KKR & Co. Inc.

Press Release

KKR & Co. L.P. Announces First Quarter 2015 Results

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04.23.15

 

Exit Activity and Realized Cash Carry Drive Strong Distributable Earnings

GAAP net income (loss) attributable to KKR & Co. L.P. was $270.5 million for the quarter ended March 31, 2015, up from $210.0 million for the quarter ended March 31, 2014.

Total distributable earnings was $516.5 million for the quarter ended March 31, 2015, up from $446.8 million for the quarter ended March 31, 2014.

Distribution per common unit was $0.46 for the quarter ended March 31, 2015, up from $0.43 for the quarter ended March 31, 2014.

Economic net income ("ENI") was $599.4 million for the quarter ended March 31, 2015, down from $630.3 million for the quarter ended March 31, 2014.

ENI after taxes per adjusted unit was $0.62 for the quarter ended March 31, 2015, down from $0.77 for the quarter ended March 31, 2014.

Fee and yield earnings were $168.0 million for the quarter ended March 31, 2015, up from $162.9 million for the quarter ended March 31, 2014.

Book value was $10.4 billion on a total reportable segment basis as of March 31, 2015 or $12.19 per adjusted unit.

Return on equity and cash return on equity were 15% and 20%, respectively.

Assets under management ("AUM") and fee paying assets under management ("FPAUM") totaled $99.1 billion and $82.9 billion, respectively, as of March 31, 2015.

NEW YORK--(BUSINESS WIRE)-- KKR & Co. L.P. (NYSE:KKR) today reported its first quarter 2015 results.

For the quarter ended March 31, 2015, the fair value of our private equity portfolio appreciated 5.1%.

KKR declares a distribution of $0.46 per common unit, which includes $0.22 of realized cash carry, the 20th consecutive quarter that realized cash carry has been a component of the distribution.

"We had a good start to the year with strong returns and cash flow generation, which translated into $599 million of economic net income and $517 million of total distributable earnings," said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. "Additionally, our balance sheet continues to perform, resulting in a 20% cash return on equity over the twelve months ending March 31st."

Note: Certain financial measures, including total distributable earnings, FRE, ENI, ENI after taxes, fee and yield earnings, book value, cash and short-term investments and adjusted units, are not presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). See Exhibits B and C for a reconciliation of such measures to financial results prepared in accordance with GAAP.

GAAP RESULTS

GAAP net income (loss) for the quarter ended March 31, 2015, included net income (loss) attributable to KKR & Co. L.P. of $270.5 million and net income (loss) attributable to KKR & Co. L.P. per common unit of $0.57, on a diluted basis. For the quarter ended March 31, 2014, net income (loss) attributable to KKR & Co. L.P. was $210.0 million and net income (loss) attributable to KKR & Co. L.P. per common unit was $0.65, on a diluted basis. The increase in net income (loss) was primarily due to an increase in KKR & Co. L.P.'s ownership percentage in the KKR business, partially offset by an increase in expenses.

SEGMENT RESULTS*

KEY METRICS
(Amounts in millions, except per adjusted unit amounts)
       
      Quarter Ended
      March 31, 2015   March 31, 2014   % Change
Total Distributable Earnings              
Fees     $ 300     $ 328      
Realized Cash Carry     302     194      
Net Realized Investment Income     231     193      
Total Cash Revenues     $ 833     $ 715     17 %
Total Cash Expenses and Other     317     267      
Total Distributable Earnings     $ 516     $ 448     15 %
Less: Estimated Current Corporate Income Taxes     (29 )     (33 )      
Distributable Earnings, net of taxes     $ 487     $ 415     17 %
               
Distributable Earnings, net of taxes per KKR & Co. L.P. common unit     $ 0.60     $ 0.59     2 %
Distribution per KKR & Co. L.P. common unit     $ 0.46     $ 0.43     7 %
               
Payout ratio     76 %     72 %      
               
Economic Net Income              
Management, Monitoring and Transaction Fees, Net     $ 294     $ 311      
Performance Income     447     356      
Investment Income     221     279      
Total Segment Revenues     $ 962     $ 946     2 %
Total Segment Expenses and Other     436     391      
Economic Net Income, After-Taxes     $ 526     $ 555     (5 )%
               
Economic Net Income, After-Taxes per Adjusted Unit     $ 0.62     $ 0.77     (19 )%
               
Fee and Yield Earnings     $ 168     $ 163     3 %
               
Other              
Book Value per Adjusted Unit     $ 12.19     $ 11.18     9 %
               
               
      Last Twelve Months Ended    
      March 31, 2015   March 31, 2014    
Return on Equity     15 %   26 %    
Cash Return on Equity     20 %   20 %    

* All segment financial information presented in this release reflects a new presentation as of the second quarter of 2014 following the closing of the acquisition of KFN.

Private Markets

AUM was $62.1 billion as of March 31, 2015, an increase of $0.6 billion, compared to AUM of $61.5 billion as of December 31, 2014. The increase was primarily attributable to new capital raised in European Fund IV and Global Infrastructure Investors II as well as appreciation in the fair value of our private equity portfolio. These increases were offset by distributions to limited partners of our private equity funds arising from realizations.

FPAUM was $47.2 billion as of March 31, 2015, a decrease of $0.1 billion, compared to FPAUM of $47.3 billion as of December 31, 2014. The decrease was primarily attributable to distributions to limited partners of our private equity funds arising from realizations as well as the impact of changes in foreign exchange rates on euro denominated commitments. These decreases were offset by new capital raised in European Fund IV and Global Infrastructure Investors II.

Total segment revenues were $868.0 million for the quarter ended March 31, 2015, an increase of $137.3 million, compared to total segment revenues of $730.7 million for the quarter ended March 31, 2014. The increase in revenues for the quarter ended March 31, 2015 was principally attributable to an increase in performance income due to higher net carried interest resulting from more private equity funds earning carried interest and to a lesser extent higher overall appreciation in our private equity portfolio.

ENI was $568.5 million for the quarter ended March 31, 2015, an increase of $83.1 million, compared to ENI of $485.4 million for the quarter ended March 31, 2014. The increase was primarily attributable to higher total segment revenues as described above, partially offset by higher allocations to the carry pool resulting from the higher levels of net carried interest.

Public Markets

AUM was $37.0 billion as of March 31, 2015, a decrease of $0.1 billion, compared to AUM of $37.1 billion as of December 31, 2014. FPAUM was $35.7 billion as of March 31, 2015, a decrease of $0.1 billion, compared to FPAUM of $35.8 billion as of December 31, 2014. For both AUM and FPAUM, the decreases were primarily attributable to distributions and redemptions across multiple strategies, as well as the impact of changes in foreign exchange rates on our euro denominated CLO portfolio. The decreases for both AUM and FPAUM were largely offset by new capital raised.

Total segment revenues were $50.0 million for the quarter ended March 31, 2015, a decrease of $95.6 million, compared to total segment revenues of $145.6 million for the quarter ended March 31, 2014. The decrease in revenues for the quarter ended March 31, 2015 was principally attributable to a decrease in investment income due primarily to net unrealized losses in our CLOs and certain credit and other Public Markets related investments, as well as lower performance income for the period. These decreases were partially offset by an increase in net interest and dividends relating primarily to the yielding assets of KKR Financial Holdings LLC ("KFN"), which was acquired on April 30, 2014 but was not part of the KKR platform for the quarter ended March 31, 2014.

ENI was $2.8 million for the quarter ended March 31, 2015, a decrease of $95.0 million, compared to ENI of $97.8 million for the quarter ended March 31, 2014. The decrease for the quarter ended March 31, 2015 was principally attributable to the decrease in total segment revenues as described above.

Capital Markets

Total segment revenues were $44.4 million for the quarter ended March 31, 2015, a decrease of $24.8 million, compared to total segment revenues of $69.2 million for the quarter ended March 31, 2014. The decrease in revenues primarily reflect a lower level of overall capital markets transaction activity for the quarter ended March 31, 2015.

ENI was $28.1 million for the quarter ended March 31, 2015, a decrease of $19.0 million, compared to ENI of $47.1 million for the quarter ended March 31, 2014. The decrease for the quarter ended March 31, 2015 primarily reflects the decrease in total segment revenues as described above, partially offset by lower compensation expense.

CAPITAL AND LIQUIDITY

As of March 31, 2015, KKR had $1.5 billion of cash and short-term investments and $3.1 billion of outstanding debt and preferred share obligations on a total reportable segment basis. This includes KFN's debt obligations of $657.3 million and KFN's 7.375% Series A LLC preferred shares of $373.8 million, which are non-recourse to KKR beyond the assets of KFN. As of March 31, 2015, KKR had a $1.0 billion revolving credit facility, which was undrawn. In addition, KKR has a $500.0 million revolving credit facility for use in its capital markets business that had $97.0 million drawn as of March 31, 2015.

As of March 31, 2015, KKR's portion of total uncalled commitments to its investment funds was $1.2 billion. See Exhibit A for details.

DISTRIBUTION

A distribution of $0.46 per common unit has been declared, comprised of (i) $0.10 per common unit from after-tax FRE, (ii) $0.22 per common unit from realized cash carry, (iii) $0.09 per common unit from KKR's net realized investment income and (iv) $0.05 per common unit from KFN's net realized investment income. The distribution will be paid on May 18, 2015 to unitholders of record as of the close of business on May 4, 2015.

CONFERENCE CALL

A conference call to discuss KKR's financial results will be held on Thursday, April 23, 2015 at 10:00 a.m. EDT. The conference call may be accessed by dialing (877) 303-2917 (U.S. callers) or +1 (253) 237-1135 (non-U.S. callers); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Investor Center section of KKR's website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. A replay of the live broadcast will be available on KKR's website or by dialing (855) 859-2056 (U.S. callers) or +1 (404) 537-3406 (non-U.S. callers), pass code 22741370, beginning approximately two hours after the broadcast.

From time to time, KKR may use its website as a channel of distribution of material company information. Financial and other important information regarding KKR is routinely posted and accessible on the Investor Center for KKR & Co.L.P. at http://ir.kkr.com/kkr_ir/kkr_events.cfm. In addition, you may automatically receive email alerts and other information about KKR by enrolling your email address at the "Email Alerts" area of the Investor Center on the website.

ABOUT KKR

KKR is a leading global investment firm that manages investments across multiple asset classes including private equity, energy, infrastructure, real estate, credit and hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation at the asset level. KKR invests its own capital alongside its partners' capital and brings opportunities to others through its capital markets business. References to KKR's investments may include the activities of its sponsored funds. For additional information about KKR & Co. L.P. (NYSE: KKR), please visit KKR's website at www.kkr.com.

FORWARD-LOOKING STATEMENTS

This release contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements are based on KKR's beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or are within its control. If a change occurs, KKR's business, financial condition, liquidity and results of operations, including but not limited to AUM, FPAUM, FRE, total distributable earnings, ENI, ENI after taxes, fee and yield earnings, fee and yield EBITDA, equity invested and syndicated capital, uncalled commitments, core interest expense, cash and short-term investments, net realized investment income and book value, may vary materially from those expressed in the forward-looking statements. The following factors, among others, could cause actual results to vary from the forward-looking statements: the general volatility of the capital markets; failure to realize the benefits of or changes in KKR's business strategies including the ability to realize the anticipated synergies from acquisitions or strategic partnerships ; availability, terms and deployment of capital; availability of qualified personnel and expense of recruiting and retaining such personnel; changes in the asset management industry, interest rates or the general economy; underperformance of KKR's investments and decreased ability to raise funds; and the degree and nature of KKR's competition. KKR does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made except as required by law. In addition, KKR's business strategy is focused on the long term and financial results are subject to significant volatility. Additional information about factors affecting KKR is available in KKR & Co. L.P.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC on February 27, 2015, quarterly reports on Form 10-Q for subsequent quarters and other filings with the SEC, which are available at www.sec.gov.

KKR
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
 
      Quarter Ended
      March 31, 2015   March 31, 2014
Revenues          
Fees and Other     $ 291,345     $ 302,926  
Expenses          
Compensation and Benefits     364,999     331,038  
Occupancy and Related Charges     15,732     15,408  
General, Administrative and Other     134,302     126,725  
Total Expenses     515,033     473,171  
Investment Income (Loss)          
Net Gains (Losses) from Investment Activities     1,919,825     1,972,180  
Dividend Income     78,815     96,704  
Interest Income     296,158     161,960  
Interest Expense     (111,963 )   (34,731 )
Total Investment Income (Loss)     2,182,835     2,196,113  
           
Income (Loss) Before Taxes     1,959,147     2,025,868  
           
Income Taxes     16,138     21,702  
           
Net Income (Loss)     1,943,009     2,004,166  
           
Net Income (Loss) Attributable to          
Redeemable Noncontrolling Interests     1,933     10,637  
Net Income (Loss) Attributable to          
Noncontrolling Interests     1,670,569     1,783,488  
           
Net Income (Loss) Attributable to KKR & Co. L.P.     $ 270,507     $ 210,041  
           
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit          
Basic     $ 0.62     $ 0.72  
Diluted (a)     $ 0.57     $ 0.65  
Weighted Average Common Units Outstanding          
Basic     434,874,820     293,490,461  
Diluted (a)     472,225,344     325,104,229  
(a)   KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit since the exchange of these units would not dilute KKR's respective ownership interests in the KKR Group Partnerships.

 

KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
      Quarter Ended
      March 31, 2015   December 31, 2014   March 31, 2014
Segment Revenues              
Management, Monitoring and Transaction Fees, Net              
Management Fees     $ 173,780     $ 178,064     $ 195,393  
Monitoring Fees     97,838     38,738     36,363  
Transaction Fees     103,286     53,292     163,516  
Fee Credits     (80,494 )   (25,728 )   (84,668 )
Total Management, Monitoring and Transaction Fees, Net     294,410     244,366     310,604  
Performance Income              
Realized Carried Interest     302,425     198,597     193,550  
Incentive Fees     5,665     11,301     17,019  
Unrealized Carried Interest     139,284     46,120     145,647  
Total Performance Income     447,374     256,018     356,216  
Investment Income (Loss)              
Net Realized Gains (Losses)     180,667     62,219     181,728  
Net Unrealized Gains (Losses)     (10,721 )   (324,416 )   85,759  
Total Realized and Unrealized     169,946     (262,197 )   267,487  
Net Interest and Dividends     50,675     119,325     11,164  
Total Investment Income (Loss)     220,621     (142,872 )   278,651  
Total Segment Revenues     962,405     357,512     945,471  
Segment Expenses              
Compensation and Benefits              
Cash Compensation and Benefits     107,027     90,556     108,915  
Realized Allocation to Carry Pool     120,970     79,439     77,420  
Unrealized Allocation to Carry Pool     55,631     21,508     58,690  
Total Compensation and Benefits     283,628     191,503     245,025  
Occupancy and Related Charges     14,796     14,383     14,189  
Other Operating Expenses     60,946     61,685     52,801  
Total Segment Expenses     359,370     267,571     312,015  
Income (Loss) attributable to noncontrolling interests     3,622     3,349     3,202  
Economic Net Income (Loss) (a)     $ 599,413     $ 86,592     $ 630,254  
Provision for Income Taxes     21,235     3,951     36,581  
Equity-based Charges     52,265     36,607     39,353  
Economic Net Income (Loss), After Taxes (b)     $ 525,913     $ 46,034     $ 554,320  
               
Economic Net Income (Loss), After Taxes Per Adjusted Unit     $ 0.62     $ 0.05     $ 0.77  
Weighted Average Adjusted Units (Fully Diluted Basis) (a)     848,061,661     838,067,975     724,579,220  
               
Assets Under Management     $ 99,128,000     $ 98,612,500     $ 102,277,500  
Fee Paying Assets Under Management     $ 82,884,500     $ 83,046,400     $ 83,611,600  
Equity Invested and Syndicated Capital     $ 2,945,400     $ 2,343,900     $ 3,377,300  
Uncalled Commitments     $ 21,555,600     $ 21,113,700     $ 19,985,100  
               
Other Information              
Fee Related Earnings     $ 117,306     $ 89,043     $ 151,718  
Plus: Net Interest and Dividends     50,675     119,325     11,164  
Fee and Yield Earnings (a)     $ 167,981     $ 208,368     $ 162,882  
Plus: Depreciation and Amortization     3,881     3,830     4,035  
Plus: Core Interest Expense     25,332     27,050     18,400  
Fee and Yield EBITDA (a)     $ 197,194     $ 239,248     $ 185,317  
               
Total Distributable Earnings (a)     $ 516,531     $ 376,326     $ 446,808  
GAAP interest expense     $ 111,963     $ 119,846     $ 34,731  
Less: interest expense related to debt obligations              
from investment financing arrangements and KFN     86,631     92,796     16,331  
Core Interest Expense (a)     $ 25,332     $ 27,050     $ 18,400  
(a)   See definitions for economic net income (loss), adjusted units, fee and yield earnings, fee and yield EBITDA, total distributable earnings and core interest expense under "Notes to Reportable Segments."
(b)   Represents economic net income (loss) after reductions for income taxes and equity-based charges.

 

KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
       
      Quarter Ended
      March 31, 2015   December 31, 2014   March 31, 2014
Segment Revenues              
Management, Monitoring and Transaction Fees, Net              
Management Fees     $ 109,276     $ 111,186     $ 123,039  
Monitoring Fees     97,838     38,738     36,363  
Transaction Fees     46,599     8,480     93,020  
Fee Credits     (69,906 )   (16,054 )   (80,338 )
Total Management, Monitoring and Transaction Fees, Net     183,807     142,350     172,084  
Performance Income              
Realized Carried Interest     302,425     198,597     168,800  
Incentive Fees              
Unrealized Carried Interest     126,937     34,070     145,776  
Total Performance Income     429,362     232,667     314,576  
Investment Income (Loss)              
Net Realized Gains (Losses)     183,264     60,768     176,198  
Net Unrealized Gains (Losses)     79,363     (201,497 )   70,673  
Total Realized and Unrealized     262,627     (140,729 )   246,871  
Net Interest and Dividends     (7,831 )   49,084     (2,808 )
Total Investment Income (Loss)     254,796     (91,645 )   244,063  
Total Segment Revenues     867,965     283,372     730,723  
               
Segment Expenses              
Compensation and Benefits              
Cash Compensation and Benefits     73,967     55,750     66,898  
Realized Allocation to Carry Pool     120,970     79,439     67,520  
Unrealized Allocation to Carry Pool     50,693     16,688     58,743  
Total Compensation and Benefits     245,630     151,877     193,161  
Occupancy and Related Charges     11,016     10,687     11,560  
Other Operating Expenses     42,116     43,754     40,059  
Total Segment Expenses     298,762     206,318     244,780  
Income (Loss) attributable to noncontrolling interests     719     232     515  
               
Economic Net Income (Loss)     $ 568,484     $ 76,822     $ 485,428  
               
Assets Under Management     $ 62,139,400     $ 61,505,800     $ 60,520,300  
Fee Paying Assets Under Management     $ 47,161,900     $ 47,262,500     $ 48,211,000  
Equity Invested     $ 2,047,400     $ 828,000     $ 2,551,800  
Uncalled Commitments     $ 18,690,000     $ 18,272,400     $ 18,256,800  
                           

 

KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
 
      Quarter Ended
      March 31, 2015   December 31, 2014   March 31, 2014
Segment Revenues              
Management, Monitoring and Transaction Fees, Net              
Management Fees     $ 64,504     $ 66,878     $ 72,354  
Monitoring Fees    

-

   

-

   

-

 
Transaction Fees     13,430     10,511     6,022  
Fee Credits     (10,588 )   (9,674 )   (4,330 )
Total Management, Monitoring and Transaction Fees, Net     67,346     67,715     74,046  
Performance Income              
Realized Carried Interest    

-

   

-

    24,750  
Incentive Fees     5,665     11,301     17,019  
Unrealized Carried Interest     12,347     12,050     (129 )
Total Performance Income     18,012     23,351     41,640  
Investment Income (Loss)              
Net Realized Gains (Losses)     684     1,417     5,479  
Net Unrealized Gains (Losses)     (87,877 )   (121,340 )   14,814  
Total Realized and Unrealized     (87,193 )   (119,923 )   20,293  
Net Interest and Dividends     51,872     62,398     9,577  
Total Investment Income (Loss)     (35,321 )   (57,525 )   29,870  
Total Segment Revenues     50,037     33,541     145,556  
Segment Expenses              
Compensation and Benefits              
Cash Compensation and Benefits     24,005     25,174     26,745  
Realized Allocation to Carry Pool    

-

   

-

    9,900  
Unrealized Allocation to Carry Pool     4,938     4,820     (53 )
Total Compensation and Benefits     28,943     29,994     36,592  
Occupancy and Related Charges     3,122     3,026     2,172  
Other Operating Expenses     14,954     11,502     8,507  
Total Segment Expenses     47,019     44,522     47,271  
Income (Loss) attributable to noncontrolling interests     175     394     522  
               
Economic Net Income (Loss)     $ 2,843     $ (11,375 )   $ 97,763  
               
Assets Under Management     $ 36,988,600     $ 37,106,700     $ 41,757,200  
Fee Paying Assets Under Management     $ 35,722,600     $ 35,783,900     $ 35,400,600  
Equity Invested     $ 649,300     $ 1,126,700     $ 734,100  
Uncalled Commitments     $ 2,865,600     $ 2,841,300     $ 1,728,300  
Gross Dollars Invested     $ 1,210,800     $ 1,545,600     $ 989,700  
                           

 

KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
       
      Quarter Ended
      March 31, 2015   December 31, 2014   March 31, 2014
Segment Revenues              
Management, Monitoring and Transaction Fees, Net              
Management Fees     $

-

    $

-

    $

-

Monitoring Fees    

-

   

-

   

-

Transaction Fees     43,257     34,301     64,474
Fee Credits    

-

   

-

   

-

Total Management, Monitoring and Transaction Fees, Net     43,257     34,301     64,474
Performance Income              
Realized Carried Interest    

-

   

-

   

-

Incentive Fees    

-

   

-

   

-

Unrealized Carried Interest    

-

   

-

   

-

Total Performance Income    

-

   

-

   

-

Investment Income (Loss)              
Net Realized Gains (Losses)     (3,281 )   34     51
Net Unrealized Gains (Losses)     (2,207 )   (1,579 )   272
Total Realized and Unrealized     (5,488 )   (1,545 )   323
Net Interest and Dividends     6,634     7,843     4,395
Total Investment Income (Loss)     1,146     6,298     4,718
Total Segment Revenues     44,403     40,599     69,192
Segment Expenses              
Compensation and Benefits              
Cash Compensation and Benefits     9,055     9,632     15,272
Realized Allocation to Carry Pool    

-

   

-

   

-

Unrealized Allocation to Carry Pool    

-

   

-

   

-

Total Compensation and Benefits     9,055     9,632     15,272
Occupancy and Related Charges     658     670     457
Other Operating Expenses     3,876     6,429     4,235
Total Segment Expenses     13,589     16,731     19,964
Income (Loss) attributable to noncontrolling interests     2,728     2,723     2,165
               
Economic Net Income (Loss)     $ 28,086     $ 21,145     $ 47,063
               
Syndicated Capital     $ 248,700     $ 389,200     $ 91,400
                         

 

KKR
BALANCE SHEET
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
       
      As of       As of    
      March 31, 2015       December 31, 2014    
Cash and short-term investments     $ 1,453,916         $ 1,121,385      
Investments     10,040,752     (a)   9,807,606      
Unrealized carry (b)     1,375,022     (b)   1,283,022     (b)
Other assets     1,055,496         999,654      
Total assets     $ 13,925,186         $ 13,211,667      
                   
Debt obligations - KKR (ex-KFN)     $ 2,097,000         $ 1,527,000      
Debt obligations - KFN     657,310         657,310      
Preferred shares - KFN     373,750         373,750      
Other liabilities     285,297         413,808      
Total liabilities     3,413,357         2,971,868      
Noncontrolling interests     124,769         121,574      
Book value     $ 10,387,060         $ 10,118,225      
                   
Book value per adjusted unit     $ 12.19         $ 12.07      
                   
                   
                   
(a) See schedule of investments that follows on the next page.
                   
      As of       As of    

(b) Unrealized Carry

    March 31, 2015       December 31, 2014    

Private Markets

    $ 1,281,225         $ 1,196,633      
Public Markets     93,797         86,389      
Total     $ 1,375,022         $ 1,283,022      
                           

 

KKR
SCHEDULE OF INVESTMENTS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except percentage amounts)
       
      As of March 31, 2015
               
Investments     Cost   Fair

Value

  Fair Value as a

Percentage of

Total Investments

               
Private Equity Co-Investments     $ 2,366,648     $ 2,900,089     28.9 %
Private Equity Funds     858,817     1,082,185     10.8 %
Private Equity Total     3,225,465     3,982,274     39.7 %
Energy     939,776     684,117     6.8 %
Real Estate     671,839     693,559     6.9 %
Infrastructure     151,252     155,207     1.5 %
Real Assets Total     1,762,867     1,532,883     15.2 %
               
Private Markets Total     4,988,332     5,515,157     54.9 %
               
Special Situations     762,043     808,111     8.0 %
Direct Lending     200,583     190,721     1.9 %
Mezzanine     86,520     94,358     0.9 %
Alternative Credit     1,049,146     1,093,190     10.8 %
CLOs     1,538,004     1,374,076     13.7 %
Liquid Credit     257,000     282,968     2.9 %
Credit Total     2,844,150     2,750,234     27.4 %
               
Specialty Finance     282,513     255,440     2.5 %
               
Public Markets Total     3,126,663     3,005,674     29.9 %
               
Other     1,497,099     1,519,921     15.2 %
               
Total Investments     $ 9,612,094     $ 10,040,752     100.0 %
               
               
               

Significant Aggregate Portfolio Company Investments: (a)

             
First Data Corporation     $ 1,061,332     $ 1,248,176     12.4 %
Walgreens Boots Alliance     165,776     594,838     5.9 %
Biomet, Inc.     164,644     229,342     2.3 %
HCA Inc.     29,455     188,244     1.9 %
U.S. Foodservice, Inc.     80,000     112,000     1.1 %
      1,501,207     2,372,600     23.6 %
Other Investments     8,110,887     7,668,152     76.4 %
Total Investments     $ 9,612,094     $ 10,040,752     100.0 %
(a)   The significant aggregate portfolio company investments include the top five private equity investments in portfolio companies (other than investments expected to be syndicated or transferred in connection with new fundraising) based on their fair market value as of March 31, 2015. The fair value figures include the co-investment and the limited partner and/or general partner interests held by KKR in the underlying portfolio company.

 

KKR
ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
               
      Private

Markets

Segment

  Public

Markets

Segment

  Total

Reportable

Segments

Quarter Ended March 31, 2015

             
December 31, 2014     $ 61,505,800     $ 37,106,700     $ 98,612,500  
New Capital Raised     1,591,100     2,247,900     3,839,000  
Distributions     (2,967,000 )   (1,848,600 ) (c) (4,815,600 )
Net Changes in Fee Base of Certain Funds (a)    

-

    (238,600 )   (238,600 )
Change in Value     2,009,500     (278,800 )   1,730,700  
March 31, 2015     $ 62,139,400     $ 36,988,600     $ 99,128,000  
               

Trailing Twelve Months Ended March 31, 2015

             
March 31, 2014     $ 60,520,300     $ 41,757,200     $ 102,277,500  
New Capital Raised     7,058,200     8,379,900     15,438,100  
KFN Acquisition (b)    

-

    (4,511,900 )   (4,511,900 )
Distributions     (11,502,200 )   (7,793,500 ) (d) (19,295,700 )
Net Changes in Fee Base of Certain Funds (a)    

-

    (238,600 )   (238,600 )
Change in Value     6,063,100     (604,500 )   5,458,600  
March 31, 2015     $ 62,139,400     $ 36,988,600     $ 99,128,000  
               
KKR
FEE PAYING ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
               
      Private

Markets

Segment

  Public

Markets

Segment

  Total

Reportable

Segments

Quarter Ended March 31, 2015

             
December 31, 2014     $ 47,262,500     $ 35,783,900     $ 83,046,400  
New Capital Raised     1,320,500     2,193,800     3,514,300  
Distributions     (961,100 )   (1,586,400 ) (c) (2,547,500 )
Net Changes in Fee Base of Certain Funds (a)    

-

    (325,200 )   (325,200 )
Change in Value     (460,000 )   (343,500 )   (803,500 )
March 31, 2015     $ 47,161,900     $ 35,722,600     $ 82,884,500  
               

Trailing Twelve Months Ended March 31, 2015

             
March 31, 2014     $ 48,211,000     $ 35,400,600     $ 83,611,600  
New Capital Raised     6,183,700     9,997,400     16,181,100  
KFN Acquisition (b)    

-

    (2,684,700 )   (2,684,700 )
Distributions     (6,368,400 )   (5,584,300 ) (d) (11,952,700 )
Net Changes in Fee Base of Certain Funds (a)    

-

    (325,200 )   (325,200 )
Change in Value     (864,400 )   (1,081,200 )   (1,945,600 )
March 31, 2015     $ 47,161,900     $ 35,722,600     $ 82,884,500  
*   Excludes those assets managed by entities where KKR does not hold more than a 50% ownership interest.
(a)   Represents the impact of certain funds entering the post-investment period.
(b)   Certain assets that were externally managed prior to the acquisition of KFN are now reported on the balance sheet and excluded from AUM and FPAUM.
(c)   Includes $653.2 million of redemptions by fund investors.
(d)   Includes $3,414.6 million of redemptions by fund investors.

 

KKR
INVESTMENT VEHICLE SUMMARY (a) (UNAUDITED)
As of March 31, 2015
(Amounts in millions, except percentages)
      Investment Period   Amount
      Commencement

Date

  End Date   Commitment   Uncalled

Commitments

  Percentage

Committed

by General

Partner

  Invested   Realized   Remaining

Cost

  Remaining Fair

Value

Private Markets                                      
                                       
Private Equity Funds                                      
European Fund IV     12/2014   12/2020   $ 2,229.3   $ 2,068.4   8.9%   $ 160.9   $

-

  $ 160.9   $ 154.8
Asian Fund II     4/2013   4/2019   5,825.0   4,157.0   1.3%   1,668.0  

-

  1,668.0   2,382.4
North America Fund XI     9/2012   9/2018   8,718.4   4,202.6   2.9%   4,515.8   205.6   4,515.8   6,006.1
China Growth Fund     11/2010   11/2016   1,010.0   444.7   1.0%   565.3   46.3   547.9   683.0
E2 Investors (Annex Fund)     8/2009   11/2013   208.1   12.3   4.6%   195.8   166.0   33.9   150.4
European Fund III     3/2008   3/2014   6,137.6   629.1   4.6%   5,508.5   3,934.4   3,694.0   4,596.6
Asian Fund     7/2007   4/2013   3,983.3   158.7   2.5%   3,824.6   4,432.7   2,296.7   3,452.2
2006 Fund     9/2006   9/2012   17,642.2   553.1   2.1%   17,089.1   15,043.2   9,270.4   15,319.2
European Fund II     11/2005   10/2008   5,750.8  

-

  2.1%   5,750.8   6,143.6   1,268.9   2,068.6
Millennium Fund     12/2002   12/2008   6,000.0  

-

  2.5%   6,000.0   11,445.6   1,284.3   2,284.5
European Fund     12/1999   12/2005   3,085.4  

-

  3.2%   3,085.4   8,736.6  

-

  40.0
Total Private Equity Funds             60,590.1   12,225.9       48,364.2   50,154.0   24,740.8   37,137.8
                                       
Co-Investment Vehicles     Various   Various   4,195.9   1,298.1   Various   2,897.8   1,434.9   2,371.5   3,059.5
                                       
Total Private Equity             64,786.0   13,524.0       51,262.0   51,588.9   27,112.3   40,197.3
                                       
Real Assets                                      
Energy Income and Growth Fund     9/2013   9/2018   1,974.2   1,217.7   12.8%   756.5   92.1   715.0   580.3
Natural Resources Fund     Various   Various   887.4   2.9   Various   884.5   96.6   809.9   319.9
Global Energy Opportunities     Various   Various   1,033.7   809.6   Various   224.1   27.7   218.4   149.1
Infrastructure Fund     9/2011   10/2014   1,039.8   132.5   4.8%   907.3   81.8   907.3   947.8
Infrastructure Fund II     10/2014   10/2020   2,325.6   2,275.3   5.4%   50.3  

-

  50.3   50.3
Infrastructure Co-Investments     Various   Various   1,125.0  

-

  Various   1,125.0   314.8   1,125.0   1,583.1
Real Estate Partners Americas     5/2013   12/2016   1,330.2   728.0   16.3%   602.2   229.8   500.8   557.4
Real Assets             9,715.9   5,166.0       4,549.9   842.8   4,326.7   4,187.9
                                       
Private Markets Total             74,501.9   18,690.0       55,811.9   52,431.7   31,439.0   44,385.2
                                       
Public Markets                                      
Special Situations Fund     12/2012   12/2015   2,073.7   168.4   11.6%   1,905.3   73.7   1,905.3   2,214.2
Special Situations Fund II     12/2014   (b)   659.7   574.7   22.8%   85.0  

-

  85.0   85.5
Mezzanine Fund     3/2010   8/2015   1,022.8   223.1   4.4%   799.7   269.6   669.7   797.2
Direct Lending Fund     12/2011   12/2014   460.2   77.2   15.2%   383.0   127.7   355.0   357.0
Direct Lending Fund II     06/2014   06/2017   1,071.4   638.1   4.7%   433.3  

-

  433.3   460.4
Other Alternative Credit Vehicles     Various   Various   3,325.8   1,184.1   Various   2,141.7   1,142.6   1,483.2   1,703.6
                                       
Public Markets Total             8,613.6   2,865.6       5,748.0   1,613.6   4,931.5   5,617.9
                                       
Grand Total             $ 83,115.5   $ 21,555.6       $ 61,559.9   $ 54,045.3   $ 36,370.5   $ 50,003.1
(a)   Reflects investment vehicles for which KKR has the ability to earn carried interest.
(b)   Three years from final close.

 

KKR
DISTRIBUTION CALCULATION (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
       
      Quarter Ended
      March 31, 2015   December 31, 2014   March 31, 2014
Cash Revenues              
Fees     $ 300,075     $ 255,667     $ 327,623  
Realized cash carry     302,425     198,597     193,550  
Net realized investment income - KKR (ex-KFN)     191,477     120,618     192,892  
Net realized investment income - KFN     39,865     60,926    

-

 

Total Cash Revenues

    833,842     635,808     714,065  
Cash Expenses              
Cash compensation and benefits     107,027     90,556     108,915  
Realized cash carry allocated to carry pool     120,970     79,439     77,420  
Occupancy and related charges     14,796     14,383     14,189  
Other operating expenses     60,946     61,685     52,801  
Total Cash Expenses     303,739     246,063     253,325  
               
Cash income (loss) before noncontrolling interests and local taxes     530,103     389,745     460,740  
               
Less: local income taxes     (9,950 )   (10,070 )   (10,730 )
Less: noncontrolling interests     (3,622 )   (3,349 )   (3,202 )
Total Distributable Earnings     516,531     376,326     446,808  
Less: estimated current corporate income taxes     (28,855 )   (15,113 )   (33,445 )
Distributable Earnings, net of taxes     487,676     361,213     413,363  
Less: Undistributed net realized investment income - KKR (ex-KFN)     (114,886 )   (72,371 )   (115,735 )
Distributed Earnings     $ 372,790     $ 288,842     $ 297,628  
               
Distributable Earnings, net of taxes per KKR & Co. L.P. common unit     $ 0.60     $ 0.44     $ 0.59  
               
Distribution per KKR & Co. L.P. common unit     $ 0.46     $ 0.35     $ 0.43  
               
Components of Distribution per KKR & Co. L.P. Common Unit
               
After-tax FRE     $ 0.10     $ 0.07     $ 0.15  
Realized Cash Carry     $ 0.22     $ 0.15     $ 0.17  
Distributed Net Realized Investment Income - KKR (ex-KFN)     $ 0.09     $ 0.06     $ 0.11  
Distributed Net Realized Investment Income - KFN     $ 0.05     $ 0.07     $

-

 
               
Fee and yield earnings distribution per KKR & Co. L.P. common unit     $ 0.15     $ 0.18     $ 0.16  
               
Adjusted Units Eligible For Distribution     813,796,584     813,647,533     696,070,615  
               
Payout Ratio     76.4 %   80.0 %   72.0 %

 

KKR

Notes to Reportable Segments (Unaudited)

The segment key performance measures that follow are used by management in making operating and resource deployment decisions as well as assessing the overall performance of each of KKR's reportable business segments. The reportable segments for KKR's business are presented prior to giving effect to the allocation of income (loss) between KKR & Co. L.P. and KKR Holdings L.P. and as such represent the business in total. In addition, KKR's reportable segments are presented without giving effect to the consolidation of the funds that KKR manages.

KKR discloses the following financial measures in this earnings release that are calculated and presented using methodologies other than in accordance with GAAP. We believe that providing these performance measures on a supplemental basis to our GAAP results is helpful to unitholders in assessing the overall performance of KKR's businesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP. We caution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included elsewhere within this earnings release.

Fee related earnings ("FRE") is comprised of (i) total management, monitoring and transaction fees, net, plus incentive fees, less (ii) cash compensation and benefits, occupancy and related charges and other operating expenses. This measure is used by management as an alternative measurement of the operating earnings of KKR and its business segments before carried interest and related carry pool allocations and 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-based charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR & Co. L.P. 2010 Equity Incentive Plan ("Equity Incentive Plan"); (vi) the exclusion of certain reimbursable expenses; and (vii) the exclusion of certain non-recurring items.

Economic net income (loss) ("ENI") is a measure of profitability for KKR's reportable segments and is used by management as an alternative measurement of the operating and investment earnings of KKR and its business segments. We believe this measure is useful to unitholders as it provides additional insight into the overall profitability of KKR's businesses inclusive of carried interest and related carry pool allocations and investment income. ENI is comprised of total segment revenues less total segment expenses and certain economic interests in KKR's segments held by third parties. ENI differs from net income (loss) on a GAAP basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of non-cash equity-based charges and other non-cash compensation charges borne by KKR Holdings or incurred under the Equity Incentive Plan or other securities that are exchangeable for common units of KKR & Co. L.P.; (v) the exclusion of certain non-recurring items; (vi) the exclusion of investment income (loss) relating to noncontrolling interests; and (vii) the exclusion of income taxes.

Fee and Yield Earnings is comprised of FRE and net interest and dividends from KKR's business segments. This measure is used by management as a measure of the cash earnings of KKR and its business segments' investment income. We believe this measure is useful to unitholders as it provides insight into the amount of KKR's cash earnings, significant portions of which tend to be more recurring than realized carried interest and net realized gains from quarter to quarter.

Fee and Yield EBITDA is comprised of Fee and Yield Earnings before the impact of depreciation of fixed assets and core interest expense. This is used by management as another measure of the cash earnings of KKR and its business segments investment income. We believe this measure is also useful to unitholders as it provides insight into the amount of KKR's cash earnings before the impact of interest expense, significant portions of which tend to be more recurring than realized carried interest and realized investment income from quarter to quarter.

Net realized investment income - KKR (ex-KFN) refers to net cash income from (i) realized investment gains and losses excluding certain realized investment losses to the extent unrealized losses on these investments were recognized prior to the combination with KPE on October 1, 2009, (ii) dividend income, and (iii) interest income net of interest expense in each case generated by KKR (excluding KFN). This term describes a portion of KKR's quarterly distribution and excludes net realized investment income of KFN.

Net realized investment income - KFN refers to net cash income from (i) realized investment gains and losses, (ii) dividend income and (iii) interest income net of interest expense less certain general and administrative expenses incurred in the generation of net realized investment income in each case generated by KFN. This term describes a portion of KKR's quarterly distribution.

Investments is a term used solely for purposes of financial presentation of a portion of KKR's balance sheet and includes majority investments in subsidiaries that operate KKR's asset management and broker-dealer businesses, including the general partner interests of KKR's investment funds.

Total distributable earnings is the sum of (i) FRE, (ii) carry distributions received from KKR's investment funds which have not been allocated as part of its carry pool, (iii) net realized investment income — KKR (ex-KFN) and (iv) net realized investment income — KFN; less (i) applicable local income taxes, if any, and (ii) noncontrolling interests. We believe this measure is useful to unitholders as it provides a supplemental measure to assess performance, excluding the impact of mark-to-market gains (losses), and amounts available for distribution to KKR unitholders. However, total distributable earnings is not a measure that calculates actual distributions under KKR's current distribution policy.

Assets under management ("AUM") represent the assets from which KKR is entitled to receive fees or a carried interest and general partner capital. We believe this measure is useful to unitholders as it provides additional insight into KKR's capital raising activities and the overall activity in its investment funds. KKR calculates the amount of AUM as of any date as the sum of: (i) the fair value of the investments of KKR's investment funds plus uncalled capital commitments from these funds; (ii) the fair value of investments in KKR's co-investment vehicles; (iii) the net asset value of certain of KKR's fixed income products; (iv) the value of outstanding CLOs (excluding CLOs wholly-owned by KKR); and (v) the fair value of other assets managed by KKR. AUM excludes those assets managed by entities where KKR does not hold more than a 50% ownership interest. KKR's definition of AUM is not based on any definition of AUM that may be set forth in the agreements governing the investment funds, vehicles or accounts that it manages or calculated pursuant to any regulatory definitions.

Fee paying AUM ("FPAUM") represents only those assets under management from which KKR receives management fees. We believe this measure is useful to unitholders as it provides additional insight into the capital base upon which KKR earns management fees. This relates to KKR's capital raising activities and the overall activity in its investment funds or CLOs, for only those funds or CLOs where KKR receives fees (i.e., excluding vehicles that receive only carried interest or general partner capital). FPAUM is the sum of all of the individual fee bases that are used to calculate KKR's fees and differs from AUM in the following respects: (i) assets from which KKR does not receive a fee are excluded (i.e., assets with respect to which it receives only carried interest) and (ii) certain assets, primarily in its private equity funds, are reflected based on capital commitments and invested capital as opposed to fair value because fees are not impacted by changes in the fair value of underlying investments.

Equity invested is the aggregate amount of equity capital that has been invested by KKR's investment funds and carry-yielding co-investment vehicles and is used as a measure of investment activity for KKR and its business segments during a given period. We believe this measure is useful to unitholders as it provides additional insight into KKR's investments among its investment funds and carry-yielding co-investment vehicles and replaces committed dollars invested. Such amounts include: (i) capital invested by fund investors and co-investors with respect to which KKR is entitled to a carried interest and (ii) capital invested by KKR's investment funds, including investments made using investment financing arrangements.

Gross dollars invested is the aggregate amount of capital that has been invested by all of KKR's Public Markets investment vehicles in our private credit non-liquid strategies and is used as a measure of investment activity for a portion of KKR's Public Markets segment in a given period. We believe this measure is useful to unitholders as it provides additional insight into KKR's investment of capital across private credit non-liquid strategies for all the investment vehicles in the Public Markets segment. Such amounts include capital invested by fund investors and co-investors with respect to which KKR's Public Markets business is entitled to a fee or carried interest.

Syndicated capital is generally the aggregate amount of capital in transactions originated by KKR investment funds and carry-yielding co-investment vehicles, which has been distributed to third parties in exchange for a fee. It does not include (i) capital invested in such transactions by KKR investment funds and carry-yielding co-investment vehicles, which is instead reported in equity invested and (ii) debt capital that is arranged as part of the acquisition financing of transactions originated by KKR investment funds. Syndicated capital is used as a measure of investment activity for KKR and its business segments during a given period, and we believe that this measure is useful to unitholders as it provides additional insight into levels of syndication activity in the Capital Markets segment and across its investment platform.

Uncalled commitments are used as a measure of unfunded capital commitments that KKR's investment funds and carry-paying co-investment vehicles have received from partners to contribute capital to fund future investments. We believe this measure is useful to unitholders as it provides additional insight into the amount of capital that is available to KKR's investment funds to make future investments. Uncalled commitments are not reduced for investments completed using fund-level investment financing arrangements.

Adjusted units are used as a measure of the total equity ownership of KKR that is held by KKR & Co. L.P. (including equity awards issued under the Equity Incentive Plan), KKR Holdings and other holders of securities exchangeable into common units of KKR & Co. L.P. and represent the fully diluted unit count using the if-converted method. We believe this measure is useful to unitholders as it provides an indication of the total equity ownership of KKR as if all outstanding KKR Holdings units, equity awards issued under the Equity Incentive Plan and other exchangeable securities had been exchanged for common units of KKR & Co. L.P.

Core interest expense is used by management as an alternative measurement of interest expense incurred by KKR on a segment basis and excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR's investment funds, investment vehicles and principal investments and also excludes interest expense incurred by KFN. The financing arrangements excluded from core interest expense are not direct obligations of the general partners of KKR's private equity funds or its management companies, and in the case of debt obligations of KFN are non-recourse to KKR beyond the assets of KFN. On a segment basis, interest expense is included in net interest and dividends within total investment income. We believe this measure is useful to unitholders as it provides an indication of the amount of interest expense borne by KKR excluding interest expense that is allocated to KKR's investment funds, other noncontrolling interest holders and KFN. Additionally, we believe this measure is useful for analyzing KKR's ability to service its debt obligations other than the debt obligations of KFN.

Book value is a measure of the net assets of KKR's reportable segments and is used by management primarily in assessing the unrealized value of KKR's investment portfolio, including carried interest, as well as KKR's overall liquidity position. We believe this measure is useful to unitholders as it provides additional insight into the assets and liabilities of KKR excluding the assets and liabilities that are allocated to noncontrolling interest holders. Book value differs from KKR & Co. L.P. partners' capital on a GAAP basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings.

Cash and short-term investments represent cash and liquid short-term investments in high-grade, short-duration cash management strategies used by KKR to generate additional yield on our excess liquidity and is used by management in evaluating KKR's liquidity position. We believe this measure is useful to unitholders as it provides additional insight into KKR's available liquidity. Cash and short-term investments differ from cash and cash equivalents on a GAAP basis as a result of the inclusion of liquid short-term investments in cash and short-term investments.

Return on equity measures the amount of net income generated as a percentage of capital invested in KKR's business. Return on equity is calculated by dividing Economic Net Income (Loss), After Taxes on a trailing twelve-month basis by the average book value during the period.

Cash return on equity measures the amount of cash income generated as a percentage of capital invested in KKR's business. Cash return on equity is calculated by dividing Distributable Earnings, net of taxes on a trailing twelve-month basis by the average book value during the period.

KKR

EXHIBIT A

KKR'S PORTION OF TOTAL UNCALLED COMMITMENTS TO ITS INVESTMENT FUNDS
(Amounts in thousands)
       
       
      Uncalled

Commitments

Private Markets

     
European Fund IV     $ 184,700
Energy Income and Growth Fund     157,200
North America Fund XI     156,700
Infrastructure Fund II     121,600
Real Estate Partners Americas     118,500
Asian Fund II     53,200
European Fund III     52,100
2006 Fund     23,400
Co-Investment Vehicles     30,500
Other Private Markets Funds     14,600
Total Private Markets Commitments     912,500
       

Public Markets

     
Special Situations Vehicles     187,900
Direct Lending Vehicles     82,500
Mezzanine Fund     9,600
Total Public Markets Commitments     280,000
       
Total Uncalled Commitments     $ 1,192,500
         

 

KKR

EXHIBIT B

RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT - BASIC (GAAP BASIS)
TO ENI AFTER TAXES PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
       
      Quarter Ended
      March 31, 2015   December 31, 2014   March 31, 2014
               
Net income (loss) attributable to KKR & Co. L.P. per common unit - Basic     $ 0.62     $ 0.00     $ 0.72
Weighted Average Common Units Outstanding - Basic     434,874,820     431,432,521     293,490,461
Net income (loss) attributable to KKR & Co. L.P.     270,507     (583 )   210,041
Plus: Net income (loss) attributable to noncontrolling

interests held by KKR Holdings L.P.

    239,008     (3,365 )   300,814
Plus: Non-cash equity-based charges     76,550     55,968     77,528
Plus: Amortization of intangibles and other, net     (2,790 )   28,048     20,169
Plus: Income taxes     16,138     6,524     21,702
Economic net income (loss)     599,413     86,592     630,254
Less: Provision for income taxes     21,235     3,951     36,581
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan     52,265     36,607     39,353
Economic net income (loss) after taxes     525,913     46,034     554,320
Weighted Average Adjusted Units     848,061,661     838,067,975     724,579,220
Economic net income (loss) after taxes per adjusted unit     $ 0.62     $ 0.05     $ 0.77
                         

 

KKR

EXHIBIT B (CONTINUED)

RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. (GAAP BASIS)
TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS, FEE AND YIELD EARNINGS, FEE AND YIELD EBITDA, TOTAL DISTRIBUTABLE EARNINGS, AND TOTAL EBITDA (UNAUDITED)
(Amounts in thousands)
 
      Quarter Ended
      March 31, 2015   December 31, 2014   March 31, 2014
               
Net income (loss) attributable to KKR & Co. L.P.     $ 270,507     $ (583 )   $ 210,041
Plus: Net income (loss) attributable to noncontrolling

interests held by KKR Holdings L.P.

    239,008     (3,365 )   300,814
Plus: Non-cash equity-based charges     76,550     55,968     77,528
Plus: Amortization of intangibles and other, net     (2,790 )   28,048     20,169
Plus: Income taxes     16,138     6,524     21,702
Economic net income (loss)     599,413     86,592     630,254
Plus: Income attributable to segment noncontrolling interests     3,622     3,349     3,202
Less: Total investment income (loss)     220,621     (142,872 )   278,651
Less: Net carried interest     265,108     143,770     203,087
Fee related earnings     117,306     89,043     151,718
Plus: Net interest and dividends     50,675     119,325     11,164
Fee and yield earnings     167,981     208,368     162,882
Plus: Depreciation and amortization     3,881     3,830     4,035
Plus: Core interest expense     25,332     27,050     18,400
Fee and yield EBITDA     197,194     239,248     185,317
Less: Depreciation and amortization     3,881     3,830     4,035
Less: Core interest expense     25,332     27,050     18,400
Less: Net interest and dividends     50,675     119,325     11,164
Plus: Realized cash carry, net of realized cash carry allocated to carry pool     181,455     119,158     116,130
Plus: Net realized investment income - KKR (ex-KFN)     191,477     120,618     192,892
Plus: Net realized investment income - KFN     39,865     60,926    
Less: Local income taxes and noncontrolling interests     13,572     13,419     13,932
Total distributable earnings     516,531     376,326     446,808
Plus: Depreciation and amortization     3,881     3,830     4,035
Plus: Core interest expense     25,332     27,050     18,400
Plus: Local income taxes and noncontrolling interests     13,572     13,419     13,932
Total EBITDA     $ 559,316     $ 420,625     $ 483,175
                         

 

KKR
EXHIBIT B (CONTINUED)
RECONCILIATION OF KKR & CO. L.P. PARTNERS' CAPITAL (GAAP BASIS)
TO BOOK VALUE AND BOOK VALUE PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
           
      As of   As of
      March 31, 2015   December 31, 2014
           
KKR & Co. L.P. partners' capital     $ 5,601,366     $ 5,382,691
Noncontrolling interests held by KKR Holdings L.P.     4,719,963     4,661,679
Equity impact of KKR Management Holdings Corp. and other     65,731     73,855
           
Book value     10,387,060     10,118,225
Adjusted units     852,445,671     838,020,974
Book value per adjusted unit     $ 12.19     $ 12.07
           
           
           
           
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS)
TO CASH AND SHORT-TERM INVESTMENTS (UNAUDITED)
(Amounts in thousands)
      As of   As of
      March 31, 2015   December 31, 2014
           
Cash and cash equivalents     $ 1,306,975     $ 918,080
Liquid short-term investments     146,941     203,305
Cash and short-term investments     $ 1,453,916     $ 1,121,385
                 

 

KKR

EXHIBIT C

RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING - BASIC TO WEIGHTED AVERAGE ADJUSTED UNITS (UNAUDITED)
 
The following table provides a reconciliation of KKR's Weighted Average GAAP Common Units Outstanding to Weighted Average Adjusted Units.
 
      Quarter Ended
      March 31, 2015   December 31, 2014   March 31, 2014
Weighted Average GAAP Common Units Outstanding - Basic     434,874,820     431,432,521     293,490,461
Adjustments:              
Weighted Average Unvested Common Units and Other Securities (a)     37,350,524     27,550,338     31,613,768
Weighted Average GAAP Common Units Outstanding - Diluted     472,225,344     458,982,859     325,104,229
Adjustments:              
Weighted Average KKR Holdings Units (b)     375,836,317     379,085,116     399,474,991
Weighted Average Adjusted Units     848,061,661     838,067,975     724,579,220
               
               
RECONCILIATION OF GAAP COMMON UNITS OUTSTANDING - BASIC TO ADJUSTED UNITS AND ADJUSTED UNITS ELIGIBLE FOR DISTRIBUTION (UNAUDITED)
 
The following table provides a reconciliation of KKR's GAAP Common Units Outstanding to Adjusted Units and Adjusted Units Eligible for Distribution.
               
      As of   As of    
      March 31, 2015   December 31, 2014    
GAAP Common Units Outstanding - Basic     438,054,363     433,330,540      

Unvested Common Units and Other Securities (a)

    41,729,331     27,493,685      
GAAP Common Units Outstanding - Diluted     479,783,694     460,824,225      
Adjustments:              
KKR Holdings Units (b)     372,661,977     377,196,749      
Adjusted Units     852,445,671     838,020,974      
Adjustments:              

Unvested Common Units and Unvested Other Securities (a)

    (38,649,087 )   (24,373,441 )    
Adjusted Units Eligible For Distribution     813,796,584     813,647,533      
(a)   Represents equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan and other securities that are exchangeable into KKR & Co. L.P. common units. The issuance of common units of KKR & Co. L.P. pursuant to such equity awards or other securities dilutes KKR common unitholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business.
(b)   Common units that may be issued by KKR & Co. L.P. upon exchange of units in KKR Holdings L.P. for KKR common units.

 

Kohlberg Kravis Roberts & Co. L.P.
Investor Relations:
Craig Larson, +1-877-610-4910 (U.S.)
+1-212-230-9410
investor-relations@kkr.com
or
Media:
Kristi Huller, +1-212-750-8300
media@kkr.com

 

Source: Kohlberg Kravis Roberts & Co. L.P.

 

 

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