 191,181 2.1 %
Real Assets Total 1,953,628 1,618,127 18.0 %
Special Situations 894,344 788,123 8.8 %
Direct Lending 65,802 66,827 0.8 %
Mezzanine 63,559 64,090 0.7 %
Alternative Credit Total 1,023,705 919,040 10.3 %
CLOs (a) 1,330,450 921,509 10.3 %
Liquid Credit 189,280 184,825 2.1 %
Specialty Finance 297,756 234,467 2.6 %
Credit Total 2,841,191 2,259,841 25.3 %
Other 1,090,008 1,022,363 11.4 %
Total Investments $ 8,920,949 $ 8,958,089 100.0 %
As of December 31, 2015
Significant Investments: (b) Cost Fair
Value Fair Value as a
Percentage of
Total Investments
First Data Corporation (NYSE: FDC)
$ 1,061,332 $ 1,266,196 14.1 %
Walgreens Boots Alliance (NASDAQ: WBA)
222,533 748,688 8.4 %
WMI Holdings Corp. (NASDAQ: WMIH)
221,127 311,270 3.5 %
Oil & Gas Royalties Investment
118,640 173,800 1.9 %
HCA Holdings, Inc. (NYSE: HCA)
29,455 169,332 1.9 %
Total Significant Investments 1,653,087 2,669,286 29.8 %
Other Investments 7,267,862 6,288,803 70.2 %
Total Investments $ 8,920,949 $ 8,958,089 100.0 %
* 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.
(a) Includes approximately $104.2 million of CLOs that are not held for investment purposes and are held at cost.
(b) The significant investments include the top five investments (other than investments expected to be syndicated or transferred in connection with new fundraising) based on their fair market value as of December 31, 2015. The fairvalue figures include the co-investment and the limited partner and/or general partner interests held by KKR in the underlying investment, if applicable.
KKR
ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
Private
Markets
Segment
Public
Markets
Segment
Total
Reportable
Segments
First Quarter 2015
December 31, 2014 - As Reported $ 61,505,800 $ 37,106,700 $ 98,612,500
Net AUM of Strategic Partnerships (pro-rata based on ownership interest) — 2,810,800 2,810,800
Capital Commitments Excluded from AUM ("Shadow AUM") 3,105,500 2,590,500 5,696,000
December 31, 2014 - As Adjusted $ 64,611,300 $ 42,508,000 $ 107,119,300
New Capital Raised 1,570,500 2,324,600 3,895,100
Distributions (2,967,000 ) (1,900,800 ) (c) (4,867,800 )
Net Changes in Fee Base of Certain Funds (a) — (238,600 ) (238,600 )
Change in Value 2,009,500 (292,800 ) 1,716,700
March 31, 2015 $ 65,224,300 $ 42,400,400 $ 107,624,700
Second Quarter 2015
March 31, 2015 $ 65,224,300 $ 42,400,400 $ 107,624,700
New Capital Raised 3,468,900 4,374,700 7,843,600
Distributions (3,447,000 ) (1,485,400 ) (d) (4,932,400 )
Change in Value 3,294,100 642,700 3,936,800
June 30, 2015 $ 68,540,300 $ 45,932,400 $ 114,472,700
Third Quarter 2015
June 30, 2015 $ 68,540,300 $ 45,932,400 $ 114,472,700
New Capital Raised 1,583,800 2,444,700 4,028,500
Distributions (2,700,300 ) (1,861,300 ) (e) (4,561,600 )
Change in Value (647,200 ) (877,900 ) (1,525,100 )
September 30, 2015 $ 66,776,600 $ 45,637,900 $ 112,414,500
Fourth Quarter 2015
September 30, 2015 $ 66,776,600 $ 45,637,900 $ 112,414,500
New Capital Raised 327,000 3,782,300 4,109,300
Acquisitions — 6,010,800 (b) 6,010,800
Distributions (2,718,200 ) (1,713,900 ) (f) (4,432,100 )
Change in Value 1,643,200 (201,400 ) 1,441,800
December 31, 2015 $ 66,028,600 $ 53,515,700 $ 119,544,300
Full Year 2015
December 31, 2014 - As Adjusted $ 64,611,300 $ 42,508,000 $ 107,119,300
New Capital Raised 6,950,200 12,926,300 19,876,500
Acquisitions — 6,010,800 (b) 6,010,800
Distributions (11,832,500 ) (6,961,400 ) (g) (18,793,900 )
Net Changes in Fee Base of Certain Funds (a) — (238,600 ) (238,600 )
Change in Value 6,299,600 (729,400 ) 5,570,200
December 31, 2015 $ 66,028,600 $ 53,515,700 $ 119,544,300
* For the periods reported, AUM reflects the inclusion of capital commitments for which we are eligible to receive fees or carried interest upon deployment of capital and the inclusion of KKR's pro rata portion of AUM managed by other asset managers in which KKR holds a minority stake.
(a) Represents the impact of certain funds entering their post-investment period.
(b) Represents KKR's pro rata portion of AUM managed by Marshall Wace.
(c) Includes $705.4 million of redemptions by fund investors.
(d) Includes $563.8 million of redemptions by fund investors.
(e) Includes $696.3 million of redemptions by fund investors.
(f) Includes $908.0 million of redemptions by fund investors.
(g) Includes $2,873.5 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
First Quarter 2015
December 31, 2014 - As Reported $ 47,262,500 $ 35,783,900 $ 83,046,400
Net FPAUM of Strategic Partnerships (pro-rata based on ownership interest) — 2,810,800 2,810,800
December 31, 2014 - As Adjusted $ 47,262,500 $ 38,594,700 $ 85,857,200
New Capital Raised 1,320,500 2,277,200 3,597,700
Distributions (961,100 ) (1,638,600 ) (c) (2,599,700 )
Net Changes in Fee Base of Certain Funds (a) — (325,200 ) (325,200 )
Change in Value (460,000 ) (357,500 ) (817,500 )
March 31, 2015 $ 47,161,900 $ 38,550,600 $ 85,712,500
Second Quarter 2015
March 31, 2015 $ 47,161,900 $ 38,550,600 $ 85,712,500
New Capital Raised 1,310,500 2,249,200 3,559,700
Distributions (1,723,600 ) (1,293,900 ) (d) (3,017,500 )
Change in Value 196,900 429,300 626,200
June 30, 2015 $ 46,945,700 $ 39,935,200 $ 86,880,900
Third Quarter 2015
June 30, 2015 $ 46,945,700 $ 39,935,200 $ 86,880,900
New Capital Raised 1,042,700 1,944,500 2,987,200
Distributions (1,648,300 ) (1,776,100 ) (e) (3,424,400 )
Change in Value 59,700 (641,600 ) (581,900 )
September 30, 2015 $ 46,399,800 $ 39,462,000 $ 85,861,800
Fourth Quarter 2015
September 30, 2015 $ 46,399,800 $ 39,462,000 $ 85,861,800
New Capital Raised 222,400 2,741,500 2,963,900
Acquisitions — 6,010,800 (b) 6,010,800
Distributions (1,212,200 ) (1,620,700 ) (f) (2,832,900 )
Change in Value (102,600 ) (180,500 ) (283,100 )
December 31, 2015 $ 45,307,400 $ 46,413,100 $ 91,720,500
Full Year 2015
December 31, 2014 - As Adjusted $ 47,262,500 $ 38,594,700 $ 85,857,200
New Capital Raised 3,896,100 9,212,400 13,108,500
Acquisitions — 6,010,800 (b) 6,010,800
Distributions (5,545,200 ) (6,329,300 ) (g) (11,874,500 )
Net Changes in Fee Base of Certain Funds (a) — (325,200 ) (325,200 )
Change in Value (306,000 ) (750,300 ) (1,056,300 )
December 31, 2015 $ 45,307,400 $ 46,413,100 $ 91,720,500
* For the periods reported, FPAUM reflects the inclusion of KKR's pro rata portion of FPAUM managed by other asset managers in which KKR holds a minority stake.
(a) Represents the impact of certain funds entering their post-investment period.
(b) Represents KKR's pro rata portion of FPAUM managed by Marshall Wace.
(c) Includes $705.4 million of redemptions by fund investors.
(d) Includes $563.8 million of redemptions by fund investors.
(e) Includes $696.3 million of redemptions by fund investors.
(f) Includes $908.0 million of redemptions by fund investors.
(g) Includes $2,873.5 million of redemptions by fund investors.
KKR
INVESTMENT VEHICLE SUMMARY (a) (UNAUDITED)
As of December 31, 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 (b) 12/2014 12/2020 $ 3,468.0 $ 3,307.1 5.7% $ 160.9 $ — $ 160.9 $ 185.7
Asian Fund II (b) 4/2013 4/2019 5,825.0 3,979.3 1.3% 2,599.7 753.9 1,845.8 3,163.6
North America Fund XI (b) 9/2012 9/2018 8,718.4 3,704.0 2.9% 5,932.1 1,733.8 4,635.4 6,983.8
China Growth Fund 11/2010 11/2016 1,010.0 307.6 1.0% 702.4 283.4 544.4 713.4
E2 Investors (Annex Fund) 8/2009 11/2013 195.8 — 4.9% 195.8 195.7 18.1 10.3
European Fund III 3/2008 3/2014 6,121.8 812.1 4.6% 5,309.7 4,447.2 3,224.2 4,240.2
Asian Fund 7/2007 4/2013 3,983.3 129.5 2.5% 3,853.8 5,397.4 1,918.7 2,534.0
2006 Fund 9/2006 9/2012 17,642.2 525.6 2.1% 17,116.6 18,411.5 7,703.3 13,028.5
European Fund II 11/2005 10/2008 5,750.8 — 2.1% 5,750.8 6,611.1 825.0 2,003.2
Millennium Fund 12/2002 12/2008 6,000.0 — 2.5% 6,000.0 12,517.4 714.0 1,521.1
European Fund 12/1999 12/2005 3,085.4 — 3.2% 3,085.4 8,748.0 — 17.1
Total Private Equity Funds 61,800.7 12,765.2 50,707.2 59,099.4 21,589.8 34,400.9
Co-Investment Vehicles (b) Various Various 5,774.0 2,709.6 Various 3,137.4 2,511.0 2,118.0 2,865.8
Total Private Equity 67,574.7 15,474.8 53,844.6 61,610.4 23,707.8 37,266.7
Real Assets
Energy Income and Growth Fund 9/2013 9/2018 1,974.2 1,142.6 12.8% 831.6 143.9 757.1 544.3
Natural Resources Fund Various Various 887.4 2.9 Various 884.5 96.6 809.9 200.1
Global Energy Opportunities (b) Various Various 1,026.4 808.7 Various 252.7 55.0 144.8 124.7
Global Infrastructure Investors (b) 9/2011 10/2014 1,039.9 100.9 4.8% 967.0 216.4 847.8 972.7
Global Infrastructure Investors II (b) 10/2014 10/2020 3,028.3 2,685.7 4.1% 346.5 8.9 338.9 354.0
Infrastructure Co-Investments Various Various 1,125.0 — Various 1,125.0 377.9 1,124.4 1,520.1
Real Estate Partners Americas (b) 5/2013 12/2016 1,229.1 598.2 16.3% 777.5 314.5 630.5 740.7
Real Estate Partners Europe (b) 9/2015 (d) 591.3 591.3 10.9% — — — —
Real Assets 10,901.6 5,930.3 5,184.8 1,213.2 4,653.4 4,456.6
Unallocated Commitments 1,361.2 1,361.2 Various — — — —
Private Markets Total 79,837.5 22,766.3 59,029.4 62,823.6 28,361.2 41,723.3
Public Markets
Special Situations Fund 12/2012 1/2016 2,257.6 128.0 11.6% 2,129.6 257.6 2,129.6 2,205.6
Special Situations Fund II 12/2014 (c) 2,675.5 2,083.4 9.4% 592.1 — 592.1 452.4
Mezzanine Fund 3/2010 3/2015 1,022.8 150.6 4.4% 872.2 541.0 618.5 634.3
Lending Partners 12/2011 12/2014 460.2 90.5 15.2% 369.7 181.5 325.3 303.3
Lending Partners II 6/2014 6/2017 1,335.9 889.6 3.7% 446.3 26.4 446.3 475.7
Lending Partners Europe 3/2015 3/2018 780.1 763.6 5.2% 16.5 — 16.5 24.0
Other Alternative Credit Vehicles Various Various 5,157.2 2,585.1 Various 2,572.1 1,496.5 1,706.7 1,925.9
Public Markets Total 13,689.3 6,690.8 6,998.5 2,503.0 5,835.0 6,021.2
Grand Total $ 93,526.8 $ 29,457.1 $ 66,027.9 $ 65,326.6 $ 34,196.2 $ 47,744.5
_____________________________________________________________________________________________________________________
(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.
(d) Four years from final close.
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.
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.
After-tax cash earnings is used by management as a measure of the cash earnings of KKR. KKR believes this measure, which was formerly referred to as total distributable earnings, is useful to unitholders as it provides a supplemental measure to assess performance, excluding the impact of mark-to-market gains (losses). After-tax cash earnings excludes certain realized investment losses to the extent unrealized losses on these investments were recognized prior to the combination with KPE on October 1, 2009.
Assets under management ("AUM") represent the assets managed by KKR or by its strategic partners from which KKR is entitled to receive fees or a carried interest (either currently or upon deployment of capital) 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 and strategic partnerships. 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; (ii) uncalled capital commitments from these funds, including uncalled capital commitments from which KKR is currently not earning management fees or carried interest; (iii) the fair value of investments in KKR's co-investment vehicles; (iv) the par value of outstanding CLOs (excluding CLOs wholly-owned by KKR); (vi) KKR's pro-rata portion of the AUM managed by strategic partnerships in which KKR holds a minority ownership interest and (vi) the fair value of other assets managed by KKR. The pro-rata portion of the AUM managed by strategic partnerships is calculated based on KKR’s percentage ownership interest in such entities multiplied by such entity’s respective AUM. 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.
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.
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 Cash Earnings on a trailing twelve-month basis by the average book value during the period.
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.
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.
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.
Fee paying AUM ("FPAUM") represents only those assets under management of KKR or its strategic partners 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. 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 and commitments from which KKR does not receive a fee are excluded (i.e., assets and commitments with respect to which it receives only carried interest or is otherwise not currently receiving a fee) 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.
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.
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 After-tax Economic Net Income (Loss) on a trailing twelve-month basis by the average book value during the period.
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.
KKR
EXHIBIT A
OTHER FINANCIAL INFORMATION (UNAUDITED)
(Amounts in thousands)
Quarter Ended Year Ended
December 31, 2015 September 30, 2015 December 31, 2014 December 31, 2015 December 31, 2014
Fee Related Earnings
Total Management, Monitoring and Transaction Fees, Net $ 337,145 $ 244,888 $ 244,366 $ 1,142,050 $ 1,098,843
Less: Cash Compensation and Benefits 121,036 87,680 86,035 409,992 380,581
Less: Occupancy and Related Charges 16,666 15,720 14,383 62,657 57,787
Less: Other Operating expenses 68,978 52,081 61,685 233,618 229,069
Plus: Expenses of Principal Activities Segment 50,383 38,116 44,153 174,713 199,938
Fee Related Earnings (a) 180,848 127,523 126,416 610,496 631,344
Plus: Net Interest and Dividends 33,733 48,637 119,325 208,451 273,175
Plus: Depreciation and Amortization 3,775 3,745 3,830 15,319 15,782
Plus: Core Interest Expense 29,516 30,429 27,050 116,027 88,002
Less: Expenses of Principal Activities Segment 50,383 38,116 44,153 174,713 199,938
Fee and Yield EBITDA (b) 197,489 172,218 232,468 775,580 808,365
Plus: Realized Performance Income, net 128,654 159,702 125,938 628,083 744,879
Plus: Net Realized Gains (Losses) (81,343 ) 61,439 62,219 337,023 628,403
Total EBITDA $ 244,800 $ 393,359 $ 420,625 $ 1,740,686 $ 2,181,647
Core Interest Expense
GAAP Interest Expense $ 170,282 $ 151,554 $ 119,846 $ 573,226 $ 317,192
Less: Interest expense related to debt obligations from investment financing arrangements
118,108 98,873 73,315 370,141 182,283
Segment Interest Expense 52,174 52,681 46,531 203,085 134,909
Less: Interest Expense related to debt obligations from KFN and other 22,658 22,252 19,481 87,058 46,907
Core Interest Expense (c) $ 29,516 $ 30,429 $ 27,050 $ 116,027 $ 88,002
________________________________________________________________________________________________________________________________________________________
(a) Fee related earnings (“FRE”) is a measure of the operating earnings of KKR and its business segments before performance income, related performance income compensation and investment income. KKR believes this measure is useful to unitholders as it provides additional insight into the operating profitability of KKR's fee generating management companies and capital markets businesses.
(b) Fee and Yield EBITDA 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.
(c) 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. KKR believes 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.
KKR
EXHIBIT B
KKR'S PORTION OF TOTAL UNCALLED COMMITMENTS TO ITS INVESTMENT FUNDS (UNAUDITED)
(Amounts in thousands)
Uncalled
Commitments
Private Markets
European Fund IV $ 184,700
Energy Income and Growth Fund 147,100
Global Infrastructure Investors II 110,900
North America Fund XI 100,500
Real Estate Partners Americas 97,300
European Fund III 66,300
Real Estate Partners Europe 64,700
Asian Fund II 50,900
2006 Fund 22,700
Co-Investment Vehicles 69,600
Other Private Markets Funds 10,600
Total Private Markets Commitments 925,300
Public Markets
Special Situations Fund 14,900
Special Situations Fund II 195,100
Mezzanine Fund 6,500
Lending Partners 13,900
Lending Partners II 33,300
Lending Partners Europe 39,600
Other Alternative Credit Vehicles 125,200
Total Public Markets Commitments 428,500
Total Uncalled Commitments $ 1,353,800
KKR
EXHIBIT C
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT - BASIC (GAAP BASIS)
TO AFTER TAX ENI PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
Quarter Ended
December 31, 2015 September 30, 2015 December 31, 2014
Net income (loss) attributable to KKR & Co. L.P. per common unit
- Basic
$ 0.07 $ (0.42 ) $ 0.00
Weighted Average Common Units Outstanding - Basic 461,374,013 452,165,697 431,432,521
Net income (loss) attributable to KKR & Co. L.P. 32,257 (190,588 ) (583 )
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
35,060 (166,078 ) (3,365 )
Plus: Non-cash equity-based charges 47,730 67,821 55,968
Plus: Amortization of intangibles and other, net 2,293 10,186 28,048
Plus: Income tax (benefit) 27,341 (7,390 ) 6,524
Economic Net Income (Loss) 144,681 (286,049 ) 86,592
Less: Equity-based compensation associated with the KKR & Co. L.P.
2010 equity incentive plan
37,376 48,252 36,607
Pre-tax Economic Net Income (Loss) 107,305 (334,301 ) 49,985
Less: Provision for income tax (benefit) 36,797 (19,505 ) 3,951
After-tax Economic Net Income (Loss) 70,508 (314,796 ) 46,034
Weighted Average Adjusted Units 852,446,702 851,704,303 838,067,975
After-tax Economic Net Income (Loss) Per Adjusted Unit $ 0.08 $ (0.37 ) $ 0.05
Year Ended
December 31, 2015 December 31, 2014
Net income (loss) attributable to KKR & Co. L.P. per common unit
- Basic
$ 1.09 $ 1.25
Weighted Average Common Units Outstanding - Basic 448,884,185 381,092,394
Net income (loss) attributable to KKR & Co. L.P. 488,482 477,611
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
433,693 585,135
Plus: Non-cash equity-based charges 261,579 310,403
Plus: Amortization of intangibles and other, net 47,599 290,348
Plus: Income tax (benefit) 66,636 63,669
Economic Net Income (Loss) 1,297,989 1,727,166
Less: Equity-based compensation associated with the KKR & Co. L.P.
2010 equity incentive plan
186,346 158,927
Pre-tax Economic Net Income (Loss) 1,111,643 1,568,239
Less: Provision for income tax (benefit) 83,363 94,223
After-tax Economic Net Income (Loss) 1,028,280 1,474,016
Weighted Average Adjusted Units 851,099,066 800,247,988
After-tax Economic Net Income (Loss) Per Adjusted Unit $ 1.21 $ 1.84
KKR
EXHIBIT C (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 EBITDA, AFTER TAX CASH EARNINGS AND
TOTAL EBITDA (UNAUDITED)
(Amounts in thousands)
Quarter Ended
December 31, 2015 September 30, 2015 December 31, 2014
Net income (loss) attributable to KKR & Co. L.P. $ 32,257 $ (190,588 ) $ (583 )
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
35,060 (166,078 ) (3,365 )
Plus: Non-cash equity-based charges 47,730 67,821 55,968
Plus: Amortization of intangibles and other, net 2,293 10,186 28,048
Plus: Income tax (benefit) 27,341 (7,390 ) 6,524
Economic Net Income (Loss) 144,681 (286,049 ) 86,592
Plus: Income attributable to segment noncontrolling interests 5,100 2,902 3,349
Less: Total investment income (loss) (176,375 ) (274,384 ) (142,872 )
Less: Net performance income (loss) 195,691 (98,170 ) 150,550
Plus: Expenses of Principal Activities Segment 50,383 38,116 44,153
Fee Related Earnings 180,848 127,523 126,416
Plus: Net interest and dividends 33,733 48,637 119,325
Plus: Depreciation and amortization 3,775 3,745 3,830
Plus: Core interest expense 29,516 30,429 27,050
Less: Expenses of Principal Activities Segment 50,383 38,116 44,153
Fee and Yield EBITDA 197,489 172,218 232,468
Less: Depreciation and amortization 3,775 3,745 3,830
Less: Core interest expense 29,516 30,429 27,050
Plus: Realized performance income (loss), net 128,654 159,702 125,938
Plus: Net realized gains (losses) (81,343 ) 61,439 62,219
Less: Corporate and local income taxes paid 37,791 25,173 25,183
Less: Income attributable to segment noncontrolling interests 5,100 2,902 3,349
After-tax Cash Earnings 168,618 331,110 361,213
Plus: Depreciation and amortization 3,775 3,745 3,830
Plus: Core interest expense 29,516 30,429 27,050
Plus: Corporate and local income taxes paid 37,791 25,173 25,183
Plus: Income attributable to segment noncontrolling interests 5,100 2,902 3,349
Total EBITDA $ 244,800 $ 393,359 $ 420,625
Year Ended
December 31, 2015 December 31, 2014
Net income (loss) attributable to KKR & Co. L.P. $ 488,482 $ 477,611
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
433,693 585,135
Plus: Non-cash equity-based charges 261,579 310,403
Plus: Amortization of intangibles and other, net 47,599 290,348
Plus: Income tax (benefit) 66,636 63,669
Economic Net Income (Loss) 1,297,989 1,727,166
Plus: Income attributable to segment noncontrolling interests 16,007 14,946
Less: Total investment income (loss) 153,512 505,153
Less: Net performance income (loss) 724,701 805,553
Plus: Expenses of Principal Activities Segment 174,713 199,938
Fee Related Earnings 610,496 631,344
Plus: Net interest and dividends 208,451 273,175
Plus: Depreciation and amortization 15,319 15,782
Plus: Core interest expense 116,027 88,002
Less: Expenses of Principal Activities Segment 174,713 199,938
Fee and Yield EBITDA 775,580 808,365
Less: Depreciation and amortization 15,319 15,782
Less: Core interest expense 116,027 88,002
Plus: Realized performance income (loss), net 628,083 744,879
Plus: Net realized gains (losses) 337,023 628,403
Less: Corporate and local income taxes paid 140,677 131,081
Less: Income attributable to segment noncontrolling interests 16,007 14,946
After-tax Cash Earnings 1,452,656 1,931,836
Plus: Depreciation and amortization 15,319 15,782
Plus: Core interest expense 116,027 88,002
Plus: Corporate and local income taxes paid 140,677 131,081
Plus: Income attributable to segment noncontrolling interests 16,007 14,946
Total EBITDA $ 1,740,686 $ 2,181,647
KKR
EXHIBIT C (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
December 31, 2015 December 31, 2014
KKR & Co. L.P. partners’ capital $ 5,547,182 $ 5,382,691
Noncontrolling interests held by KKR Holdings L.P. 4,347,153 4,661,679
Equity impact of KKR Management Holdings Corp. and other 84,894 73,855
Book value 9,979,229 10,118,225
Adjusted units 847,083,373 838,020,974
Book value per adjusted unit $ 11.78 $ 12.07
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS)
TO CASH AND SHORT-TERM INVESTMENTS (UNAUDITED)
(Amounts in thousands)
As of As of
December 31, 2015 December 31, 2014
Cash and cash equivalents $ 1,047,740 $ 918,080
Liquid short-term investments 239,910 203,305
Cash and short-term investments $ 1,287,650 $ 1,121,385
KKR
EXHIBIT D
RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING (UNAUDITED)
The following table provides a reconciliation of KKR's Weighted Average GAAP Common Units Outstanding to Weighted Average Adjusted Units:
Quarter Ended
December 31, 2015 September 30, 2015 December 31, 2014
Weighted Average GAAP Common Units Outstanding - Basic 461,374,013 452,165,697 431,432,521
Adjustments:
Weighted Average Unvested Common Units and Other Securities (a) 28,330,774 — (c) 27,550,338
Weighted Average GAAP Common Units Outstanding - Diluted 489,704,787 452,165,697 458,982,859
Adjustments:
Weighted Average KKR Holdings Units (b) 362,741,915 365,717,358 379,085,116
Weighted Average Unvested Common Units and Other Securities (a) — 33,821,248 (c) —
Weighted Average Adjusted Units 852,446,702 851,704,303 838,067,975
Year Ended
December 31, 2015 December 31, 2014
Weighted Average GAAP Common Units Outstanding - Basic 448,884,185 381,092,394
Adjustments:
Weighted Average Unvested Common Units and Other Securities (a) 33,815,009 30,956,881
Weighted Average GAAP Common Units Outstanding - Diluted 482,699,194 412,049,275
Adjustments:
Weighted Average KKR Holdings Units (b) 368,399,872 388,198,713
Weighted Average Adjusted Units 851,099,066 800,247,988
RECONCILIATION OF GAAP COMMON UNITS OUTSTANDING (UNAUDITED)
The following table provides a reconciliation of KKR's GAAP Common Units Outstanding to Adjusted Units, Adjusted Units Eligible for Distribution and
Outstanding Adjusted Units:
As of As of
December 31, 2015 December 31, 2014
GAAP Common Units Outstanding - Basic 457,834,875 433,330,540
Unvested Common Units and Other Securities (a) 27,901,910 27,493,685
GAAP Common Units Outstanding - Diluted 485,736,785 460,824,225
Adjustments:
KKR Holdings Units (b) 361,346,588 377,196,749
Adjusted Units 847,083,373 838,020,974
Adjustments:
Unvested Common Units and Unvested Other Securities (a) (24,060,289 ) (24,373,441 )
Adjusted Units Eligible for Distribution 823,023,084 813,647,533
Adjustments:
Vested Other Securities (3,841,621 ) (3,120,244 )
Outstanding Adjusted Units 819,181,463 810,527,289
______________________________________________________________________________________________________________________________________________________
(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.
(c) Unvested common units and other securities are excluded from the calculation of diluted earnings per common unit on a GAAP basis because inclusion of such unvested common units and other securities would be anti-dilutive (decrease the loss per common unit).
View source version on businesswire.com: http://www.businesswire.com/news/home/20160211005372/en/
Contact:
Investor Relations:
Kohlberg Kravis Roberts & Co. L.P.
Craig Larson, +1-877-610-4910 (U.S.)
+1-212-230-9410
investor-relations@kkr.com
or
Media:
Kohlberg Kravis Roberts & Co. L.P.
Kristi Huller, +1-212-750-8300
media@kkr.com
KKR TROUBLE COMING! One of the largest bankruptcies so far is Samson Resources of Oklahoma. In 2011, private equity firm KKR (KKR) bought it for over $7 billion. Now it's struggling to deal with over $1 billion in debt that's due this year alone.
KKR & Co. L.P. Announces Third Quarter 2015 Results
KKR adopts a $500 million unit repurchase program
KKR to change distribution policy to fixed $0.16 per common unit per quarter beginning with the fourth quarter of 2015
GAAP net income (loss) attributable to KKR & Co. L.P. was $(190.6) million and $456.2 million for the quarter and nine months ended September 30, 2015, respectively, down from $89.9 million and $478.2 million in the comparable periods of 2014.
Total distributable earnings was $349.1 million and $1,357.1 million for the quarter and nine months ended September 30, 2015, respectively, down from $504.8 million and $1,652.6 million in the comparable periods of 2014.
Distribution per common unit was $0.35 and $1.23 for the quarter and nine months ended September 30, 2015, respectively, down from $0.45 and $1.55 in the comparable periods of 2014.
Economic net income (loss) (“ENI”) was $(286.0) million and $1,153.3 million for the quarter and nine months ended September 30, 2015, respectively, down from $508.7 million and $1,640.6 million in the comparable periods of 2014.
ENI after taxes per adjusted unit was $(0.37) and $1.13 for the quarter and nine months ended September 30, 2015, respectively, down from $0.50 and $1.81 in the comparable periods of 2014.
Book value was $10.2 billion on a total reportable segment basis as of September 30, 2015 or $12.01 per adjusted unit.
Return on equity and cash return on equity were 9.6% and 15.8%, respectively on a trailing twelve month basis.
Assets under management (“AUM”) and fee paying assets under management (“FPAUM”) totaled $98.7 billion and $82.9 billion, respectively, as of September 30, 2015.
Business Wire
KKR & Co. L.P.
9 minutes ago
NEW YORK--(BUSINESS WIRE)--
KKR & Co. L.P. (KKR) today reported its third quarter 2015 results.
KKR has adopted a repurchase program for up to $500 million in the aggregate of its outstanding common units. Under this program, units may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise.
In addition, KKR has amended its distribution policy effective beginning with the distribution anticipated to be declared in early 2016 with respect to the quarter ending December 31, 2015. Under the new distribution policy, KKR intends to make equal quarterly distributions to holders of its common units in an amount of $0.16 per common unit per quarter. The distribution declared for the quarter ended September 30, 2015 was calculated under the prior distribution policy.
On September 9, 2015, KKR announced a long-term strategic partnership with Marshall Wace LLP and its affiliates. Under the terms of the agreement and subject to customary closing conditions, KKR will acquire at closing a 24.9% interest in Marshall Wace through a combination of cash and common units. In addition, KKR and Marshall Wace have the option to grow KKR’s ownership interest over time to 39.9%.
"Our announcements today, including the introductions of a fixed distribution per quarter and a share buyback program, reflect important changes to our capital management strategy,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. “Our strong balance sheet, with approximately $14 billion in assets, allows us to support a meaningful fixed quarterly distribution. We will use incremental retained capital to invest behind our ideas and buy back our units. Over time, we think the market will value what we do with our balance sheet, including repurchasing our own units, more than the variable distributions we have been paying. These changes, coupled with continued investment performance, will allow us to create significant long-term equity value for our unitholders.”
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 nine months ended September 30, 2015, included net income (loss) attributable to KKR & Co. L.P. of $(190.6) million and $456.2 million, respectively, and net income (loss) attributable to KKR & Co. L.P. per common unit of $(0.42) and $0.95, respectively, on a diluted basis. For the quarter and nine months ended September 30, 2014, net income (loss) attributable to KKR & Co. L.P. was $89.9 million and $478.2 million, respectively, and net income (loss) attributable to KKR & Co. L.P. per common unit was $0.20 and $1.21, respectively, on a diluted basis. The decrease in both comparable periods was primarily due to a decrease in investment income and to a lesser extent a decrease in transaction fees.
SEGMENT RESULTS
KEY METRICS (UNAUDITED)
(Amounts in millions, except per adjusted unit amounts)
Quarter Ended Nine Months Ended
September 30, 2015 September 30, 2014 % Change September 30, 2015 September 30, 2014 % Change
Total Distributable Earnings
Fees $ 246 $ 309 $ 817 $ 891
Realized Cash Carry 265 246 820 995
Net Realized Investment Income 110 245 593 720
Total Cash Revenues $ 621 $ 800 (22 )% $ 2,230 $ 2,606 (14 )%
Total Cash Expenses and Other 272 295 873 953
Total Distributable Earnings $ 349 $ 505 (31 )% $ 1,357 $ 1,653 (18 )%
Less: Estimated Current Corporate Income Taxes (18 ) (30 ) (73 ) (82 )
Distributable Earnings, net of taxes $ 331 $ 475 (30 )% $ 1,284 $ 1,571 (18 )%
Distributable Earnings, net of taxes per KKR & Co. L.P. common unit $ 0.40 $ 0.59 (32 )% $ 1.57 $ 2.03 (23 )%
Distribution per KKR & Co. L.P. common unit $ 0.35 $ 0.45 (22 )% $ 1.23 $ 1.55 (21 )%
Payout ratio 88 % 76 % 79 % 76 %
Economic Net Income
Management, Monitoring and Transaction Fees, Net $ 245 $ 301 $ 805 $ 854
Performance Income (162 ) 310 884 1,096
Investment Income (274 ) 207 330 648
Total Segment Revenues $ (191 ) $ 818 (123 )% $ 2,019 $ 2,598 (22 )%
Total Segment Expenses and Other 124 399 1,061 1,170
Economic Net Income, After-Taxes $ (315 ) $ 419 (175 )% $ 958 $ 1,428 (33 )%
Economic Net Income, After-Taxes per Adjusted Unit $ (0.37 ) $ 0.50 (174 )% $ 1.13 $ 1.81 (38 )%
Fee and Yield Earnings $ 139 $ 208 (33 )% $ 487 $ 525 (7 )%
Other
Book Value per Adjusted Unit $ 12.01 $ 12.51 (4 )%
Last Twelve Months Ended
September 30, 2015 September 30, 2014
Return on Equity 9.6% 24.7%
Cash Return on Equity 15.8% 23.3%
Private Markets
AUM was $60.8 billion as of September 30, 2015, a decrease of $2.3 billion, compared to AUM of $63.1 billion as of June 30, 2015. The decrease was primarily attributable to distributions to limited partners of our private equity funds arising from realizations and to a lesser extent, a decline in the fair value of our private equity portfolio. For the three months ended September 30, 2015, the fair value of our private equity portfolio decreased 1.4%. These decreases were offset by new capital raised primarily in European Fund IV and Global Infrastructure Investors II.
FPAUM was $46.2 billion as of September 30, 2015, a decrease of $0.6 billion, compared to FPAUM of $46.8 billion as of June 30, 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 $(74.6) million for the quarter ended September 30, 2015, a decrease of $706.2 million, compared to total segment revenues of $631.6 million for the quarter ended September 30, 2014. The decrease was principally attributable to net carried interest losses reflecting a decline in the value of our private equity portfolio and to a lesser extent, net investment losses reflecting overall decreases in the value of our energy and private equity portfolios.
Total segment revenues were $1,798.3 million for the nine months ended September 30, 2015, a decrease of $206.8 million, compared to total segment revenues of $2,005.1 million for the nine months ended September 30, 2014. The decrease was largely attributable to (i) a lower level of net carried interest primarily reflecting a lower level of investment gains at carry earning funds during the current period and (ii) a lower level of investment income primarily relating to investment losses in our energy portfolio during the nine months ended September 30, 2015. For the nine months ended September 30, 2015, the fair value of our private equity portfolio increased 10.5%.
ENI was $(133.7) million for the quarter ended September 30, 2015, a decrease of $532.7 million, compared to ENI of $399.0 million for the quarter ended September 30, 2014. The decrease was primarily attributable to lower total segment revenues as described above partially offset by lower allocations to the carry pool resulting from the lower levels of net carried interest.
Public Markets
AUM was $37.9 billion as of September 30, 2015, a decrease of $0.5 billion, compared to AUM of $38.4 billion as of June 30, 2015. FPAUM was $36.7 billion as of September 30, 2015, a decrease of $0.3 billion, compared to FPAUM of $37.0 billion as of June 30, 2015. For both AUM and FPAUM, the decreases were primarily attributable to distributions and redemptions across multiple strategies, offset by new capital either raised or invested, primarily in Special Situations Fund II and our CLOs.
Total segment revenues were $(163.6) million for the quarter ended September 30, 2015, a decrease of $257.2 million, compared to total segment revenues of $93.6 million for the quarter ended September 30, 2014. The decrease in revenues was principally attributable to (i) net investment losses in the third quarter of 2015 across multiple strategies, primarily in our Special Situations platform and our domestic CLOs, and (ii) net carried interest losses in the third quarter of 2015 primarily reflecting overall decreases in the value of our carry paying vehicles, the most significant of which was our Special Situations Fund.
Total segment revenues were $74.6 million for the nine months ended September 30, 2015, a decrease of $321.8 million, compared to total segment revenues of $396.4 million for the nine months ended September 30, 2014. The decrease was principally attributable to (i) net investment losses for the nine months ended September 30, 2015 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 $(183.3) million for the quarter ended September 30, 2015, a decrease of $231.4 million, compared to ENI of $48.1 million for the quarter ended September 30, 2014. The decrease was principally attributable to the decrease in total segment revenues as described above.
ENI was $(43.9) million for the nine months ended September 30, 2015, a decrease of $295.4 million, compared to ENI of $251.5 million for the nine months ended September 30, 2014. The decrease was principally attributable to the decrease in total segment revenues as described above.
Capital Markets
Total segment revenues were $46.4 million for the quarter ended September 30, 2015, a decrease of $47.0 million, compared to total segment revenues of $93.4 million for the quarter ended September 30, 2014. The decrease in revenues primarily reflects a lower level of overall capital markets transaction activity for the quarter ended September 30, 2015.
Total segment revenues were $145.5 million for the nine months ended September 30, 2015, a decrease of $51.0 million, compared to total segment revenues of $196.5 million for the nine months ended September 30, 2014. The decrease in revenues primarily reflects a lower level of overall capital markets transaction activity for the nine months ended September 30, 2015.
ENI was $30.9 million for the quarter ended September 30, 2015, a decrease of $30.7 million, compared to ENI of $61.6 million for the quarter ended September 30, 2014. The decrease primarily reflects the decrease in total segment revenues as described above.
ENI was $96.2 million for the nine months ended September 30, 2015, a decrease of $32.3 million, compared to ENI of $128.5 million for the nine months ended September 30, 2014. The decrease primarily reflects the decrease in total segment revenues as described above.
CAPITAL AND LIQUIDITY
As of September 30, 2015, KKR had $2.1 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 September 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 September 30, 2015.
As of September 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 $0.35 per common unit has been declared, comprised of (i) $0.08 per common unit from after-tax FRE, (ii) $0.19 per common unit from realized cash carry, (iii) $0.03 per common unit from KKR’s net realized investment income and (iv) $0.05 per common unit from KFN’s net realized investment income. The distribution will be paid on November 24, 2015 to unitholders of record as of the close of business on November 6, 2015. This distribution was calculated under KKR’s prior distribution policy.
The declaration and payment of any distributions including distributions made under KKR’s new policy are subject to the discretion of the board of directors of the general partner of KKR, and the terms of its limited partnership agreement. There can be no assurance that distributions will be made as intended or at all, that unitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR or that any particular distribution policy will be maintained.
SUPPLEMENTAL INFORMATION
A slide presentation containing supplemental commentary about the Company's financial results for the fiscal quarter ended September 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 Tuesday, October 27, 2015 at 5:00 p.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 33603948, 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 and on Twitter @KKR_Co.
FORWARD-LOOKING STATEMENTS
This release contains certain forward-looking statements, including the statements with respect to the strategic partnership with Marshall Wace LLP, the declaration and payment of distributions on common units of KKR and the timing, manner and volume of repurchases of common units pursuant to a repurchase program. 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, 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. All forward looking statements speak only as of the date hereof. 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 Nine Months Ended
September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014
Revenues
Fees and Other $ 188,626 $ 344,768 $ 735,845 $ 897,064
Expenses
Compensation and Benefits 96,959 320,423 873,649 1,010,191
Occupancy and Related Charges 16,484 15,501 48,388 46,968
General, Administrative and Other 163,477 168,486 424,093 505,747
Total Expenses 276,920 504,410 1,346,130 1,562,906
Investment Income (Loss)
Net Gains (Losses) from Investment Activities (1,555,681 ) 298,259 3,474,748 4,242,289
Dividend Income 270,759 599,020 710,130 968,626
Interest Income 299,485 260,292 898,628 638,124
Interest Expense (151,554 ) (96,618 ) (402,944 ) (197,346 )
Total Investment Income (Loss) (1,136,991 ) 1,060,953 4,680,562 5,651,693
Income (Loss) Before Taxes (1,225,285 ) 901,311 4,070,277 4,985,851
Income Tax (Benefit) (7,390 ) 29,267 39,295 57,145
Net Income (Loss) (1,217,895 ) 872,044 4,030,982 4,928,706
Net Income (Loss) Attributable to
Redeemable Noncontrolling Interests (12,925 ) (2,462 ) (11,883 ) 1,366
Net Income (Loss) Attributable to
Noncontrolling Interests and Appropriated Capital (1,014,382 ) 784,568 3,586,640 4,449,146
Net Income (Loss) Attributable to KKR & Co. L.P. $ (190,588 ) $ 89,938 $ 456,225 $ 478,194
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic $ (0.42 ) $ 0.21 $ 1.03 $ 1.31
Diluted (a) $ (0.42 ) $ 0.20 $ 0.95 $ 1.21
Weighted Average Common Units Outstanding
Basic 452,165,697 419,961,455 444,675,159 364,127,956
Diluted (a) 452,165,697 452,019,742 480,338,335 396,232,828
(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. For the three months ended September 30, 2015, unvested common units and other securities are excluded from the calculation of diluted earnings per common unit because inclusion of such unvested common units and other securities would be anti-dilutive (decrease the loss per common unit).
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended Nine Months Ended
September 30, 2015 June 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 181,780 $ 181,401 $ 173,912 $ 536,961 $ 547,979
Monitoring Fees 24,964 47,713 30,449 170,515 96,422
Transaction Fees 61,437 92,951 158,564 257,674 406,385
Fee Credits (23,293 ) (56,458 ) (61,811 ) (160,245 ) (196,309 )
Total Management, Monitoring and Transaction Fees, Net 244,888 265,607 301,114 804,905 854,477
Performance Income
Realized Carried Interest 265,291 252,227 246,026 819,943 995,064
Incentive Fees 880 5,893 8,009 12,438 36,506
Unrealized Carried Interest (428,493 ) 340,366 56,192 51,157 64,013
Total Performance Income (162,322 ) 598,486 310,227 883,538 1,095,583
Investment Income (Loss)
Net Realized Gains (Losses) 61,439 176,260 162,795 418,366 566,184
Net Unrealized Gains (Losses) (384,460 ) 131,984 (37,833 ) (263,197 ) (72,009 )
Total Realized and Unrealized (323,021 ) 308,244 124,962 155,169 494,175
Net Interest and Dividends 48,637 75,406 82,254 174,718 153,850
Total Investment Income (Loss) (274,384 ) 383,650 207,216 329,887 648,025
Total Segment Revenues (191,818 ) 1,247,743 818,557 2,018,330 2,598,085
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 88,033 98,871 108,790 293,931 309,149
Realized Allocation to Carry Pool 106,116 100,891 98,411 327,977 398,026
Unrealized Allocation to Carry Pool (170,621 ) 136,566 22,696 21,576 27,951
Total Compensation and Benefits 23,528 336,328 229,897 643,484 735,126
Occupancy and Related Charges 15,720 15,475 14,458 45,991 43,404
Other Operating Expenses 52,081 51,613 60,272 164,640 167,384
Total Segment Expenses 91,329 403,416 304,627 854,115 945,914
Income (Loss) attributable to noncontrolling interests 2,902 4,383 5,189 10,907 11,597
Economic Net Income (Loss) (a) $ (286,049 ) $ 839,944 $ 508,741 $ 1,153,308 $ 1,640,574
Provision for Income Tax (Benefit) (19,505 ) 44,836 47,361 46,566 90,272
Equity-based Charges 48,252 48,453 42,090 148,970 122,320
Economic Net Income (Loss), After Taxes (b) $ (314,796 ) $ 746,655 $ 419,290 $ 957,772 $ 1,427,982
Economic Net Income (Loss), After Taxes Per Adjusted Unit $ (0.37 ) $ 0.88 $ 0.50 $ 1.13 $ 1.81
Weighted Average Adjusted Units (Fully Diluted Basis) (a) 851,704,303 852,128,762 835,957,683 850,644,918 787,502,790
Assets Under Management $ 98,708,500 $ 101,569,600 $ 96,149,900 $ 98,708,500 $ 96,149,900
Fee Paying Assets Under Management $ 82,889,000 $ 83,732,800 $ 81,356,700 $ 82,889,000 $ 81,356,700
Equity Invested and Syndicated Capital $ 1,462,900 $ 2,011,100 $ 4,751,400 $ 6,419,400 $ 10,474,200
Uncalled Commitments $ 26,892,300 $ 25,906,300 $ 17,555,400 $ 26,892,300 $ 17,555,400
Other Information
Fee Related Earnings $ 89,934 $ 105,541 $ 125,603 $ 312,781 $ 371,046
Plus: Net Interest and Dividends 48,637 75,406 82,254 174,718 153,850
Fee and Yield Earnings (a) $ 138,571 $ 180,947 $ 207,857 $ 487,499 $ 524,896
Plus: Depreciation and Amortization 3,745 3,918 3,777 11,544 11,952
Plus: Core Interest Expense 30,429 30,750 23,347 86,511 60,952
Fee and Yield EBITDA (a) $ 172,745 $ 215,615 $ 234,981 $ 585,554 $ 597,800
Total Distributable Earnings (a) $ 349,115 $ 491,407 $ 504,817 $ 1,357,053 $ 1,652,598
GAAP interest expense $ 151,554 $ 139,427 $ 96,618 $ 402,944 $ 197,346
Less: interest expense related to debt obligations
from investment financing arrangements and KFN 121,125 108,677 73,271 316,433 136,394
Core Interest Expense (a) $ 30,429 $ 30,750 $ 23,347 $ 86,511 $ 60,952
(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 Nine Months Ended
September 30, 2015 June 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 118,250 $ 115,346 $ 107,443 $ 342,872 $ 342,024
Monitoring Fees 24,964 47,713 30,449 170,515 96,422
Transaction Fees 17,732 40,321 67,772 104,652 206,132
Fee Credits (20,266 ) (53,286 ) (58,810 ) (143,458 ) (182,626 )
Total Management, Monitoring and Transaction Fees, Net 140,680 150,094 146,854 474,581 461,952
Performance Income
Realized Carried Interest 265,291 243,274 236,126 810,990 960,414
Incentive Fees — — —
—
—
Unrealized Carried Interest (394,126 ) 312,379 53,776 45,190 35,988
Total Performance Income (128,835 ) 555,653 289,902 856,180 996,402
Investment Income (Loss)
Net Realized Gains (Losses) 59,880 145,817 165,047 388,961 549,137
Net Unrealized Gains (Losses) (149,865 ) 145,094 8,293 74,592 (43,763 )
Total Realized and Unrealized (89,985 ) 290,911 173,340 463,553 505,374
Net Interest and Dividends 3,538 8,234 21,463 3,941 41,415
Total Investment Income (Loss) (86,447 ) 299,145 194,803 467,494 546,789
Total Segment Revenues (74,602 ) 1,004,892 631,559 1,798,255 2,005,143
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 57,991 65,939 59,991 197,897 183,411
Realized Allocation to Carry Pool 106,116 97,310 94,451 324,396 384,166
Unrealized Allocation to Carry Pool (156,874 ) 125,371 21,729 19,190 16,742
Total Compensation and Benefits 7,233 288,620 176,171 541,483 584,319
Occupancy and Related Charges 11,937 11,832 11,460 34,785 34,784
Other Operating Expenses 39,674 38,125 44,619 119,915 124,267
Total Segment Expenses 58,844 338,577 232,250 696,183 743,370
Income (Loss) attributable to noncontrolling interests 250 143 342 1,112 1,192
Economic Net Income (Loss) $ (133,696 ) $ 666,172 $ 398,967 $ 1,100,960 $ 1,260,581
Assets Under Management $ 60,781,200 $ 63,129,200 $ 59,168,300 $ 60,781,200 $ 59,168,300
Fee Paying Assets Under Management $ 46,199,000 $ 46,758,800 $ 45,591,600 $ 46,199,000 $ 45,591,600
Equity Invested $ 867,000 $ 1,258,200 $ 2,389,200 $ 4,172,600 $ 6,395,400
Uncalled Commitments $ 21,610,400 $ 21,078,400 $ 14,907,300 $ 21,610,400 $ 14,907,300
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
Quarter Ended Nine Months Ended
September 30, 2015 June 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 63,530 $ 66,055 $ 66,469 $ 194,089 $ 205,955
Monitoring Fees — — — — —
Transaction Fees 3,386 3,873 3,262 20,689 16,634
Fee Credits (3,027 ) (3,172 ) (3,001 ) (16,787 ) (13,683 )
Total Management, Monitoring and Transaction Fees, Net 63,889 66,756 66,730 197,991 208,906
Performance Income
Realized Carried Interest — 8,953 9,900 8,953 34,650
Incentive Fees 880 5,893 8,009 12,438 36,506
Unrealized Carried Interest (34,367 ) 27,987 2,416 5,967 28,025
Total Performance Income (33,487 ) 42,833 20,325 27,358 99,181
Investment Income (Loss)
Net Realized Gains (Losses) 1,538 31,192 (630 ) 33,414 19,133
Net Unrealized Gains (Losses) (230,569 ) (11,988 ) (46,118 ) (330,434 ) (27,553 )
Total Realized and Unrealized (229,031 ) 19,204 (46,748 ) (297,020 ) (8,420 )
Net Interest and Dividends 34,995 59,390 53,335 146,257 96,734
Total Investment Income (Loss) (194,036 ) 78,594 6,587 (150,763 ) 88,314
Total Segment Revenues (163,634 ) 188,183 93,642 74,586 396,401
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 21,002 22,785 26,787 67,792 80,436
Realized Allocation to Carry Pool — 3,581 3,960 3,581 13,860
Unrealized Allocation to Carry Pool (13,747 ) 11,195 967 2,386 11,209
Total Compensation and Benefits 7,255 37,561 31,714 73,759 105,505
Occupancy and Related Charges 3,096 2,977 2,518 9,195 7,234
Other Operating Expenses 9,004 10,617 10,929 34,575 30,910
Total Segment Expenses 19,355 51,155 45,161 117,529 143,649
Income (Loss) attributable to noncontrolling interests 305 478 335 958 1,242
Economic Net Income (Loss) $ (183,294 ) $ 136,550 $ 48,146 $ (43,901 ) $ 251,510
Assets Under Management $ 37,927,300 $ 38,440,400 $ 36,981,600 $ 37,927,300 $ 36,981,600
Fee Paying Assets Under Management $ 36,690,000 $ 36,974,000 $ 35,765,100 $ 36,690,000 $ 35,765,100
Equity Invested $ 583,400 $ 320,800 $ 442,200 $ 1,553,500 $ 1,900,700
Uncalled Commitments $ 5,281,900 $ 4,827,900 $ 2,648,100 $ 5,281,900 $ 2,648,100
Gross Dollars Invested $ 1,181,400 $ 1,110,100 $ 1,122,100 $ 3,502,300 $ 2,880,000
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
Quarter Ended Nine Months Ended
September 30, 2015 June 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ — $ — $ — $ — $ —
Monitoring Fees — — — — —
Transaction Fees 40,319 48,757 87,530 132,333 183,619
Fee Credits — — — — —
Total Management, Monitoring and Transaction Fees, Net 40,319 48,757 87,530 132,333 183,619
Performance Income
Realized Carried Interest — — — — —
Incentive Fees — — — — —
Unrealized Carried Interest — — — — —
Total Performance Income — — — — —
Investment Income (Loss)
Net Realized Gains (Losses) 21 (749 ) (1,622 ) (4,009 ) (2,086 )
Net Unrealized Gains (Losses) (4,026 ) (1,122 ) (8 ) (7,355 ) (693 )
Total Realized and Unrealized (4,005 ) (1,871 ) (1,630 ) (11,364 ) (2,779 )
Net Interest and Dividends 10,104 7,782 7,456 24,520 15,701
Total Investment Income (Loss) 6,099 5,911 5,826 13,156 12,922
Total Segment Revenues 46,418 54,668 93,356 145,489 196,541
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 9,040 10,147 22,012 28,242 45,302
Realized Allocation to Carry Pool — — — — —
Unrealized Allocation to Carry Pool — — — — —
Total Compensation and Benefits 9,040 10,147 22,012 28,242 45,302
Occupancy and Related Charges 687 666 480 2,011 1,386
Other Operating Expenses 3,403 2,871 4,724 10,150 12,207
Total Segment Expenses 13,130 13,684 27,216 40,403 58,895
Income (Loss) attributable to noncontrolling interests 2,347 3,762 4,512 8,837 9,163
Economic Net Income (Loss) $ 30,941 $ 37,222 $ 61,628 $ 96,249 $ 128,483
Syndicated Capital $ 12,500 $ 432,100 $ 1,920,000 $ 693,300 $ 2,178,100
KKR
BALANCE SHEET
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
As of As of
September 30, 2015 December 31, 2014
Cash and short-term investments $ 2,062,633 $ 1,121,385
Investments 9,278,102 (a) 9,807,606
Unrealized carry (b) 1,341,473 (b) 1,283,022 (b)
Other assets 1,066,591 999,654
Total assets $ 13,748,799 $ 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 361,557 413,808
Total liabilities 3,392,617 2,971,868
Noncontrolling interests 124,619 121,574
Book value $ 10,231,563 $ 10,118,225
Book value per adjusted unit $ 12.01 $ 12.07
(a) See schedule of investments that follows on the next page.
As of As of
(b) Unrealized Carry
September 30, 2015 December 31, 2014
Private Markets $ 1,251,503 $ 1,196,633
Public Markets 89,970 86,389
Total $ 1,341,473 $ 1,283,022
KKR
SCHEDULE OF INVESTMENTS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except percentage amounts)
As of September 30, 2015
Investments Cost Fair
Value
Fair Value as a
Percentage of
Total Investments
Private Equity Co-Investments $ 2,338,853 $ 2,930,212 31.6 %
Private Equity Funds 812,983 1,045,475 11.3 %
Private Equity Total 3,151,836 3,975,687 42.9 %
Energy 950,476 636,479 6.9 %
Real Estate 754,913 801,544 8.6 %
Infrastructure 176,814 188,440 2.0 %
Real Assets Total 1,882,203 1,626,463 17.5 %
Private Markets Total 5,034,039 5,602,150 60.4 %
Special Situations 799,103 791,583 8.5 %
Direct Lending 116,468 112,714 1.2 %
Mezzanine 89,991 95,173 1.0 %
Alternative Credit Total 1,005,562 999,470 10.7 %
CLOs (a) 1,415,896 1,137,612 12.3 %
Liquid Credit 203,706 203,084 2.2 %
Credit Total 2,625,164 2,340,166 25.2 %
Specialty Finance 277,421 236,753 2.6 %
Public Markets Total 2,902,585 2,576,919 27.8 %
Other 1,149,469 1,099,033 11.8 %
Total Investments $ 9,086,093 $ 9,278,102 100.0 %
Significant Aggregate Portfolio Company Investments: (b)
First Data Corporation $ 1,061,332 $ 1,310,542 14.1 %
Walgreens Boots Alliance 165,776 659,487 7.1 %
HCA Inc. 29,455 193,538 2.1 %
U.S. Foodservice, Inc. 80,000 96,000 1.0 %
Zimmer Biomet Holdings Inc. 68,572 86,755 0.9 %
1,405,135 2,346,322 25.2 %
Other Investments 7,680,958 6,931,780 74.8 %
Total Investments $ 9,086,093 $ 9,278,102 100.0 %
(a) Includes approximately $80.6 million of CLOs that are not held for investment purposes and are held at cost. For prior periods, all CLOs were held at fair value.
(b) 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 September 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 September 30, 2015
June 30, 2015 $ 63,129,200 $ 38,440,400 $ 101,569,600
New Capital Raised 999,500 1,897,300 2,896,800
Distributions (2,697,400 ) (1,559,200 ) (b) (4,256,600
)
Change in Value (650,100 ) (851,200 ) (1,501,300
)
September 30, 2015 $ 60,781,200 $ 37,927,300 $ 98,708,500
Nine Months Ended September 30, 2015
December 31, 2014 $ 61,505,800 $ 37,106,700 $ 98,612,500
New Capital Raised 3,733,300 6,346,900 10,080,200
Distributions (9,111,400 ) (4,793,100 ) (c) (13,904,500
)
Net Changes in Fee Base of Certain Funds (a) — (238,600 ) (238,600
)
Change in Value 4,653,500 (494,600 ) 4,158,900
September 30, 2015 $ 60,781,200 $ 37,927,300 $ 98,708,500
Trailing Twelve Months Ended September 30, 2015
September 30, 2014 $ 59,168,300 $ 36,981,600 $ 96,149,900
New Capital Raised 7,340,300 8,577,900 15,918,200
Distributions (11,212,000 ) (6,775,700 ) (d) (17,987,700
)
Net Changes in Fee Base of Certain Funds (a) — (238,600 ) (238,600
)
Change in Value 5,484,600 (617,900 ) 4,866,700
September 30, 2015 $ 60,781,200 $ 37,927,300 $ 98,708,500
Supplemental AUM Information:
Private
Markets
Segment Public
Markets
Segment Total
Reportable
Segments
Net AUM of Strategic Partnerships (Pro-rata based on ownership interest) $ 200,800 $ 2,772,000 $ 2,972,800
Capital Commitments Excluded from AUM ("Shadow AUM") 5,794,600 4,938,600 10,733,200
AUM as Reported at September 30, 2015 60,781,200 37,927,300 98,708,500
Total at September 30, 2015 $ 66,776,600 $ 45,637,900 $ 112,414,500
*Except as shown under "Supplemental AUM Information," excludes those assets managed by strategic partnerships where KKR does not hold more than a 50% ownership interest and excludes capital commitments for which KKR is entitled to management fees or carried interest upon the satisfaction of certain conditions in the future.
(a) Represents the impact of certain funds entering the post-investment period
(b) Includes $394.2 million of redemptions by fund investors.
(c) Includes $1,511.1 million of redemptions by fund investors.
(d) Includes $2,647.2 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 September 30, 2015
June 30, 2015 $ 46,758,800 $ 36,974,000 $ 83,732,800
New Capital Raised 1,028,800 1,804,900 2,833,700
Distributions (1,645,400 ) (1,474,000 ) (b) (3,119,400 )
Change in Value 56,800 (614,900 ) (558,100 )
September 30, 2015 $ 46,199,000 $ 36,690,000 $ 82,889,000
Nine Months Ended September 30, 2015
December 31, 2014 $ 47,262,500 $ 35,783,900 $ 83,046,400
New Capital Raised 3,472,900 6,021,900 9,494,800
Distributions (4,330,100 ) (4,254,200 ) (c) (8,584,300 )
Net Changes in Fee Base of Certain Funds (a) — (325,200 ) (325,200 )
Change in Value (206,300 ) (536,400 ) (742,700 )
September 30, 2015 $ 46,199,000 $ 36,690,000 $ 82,889,000
Trailing Twelve Months Ended September 30, 2015
September 30, 2014 $ 45,591,600 $ 35,765,100 $ 81,356,700
New Capital Raised 6,752,100 8,078,600 14,830,700
Distributions (5,775,800 ) (6,101,600 ) (d) (11,877,400 )
Net Changes in Fee Base of Certain Funds (a) — (325,200 ) (325,200 )
Change in Value (368,900 ) (726,900 ) (1,095,800 )
September 30, 2015 $ 46,199,000 $ 36,690,000 $ 82,889,000
* Excludes those assets managed by strategic partnerships where KKR does not hold more than a 50% ownership interest and excludes capital commitments for which KKR is entitled to management fees or carried interest upon the satisfaction of certain conditions in the future.
(a) Represents the impact of certain funds entering the post-investment period.
(b) Includes $394.2 million of redemptions by fund investors.
(c) Includes $1,511.1 million of redemptions by fund investors.
(d) Includes $2,647.2 million of redemptions by fund investors.
KKR
INVESTMENT VEHICLE SUMMARY (a) (UNAUDITED)
As of September 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 (b) 12/2014 12/2020 $ 3,418.6 $ 3,257.7 5.8% $ 160.9 $ — $ 160.9 $ 197.2
Asian Fund II (b) 4/2013 4/2019 5,825.0 3,839.1 1.3% 2,599.7 613.7 1,985.9 2,731.2
North America Fund XI (b) 9/2012 9/2018 8,718.4 3,981.2 2.9% 5,555.7 1,597.7 4,357.9 6,268.5
China Growth Fund 11/2010 11/2016 1,010.0 399.5 1.0% 610.5 166.6 535.0 686.9
E2 Investors (Annex Fund) 8/2009 11/2013 195.8 — 4.9% 195.8 195.7 18.1 48.2
European Fund III 3/2008 3/2014 6,138.5 828.8 4.6% 5,309.7 4,392.7 3,278.6 4,312.4
Asian Fund 7/2007 4/2013 3,983.3 129.5 2.5% 3,853.8 5,343.1 1,973.0 2,541.8
2006 Fund 9/2006 9/2012 17,642.2 525.7 2.1% 17,116.5 17,585.2 8,178.0 13,456.0
European Fund II 11/2005 10/2008 5,750.8 — 2.1% 5,750.8 6,574.3 841.1 1,859.3
Millennium Fund 12/2002 12/2008 6,000.0 — 2.5% 6,000.0 11,901.7 1,156.2 2,156.7
European Fund 12/1999 12/2005 3,085.4 — 3.2% 3,085.4 8,748.0 — 17.8
Total Private Equity Funds 61,768.0 12,961.5 50,238.8 57,118.7 22,484.7 34,276.0
Co-Investment Vehicles (b) Various Various 5,701.3 2,757.4 Various 3,038.5 1,801.7 2,183.5 3,177.9
Total Private Equity 67,469.3 15,718.9 53,277.3 58,920.4 24,668.2 37,453.9
Real Assets
Energy Income and Growth Fund 9/2013 9/2018 1,974.2 1,217.7 12.8% 756.5 127.1 673.8 518.2
Natural Resources Fund Various Various 887.4 2.9 Various 884.5 96.6 809.9 243.6
Global Energy Opportunities (b) Various Various 1,026.4 807.9 Various 252.7 53.8 220.9 139.8
Global Infrastructure Investors (b) 9/2011 10/2014 1,040.1 129.8 4.8% 938.2 128.0 910.3 1,014.3
Global Infrastructure Investors II 10/2014 10/2020 3,037.5 2,842.1 4.1% 195.4 — 195.4 215.8
Infrastructure Co-Investments Various Various 1,125.0 — Various 1,125.0 356.5 1,125.0 1,542.3
Real Estate Partners Americas (b) 5/2013 12/2016 1,229.1 614.1 16.3% 755.5 303.6 614.6 690.7
Real Estate Partners Europe (b) 9/2015 (d) 277.0 277.0 36.1% — — — —
Real Assets 10,596.7 5,891.5 4,907.8 1,065.6 4,549.9 4,364.7
Private Markets Total 78,066.0 21,610.4 58,185.1 59,986.0 29,218.1 41,818.6
Public Markets
Special Situations Fund 12/2012 12/2015 2,184.1 168.4 11.6% 2,015.7 184.2 2,015.7 2,230.1
Special Situations Fund II 12/2014 (c) 1,694.5 1,319.5 8.9% 375.0 — 375.0 268.1
Mezzanine Fund 3/2010 3/2015 1,022.8 150.6 4.4% 872.2 435.2 666.6 715.2
Lending Partners 12/2011 12/2014 460.2 91.7 15.2% 368.5 167.7 324.7 306.3
Lending Partners II 06/2014 06/2017 1,335.9 889.6 3.7% 446.3 13.0 446.3 466.7
Lending Partners Europe 03/2015 03/2018 556.6 543.2 7.3% 13.4 — 13.4 22.0
Other Alternative Credit Vehicles Various Various 4,430.9 2,118.9 Various 2,312.0 1,359.3 1,521.2 1,755.5
Public Markets Total 11,685.0 5,281.9 6,403.1 2,159.4 5,362.9 5,763.9
Grand Total $ 89,751.0 $ 26,892.3 $ 64,588.2 $ 62,145.4 $ 34,581.0 $ 47,582.5
(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.
(d) Four years from final close.
KKR
DISTRIBUTION CALCULATION (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended Nine Months Ended
September 30, 2015 June 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014
Cash Revenues
Fees $ 245,768 $ 271,500 $ 309,123 $ 817,343 $ 890,983
Realized cash carry 265,291 252,227 246,026 819,943 995,064
Net realized investment income - KKR (ex-KFN) 67,942 195,408 192,146 454,827 630,749
Net realized investment income - KFN 42,134 56,258 52,903 138,257 89,285
Total Cash Revenues 621,135 775,393 800,198 2,230,370 2,606,081
Cash Expenses
Cash compensation and benefits 88,033 98,871 108,790 293,931 309,149
Realized cash carry allocated to carry pool 106,116 100,891 98,411 327,977 398,026
Occupancy and related charges 15,720 15,475 14,458 45,991 43,404
Other operating expenses 52,081 51,613 60,272 164,640 167,384
Total Cash Expenses 261,950 266,850 281,931 832,539 917,963
Cash income (loss) before noncontrolling interests and local taxes 359,185 508,543 518,267 1,397,831 1,688,118
Less: local income taxes (7,168 ) (12,753 ) (8,261 ) (29,871 ) (23,923 )
Less: noncontrolling interests (2,902 ) (4,383 ) (5,189 ) (10,907 ) (11,597 )
Total Distributable Earnings 349,115 491,407 504,817 1,357,053 1,652,598
Less: estimated current corporate income taxes (18,005 ) (26,155 ) (29,505 ) (73,015 ) (81,975 )
Distributable Earnings, net of taxes 331,110 465,252 475,312 1,284,038 1,570,623
Less: Undistributed net realized investment income - KKR (ex-KFN) (40,765 ) (117,245 ) (115,288 ) (272,896 ) (378,450 )
Distributed Earnings $ 290,345 $ 348,007 $ 360,024 $ 1,011,142 $ 1,192,173
Distributable Earnings, net of taxes per KKR & Co. L.P. common unit $ 0.40 $ 0.57 $ 0.59 $ 1.57 $ 2.03
Distribution per KKR & Co. L.P. common unit $ 0.35 $ 0.42 $ 0.45 $ 1.23 $ 1.55
Components of Distribution per KKR & Co. L.P. Common Unit
After-tax FRE $ 0.08 $ 0.07 $ 0.10 $ 0.25 $ 0.34
Realized Cash Carry $ 0.19 $ 0.18 $ 0.18 $ 0.59 $ 0.76
Distributed Net Realized Investment Income - KKR (ex-KFN) $ 0.03 $ 0.10 $ 0.10 $ 0.22 $ 0.33
Distributed Net Realized Investment Income - KFN $ 0.05 $ 0.07 $ 0.07 $ 0.17 $ 0.12
Fee and yield earnings distribution per KKR & Co. L.P. common unit $ 0.12 $ 0.15 $ 0.18 $ 0.42 $ 0.49
Adjusted Units Eligible For Distribution 820,963,035 820,963,434 808,698,012
Payout Ratio 87.7 % 74.8 % 75.7 % 78.7 % 75.9 %
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 under its prior distribution policy. 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 under KKR's prior distribution policy 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 under KKR's prior distribution policy.
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 prior or 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
Energy Income and Growth Fund 157,300
North America Fund XI 129,700
Global Infrastructure Investors II 116,900
Real Estate Partners Europe 100,000
Real Estate Partners Americas 99,900
European Fund III 66,300
Asian Fund II 49,100
2006 Fund 22,700
Co-Investment Vehicles 69,500
Other Private Markets Funds 12,500
Total Private Markets Commitments 1,008,600
Public Markets
Special Situations Fund 19,600
Special Situations Fund II 117,200
Mezzanine Fund 6,500
Lending Partners 14,000
Lending Partners II 33,300
Lending Partners Europe 39,500
Other Alternative Credit Vehicles 78,800
Total Public Markets Commitments 308,900
Total Uncalled Commitments $ 1,317,500
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
September 30, 2015 June 30, 2015 September 30, 2014
Net income (loss) attributable to KKR & Co. L.P. per common unit - Basic $ (0.42 ) $ 0.84 $ 0.21
Weighted Average Common Units Outstanding - Basic 452,165,697 446,794,950 419,961,455
Net income (loss) attributable to KKR & Co. L.P. (190,588 ) 376,306 89,938
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
(166,078 ) 325,703 100,910
Plus: Non-cash equity-based charges 67,821 69,478 83,950
Plus: Amortization of intangibles and other, net 10,186 37,910 204,676
Plus: Income tax (benefit) (7,390 ) 30,547 29,267
Economic net income (loss) (286,049 ) 839,944 508,741
Less: Provision for income tax (benefit) (19,505 ) 44,836 47,361
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 48,252 48,453 42,090
Economic net income (loss) after taxes (314,796 ) 746,655 419,290
Weighted Average Adjusted Units 851,704,303 852,128,762 835,957,683
Economic net income (loss) after taxes per adjusted unit $ (0.37 ) $ 0.88 $ 0.50
Nine Months Ended
September 30, 2015 September 30, 2014
Net income (loss) attributable to KKR & Co. L.P. per common unit - Basic $ 1.03 $ 1.31
Weighted Average Common Units Outstanding - Basic 444,675,159 364,127,956
Net income (loss) attributable to KKR & Co. L.P. 456,225 478,194
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
398,633 588,500
Plus: Non-cash equity-based charges 213,849 254,435
Plus: Amortization of intangibles and other, net 45,306 262,300
Plus: Income tax (benefit) 39,295 57,145
Economic net income (loss) 1,153,308 1,640,574
Less: Provision for income tax (benefit) 46,566 90,272
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 148,970 122,320
Economic net income (loss) after taxes 957,772 1,427,982
Weighted Average Adjusted Units 850,644,918 787,502,790
Economic net income (loss) after taxes per adjusted unit $ 1.13 $ 1.81
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
September 30, 2015 June 30, 2015 September 30, 2014
Net income (loss) attributable to KKR & Co. L.P. $ (190,588 ) $ 376,306 $ 89,938
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
(166,078 ) 325,703 100,910
Plus: Non-cash equity-based charges 67,821 69,478 83,950
Plus: Amortization of intangibles and other, net 10,186 37,910 204,676
Plus: Income tax (benefit) (7,390 ) 30,547 29,267
Economic net income (loss) (286,049 ) 839,944 508,741
Plus: Income attributable to segment noncontrolling interests 2,902 4,383 5,189
Less: Total investment income (loss) (274,384 ) 383,650 207,216
Less: Net carried interest (98,697 ) 355,136 181,111
Fee related earnings 89,934 105,541 125,603
Plus: Net interest and dividends 48,637 75,406 82,254
Fee and yield earnings 138,571 180,947 207,857
Plus: Depreciation and amortization 3,745 3,918 3,777
Plus: Core interest expense 30,429 30,750 23,347
Fee and yield EBITDA 172,745 215,615 234,981
Less: Depreciation and amortization 3,745 3,918 3,777
Less: Core interest expense 30,429 30,750 23,347
Less: Net interest and dividends 48,637 75,406 82,254
Plus: Realized cash carry, net of realized cash carry allocated to carry pool 159,175 151,336 147,615
Plus: Net realized investment income - KKR (ex-KFN) 67,942 195,408 192,146
Plus: Net realized investment income - KFN 42,134 56,258 52,903
Less: Local income taxes and noncontrolling interests 10,070 17,136 13,450
Total distributable earnings 349,115 491,407 504,817
Plus: Depreciation and amortization 3,745 3,918 3,777
Plus: Core interest expense 30,429 30,750 23,347
Plus: Local income taxes and noncontrolling interests 10,070 17,136 13,450
Total EBITDA $ 393,359 $ 543,211 $ 545,391
Nine Months Ended
September 30, 2015 September 30, 2014
Net income (loss) attributable to KKR & Co. L.P. $ 456,225 $ 478,194
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
398,633 588,500
Plus: Non-cash equity-based charges 213,849 254,435
Plus: Amortization of intangibles and other, net 45,306 262,300
Plus: Income tax (benefit) 39,295 57,145
Economic net income (loss) 1,153,308 1,640,574
Plus: Income attributable to segment noncontrolling interests 10,907 11,597
Less: Total investment income (loss) 329,887 648,025
Less: Net carried interest 521,547 633,100
Fee related earnings 312,781 371,046
Plus: Net interest and dividends 174,718 153,850
Fee and yield earnings 487,499 524,896
Plus: Depreciation and amortization 11,544 11,952
Plus: Core interest expense 86,511 60,952
Fee and yield EBITDA 585,554 597,800
Less: Depreciation and amortization 11,544 11,952
Less: Core interest expense 86,511 60,952
Less: Net interest and dividends 174,718 153,850
Plus: Realized cash carry, net of realized cash carry allocated to carry pool 491,966 597,038
Plus: Net realized investment income - KKR (ex-KFN) 454,827 630,749
Plus: Net realized investment income - KFN 138,257 89,285
Less: Local income taxes and noncontrolling interests 40,778 35,520
Total distributable earnings 1,357,053 1,652,598
Plus: Depreciation and amortization 11,544 11,952
Plus: Core interest expense 86,511 60,952
Plus: Local income taxes and noncontrolling interests 40,778 35,520
Total EBITDA $ 1,495,886 $ 1,761,022
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
September 30, 2015 December 31, 2014
KKR & Co. L.P. partners’ capital $ 5,658,646 $ 5,382,691
Noncontrolling interests held by KKR Holdings L.P. 4,482,900 4,661,679
Equity impact of KKR Management Holdings Corp. and other 90,017 73,855
Book value 10,231,563 10,118,225
Adjusted units 851,670,762 838,020,974
Book value per adjusted unit $ 12.01 $ 12.07
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS)
TO CASH AND SHORT-TERM INVESTMENTS (UNAUDITED)
(Amounts in thousands)
As of As of
September 30, 2015 December 31, 2014
Cash and cash equivalents $ 1,756,918 $ 918,080
Liquid short-term investments 305,715 203,305
Cash and short-term investments $ 2,062,633 $ 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
September 30, 2015 June 30, 2015 September 30, 2014
Weighted Average GAAP Common Units Outstanding - Basic 452,165,697 446,794,950 419,961,455
Adjustments:
Weighted Average Unvested Common Units and Other Securities (a) — (c) 35,856,541 32,058,287
Weighted Average GAAP Common Units Outstanding - Diluted 452,165,697 482,651,491 452,019,742
Adjustments:
Weighted Average KKR Holdings Units (b) 365,717,358 369,477,271 383,937,941
Weighted Average Unvested Common Units and Other Securities (a) 33,821,248 (c) — —
Weighted Average Adjusted Units 851,704,303 852,128,762 835,957,683
Nine Months Ended
September 30, 2015 September 30, 2014
Weighted Average GAAP Common Units Outstanding - Basic 444,675,159 364,127,956
Adjustments:
Weighted Average Unvested Common Units and Other Securities (a) 35,663,176 32,104,872
Weighted Average GAAP Common Units Outstanding - Diluted 480,338,335 396,232,828
Adjustments:
Weighted Average KKR Holdings Units (b) 370,306,583 391,269,962
Weighted Average Adjusted Units 850,644,918 787,502,790
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
September 30, 2015 December 31, 2014
GAAP Common Units Outstanding - Basic 453,251,950 433,330,540
Unvested Common Units and Other Securities (a) 33,787,971 27,493,685
GAAP Common Units Outstanding - Diluted 487,039,921 460,824,225
Adjustments:
KKR Holdings Units (b) 364,630,841 377,196,749
Adjusted Units 851,670,762 838,020,974
Adjustments:
Unvested Common Units and Unvested Other Securities (a) (30,707,727 ) (24,373,441 )
Adjusted Units Eligible For Distribution 820,963,035 813,647,533
(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.
(c) Unvested common units and other securities are excluded from the calculation of diluted earnings per common unit on a GAAP basis because inclusion of such unvested common units and other securities would be anti-dilutive (decrease the loss per common unit).
View source version on businesswire.com: http://www.businesswire.com/news/home/20151027005588/en/
Contact:
Investor Relations:
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The "Street" has KKR coming in at - .28 for the quarter that should be reported on or about October 27, 2015! All post's welcome! The "Good Dr's In"!
Buying opportunity at these prices!
KKR -6.1% AH after Dow Jones reports Samson Resources plans to file for chapter 11 bankruptcy by mid-September after finalizing a restructuring plan with key creditors today.
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.
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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
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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.
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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
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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.
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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
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