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KKR LONG$$$
KKR to invest in Sedgwick
PR Newswire Sedgwick Claims Management Services, Inc.
12 hours ago
MEMPHIS, Tenn., Jan. 27, 2014 /PRNewswire/ -- Sedgwick Claims Management Services, Inc., a leading provider of technology-enabled claims and productivity management solutions, announced today that KKR, together with management, have signed an agreement to acquire majority ownership of Sedgwick for approximately $2.4 billion from its current group of investors, which includes Hellman & Friedman LLC and Stone Point Capital LLC.
(Logo: http://photos.prnewswire.com/prnh/20120813/CL56657LOGO)
(Logo: http://photos.prnewswire.com/prnh/20140127/CL52861LOGO-b)
"We couldn't ask for a better partner in the next stage of Sedgwick's evolution," said David A. North, president and CEO of Sedgwick. "KKR has an exceptional record of investing in financial services companies and will be a valuable strategic resource for our organization. We share a commitment to continued innovation in the claims and productivity management industry. My colleagues and I look forward to collaborating with KKR as we develop solutions for the changing needs of our clients."
"This is a critical time for employers as they adjust to an evolving health care delivery model, the shifting demographics of the workforce and a multitude of additional challenges," said Tagar Olson, Member of KKR and head of its financial services investment practice. "Sedgwick has an exceptional management team, a strong track record of innovation and the technology-driven solutions to address these challenges. We believe our partnership will enable them to maintain and enhance their leadership position in the industry."
On an annual basis, Sedgwick handles more than 2.1 million claims and has fiduciary responsibility for claim payments totaling more than $11 billion.
The transaction is expected to close during the first quarter of 2014, subject to customary conditions and regulatory approvals.
Equity for the investment was provided principally by KKR's North American XI private equity fund. UBS Securities LLC, Deutsche Bank Securities, Morgan Stanley, Mizuho, KKR Capital Markets LLC and MCS Capital Markets LLC provided financing for the transaction. Simpson Thacher & Bartlett LLP and Latham & Watkins LLP provided legal counsel to Sedgwick and KKR, respectively.
About Sedgwick
Sedgwick Claims Management Services, Inc. is the leading North American provider of technology-enabled claims and productivity management solutions. Sedgwick and its affiliated companies deliver cost-effective claims, productivity, managed care, risk consulting and other services to clients through the expertise of more than 11,000 colleagues in some 200 offices located in the U.S. and Canada. The company specializes in workers' compensation; disability, FMLA, and other employee absence; managed care; general, automobile, and professional liability; warranty and credit card claims services; fraud and investigation; structured settlements; and Medicare compliance solutions. Sedgwick and its affiliates design and implement customized programs based on proven practices and advanced technology that exceed client expectations. For more, see www.sedgwick.com.
About KKR
Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $90.2 billion in assets under management as of September 30, 2013. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with investors through its client relationships and capital markets platform. KKR is publicly traded on the New York Stock Exchange (KKR) and "KKR," as used in this release, includes its subsidiaries, their managed investment funds and accounts, and/or their affiliated investment vehicles, as appropriate. For additional information, please visit KKR's website at www.kkr.com.
About Hellman & Friedman
Hellman & Friedman LLC is a leading private equity investment firm with offices in San Francisco, New York and London. Since its founding in 1984, H&F has raised and, through its affiliated funds, managed over $25 billion of committed capital. The Firm focuses on investing in superior business franchises and serving as a value-added partner to management in select industries including financial services, insurance, software, business & marketing services, internet & digital media, media, healthcare and energy & industrials. For more information on H&F, visit www.hf.com.
About Stone Point Capital
Stone Point Capital is a global private equity firm based in Greenwich, Conn. Stone Point serves as the manager of the Trident Funds, which have raised more than $10 billion in committed capital to make investments in the insurance, employee benefits and financial services industries. Stone Point has a 25-year record of making successful investments in the financial services industry, including in the insurance services sector. For further information about Stone Point, see www.stonepoint.com.
KKR & Co. L.P. to Announce Fourth Quarter 2013 Results
Business Wire KKR & Co. L.P.
11 hours ago
NEW YORK--(BUSINESS WIRE)--
KKR & Co. L.P. (KKR) announced today that it plans to release its financial results for the fourth quarter 2013 on Thursday, February 6, 2014, before the opening of trading on the New York Stock Exchange.
A conference call to discuss KKR’s financial results will be held on Thursday, February 6, 2014 at 10:00 a.m. EST. 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 35363339, beginning approximately two hours after the broadcast.
ABOUT KKR
Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $90.2 billion in assets under management as of September 30, 2013. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with fund investors through its client relationships and capital markets platform. KKR & Co L.P. is publicly traded on the New York Stock Exchange (KKR), and "KKR," as used in this release, includes its subsidiaries, their managed investment funds and accounts, and/or their affiliated investment vehicles, as appropriate.
Contact:
Investor Relations:
Craig Larson
Kohlberg Kravis Roberts & Co. L.P.
Tel: +1 (877) 610-4910 (U.S.) / +1 (212) 230-9410
investor-relations@kkr.com
or
Media:
Kristi Huller
Kohlberg Kravis Roberts & Co. L.P.
Tel: + 1 (212) 750-8300
media@kkr.com
World class management team at KKR$$$
KKR Income Opportunities Fund Declares Special Distribution of $0.163 Per Share and Monthly Distributions of $0.125 Per Share
Business Wire KKR Income Opportunities Fund
19 hours ago
NEW YORK--(BUSINESS WIRE)--
KKR Income Opportunities Fund (the “Fund”) (KIO) today announced additional cash distributions with the record, ex-dividend and payable dates outlined below. A special distribution of $0.163 per common share ($0.124 relating to net investment income and $0.039 relating to short-term capital gains), will be payable January 31, 2014 to shareholders of record on December 30, 2013.
The special distribution schedule is as follows:
Ex-Date: December 26, 2013
Record Date: December 30, 2013
Payable Date: January 31, 2014
Amount: $0.163 per share
The Fund also today announced additional monthly distributions of $0.125 per common share, payable on the dates below. Based on the Fund’s initial public offering price of $20.00 per share and current share price of $18.05 (as of its close on December 18, 2013), the distributions represent an annualized distribution rate of 7.5% and 8.3%, respectively (calculated by annualizing the distribution amount and dividing it by the IPO share price or current price, as the case may be).
The monthly distribution schedule is as follows for the months of February, March and April:
Ex-Date: February 6, 2014
Record Date: February 10, 2014
Payable Date: February 24, 2014
Amount: $0.125 per share
Ex-Date: March 13, 2014
Record Date: March 17, 2014
Payable Date: March 31, 2014
Amount: $0.125 per share
Ex-Date: April 16, 2014
Record Date: April 21, 2014
Payable Date: April 28, 2014
Amount: $0.125 per share
Information regarding the distribution rate is included for informational purposes only and is not necessarily indicative of future results, the achievement of which cannot be assured. The distribution rate should not be considered the yield or total return on an investment in the Fund.
The Fund is a recently organized, non-diversified, closed-end fund. Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing.
The investment return, price, yields, market value and net asset value (NAV) of a fund's shares will fluctuate with market conditions. Closed-end funds frequently trade at a discount to their NAV, which may increase an investor’s risk of loss. There is no assurance that the Fund will meet its investment objective.
An investment in the Fund is not appropriate for all investors and is not intended to be a complete investment program. The Fund is designed as a long-term investment and not as a trading vehicle. Investors should carefully review and consider the Fund’s investment objective, risk, charges and expenses before investing.
Investment return and principal value will fluctuate, and it is possible to lose money by investing in the Fund. Past performance is not a guarantee of future results. Please see the Fund’s prospectus for more risk information.
Forward Looking Statements
This press release contains certain statements that may include "forward-looking statements" within the meaning of the federal securities laws. All statements, other than statements of historical fact, included herein are "forward-looking statements." The forward-looking statements are based on the Fund’s and 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 the Fund or KKR or are within their control. The Fund and KKR do 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.
This document is not an offer to sell securities and is not soliciting an offer to buy securities in any jurisdiction where the offer or sale is not permitted. Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. The prospectus, which contains this and other important information about the Fund, should be read carefully before investing. A copy of the prospectus can be obtained on the Fund website. An investment in the Fund should not constitute a complete investment program.
KKR Income Opportunities Fund
KKR Income Opportunities Fund is a recently organized non-diversified, closed-end fund that trades on the New York Stock Exchange under the symbol “KIO”. The Fund’s primary investment objective is to seek a high level of current income with a secondary objective of capital appreciation. The Fund seeks to achieve its investment objectives by employing a dynamic strategy of investing in a targeted portfolio of loans and fixed-income instruments (including derivatives) of U.S. and non-U.S. issuers and implementing hedging strategies in order to achieve attractive risk-adjusted returns.
About KKR Asset Management
Launched by KKR in 2004, KAM invests on behalf of its managed funds, clients and accounts across long/short equities and the corporate credit spectrum, including secured credit, bank loans and high yield securities and alternative assets such as mezzanine financing, special situations investing and structured finance. With more than 100 employees, including approximately 50 investment professionals, KAM's investment teams are closely aligned with KKR's wealth of private equity investment and industry resources. KAM has $30.5 billion in assets under management as of September 30, 2013.
About KKR
Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $90.2 billion in assets under management as of September 30, 2013. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with fund investors through its client relationships and capital markets platform. KKR & Co. L.P. is publicly traded on the New York Stock Exchange (KKR), and “KKR,” as used in this release, includes its subsidiaries, their managed investment funds and accounts, and/or their affiliated investment vehicles, as appropriate.
Contact the Fund at (855) 330-3927 or visit the Fund’s website at www.kkrfunds.com/kio for additional information.
The Fund will invest in loans and other types of fixed-income instruments and securities. Such investments may be secured, partially secured or unsecured and may be unrated, and whether or not rated, may have speculative characteristics. The market price of the Fund’s investments will change in response to changes in interest rates and other factors. Generally, when interest rates rise, the values of fixed-income instruments fall, and vice versa.
Use of leverage creates an opportunity for increased income and return for Common Shareholders but, at the same time, creates risks, including the likelihood of greater volatility in the NAV and market price of, and distributions on, the Common Shares. In particular, leverage may magnify interest rate risk, which is the risk that the prices of portfolio securities will fall (or rise) if market interest rates for those types of securities rise (or fall). As a result, leverage may cause greater changes in the Fund’s NAV, which will be borne entirely by the Fund’s Common Shareholders.
Derivative investments have risks, including the imperfect correlation between the value of such instruments and the underlying assets of the Fund. The risk of loss from a short sale is unlimited because the Fund must purchase the shorted security at a higher price to complete the transaction and there is no upper limit for the security price. The use of options, swaps, and derivatives by the Fund has the potential to significantly increase the Fund’s volatility.
Investments in ETFs are subject to a variety of risks, including all of the risks of a direct investment in the underlying securities that the ETF holds. ETFs are also subject to certain additional risks, including, without limitation, the risk that their prices may not correlate perfectly with changes in the prices of the underlying securities they are designed to track, and the risk of trading in an ETF halting due to market conditions or other reasons, based on the policies of the exchange upon which the ETF trades. ETF shares may trade at a premium or discount to their NAV because the supply and demand in the market for ETF shares at any point in time may not be identical to the supply and demand in the market for the underlying securities.
In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. The Fund’s investments in securities or other instruments of non-U.S. issuers or borrowers may be traded in undeveloped, inefficient and less liquid markets and may experience greater price volatility and changes in value.
Contact:
Media:
Kristi Huller, 212-230-9722
Kristi.Huller@kkr.com
wmih is within the target of kkr. it could lead to around $6 billion in NOLs.
KKR carries an unmatched standard of excellence.
KKR & Co. L.P. Announces Third Quarter 2013 Results
Strong Investment Performance Drives Meaningful Economic Net Income
GAAP net income (loss) attributable to KKR & Co. L.P. was $204.7 million for the quarter ended September 30, 2013, up from $127.4 million in the comparable period of 2012. GAAP net income (loss) attributable to KKR & Co. L.P. was $413.3 million for the nine months ended September 30, 2013, down from $464.1 million in the comparable period of 2012.
Assets under management (“AUM”) totaled $90.2 billion as of September 30, 2013, up from $83.5 billion as of June 30, 2013.
Fee related earnings (“FRE”) were $106.0 million and $292.2 million for the quarter and nine months ended September 30, 2013, respectively, up from $90.7 million and $233.8 million in the comparable periods of 2012.
Total distributable earnings were $251.1 million for the quarter ended September 30, 2013, down from $332.9 million for the quarter ended September 30, 2012. Total distributable earnings were $945.5 million for the nine months ended September 30, 2013, up from $903.1 million in the comparable period of 2012.
Economic net income (“ENI”) was $613.7 million for the quarter ended September 30, 2013, up from $509.9 million in the comparable period of 2012. ENI was $1.4 billion for the nine months ended September 30, 2013, down from $1.8 billion in the comparable period of 2012.
After-tax ENI was $0.84 per adjusted unit for the quarter ended September 30, 2013, up from $0.69 per adjusted unit in the comparable period of 2012. After-tax ENI was $1.90 per adjusted unit for the nine months ended September 30, 2013, down from $2.42 per adjusted unit in the comparable period of 2012.
Book value was $7.2 billion on a total reportable segment basis as of September 30, 2013 or $10.07 per adjusted unit.
KKR & Co. L.P. declares a third quarter distribution of $0.23 per common unit.
KKR & Co. L.P. announced a transaction to acquire Avoca Capital.
Business WirePress Release: Kohlberg Kravis Roberts & Co. L.P. – 1 hour 48 minutes ago..
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KKR 23.78 +0.8700
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NEW YORK--(BUSINESS WIRE)--
KKR & Co. L.P. (KKR) today reported its third quarter 2013 results.
For the quarter and nine months ended September 30, 2013, the carrying value of our private equity investment portfolio appreciated 5.9% and 12.5%, respectively.
ENI was $613.7 million for the quarter ended September 30, 2013, up from $509.9 million for the quarter ended September 30, 2012. The increase was principally attributable to higher investment income earned from our principal investments and to a lesser extent a higher level of net carried interest earned from our private equity funds.
ENI was $1.4 billion for the nine months ended September 30, 2013, down from $1.8 billion for the nine months ended September 30, 2012. The decrease was primarily due to lower investment income earned from our principal investments as well as a lower level of net carried interest earned from our private equity funds. While the fair value of our principal investments and private equity portfolio increased during the nine months ended September 30, 2013, the level of appreciation was lower than in the comparable period of 2012.
AUM and fee paying assets under management (“FPAUM”) were $90.2 billion and $73.6 billion, respectively, as of September 30, 2013, both up from June 30, 2013. The increases in both AUM and FPAUM were primarily attributable to new capital raised across our various investment platforms, partially offset by distributions to fund limited partners. In September 2013, our Energy Income and Growth Fund had its first close with commitments totaling $1.4 billion (includes general partner commitment).
For the quarter and nine months ended September 30, 2013, FRE was $106.0 million and $292.2 million, respectively, up from $90.7 million and $233.8 million in the comparable periods of 2012. The increases in both comparable periods were primarily driven by (i) management fees attributable to new capital raised; (ii) higher transaction fees; and (iii) the acquisition of Prisma.
On October 18, 2013, KKR announced a transaction to acquire Avoca Capital (Unlimited) and its affiliates (“Avoca”), a European credit investment manager with approximately $8 billion in assets under management as of September 30, 2013. The transaction, which is subject to customary regulatory approvals, is expected to close in the first quarter of 2014.
“Our investment portfolio and balance sheet continue to perform, resulting in an unannualized 20% return on equity in the first nine months of this year,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR.
___________________________________________________________________________________________________
Note: Certain financial measures, including FRE, ENI, after-tax ENI, ENI after taxes and equity-based charges, fee related EBITDA, 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 A and B for a reconciliation of such measures to financial results prepared in accordance with GAAP.
GAAP RESULTS
GAAP results for the quarter and nine months ended September 30, 2013 included net income attributable to KKR & Co. L.P. of $204.7 million and $413.3 million, respectively, and net income attributable to KKR & Co. L.P. per common unit of $0.66 and $1.40, respectively, on a diluted basis. For the quarter and nine months ended September 30, 2012, net income attributable to KKR & Co. L.P. was $127.4 million and $464.1 million, respectively, and net income attributable to KKR & Co. L.P. per common unit were $0.49 and $1.86, respectively, on a diluted basis. The increase quarter over quarter was primarily due to (i) an increase in management fees attributable to new capital raised and the acquisition of Prisma; (ii) higher transaction fees; and (iii) a higher level of total investment income. The year over year decrease was primarily due to a lower level of total investment income. The decrease in total investment income was partially offset by increases in fees primarily attributable to the acquisition of Prisma and higher transaction fees. The decrease in compensation and benefits expense was primarily attributable to lower carry pool allocations as a result of the recognition of lower carried interest during the nine months ended September 30, 2013 compared to the comparable period in 2012.
SEGMENT RESULTS
Private Markets
AUM was $59.7 billion as of September 30, 2013, an increase of $5.2 billion, or 9.5%, compared to AUM of $54.5 billion as of June 30, 2013. The increase was primarily attributable to new capital raised from fund investors and to a lesser extent appreciation in the fair value of our private equity portfolio. The increase was partially offset by distributions to the limited partners of our private equity funds arising from realizations.
FPAUM was $49.9 billion as of September 30, 2013, an increase of $4.0 billion, or 8.7%, compared to FPAUM of $45.9 billion as of June 30, 2013. The increase was primarily attributable to new capital raised from fund investors partially offset by distributions to the limited partners of our private equity funds arising from realizations.
FRE was $44.4 million for the quarter ended September 30, 2013, a decrease of $0.3 million compared to FRE of $44.7 million for the quarter ended September 30, 2012. The decrease was primarily driven by higher compensation expense due to additional headcount, partially offset by higher management fees resulting from new capital raised and higher transaction fees.
FRE was $127.8 million for the nine months ended September 30, 2013, an increase of $9.2 million, or 7.8%, compared to FRE of $118.6 million for the nine months ended September 30, 2012. The increase was primarily driven by higher management fees resulting from new capital raised and higher transaction fees. The increase was partially offset by higher compensation expense due to additional headcount.
ENI was $245.2 million for the quarter ended September 30, 2013, an increase of $31.3 million, or 14.6%, compared to ENI of $213.9 million for the quarter ended September 30, 2012. The increase was primarily attributable to higher net carried interest resulting from a higher level of appreciation in our private equity portfolio.
ENI was $583.9 million for the nine months ended September 30, 2013, a decrease of $70.0 million, or 10.7%, compared to ENI of $653.9 million for the nine months ended September 30, 2012. The decrease was primarily attributable to lower net carried interest resulting from a lower level of appreciation in our private equity portfolio, partially offset by the increase in FRE discussed above.
Public Markets
AUM was $30.5 billion as of September 30, 2013, an increase of $1.5 billion, or 5.2%, compared to AUM of $29.0 billion as of June 30, 2013. FPAUM was $23.7 billion as of September 30, 2013, an increase of $1.7 billion, or 7.7%, compared to FPAUM of $22.0 billion as of June 30, 2013. For both AUM and FPAUM, the increases were primarily attributable to net new capital raised from fund investors.
FRE was $20.2 million for the quarter ended September 30, 2013, a decrease of $3.1 million, or 13.3%, compared to FRE of $23.3 million for the quarter ended September 30, 2012. The decrease was principally attributable to lower incentive fees earned and higher expenses related to one-time expenses in connection with the launch of a closed-end fund in the quarter ended September 30, 2013. The decrease was partially offset by higher management fees related to new capital raised from fund investors and the acquisition of Prisma.
FRE was $91.8 million for the nine months ended September 30, 2013, an increase of $40.7 million, or 79.6%, compared to FRE of $51.1 million for the nine months ended September 30, 2012. The increase was primarily attributable to higher management fees related to new capital raised from fund investors and the acquisition of Prisma.
ENI was $28.4 million for the quarter ended September 30, 2013, a decrease of $6.5 million, or 18.6%, compared to ENI of $34.9 million for the quarter ended September 30, 2012. The decrease was primarily driven by the decrease in FRE discussed above and lower net carried interest resulting from a lower level of appreciation of certain carry-earning credit investment vehicles.
ENI was $118.0 million for the nine months ended September 30, 2013, an increase of $52.4 million, or 79.9%, compared to ENI of $65.6 million for the nine months ended September 30, 2012. The increase was primarily driven by the increase in FRE discussed above and to a lesser extent higher net carried interest due to certain credit investment vehicles beginning to earn carry in 2013.
Capital Markets and Principal Activities
FRE was $41.4 million for the quarter ended September 30, 2013, an increase of $18.7 million, or 82.4%, compared to FRE of $22.7 million for the quarter ended September 30, 2012. FRE was $72.7 million for the nine months ended September 30, 2013, an increase of $8.5 million, or 13.2%, compared to FRE of $64.2 million for the nine months ended September 30, 2012. The increases in both comparable periods were primarily driven by a higher level of overall capital markets transaction activity.
ENI was $340.1 million for the quarter ended September 30, 2013, an increase of $79.0 million, or 30.3%, compared to ENI of $261.1 million for the quarter ended September 30, 2012. The increase was primarily attributable to a higher level of investment income from our principal investments and to a lesser extent the increase in FRE discussed above.
ENI was $704.0 million for the nine months ended September 30, 2013, a decrease of $359.7 million, or 33.8%, compared to ENI of $1,063.7 million for the nine months ended September 30, 2012. The decrease was primarily due to a lower level of investment income from our principal investments. While the fair value of our principal investments increased during the nine months ended September 30, 2013, the level of appreciation was lower than in the comparable period of 2012.
CAPITAL AND LIQUIDITY
As of September 30, 2013, KKR had $1.9 billion of cash and short-term investments on a total reportable segment basis and $1.0 billion of outstanding debt obligations. KKR’s availability for borrowings was $750.0 million (which is reduced by an outstanding letter of credit), which does not include a $500.0 million revolving credit facility for use in its capital markets business that was undrawn as of September 30, 2013.
As of September 30, 2013, KKR’s portion of total uncalled commitments to its investment funds was $1,164.5 million, consisting of the following (amounts in thousands):
Uncalled
Commitments
Private Markets
Energy Income and Growth Fund $ 252,500
North America Fund XI 191,300
Real Estate Fund 155,600
European Fund III 113,300
Asian Fund II 75,000
2006 Fund 62,900
Infrastructure 24,400
Natural Resources 10,900
E2 Investors (Annex Fund) 10,200
Asian Fund 9,300
China Growth Fund 6,500
Co-Investment Vehicles 45,600
Total Private Markets Commitments 957,500
Public Markets
Special Situations Vehicles 162,000
Mezzanine Fund 25,700
Direct Lending Vehicles 19,300
Total Public Markets Commitments 207,000
Total Uncalled Commitments $ 1,164,500
DISTRIBUTION
A distribution of $0.23 per common unit has been declared, comprised of (i) $0.10 per common unit from after-tax FRE, (ii) $0.07 per common unit from realized cash carry, and (iii) $0.06 per common unit from net realized principal investment income. The distribution will be paid on November 19, 2013 to unitholders of record as of the close of business on November 4, 2013. Please refer to the distribution policy presented later in this release.
CONFERENCE CALL
A conference call to discuss KKR’s financial results will be held on Thursday, October 24, 2013 at 11:00 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 Public Investors 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 76308413 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
Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $90.2 billion in assets under management as of September 30, 2013. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with fund investors through its client relationships and capital markets platform. KKR & Co. L.P. is publicly traded on the New York Stock Exchange (KKR) and “KKR”, as used in this release, includes its subsidiaries, their managed investment funds and accounts, and/or their affiliated investment vehicles, as appropriate. For additional information, 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, after-tax ENI, ENI after taxes and equity-based charges, fee related EBITDA, committed dollars invested and syndicated capital, uncalled commitments, core interest expense, cash and short-term investments, net realized principal 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 such as Prisma, Nephila or Avoca; 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, 2012, filed with the SEC on February 22, 2013, 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, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Revenues
Fees $ 220,028 $ 162,154 $ 537,644 $ 390,821
Expenses
Compensation and Benefits 329,182 366,350 860,905 1,019,400
Occupancy and Related Charges 17,637 14,344 46,036 43,636
General, Administrative and Other 108,676 65,825 279,906 177,480
Total Expenses 455,495 446,519 1,186,847 1,240,516
Investment Income (Loss)
Net Gains (Losses) from Investment Activities 2,230,401 2,308,613 4,598,755 6,997,166
Dividend Income 121,059 10,440 370,014 263,298
Interest Income 114,861 95,578 352,250 259,669
Interest Expense (25,056 ) (17,868 ) (72,693 ) (52,757 )
Total Investment Income (Loss) 2,441,265 2,396,763 5,248,326 7,467,376
Income (Loss) Before Taxes 2,205,798 2,112,398 4,599,123 6,617,681
Income Taxes 7,644 9,612 25,525 37,777
Net Income (Loss) 2,198,154 2,102,786 4,573,598 6,579,904
Net Income (Loss) Attributable to
Redeemable Noncontrolling Interests 9,169 9,994 25,992 18,551
Net Income (Loss) Attributable to
Noncontrolling Interests 1,984,245 1,965,381 4,134,293 6,097,245
Net Income (Loss) Attributable to KKR & Co. L.P. $ 204,740 $ 127,411 $ 413,313 $ 464,108
Distributions Declared per KKR & Co. L.P. Common Unit $ 0.23 $ 0.24 $ 0.92 $ 0.52
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic $ 0.73 $ 0.53 $ 1.53 $ 1.98
Diluted (a) $ 0.66 $ 0.49 $ 1.40 $ 1.86
Weighted Average Common Units Outstanding
Basic 282,148,802 239,696,358 270,484,224 234,876,879
Diluted (a) 308,135,191 257,646,622 296,181,070 249,359,200
(a) KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit given that the exchange of these units would proportionally increase KKR & Co. L.P.’s interests in KKR’s business and would have an anti-dilutive effect on earnings per common unit as a result of certain tax benefits KKR & Co. L.P. is assumed to receive upon the exchange.
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, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Fees
Management and incentive fees:
Management fees $ 173,245 $ 164,176 $ 126,483 $ 490,384 $ 384,752
Incentive fees 1,225 15,590 17,768 35,664 31,495
Management and incentive fees 174,470 179,766 144,251 526,048 416,247
Monitoring and transaction fees:
Monitoring fees 33,010 28,907 29,969 93,985 83,577
Transaction fees 129,127 62,785 75,264 232,211 163,268
Fee credits (61,782 ) (34,751 ) (31,707 ) (119,598 ) (67,739 )
Net monitoring and transaction fees 100,355 56,941 73,526 206,598 179,106
Total fees 274,825 236,707 217,777 732,646 595,353
Expenses
Compensation and benefits 92,229 80,436 71,340 247,827 196,810
Occupancy and related charges 15,674 13,067 13,605 42,063 41,305
Other operating expenses (a) 60,884 45,027 42,128 150,541 123,406
Total expenses 168,787 138,530 127,073 440,431 361,521
Fee Related Earnings (a) 106,038 98,177 90,704 292,215 233,832
Investment income (loss)
Realized carried interest 81,532 269,828 166,908 439,527 307,387
Unrealized carried interest 278,004 (202,018 ) 243,828 407,184 855,587
Gross carried interest 359,536 67,810 410,736 846,711 1,162,974
Less: allocation to KKR carry pool (145,512 ) (26,536 ) (169,633 ) (341,552 ) (473,692 )
Less: management fee refunds (b) (7,767 ) (4,735 ) (61,499 ) (21,718 ) (135,011 )
Net carried interest 206,257 36,539 179,604 483,441 554,271
Other investment income (loss) 303,472 11,050 240,876 634,720 1,000,886
Total investment income (loss) 509,729 47,589 420,480 1,118,161 1,555,157
Income (Loss) before noncontrolling interests
in Income of consolidated entities 615,767 145,766 511,184 1,410,376 1,788,989
Income (Loss) attributable to
noncontrolling interests 2,020 1,323 1,310 4,444 5,798
Economic Net Income (Loss) $ 613,747 $ 144,443 $ 509,874 $ 1,405,932 $ 1,783,191
Provision for Income Taxes 11,950 13,486 22,548 45,553 91,788
Economic Net Income (Loss), After Taxes (c) $ 601,797 $ 130,957 $ 487,326 $ 1,360,379 $ 1,691,403
Economic Net Income (Loss), After Taxes per Adjusted Unit (c) $ 0.84 $ 0.18 $ 0.69 $ 1.90 $ 2.42
Assets Under Management $ 90,169,200 $ 83,500,900 $ 66,278,700 $ 90,169,200 $ 66,278,700
Fee Paying Assets Under Management $ 73,611,900 $ 67,956,400 $ 50,266,000 $ 73,611,900 $ 50,266,000
Committed Dollars Invested and Syndicated Capital $ 2,848,700 $ 1,889,400 $ 926,000 $ 5,562,500 $ 2,639,200
Uncalled Commitments $ 22,718,400 $ 21,364,400 $ 15,845,900 $ 22,718,400 $ 15,845,900
Other Information
Fee Related Earnings $ 106,038 $ 98,177 $ 90,704 $ 292,215 $ 233,832
Plus: depreciation and amortization 3,601 3,708 3,273 10,990 8,919
Fee Related EBITDA $ 109,639 $ 101,885 $ 93,977 $ 303,205 $ 242,751
Distributed Earnings $ 189,477 $ 313,559 $ 187,174 $ 701,756 $ 403,208
Plus: Undistributed net realized principal investment income 61,660 90,217 145,700 243,771 499,898
Total Distributable Earnings (c) $ 251,137 $ 403,776 $ 332,874 $ 945,527 $ 903,106
GAAP interest expense $ 25,056 $ 24,614 $ 17,868 $ 72,693 $ 52,757
Less: interest expense related to debt obligations
from investment financing arrangements 8,841 8,404 8,502 24,035 24,036
Core Interest Expense (c) $ 16,215 $ 16,210 $ 9,366 $ 48,658 $ 28,721
Economic Net Income (Loss), After Taxes and Equity-based Charges (c) $ 570,570 $ 105,021 $ 469,961 $ 1,275,798 $ 1,643,724
(a) For the quarter ended September 30, 2013, other operating expenses include $9.7 million of one-time expenses incurred in connection with the launch of a closed-end fund.
(b) As of September 30, 2013, there is no carried interest subject to management fee refunds, which may reduce carried interest in future periods.
(c) See definitions for economic net income (loss), after taxes, adjusted units, total distributable earnings, core interest expense and economic net income (loss), after taxes and equity-based charges under “Notes to Reportable Segments.”
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENTS (UNAUDITED)
(Amounts in thousands)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Fees
Management and incentive fees:
Management fees $ 119,410 $ 114,700 $ 105,035 $ 340,715 $ 319,117
Incentive fees - - - - -
Management and incentive fees 119,410 114,700 105,035 340,715 319,117
Monitoring and transaction fees:
Monitoring fees 33,010 28,907 29,969 93,985 83,577
Transaction fees 54,968 25,231 32,788 96,611 55,223
Fee credits (46,597 ) (29,547 ) (26,293 ) (97,153 ) (59,641 )
Net monitoring and transaction fees 41,381 24,591 36,464 93,443 79,159
Total fees 160,791 139,291 141,499 434,158 398,276
Expenses
Compensation and benefits 65,400 51,516 48,905 164,917 139,382
Occupancy and related charges 13,367 11,143 12,049 35,935 36,487
Other operating expenses 37,586 33,988 35,885 105,516 103,790
Total expenses 116,353 96,647 96,839 306,368 279,659
Fee Related Earnings 44,438 42,644 44,660 127,790 118,617
Investment income (loss)
Realized carried interest 81,532 269,828 166,908 439,527 307,387
Unrealized carried interest 263,982 (212,809 ) 224,260 361,972 830,072
Gross carried interest 345,514 57,019 391,168 801,499 1,137,459
Less: allocation to KKR carry pool (139,903 ) (22,220 ) (161,805 ) (323,467 ) (463,485 )
Less: management fee refunds (7,767 ) (4,735 ) (61,499 ) (21,718 ) (135,011 )
Net carried interest 197,844 30,064 167,864 456,314 538,963
Other investment income (loss) 3,357 (249 ) 1,779 1,073 (559 )
Total investment income (loss) 201,201 29,815 169,643 457,387 538,404
Income (Loss) before noncontrolling interests
in Income of consolidated entities 245,639 72,459 214,303 585,177 657,021
Income (Loss) attributable to
noncontrolling interests 433 411 444 1,242 3,098
Economic Net Income (Loss) $ 245,206 $ 72,048 $ 213,859 $ 583,935 $ 653,923
Assets Under Management $ 59,678,300 $ 54,452,400 $ 49,771,000 $ 59,678,300 $ 49,771,000
Fee Paying Assets Under Management $ 49,889,500 $ 45,907,500 $ 40,354,200 $ 49,889,500 $ 40,354,200
Committed Dollars Invested $ 1,805,800 $ 1,314,000 $ 623,000 $ 3,718,300 $ 1,805,500
Uncalled Commitments $ 21,103,800 $ 19,972,800 $ 14,594,700 $ 21,103,800 $ 14,594,700
...
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENTS (UNAUDITED)
(Amounts in thousands)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Fees
Management and incentive fees:
Management fees $ 53,835 $ 49,476 $ 21,448 $ 149,669 $ 65,635
Incentive fees 1,225 15,590 17,768 35,664 31,495
Management and incentive fees 55,060 65,066 39,216 185,333 97,130
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 20,534 7,243 8,780 30,883 12,521
Fee credits (15,185 ) (5,204 ) (5,414 ) (22,445 ) (8,098 )
Net monitoring and transaction fees 5,349 2,039 3,366 8,438 4,423
Total fees 60,409 67,105 42,582 193,771 101,553
Expenses
Compensation and benefits 18,606 21,990 13,997 60,296 34,608
Occupancy and related charges 1,906 1,615 1,343 5,063 4,127
Other operating expenses (a) 19,670 9,147 3,897 36,643 11,754
Total expenses 40,182 32,752 19,237 102,002 50,489
Fee Related Earnings (a) 20,227 34,353 23,345 91,769 51,064
Investment income (loss)
Realized carried interest - - - - -
Unrealized carried interest 14,022 10,791 19,568 45,212 25,515
Gross carried interest 14,022 10,791 19,568 45,212 25,515
Less: allocation to KKR carry pool (5,609 ) (4,316 ) (7,828 ) (18,085 ) (10,207 )
Less: management fee refunds - - - - -
Net carried interest 8,413 6,475 11,740 27,127 15,308
Other investment income (loss) (4 ) 22 25 80 (10 )
Total investment income (loss) 8,409 6,497 11,765 27,207 15,298
Income (Loss) before noncontrolling interests
in Income of consolidated entities 28,636 40,850 35,110 118,976 66,362
Income (Loss) attributable to
noncontrolling interests 202 378 233 935 787
Economic Net Income (Loss) $ 28,434 $ 40,472 $ 34,877 $ 118,041 $ 65,575
Assets Under Management $ 30,490,900 $ 29,048,500 $ 16,507,700 $ 30,490,900 $ 16,507,700
Fee Paying Assets Under Management $ 23,722,400 $ 22,048,900 $ 9,911,800 $ 23,722,400 $ 9,911,800
Committed Dollars Invested $ 326,400 $ 370,800 $ 278,300 $ 862,100 $ 558,400
Uncalled Commitments $ 1,614,600 $ 1,391,600 $ 1,251,200 $ 1,614,600 $ 1,251,200
(a) For the quarter ended September 30, 2013, other operating expenses include $9.7 million of one-time expenses incurred in connection with the launch of a closed-end fund.
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENTS (UNAUDITED)
(Amounts in thousands)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Fees
Management and incentive fees:
Management fees $ - $ - $ - $ - $ -
Incentive fees - - - - -
Management and incentive fees - - - - -
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 53,625 30,311 33,696 104,717 95,524
Fee credits - - - - -
Net monitoring and transaction fees 53,625 30,311 33,696 104,717 95,524
Total fees 53,625 30,311 33,696 104,717 95,524
Expenses
Compensation and benefits 8,223 6,930 8,438 22,614 22,820
Occupancy and related charges 401 309 213 1,065 691
Other operating expenses 3,628 1,892 2,346 8,382 7,862
Total expenses 12,252 9,131 10,997 32,061 31,373
Fee Related Earnings 41,373 21,180 22,699 72,656 64,151
Investment income (loss)
Realized carried interest - - - - -
Unrealized carried interest - - - - -
Gross carried interest - - - - -
Less: allocation to KKR carry pool - - - - -
Less: management fee refunds - - - - -
Net carried interest - - - - -
Other investment income (loss) (a) 300,119 11,277 239,072 633,567 1,001,455
Total investment income (loss) 300,119 11,277 239,072 633,567 1,001,455
Income (Loss) before noncontrolling interests
in Income of consolidated entities 341,492 32,457 261,771 706,223 1,065,606
Income (Loss) attributable to
noncontrolling interests 1,385 534 633 2,267 1,913
Economic Net Income (Loss) $ 340,107 $ 31,923 $ 261,138 $ 703,956 $ 1,063,693
Syndicated Capital $ 716,500 $ 204,600 $ 24,700 $ 982,100 $ 275,300
(a) Amount is net of (i) interest expense and (ii) certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income that is not included in “Compensation and benefits” and “Other operating expenses” above and on page 6.
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended September 30, 2013
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 119,410 $ 53,835 $ - $ 173,245
Incentive fees - 1,225 - 1,225
Management and incentive fees 119,410 55,060 - 174,470
Monitoring and transaction fees:
Monitoring fees 33,010 - - 33,010
Transaction fees 54,968 20,534 53,625 129,127
Fee credits (46,597 ) (15,185 ) - (61,782 )
Net monitoring and transaction fees 41,381 5,349 53,625 100,355
Total fees 160,791 60,409 53,625 274,825
Expenses
Compensation and benefits 65,400 18,606 8,223 92,229
Occupancy and related charges 13,367 1,906 401 15,674
Other operating expenses 37,586 19,670 3,628 60,884
Total expenses 116,353 40,182 12,252 168,787
Fee Related Earnings 44,438 20,227 41,373 106,038
Investment income (loss)
Realized carried interest 81,532 - - 81,532
Unrealized carried interest 263,982 14,022 - 278,004
Gross carried interest 345,514 14,022 - 359,536
Less: allocation to KKR carry pool (139,903 ) (5,609 ) - (145,512 )
Less: management fee refunds (7,767 ) - - (7,767 )
Net carried interest 197,844 8,413 - 206,257
Other investment income (loss) 3,357 (4 ) 300,119 303,472
Total investment income (loss) 201,201 8,409 300,119 509,729
Income (Loss) before noncontrolling interests
in Income of consolidated entities 245,639 28,636 341,492 615,767
Income (Loss) attributable to
noncontrolling interests 433 202 1,385 2,020
Economic Net Income (Loss) $ 245,206 $ 28,434 $ 340,107 $ 613,747
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended June 30, 2013
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 114,700 $ 49,476 $ - $ 164,176
Incentive fees - 15,590 - 15,590
Management and incentive fees 114,700 65,066 - 179,766
Monitoring and transaction fees:
Monitoring fees 28,907 - - 28,907
Transaction fees 25,231 7,243 30,311 62,785
Fee credits (29,547 ) (5,204 ) - (34,751 )
Net monitoring and transaction fees 24,591 2,039 30,311 56,941
Total fees 139,291 67,105 30,311 236,707
Expenses
Compensation and benefits 51,516 21,990 6,930 80,436
Occupancy and related charges 11,143 1,615 309 13,067
Other operating expenses 33,988 9,147 1,892 45,027
Total expenses 96,647 32,752 9,131 138,530
Fee Related Earnings 42,644 34,353 21,180 98,177
Investment income (loss)
Realized carried interest 269,828 - - 269,828
Unrealized carried interest (212,809 ) 10,791 - (202,018 )
Gross carried interest 57,019 10,791 - 67,810
Less: allocation to KKR carry pool (22,220 ) (4,316 ) - (26,536 )
Less: management fee refunds (4,735 ) - - (4,735 )
Net carried interest 30,064 6,475 - 36,539
Other investment income (loss) (249 ) 22 11,277 11,050
Total investment income (loss) 29,815 6,497 11,277 47,589
Income (Loss) before noncontrolling interests
in Income of consolidated entities 72,459 40,850 32,457 145,766
Income (Loss) attributable to
noncontrolling interests 411 378 534 1,323
Economic Net Income (Loss) $ 72,048 $ 40,472 $ 31,923 $ 144,443
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended September 30, 2012
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 105,035 $ 21,448 $ - $ 126,483
Incentive fees - 17,768 - 17,768
Management and incentive fees 105,035 39,216 - 144,251
Monitoring and transaction fees:
Monitoring fees 29,969 - - 29,969
Transaction fees 32,788 8,780 33,696 75,264
Fee credits (26,293 ) (5,414 ) - (31,707 )
Net monitoring and transaction fees 36,464 3,366 33,696 73,526
Total fees 141,499 42,582 33,696 217,777
Expenses
Compensation and benefits 48,905 13,997 8,438 71,340
Occupancy and related charges 12,049 1,343 213 13,605
Other operating expenses 35,885 3,897 2,346 42,128
Total expenses 96,839 19,237 10,997 127,073
Fee Related Earnings 44,660 23,345 22,699 90,704
Investment income (loss)
Realized carried interest 166,908 - - 166,908
Unrealized carried interest 224,260 19,568 - 243,828
Gross carried interest 391,168 19,568 - 410,736
Less: allocation to KKR carry pool (161,805 ) (7,828 ) - (169,633 )
Less: management fee refunds (61,499 ) - - (61,499 )
Net carried interest 167,864 11,740 - 179,604
Other investment income (loss) 1,779 25 239,072 240,876
Total investment income (loss) 169,643 11,765 239,072 420,480
Income (Loss) before noncontrolling interests
in Income of consolidated entities 214,303 35,110 261,771 511,184
Income (Loss) attributable to
noncontrolling interests 444 233 633 1,310
Economic Net Income (Loss) $ 213,859 $ 34,877 $ 261,138 $ 509,874
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Nine Months Ended September 30, 2013
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 340,715 $ 149,669 $ - $ 490,384
Incentive fees - 35,664 - 35,664
Management and incentive fees 340,715 185,333 - 526,048
Monitoring and transaction fees:
Monitoring fees 93,985 - - 93,985
Transaction fees 96,611 30,883 104,717 232,211
Fee credits (97,153 ) (22,445 ) - (119,598 )
Net monitoring and transaction fees 93,443 8,438 104,717 206,598
Total fees 434,158 193,771 104,717 732,646
Expenses
Compensation and benefits 164,917 60,296 22,614 247,827
Occupancy and related charges 35,935 5,063 1,065 42,063
Other operating expenses 105,516 36,643 8,382 150,541
Total expenses 306,368 102,002 32,061 440,431
Fee Related Earnings 127,790 91,769 72,656 292,215
Investment income (loss)
Realized carried interest 439,527 - - 439,527
Unrealized carried interest 361,972 45,212 - 407,184
Gross carried interest 801,499 45,212 - 846,711
Less: allocation to KKR carry pool (323,467 ) (18,085 ) - (341,552 )
Less: management fee refunds (21,718 ) - - (21,718 )
Net carried interest 456,314 27,127 - 483,441
Other investment income (loss) 1,073 80 633,567 634,720
Total investment income (loss) 457,387 27,207 633,567 1,118,161
Income (Loss) before noncontrolling interests
in Income of consolidated entities 585,177 118,976 706,223 1,410,376
Income (Loss) attributable to
noncontrolling interests 1,242 935 2,267 4,444
Economic Net Income (Loss) $ 583,935 $ 118,041 $ 703,956 $ 1,405,932
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Nine Months Ended September 30, 2012
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 319,117 $ 65,635 $ - $ 384,752
Incentive fees - 31,495 - 31,495
Management and incentive fees 319,117 97,130 - 416,247
Monitoring and transaction fees:
Monitoring fees 83,577 - - 83,577
Transaction fees 55,223 12,521 95,524 163,268
Fee credits (59,641 ) (8,098 ) - (67,739 )
Net monitoring and transaction fees 79,159 4,423 95,524 179,106
Total fees 398,276 101,553 95,524 595,353
Expenses
Compensation and benefits 139,382 34,608 22,820 196,810
Occupancy and related charges 36,487 4,127 691 41,305
Other operating expenses 103,790 11,754 7,862 123,406
Total expenses 279,659 50,489 31,373 361,521
Fee Related Earnings 118,617 51,064 64,151 233,832
Investment income (loss)
Realized carried interest 307,387 - - 307,387
Unrealized carried interest 830,072 25,515 - 855,587
Gross carried interest 1,137,459 25,515 - 1,162,974
Less: allocation to KKR carry pool (463,485 ) (10,207 ) - (473,692 )
Less: management fee refunds (135,011 ) - - (135,011 )
Net carried interest 538,963 15,308 - 554,271
Other investment income (loss) (559 ) (10 ) 1,001,455 1,000,886
Total investment income (loss) 538,404 15,298 1,001,455 1,555,157
Income (Loss) before noncontrolling interests
in Income of consolidated entities 657,021 66,362 1,065,606 1,788,989
Income (Loss) attributable to
noncontrolling interests 3,098 787 1,913 5,798
Economic Net Income (Loss) $ 653,923 $ 65,575 $ 1,063,693 $ 1,783,191
KKR
BALANCE SHEETS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
As of September 30, 2013
Capital
Markets and
Private Public Principal Total
Markets Markets Activities Reportable
Segment Segment Segment Segments
Cash and short-term investments $ 173,453 $ 47,074 $ 1,680,428 $ 1,900,955
Investments - - 4,937,849
(a)
4,937,849
Unrealized carry 918,574 52,066 - 970,640
Other assets 363,981 283,283 58,336 705,600
Total assets $ 1,456,008 $ 382,423 $ 6,676,613 $ 8,515,044
Debt obligations $ - $ - $ 1,000,000 $ 1,000,000
Other liabilities 143,016 51,701 40,964 235,681
Total liabilities 143,016 51,701 1,040,964 1,235,681
Noncontrolling interests 1,479 649 69,487 71,615
Book value $ 1,311,513 $ 330,073 $ 5,566,162 $ 7,207,748
Book value per adjusted unit $ 1.83 $ 0.46 $ 7.78 $ 10.07
As of December 31, 2012
Capital
Markets and
Private Public Principal Total
Markets Markets Activities Reportable
Segment Segment Segment Segments
Cash and short-term investments $ 358,237 $ 28,690 $ 1,147,360 $ 1,534,287
Investments - - 4,758,157 4,758,157
Unrealized carry 730,292 24,939 - 755,231
Other assets 207,047 280,472 62,119 549,638
Total assets $ 1,295,576 $ 334,101 $ 5,967,636 $ 7,597,313
Debt obligations $ - $ - $ 500,000 $ 500,000
Other liabilities 78,724 16,433 24,275 119,432
Total liabilities 78,724 16,433 524,275 619,432
Noncontrolling interests 1,339 739 18,619 20,697
Book value $ 1,215,513 $ 316,929 $ 5,424,742 $ 6,957,184
Book value per adjusted unit $ 1.72 $ 0.45 $ 7.70 $ 9.87
(a) See Capital Markets and Principal Activities segment schedule of investments that follows.
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS (UNAUDITED)
(Amounts in thousands, except percentage amounts)
As of September 30, 2013
Fair Value as
Fair a Percentage of
Investment
Cost
Value Total Investments
Co-Investments in Portfolio Companies of
Private Equity Investment Vehicles:
Alliance Boots GmbH 195,640 491,801 10.0 %
HCA Inc. 96,289 363,611 7.4 %
ProSiebenSat.1 Media AG 226,913 279,201 5.7 %
The Nielsen Company B.V. 87,657 214,492 4.3 %
Samson Resources Corporation 237,514 190,012 3.8 %
KION Group 128,058 189,391 3.8 %
NXP B.V. 122,059 172,084 3.5 %
US Foods, Inc. 100,000 130,000 2.6 %
Biomet, Inc. 151,444 121,155 2.5 %
First Data Corporation 135,258 94,681 1.9 %
Dollar General Corporation 2,893 18,171 0.4 %
Energy Future Holdings Corp. 200,000 10,000 0.2 %
1,683,725 2,274,599 46.1 %
Private Equity Investment Vehicles
KKR 2006 Fund L.P. 340,655 389,950 7.9 %
KKR European Fund III L.P. 243,973 286,953 5.8 %
KKR Asian Fund L.P. 84,152 95,665 1.9 %
KKR North America Fund XI L.P. 61,565 64,106 1.3 %
KKR European Fund II L.P. 46,966 49,205 1.0 %
KKR Millennium Fund L.P. 50,470 42,693 0.9 %
KKR E2 Investors, L.P. 14,210 26,037 0.5 %
Co-Investments 7,598 7,730 0.2 %
KKR European Fund L.P. 47,664 4,290 0.1 %
KKR China Growth Fund L.P. 3,286 4,207 0.1 %
900,539 970,836 19.7 %
Private Equity Total 2,584,264 3,245,435 65.8 %
Real Assets
Royalties and Drilling 281,968 294,670 6.0 %
Real Estate Fund 45,135 57,065 1.2 %
Infrastructure Fund 30,324 32,668 0.7 %
Co-Investments 10,835 12,888 0.3 %
Natural Resources 12,917 8,159 0.2 %
Real Assets Total 381,179 405,450 8.4 %
Private Markets Total 2,965,443 3,650,885 74.2 %
Public Markets Investment Strategies
Liquid Credit 187,263 196,972 4.0 %
Long/Short Equities 100,000 110,899 2.2 %
Credit Relative Value 82,000 91,550 1.9 %
Direct Lending 49,796 55,323 1.1 %
Special Situations 30,205 34,600 0.7 %
Mezzanine Fund 15,865 19,331 0.4 %
Public Markets Total 465,129 508,675 10.3 %
Other 762,234 778,289 15.5 %
Total Investments $ 4,192,806 $ 4,937,849 100.0 %
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS, CONTINUED (UNAUDITED)
(Amounts in thousands, except percentage amounts)
As of September 30, 2013
Fair Value as
a Percentage
Investment
Cost
Fair
Value
of Total
Investments
Significant Aggregate Investments: (a)
Alliance Boots GmbH $ 228,769 $ 565,811 11.5 %
HCA Inc. 117,624 432,333 8.7 %
ProSieben.Sat 1 Media AG 242,643 297,299 6.0 %
589,036 1,295,443 26.2 %
Other investments 3,603,770 3,642,406 73.8 %
Total Investments $ 4,192,806 $ 4,937,849 100.0 %
(a) The significant aggregate investments include investments in portfolio companies with individual fair values of 5% or more of the Capital Markets and Principal Activities segment investments balance as of September 30, 2013. The fair value figures include the co-investment and the limited partner and/or general partner interests in the underlying portfolio company.
KKR
ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
Private Public Total
Markets Markets Reportable
Segment Segment Segments
Quarter Ended September 30, 2013
June 30, 2013 $ 54,452,400 $ 29,048,500 $ 83,500,900
New Capital Raised 4,670,800 1,821,700 6,492,500
Distributions (1,591,600 ) (552,300 )
(c)
(2,143,900 )
Foreign Exchange 33,100 - 33,100
Change in Value 2,113,600 173,000 2,286,600
September 30, 2013 $ 59,678,300 $ 30,490,900 $ 90,169,200
Nine Months Ended September 30, 2013
December 31, 2012 $ 49,127,600 $ 26,399,900 $ 75,527,500
New Capital Raised 12,319,000 5,056,500 17,375,500
Distributions (6,109,000 ) (1,952,500 )
(d)
(8,061,500 )
Net Changes in Fee Base of Certain Funds (a) (272,300 ) - (272,300 )
Foreign Exchange 22,100 - 22,100
Change in Value 4,590,900 987,000 5,577,900
September 30, 2013 $ 59,678,300 $ 30,490,900 $ 90,169,200
Trailing Twelve Months Ended September 30, 2013
September 30, 2012 $ 49,771,000 $ 16,507,700 $ 66,278,700
New Capital Raised 13,253,100 6,850,500 20,103,600
Acquisitions (b) - 8,086,900 8,086,900
Distributions (9,206,100 ) (2,438,100 )
(e)
(11,644,200 )
Net Changes in Fee Base of Certain Funds (a) (272,300 ) - (272,300 )
Foreign Exchange 39,500 - 39,500
Change in Value 6,093,100 1,483,900 7,577,000
September 30, 2013 $ 59,678,300 $ 30,490,900 $ 90,169,200
* Assets Under Management exclude those assets managed by entities where KKR holds less than a 50% ownership interest.
(a) Represents the impact of including certain funds entering the post-investment period.
(b) Represents AUM of Prisma as of October 1, 2012, the date of acquisition. This figure excludes new capital raised from fund investors and distributions since the acquisition.
(c) Includes $155.3 million of redemptions by fund investors.
(d) Includes $694.5 million of redemptions by fund investors.
(e) Includes $864.4 million of redemptions by fund investors.
KKR
FEE PAYING ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
Private Public Total
Markets Markets Reportable
Segment Segment Segments
Quarter Ended September 30, 2013
June 30, 2013 $ 45,907,500 $ 22,048,900 $ 67,956,400
New Capital Raised 4,366,900 1,719,500 6,086,400
Distributions (582,800 ) (311,100 )
(c)
(893,900 )
Foreign Exchange 162,800 - 162,800
Change in Value 35,100 265,100 300,200
September 30, 2013 $ 49,889,500 $ 23,722,400 $ 73,611,900
Nine Months Ended September 30, 2013
December 31, 2012 $ 41,173,000 $ 19,673,000 $ 60,846,000
New Capital Raised 11,730,800 4,453,800 16,184,600
Distributions (2,533,800 ) (1,284,800 )
(d)
(3,818,600 )
Net Changes in Fee Base of Certain Funds (a) (654,700 ) - (654,700 )
Foreign Exchange 107,400 - 107,400
Change in Value 66,800 880,400 947,200
September 30, 2013 $ 49,889,500 $ 23,722,400 $ 73,611,900
Trailing Twelve Months Ended September 30, 2013
September 30, 2012 $ 40,354,200 $ 9,911,800 $ 50,266,000
New Capital Raised 13,002,800 6,012,900 19,015,700
Acquisitions (b) - 8,078,400 8,078,400
Distributions (3,084,900 ) (1,542,000 )
(e)
(4,626,900 )
Net Changes in Fee Base of Certain Funds (a) (654,700 ) - (654,700 )
Foreign Exchange 191,000 - 191,000
Change in Value 81,100 1,261,300 1,342,400
September 30, 2013 $ 49,889,500 $ 23,722,400 $ 73,611,900
* Fee Paying Assets Under Management exclude those assets managed by entities where KKR holds less than a 50% ownership interest.
(a) Represents the impact of including certain funds entering the post-investment period.
(b) Represents FPAUM of Prisma as of October 1, 2012, the date of acquisition. This figure excludes new capital raised from fund investors and distributions since the acquisition.
(c) Includes $155.3 million of redemptions by fund investors.
(d) Includes $694.5 million of redemptions by fund investors.
(e) Includes $864.4 million of redemptions by fund investors.
KKR
INVESTMENT VEHICLE SUMMARY (a) (UNAUDITED)
As of September 30, 2013
(Amounts in millions, except percentages)
Investment Period Amount
Percentage
Committed by
Commencement Uncalled
General
Remaining
Remaining Fair
Date End Date Commitment Commitments Partner Invested Realized Cost
Value
Private Markets
Private Equity Funds
Asian Fund II 4/2013 4/2019 $ 5,825.0 $ 5,825.0 1.3 % $ - $ - $ - $ -
North America Fund XI 9/2012 9/2018 8,030.4 6,316.2 3.1 % 1,714.2 3.9 1,714.2 1,774.5
China Growth Fund 11/2010 11/2016 1,010.0 692.4 1.0 % 317.6 32.6 300.1 388.8
E2 Investors (Annex Fund) 8/2009 11/2013 347.9 152.1 4.3 % 195.8 - 195.8 395.1
European Fund III 3/2008 3/2014 6,108.1 1,599.4 4.6 % 4,508.7 653.5 4,151.3 5,154.1
Asian Fund 7/2007 4/2013 3,983.2 243.3 2.5 % 3,739.9 1,663.1 2,869.9 4,763.2
2006 Fund 9/2006 9/2012 17,642.2 1,255.5 2.1 % 16,386.7 10,874.8 9,914.7 14,627.2
European Fund II 11/2005 10/2008 5,750.8 - 2.1 % 5,750.8 3,245.1 3,120.4 4,636.4
Millennium Fund 12/2002 12/2008 6,000.0 - 2.5 % 6,000.0 9,502.7 2,084.1 3,500.4
European Fund 12/1999 12/2005 3,085.4 - 3.2 % 3,085.4 8,720.0 - 51.8
Total Private Equity Funds 57,783.0 16,083.9 41,699.1 34,695.7 24,350.5 35,291.5
Co-Investment Vehicles Various Various 3,137.9 1,083.1 Various 2,054.8 2,436.9 1,413.3 1,837.7
Total Private Equity 60,920.9 17,167.0 43,753.9 37,132.6 25,763.8 37,129.2
Real Assets
Energy Income and Growth Fund 9/2013 9/2018 1,413.5 1,413.5 17.9 % - - - -
Natural Resources Fund Various Various 1,072.3 499.4 Various 572.9 67.3 525.5 329.6
Global Energy Opportunities Various Various 861.0 734.4 Various 126.6 - 126.6 121.9
Infrastructure Fund Various Various 1,042.0 498.0 4.8 % 544.0 9.0
544.0 583.2
Infrastructure Co-Investments Various Various 1,356.2 251.7 Various 1,104.5 208.7
1,104.5 1,337.6
Real Estate Partners Americas 5/2013 (b) 694.0 539.8 29 % 154.2 - 154.2 196.0
Real Assets 6,439.0 3,936.8 2,502.2 285.0 2,454.8 2,568.3
Private Markets Total 67,359.9 21,103.8 46,256.1 37,417.6 28,218.6 39,697.5
Public Markets
Special Situations Vehicles Various Various 2,635.5 822.4 Various 1,813.1 530.4 1,567.3 1,934.1
Mezzanine Fund 3/2010 8/2015 987.0 564.1 4.6 % 422.9 129.3 364.9 426.9
Direct Lending Vehicles Various Various 681.0 228.1 Various 452.9 19.5 452.9 484.7
Public Markets Total 4,303.5 1,614.6 2,688.9 679.2 2,385.1 2,845.7
Grand Total $ 71,663.4 $ 22,718.4 $ 48,945.0 $ 38,096.8 $ 30,603.7 $ 42,543.2
(a) Reflects investment vehicles for which KKR has the ability to earn carried interest.
(b) Third anniversary of final close.
KKR
DISTRIBUTION CALCULATION (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
FRE (a) $ 106,038 $ 98,177 $ 90,704 $ 292,215 $ 233,832
Realized cash carry 48,919 161,897 100,145 263,716 184,432
Net realized principal investment income 102,766 150,361 145,700 406,283 499,898
Less: local income taxes (4,566 ) (5,336 ) (2,365 ) (12,243 ) (9,258 )
Less: noncontrolling interests (2,020 ) (1,323 ) (1,310 ) (4,444 ) (5,798 )
Total Distributable Earnings 251,137 403,776 332,874 945,527 903,106
Less: Undistributed net realized principal investment income (61,660 ) (90,217 ) (145,700 ) (243,771 ) (499,898 )
Distributed Earnings 189,477 313,559 187,174 701,756 403,208
Distributed Earnings to KKR & Co. L.P. (b) 78,300 126,295 66,015 280,344 140,216
Less: estimated current corporate income taxes (12,455 ) (10,125 ) (6,890 ) (28,956 ) (15,180 )
Distributed Earnings to KKR & Co. L.P., After Taxes 65,845 116,170 59,125 251,388 125,036
Distribution per KKR & Co. L.P. common unit $ 0.23 $ 0.42 $ 0.24 $ 0.92 $ 0.52
Components of Distribution per KKR & Co. L.P. common unit
After-tax FRE $ 0.10 $ 0.10 $ 0.09 $ 0.30 $ 0.24
Realized Cash Carry $ 0.07 $ 0.23 $ 0.15 $ 0.38 $ 0.28
Distributed Net Realized Principal Investment Income $ 0.06 $ 0.09 $ - $ 0.24 $ -
Outstanding KKR & Co. L.P. common units 285,051,256 277,834,343 241,407,805
(a) See Exhibit A for a reconciliation of such measure to financial results prepared in accordance with GAAP.
(b) Represents the amount of distributed earnings allocable to KKR & Co. L.P. based on its ownership in the KKR business.
DISTRIBUTION POLICY
KKR intends to make quarterly cash distributions in amounts that in the aggregate are expected to constitute substantially all of the cash earnings of its investment management business and 40% of the net cash income from realized principal investments, in each case in excess of amounts determined by KKR to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and its investment funds and to comply with applicable law and any of its debt instruments or other obligations. For purposes of KKR’s distribution policy, its distributions are expected to consist of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool and (iii) a percentage of net realized principal investment income. This amount is expected to be reduced by (i) corporate and applicable local taxes, if any, (ii) non-controlling interests, and (iii) amounts determined by KKR to be necessary or appropriate for the conduct of its business and other matters as discussed above.
The declaration and payment of any distributions are subject to the discretion of the board of directors of the general partner of KKR & Co. L.P., which may change the distribution policy at any time, and the terms of its limited partnership agreement. There can be no assurance that distributions will be made as intended or at all or that unitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR & Co. L.P. When KKR & Co. L.P. receives distributions from the KKR Group Partnerships (the holding companies of the KKR business), KKR Holdings receives its pro rata share of such distributions from the KKR Group Partnerships.
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 segment operating revenues less segment operating expenses, excluding certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income. This measure is used by management as an alternative measurement of the operating earnings of KKR and its business segments before investment income. 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 charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR & Co. L.P. 2010 Equity Incentive Plan; (vi) the exclusion of certain reimbursable expenses; and (vii) the exclusion of certain non-recurring items.
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 investment income and carried interest. ENI is comprised of: (i) FRE plus (ii) segment investment income (loss), which is reduced for carry pool allocations, management fee refunds, interest expense and certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income; less (iii) 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 exclusion of the items referred to in FRE above; (ii) the exclusion of investment income (loss) relating to noncontrolling interests; and (iii) the exclusion of income taxes.
Economic net income (loss), after taxes is used to measure KKR’s implied ENI on a fully diluted basis. We believe this measure is useful to unitholders as it provides an indication of KKR’s ENI as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P. Economic Net Income (Loss), After Taxes is calculated by deducting from ENI the implied income tax provision that has been calculated assuming that all income is allocated to KKR & Co. L.P., which would occur following an exchange of all KKR Holdings units for common units of KKR & Co. L.P. The assumptions and methodology used to calculate the implied income tax provision are consistent with those used in calculating the tax provision for KKR & Co. L.P. under GAAP. The implied income tax provision does not give effect to any tax savings or deductions that may result from the exchange of KKR Holdings units.
Economic net income (loss), after taxes and equity-based charges is used to measure KKR’s implied ENI on a fully diluted basis. We believe this measure is useful to unitholders as it provides an indication of KKR’s ENI as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P. Economic Net Income (Loss), After Taxes and Equity-based Charges is calculated by deducting from ENI: (i) equity-based charges associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan; and (ii) the implied income tax provision that has been calculated assuming that all income is allocated to KKR & Co. L.P., which would occur following an exchange of all KKR Holdings units for common units of KKR & Co. L.P. The assumptions and methodology used to calculate the implied income tax provision are consistent with those used in calculating the tax provision for KKR & Co. L.P. under GAAP. The implied income tax provision does not give effect to any tax savings or deductions that may result from the exchange of KKR Holdings units.
Net realized principal investment income refers to net cash income from (i) realized investment gains and losses excluding certain realized investment losses from principal investments during the second quarter of 2013 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 less certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income in each case generated by KKR’s principal investments held on or through KKR’s balance sheet in our Capital Markets and Principal Activities segment. This is a term to describe a portion of KKR’s quarterly distribution.
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 and (iii) net realized principal investment income; 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 also assess 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 and vehicles. 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 structured finance vehicles; and (v) the fair value of other assets managed by KKR. 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 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 and vehicles, for only those funds and vehicles 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.
Committed dollars invested is the aggregate amount of capital commitments that have 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 investment of committed capital. Such amounts include: (i) capital invested by fund investors and co-investors with respect to which KKR is entitled to a fee or carried interest and (ii) capital invested by KKR’s investment funds and vehicles.
Syndicated capital is the aggregate amount of debt or equity capital in transactions originated by KKR investment funds and vehicles, which has been distributed to third parties in exchange for a fee. It does not include (i) capital committed to such transactions by carry-yielding co-investment vehicles, which is instead reported in committed dollars invested and (ii) debt capital that is arranged as part of the acquisition financing of transactions originated by KKR investment funds and vehicles. 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 and Principal Activities 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 and vehicles to make future investments.
Adjusted units are used as a measure of the total equity ownership of KKR that is held by KKR & Co. L.P. and KKR Holdings 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 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 private equity funds, investment vehicles and principal investments. These financing arrangements are not direct obligations of the general partners of KKR’s private equity funds or its management companies. On a segment basis, interest expense is included in other 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 and vehicles and other noncontrolling interest holders. Additionally, we believe this measure is useful for analyzing KKR’s ability to service its debt obligations.
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 our investment portfolio, including carried interest, as well as our 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 the equivalent GAAP amounts on a consolidated basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings L.P.
Fee related EBITDA is comprised of FRE before the impact of depreciation of fixed assets and amortization of intangible assets and is used by management as a measure of the cash earnings of KKR and its business segments before investment income. We believe this measure is useful to unitholders as it provides additional insight into the amount of cash earnings generated by KKR’s management companies and capital markets businesses.
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.
KKR
EXHIBIT A
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT (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, 2013 June 30, 2013 September 30, 2012
Net income (loss) attributable to KKR & Co. L.P. per common unit $ 0.73 $ 0.06 $ 0.53
Weighted Average Common Units Outstanding 282,148,802 271,983,811 239,696,358
Net income (loss) attributable to KKR & Co. L.P. 204,740 15,134 127,411
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
300,169 28,106 249,460
Plus: Non-cash equity based charges 85,215 80,318 122,157
Plus: Amortization of intangibles and other, net 15,979 12,360 1,234
Plus: Income taxes 7,644 8,525 9,612
Economic net income (loss) 613,747 144,443 509,874
Less: Provision for income taxes 11,950 13,486 22,548
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 31,227 25,936 17,365
Economic net income (loss) after taxes and equity-based charges 570,570 105,021 469,961
Plus: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 31,227 25,936 17,365
Economic net income (loss) after taxes 601,797 130,957 487,326
Weighted Average Adjusted Units 715,781,663 715,453,358 702,252,548
Economic net income (loss) after taxes per adjusted unit $ 0.84 $ 0.18 $ 0.69
Nine Months Ended
September 30, 2013 September 30, 2012
Net income (loss) attributable to KKR & Co. L.P. per common unit $ 1.53 $ 1.98
Weighted Average Common Units Outstanding 270,484,224 234,876,879
Net income (loss) attributable to KKR & Co. L.P. 413,313 464,108
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
662,387 946,484
Plus: Non-cash equity based charges 247,183 330,037
Plus: Amortization of intangibles and other, net 57,524 4,785
Plus: Income taxes 25,525 37,777
Economic net income (loss) 1,405,932 1,783,191
Less: Provision for income taxes 45,553 91,788
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 84,581 47,678
Economic net income (loss) after taxes and equity-based charges 1,275,798 1,643,725
Plus: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 84,581 47,678
Economic net income (loss) after taxes 1,360,379 1,691,403
Weighted Average Adjusted Units 714,171,641 698,371,025
Economic net income (loss) after taxes per adjusted unit $ 1.90 $ 2.42
KKR
EXHIBIT A (CONTINUED)
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. (GAAP BASIS)
TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS, FEE RELATED EBITDA, AND TOTAL DISTRIBUTABLE EARNINGS (UNAUDITED)
(Amounts in thousands)
Quarter Ended
September 30, 2013 June 30, 2013 September 30, 2012
Net income (loss) attributable to KKR & Co. L.P. $ 204,740 $ 15,134 $ 127,411
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
300,169 28,106 249,460
Plus: Non-cash equity based charges 85,215 80,318 122,157
Plus: Amortization of intangibles and other, net 15,979 12,360 1,234
Plus: Income taxes 7,644 8,525 9,612
Economic net income (loss) 613,747 144,443 509,874
Plus: Income attributable to segment noncontrolling interests 2,020 1,323 1,310
Less: Investment income (loss) 509,729 47,589 420,480
Fee related earnings 106,038 98,177 90,704
Plus: Depreciation and amortization 3,601 3,708 3,273
Fee related EBITDA $ 109,639 $ 101,885 $ 93,977
Less: Depreciation and amortization 3,601 3,708 3,273
Plus: Realized cash carry 48,919 161,897 100,145
Plus: Net realized principal investment income 102,766 150,361 145,700
Less: Local income taxes and noncontrolling interests 6,586 6,659 3,675
Total distributable earnings $ 251,137 $ 403,776 $ 332,874
Nine Months Ended
September 30, 2013 September 30, 2012
Net income (loss) attributable to KKR & Co. L.P. $ 413,313 $ 464,108
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
662,387 946,484
Plus: Non-cash equity based charges 247,183 330,037
Plus: Amortization of intangibles and other, net 57,524 4,785
Plus: Income taxes 25,525 37,777
Economic net income (loss) 1,405,932 1,783,191
Plus: Income attributable to segment noncontrolling interests 4,444 5,798
Less: Investment income (loss) 1,118,161 1,555,157
Fee related earnings 292,215 233,832
Plus: Depreciation and amortization 10,990 8,919
Fee related EBITDA $ 303,205 $ 242,751
Less: Depreciation and amortization 10,990 8,919
Plus: Realized cash carry 263,716 184,432
Plus: Net realized principal investment income 406,283 499,898
Less: Local income taxes and noncontrolling interests 16,687 15,056
Total distributable earnings $ 945,527 $ 903,106
KKR
EXHIBIT A (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, 2013 December 31, 2012
KKR & Co. L.P. partners’ capital $ 2,495,093 $ 2,004,359
Noncontrolling interests held by KKR Holdings L.P. 4,796,218 4,981,864
Equity impact of KKR Management Holdings Corp. and other (83,563 ) (29,039 )
Book value 7,207,748 6,957,184
Adjusted units 715,755,721 704,780,484
Book value per adjusted unit $ 10.07 $ 9.87
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS)
TO CASH AND SHORT-TERM INVESTMENTS (SEGMENT BASIS) (UNAUDITED)
(Amounts in thousands)
As of As of
September 30, 2013 December 31, 2012
Cash and cash equivalents $ 1,112,316 $ 1,230,464
Liquid short-term investments 788,639 303,823
Cash and short-term investments $ 1,900,955 $ 1,534,287
KKR
EXHIBIT B
RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING 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, 2013 June 30, 2013 September 30, 2012
Weighted Average GAAP Common Units Outstanding - Basic 282,148,802 271,983,811 239,696,358
Weighted Average Unvested Common Units(a) 25,986,389 26,094,953 17,950,264
Weighted Average GAAP Common Units Outstanding - Diluted 308,135,191 298,078,764 257,646,622
Adjustments:
Weighted Average KKR Holdings Units(b) 407,646,472 417,374,594 444,605,926
Weighted Average Adjusted Units 715,781,663 715,453,358 702,252,548
Nine Months Ended
September 30, 2013 September 30, 2012
Weighted Average GAAP Common Units Outstanding - Basic 270,484,224 234,876,879
Weighted Average Unvested Common Units(a) 25,696,846 14,482,321
Weighted Average GAAP Common Units Outstanding - Diluted 296,181,070 249,359,200
Adjustments:
Weighted Average KKR Holdings Units(b) 417,990,571 449,011,825
Weighted Average Adjusted Units 714,171,641 698,371,025
RECONCILIATION OF GAAP COMMON UNITS OUTSTANDING TO ADJUSTED UNITS (UNAUDITED)
The following table provides a reconciliation of KKR's GAAP Common Units Outstanding to Adjusted Units.
As of As of
September 30, 2013 December 31, 2012
GAAP Common Units Outstanding - Basic 285,051,256 253,363,691
Unvested Common Units(a) 25,960,447 18,863,517
GAAP Common Units Outstanding - Diluted 311,011,703 272,227,208
Adjustments:
KKR Holdings Units(b) 404,744,018 432,553,276
Adjusted Units 715,755,721 704,780,484
(a) Represents equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. The issuance of common units of KKR & Co. L.P. pursuant to awards under its equity incentive plan dilutes KKR common unitholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business.
(b) Common units that may be issued by KKR & Co. L.P. upon exchange of units in KKR Holdings L.P. for KKR common units.
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Investor Relations:
Kohlberg Kravis Roberts & Co. L.P.
Craig Larson
+1-877-610-4910 (U.S.) / +1-212-230-9410
investor-relations@kkr.com
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Media:
Kohlberg Kravis Roberts & Co. L.P.
Kristi Huller
+1-212-750-8300
media@kkr.com
KKR & Co. L.P. Announces Third Quarter 2013 Results
Strong Investment Performance Drives Meaningful Economic Net Income
GAAP net income (loss) attributable to KKR & Co. L.P. was $204.7 million for the quarter ended September 30, 2013, up from $127.4 million in the comparable period of 2012. GAAP net income (loss) attributable to KKR & Co. L.P. was $413.3 million for the nine months ended September 30, 2013, down from $464.1 million in the comparable period of 2012.
Assets under management (“AUM”) totaled $90.2 billion as of September 30, 2013, up from $83.5 billion as of June 30, 2013.
Fee related earnings (“FRE”) were $106.0 million and $292.2 million for the quarter and nine months ended September 30, 2013, respectively, up from $90.7 million and $233.8 million in the comparable periods of 2012.
Total distributable earnings were $251.1 million for the quarter ended September 30, 2013, down from $332.9 million for the quarter ended September 30, 2012. Total distributable earnings were $945.5 million for the nine months ended September 30, 2013, up from $903.1 million in the comparable period of 2012.
Economic net income (“ENI”) was $613.7 million for the quarter ended September 30, 2013, up from $509.9 million in the comparable period of 2012. ENI was $1.4 billion for the nine months ended September 30, 2013, down from $1.8 billion in the comparable period of 2012.
After-tax ENI was $0.84 per adjusted unit for the quarter ended September 30, 2013, up from $0.69 per adjusted unit in the comparable period of 2012. After-tax ENI was $1.90 per adjusted unit for the nine months ended September 30, 2013, down from $2.42 per adjusted unit in the comparable period of 2012.
Book value was $7.2 billion on a total reportable segment basis as of September 30, 2013 or $10.07 per adjusted unit.
KKR & Co. L.P. declares a third quarter distribution of $0.23 per common unit.
KKR & Co. L.P. announced a transaction to acquire Avoca Capital.
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NEW YORK--(BUSINESS WIRE)--
KKR & Co. L.P. (KKR) today reported its third quarter 2013 results.
For the quarter and nine months ended September 30, 2013, the carrying value of our private equity investment portfolio appreciated 5.9% and 12.5%, respectively.
ENI was $613.7 million for the quarter ended September 30, 2013, up from $509.9 million for the quarter ended September 30, 2012. The increase was principally attributable to higher investment income earned from our principal investments and to a lesser extent a higher level of net carried interest earned from our private equity funds.
ENI was $1.4 billion for the nine months ended September 30, 2013, down from $1.8 billion for the nine months ended September 30, 2012. The decrease was primarily due to lower investment income earned from our principal investments as well as a lower level of net carried interest earned from our private equity funds. While the fair value of our principal investments and private equity portfolio increased during the nine months ended September 30, 2013, the level of appreciation was lower than in the comparable period of 2012.
AUM and fee paying assets under management (“FPAUM”) were $90.2 billion and $73.6 billion, respectively, as of September 30, 2013, both up from June 30, 2013. The increases in both AUM and FPAUM were primarily attributable to new capital raised across our various investment platforms, partially offset by distributions to fund limited partners. In September 2013, our Energy Income and Growth Fund had its first close with commitments totaling $1.4 billion (includes general partner commitment).
For the quarter and nine months ended September 30, 2013, FRE was $106.0 million and $292.2 million, respectively, up from $90.7 million and $233.8 million in the comparable periods of 2012. The increases in both comparable periods were primarily driven by (i) management fees attributable to new capital raised; (ii) higher transaction fees; and (iii) the acquisition of Prisma.
On October 18, 2013, KKR announced a transaction to acquire Avoca Capital (Unlimited) and its affiliates (“Avoca”), a European credit investment manager with approximately $8 billion in assets under management as of September 30, 2013. The transaction, which is subject to customary regulatory approvals, is expected to close in the first quarter of 2014.
“Our investment portfolio and balance sheet continue to perform, resulting in an unannualized 20% return on equity in the first nine months of this year,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR.
___________________________________________________________________________________________________
Note: Certain financial measures, including FRE, ENI, after-tax ENI, ENI after taxes and equity-based charges, fee related EBITDA, 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 A and B for a reconciliation of such measures to financial results prepared in accordance with GAAP.
GAAP RESULTS
GAAP results for the quarter and nine months ended September 30, 2013 included net income attributable to KKR & Co. L.P. of $204.7 million and $413.3 million, respectively, and net income attributable to KKR & Co. L.P. per common unit of $0.66 and $1.40, respectively, on a diluted basis. For the quarter and nine months ended September 30, 2012, net income attributable to KKR & Co. L.P. was $127.4 million and $464.1 million, respectively, and net income attributable to KKR & Co. L.P. per common unit were $0.49 and $1.86, respectively, on a diluted basis. The increase quarter over quarter was primarily due to (i) an increase in management fees attributable to new capital raised and the acquisition of Prisma; (ii) higher transaction fees; and (iii) a higher level of total investment income. The year over year decrease was primarily due to a lower level of total investment income. The decrease in total investment income was partially offset by increases in fees primarily attributable to the acquisition of Prisma and higher transaction fees. The decrease in compensation and benefits expense was primarily attributable to lower carry pool allocations as a result of the recognition of lower carried interest during the nine months ended September 30, 2013 compared to the comparable period in 2012.
SEGMENT RESULTS
Private Markets
AUM was $59.7 billion as of September 30, 2013, an increase of $5.2 billion, or 9.5%, compared to AUM of $54.5 billion as of June 30, 2013. The increase was primarily attributable to new capital raised from fund investors and to a lesser extent appreciation in the fair value of our private equity portfolio. The increase was partially offset by distributions to the limited partners of our private equity funds arising from realizations.
FPAUM was $49.9 billion as of September 30, 2013, an increase of $4.0 billion, or 8.7%, compared to FPAUM of $45.9 billion as of June 30, 2013. The increase was primarily attributable to new capital raised from fund investors partially offset by distributions to the limited partners of our private equity funds arising from realizations.
FRE was $44.4 million for the quarter ended September 30, 2013, a decrease of $0.3 million compared to FRE of $44.7 million for the quarter ended September 30, 2012. The decrease was primarily driven by higher compensation expense due to additional headcount, partially offset by higher management fees resulting from new capital raised and higher transaction fees.
FRE was $127.8 million for the nine months ended September 30, 2013, an increase of $9.2 million, or 7.8%, compared to FRE of $118.6 million for the nine months ended September 30, 2012. The increase was primarily driven by higher management fees resulting from new capital raised and higher transaction fees. The increase was partially offset by higher compensation expense due to additional headcount.
ENI was $245.2 million for the quarter ended September 30, 2013, an increase of $31.3 million, or 14.6%, compared to ENI of $213.9 million for the quarter ended September 30, 2012. The increase was primarily attributable to higher net carried interest resulting from a higher level of appreciation in our private equity portfolio.
ENI was $583.9 million for the nine months ended September 30, 2013, a decrease of $70.0 million, or 10.7%, compared to ENI of $653.9 million for the nine months ended September 30, 2012. The decrease was primarily attributable to lower net carried interest resulting from a lower level of appreciation in our private equity portfolio, partially offset by the increase in FRE discussed above.
Public Markets
AUM was $30.5 billion as of September 30, 2013, an increase of $1.5 billion, or 5.2%, compared to AUM of $29.0 billion as of June 30, 2013. FPAUM was $23.7 billion as of September 30, 2013, an increase of $1.7 billion, or 7.7%, compared to FPAUM of $22.0 billion as of June 30, 2013. For both AUM and FPAUM, the increases were primarily attributable to net new capital raised from fund investors.
FRE was $20.2 million for the quarter ended September 30, 2013, a decrease of $3.1 million, or 13.3%, compared to FRE of $23.3 million for the quarter ended September 30, 2012. The decrease was principally attributable to lower incentive fees earned and higher expenses related to one-time expenses in connection with the launch of a closed-end fund in the quarter ended September 30, 2013. The decrease was partially offset by higher management fees related to new capital raised from fund investors and the acquisition of Prisma.
FRE was $91.8 million for the nine months ended September 30, 2013, an increase of $40.7 million, or 79.6%, compared to FRE of $51.1 million for the nine months ended September 30, 2012. The increase was primarily attributable to higher management fees related to new capital raised from fund investors and the acquisition of Prisma.
ENI was $28.4 million for the quarter ended September 30, 2013, a decrease of $6.5 million, or 18.6%, compared to ENI of $34.9 million for the quarter ended September 30, 2012. The decrease was primarily driven by the decrease in FRE discussed above and lower net carried interest resulting from a lower level of appreciation of certain carry-earning credit investment vehicles.
ENI was $118.0 million for the nine months ended September 30, 2013, an increase of $52.4 million, or 79.9%, compared to ENI of $65.6 million for the nine months ended September 30, 2012. The increase was primarily driven by the increase in FRE discussed above and to a lesser extent higher net carried interest due to certain credit investment vehicles beginning to earn carry in 2013.
Capital Markets and Principal Activities
FRE was $41.4 million for the quarter ended September 30, 2013, an increase of $18.7 million, or 82.4%, compared to FRE of $22.7 million for the quarter ended September 30, 2012. FRE was $72.7 million for the nine months ended September 30, 2013, an increase of $8.5 million, or 13.2%, compared to FRE of $64.2 million for the nine months ended September 30, 2012. The increases in both comparable periods were primarily driven by a higher level of overall capital markets transaction activity.
ENI was $340.1 million for the quarter ended September 30, 2013, an increase of $79.0 million, or 30.3%, compared to ENI of $261.1 million for the quarter ended September 30, 2012. The increase was primarily attributable to a higher level of investment income from our principal investments and to a lesser extent the increase in FRE discussed above.
ENI was $704.0 million for the nine months ended September 30, 2013, a decrease of $359.7 million, or 33.8%, compared to ENI of $1,063.7 million for the nine months ended September 30, 2012. The decrease was primarily due to a lower level of investment income from our principal investments. While the fair value of our principal investments increased during the nine months ended September 30, 2013, the level of appreciation was lower than in the comparable period of 2012.
CAPITAL AND LIQUIDITY
As of September 30, 2013, KKR had $1.9 billion of cash and short-term investments on a total reportable segment basis and $1.0 billion of outstanding debt obligations. KKR’s availability for borrowings was $750.0 million (which is reduced by an outstanding letter of credit), which does not include a $500.0 million revolving credit facility for use in its capital markets business that was undrawn as of September 30, 2013.
As of September 30, 2013, KKR’s portion of total uncalled commitments to its investment funds was $1,164.5 million, consisting of the following (amounts in thousands):
Uncalled
Commitments
Private Markets
Energy Income and Growth Fund $ 252,500
North America Fund XI 191,300
Real Estate Fund 155,600
European Fund III 113,300
Asian Fund II 75,000
2006 Fund 62,900
Infrastructure 24,400
Natural Resources 10,900
E2 Investors (Annex Fund) 10,200
Asian Fund 9,300
China Growth Fund 6,500
Co-Investment Vehicles 45,600
Total Private Markets Commitments 957,500
Public Markets
Special Situations Vehicles 162,000
Mezzanine Fund 25,700
Direct Lending Vehicles 19,300
Total Public Markets Commitments 207,000
Total Uncalled Commitments $ 1,164,500
DISTRIBUTION
A distribution of $0.23 per common unit has been declared, comprised of (i) $0.10 per common unit from after-tax FRE, (ii) $0.07 per common unit from realized cash carry, and (iii) $0.06 per common unit from net realized principal investment income. The distribution will be paid on November 19, 2013 to unitholders of record as of the close of business on November 4, 2013. Please refer to the distribution policy presented later in this release.
CONFERENCE CALL
A conference call to discuss KKR’s financial results will be held on Thursday, October 24, 2013 at 11:00 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 Public Investors 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 76308413 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
Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $90.2 billion in assets under management as of September 30, 2013. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with fund investors through its client relationships and capital markets platform. KKR & Co. L.P. is publicly traded on the New York Stock Exchange (KKR) and “KKR”, as used in this release, includes its subsidiaries, their managed investment funds and accounts, and/or their affiliated investment vehicles, as appropriate. For additional information, 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, after-tax ENI, ENI after taxes and equity-based charges, fee related EBITDA, committed dollars invested and syndicated capital, uncalled commitments, core interest expense, cash and short-term investments, net realized principal 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 such as Prisma, Nephila or Avoca; 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, 2012, filed with the SEC on February 22, 2013, 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, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Revenues
Fees $ 220,028 $ 162,154 $ 537,644 $ 390,821
Expenses
Compensation and Benefits 329,182 366,350 860,905 1,019,400
Occupancy and Related Charges 17,637 14,344 46,036 43,636
General, Administrative and Other 108,676 65,825 279,906 177,480
Total Expenses 455,495 446,519 1,186,847 1,240,516
Investment Income (Loss)
Net Gains (Losses) from Investment Activities 2,230,401 2,308,613 4,598,755 6,997,166
Dividend Income 121,059 10,440 370,014 263,298
Interest Income 114,861 95,578 352,250 259,669
Interest Expense (25,056 ) (17,868 ) (72,693 ) (52,757 )
Total Investment Income (Loss) 2,441,265 2,396,763 5,248,326 7,467,376
Income (Loss) Before Taxes 2,205,798 2,112,398 4,599,123 6,617,681
Income Taxes 7,644 9,612 25,525 37,777
Net Income (Loss) 2,198,154 2,102,786 4,573,598 6,579,904
Net Income (Loss) Attributable to
Redeemable Noncontrolling Interests 9,169 9,994 25,992 18,551
Net Income (Loss) Attributable to
Noncontrolling Interests 1,984,245 1,965,381 4,134,293 6,097,245
Net Income (Loss) Attributable to KKR & Co. L.P. $ 204,740 $ 127,411 $ 413,313 $ 464,108
Distributions Declared per KKR & Co. L.P. Common Unit $ 0.23 $ 0.24 $ 0.92 $ 0.52
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic $ 0.73 $ 0.53 $ 1.53 $ 1.98
Diluted (a) $ 0.66 $ 0.49 $ 1.40 $ 1.86
Weighted Average Common Units Outstanding
Basic 282,148,802 239,696,358 270,484,224 234,876,879
Diluted (a) 308,135,191 257,646,622 296,181,070 249,359,200
(a) KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit given that the exchange of these units would proportionally increase KKR & Co. L.P.’s interests in KKR’s business and would have an anti-dilutive effect on earnings per common unit as a result of certain tax benefits KKR & Co. L.P. is assumed to receive upon the exchange.
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, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Fees
Management and incentive fees:
Management fees $ 173,245 $ 164,176 $ 126,483 $ 490,384 $ 384,752
Incentive fees 1,225 15,590 17,768 35,664 31,495
Management and incentive fees 174,470 179,766 144,251 526,048 416,247
Monitoring and transaction fees:
Monitoring fees 33,010 28,907 29,969 93,985 83,577
Transaction fees 129,127 62,785 75,264 232,211 163,268
Fee credits (61,782 ) (34,751 ) (31,707 ) (119,598 ) (67,739 )
Net monitoring and transaction fees 100,355 56,941 73,526 206,598 179,106
Total fees 274,825 236,707 217,777 732,646 595,353
Expenses
Compensation and benefits 92,229 80,436 71,340 247,827 196,810
Occupancy and related charges 15,674 13,067 13,605 42,063 41,305
Other operating expenses (a) 60,884 45,027 42,128 150,541 123,406
Total expenses 168,787 138,530 127,073 440,431 361,521
Fee Related Earnings (a) 106,038 98,177 90,704 292,215 233,832
Investment income (loss)
Realized carried interest 81,532 269,828 166,908 439,527 307,387
Unrealized carried interest 278,004 (202,018 ) 243,828 407,184 855,587
Gross carried interest 359,536 67,810 410,736 846,711 1,162,974
Less: allocation to KKR carry pool (145,512 ) (26,536 ) (169,633 ) (341,552 ) (473,692 )
Less: management fee refunds (b) (7,767 ) (4,735 ) (61,499 ) (21,718 ) (135,011 )
Net carried interest 206,257 36,539 179,604 483,441 554,271
Other investment income (loss) 303,472 11,050 240,876 634,720 1,000,886
Total investment income (loss) 509,729 47,589 420,480 1,118,161 1,555,157
Income (Loss) before noncontrolling interests
in Income of consolidated entities 615,767 145,766 511,184 1,410,376 1,788,989
Income (Loss) attributable to
noncontrolling interests 2,020 1,323 1,310 4,444 5,798
Economic Net Income (Loss) $ 613,747 $ 144,443 $ 509,874 $ 1,405,932 $ 1,783,191
Provision for Income Taxes 11,950 13,486 22,548 45,553 91,788
Economic Net Income (Loss), After Taxes (c) $ 601,797 $ 130,957 $ 487,326 $ 1,360,379 $ 1,691,403
Economic Net Income (Loss), After Taxes per Adjusted Unit (c) $ 0.84 $ 0.18 $ 0.69 $ 1.90 $ 2.42
Assets Under Management $ 90,169,200 $ 83,500,900 $ 66,278,700 $ 90,169,200 $ 66,278,700
Fee Paying Assets Under Management $ 73,611,900 $ 67,956,400 $ 50,266,000 $ 73,611,900 $ 50,266,000
Committed Dollars Invested and Syndicated Capital $ 2,848,700 $ 1,889,400 $ 926,000 $ 5,562,500 $ 2,639,200
Uncalled Commitments $ 22,718,400 $ 21,364,400 $ 15,845,900 $ 22,718,400 $ 15,845,900
Other Information
Fee Related Earnings $ 106,038 $ 98,177 $ 90,704 $ 292,215 $ 233,832
Plus: depreciation and amortization 3,601 3,708 3,273 10,990 8,919
Fee Related EBITDA $ 109,639 $ 101,885 $ 93,977 $ 303,205 $ 242,751
Distributed Earnings $ 189,477 $ 313,559 $ 187,174 $ 701,756 $ 403,208
Plus: Undistributed net realized principal investment income 61,660 90,217 145,700 243,771 499,898
Total Distributable Earnings (c) $ 251,137 $ 403,776 $ 332,874 $ 945,527 $ 903,106
GAAP interest expense $ 25,056 $ 24,614 $ 17,868 $ 72,693 $ 52,757
Less: interest expense related to debt obligations
from investment financing arrangements 8,841 8,404 8,502 24,035 24,036
Core Interest Expense (c) $ 16,215 $ 16,210 $ 9,366 $ 48,658 $ 28,721
Economic Net Income (Loss), After Taxes and Equity-based Charges (c) $ 570,570 $ 105,021 $ 469,961 $ 1,275,798 $ 1,643,724
(a) For the quarter ended September 30, 2013, other operating expenses include $9.7 million of one-time expenses incurred in connection with the launch of a closed-end fund.
(b) As of September 30, 2013, there is no carried interest subject to management fee refunds, which may reduce carried interest in future periods.
(c) See definitions for economic net income (loss), after taxes, adjusted units, total distributable earnings, core interest expense and economic net income (loss), after taxes and equity-based charges under “Notes to Reportable Segments.”
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENTS (UNAUDITED)
(Amounts in thousands)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Fees
Management and incentive fees:
Management fees $ 119,410 $ 114,700 $ 105,035 $ 340,715 $ 319,117
Incentive fees - - - - -
Management and incentive fees 119,410 114,700 105,035 340,715 319,117
Monitoring and transaction fees:
Monitoring fees 33,010 28,907 29,969 93,985 83,577
Transaction fees 54,968 25,231 32,788 96,611 55,223
Fee credits (46,597 ) (29,547 ) (26,293 ) (97,153 ) (59,641 )
Net monitoring and transaction fees 41,381 24,591 36,464 93,443 79,159
Total fees 160,791 139,291 141,499 434,158 398,276
Expenses
Compensation and benefits 65,400 51,516 48,905 164,917 139,382
Occupancy and related charges 13,367 11,143 12,049 35,935 36,487
Other operating expenses 37,586 33,988 35,885 105,516 103,790
Total expenses 116,353 96,647 96,839 306,368 279,659
Fee Related Earnings 44,438 42,644 44,660 127,790 118,617
Investment income (loss)
Realized carried interest 81,532 269,828 166,908 439,527 307,387
Unrealized carried interest 263,982 (212,809 ) 224,260 361,972 830,072
Gross carried interest 345,514 57,019 391,168 801,499 1,137,459
Less: allocation to KKR carry pool (139,903 ) (22,220 ) (161,805 ) (323,467 ) (463,485 )
Less: management fee refunds (7,767 ) (4,735 ) (61,499 ) (21,718 ) (135,011 )
Net carried interest 197,844 30,064 167,864 456,314 538,963
Other investment income (loss) 3,357 (249 ) 1,779 1,073 (559 )
Total investment income (loss) 201,201 29,815 169,643 457,387 538,404
Income (Loss) before noncontrolling interests
in Income of consolidated entities 245,639 72,459 214,303 585,177 657,021
Income (Loss) attributable to
noncontrolling interests 433 411 444 1,242 3,098
Economic Net Income (Loss) $ 245,206 $ 72,048 $ 213,859 $ 583,935 $ 653,923
Assets Under Management $ 59,678,300 $ 54,452,400 $ 49,771,000 $ 59,678,300 $ 49,771,000
Fee Paying Assets Under Management $ 49,889,500 $ 45,907,500 $ 40,354,200 $ 49,889,500 $ 40,354,200
Committed Dollars Invested $ 1,805,800 $ 1,314,000 $ 623,000 $ 3,718,300 $ 1,805,500
Uncalled Commitments $ 21,103,800 $ 19,972,800 $ 14,594,700 $ 21,103,800 $ 14,594,700
...
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENTS (UNAUDITED)
(Amounts in thousands)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Fees
Management and incentive fees:
Management fees $ 53,835 $ 49,476 $ 21,448 $ 149,669 $ 65,635
Incentive fees 1,225 15,590 17,768 35,664 31,495
Management and incentive fees 55,060 65,066 39,216 185,333 97,130
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 20,534 7,243 8,780 30,883 12,521
Fee credits (15,185 ) (5,204 ) (5,414 ) (22,445 ) (8,098 )
Net monitoring and transaction fees 5,349 2,039 3,366 8,438 4,423
Total fees 60,409 67,105 42,582 193,771 101,553
Expenses
Compensation and benefits 18,606 21,990 13,997 60,296 34,608
Occupancy and related charges 1,906 1,615 1,343 5,063 4,127
Other operating expenses (a) 19,670 9,147 3,897 36,643 11,754
Total expenses 40,182 32,752 19,237 102,002 50,489
Fee Related Earnings (a) 20,227 34,353 23,345 91,769 51,064
Investment income (loss)
Realized carried interest - - - - -
Unrealized carried interest 14,022 10,791 19,568 45,212 25,515
Gross carried interest 14,022 10,791 19,568 45,212 25,515
Less: allocation to KKR carry pool (5,609 ) (4,316 ) (7,828 ) (18,085 ) (10,207 )
Less: management fee refunds - - - - -
Net carried interest 8,413 6,475 11,740 27,127 15,308
Other investment income (loss) (4 ) 22 25 80 (10 )
Total investment income (loss) 8,409 6,497 11,765 27,207 15,298
Income (Loss) before noncontrolling interests
in Income of consolidated entities 28,636 40,850 35,110 118,976 66,362
Income (Loss) attributable to
noncontrolling interests 202 378 233 935 787
Economic Net Income (Loss) $ 28,434 $ 40,472 $ 34,877 $ 118,041 $ 65,575
Assets Under Management $ 30,490,900 $ 29,048,500 $ 16,507,700 $ 30,490,900 $ 16,507,700
Fee Paying Assets Under Management $ 23,722,400 $ 22,048,900 $ 9,911,800 $ 23,722,400 $ 9,911,800
Committed Dollars Invested $ 326,400 $ 370,800 $ 278,300 $ 862,100 $ 558,400
Uncalled Commitments $ 1,614,600 $ 1,391,600 $ 1,251,200 $ 1,614,600 $ 1,251,200
(a) For the quarter ended September 30, 2013, other operating expenses include $9.7 million of one-time expenses incurred in connection with the launch of a closed-end fund.
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENTS (UNAUDITED)
(Amounts in thousands)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Fees
Management and incentive fees:
Management fees $ - $ - $ - $ - $ -
Incentive fees - - - - -
Management and incentive fees - - - - -
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 53,625 30,311 33,696 104,717 95,524
Fee credits - - - - -
Net monitoring and transaction fees 53,625 30,311 33,696 104,717 95,524
Total fees 53,625 30,311 33,696 104,717 95,524
Expenses
Compensation and benefits 8,223 6,930 8,438 22,614 22,820
Occupancy and related charges 401 309 213 1,065 691
Other operating expenses 3,628 1,892 2,346 8,382 7,862
Total expenses 12,252 9,131 10,997 32,061 31,373
Fee Related Earnings 41,373 21,180 22,699 72,656 64,151
Investment income (loss)
Realized carried interest - - - - -
Unrealized carried interest - - - - -
Gross carried interest - - - - -
Less: allocation to KKR carry pool - - - - -
Less: management fee refunds - - - - -
Net carried interest - - - - -
Other investment income (loss) (a) 300,119 11,277 239,072 633,567 1,001,455
Total investment income (loss) 300,119 11,277 239,072 633,567 1,001,455
Income (Loss) before noncontrolling interests
in Income of consolidated entities 341,492 32,457 261,771 706,223 1,065,606
Income (Loss) attributable to
noncontrolling interests 1,385 534 633 2,267 1,913
Economic Net Income (Loss) $ 340,107 $ 31,923 $ 261,138 $ 703,956 $ 1,063,693
Syndicated Capital $ 716,500 $ 204,600 $ 24,700 $ 982,100 $ 275,300
(a) Amount is net of (i) interest expense and (ii) certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income that is not included in “Compensation and benefits” and “Other operating expenses” above and on page 6.
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended September 30, 2013
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 119,410 $ 53,835 $ - $ 173,245
Incentive fees - 1,225 - 1,225
Management and incentive fees 119,410 55,060 - 174,470
Monitoring and transaction fees:
Monitoring fees 33,010 - - 33,010
Transaction fees 54,968 20,534 53,625 129,127
Fee credits (46,597 ) (15,185 ) - (61,782 )
Net monitoring and transaction fees 41,381 5,349 53,625 100,355
Total fees 160,791 60,409 53,625 274,825
Expenses
Compensation and benefits 65,400 18,606 8,223 92,229
Occupancy and related charges 13,367 1,906 401 15,674
Other operating expenses 37,586 19,670 3,628 60,884
Total expenses 116,353 40,182 12,252 168,787
Fee Related Earnings 44,438 20,227 41,373 106,038
Investment income (loss)
Realized carried interest 81,532 - - 81,532
Unrealized carried interest 263,982 14,022 - 278,004
Gross carried interest 345,514 14,022 - 359,536
Less: allocation to KKR carry pool (139,903 ) (5,609 ) - (145,512 )
Less: management fee refunds (7,767 ) - - (7,767 )
Net carried interest 197,844 8,413 - 206,257
Other investment income (loss) 3,357 (4 ) 300,119 303,472
Total investment income (loss) 201,201 8,409 300,119 509,729
Income (Loss) before noncontrolling interests
in Income of consolidated entities 245,639 28,636 341,492 615,767
Income (Loss) attributable to
noncontrolling interests 433 202 1,385 2,020
Economic Net Income (Loss) $ 245,206 $ 28,434 $ 340,107 $ 613,747
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended June 30, 2013
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 114,700 $ 49,476 $ - $ 164,176
Incentive fees - 15,590 - 15,590
Management and incentive fees 114,700 65,066 - 179,766
Monitoring and transaction fees:
Monitoring fees 28,907 - - 28,907
Transaction fees 25,231 7,243 30,311 62,785
Fee credits (29,547 ) (5,204 ) - (34,751 )
Net monitoring and transaction fees 24,591 2,039 30,311 56,941
Total fees 139,291 67,105 30,311 236,707
Expenses
Compensation and benefits 51,516 21,990 6,930 80,436
Occupancy and related charges 11,143 1,615 309 13,067
Other operating expenses 33,988 9,147 1,892 45,027
Total expenses 96,647 32,752 9,131 138,530
Fee Related Earnings 42,644 34,353 21,180 98,177
Investment income (loss)
Realized carried interest 269,828 - - 269,828
Unrealized carried interest (212,809 ) 10,791 - (202,018 )
Gross carried interest 57,019 10,791 - 67,810
Less: allocation to KKR carry pool (22,220 ) (4,316 ) - (26,536 )
Less: management fee refunds (4,735 ) - - (4,735 )
Net carried interest 30,064 6,475 - 36,539
Other investment income (loss) (249 ) 22 11,277 11,050
Total investment income (loss) 29,815 6,497 11,277 47,589
Income (Loss) before noncontrolling interests
in Income of consolidated entities 72,459 40,850 32,457 145,766
Income (Loss) attributable to
noncontrolling interests 411 378 534 1,323
Economic Net Income (Loss) $ 72,048 $ 40,472 $ 31,923 $ 144,443
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended September 30, 2012
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 105,035 $ 21,448 $ - $ 126,483
Incentive fees - 17,768 - 17,768
Management and incentive fees 105,035 39,216 - 144,251
Monitoring and transaction fees:
Monitoring fees 29,969 - - 29,969
Transaction fees 32,788 8,780 33,696 75,264
Fee credits (26,293 ) (5,414 ) - (31,707 )
Net monitoring and transaction fees 36,464 3,366 33,696 73,526
Total fees 141,499 42,582 33,696 217,777
Expenses
Compensation and benefits 48,905 13,997 8,438 71,340
Occupancy and related charges 12,049 1,343 213 13,605
Other operating expenses 35,885 3,897 2,346 42,128
Total expenses 96,839 19,237 10,997 127,073
Fee Related Earnings 44,660 23,345 22,699 90,704
Investment income (loss)
Realized carried interest 166,908 - - 166,908
Unrealized carried interest 224,260 19,568 - 243,828
Gross carried interest 391,168 19,568 - 410,736
Less: allocation to KKR carry pool (161,805 ) (7,828 ) - (169,633 )
Less: management fee refunds (61,499 ) - - (61,499 )
Net carried interest 167,864 11,740 - 179,604
Other investment income (loss) 1,779 25 239,072 240,876
Total investment income (loss) 169,643 11,765 239,072 420,480
Income (Loss) before noncontrolling interests
in Income of consolidated entities 214,303 35,110 261,771 511,184
Income (Loss) attributable to
noncontrolling interests 444 233 633 1,310
Economic Net Income (Loss) $ 213,859 $ 34,877 $ 261,138 $ 509,874
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Nine Months Ended September 30, 2013
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 340,715 $ 149,669 $ - $ 490,384
Incentive fees - 35,664 - 35,664
Management and incentive fees 340,715 185,333 - 526,048
Monitoring and transaction fees:
Monitoring fees 93,985 - - 93,985
Transaction fees 96,611 30,883 104,717 232,211
Fee credits (97,153 ) (22,445 ) - (119,598 )
Net monitoring and transaction fees 93,443 8,438 104,717 206,598
Total fees 434,158 193,771 104,717 732,646
Expenses
Compensation and benefits 164,917 60,296 22,614 247,827
Occupancy and related charges 35,935 5,063 1,065 42,063
Other operating expenses 105,516 36,643 8,382 150,541
Total expenses 306,368 102,002 32,061 440,431
Fee Related Earnings 127,790 91,769 72,656 292,215
Investment income (loss)
Realized carried interest 439,527 - - 439,527
Unrealized carried interest 361,972 45,212 - 407,184
Gross carried interest 801,499 45,212 - 846,711
Less: allocation to KKR carry pool (323,467 ) (18,085 ) - (341,552 )
Less: management fee refunds (21,718 ) - - (21,718 )
Net carried interest 456,314 27,127 - 483,441
Other investment income (loss) 1,073 80 633,567 634,720
Total investment income (loss) 457,387 27,207 633,567 1,118,161
Income (Loss) before noncontrolling interests
in Income of consolidated entities 585,177 118,976 706,223 1,410,376
Income (Loss) attributable to
noncontrolling interests 1,242 935 2,267 4,444
Economic Net Income (Loss) $ 583,935 $ 118,041 $ 703,956 $ 1,405,932
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Nine Months Ended September 30, 2012
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 319,117 $ 65,635 $ - $ 384,752
Incentive fees - 31,495 - 31,495
Management and incentive fees 319,117 97,130 - 416,247
Monitoring and transaction fees:
Monitoring fees 83,577 - - 83,577
Transaction fees 55,223 12,521 95,524 163,268
Fee credits (59,641 ) (8,098 ) - (67,739 )
Net monitoring and transaction fees 79,159 4,423 95,524 179,106
Total fees 398,276 101,553 95,524 595,353
Expenses
Compensation and benefits 139,382 34,608 22,820 196,810
Occupancy and related charges 36,487 4,127 691 41,305
Other operating expenses 103,790 11,754 7,862 123,406
Total expenses 279,659 50,489 31,373 361,521
Fee Related Earnings 118,617 51,064 64,151 233,832
Investment income (loss)
Realized carried interest 307,387 - - 307,387
Unrealized carried interest 830,072 25,515 - 855,587
Gross carried interest 1,137,459 25,515 - 1,162,974
Less: allocation to KKR carry pool (463,485 ) (10,207 ) - (473,692 )
Less: management fee refunds (135,011 ) - - (135,011 )
Net carried interest 538,963 15,308 - 554,271
Other investment income (loss) (559 ) (10 ) 1,001,455 1,000,886
Total investment income (loss) 538,404 15,298 1,001,455 1,555,157
Income (Loss) before noncontrolling interests
in Income of consolidated entities 657,021 66,362 1,065,606 1,788,989
Income (Loss) attributable to
noncontrolling interests 3,098 787 1,913 5,798
Economic Net Income (Loss) $ 653,923 $ 65,575 $ 1,063,693 $ 1,783,191
KKR
BALANCE SHEETS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
As of September 30, 2013
Capital
Markets and
Private Public Principal Total
Markets Markets Activities Reportable
Segment Segment Segment Segments
Cash and short-term investments $ 173,453 $ 47,074 $ 1,680,428 $ 1,900,955
Investments - - 4,937,849
(a)
4,937,849
Unrealized carry 918,574 52,066 - 970,640
Other assets 363,981 283,283 58,336 705,600
Total assets $ 1,456,008 $ 382,423 $ 6,676,613 $ 8,515,044
Debt obligations $ - $ - $ 1,000,000 $ 1,000,000
Other liabilities 143,016 51,701 40,964 235,681
Total liabilities 143,016 51,701 1,040,964 1,235,681
Noncontrolling interests 1,479 649 69,487 71,615
Book value $ 1,311,513 $ 330,073 $ 5,566,162 $ 7,207,748
Book value per adjusted unit $ 1.83 $ 0.46 $ 7.78 $ 10.07
As of December 31, 2012
Capital
Markets and
Private Public Principal Total
Markets Markets Activities Reportable
Segment Segment Segment Segments
Cash and short-term investments $ 358,237 $ 28,690 $ 1,147,360 $ 1,534,287
Investments - - 4,758,157 4,758,157
Unrealized carry 730,292 24,939 - 755,231
Other assets 207,047 280,472 62,119 549,638
Total assets $ 1,295,576 $ 334,101 $ 5,967,636 $ 7,597,313
Debt obligations $ - $ - $ 500,000 $ 500,000
Other liabilities 78,724 16,433 24,275 119,432
Total liabilities 78,724 16,433 524,275 619,432
Noncontrolling interests 1,339 739 18,619 20,697
Book value $ 1,215,513 $ 316,929 $ 5,424,742 $ 6,957,184
Book value per adjusted unit $ 1.72 $ 0.45 $ 7.70 $ 9.87
(a) See Capital Markets and Principal Activities segment schedule of investments that follows.
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS (UNAUDITED)
(Amounts in thousands, except percentage amounts)
As of September 30, 2013
Fair Value as
Fair a Percentage of
Investment
Cost
Value Total Investments
Co-Investments in Portfolio Companies of
Private Equity Investment Vehicles:
Alliance Boots GmbH 195,640 491,801 10.0 %
HCA Inc. 96,289 363,611 7.4 %
ProSiebenSat.1 Media AG 226,913 279,201 5.7 %
The Nielsen Company B.V. 87,657 214,492 4.3 %
Samson Resources Corporation 237,514 190,012 3.8 %
KION Group 128,058 189,391 3.8 %
NXP B.V. 122,059 172,084 3.5 %
US Foods, Inc. 100,000 130,000 2.6 %
Biomet, Inc. 151,444 121,155 2.5 %
First Data Corporation 135,258 94,681 1.9 %
Dollar General Corporation 2,893 18,171 0.4 %
Energy Future Holdings Corp. 200,000 10,000 0.2 %
1,683,725 2,274,599 46.1 %
Private Equity Investment Vehicles
KKR 2006 Fund L.P. 340,655 389,950 7.9 %
KKR European Fund III L.P. 243,973 286,953 5.8 %
KKR Asian Fund L.P. 84,152 95,665 1.9 %
KKR North America Fund XI L.P. 61,565 64,106 1.3 %
KKR European Fund II L.P. 46,966 49,205 1.0 %
KKR Millennium Fund L.P. 50,470 42,693 0.9 %
KKR E2 Investors, L.P. 14,210 26,037 0.5 %
Co-Investments 7,598 7,730 0.2 %
KKR European Fund L.P. 47,664 4,290 0.1 %
KKR China Growth Fund L.P. 3,286 4,207 0.1 %
900,539 970,836 19.7 %
Private Equity Total 2,584,264 3,245,435 65.8 %
Real Assets
Royalties and Drilling 281,968 294,670 6.0 %
Real Estate Fund 45,135 57,065 1.2 %
Infrastructure Fund 30,324 32,668 0.7 %
Co-Investments 10,835 12,888 0.3 %
Natural Resources 12,917 8,159 0.2 %
Real Assets Total 381,179 405,450 8.4 %
Private Markets Total 2,965,443 3,650,885 74.2 %
Public Markets Investment Strategies
Liquid Credit 187,263 196,972 4.0 %
Long/Short Equities 100,000 110,899 2.2 %
Credit Relative Value 82,000 91,550 1.9 %
Direct Lending 49,796 55,323 1.1 %
Special Situations 30,205 34,600 0.7 %
Mezzanine Fund 15,865 19,331 0.4 %
Public Markets Total 465,129 508,675 10.3 %
Other 762,234 778,289 15.5 %
Total Investments $ 4,192,806 $ 4,937,849 100.0 %
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS, CONTINUED (UNAUDITED)
(Amounts in thousands, except percentage amounts)
As of September 30, 2013
Fair Value as
a Percentage
Investment
Cost
Fair
Value
of Total
Investments
Significant Aggregate Investments: (a)
Alliance Boots GmbH $ 228,769 $ 565,811 11.5 %
HCA Inc. 117,624 432,333 8.7 %
ProSieben.Sat 1 Media AG 242,643 297,299 6.0 %
589,036 1,295,443 26.2 %
Other investments 3,603,770 3,642,406 73.8 %
Total Investments $ 4,192,806 $ 4,937,849 100.0 %
(a) The significant aggregate investments include investments in portfolio companies with individual fair values of 5% or more of the Capital Markets and Principal Activities segment investments balance as of September 30, 2013. The fair value figures include the co-investment and the limited partner and/or general partner interests in the underlying portfolio company.
KKR
ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
Private Public Total
Markets Markets Reportable
Segment Segment Segments
Quarter Ended September 30, 2013
June 30, 2013 $ 54,452,400 $ 29,048,500 $ 83,500,900
New Capital Raised 4,670,800 1,821,700 6,492,500
Distributions (1,591,600 ) (552,300 )
(c)
(2,143,900 )
Foreign Exchange 33,100 - 33,100
Change in Value 2,113,600 173,000 2,286,600
September 30, 2013 $ 59,678,300 $ 30,490,900 $ 90,169,200
Nine Months Ended September 30, 2013
December 31, 2012 $ 49,127,600 $ 26,399,900 $ 75,527,500
New Capital Raised 12,319,000 5,056,500 17,375,500
Distributions (6,109,000 ) (1,952,500 )
(d)
(8,061,500 )
Net Changes in Fee Base of Certain Funds (a) (272,300 ) - (272,300 )
Foreign Exchange 22,100 - 22,100
Change in Value 4,590,900 987,000 5,577,900
September 30, 2013 $ 59,678,300 $ 30,490,900 $ 90,169,200
Trailing Twelve Months Ended September 30, 2013
September 30, 2012 $ 49,771,000 $ 16,507,700 $ 66,278,700
New Capital Raised 13,253,100 6,850,500 20,103,600
Acquisitions (b) - 8,086,900 8,086,900
Distributions (9,206,100 ) (2,438,100 )
(e)
(11,644,200 )
Net Changes in Fee Base of Certain Funds (a) (272,300 ) - (272,300 )
Foreign Exchange 39,500 - 39,500
Change in Value 6,093,100 1,483,900 7,577,000
September 30, 2013 $ 59,678,300 $ 30,490,900 $ 90,169,200
* Assets Under Management exclude those assets managed by entities where KKR holds less than a 50% ownership interest.
(a) Represents the impact of including certain funds entering the post-investment period.
(b) Represents AUM of Prisma as of October 1, 2012, the date of acquisition. This figure excludes new capital raised from fund investors and distributions since the acquisition.
(c) Includes $155.3 million of redemptions by fund investors.
(d) Includes $694.5 million of redemptions by fund investors.
(e) Includes $864.4 million of redemptions by fund investors.
KKR
FEE PAYING ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
Private Public Total
Markets Markets Reportable
Segment Segment Segments
Quarter Ended September 30, 2013
June 30, 2013 $ 45,907,500 $ 22,048,900 $ 67,956,400
New Capital Raised 4,366,900 1,719,500 6,086,400
Distributions (582,800 ) (311,100 )
(c)
(893,900 )
Foreign Exchange 162,800 - 162,800
Change in Value 35,100 265,100 300,200
September 30, 2013 $ 49,889,500 $ 23,722,400 $ 73,611,900
Nine Months Ended September 30, 2013
December 31, 2012 $ 41,173,000 $ 19,673,000 $ 60,846,000
New Capital Raised 11,730,800 4,453,800 16,184,600
Distributions (2,533,800 ) (1,284,800 )
(d)
(3,818,600 )
Net Changes in Fee Base of Certain Funds (a) (654,700 ) - (654,700 )
Foreign Exchange 107,400 - 107,400
Change in Value 66,800 880,400 947,200
September 30, 2013 $ 49,889,500 $ 23,722,400 $ 73,611,900
Trailing Twelve Months Ended September 30, 2013
September 30, 2012 $ 40,354,200 $ 9,911,800 $ 50,266,000
New Capital Raised 13,002,800 6,012,900 19,015,700
Acquisitions (b) - 8,078,400 8,078,400
Distributions (3,084,900 ) (1,542,000 )
(e)
(4,626,900 )
Net Changes in Fee Base of Certain Funds (a) (654,700 ) - (654,700 )
Foreign Exchange 191,000 - 191,000
Change in Value 81,100 1,261,300 1,342,400
September 30, 2013 $ 49,889,500 $ 23,722,400 $ 73,611,900
* Fee Paying Assets Under Management exclude those assets managed by entities where KKR holds less than a 50% ownership interest.
(a) Represents the impact of including certain funds entering the post-investment period.
(b) Represents FPAUM of Prisma as of October 1, 2012, the date of acquisition. This figure excludes new capital raised from fund investors and distributions since the acquisition.
(c) Includes $155.3 million of redemptions by fund investors.
(d) Includes $694.5 million of redemptions by fund investors.
(e) Includes $864.4 million of redemptions by fund investors.
KKR
INVESTMENT VEHICLE SUMMARY (a) (UNAUDITED)
As of September 30, 2013
(Amounts in millions, except percentages)
Investment Period Amount
Percentage
Committed by
Commencement Uncalled
General
Remaining
Remaining Fair
Date End Date Commitment Commitments Partner Invested Realized Cost
Value
Private Markets
Private Equity Funds
Asian Fund II 4/2013 4/2019 $ 5,825.0 $ 5,825.0 1.3 % $ - $ - $ - $ -
North America Fund XI 9/2012 9/2018 8,030.4 6,316.2 3.1 % 1,714.2 3.9 1,714.2 1,774.5
China Growth Fund 11/2010 11/2016 1,010.0 692.4 1.0 % 317.6 32.6 300.1 388.8
E2 Investors (Annex Fund) 8/2009 11/2013 347.9 152.1 4.3 % 195.8 - 195.8 395.1
European Fund III 3/2008 3/2014 6,108.1 1,599.4 4.6 % 4,508.7 653.5 4,151.3 5,154.1
Asian Fund 7/2007 4/2013 3,983.2 243.3 2.5 % 3,739.9 1,663.1 2,869.9 4,763.2
2006 Fund 9/2006 9/2012 17,642.2 1,255.5 2.1 % 16,386.7 10,874.8 9,914.7 14,627.2
European Fund II 11/2005 10/2008 5,750.8 - 2.1 % 5,750.8 3,245.1 3,120.4 4,636.4
Millennium Fund 12/2002 12/2008 6,000.0 - 2.5 % 6,000.0 9,502.7 2,084.1 3,500.4
European Fund 12/1999 12/2005 3,085.4 - 3.2 % 3,085.4 8,720.0 - 51.8
Total Private Equity Funds 57,783.0 16,083.9 41,699.1 34,695.7 24,350.5 35,291.5
Co-Investment Vehicles Various Various 3,137.9 1,083.1 Various 2,054.8 2,436.9 1,413.3 1,837.7
Total Private Equity 60,920.9 17,167.0 43,753.9 37,132.6 25,763.8 37,129.2
Real Assets
Energy Income and Growth Fund 9/2013 9/2018 1,413.5 1,413.5 17.9 % - - - -
Natural Resources Fund Various Various 1,072.3 499.4 Various 572.9 67.3 525.5 329.6
Global Energy Opportunities Various Various 861.0 734.4 Various 126.6 - 126.6 121.9
Infrastructure Fund Various Various 1,042.0 498.0 4.8 % 544.0 9.0
544.0 583.2
Infrastructure Co-Investments Various Various 1,356.2 251.7 Various 1,104.5 208.7
1,104.5 1,337.6
Real Estate Partners Americas 5/2013 (b) 694.0 539.8 29 % 154.2 - 154.2 196.0
Real Assets 6,439.0 3,936.8 2,502.2 285.0 2,454.8 2,568.3
Private Markets Total 67,359.9 21,103.8 46,256.1 37,417.6 28,218.6 39,697.5
Public Markets
Special Situations Vehicles Various Various 2,635.5 822.4 Various 1,813.1 530.4 1,567.3 1,934.1
Mezzanine Fund 3/2010 8/2015 987.0 564.1 4.6 % 422.9 129.3 364.9 426.9
Direct Lending Vehicles Various Various 681.0 228.1 Various 452.9 19.5 452.9 484.7
Public Markets Total 4,303.5 1,614.6 2,688.9 679.2 2,385.1 2,845.7
Grand Total $ 71,663.4 $ 22,718.4 $ 48,945.0 $ 38,096.8 $ 30,603.7 $ 42,543.2
(a) Reflects investment vehicles for which KKR has the ability to earn carried interest.
(b) Third anniversary of final close.
KKR
DISTRIBUTION CALCULATION (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
FRE (a) $ 106,038 $ 98,177 $ 90,704 $ 292,215 $ 233,832
Realized cash carry 48,919 161,897 100,145 263,716 184,432
Net realized principal investment income 102,766 150,361 145,700 406,283 499,898
Less: local income taxes (4,566 ) (5,336 ) (2,365 ) (12,243 ) (9,258 )
Less: noncontrolling interests (2,020 ) (1,323 ) (1,310 ) (4,444 ) (5,798 )
Total Distributable Earnings 251,137 403,776 332,874 945,527 903,106
Less: Undistributed net realized principal investment income (61,660 ) (90,217 ) (145,700 ) (243,771 ) (499,898 )
Distributed Earnings 189,477 313,559 187,174 701,756 403,208
Distributed Earnings to KKR & Co. L.P. (b) 78,300 126,295 66,015 280,344 140,216
Less: estimated current corporate income taxes (12,455 ) (10,125 ) (6,890 ) (28,956 ) (15,180 )
Distributed Earnings to KKR & Co. L.P., After Taxes 65,845 116,170 59,125 251,388 125,036
Distribution per KKR & Co. L.P. common unit $ 0.23 $ 0.42 $ 0.24 $ 0.92 $ 0.52
Components of Distribution per KKR & Co. L.P. common unit
After-tax FRE $ 0.10 $ 0.10 $ 0.09 $ 0.30 $ 0.24
Realized Cash Carry $ 0.07 $ 0.23 $ 0.15 $ 0.38 $ 0.28
Distributed Net Realized Principal Investment Income $ 0.06 $ 0.09 $ - $ 0.24 $ -
Outstanding KKR & Co. L.P. common units 285,051,256 277,834,343 241,407,805
(a) See Exhibit A for a reconciliation of such measure to financial results prepared in accordance with GAAP.
(b) Represents the amount of distributed earnings allocable to KKR & Co. L.P. based on its ownership in the KKR business.
DISTRIBUTION POLICY
KKR intends to make quarterly cash distributions in amounts that in the aggregate are expected to constitute substantially all of the cash earnings of its investment management business and 40% of the net cash income from realized principal investments, in each case in excess of amounts determined by KKR to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and its investment funds and to comply with applicable law and any of its debt instruments or other obligations. For purposes of KKR’s distribution policy, its distributions are expected to consist of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool and (iii) a percentage of net realized principal investment income. This amount is expected to be reduced by (i) corporate and applicable local taxes, if any, (ii) non-controlling interests, and (iii) amounts determined by KKR to be necessary or appropriate for the conduct of its business and other matters as discussed above.
The declaration and payment of any distributions are subject to the discretion of the board of directors of the general partner of KKR & Co. L.P., which may change the distribution policy at any time, and the terms of its limited partnership agreement. There can be no assurance that distributions will be made as intended or at all or that unitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR & Co. L.P. When KKR & Co. L.P. receives distributions from the KKR Group Partnerships (the holding companies of the KKR business), KKR Holdings receives its pro rata share of such distributions from the KKR Group Partnerships.
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 segment operating revenues less segment operating expenses, excluding certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income. This measure is used by management as an alternative measurement of the operating earnings of KKR and its business segments before investment income. 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 charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR & Co. L.P. 2010 Equity Incentive Plan; (vi) the exclusion of certain reimbursable expenses; and (vii) the exclusion of certain non-recurring items.
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 investment income and carried interest. ENI is comprised of: (i) FRE plus (ii) segment investment income (loss), which is reduced for carry pool allocations, management fee refunds, interest expense and certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income; less (iii) 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 exclusion of the items referred to in FRE above; (ii) the exclusion of investment income (loss) relating to noncontrolling interests; and (iii) the exclusion of income taxes.
Economic net income (loss), after taxes is used to measure KKR’s implied ENI on a fully diluted basis. We believe this measure is useful to unitholders as it provides an indication of KKR’s ENI as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P. Economic Net Income (Loss), After Taxes is calculated by deducting from ENI the implied income tax provision that has been calculated assuming that all income is allocated to KKR & Co. L.P., which would occur following an exchange of all KKR Holdings units for common units of KKR & Co. L.P. The assumptions and methodology used to calculate the implied income tax provision are consistent with those used in calculating the tax provision for KKR & Co. L.P. under GAAP. The implied income tax provision does not give effect to any tax savings or deductions that may result from the exchange of KKR Holdings units.
Economic net income (loss), after taxes and equity-based charges is used to measure KKR’s implied ENI on a fully diluted basis. We believe this measure is useful to unitholders as it provides an indication of KKR’s ENI as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P. Economic Net Income (Loss), After Taxes and Equity-based Charges is calculated by deducting from ENI: (i) equity-based charges associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan; and (ii) the implied income tax provision that has been calculated assuming that all income is allocated to KKR & Co. L.P., which would occur following an exchange of all KKR Holdings units for common units of KKR & Co. L.P. The assumptions and methodology used to calculate the implied income tax provision are consistent with those used in calculating the tax provision for KKR & Co. L.P. under GAAP. The implied income tax provision does not give effect to any tax savings or deductions that may result from the exchange of KKR Holdings units.
Net realized principal investment income refers to net cash income from (i) realized investment gains and losses excluding certain realized investment losses from principal investments during the second quarter of 2013 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 less certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income in each case generated by KKR’s principal investments held on or through KKR’s balance sheet in our Capital Markets and Principal Activities segment. This is a term to describe a portion of KKR’s quarterly distribution.
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 and (iii) net realized principal investment income; 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 also assess 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 and vehicles. 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 structured finance vehicles; and (v) the fair value of other assets managed by KKR. 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 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 and vehicles, for only those funds and vehicles 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.
Committed dollars invested is the aggregate amount of capital commitments that have 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 investment of committed capital. Such amounts include: (i) capital invested by fund investors and co-investors with respect to which KKR is entitled to a fee or carried interest and (ii) capital invested by KKR’s investment funds and vehicles.
Syndicated capital is the aggregate amount of debt or equity capital in transactions originated by KKR investment funds and vehicles, which has been distributed to third parties in exchange for a fee. It does not include (i) capital committed to such transactions by carry-yielding co-investment vehicles, which is instead reported in committed dollars invested and (ii) debt capital that is arranged as part of the acquisition financing of transactions originated by KKR investment funds and vehicles. 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 and Principal Activities 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 and vehicles to make future investments.
Adjusted units are used as a measure of the total equity ownership of KKR that is held by KKR & Co. L.P. and KKR Holdings 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 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 private equity funds, investment vehicles and principal investments. These financing arrangements are not direct obligations of the general partners of KKR’s private equity funds or its management companies. On a segment basis, interest expense is included in other 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 and vehicles and other noncontrolling interest holders. Additionally, we believe this measure is useful for analyzing KKR’s ability to service its debt obligations.
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 our investment portfolio, including carried interest, as well as our 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 the equivalent GAAP amounts on a consolidated basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings L.P.
Fee related EBITDA is comprised of FRE before the impact of depreciation of fixed assets and amortization of intangible assets and is used by management as a measure of the cash earnings of KKR and its business segments before investment income. We believe this measure is useful to unitholders as it provides additional insight into the amount of cash earnings generated by KKR’s management companies and capital markets businesses.
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.
KKR
EXHIBIT A
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT (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, 2013 June 30, 2013 September 30, 2012
Net income (loss) attributable to KKR & Co. L.P. per common unit $ 0.73 $ 0.06 $ 0.53
Weighted Average Common Units Outstanding 282,148,802 271,983,811 239,696,358
Net income (loss) attributable to KKR & Co. L.P. 204,740 15,134 127,411
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
300,169 28,106 249,460
Plus: Non-cash equity based charges 85,215 80,318 122,157
Plus: Amortization of intangibles and other, net 15,979 12,360 1,234
Plus: Income taxes 7,644 8,525 9,612
Economic net income (loss) 613,747 144,443 509,874
Less: Provision for income taxes 11,950 13,486 22,548
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 31,227 25,936 17,365
Economic net income (loss) after taxes and equity-based charges 570,570 105,021 469,961
Plus: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 31,227 25,936 17,365
Economic net income (loss) after taxes 601,797 130,957 487,326
Weighted Average Adjusted Units 715,781,663 715,453,358 702,252,548
Economic net income (loss) after taxes per adjusted unit $ 0.84 $ 0.18 $ 0.69
Nine Months Ended
September 30, 2013 September 30, 2012
Net income (loss) attributable to KKR & Co. L.P. per common unit $ 1.53 $ 1.98
Weighted Average Common Units Outstanding 270,484,224 234,876,879
Net income (loss) attributable to KKR & Co. L.P. 413,313 464,108
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
662,387 946,484
Plus: Non-cash equity based charges 247,183 330,037
Plus: Amortization of intangibles and other, net 57,524 4,785
Plus: Income taxes 25,525 37,777
Economic net income (loss) 1,405,932 1,783,191
Less: Provision for income taxes 45,553 91,788
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 84,581 47,678
Economic net income (loss) after taxes and equity-based charges 1,275,798 1,643,725
Plus: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 84,581 47,678
Economic net income (loss) after taxes 1,360,379 1,691,403
Weighted Average Adjusted Units 714,171,641 698,371,025
Economic net income (loss) after taxes per adjusted unit $ 1.90 $ 2.42
KKR
EXHIBIT A (CONTINUED)
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. (GAAP BASIS)
TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS, FEE RELATED EBITDA, AND TOTAL DISTRIBUTABLE EARNINGS (UNAUDITED)
(Amounts in thousands)
Quarter Ended
September 30, 2013 June 30, 2013 September 30, 2012
Net income (loss) attributable to KKR & Co. L.P. $ 204,740 $ 15,134 $ 127,411
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
300,169 28,106 249,460
Plus: Non-cash equity based charges 85,215 80,318 122,157
Plus: Amortization of intangibles and other, net 15,979 12,360 1,234
Plus: Income taxes 7,644 8,525 9,612
Economic net income (loss) 613,747 144,443 509,874
Plus: Income attributable to segment noncontrolling interests 2,020 1,323 1,310
Less: Investment income (loss) 509,729 47,589 420,480
Fee related earnings 106,038 98,177 90,704
Plus: Depreciation and amortization 3,601 3,708 3,273
Fee related EBITDA $ 109,639 $ 101,885 $ 93,977
Less: Depreciation and amortization 3,601 3,708 3,273
Plus: Realized cash carry 48,919 161,897 100,145
Plus: Net realized principal investment income 102,766 150,361 145,700
Less: Local income taxes and noncontrolling interests 6,586 6,659 3,675
Total distributable earnings $ 251,137 $ 403,776 $ 332,874
Nine Months Ended
September 30, 2013 September 30, 2012
Net income (loss) attributable to KKR & Co. L.P. $ 413,313 $ 464,108
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
662,387 946,484
Plus: Non-cash equity based charges 247,183 330,037
Plus: Amortization of intangibles and other, net 57,524 4,785
Plus: Income taxes 25,525 37,777
Economic net income (loss) 1,405,932 1,783,191
Plus: Income attributable to segment noncontrolling interests 4,444 5,798
Less: Investment income (loss) 1,118,161 1,555,157
Fee related earnings 292,215 233,832
Plus: Depreciation and amortization 10,990 8,919
Fee related EBITDA $ 303,205 $ 242,751
Less: Depreciation and amortization 10,990 8,919
Plus: Realized cash carry 263,716 184,432
Plus: Net realized principal investment income 406,283 499,898
Less: Local income taxes and noncontrolling interests 16,687 15,056
Total distributable earnings $ 945,527 $ 903,106
KKR
EXHIBIT A (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, 2013 December 31, 2012
KKR & Co. L.P. partners’ capital $ 2,495,093 $ 2,004,359
Noncontrolling interests held by KKR Holdings L.P. 4,796,218 4,981,864
Equity impact of KKR Management Holdings Corp. and other (83,563 ) (29,039 )
Book value 7,207,748 6,957,184
Adjusted units 715,755,721 704,780,484
Book value per adjusted unit $ 10.07 $ 9.87
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS)
TO CASH AND SHORT-TERM INVESTMENTS (SEGMENT BASIS) (UNAUDITED)
(Amounts in thousands)
As of As of
September 30, 2013 December 31, 2012
Cash and cash equivalents $ 1,112,316 $ 1,230,464
Liquid short-term investments 788,639 303,823
Cash and short-term investments $ 1,900,955 $ 1,534,287
KKR
EXHIBIT B
RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING 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, 2013 June 30, 2013 September 30, 2012
Weighted Average GAAP Common Units Outstanding - Basic 282,148,802 271,983,811 239,696,358
Weighted Average Unvested Common Units(a) 25,986,389 26,094,953 17,950,264
Weighted Average GAAP Common Units Outstanding - Diluted 308,135,191 298,078,764 257,646,622
Adjustments:
Weighted Average KKR Holdings Units(b) 407,646,472 417,374,594 444,605,926
Weighted Average Adjusted Units 715,781,663 715,453,358 702,252,548
Nine Months Ended
September 30, 2013 September 30, 2012
Weighted Average GAAP Common Units Outstanding - Basic 270,484,224 234,876,879
Weighted Average Unvested Common Units(a) 25,696,846 14,482,321
Weighted Average GAAP Common Units Outstanding - Diluted 296,181,070 249,359,200
Adjustments:
Weighted Average KKR Holdings Units(b) 417,990,571 449,011,825
Weighted Average Adjusted Units 714,171,641 698,371,025
RECONCILIATION OF GAAP COMMON UNITS OUTSTANDING TO ADJUSTED UNITS (UNAUDITED)
The following table provides a reconciliation of KKR's GAAP Common Units Outstanding to Adjusted Units.
As of As of
September 30, 2013 December 31, 2012
GAAP Common Units Outstanding - Basic 285,051,256 253,363,691
Unvested Common Units(a) 25,960,447 18,863,517
GAAP Common Units Outstanding - Diluted 311,011,703 272,227,208
Adjustments:
KKR Holdings Units(b) 404,744,018 432,553,276
Adjusted Units 715,755,721 704,780,484
(a) Represents equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. The issuance of common units of KKR & Co. L.P. pursuant to awards under its equity incentive plan dilutes KKR common unitholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business.
(b) Common units that may be issued by KKR & Co. L.P. upon exchange of units in KKR Holdings L.P. for KKR common units.
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Contact:.
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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 & Co. L.P. to Announce Third Quarter 2013 Results
Business WirePress Release: Kohlberg Kravis Roberts & Co. L.P. – 3 hours ago
KKR & Co. L.P. (KKR) announced today that it plans to release its financial results for the third quarter 2013 on Thursday, October 24, 2013, before the opening of trading on the New York Stock Exchange.
A conference call to discuss KKR’s financial results will be held on Thursday, October 24, 2013 at 11:00 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 76308413, beginning approximately two hours after the broadcast.
ABOUT KKR
Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $83.5 billion in assets under management as of June 30, 2013. With offices around the world, including Beijing, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with fund investors through its client relationships and capital markets platform. KKR & Co. L.P. is publicly traded on the New York Stock Exchange (KKR) and "KKR", as used in this release, includes its subsidiaries, their managed investment funds and accounts, and/or their affiliated investment vehicles, as appropriate. For additional information, please visit KKR's website at www.kkr.com.
Contact:
Investor Relations:
Craig Larson
Kohlberg Kravis Roberts & Co. L.P.
Tel: +1 (877) 610-4910 (U.S.) / +1 (212) 230-9410
investor-relations@kkr.com
or
Media Contact:
Kristi Huller
Kohlberg Kravis Roberts & Co. L.P.
Tel: + 1 (212) 750-8300
media@kkr.com
KKR to Acquire The Crosby Group and Acco Material Handling Solutions
Business WirePress Release: KKR – 44 minutes ago..
Global investment firm KKR announced today the signing of a definitive agreement to acquire The Crosby Group (“Crosby”) and Acco Material Handling Solutions (“Acco”) from Melrose Industries PLC for approximately $1.0 billion.
With roots dating back to 1885, Crosby is a leading global provider of highly engineered solutions for lifting and rigging applications across the oil and gas, construction, mining and industrial sectors. Headquartered in Tulsa, Oklahoma, Crosby has over 1,300 employees globally and is known for its iconic brands, including Crosby, McKissick, National and Lebus.
Acco, headquartered in York, Pennsylvania, has 130 employees and provides custom-built specialty material handling equipment, including a full line of hoists, industrial cranes, monorails, carts and trailers that are sold under the well-recognized Louden, Wright and Nutting brands.
Pete Stavros, a Member of KKR and Head of the Industrials investing team, stated: “Crosby and Acco have long and distinguished histories of providing distributors and end customers with the highest quality products and customer support to meet their lifting and rigging needs. We are excited to partner with the many dedicated employees of both companies and look forward to working together to begin a new chapter of growth and global expansion.”
The transaction is subject to customary regulatory approvals and is expected to close in the fourth quarter of 2013.
Rothschild and Simmons & Company International served as lead financial and M&A advisors to KKR, and Morgan Stanley, UBS Investment Bank, and RBC Capital Markets also served as M&A advisors. Fully committed financing will be provided by Morgan Stanley, UBS Investment Bank, and KKR Capital Markets. Kirkland & Ellis LLP served as legal counsel to KKR.
About KKR
Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $83.5 billion in assets under management as of June 30, 2013. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with fund investors through its client relationships and capital markets platform. KKR & Co L.P. is publicly traded on the New York Stock Exchange (KKR), and "KKR," as used in this release, includes its subsidiaries, their managed investment funds and accounts, and/or their affiliated investment vehicles, as appropriate.
About the Crosby Group and Acco Material Handling Solutions
Crosby and Acco are global market leaders in the design, manufacture and marketing of highly-engineered solutions and accessories used in lifting, rigging and material handling applications. Headquartered in Tulsa, OK, Crosby manufactures lifting and rigging products, such as shackles, blocks, sheaves, fittings, hooks, swivels, and clamps under leading brands, which include Crosby, McKissick, National and Lebus. Headquartered in York, PA, Acco manufactures specialty material handling solutions under the well-recognized Louden, Wright and Nutting brands.
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Contact:.
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Media:
New York
KKR
Kristi Huller, 212-230-9722
Bid higher than ask, "crossed market" the National Association of Securities Dealers prohibits this from being done deliberately.
Panasonic and KKR Agree to Panasonic Healthcare Share Purchase
Companies to form joint holding company
Business WirePress Release: Kohlberg Kravis Roberts & Co. L.P. – 18 hours ago
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KKR 20.89 +0.29
TOKYO & NEW YORK--(BUSINESS WIRE)--
Panasonic Corporation (“Panasonic”) and Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, "KKR") today announced the signing of a share purchase agreement and a shareholders’ agreement under which Panasonic and KKR will become joint partners of Panasonic Healthcare Co., Ltd. (“Panasonic Healthcare”).
Based on today’s agreements, PHC Holdings Co, Ltd. (“PHCHD"), which is wholly-owned by KKR investment funds, will purchase all outstanding shares of Panasonic Healthcare, including its related intellectual property and assets, for an equity value of approximately JPY 165 billion (approximately US$ 1.67 billion at the exchange rate of US$1=JPY99). The transaction will be followed by a third party share allocation by PHCHD, after which KKR will own 80% of outstanding shares of PHCHD and Panasonic will own 20%. Panasonic and KKR will cooperate in the management of Panasonic Healthcare.
Panasonic Healthcare is a comprehensive healthcare company focusing on three core businesses—In Vitro Diagnostics, Medicom, and Biomedical. Panasonic Healthcare’s In Vitro Diagnostics business has a leading global market share in the manufacture and sale of blood glucose monitoring meters and sensors for diabetics. Its Medicom business has the top share in Japan in medical receipt computers, electronic health record systems and other IT equipment for medical clinics, while its Biomedical business has a leading market share in Japan and overseas in biomedical laboratory equipment including CO2 incubators and ultra-low temperature freezers.
Panasonic and KKR will leverage their respective business resources, including their healthcare industry knowledge, technology, and specialist expertise, as well as their global healthcare industry investment experience and network, to together aim for further growth of Panasonic Healthcare.
Panasonic President, Kazuhiro Tsuga, said, “As previously announced in Panasonic’s New Midterm Management Plan, we have been seeking a partner who shares our vision for achieving a step change in the growth and evolution of Panasonic Healthcare. Today, we are pleased to have reached an agreement with KKR to acquire Panasonic Healthcare. We understand KKR has been actively investing in the expanding healthcare sector, and we highly respect KKR’s industry expertise and its capability to provide the necessary growth capital and operational know-how, in preparation for the future development of Panasonic Healthcare in the global healthcare industry. Through our partnership, Panasonic will work with KKR to support the growth of Panasonic Healthcare, which will continue to be a member of the Panasonic Group. At the same time, we believe that partnering with KKR will also allow us to learn from KKR’s global operational and business management expertise as we pursue the next stage in growth for Panasonic.”
Commenting on the agreements, KKR’s Co-Founder and Co-CEO Henry Kravis said, “Panasonic Healthcare has excellent market positions and high-level technical capabilities, and we believe it has significant growth potential. Panasonic Healthcare’s experienced management team and employees, our equity partner Panasonic, and KKR all share a common goal of working together as partners over the long term to support further growth of Panasonic Healthcare. Japan is a very important and attractive market for KKR, and our experienced team on the ground in Japan looks forward to leveraging KKR’s global expertise and experience to make this a highly successful partnership.”
Panasonic Healthcare President Kenji Yamane said, “KKR has built long-term relationships with its portfolio companies around the world, and I am delighted for their support as Panasonic’s new partner for Panasonic Healthcare. Looking ahead, we aim to accelerate growth by building out our global sales channels to major overseas healthcare facilities, aided by KKR’s overseas network, and delivering to customers around the world an enhanced range of products and services. We also welcome the continued support of Panasonic as an important shareholder in this partnership.”
Subject to approval by the relevant authorities and other customary closing conditions the above agreements are expected to be completed by the end of March 2014.
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About Panasonic Corporation
Panasonic Corporation is a worldwide leader in the development and engineering of electronic technologies and solutions for customers in residential, non-residential, mobility and personal applications. Since its founding in 1918, the company has expanded globally and now operates over 500 consolidated companies worldwide, recording consolidated net sales of 7.30 trillion yen for the year ended March 31, 2013. Committed to pursuing new value through innovation across divisional lines, the company strives to create a better life and a better world for its customers. For more information about Panasonic, please visit the company's website at http://panasonic.net/.
About Panasonic Healthcare
Established in 1969, Panasonic Healthcare is a Panasonic group company involved in developing, manufacturing, selling and servicing medical equipment. It seeks to strengthen its core businesses, In Vitro Diagnostics including self-monitoring of blood glucose systems, its Medicom businesses involved in medical IT businesses and its life sciences based Biomedical business and to continue to pursue an important role in the provision of optimal healthcare for all. For further information on Panasonic Healthcare please visit http://panasonic.net/corporate/segments/phc/.
About KKR
KKR was founded in 1976 and is led by Henry Kravis and George Roberts. KKR is a leading global investment firm with $83.5 billion in assets under management as of June 30, 2013. KKR has offices located worldwide and manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR & Co. L.P. is publicly traded on the New York Stock Exchange (KKR), and “KKR,” as used in this release, includes its subsidiaries, their managed investment funds and accounts, and/or their affiliated investment vehicles, as appropriate. For additional information on KKR, please visit KKR's website at www.kkr.com.
Contact:
Media Contacts:
Panasonic / Panasonic Healthcare
Tokyo Public Relations Office
Tel: +81 3 3574 5664 Fax: +81 3 3574 5699
or
Panasonic News Bureau
Tel: +81 3 3542 6205 Fax: +81 3 3542 9018
or
KKR Asia Pacific
Steven Okun, +65 6922 5800
Steven.Okun@kkr.com
or
KKR Japan
Ashton Consulting
+81 3 5425 7220
KKRJapanPR@ashton.jp
or
KKR New York
Kristi Huller, +1 212 230 9722
Kristi.Huller@kkr.com
KKR & Co. L.P. Announces Second Quarter 2013 Results
Realization activity drives record cash carry and $0.42 distribution per common unit
GAAP net income (loss) attributable to KKR & Co. L.P. was $15.1 million and $208.6 million for the quarter and six months ended June 30, 2013, respectively, down from $146.3 million and $336.7 million in the comparable periods of 2012.
Assets under management (“AUM”) totaled $83.5 billion as of June 30, 2013, up from $78.3 billion as of March 31, 2013.
Fee related earnings (“FRE”) were $98.2 million and $186.2 million for the quarter and six months ended June 30, 2013, respectively, up from $69.8 million and $143.1 million in the comparable periods of 2012.
Total distributable earnings were $403.8 million for the quarter ended June 30, 2013, down from $406.1 million for the quarter ended June 30, 2012. Total distributable earnings were $694.4 million for the six months ended June 30, 2013, up from $570.2 million in the comparable period of 2012.
Economic net income (“ENI”) was $144.4 million and $792.2 million for the quarter and six months ended June 30, 2013, respectively, down from $546.1 million and $1,273.3 million in the comparable periods of 2012.
After-tax ENI was $0.18 and $1.06 per adjusted unit for the quarter and six months ended June 30, 2013, respectively, down from $0.74 and $1.73 per adjusted unit in the comparable periods of 2012.
Book value was $6.9 billion on a total reportable segment basis as of June 30, 2013 or $9.65 per adjusted unit.
KKR & Co. L.P. declares a second quarter distribution of $0.42 per common unit, which includes $0.23 per common unit of cash carry and $0.09 per common unit of net realized principal investment income.
Business WirePress Release: KKR & Co. L.P. – Fri, Jul 26, 2013 8:00 AM EDT..
KKR & Co. L.P. ( KKR ) today reported its second quarter 2013 results.
AUM and fee paying assets under management (FPAUM) were $83.5 billion and $68.0 billion, respectively as of June 30, 2013, both up from March 31, 2013. The increases in both AUM and FPAUM were primarily attributable to new capital raised relating to the Asian Fund II. The increases were partially offset by distributions to fund limited partners and to a lesser extent the impact of the Asian Fund entering its post-investment period.
For the quarter and six months ended June 30, 2013, FRE was $98.2 million and $186.2 million, respectively, up from $69.8 million and $143.1 million in the comparable periods of 2012. The increase in both comparable periods was primarily driven by new capital raised over the past twelve months and the acquisition of Prisma.
For the quarter and six months ended June 30, 2013, the carrying value of our private equity investment portfolio appreciated 0.9% and 6.6%, respectively. ENI was $144.4 million and $792.2 million for the quarter and six months ended June 30, 2013, respectively, down from $546.1 million and $1,273.3 million in the comparable periods of 2012. The decrease in both comparable periods was primarily due to lower investment income earned from our principal investments as well as a lower level of net carried interest earned from our private equity funds. While the fair value of our principal investments increased during the quarter and six months ended June 30, 2013, the level of appreciation was lower than in the comparable periods of 2012.
Over the past year, organic fee-paying AUM inflows have exceeded $19 billion, supporting the continued growth of our Private Markets business as well as the scaling of our newer strategies in Public Markets, said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. In addition, our realization activity in the second quarter drove the highest cash carry weve reported since going public, contributing to a quarterly distribution of $0.42 per unit.
Note: Certain financial measures, including FRE, ENI, after-tax ENI, ENI after taxes and equity-based charges, fee related EBITDA, 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 A and B for a reconciliation of such measures to financial results prepared in accordance with GAAP.
GAAP RESULTS
GAAP results for the quarter and six months ended June 30, 2013 included net income attributable to KKR & Co. L.P. of $15.1 million and $208.6 million, respectively, and net income attributable to KKR & Co. L.P. per common unit of $0.05 and $0.72, respectively, on a diluted basis. For the quarter and six months ended June 30, 2012, net income attributable to KKR & Co. L.P. was $146.3 million and $336.7 million, respectively, and net income attributable to KKR & Co. L.P. per common unit was $0.58 and $1.37, respectively, on a diluted basis. The decrease in both comparable periods was primarily due to a lower level of investment appreciation recorded in net gains (losses) from investment activities. The decrease in net gains (losses) from investment activities was partially offset by increases in fees primarily attributable to the acquisition of Prisma and higher transaction fees. The decrease in compensation and benefits expense was primarily attributable to lower carry pool allocations as a result of the recognition of lower carried interest during the quarter and six months ended June 30, 2013 compared to the comparable periods in 2012.
SEGMENT RESULTS
Private Markets
AUM was $54.5 billion as of June 30, 2013, an increase of $4.2 billion, or 8.3%, compared to AUM of $50.3 billion as of March 31, 2013. The increase was primarily attributable to new capital raised from the Asian Fund II and to a lesser extent appreciation in the fair value of our private equity portfolio. These increases were partially offset by distributions to the limited partners of our private equity funds arising from realizations and a reduction in AUM as a result of the Asian Fund entering its post-investment period.
FPAUM was $45.9 billion as of June 30, 2013, an increase of $4.7 billion, or 11.4%, compared to FPAUM of $41.2 billion as of March 31, 2013. The increase was primarily attributable to new capital raised from the Asian Fund II partially offset by distributions to the limited partners of our private equity funds arising from realizations and the reduction in the fee base of the Asian Fund as a result of the fund entering the post-investment period.
FRE was $42.6 million for the quarter ended June 30, 2013, an increase of $6.4 million, or 17.6%, compared to FRE of $36.2 million for the quarter ended June 30, 2012. FRE was $83.4 million for the six months ended June 30, 2013, an increase of $9.4 million, or 12.7%, compared to FRE of $74.0 million for the six months ended June 30, 2012. The increase in both comparable periods was primarily driven by higher management fees resulting from new capital raised and higher transaction fees. These increases were partially offset by higher compensation expense due to additional headcount.
ENI was $72.0 million for the quarter ended June 30, 2013, a decrease of $102.7 million, or 58.7%, compared to ENI of $174.7 million for the quarter ended June 30, 2012. ENI was $338.7 million for the six months ended June 30, 2013, a decrease of $101.4 million, or 23.0%, compared to ENI of $440.1 million for the six months ended June 30, 2012. The decrease in both comparable periods was primarily attributable to lower net carried interest resulting from a lower level of appreciation in our private equity portfolio, partially offset by the increase in FRE discussed above.
Public Markets
AUM was $29.0 billion as of June 30, 2013, an increase of $1.1 billion, or 3.9%, compared to AUM of $27.9 billion as of March 31, 2013. FPAUM was $22.0 billion as of June 30, 2013, an increase of $0.8 billion, or 3.7%, compared to FPAUM of $21.2 billion as of March 31, 2013. For both AUM and FPAUM, the increases were primarily attributable to net new capital raised and to a lesser extent appreciation in the net asset values of certain credit investment vehicles.
FRE was $34.4 million for the quarter ended June 30, 2013, an increase of $22.1 million compared to FRE of $12.3 million for the quarter ended June 30, 2012. FRE was $71.5 million for the six months ended June 30, 2013, an increase of $43.8 million compared to FRE of $27.7 million for the six months ended June 30, 2012. The increase in both comparable periods was principally attributable to (i) higher management fees related to new capital raised, (ii) the acquisition of Prisma and (iii) higher incentive fees earned.
ENI was $40.5 million for the three months ended June 30, 2013, an increase of $33.7 million compared to ENI of $6.8 million for the three months ended June 30, 2012. ENI was $89.6 million for the six months ended June 30, 2013, an increase of $58.9 million compared to ENI of $30.7 million for the six months ended June 30, 2012. The increase in both comparable periods was primarily driven by the increase in FRE discussed above and to a lesser extent higher net carried interest due to investment appreciation of certain carry-earning investment vehicles.
Capital Markets and Principal Activities
FRE was $21.2 million for the quarter ended June 30, 2013, which was the same as in the quarter ended June 30, 2012.
FRE was $31.3 million for the six months ended June 30, 2013, a decrease of $10.2 million, or 24.5%, compared to FRE of $41.5 million for the six months ended June 30, 2012. The decrease was primarily driven by a lower level of overall capital markets transaction activity.
ENI was $31.9 million for the quarter ended June 30, 2013, a decrease of $332.6 million compared to ENI of $364.5 million for the quarter ended June 30, 2012. ENI was $363.8 million for the six months ended June 30, 2013, a decrease of $438.8 million compared to ENI of $802.6 million for the six months ended June 30, 2012. The decrease in both comparative periods was primarily due to a lower level of investment income from our principal investments. While the fair value of our principal investments increased during the quarter and six months ended June 30, 2013, the level of appreciation was lower than in the comparable periods of 2012.
CAPITAL AND LIQUIDITY
As of June 30, 2013, KKR had $2.0 billion of cash and short-term investments on a total reportable segment basis and $1.0 billion of outstanding debt obligations. KKRs availability for borrowings was $750.0 million (reduced for an outstanding letter of credit), which does not include a $500.0 million revolving credit facility for use in its capital markets business that was undrawn as of June 30, 2013.
As of June 30, 2013, KKRs portion of total uncalled commitments to its investment funds was $786.6 million, consisting of the following (amounts in thousands):
Uncalled
Commitments
Private Markets
North America Fund XI $ 229,600
Real Estate Fund 135,100
European Fund III 125,100
Asian Fund II 75,000
2006 Fund 63,800
Infrastructure 28,900
E2 Investors (Annex Fund) 14,000
Asian Fund 10,900
Natural Resources 10,300
China Growth Fund 6,500
Other 11,300
Total Private Markets Commitments 710,500
Public Markets
Direct Lending Vehicles 30,100
Mezzanine Fund 29,600
Special Situations Vehicles 16,400
Total Public Markets Commitments 76,100
Total Uncalled Commitments $ 786,600
DISTRIBUTION
A distribution of $0.42 per common unit has been declared, comprised of (i) $0.10 per common unit from after-tax FRE, (ii) $0.23 per common unit from realized cash carry, and (iii) $0.09 per common unit from net realized principal investment income. The distribution will be paid on August 20, 2013 to unitholders of record as of the close of business on August 5, 2013. Please refer to the distribution policy presented later in this release.
CONFERENCE CALL
A conference call to discuss KKRs financial results will be held on Friday, July 26, 2013 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 Public Investors section of KKRs website at http://ir.kkr.com/kkr_ir/kkr_events.cfm . A replay of the live broadcast will be available on KKRs website or by dialing (855) 859-2056 (U.S. callers) or +1 (404) 537-3406 (non-U.S. callers), pass code 14885175, 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
Founded in 1976 and led by Henry Kravis and George Roberts , KKR is a leading global investment firm with $83.5 billion in assets under management as of June 30, 2013. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with fund investors through its client relationships and capital markets platform. KKR & Co. L.P. is publicly traded on the New York Stock Exchange ( KKR ) and KKR, as used in this release, includes its subsidiaries, their managed investment funds and accounts, and/or their affiliated investment vehicles, as appropriate. For additional information, please visit KKRs 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 KKRs 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, KKRs business, financial condition, liquidity and results of operations, including but not limited to AUM, FPAUM, FRE, total distributable earnings, ENI, after-tax ENI, ENI after taxes and equity-based charges, fee related EBITDA, committed dollars invested and syndicated capital, uncalled commitments, core interest expense, cash and short-term investments, net realized principal 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 KKRs business strategies including the ability to realize the anticipated synergies from acquisitions or strategic partnerships such as Prisma or Nephila; 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 KKRs 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, KKRs 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, 2012, filed with the SEC on February 22, 2013, 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, 2013 June 30, 2012 June 30, 2013 June 30, 2012
Revenues
Fees $ 166,376 $ 112,360 $ 317,616 $ 228,667
Expenses
Compensation and Benefits 200,602 280,640 531,723 653,050
Occupancy and Related Charges 13,878 14,095 28,399 29,292
General, Administrative and Other 77,542 54,004 171,230 111,655
Total Expenses 292,022 348,739 731,352 793,997
Investment Income (Loss)
Net Gains (Losses) from Investment Activities 98,537 1,601,688 2,368,354 4,688,553
Dividend Income
209,486 79,919 248,955 252,858
Interest Income 128,020 87,892 237,389 164,091
Interest Expense (24,614 ) (16,884 ) (47,637 ) (34,889 )
Total Investment Income (Loss) 411,429 1,752,615 2,807,061 5,070,613
Income (Loss) Before Taxes 285,783 1,516,236 2,393,325 4,505,283
Income Taxes 8,525 11,093 17,881 28,165
Net Income (Loss) 277,258 1,505,143 2,375,444 4,477,118
Net Income (Loss) Attributable to
Redeemable Noncontrolling Interests (7,800 ) 3,285 16,823 8,557
Net Income (Loss) Attributable to
Noncontrolling Interests 269,924 1,355,597 2,150,048 4,131,864
Net Income (Loss) Attributable to KKR & Co. L.P. $ 15,134 $ 146,261 $ 208,573 $ 336,697
Distributions Declared per KKR & Co. L.P. Common Unit $ 0.42 $ 0.13 $ 0.69 $ 0.28
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic $ 0.06 $ 0.62 $ 0.79 $ 1.45
Diluted (a) $ 0.05 $ 0.58 $ 0.72 $ 1.37
Weighted Average Common Units Outstanding
Basic 271,983,811 235,781,983 264,555,267 232,440,659
Diluted (a) 298,078,764 252,507,802 290,104,942 245,169,954
(a) KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit given that the exchange of these units would proportionally increase KKR & Co. L.P.s interests in KKRs business and would have an anti-dilutive effect on earnings per common unit as a result of certain tax benefits KKR & Co. L.P. is assumed to receive upon the exchange.
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, 2013 March 31, 2013 June 30, 2012 June 30, 2013 June 30, 2012
Fees
Management and incentive fees:
Management fees $ 164,176 $ 152,963 $ 129,626 $ 317,139 $ 258,269
Incentive fees 15,590 18,849 4,057 34,439 13,727
Management and incentive fees 179,766 171,812 133,683 351,578 271,996
Monitoring and transaction fees:
Monitoring fees 28,907 32,068 27,786 60,975 53,608
Transaction fees 62,785 40,299 43,706 103,084 88,004
Fee credits (34,751 ) (23,065 ) (16,689 ) (57,816 ) (36,032 )
Net monitoring and transaction fees 56,941 49,302 54,803 106,243 105,580
Total fees 236,707 221,114 188,486 457,821 377,576
Expenses
Compensation and benefits 80,436 75,162 62,746 155,598 125,470
Occupancy and related charges 13,067 13,322 13,239 26,389 27,700
Other operating expenses 45,027 44,630 42,729 89,657 81,278
Total expenses 138,530 133,114 118,714 271,644 234,448
Fee Related Earnings 98,177 88,000 69,772 186,177 143,128
Investment income (loss)
Realized carried interest 269,828 88,167 65,600 357,995 140,478
Unrealized carried interest (202,018 ) 331,198 217,274 129,180 611,760
Gross carried interest 67,810 419,365 282,874 487,175 752,238
Less: allocation to KKR carry pool (26,536 ) (169,504 ) (112,553 ) (196,040 ) (304,059 )
Less: management fee refunds (a) (4,735 ) (9,216 ) (32,804 ) (13,951 ) (73,512 )
Net carried interest 36,539 240,645 137,517 277,184 374,667
Other investment income (loss) 11,050 320,198 340,103 331,248 760,010
Total investment income (loss) 47,589 560,843 477,620 608,432 1,134,677
Income (Loss) before noncontrolling interests
in Income of consolidated entities 145,766 648,843 547,392 794,609 1,277,805
Income (Loss) attributable to
noncontrolling interests 1,323 1,101 1,277 2,424 4,488
Economic Net Income (Loss) $ 144,443 $ 647,742 $ 546,115 $ 792,185 $ 1,273,317
Provision for Income Taxes 13,486 20,117 25,857 33,603 69,240
Economic Net Income (Loss), After Taxes (b) $ 130,957 $ 627,625 $ 520,258 $ 758,582 $ 1,204,077
Economic Net Income (Loss), After Taxes per Adjusted Unit (b) $ 0.18 $ 0.88 $ 0.74 $ 1.06 $ 1.73
Assets Under Management $ 83,500,900 $ 78,253,400 $ 61,488,900 $ 83,500,900 $ 61,488,900
Fee Paying Assets Under Management $ 67,956,400 $ 62,454,100 $ 47,200,500 $ 67,956,400 $ 47,200,500
Committed Dollars Invested and Syndicated Capital $ 1,889,400 $ 824,400 $ 680,200 $ 2,713,800 $ 1,713,200
Uncalled Commitments $ 21,364,400 $ 16,207,300 $ 10,610,300 $ 21,364,400 $ 10,610,300
Other Information
Fee Related Earnings $ 98,177 $ 88,000 $ 69,772 $ 186,177 $ 143,128
Plus: depreciation and amortization 3,708 3,681 3,093 7,389 5,646
Fee Related EBITDA $ 101,885 $ 91,681 $ 72,865 $ 193,566 $ 148,774
Distributed Earnings $ 313,559 $ 198,720 $ 104,548 $ 512,279 $ 216,034
Plus: Undistributed net realized principal investment income 90,217 91,894 301,580 182,111 354,198
Total Distributable Earnings (b) $ 403,776 $ 290,614 $ 406,128 $ 694,390 $ 570,232
GAAP interest expense $ 24,614 $ 23,023 $ 16,884 $ 47,637 $ 34,889
Less: interest expense related to debt obligations
from investment financing arrangements 8,404 6,790 7,461 15,194 15,534
Core Interest Expense (b) $ 16,210 $ 16,233 $ 9,423 $ 32,443 $ 19,355
Economic Net Income (Loss), After Taxes and Equity-based Charges (b) $ 105,021 $ 600,207 $ 506,208 $ 705,228 $ 1,173,763
(a) As of June 30, 2013, there is no carried interest subject to management fee refunds, which may reduce carried interest in future periods.
(b) See definitions for economic net income (loss), after taxes, adjusted units, total distributable earnings, core interest expense and economic net income (loss), after taxes and equity-based charges under Notes to Reportable Segments.
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENTS (UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
June 30, 2013 March 31, 2013 June 30, 2012 June 30, 2013 June 30, 2012
Fees
Management and incentive fees:
Management fees $ 114,700 $ 106,605 $ 107,170 $ 221,305 $ 214,082
Incentive fees - - - - -
Management and incentive fees 114,700 106,605 107,170 221,305 214,082
Monitoring and transaction fees:
Monitoring fees 28,907 32,068 27,786 60,975 53,608
Transaction fees 25,231 16,412 10,768 41,643 22,435
Fee credits (29,547 ) (21,009 ) (15,642 ) (50,556 ) (33,348 )
Net monitoring and transaction fees 24,591 27,471 22,912 52,062 42,695
Total fees 139,291 134,076 130,082 273,367 256,777
Expenses
Compensation and benefits 51,516 48,001 45,991 99,517 90,477
Occupancy and related charges 11,143 11,425 11,633 22,568 24,438
Other operating expenses 33,988 33,942 36,230 67,930 67,905
Total expenses 96,647 93,368 93,854 190,015 182,820
Fee Related Earnings 42,644 40,708 36,228 83,352 73,957
Investment income (loss)
Realized carried interest 269,828 88,167 65,600 357,995 140,478
Unrealized carried interest (212,809 ) 310,799 226,186 97,990 605,813
Gross carried interest 57,019 398,966 291,786 455,985 746,291
Less: allocation to KKR carry pool (22,220 ) (161,344 ) (116,118 ) (183,564 ) (301,680 )
Less: management fee refunds (4,735 ) (9,216 ) (32,804 ) (13,951 ) (73,512 )
Net carried interest 30,064 228,406 142,864 258,470 371,099
Other investment income (loss) (249 ) (2,035 ) (3,990 ) (2,284 ) (2,338 )
Total investment income (loss) 29,815 226,371 138,874 256,186 368,761
Income (Loss) before noncontrolling interests
in Income of consolidated entities 72,459 267,079 175,102 339,538 442,718
Income (Loss) attributable to
noncontrolling interests 411 398 358 809 2,654
Economic Net Income (Loss) $ 72,048 $ 266,681 $ 174,744 $ 338,729 $ 440,064
Assets Under Management $ 54,452,400 $ 50,340,400 $ 45,528,100 $ 54,452,400 $ 45,528,100
Fee Paying Assets Under Management $ 45,907,500 $ 41,218,000 $ 37,858,300 $ 45,907,500 $ 37,858,300
Committed Dollars Invested $ 1,314,000 $ 598,500 $ 606,300 $ 1,912,500 $ 1,182,500
Uncalled Commitments $ 19,972,800 $ 14,560,900 $ 9,304,500 $ 19,972,800 $ 9,304,500
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENTS (UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
June 30, 2013 March 31, 2013 June 30, 2012 June 30, 2013 June 30, 2012
Fees
Management and incentive fees:
Management fees $ 49,476 $ 46,358 $ 22,456 $ 95,834 $ 44,187
Incentive fees 15,590 18,849 4,057
34,439 13,727
Management and incentive fees 65,066 65,207 26,513 130,273 57,914
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 7,243 3,106 1,319 10,349 3,741
Fee credits (5,204 ) (2,056 ) (1,047 ) (7,260 ) (2,684 )
Net monitoring and transaction fees 2,039 1,050 272 3,089 1,057
Total fees 67,105 66,257 26,785 133,362 58,971
Expenses
Compensation and benefits 21,990 19,700 9,229 41,690 20,611
Occupancy and related charges 1,615 1,542 1,366 3,157 2,784
Other operating expenses 9,147 7,826 3,880 16,973 7,857
Total expenses 32,752 29,068 14,475 61,820 31,252
Fee Related Earnings 34,353 37,189 12,310 71,542 27,719
Investment income (loss)
Realized carried interest - - - - -
Unrealized carried interest 10,791 20,399 (8,912 ) 31,190 5,947
Gross carried interest 10,791 20,399 (8,912 ) 31,190 5,947
Less: allocation to KKR carry pool (4,316 ) (8,160 ) 3,565 (12,476 ) (2,379 )
Less: management fee refunds - - - - -
Net carried interest 6,475 12,239 (5,347 ) 18,714 3,568
Other investment income (loss) 22 62 (12 ) 84 (35 )
Total investment income (loss) 6,497 12,301 (5,359 ) 18,798 3,533
Income (Loss) before noncontrolling interests
in Income of consolidated entities 40,850 49,490 6,951 90,340 31,252
Income (Loss) attributable to
noncontrolling interests 378 355 123 733 554
Economic Net Income (Loss) $ 40,472 $ 49,135 $ 6,828 $ 89,607 $ 30,698
Assets Under Management $ 29,048,500 $ 27,913,000 $ 15,960,800 $ 29,048,500 $ 15,960,800
Fee Paying Assets Under Management $ 22,048,900 $ 21,236,100 $ 9,342,200 $ 22,048,900 $ 9,342,200
Committed Dollars Invested $ 370,800 $ 164,900 $ 73,900 $ 535,700 $ 280,100
Uncalled Commitments $ 1,391,600 $ 1,646,400 $ 1,305,800 $ 1,391,600 $ 1,305,800
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENTS (UNAUDITED)
(Amounts in thousands)
Quarter Ended Six Months Ended
June 30, 2013 March 31, 2013 June 30, 2012 June 30, 2013 June 30, 2012
Fees
Management and incentive fees:
Management fees $ - $ - $ - $ - $ -
Incentive fees - - - - -
Management and incentive fees - - - - -
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 30,311 20,781 31,619 51,092 61,828
Fee credits - - - - -
Net monitoring and transaction fees 30,311 20,781 31,619 51,092 61,828
Total fees 30,311 20,781 31,619 51,092 61,828
Expenses
Compensation and benefits 6,930 7,461 7,526 14,391 14,382
Occupancy and related charges 309 355 240 664 478
Other operating expenses 1,892 2,862 2,619 4,754 5,516
Total expenses 9,131 10,678 10,385 19,809 20,376
Fee Related Earnings 21,180 10,103 21,234 31,283 41,452
Investment income (loss)
Realized carried interest - - - - -
Unrealized carried interest - - - - -
Gross carried interest - - - - -
Less: allocation to KKR carry pool - - - - -
Less: management fee refunds - - - - -
Net carried interest - - - - -
Other investment income (loss) (a) 11,277 322,171 344,105 333,448 762,383
Total investment income (loss) 11,277 322,171 344,105 333,448 762,383
Income (Loss) before noncontrolling interests
in Income of consolidated entities 32,457 332,274 365,339 364,731 803,835
Income (Loss) attributable to
noncontrolling interests 534 348 796 882 1,280
Economic Net Income (Loss) $ 31,923 $ 331,926 $ 364,543 $ 363,849 $ 802,555
Syndicated Capital $ 204,600 $ 61,000 $ - $ 265,600 $ 250,600
(a) Amount is net of (i) interest expense and (ii) certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income that is not included in Compensation and benefits and Other operating expenses above and on page 6.
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended June 30, 2013
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 114,700 $ 49,476 $ - $ 164,176
Incentive fees - 15,590 - 15,590
Management and incentive fees 114,700 65,066 - 179,766
Monitoring and transaction fees:
Monitoring fees 28,907 - - 28,907
Transaction fees 25,231 7,243 30,311 62,785
Fee credits (29,547 ) (5,204 ) - (34,751 )
Net monitoring and transaction fees 24,591 2,039 30,311 56,941
Total fees 139,291 67,105 30,311 236,707
Expenses
Compensation and benefits 51,516 21,990 6,930 80,436
Occupancy and related charges 11,143 1,615 309 13,067
Other operating expenses 33,988 9,147 1,892 45,027
Total expenses 96,647 32,752 9,131 138,530
Fee Related Earnings 42,644 34,353 21,180 98,177
Investment income (loss)
Realized carried interest 269,828 - - 269,828
Unrealized carried interest (212,809 ) 10,791 - (202,018 )
Gross carried interest 57,019 10,791 - 67,810
Less: allocation to KKR carry pool (22,220 ) (4,316 ) - (26,536 )
Less: management fee refunds (4,735 ) - - (4,735 )
Net carried interest 30,064 6,475 - 36,539
Other investment income (loss) (249 ) 22 11,277 11,050
Total investment income (loss) 29,815 6,497 11,277 47,589
Income (Loss) before noncontrolling interests
in Income of consolidated entities 72,459 40,850 32,457 145,766
Income (Loss) attributable to
noncontrolling interests 411 378 534 1,323
Economic Net Income (Loss) $ 72,048 $ 40,472 $ 31,923 $ 144,443
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended March 31, 2013
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 106,605 $ 46,358 $ - $ 152,963
Incentive fees - 18,849 - 18,849
Management and incentive fees 106,605 65,207 - 171,812
Monitoring and transaction fees:
Monitoring fees 32,068 - - 32,068
Transaction fees 16,412 3,106 20,781 40,299
Fee credits (21,009 ) (2,056 ) - (23,065 )
Net monitoring and transaction fees 27,471 1,050 20,781 49,302
Total fees 134,076 66,257 20,781 221,114
Expenses
Compensation and benefits 48,001 19,700 7,461 75,162
Occupancy and related charges 11,425 1,542 355 13,322
Other operating expenses 33,942 7,826 2,862 44,630
Total expenses 93,368 29,068 10,678 133,114
Fee Related Earnings 40,708 37,189 10,103 88,000
Investment income (loss)
Realized carried interest 88,167 - - 88,167
Unrealized carried interest 310,799 20,399 - 331,198
Gross carried interest 398,966 20,399 - 419,365
Less: allocation to KKR carry pool (161,344 ) (8,160 ) - (169,504 )
Less: management fee refunds (9,216 ) - - (9,216 )
Net carried interest 228,406 12,239 - 240,645
Other investment income (loss) (2,035 ) 62 322,171 320,198
Total investment income (loss) 226,371 12,301 322,171 560,843
Income (Loss) before noncontrolling interests
in Income of consolidated entities 267,079 49,490 332,274 648,843
Income (Loss) attributable to
noncontrolling interests 398 355 348 1,101
Economic Net Income (Loss) $ 266,681 $ 49,135 $ 331,926 $ 647,742
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended June 30, 2012
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets
and Principal
Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 107,170 $ 22,456 $ - $ 129,626
Incentive fees - 4,057 - 4,057
Management and incentive fees 107,170 26,513 - 133,683
Monitoring and transaction fees:
Monitoring fees 27,786 - - 27,786
Transaction fees 10,768 1,319 31,619 43,706
Fee credits (15,642 ) (1,047 ) - (16,689 )
Net monitoring and transaction fees 22,912 272 31,619 54,803
Total fees 130,082 26,785 31,619 188,486
Expenses
Compensation and benefits 45,991 9,229 7,526 62,746
Occupancy and related charges 11,633 1,366 240 13,239
Other operating expenses 36,230 3,880 2,619 42,729
Total expenses 93,854 14,475 10,385 118,714
Fee Related Earnings 36,228 12,310 21,234 69,772
Investment income (loss)
Realized carried interest 65,600 - - 65,600
Unrealized carried interest 226,186 (8,912 ) - 217,274
Gross carried interest 291,786 (8,912 ) - 282,874
Less: allocation to KKR carry pool (116,118 ) 3,565 - (112,553 )
Less: management fee refunds (32,804 ) - - (32,804 )
Net carried interest 142,864 (5,347 ) - 137,517
Other investment income (loss) (3,990 ) (12 ) 344,105 340,103
Total investment income (loss) 138,874 (5,359 ) 344,105 477,620
Income (Loss) before noncontrolling interests
in Income of consolidated entities 175,102 6,951 365,339 547,392
Income (Loss) attributable to
noncontrolling interests 358 123 796 1,277
Economic Net Income (Loss) $ 174,744 $ 6,828 $ 364,543 $ 546,115
...
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Six Months Ended June 30, 2013
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 221,305 $ 95,834 $ - $ 317,139
Incentive fees - 34,439 - 34,439
Management and incentive fees 221,305 130,273 - 351,578
Monitoring and transaction fees:
Monitoring fees 60,975 - - 60,975
Transaction fees 41,643 10,349 51,092 103,084
Fee credits (50,556 )
(7,260 ) - (57,816 ) Net monitoring and transaction fees 52,062 3,089 51,092 106,243 Total fees 273,367 133,362 51,092 457,821 Expenses Compensation and benefits 99,517 41,690 14,391 155,598 Occupancy and related charges 22,568 3,157 664 26,389 Other operating expenses 67,930 16,973 4,754 89,657 Total expenses 190,015 61,820 19,809 271,644 Fee Related Earnings 83,352 71,542 31,283 186,177 Investment income (loss) Realized carried interest 357,995 - - 357,995 Unrealized carried interest 97,990 31,190 - 129,180 Gross carried interest 455,985 31,190 - 487,175 Less: allocation to KKR carry pool (183,564 ) (12,476 ) - (196,040 ) Less: management fee refunds (13,951 ) - - (13,951 ) Net carried interest 258,470 18,714 - 277,184 Other investment income (loss) (2,284 ) 84 333,448 331,248 Total investment income (loss) 256,186 18,798 333,448 608,432 Income (Loss) before noncontrolling interests in Income of consolidated entities 339,538 90,340 364,731 794,609 Income (Loss) attributable to noncontrolling interests 809 733 882 2,424 Economic Net Income (Loss) $ 338,729 $ 89,607 $ 363,849 $ 792,185
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Six Months Ended June 30, 2012
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 214,082 $ 44,187 $ - $ 258,269
Incentive fees - 13,727 - 13,727
Management and incentive fees 214,082 57,914 - 271,996
Monitoring and transaction fees:
Monitoring fees 53,608 - - 53,608
Transaction fees 22,435 3,741 61,828 88,004
Fee credits (33,348 ) (2,684 ) - (36,032 )
Net monitoring and transaction fees 42,695 1,057 61,828 105,580
Total fees 256,777 58,971 61,828 377,576
Expenses
Compensation and benefits 90,477 20,611 14,382 125,470
Occupancy and related charges 24,438 2,784 478 27,700
Other operating expenses 67,905 7,857 5,516 81,278
Total expenses 182,820 31,252 20,376 234,448
Fee Related Earnings 73,957 27,719 41,452 143,128
Investment income (loss)
Realized carried interest 140,478 - - 140,478
Unrealized carried interest 605,813 5,947 - 611,760
Gross carried interest 746,291 5,947 - 752,238
Less: allocation to KKR carry pool (301,680 ) (2,379 ) - (304,059 )
Less: management fee refunds (73,512 ) - - (73,512 )
Net carried interest 371,099 3,568 - 374,667
Other investment income (loss) (2,338 ) (35 ) 762,383 760,010
Total investment income (loss) 368,761 3,533 762,383 1,134,677
Income (Loss) before noncontrolling interests
in Income of consolidated entities 442,718 31,252 803,835 1,277,805
Income (Loss) attributable to
noncontrolling interests 2,654 554 1,280 4,488
Economic Net Income (Loss) $ 440,064 $ 30,698 $ 802,555 $ 1,273,317
KKR
BALANCE SHEETS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
As of June 30, 2013
Private
Markets
Segment
Public
Markets
Segment
Capital
Markets and
Principal
Activities
Segment
Total
Reportable
Segments
Cash and short-term investments $ 322,639 $ 35,229 $ 1,636,977 $ 1,994,845
Investments - - 4,607,196 (a) 4,607,196
Unrealized carry 770,245 43,653 - 813,898
Other assets 316,317 308,837 68,028 693,182
Total assets $ 1,409,201 $ 387,719 $ 6,312,201 $ 8,109,121
Debt obligations $ - $ - $ 1,000,000 $ 1,000,000
Other liabilities 111,550 38,181 39,356 189,087
Total liabilities 111,550 38,181 1,039,356 1,189,087
Noncontrolling interests 1,457 825 18,695 20,977
Book value $ 1,296,194 $ 348,713 $ 5,254,150 $ 6,899,057
Book value per adjusted unit $ 1.81 $ 0.49 $ 7.35 $ 9.65
As of December 31, 2012
Private
Markets
Segment
Public
Markets
Segment
Capital
Markets and
Principal
Activities
Segment
Total
Reportable
Segments
Cash and short-term investments $ 358,237 $ 28,690 $ 1,147,360 $ 1,534,287
Investments - - 4,758,157 4,758,157
Unrealized carry 730,292 24,939 - 755,231
Other assets 207,047 280,472 62,119 549,638
Total assets $ 1,295,576 $ 334,101 $ 5,967,636 $ 7,597,313
Debt obligations $ - $ - $ 500,000 $ 500,000
Other liabilities 78,724 16,433 24,275 119,432
Total liabilities 78,724 16,433 524,275 619,432
Noncontrolling interests 1,339 739 18,619 20,697
Book value $ 1,215,513 $ 316,929 $ 5,424,742 $ 6,957,184
Book value per adjusted unit $ 1.72 $ 0.45 $ 7.70 $ 9.87
(a) See Capital Markets and Principal Activities segment schedule of investments that follows.
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS (UNAUDITED)
(Amounts in thousands, except percentage amounts)
As of June 30, 2013
Investment
Fair Value as
Fair a Percentage of
Cost
Value
Total Investments
Co-Investments in Portfolio Companies of
Private Equity Investment Vehicles:
Alliance Boots GmbH 195,640 473,795 10.3 %
HCA Inc. 96,289 306,709 6.6 %
The Nielsen Company B.V. 87,657 196,662 4.3 %
NXP B.V. 167,276 196,601 4.3 %
Samson Resources Corporation 237,514 190,012 4.1 %
ProSiebenSat.1 Media AG 226,913 183,483 4.0 %
KION Group GmbH 128,058 162,598 3.5 %
US Foods, Inc. 100,000 130,000 2.8 %
Biomet, Inc. 151,444 121,155 2.6 %
First Data Corporation 135,258 94,681 2.1 %
Dollar General Corporation 14,043 78,796 1.7 %
Energy Future Holdings Corp. 200,000 10,000 0.2 %
1,740,092 2,144,492 46.5 %
Private Equity Investment Vehicles
KKR 2006 Fund L.P. 346,036 394,058 8.5 %
KKR European Fund III L.P. 233,706 261,169 5.7 %
KKR Asian Fund L.P. 82,542 92,554 2.0 %
KKR European Fund II L.P. 54,546 57,806 1.2 %
KKR Millennium Fund L.P. 53,844 44,969 1.0 %
KKR North America Fund XI L.P. 20,177 21,510 0.5 %
KKR E2 Investors, L.P. 10,418 20,568 0.4 %
KKR European Fund L.P. 47,664 4,318 0.1 %
KKR China Growth Fund L.P. 3,286 3,314 0.1 %
Co-Investment Vehicles 546 653 0.0 %
852,765 900,919 19.5 %
Private Equity Total 2,592,857 3,045,411 66.0 %
Real Assets
Royalties and Drilling 142,272 157,062 3.4 %
Real Estate Fund 83,920 100,355 2.2 %
Infrastructure Fund 25,825 26,570 0.6 %
Co-Investments 10,835 12,988 0.3 %
Natural Resources 13,172 8,836 0.2 %
Real Assets Total 276,024 305,811 6.7 %
Private Markets Total 2,868,881 3,351,222 72.7 %
Public Markets Investment Strategies
Liquid Credit 187,263 195,094 4.2 %
Long/Short Equities 100,000 109,906 2.4 %
Credit Relative Value 82,000 88,775 1.9 %
Direct Lending 39,069 44,006 1.0 %
Special Situations 27,297 30,661 0.7 %
Mezzanine Fund 14,564 17,937 0.4 %
Public Markets Total 450,193 486,379 10.6 %
Other 760,606 769,595 16.7 %
Total Investments $ 4,079,680 $ 4,607,196 100.0 %
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS, CONTINUED (UNAUDITED)
(Amounts in thousands, except percentage amounts)
As of June 30, 2013
Fair Value as
a Percentage
Investment
Cost
Fair
Value
of Total
Investments
Significant Aggregate Investments: (a)
Alliance Boots GmbH $ 228,769 $ 545,895 11.9 %
HCA Inc. 117,624 365,344 7.9 %
346,393 911,239 19.8 %
Other investments 3,733,287 3,695,957 80.2 %
Total Investments $ 4,079,680 $ 4,607,196 100.0 %
(a)
The significant aggregate investments include investments in portfolio companies with individual fair values of 5% or more of the Capital Markets and Principal Activities segment investments balance as of June 30, 2013. The fair value figures include the co-investment and the limited partner and/or general partner interests 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, 2013
March 31, 2013 $ 50,340,400 $ 27,913,000 $ 78,253,400
New Capital Raised 6,681,000 1,703,300 8,384,300
Distributions (2,685,400 ) (720,500 ) (c) (3,405,900 )
Net Changes in Fee Base of Certain Funds (a) (272,300 ) - (272,300 )
Foreign Exchange 12,600 - 12,600
Change in Value 376,100 152,700 528,800
June 30, 2013 $ 54,452,400 $ 29,048,500 $ 83,500,900
Six Months Ended June 30, 2013
December 31, 2012 $ 49,127,600 $ 26,399,900 $ 75,527,500
New Capital Raised 7,648,200 3,234,800 10,883,000
Distributions (4,517,400 ) (1,400,200 ) (d) (5,917,600 )
Net Changes in Fee Base of Certain Funds (a) (272,300 ) - (272,300 )
Foreign Exchange (11,000 ) - (11,000 )
Change in Value 2,477,300 814,000 3,291,300
June 30, 2013 $ 54,452,400 $ 29,048,500 $ 83,500,900
Trailing Twelve Months Ended June 30, 2013
June 30, 2012 $ 45,528,100 $ 15,960,800 $ 61,488,900
New Capital Raised 14,551,400 5,464,000 20,015,400
Acquisitions (b) - 8,086,900 8,086,900
Distributions (10,254,300 ) (2,091,500 ) (e) (12,345,800 )
Net Changes in Fee Base of Certain Funds (a) (1,600,200 ) - (1,600,200 )
Foreign Exchange 68,200 - 68,200
Change in Value 6,159,200 1,628,300 7,787,500
June 30, 2013 $ 54,452,400 $ 29,048,500 $ 83,500,900
* Assets Under Management exclude those assets managed by entities where KKR holds less than a 50% ownership interest.
(a) Represents the impact of including certain funds entering the post-investment period.
(b) Represents AUM of Prisma as of October 1, 2012, the date of acquisition. This figure excludes new capital raised and distributions since the acquisition.
(c) Includes $193.5 million of redemptions by fund investors.
(d) Includes $539.2 million of redemptions by fund investors.
(e) Includes $709.1 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, 2013
March 31, 2013 $ 41,218,000 $ 21,236,100 $ 62,454,100
New Capital Raised 6,402,100 1,203,000 7,605,100
Distributions (1,109,900 ) (437,200 ) (c) (1,547,100 )
Net Changes in Fee Base of Certain Funds (a) (654,700 ) - (654,700 )
Foreign Exchange 48,300 - 48,300
Change in Value 3,700 47,000 50,700
June 30, 2013 $ 45,907,500 $ 22,048,900 $ 67,956,400
Six Months Ended June 30, 2013
December 31, 2012 $ 41,173,000 $ 19,673,000 $ 60,846,000
New Capital Raised 7,363,900 2,734,300 10,098,200
Distributions (1,951,000 ) (973,700 ) (d) (2,924,700 )
Net Changes in Fee Base of Certain Funds (a) (654,700 ) - (654,700 )
Foreign Exchange (55,400 ) - (55,400 )
Change in Value 31,700 615,300 647,000
June 30, 2013 $ 45,907,500 $ 22,048,900 $ 67,956,400
Trailing Twelve Months Ended June 30, 2013
June 30, 2012 $ 37,858,300 $ 9,342,200 $ 47,200,500
New Capital Raised 14,361,000 4,727,500 19,088,500
Acquisitions (b) - 8,078,400 8,078,400
Distributions (2,757,200 ) (1,322,300 ) (e) (4,079,500 )
Net Changes in Fee Base of Certain Funds (a) (3,860,100 ) - (3,860,100 )
Foreign Exchange 238,300 - 238,300
Change in Value 67,200 1,223,100 1,290,300
June 30, 2013 $ 45,907,500 $ 22,048,900 $ 67,956,400
* Fee Paying Assets Under Management exclude those assets managed by entities where KKR holds less than a 50% ownership interest.
(a) Represents the impact of including certain funds entering the post-investment period.
(b) Represents FPAUM of Prisma as of October 1, 2012, the date of acquisition. This figure excludes new capital raised and distributions since the acquisition.
(c) Includes $193.5 million of redemptions by fund investors.
(d) Includes $539.2 million of redemptions by fund investors.
(e) Includes $709.1 million of redemptions by fund investors.
KKR
INVESTMENT VEHICLE SUMMARY (a) (UNAUDITED)
As of June 30, 2013
(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
Asian Fund II 4/2013 4/2019 $ 5,825.0 $ 5,825.0 1.3% $ - $ - $ - $ -
North America Fund XI 9/2012 9/2018 7,230.7 6,740.2 3.5% 490.5 3.9 490.5 524.5
China Growth Fund 11/2010 11/2016 1,010.0 692.4 1.0% 317.6 28.5 300.1 305.4
E2 Investors (Annex Fund) 8/2009 11/2013 345.9 191.6 4.3% 154.3 - 154.2 325.2
European Fund III 3/2008 3/2014 6,077.2 1,729.2 4.6% 4,348.0 549.5 3,990.6 4,697.2
Asian Fund 7/2007 4/2013 3,983.2 273.9 2.5% 3,709.3 1,623.7 2,864.8 4,737.9
2006 Fund 9/2006 9/2012 17,642.2 1,269.1 2.1% 16,373.1 10,509.6 10,021.7 14,378.1
European Fund II 11/2005 10/2008 5,750.8 - 2.1% 5,750.8 2,442.6 3,922.9 4,926.6
Millennium Fund 12/2002 12/2008 6,000.0 - 2.5% 6,000.0 9,320.5 2,218.9 3,335.2
European Fund 12/1999 12/2005 3,085.4 - 3.2% 3,085.4 8,720.0 - 51.7
Total Private Equity Funds 56,950.4 16,721.4 40,229.0 33,198.3 23,963.7 33,281.8
Co-Investment Vehicles Various Various 2,434.1 504.1 Various 1,930.0 2,318.9 1,309.7 1,752.0
Total Private Equity 59,384.5 17,225.5 42,159.0 35,517.2 25,273.4 35,033.8
Real Assets
Natural Resources Fund Various Various 1,232.0 658.9 Various 573.1 46.9 547.0 370.1
Global Energy Opportunities Various Various 1,011.0 884.4 Various 126.6 - 126.6 113.4
Infrastructure Fund Various Various 1,041.5 614.2 4.8% 427.3 9.0 427.3 437.9
Infrastructure Co-Investments Various Various 1,356.7 252.2 Various 1,104.5 190.5 1,104.5 1,355.8
Real Estate Fund 5/2013 (b) 500.0 337.6 40% 162.4 - 162.4 203.8
Real Assets 5,141.2 2,747.3 2,393.9 246.4 2,367.8 2,481.0
Private Markets Total 64,525.7 19,972.8 44,552.9 35,763.6 27,641.2 37,514.8
Public Markets
Special Situations Vehicles Various Various 2,131.9 407.5 Various 1,724.4 417.9 1,562.4 1,904.3
Mezzanine Fund 3/2010 8/2015 987.0 650.7 4.6% 336.3 52.3 336.3 394.6
Direct Lending Vehicles Various Various 668.5 333.4 Various 335.1 9.4 335.1 359.4
Public Markets Total 3,787.4 1,391.6 2,395.8 479.6 2,233.8 2,658.3
Grand Total $ 68,313.1 $ 21,364.4 $ 46,948.7 $ 36,243.2 $ 29,875.0 $ 40,173.1
(a) Reflects investment vehicles for which KKR has the ability to earn carried interest.
(b) Third anniversary of final close.
KKR
DISTRIBUTION CALCULATION (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended Six Months Ended
June 30, 2013 March 31, 2013 June 30, 2012 June 30, 2013 June 30, 2012
FRE (a) $ 98,177 $ 88,000 $ 69,772 $ 186,177 $ 143,128
Realized cash carry 161,897 52,900 39,360 214,797 84,287
Net realized principal investment income 150,361 153,156 301,580 303,517 354,198
Less: local income taxes (5,336 ) (2,341 ) (3,307 ) (7,677 ) (6,893 )
Less: noncontrolling interests (1,323 ) (1,101 ) (1,277 ) (2,424 ) (4,488 )
Total Distributable Earnings 403,776 290,614 406,128 694,390 570,232
Less: Undistributed net realized principal investment income (90,217 ) (91,894 ) (301,580 ) (182,111 ) (354,198 )
Distributed Earnings 313,559 198,720 104,548 512,279 216,034
Distributed Earnings to KKR & Co. L.P. (b) 126,295 75,749 36,401 202,044 74,201
Less: estimated current corporate income taxes (10,125 ) (6,376 ) (4,268 ) (16,501 ) (8,290 )
Distributed Earnings to KKR & Co. L.P., After Taxes 116,170 69,373 32,133 185,543 65,911
Distribution per KKR & Co. L.P. common unit $ 0.42 $ 0.27 $ 0.13 $ 0.69 $ 0.28
Components of Distribution per KKR & Co. L.P. common unit
After-tax FRE $ 0.10 $ 0.10 $ 0.07 $ 0.20 $ 0.15
Realized Cash Carry $ 0.23 $ 0.08 $ 0.06 $ 0.31 $ 0.13
Distributed Net Realized Principal Investment Income $ 0.09 $ 0.09 $ - $ 0.18 $ -
Outstanding KKR & Co. L.P. common units 277,834,343 261,781,303 238,155,157
(a) See Exhibit A for a reconciliation of such measure to financial results prepared in accordance with GAAP.
(b) Represents the amount of distributed earnings allocable to KKR & Co. L.P. based on its ownership in the KKR business.
DISTRIBUTION POLICY
KKR intends to make quarterly cash distributions in amounts that in the aggregate are expected to constitute substantially all of the cash earnings of its investment management business and 40% of the net cash income from realized principal investments, in each case in excess of amounts determined by KKR to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and its investment funds and to comply with applicable law and any of its debt instruments or other obligations. For purposes of KKR’s distribution policy, its distributions are expected to consist of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool and (iii) a percentage of net realized principal investment income. This amount is expected to be reduced by (i) corporate and applicable local taxes, if any, (ii) non-controlling interests, and (iii) amounts determined by KKR to be necessary or appropriate for the conduct of its business and other matters as discussed above.
The declaration and payment of any distributions are subject to the discretion of the board of directors of the general partner of KKR & Co. L.P., which may change the distribution policy at any time, and the terms of its limited partnership agreement. There can be no assurance that distributions will be made as intended or at all or that unitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR & Co. L.P. When KKR & Co. L.P. receives distributions from the KKR Group Partnerships (the holding companies of the KKR business), KKR Holdings receives its pro rata share of such distributions from the KKR Group Partnerships.
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 segment operating revenues less segment operating expenses, excluding certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income. This measure is used by management as an alternative measurement of the operating earnings of KKR and its business segments before investment income. 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 charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR & Co. L.P. 2010 Equity Incentive Plan; (vi) the exclusion of certain reimbursable expenses; and (vii) the exclusion of certain non-recurring items.
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 investment income and carried interest. ENI is comprised of: (i) FRE plus (ii) segment investment income (loss), which is reduced for carry pool allocations, management fee refunds, interest expense and certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income; less (iii) 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 exclusion of the items referred to in FRE above; (ii) the exclusion of investment income (loss) relating to noncontrolling interests; and (iii) the exclusion of income taxes.
Economic net income (loss), after taxes is used to measure KKR’s implied ENI on a fully diluted basis. We believe this measure is useful to unitholders as it provides an indication of KKR’s ENI as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P. Economic Net Income (Loss), After Taxes is calculated by deducting from ENI the implied income tax provision that has been calculated assuming that all income is allocated to KKR & Co. L.P., which would occur following an exchange of all KKR Holdings units for common units of KKR & Co. L.P. The assumptions and methodology used to calculate the implied income tax provision are consistent with those used in calculating the tax provision for KKR & Co. L.P. under GAAP. The implied income tax provision does not give effect to any tax savings or deductions that may result from the exchange of KKR Holdings units.
Economic net income (loss), after taxes and equity-based charges is used to measure KKR’s implied ENI on a fully diluted basis. We believe this measure is useful to unitholders as it provides an indication of KKR’s ENI as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P. Economic Net Income (Loss), After Taxes and Equity-based Charges is calculated by deducting from ENI: (i) equity-based charges associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan; and (ii) the implied income tax provision that has been calculated assuming that all income is allocated to KKR & Co. L.P., which would occur following an exchange of all KKR Holdings units for common units of KKR & Co. L.P. The assumptions and methodology used to calculate the implied income tax provision are consistent with those used in calculating the tax provision for KKR & Co. L.P. under GAAP. The implied income tax provision does not give effect to any tax savings or deductions that may result from the exchange of KKR Holdings units.
Net realized principal investment income refers to net cash income from (i) realized investment gains and losses excluding certain realized investment losses from principal investments during the second quarter of 2013 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 less certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income in each case generated by KKR’s principal investments held on or through KKR’s balance sheet in our Capital Markets and Principal Activities segment. This is a term to describe a portion of KKR’s quarterly distribution.
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 and (iii) net realized principal investment income; 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 also assess 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 and vehicles. 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 structured finance vehicles; and (v) the fair value of other assets managed by KKR. 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 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 and vehicles, for only those funds and vehicles 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.
Committed dollars invested is the aggregate amount of capital commitments that have 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 investment of committed capital. Such amounts include: (i) capital invested by fund investors and co-investors with respect to which KKR is entitled to a fee or carried interest and (ii) capital invested by KKR’s investment funds and vehicles.
Syndicated capital is the aggregate amount of debt or equity capital in transactions originated by KKR investment funds and vehicles, which has been distributed to third parties in exchange for a fee. It does not include (i) capital committed to such transactions by carry-yielding co-investment vehicles, which is instead reported in committed dollars invested and (ii) debt capital that is arranged as part of the acquisition financing of transactions originated by KKR investment funds and vehicles. 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 and Principal Activities 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 and vehicles to make future investments.
Adjusted units are used as a measure of the total equity ownership of KKR that is held by KKR & Co. L.P. and KKR Holdings 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 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 private equity funds, investment vehicles and principal investments. These financing arrangements are not direct obligations of the general partners of KKR’s private equity funds or its management companies. On a segment basis, interest expense is included in other 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 and vehicles and other noncontrolling interest holders. Additionally, we believe this measure is useful for analyzing KKR’s ability to service its debt obligations.
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 our investment portfolio, including carried interest, as well as our 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 the equivalent GAAP amounts on a consolidated basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings L.P.
Fee related EBITDA is comprised of FRE before the impact of depreciation of fixed assets and amortization of intangible assets and is used by management as a measure of the cash earnings of KKR and its business segments before investment income. We believe this measure is useful to unitholders as it provides additional insight into the amount of cash earnings generated by KKR’s management companies and capital markets businesses.
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.
KKR
EXHIBIT A
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT (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, 2013 March 31, 2013 June 30, 2012
Net income (loss) attributable to KKR & Co. L.P. per common unit $ 0.06 $ 0.75 $ 0.62
Weighted Average Common Units Outstanding 271,983,811 257,044,184 235,781,983
Net income (loss) attributable to KKR & Co. L.P. 15,134 193,439 146,261
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
28,106 334,112 292,833
Plus: Non-cash equity based charges 80,318 81,650 93,540
Plus: Amortization of intangibles and other, net 12,360 29,185 2,388
Plus: Income taxes 8,525 9,356 11,093
Economic net income (loss) 144,443 647,742 546,115
Less: Provision for income taxes 13,486 20,117 25,857
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 25,936 27,418 14,050
Economic net income (loss) after taxes and equity-based charges 105,021 600,207 506,208
Plus: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 25,936 27,418 14,050
Economic net income (loss) after taxes 130,957 627,625 520,258
Weighted Average Adjusted Units 715,453,358 711,229,881 700,720,686
Economic net income (loss) after taxes per adjusted unit $ 0.18 $ 0.88 $ 0.74
Six Months Ended
June 30, 2013 June 30, 2012
Net income (loss) attributable to KKR & Co. L.P. per common unit $ 0.79 $ 1.45
Weighted Average Common Units Outstanding 264,555,267 232,440,659
Net income (loss) attributable to KKR & Co. L.P. 208,573 336,697
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
362,218 697,024
Plus: Non-cash equity based charges 161,968 207,881
Plus: Amortization of intangibles and other, net 41,545 3,550
Plus: Income taxes 17,881 28,165
Economic net income (loss) 792,185 1,273,317
Less: Provision for income taxes 33,603 69,240
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 53,354 30,314
Economic net income (loss) after taxes and equity-based charges 705,228 1,173,763
Plus: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 53,354 30,314
Economic net income (loss) after taxes 758,582 1,204,077
Weighted Average Adjusted Units 713,353,287 696,408,937
Economic net income (loss) after taxes per adjusted unit $ 1.06 $ 1.73
KKR
EXHIBIT A (CONTINUED)
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. (GAAP BASIS)
TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS, FEE RELATED EBITDA, AND TOTAL DISTRIBUTABLE EARNINGS (UNAUDITED)
(Amounts in thousands)
Quarter Ended
June 30, 2013 March 31, 2013 June 30, 2012
Net income (loss) attributable to KKR & Co. L.P. $ 15,134 $ 193,439 $ 146,261
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
28,106 334,112 292,833
Plus: Non-cash equity based charges 80,318 81,650 93,540
Plus: Amortization of intangibles and other, net 12,360 29,185 2,388
Plus: Income taxes 8,525 9,356 11,093
Economic net income (loss) 144,443 647,742 546,115
Plus: Income attributable to segment noncontrolling interests 1,323 1,101 1,277
Less: Investment income (loss) 47,589 560,843 477,620
Fee related earnings 98,177 88,000 69,772
Plus: Depreciation and amortization 3,708 3,681 3,093
Fee related EBITDA $ 101,885 $ 91,681 $ 72,865
Less: Depreciation and amortization 3,708 3,681 3,093
Plus: Realized cash carry 161,897 52,900 39,360
Plus: Net realized principal investment income 150,361 153,156 301,580
Less: Local income taxes and noncontrolling interests 6,659 3,442 4,584
Total distributable earnings $ 403,776 $ 290,614 $ 406,128
Six Months Ended
June 30, 2013 June 30, 2012
Net income (loss) attributable to KKR & Co. L.P. $ 208,573 $ 336,697
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
362,218 697,024
Plus: Non-cash equity based charges 161,968 207,881
Plus: Amortization of intangibles and other, net 41,545 3,550
Plus: Income taxes 17,881 28,165
Economic net income (loss) 792,185 1,273,317
Plus: Income attributable to segment noncontrolling interests 2,424 4,488
Less: Investment income (loss) 608,432 1,134,677
Fee related earnings 186,177 143,128
Plus: Depreciation and amortization 7,389 5,646
Fee related EBITDA $ 193,566 $ 148,774
Less: Depreciation and amortization 7,389 5,646
Plus: Realized cash carry 214,797 84,287
Plus: Net realized principal investment income 303,517 354,198
Less: Local income taxes and noncontrolling interests 10,101 11,381
Total distributable earnings $ 694,390 $ 570,232
KKR
EXHIBIT A (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, 2013 December 31, 2012
KKR & Co. L.P. partners’ capital $ 2,287,389 $ 2,004,359
Noncontrolling interests held by KKR Holdings L.P. 4,699,114 4,981,864
Equity impact of KKR Management Holdings Corp. and other (87,446 ) (29,039 )
Book value 6,899,057 6,957,184
Adjusted units 715,296,775 704,780,484
Book value per adjusted unit $ 9.65 $ 9.87
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS)
TO CASH AND SHORT-TERM INVESTMENTS (SEGMENT BASIS) (UNAUDITED)
(Amounts in thousands)
As of
As of
June 30, 2013 December 31, 2012
Cash and cash equivalents $ 1,167,413 $ 1,230,464
Liquid short-term investments 827,432 303,823
Cash and short-term investments $ 1,994,845 $ 1,534,287
KKR
EXHIBIT B
RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING 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, 2013 March 31, 2013 June 30, 2012
Weighted Average GAAP Common Units Outstanding - Basic 271,983,811 257,044,184 235,781,983
Weighted Average Unvested Common Units(a) 26,094,953 24,998,337 16,725,819
Weighted Average GAAP Common Units Outstanding - Diluted 298,078,764 282,042,521 252,507,802
Adjustments:
Weighted Average KKR Holdings Units(b) 417,374,594 429,187,360 448,212,884
Weighted Average Adjusted Units 715,453,358 711,229,881 700,720,686
Six Months Ended
June 30, 2013 June 30, 2012
Weighted Average GAAP Common Units Outstanding - Basic 264,555,267 232,440,659
Weighted Average Unvested Common Units(a) 25,549,675 12,729,295
Weighted Average GAAP Common Units Outstanding - Diluted 290,104,942 245,169,954
Adjustments:
Weighted Average KKR Holdings Units(b) 423,248,345 451,238,983
Weighted Average Adjusted Units 713,353,287 696,408,937
RECONCILIATION OF GAAP COMMON UNITS OUTSTANDING TO ADJUSTED UNITS (UNAUDITED)
The following table provides a reconciliation of KKR's GAAP Common Units Outstanding to Adjusted Units.
As of As of
June 30, 2013 December 31, 2012
GAAP Common Units Outstanding - Basic 277,834,343 253,363,691
Unvested Common Units(a) 25,501,501 18,863,517
GAAP Common Units Outstanding - Diluted 303,335,844 272,227,208
Adjustments:
KKR Holdings Units(b) 411,960,931 432,553,276
Adjusted Units 715,296,775 704,780,484
(a)
Represents equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. The issuance of common units of KKR & Co. L.P. pursuant to awards under its equity incentive plan dilutes KKR common unitholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business.
(b)
Common units that may be issued by KKR & Co. L.P. upon exchange of units in KKR Holdings L.P. for KKR common units.
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Contact:.
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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
Looks like good financial news today.
Thanks for the note. Closed 13.91 (note for future reference).
KKR executed the biggest private-equity deal of 2011 when it agreed to buy closely held Samson Investment Co., the Tulsa, Oklahoma-based oil and gas producer, for $7.2 billion.
KKR bought all of CRZO non-core Barnett Shale assets in May 2011. http://ih.advfn.com/p.php?pid=nmona&article=48756004&symbol=CRZO
...the sale of substantially all of our non-core area Barnett Shale properties to KKR Natural Resources ("KKR") in May 2011.
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