KKR & Co. Inc.

Press Release

KKR & Co. L.P. Reports Fourth Quarter and Full Year 2015 Results

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02.11.16

 

NEW YORK--(BUSINESS WIRE)-- KKR & Co. L.P. (NYSE:KKR) today reported GAAP net income for the fourth quarter and full year 2015 of $32.3 million and $488.5 million, respectively.

For the full year 2015, After-tax Economic Net Income and After-tax Economic Net Income per adjusted unit were $1.0 billion and $1.21, respectively, compared to $1.5 billion and $1.84 for the full year 2014. After-tax Cash Earnings and After-tax Cash Earnings per adjusted unit eligible for distribution were $1.5 billion and $1.78, respectively, for the full year 2015 compared to $1.9 billion and $2.47 for the full year 2014. Return on equity and cash return on equity were 10% and 14%, respectively, for 2015.

For the quarter ended December 31, 2015, After-tax Economic Net Income and After-tax Economic Net Income per adjusted unit were $70.5 million and $0.08, respectively, compared to $46.0 million and $0.05 for the quarter ended December 31, 2014. After-tax Cash Earnings and After-tax Cash Earnings per adjusted unit eligible for distribution were $168.6 million and $0.21, respectively, for the quarter ended December 31, 2015 compared to $361.2 million and $0.44 for the quarter ended December 31, 2014.

Annual Highlights

  • For the full year 2015, KKR's private equity portfolio appreciated 14.2% and the investments on KKR's balance sheet appreciated 3.3% compared to the total return for the S&P 500 and MSCI World indices of 1.4% and -0.3%, respectively.
  • Book value per adjusted unit was $11.78 as of December 31, 2015 compared to $12.07 per adjusted unit as of December 31, 2014.
  • Assets Under Management and Fee Paying Assets Under Management were $120 billion and $92 billion, respectively, up 12% and 7% compared to December 31, 2014. (1)
  • Since the announcement of KKR's unit repurchase program on October 27, 2015, KKR has repurchased and canceled 17.5 million outstanding common units for $270 million. In addition, 1.7 million granted equity awards were canceled for approximately $27 million to satisfy tax obligations in connection with their vesting. In total, 19.2 million common units have been retired on a fully-diluted basis over this period.
  • KKR's regular distribution per common unit of $0.16 was declared for the quarter ended December 31, 2015.

___________________________

"KKR delivered strong investment results in 2015 as our private equity portfolio appreciated 14.2%, outperforming the S&P 500 by over 1,200 basis points despite challenging markets," said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. "We capitalized on attractive opportunities across our segments in the fourth quarter including record deployment within our Credit and Infrastructure businesses. Our ability to take advantage of volatile market environments stems from the long-dated capital entrusted to us by a growing base of limited partners across our diverse set of strategies. With $20 billion of new capital raised in 2015, we ended the year with record dry powder and over $10 billion of cash and investments on our balance sheet to invest as attractive opportunities arise."

 
Note: Certain financial measures, including ENI, After-tax ENI, After-tax cash earnings, book value, cash and short-term investments and adjusted units, are not presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). See Exhibits C and D for a reconciliation of such measures to financial results prepared in accordance with GAAP.
 
(1) AUM and FPAUM reflect the inclusion of KKR's pro rata portion of AUM or FPAUM, as applicable, managed by other asset managers in which KKR holds a minority stake. In addition, AUM reflects the inclusion of capital commitments for which KKR is eligible to receive fees or carried interest upon deployment of capital. See "Notes to Reportable Segments" for the definitions of AUM and FPAUM.
 

GAAP RESULTS

GAAP net income (loss) for the quarter and year ended December 31, 2015, included net income (loss) attributable to KKR & Co. L.P. of $32.3 million and $488.5 million, respectively, and net income (loss) attributable to KKR & Co. L.P. per common unit of $0.07 and $1.01, respectively, on a diluted basis. For the quarter and year ended December 31, 2014, net income (loss) attributable to KKR & Co. L.P. was $(0.6) million and $477.6 million, respectively, and net income (loss) attributable to KKR & Co. L.P. per common unit was $0.00 and $1.16, respectively, on a diluted basis. The increase in both comparable periods was primarily due to an increase in KKR & Co. L.P.'s ownership percentage in the KKR business, and for the quarter ended December 31, 2015, an increase in income before taxes.

TOTAL REPORTABLE SEGMENT RESULTS

KEY FINANCIAL METRICS (UNAUDITED)
(Amounts in millions, except per adjusted unit amounts)
           
           
    Quarter Ended     Year Ended
   

December 31,
2015

   

December 31,
2014

   

%
Change

   

December 31,
2015

   

December 31,
2014

   

%
Change

Cash Earnings

                                 
                                   
Management, Monitoring and Transaction Fees, Net   $ 337       $ 244             $ 1,142       $ 1,099        
Realized Performance Income (Loss)   215       210             1,047       1,242        
Realized Investment Income (Loss)   (48 )

(1)

  182             547   (1)   902        
Total Cash Segment Revenues   504       636       (21 )%     2,736       3,243       (16 )%
Less: Total Cash Segment Expenses and Other   297       250             1,142       1,180        
Less: Corporate and Local Income Taxes Paid   38       25             141       131        
After-tax Cash Earnings   $ 169  

(1)

  $ 361      

(53

)%

 

  $ 1,453  

(1)

  $ 1,932       (25 )%
                                   

After-tax Cash Earnings Per Adjusted Units
Eligible for Distribution

  $ 0.21       $ 0.44       (52 )%     $ 1.78       $ 2.47       (28 )%
                                   
    Quarter Ended     Year Ended

Economic Net Income (Loss)

 

December 31,
2015

   

December 31,
2014

   

%
Change

   

December 31,
2015

   

December 31,
2014

   

%
Change

                                   
Management, Monitoring and Transaction Fees, Net   $ 337       $ 244             $ 1,142       $ 1,099        
Performance Income (Loss)   327       256             1,210       1,352        
Investment Income (Loss)   (176 )     (143 )           154       505        
Total Segment Revenues   488       357       37 %     2,506       2,956       (15 )%
Less: Total Segment Expenses and Other   343       270             1,208       1,229        
Economic Net Income (Loss)   145       87       67 %     1,298       1,727       (25 )%
Less: Equity-based Compensation   38       37             186       159        
Pre-tax Economic Net Income (Loss)   107       50       114 %     1,112       1,568       (29 )%
Less: Provision for Income Tax (Benefit)   36       4             84       94        
After-tax Economic Net Income (Loss)   $ 71       $ 46       54 %     $ 1,028       $ 1,474       (30 )%
                                   

After-tax Economic Net Income (Loss) Per
Adjusted Unit

  $ 0.08       $ 0.05       60 %     $ 1.21       $ 1.84       (34 )%
                                   

Book Value Per Unit

  December 31, 2015     December 31, 2014                        
                                   
Book Value Per Outstanding Adjusted Unit   $ 12.18       $ 12.48       (2 )%                  
                                   
Book Value Per Adjusted Unit   $ 11.78       $ 12.07       (2 )%                  
                                   
    Year Ended                        
    December 31, 2015     December 31, 2014                        
Return on Equity   10%     16%                        
                                   
Cash Return on Equity   14%     21%                        
 

(1) Amount includes a $100.0 million realized loss on a segment basis relating to the write off of an investment which had previously been marked at zero on an unrealized basis. Accordingly, this write off had no impact on our Economic Net Income during the fourth quarter and full year of 2015.

 

TOTAL REPORTABLE SEGMENTS

Total segment revenues were $487.6 million for the quarter ended December 31, 2015, an increase of $130.1 million, compared to total segment revenues of $357.5 million for the quarter ended December 31, 2014. The increase was principally attributable to (i) a non-recurring increase in monitoring fees in our Private Markets segment, which increased segment revenues by $55.5 million net of associated fee credits, (ii) an increase in transaction fees primarily reflecting larger transaction sizes in both our Private Markets segment and Capital Markets segment and (iii) higher performance income from increased carried interest primarily reflecting more favorable performance in our carry earning Private Markets funds. These increases were partially offset by lower total investment income driven primarily by a lower level of net interest and dividends in the current period.

Total segment revenues were $2,505.9 million for the year ended December 31, 2015, a decrease of $449.7 million, compared to total segment revenues of $2,955.6 million for the year ended December 31, 2014. The decrease was principally attributable to (i) lower total investment income driven primarily by a lower level of realized and unrealized investment income which represented a net loss in the current year and (ii) lower performance income during the year reflecting a lower level of net carried interest in our Public Markets segment as well as a decrease in incentive fees.

ENI was $144.7 million for the quarter ended December 31, 2015, an increase of $58.1 million, compared to ENI of $86.6 million for the quarter ended December 31, 2014. The increase was primarily attributable to higher total segment revenues as described above partially offset by an increase in cash compensation and benefits resulting from the higher levels of management, monitoring and transaction fees.

ENI was $1,298.0 million for the year ended December 31, 2015, a decrease of $429.2 million, compared to ENI of $1,727.2 million for the year ended December 31, 2014. The decrease was primarily attributable to lower total segment revenues as described above.

AUM(1) was $119.5 billion as of December 31, 2015, an increase of $7.1 billion, compared to AUM of $112.4 billion as of September 30, 2015. The increase was primarily attributable to (i) an increase in our pro rata portion of AUM managed by other asset managers in which KKR holds a minority stake, primarily reflecting our long-term strategic partnership with Marshall Wace, (ii) an increase in the fair value of our private equity portfolio (our private equity portfolio appreciated by 4.8% and 14.2% for the quarter and year ended December 31, 2015, respectively) and (iii) new capital raised primarily in Special Situations Fund II, our hedge-fund-of-funds platform and our CLOs. These increases were partially offset by distributions to limited partners of our private equity funds arising from realizations and distributions and redemptions in our alternative credit funds and other separately managed accounts in our Public Markets segment.

FPAUM(1) was $91.7 billion as of December 31, 2015, an increase of $5.8 billion, compared to FPAUM of $85.9 billion as of September 30, 2015. The increase was primarily attributable to (i) an increase in our pro rata portion of FPAUM managed by other asset managers in which KKR holds a minority stake, primarily reflecting our long-term strategic partnership with Marshall Wace, (ii) new capital raised primarily in our hedge-fund-of-funds platform and our CLOs and (iii) capital invested across various investment strategies for which KKR was not eligible to receive a fee until deployment of such capital. These increases were partially offset by distributions to limited partners of our private equity funds arising from realizations and distributions and redemptions in our alternative credit funds and other separately managed accounts in our Public Markets segment.

CAPITAL AND LIQUIDITY

As of December 31, 2015, KKR had $1.3 billion of cash and short-term investments and $3.0 billion of outstanding debt and preferred share obligations on a total reportable segment basis. This includes KFN's debt obligations of $657.3 million and KFN's 7.375% Series A LLC preferred shares of $373.8 million, which are non-recourse to KKR beyond the assets of KFN. As of December 31, 2015, KKR had a $1.0 billion revolving credit facility, which was undrawn. In addition, KKR has a $500.0 million revolving credit facility for use in its capital markets business, which was undrawn as of December 31, 2015.

As of December 31, 2015, KKR's portion of total uncalled commitments to its investment funds was $1.4 billion. See Exhibit B for details.

DISTRIBUTION

A distribution of $0.16 per common unit has been declared, which will be paid on March 8, 2016 to unitholders of record as of the close of business on February 22, 2016. Under KKR's distribution policy, KKR intends to make equal quarterly distributions to holders of common units in an amount of $0.16 per common unit per quarter.

The declaration and payment of any distributions are subject to the discretion of the board of directors of the general partner of KKR, and the terms of its limited partnership agreement. There can be no assurance that distributions will be made as intended or at all, that unitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR or that any particular distribution policy will be maintained.

 
(1) AUM and FPAUM reflect the inclusion of KKR's pro rata portion of AUM or FPAUM, as applicable, managed by other asset managers in which KKR holds a minority stake. In addition, AUM reflects the inclusion of capital commitments for which KKR is eligible to receive fees or carried interest upon deployment of capital. See "Notes to Reportable Segments" for the definitions of AUM and FPAUM.
 

SUPPLEMENTAL INFORMATION

A slide presentation containing supplemental commentary about the Company's financial results for the fiscal quarter and year ended December 31, 2015 may be accessed through the KKR Investor Relations section of the KKR website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. The presentation will be referenced on the conference call discussed below.

CONFERENCE CALL

A conference call to discuss KKR's financial results will be held on Thursday, February 11, 2016 at 10:00 a.m. ET. The conference call may be accessed by dialing (877) 303-2917 (U.S. callers) or +1 (253) 237-1135 (non-U.S. callers); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Investor Center section of KKR's website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. A replay of the live broadcast will be available on KKR's website or by dialing (855) 859-2056 (U.S. callers) or +1 (404) 537-3406 (non-U.S. callers), pass code 38906590, beginning approximately two hours after the broadcast.

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

2015 SCHEDULE K-1 DISTRIBUTION

The 2015 K-1 tax information is expected to be available by the end of March 2016. For the quickest access to your K-1, we encourage you to register for e-mail notification and electronic K-1 delivery at our dedicated website https://www.taxpackagesupport.com/kkr. Unitholders who do not register for electronic delivery will receive a hard copy K-1 with delivery expected in April 2016.

ABOUT KKR

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

FORWARD-LOOKING STATEMENTS

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

KKR
CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
             
             
             
             
      Quarter Ended     Year Ended
      December 31, 2015     December 31, 2014     December 31, 2015     December 31, 2014
Revenues                        
Fees and Other     $ 307,923       $ 212,944       $ 1,043,768       $ 1,110,008  
Expenses                        
Compensation and Benefits     306,942       253,661       1,180,591       1,263,852  
Occupancy and Related Charges     17,295       15,596       65,683       62,564  
General, Administrative and Other     200,858       363,904       624,951       869,651  
Total Expenses     525,095       633,161       1,871,225       2,196,067  
Investment Income (Loss)                        
Net Gains (Losses) from Investment Activities     1,197,879       535,943       4,672,627       4,778,232  
Dividend Income     140,397       205,875       850,527       1,174,501  
Interest Income     320,569       271,083       1,219,197       909,207  
Interest Expense     (170,282 )     (119,846 )     (573,226 )     (317,192 )
Total Investment Income (Loss)     1,488,563       893,055       6,169,125       6,544,748  
                         
Income (Loss) Before Taxes     1,271,391       472,838       5,341,668       5,458,689  
                         
Income Tax (Benefit)     27,341       6,524       66,636       63,669  
                         
Net Income (Loss)     1,244,050       466,314       5,275,032       5,395,020  
                         
Net Income (Loss) Attributable to                        
Redeemable Noncontrolling Interests     7,371       (4,707 )     (4,512 )     (3,341 )
Net Income (Loss) Attributable to                        
Noncontrolling Interests and Appropriated Capital     1,204,422       471,604       4,791,062       4,920,750  
                         
Net Income (Loss) Attributable to KKR & Co. L.P.     $ 32,257       $ (583 )     $ 488,482       $ 477,611  
                         
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit                        
Basic     $ 0.07       $ 0.00       $ 1.09       $ 1.25  
Diluted (a)     $ 0.07       $ 0.00       $ 1.01       $ 1.16  
Weighted Average Common Units Outstanding                        
Basic     461,374,013       431,432,521       448,884,185       381,092,394  
Diluted (a)     489,704,787       458,982,859       482,699,194       412,049,275  
                                 
 
(a) KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit since the exchange of these units would not dilute KKR's respective ownership interests in the KKR Group Partnerships.
 

 

KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
             
             
      Quarter Ended     Year Ended
      December 31, 2015     September 30, 2015     December 31, 2014     December 31, 2015     December 31, 2014
Segment Revenues                              
Management, Monitoring and Transaction Fees, Net                              
Management Fees     $ 195,072       $ 181,780       $ 178,064       $ 732,033       $ 726,043  
Monitoring Fees     94,128       24,964       38,738       264,643       135,160  
Transaction Fees     107,320       61,437       53,292       364,994       459,677  
Fee Credits     (59,375 )     (23,293 )     (25,728 )     (219,620 )     (222,037 )
Total Management, Monitoring and Transaction Fees, Net     337,145       244,888       244,366       1,142,050       1,098,843  
Performance Income                              
Realized Incentive Fees     7,209       880       11,301       19,647       47,807  
Realized Carried Interest     207,211       265,291       198,597       1,027,154       1,193,661  
Unrealized Carried Interest     112,388       (428,493 )     46,120       163,545       110,133  
Total Performance Income     326,808       (162,322 )     256,018       1,210,346       1,351,601  
Investment Income (Loss)                              
Net Realized Gains (Losses)     (81,343 )     61,439       62,219       337,023       628,403  
Net Unrealized Gains (Losses)     (128,765 )     (384,460 )     (324,416 )     (391,962 )     (396,425 )
Total Realized and Unrealized     (210,108 )     (323,021 )     (262,197 )     (54,939 )     231,978  
Interest Income and Dividends     85,907       101,318       165,856       411,536       408,084  
Interest Expense     (52,174 )     (52,681 )     (46,531 )     (203,085 )     (134,909 )
Net Interest and Dividends     33,733       48,637       119,325       208,451       273,175  
Total Investment Income (Loss)     (176,375 )     (274,384 )     (142,872 )     153,512       505,153  
Total Segment Revenues     487,578       (191,818 )     357,512       2,505,908       2,955,597  
Segment Expenses                              
Compensation and Benefits                              
Cash Compensation and Benefits     121,036       87,680       86,035       409,992       380,581  
Realized Performance Income Compensation     85,766       106,469       83,960       418,718       496,589  
Unrealized Performance Income Compensation     45,351       (170,621 )     21,508       66,927       49,459  
Total Compensation and Benefits     252,153       23,528       191,503       895,637       926,629  
Occupancy and Related Charges     16,666       15,720       14,383       62,657       57,787  
Other Operating Expenses     68,978       52,081       61,685       233,618       229,069  
Total Segment Expenses     337,797       91,329       267,571       1,191,912       1,213,485  
Income (Loss) attributable to noncontrolling interests     5,100       2,902       3,349       16,007       14,946  
Economic Net Income (Loss) (a)     144,681       (286,049 )     86,592       1,297,989       1,727,166  
Equity-based Compensation     37,376       48,252       36,607       186,346       158,927  
Pre-tax Economic Net Income (Loss) (b)     107,305       (334,301 )     49,985       1,111,643       1,568,239  
Provision for Income Tax (Benefit)     36,797       (19,505 )     3,951       83,363       94,223  
After-tax Economic Net Income (Loss) (c)     $ 70,508       $ (314,796 )     $ 46,034       $ 1,028,280       $ 1,474,016  
                               
After-tax Economic Net Income (Loss) Per Adjusted Unit     $ 0.08       $ (0.37 )     $ 0.05       $ 1.21       $ 1.84  
Weighted Average Adjusted Units (Fully Diluted Basis) (a)     852,446,702       851,704,303       838,067,975       851,099,066       800,247,988  
                               
Assets Under Management     $ 119,544,300       $ 112,414,500       $ 107,119,300       $ 119,544,300       $ 107,119,300  
Fee Paying Assets Under Management     $ 91,720,500       $ 85,861,800       $ 85,857,200       $ 91,720,500       $ 85,857,200  
Equity Invested and Syndicated Capital     $ 2,192,100       $ 1,462,900       $ 2,343,900       $ 8,611,500       $ 12,818,100  
Uncalled Commitments     $ 29,457,100       $ 26,892,300       $ 21,113,700       $ 29,457,100       $ 21,113,700  
                               
Fee Related Earnings (d)     $ 180,848       $ 127,523       $ 126,416       $ 610,496       $ 631,344  
                                                   
 
(a)   See definitions for Economic Net Income (Loss) and adjusted units under "Notes to Reportable Segments."
(b)   Represents Economic Net Income (Loss) after equity-based compensation.
(c)   Represents Economic Net Income (Loss) after equity-based compensation and income taxes.
(d)   See Exhibit A "Other Information" for the definition and calculation of Fee Related Earnings.
     

 

KKR
SCHEDULE OF SEGMENT REVENUES AND OTHER SELECTED FINANCIAL INFORMATION (UNAUDITED)
(Amounts in thousands)
             
PRIVATE MARKETS
             
      Quarter Ended     Year Ended
      December 31, 2015     September 30, 2015     December 31, 2014     December 31, 2015     December 31, 2014
Segment Revenues                              
Management, Monitoring and Transaction Fees, Net                              
Management Fees     $ 122,703       $ 118,250       $ 111,186       $ 465,575       $ 453,210  
Monitoring Fees     94,128       24,964       38,738       264,643       135,160  
Transaction Fees     40,000       17,732       8,480       144,652       214,612  
Fee Credits     (51,567 )     (20,266 )     (16,054 )     (195,025 )     (198,680 )
Total Management, Monitoring and Transaction Fees, Net     205,264       140,680       142,350       679,845       604,302  
Performance Income                              
Realized Incentive Fees                              
Realized Carried Interest     207,211       265,291       198,597       1,018,201       1,159,011  
Unrealized Carried Interest     137,438       (394,126 )     34,070       182,628       70,058  
Total Performance Income     344,649       (128,835 )     232,667       1,200,829       1,229,069  
Investment Income (Loss)                              
Net Realized Gains (Losses)                              
Net Unrealized Gains (Losses)                              
Total Realized and Unrealized                              
Interest Income and Dividends                              
Interest Expense                              
Net Interest and Dividends                              
Total Investment Income (Loss)                              
Total Segment Revenues     $ 549,913       $ 11,845       $ 375,017       $ 1,880,674       $ 1,833,371  
                               
Assets Under Management     $ 66,028,600       $ 66,776,600       $ 64,611,300       $ 66,028,600       $ 64,611,300  
Fee Paying Assets Under Management     $ 45,307,400       $ 46,399,800       $ 47,262,500       $ 45,307,400       $ 47,262,500  
Equity Invested     $ 1,355,300       $ 867,000       $ 828,000       $ 5,527,900       $ 7,223,400  
Uncalled Commitments     $ 22,766,300       $ 21,610,400       $ 18,272,400       $ 22,766,300       $ 18,272,400  
 
PUBLIC MARKETS
             
      Quarter Ended     Year Ended
      December 31, 2015     September 30, 2015     December 31, 2014     December 31, 2015     December 31, 2014
Segment Revenues                              
Management, Monitoring and Transaction Fees, Net                              
Management Fees     $ 72,369       $ 63,530       $ 66,878       $ 266,458       $ 272,833  
Monitoring Fees                              
Transaction Fees     8,183       3,386       10,511       28,872       27,145  
Fee Credits     (7,808 )     (3,027 )     (9,674 )     (24,595 )     (23,357 )
Total Management, Monitoring and Transaction Fees, Net     72,744       63,889       67,715       270,735       276,621  
Performance Income                              
Realized Incentive Fees     7,209       880       11,301       19,647       47,807  
Realized Carried Interest                       8,953       34,650  
Unrealized Carried Interest     (25,050 )     (34,367 )     12,050       (19,083 )     40,075  
Total Performance Income     (17,841 )     (33,487 )     23,351       9,517       122,532  
Investment Income (Loss)                              
Net Realized Gains (Losses)                              
Net Unrealized Gains (Losses)                              
Total Realized and Unrealized                              
Interest Income and Dividends                              
Interest Expense                              
Net Interest and Dividends                              
Total Investment Income (Loss)                              
Total Segment Revenues     $ 54,903       $ 30,402       $ 91,066       $ 280,252       $ 399,153  
                               
Assets Under Management     $ 53,515,700       $ 45,637,900       $ 42,508,000       $ 53,515,700       $ 42,508,000  
Fee Paying Assets Under Management     $ 46,413,100       $ 39,462,000       $ 38,594,700       $ 46,413,100       $ 38,594,700  
Equity Invested     $ 661,200       $ 583,400       $ 1,126,700       $ 2,214,700       $ 3,027,400  
Uncalled Commitments     $ 6,690,800       $ 5,281,900       $ 2,841,300       $ 6,690,800       $ 2,841,300  
Gross Dollars Invested     $ 1,742,600       $ 1,181,400       $ 1,545,600       $ 5,244,900       $ 4,425,600  
                                                   

 

KKR
SCHEDULE OF SEGMENT REVENUES AND OTHER SELECTED FINANCIAL INFORMATION (UNAUDITED)
(Amounts in thousands)
                   
CAPITAL MARKETS
                   
      Quarter Ended     Year Ended
      December 31, 2015     September 30, 2015     December 31, 2014     December 31, 2015     December 31, 2014
Segment Revenues                              
Management, Monitoring and Transaction Fees, Net                              
Management Fees     $       $       $       $       $
Monitoring Fees                            
Transaction Fees     59,137       40,319       34,301       191,470       217,920
Fee Credits                            
Total Management, Monitoring and Transaction Fees, Net     59,137       40,319       34,301       191,470       217,920
Performance Income                              
Realized Incentive Fees                            
Realized Carried Interest                            
Unrealized Carried Interest                            
Total Performance Income                            
Investment Income (Loss)                              
Net Realized Gains (Losses)                            
Net Unrealized Gains (Losses)                            
Total Realized and Unrealized                            
Interest Income and Dividends                            
Interest Expense                            
Net Interest and Dividends                            
Total Investment Income (Loss)                            
Total Segment Revenues     $ 59,137       $ 40,319       $ 34,301       $ 191,470       $ 217,920
                               
Syndicated Capital     $ 175,600       $ 12,500       $ 389,200       $ 868,900       $ 2,567,300
 
PRINCIPAL ACTIVITIES
                   
      Quarter Ended     Year Ended
      December 31, 2015     September 30, 2015     December 31, 2014     December 31, 2015     December 31, 2014
Segment Revenues                              
Management, Monitoring and Transaction Fees, Net                              
Management Fees     $       $       $       $       $  
Monitoring Fees                              
Transaction Fees                              
Fee Credits                              
Total Management, Monitoring and Transaction Fees, Net                              
Performance Income                              
Realized Incentive Fees                              
Realized Carried Interest                              
Unrealized Carried Interest                              
Total Performance Income                              
Investment Income (Loss)                              
Net Realized Gains (Losses)    

(81,343

)     61,439       62,219       337,023       628,403  
Net Unrealized Gains (Losses)     (128,765 )     (384,460 )     (324,416 )     (391,962 )     (396,425 )
Total Realized and Unrealized     (210,108 )     (323,021 )     (262,197 )     (54,939 )     231,978  
Interest Income and Dividends     85,907       101,318       165,856       411,536       408,084  
Interest Expense     (52,174 )     (52,681 )     (46,531 )     (203,085 )     (134,909 )
Net Interest and Dividends     33,733       48,637       119,325       208,451       273,175  
Total Investment Income (Loss)     (176,375 )     (274,384 )     (142,872 )     153,512       505,153  
Total Segment Revenues     $ (176,375 )     $ (274,384 )     $ (142,872 )     $ 153,512       $ 505,153  
                                                   

 

KKR
BALANCE SHEET
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
                     
                     
                     
      As of         As of    
      December 31, 2015         December 31, 2014    
Cash and Short-term Investments     $ 1,287,650           $ 1,121,385      
Investments     8,958,089     (a)     9,807,606      
Unrealized Carry     1,415,478     (b)     1,283,022     (b)
Other Assets     1,613,139           999,654      
Corporate Real Estate     154,942                
Total Assets     $ 13,429,298           $ 13,211,667      
                     
Debt Obligations - KKR (ex-KFN)     $ 2,000,000           $ 1,527,000      
Debt Obligations - KFN     657,310           657,310      
Preferred Shares - KFN     373,750           373,750      
Other Liabilities     291,537           413,808      
Total Liabilities     3,322,597           2,971,868      
                     
Noncontrolling Interests     127,472           121,574      
                     
Book Value     $ 9,979,229           $ 10,118,225      
                     
                     
Book Value Per Outstanding Adjusted Unit     $ 12.18           $ 12.48      
                     
Book Value Per Adjusted Unit     $ 11.78           $ 12.07      
                     
                     
(a) See schedule of investments that follows on the next page.
                     
      As of         As of    

(b) Unrealized Carry

    December 31, 2015         December 31, 2014    
Private Markets     $ 1,340,556           $ 1,196,633      
Public Markets     74,922           86,389      
Total     $ 1,415,478           $ 1,283,022      
                             

 

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

Value

    Fair Value as a

Percentage of

Total Investments

                   
Private Equity Co-Investments     $ 2,250,079       $ 3,036,805       33.9 %
Private Equity Funds     786,043       1,020,953       11.4 %
Private Equity Total     3,036,122       4,057,758       45.3 %
                   
Energy     977,213       580,680       6.5 %
Real Estate     793,068       846,266       9.4 %
Infrastructure     183,347       191,181       2.1 %
Real Assets Total     1,953,628       1,618,127       18.0 %
                   
                   
Special Situations     894,344       788,123       8.8 %
Direct Lending     65,802       66,827       0.8 %
Mezzanine     63,559       64,090       0.7 %
Alternative Credit Total     1,023,705       919,040       10.3 %
CLOs (a)     1,330,450       921,509       10.3 %
Liquid Credit     189,280       184,825       2.1 %
Specialty Finance     297,756       234,467       2.6 %
Credit Total     2,841,191       2,259,841       25.3 %
                   
                   
Other     1,090,008       1,022,363       11.4 %
                   
Total Investments     $ 8,920,949       $ 8,958,089       100.0 %
                   
                   
                   
      As of December 31, 2015
                   
Significant Investments: (b)     Cost     Fair
Value
    Fair Value as a
Percentage of
Total Investments

First Data Corporation (NYSE: FDC)

    $ 1,061,332       $ 1,266,196       14.1 %

Walgreens Boots Alliance (NASDAQ: WBA)

    222,533       748,688       8.4 %

WMI Holdings Corp. (NASDAQ: WMIH)

    221,127       311,270       3.5 %

Oil & Gas Royalties Investment

    118,640       173,800       1.9 %

HCA Holdings, Inc. (NYSE: HCA)

    29,455       169,332       1.9 %
Total Significant Investments     1,653,087       2,669,286       29.8 %
                   
Other Investments     7,267,862       6,288,803       70.2 %
Total Investments     $ 8,920,949       $ 8,958,089       100.0 %
 
* Investments is a term used solely for purposes of financial presentation of a portion of KKR's balance sheet and includes majority investments in subsidiaries that operate KKR's asset management and broker-dealer businesses, including the general partner interests of KKR's investment funds.
 
(a) Includes approximately $104.2 million of CLOs that are not held for investment purposes and are held at cost.

(b) The significant investments include the top five investments (other than investments expected to be syndicated or transferred in connection with new fundraising) based on their fair market value as of December 31, 2015. The fairvalue figures include the co-investment and the limited partner and/or general partner interests held by KKR in the underlying investment, if applicable.

 

 

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

Markets

Segment

    Public

Markets

Segment

    Total

Reportable

Segments

First Quarter 2015

                 
December 31, 2014 - As Reported     $ 61,505,800       $ 37,106,700       $ 98,612,500  
Net AUM of Strategic Partnerships (pro-rata based on ownership interest)           2,810,800       2,810,800  
Capital Commitments Excluded from AUM ("Shadow AUM")     3,105,500       2,590,500       5,696,000  
December 31, 2014 - As Adjusted     $ 64,611,300       $ 42,508,000       $ 107,119,300  
New Capital Raised     1,570,500       2,324,600       3,895,100  
Distributions     (2,967,000 )     (1,900,800 ) (c)   (4,867,800 )
Net Changes in Fee Base of Certain Funds (a)           (238,600 )     (238,600 )
Change in Value     2,009,500       (292,800 )     1,716,700  
March 31, 2015     $ 65,224,300       $ 42,400,400       $ 107,624,700  
                   

Second Quarter 2015

                 
March 31, 2015     $ 65,224,300       $ 42,400,400       $ 107,624,700  
New Capital Raised     3,468,900       4,374,700       7,843,600  
Distributions     (3,447,000 )     (1,485,400 ) (d)   (4,932,400 )
Change in Value     3,294,100       642,700       3,936,800  
June 30, 2015     $ 68,540,300       $ 45,932,400       $ 114,472,700  
                   

Third Quarter 2015

                 
June 30, 2015     $ 68,540,300       $ 45,932,400       $ 114,472,700  
New Capital Raised     1,583,800       2,444,700       4,028,500  
Distributions     (2,700,300 )     (1,861,300 ) (e)   (4,561,600 )
Change in Value     (647,200 )     (877,900 )     (1,525,100 )
September 30, 2015     $ 66,776,600       $ 45,637,900       $ 112,414,500  
                   

Fourth Quarter 2015

                 
September 30, 2015     $ 66,776,600       $ 45,637,900       $ 112,414,500  
New Capital Raised     327,000       3,782,300       4,109,300  
Acquisitions           6,010,800   (b)   6,010,800  
Distributions     (2,718,200 )     (1,713,900 ) (f)   (4,432,100 )
Change in Value     1,643,200       (201,400 )     1,441,800  
December 31, 2015     $ 66,028,600       $ 53,515,700       $ 119,544,300  
                   
                   

Full Year 2015

                 
December 31, 2014 - As Adjusted     $ 64,611,300       $ 42,508,000       $ 107,119,300  
New Capital Raised     6,950,200       12,926,300       19,876,500  
Acquisitions           6,010,800   (b)   6,010,800  
Distributions     (11,832,500 )     (6,961,400 ) (g)   (18,793,900 )
Net Changes in Fee Base of Certain Funds (a)           (238,600 )     (238,600 )
Change in Value     6,299,600       (729,400 )     5,570,200  
December 31, 2015     $ 66,028,600       $ 53,515,700       $ 119,544,300  
 

* For the periods reported, AUM reflects the inclusion of capital commitments for which we are eligible to receive fees or carried interest upon deployment of capital and the inclusion of KKR's pro rata portion of AUM managed by other asset managers in which KKR holds a minority stake.

 

(a) Represents the impact of certain funds entering their post-investment period.
(b) Represents KKR's pro rata portion of AUM managed by Marshall Wace.
(c) Includes $705.4 million of redemptions by fund investors.
(d) Includes $563.8 million of redemptions by fund investors.
(e) Includes $696.3 million of redemptions by fund investors.
(f) Includes $908.0 million of redemptions by fund investors.
(g) Includes $2,873.5 million of redemptions by fund investors.
 

 

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

Markets

Segment

    Public

Markets

Segment

    Total

Reportable

Segments

First Quarter 2015

                 
December 31, 2014 - As Reported     $ 47,262,500       $ 35,783,900       $ 83,046,400  
Net FPAUM of Strategic Partnerships (pro-rata based on ownership interest)           2,810,800       2,810,800  
December 31, 2014 - As Adjusted     $ 47,262,500       $ 38,594,700       $ 85,857,200  
New Capital Raised     1,320,500       2,277,200       3,597,700  
Distributions     (961,100 )     (1,638,600 ) (c)   (2,599,700 )
Net Changes in Fee Base of Certain Funds (a)           (325,200 )     (325,200 )
Change in Value     (460,000 )     (357,500 )     (817,500 )
March 31, 2015     $ 47,161,900       $ 38,550,600       $ 85,712,500  
                   

Second Quarter 2015

                 
March 31, 2015     $ 47,161,900       $ 38,550,600       $ 85,712,500  
New Capital Raised     1,310,500       2,249,200       3,559,700  
Distributions     (1,723,600 )     (1,293,900 ) (d)   (3,017,500 )
Change in Value     196,900       429,300       626,200  
June 30, 2015     $ 46,945,700       $ 39,935,200       $ 86,880,900  
                   

Third Quarter 2015

                 
June 30, 2015     $ 46,945,700       $ 39,935,200       $ 86,880,900  
New Capital Raised     1,042,700       1,944,500       2,987,200  
Distributions     (1,648,300 )     (1,776,100 ) (e)   (3,424,400 )
Change in Value     59,700       (641,600 )     (581,900 )
September 30, 2015     $ 46,399,800       $ 39,462,000       $ 85,861,800  
                   

Fourth Quarter 2015

                 
September 30, 2015     $ 46,399,800       $ 39,462,000       $ 85,861,800  
New Capital Raised     222,400       2,741,500       2,963,900  
Acquisitions           6,010,800   (b)   6,010,800  
Distributions     (1,212,200 )     (1,620,700 ) (f)   (2,832,900 )
Change in Value     (102,600 )     (180,500 )     (283,100 )
December 31, 2015     $ 45,307,400       $ 46,413,100       $ 91,720,500  
                   
                   

Full Year 2015

                 
December 31, 2014 - As Adjusted     $ 47,262,500       $ 38,594,700       $ 85,857,200  
New Capital Raised     3,896,100       9,212,400       13,108,500  
Acquisitions           6,010,800   (b)   6,010,800  
Distributions     (5,545,200 )     (6,329,300 ) (g)   (11,874,500 )
Net Changes in Fee Base of Certain Funds (a)           (325,200 )     (325,200 )
Change in Value     (306,000 )     (750,300 )     (1,056,300 )
December 31, 2015     $ 45,307,400       $ 46,413,100       $ 91,720,500  
                               
 
* For the periods reported, FPAUM reflects the inclusion of KKR's pro rata portion of FPAUM managed by other asset managers in which KKR holds a minority stake.
 
(a) Represents the impact of certain funds entering their post-investment period.
(b) Represents KKR's pro rata portion of FPAUM managed by Marshall Wace.
(c) Includes $705.4 million of redemptions by fund investors.
(d) Includes $563.8 million of redemptions by fund investors.
(e) Includes $696.3 million of redemptions by fund investors.
(f) Includes $908.0 million of redemptions by fund investors.
(g) Includes $2,873.5 million of redemptions by fund investors.
 

 

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

Date

  End Date   Commitment   Uncalled

Commitments

  Percentage

Committed

by General

Partner

  Invested   Realized   Remaining

Cost

  Remaining Fair

Value

Private Markets

                                   
                                     
Private Equity Funds                                    
European Fund IV (b)   12/2014   12/2020   $ 3,468.0     $ 3,307.1     5.7%   $ 160.9     $     $ 160.9     $ 185.7
Asian Fund II (b)   4/2013   4/2019   5,825.0     3,979.3     1.3%   2,599.7     753.9     1,845.8     3,163.6
North America Fund XI (b)   9/2012   9/2018   8,718.4     3,704.0     2.9%   5,932.1     1,733.8     4,635.4     6,983.8
China Growth Fund   11/2010   11/2016   1,010.0     307.6     1.0%   702.4     283.4     544.4     713.4
E2 Investors (Annex Fund)   8/2009   11/2013   195.8         4.9%   195.8     195.7     18.1     10.3
European Fund III   3/2008   3/2014   6,121.8     812.1     4.6%   5,309.7     4,447.2     3,224.2     4,240.2
Asian Fund   7/2007   4/2013   3,983.3     129.5     2.5%   3,853.8     5,397.4     1,918.7     2,534.0
2006 Fund   9/2006   9/2012   17,642.2     525.6     2.1%   17,116.6     18,411.5     7,703.3     13,028.5
European Fund II   11/2005   10/2008   5,750.8         2.1%   5,750.8     6,611.1     825.0     2,003.2
Millennium Fund   12/2002   12/2008   6,000.0         2.5%   6,000.0     12,517.4     714.0     1,521.1
European Fund   12/1999   12/2005   3,085.4         3.2%   3,085.4     8,748.0         17.1
Total Private Equity Funds           61,800.7     12,765.2         50,707.2     59,099.4     21,589.8     34,400.9
                                     
Co-Investment Vehicles (b)   Various   Various   5,774.0     2,709.6     Various   3,137.4     2,511.0     2,118.0     2,865.8
                                     
Total Private Equity           67,574.7     15,474.8         53,844.6     61,610.4     23,707.8     37,266.7
                                     
Real Assets                                    
Energy Income and Growth Fund   9/2013   9/2018   1,974.2     1,142.6     12.8%   831.6     143.9     757.1     544.3
Natural Resources Fund   Various   Various   887.4     2.9     Various   884.5     96.6     809.9     200.1
Global Energy Opportunities (b)   Various   Various   1,026.4     808.7     Various   252.7     55.0     144.8     124.7
Global Infrastructure Investors (b)   9/2011   10/2014   1,039.9     100.9     4.8%   967.0     216.4     847.8     972.7
Global Infrastructure Investors II (b)   10/2014   10/2020   3,028.3     2,685.7     4.1%   346.5     8.9     338.9     354.0
Infrastructure Co-Investments   Various   Various   1,125.0         Various   1,125.0     377.9     1,124.4     1,520.1
Real Estate Partners Americas (b)   5/2013   12/2016   1,229.1     598.2     16.3%   777.5     314.5     630.5     740.7
Real Estate Partners Europe (b)   9/2015   (d)   591.3     591.3     10.9%              
Real Assets           10,901.6     5,930.3         5,184.8     1,213.2     4,653.4     4,456.6
                                     
Unallocated Commitments           1,361.2     1,361.2     Various              
                                     
Private Markets Total           79,837.5     22,766.3         59,029.4     62,823.6     28,361.2     41,723.3
                                     

Public Markets

                                   
Special Situations Fund   12/2012   1/2016   2,257.6     128.0     11.6%   2,129.6     257.6     2,129.6     2,205.6
Special Situations Fund II   12/2014   (c)   2,675.5     2,083.4     9.4%   592.1         592.1     452.4
Mezzanine Fund   3/2010   3/2015   1,022.8     150.6     4.4%   872.2     541.0     618.5     634.3
Lending Partners   12/2011   12/2014   460.2     90.5     15.2%   369.7     181.5     325.3     303.3
Lending Partners II   6/2014   6/2017   1,335.9     889.6     3.7%   446.3     26.4     446.3     475.7
Lending Partners Europe   3/2015   3/2018   780.1     763.6     5.2%   16.5         16.5     24.0
Other Alternative Credit Vehicles   Various   Various   5,157.2     2,585.1     Various   2,572.1     1,496.5     1,706.7     1,925.9
                                     
Public Markets Total           13,689.3     6,690.8         6,998.5     2,503.0     5,835.0     6,021.2
                                     
Grand Total           $ 93,526.8     $ 29,457.1         $ 66,027.9     $ 65,326.6     $ 34,196.2     $ 47,744.5
                                                           

_____________________________________________________________________________________________________________________

(a)   Reflects investment vehicles for which KKR has the ability to earn carried interest.
(b)   The "Invested" and "Realized" columns include the amounts of any realized investments that restored the unused capital commitments of the fund investors.
(c)   Three years from final close.
(d)   Four years from final close.
     

Notes to Reportable Segments (Unaudited)

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

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

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

After-tax cash earnings is used by management as a measure of the cash earnings of KKR. KKR believes this measure, which was formerly referred to as total distributable earnings, is useful to unitholders as it provides a supplemental measure to assess performance, excluding the impact of mark-to-market gains (losses). After-tax cash earnings excludes certain realized investment losses to the extent unrealized losses on these investments were recognized prior to the combination with KPE on October 1, 2009.

Assets under management ("AUM") represent the assets managed by KKR or by its strategic partners from which KKR is entitled to receive fees or a carried interest (either currently or upon deployment of capital) and general partner capital. We believe this measure is useful to unitholders as it provides additional insight into KKR's capital raising activities and the overall activity in its investment funds and strategic partnerships. KKR calculates the amount of AUM as of any date as the sum of: (i) the fair value of the investments of KKR's investment funds; (ii) uncalled capital commitments from these funds, including uncalled capital commitments from which KKR is currently not earning management fees or carried interest; (iii) the fair value of investments in KKR's co-investment vehicles; (iv) the par value of outstanding CLOs (excluding CLOs wholly-owned by KKR); (vi) KKR's pro-rata portion of the AUM managed by strategic partnerships in which KKR holds a minority ownership interest and (vi) the fair value of other assets managed by KKR. The pro-rata portion of the AUM managed by strategic partnerships is calculated based on KKR's percentage ownership interest in such entities multiplied by such entity's respective AUM. KKR's definition of AUM is not based on any definition of AUM that may be set forth in the agreements governing the investment funds, vehicles or accounts that it manages or calculated pursuant to any regulatory definitions.

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

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

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

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

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

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

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

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

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

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

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

KKR

EXHIBIT A

 
 
OTHER FINANCIAL INFORMATION (UNAUDITED)
(Amounts in thousands)
                               
      Quarter Ended     Year Ended
      December 31, 2015     September 30, 2015     December 31, 2014     December 31, 2015     December 31, 2014

Fee Related Earnings

                             
Total Management, Monitoring and Transaction Fees, Net     $ 337,145       $ 244,888       $ 244,366       $ 1,142,050       $ 1,098,843
Less: Cash Compensation and Benefits     121,036       87,680       86,035       409,992       380,581
Less: Occupancy and Related Charges     16,666       15,720       14,383       62,657       57,787
Less: Other Operating expenses     68,978       52,081       61,685       233,618       229,069
Plus: Expenses of Principal Activities Segment     50,383       38,116       44,153       174,713       199,938
Fee Related Earnings (a)     180,848       127,523       126,416       610,496       631,344
Plus: Net Interest and Dividends     33,733       48,637       119,325       208,451       273,175
Plus: Depreciation and Amortization     3,775       3,745       3,830       15,319       15,782
Plus: Core Interest Expense     29,516       30,429       27,050       116,027       88,002
Less: Expenses of Principal Activities Segment     50,383       38,116       44,153       174,713       199,938
Fee and Yield EBITDA (b)     197,489       172,218       232,468       775,580       808,365
Plus: Realized Performance Income, net     128,654       159,702       125,938       628,083       744,879
Plus: Net Realized Gains (Losses)     (81,343 )     61,439       62,219       337,023       628,403
Total EBITDA     $ 244,800       $ 393,359       $ 420,625       $ 1,740,686       $ 2,181,647
                               
                               

Core Interest Expense

                             
GAAP Interest Expense     $ 170,282       $ 151,554       $ 119,846       $ 573,226       $ 317,192

Less: Interest expense related to debt obligations from investment financing arrangements

    118,108       98,873       73,315       370,141       182,283
Segment Interest Expense     52,174       52,681       46,531       203,085       134,909
Less: Interest Expense related to debt obligations from KFN and other     22,658       22,252       19,481       87,058       46,907
Core Interest Expense (c)     $ 29,516       $ 30,429       $ 27,050       $ 116,027       $ 88,002

________________________________________________________________________________________________________________________________________________________

(a)   Fee related earnings ("FRE") is a measure of the operating earnings of KKR and its business segments before performance income, related performance income compensation and investment income. KKR believes this measure is useful to unitholders as it provides additional insight into the operating profitability of KKR's fee generating management companies and capital markets businesses.
     
(b)   Fee and Yield EBITDA is used by management as another measure of the cash earnings of KKR and its business segments investment income. We believe this measure is also useful to unitholders as it provides insight into the amount of KKR's cash earnings before the impact of interest expense, significant portions of which tend to be more recurring than realized carried interest and realized investment income from quarter to quarter.
     
(c)   Core interest expense is used by management as an alternative measurement of interest expense incurred by KKR on a segment basis and excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR's investment funds, investment vehicles and principal investments and also excludes interest expense incurred by KFN. The financing arrangements excluded from core interest expense are not direct obligations of the general partners of KKR's private equity funds or its management companies, and in the case of debt obligations of KFN are non-recourse to KKR beyond the assets of KFN. KKR believes this measure is useful to unitholders as it provides an indication of the amount of interest expense borne by KKR excluding interest expense that is allocated to KKR's investment funds, other noncontrolling interest holders and KFN. Additionally, we believe this measure is useful for analyzing KKR's ability to service its debt obligations other than the debt obligations of KFN.
     

 

KKR

EXHIBIT B

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

Commitments

Private Markets

   
European Fund IV   $ 184,700
Energy Income and Growth Fund   147,100
Global Infrastructure Investors II   110,900
North America Fund XI   100,500
Real Estate Partners Americas   97,300
European Fund III   66,300
Real Estate Partners Europe   64,700
Asian Fund II   50,900
2006 Fund   22,700
Co-Investment Vehicles   69,600
Other Private Markets Funds   10,600
Total Private Markets Commitments   925,300
     

Public Markets

   
Special Situations Fund   14,900
Special Situations Fund II   195,100
Mezzanine Fund   6,500
Lending Partners   13,900
Lending Partners II   33,300
Lending Partners Europe   39,600
Other Alternative Credit Vehicles   125,200
Total Public Markets Commitments   428,500
     
Total Uncalled Commitments   $ 1,353,800
       

 

KKR

EXHIBIT C

 
 
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT - BASIC (GAAP BASIS)
TO AFTER TAX ENI PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
     
    Quarter Ended
    December 31, 2015   September 30, 2015   December 31, 2014
             

Net income (loss) attributable to KKR & Co. L.P. per common unit
- Basic

  $ 0.07     $ (0.42 )   $ 0.00  
Weighted Average Common Units Outstanding - Basic   461,374,013     452,165,697     431,432,521  
Net income (loss) attributable to KKR & Co. L.P.   32,257     (190,588 )   (583 )
Plus: Net income (loss) attributable to noncontrolling

interests held by KKR Holdings L.P.

  35,060     (166,078 )   (3,365 )
Plus: Non-cash equity-based charges   47,730     67,821     55,968  
Plus: Amortization of intangibles and other, net   2,293     10,186     28,048  
Plus: Income tax (benefit)   27,341     (7,390 )   6,524  
Economic Net Income (Loss)   144,681     (286,049 )   86,592  

Less: Equity-based compensation associated with the KKR & Co. L.P.
2010 equity incentive plan

  37,376     48,252     36,607  
Pre-tax Economic Net Income (Loss)   107,305     (334,301 )   49,985  
Less: Provision for income tax (benefit)   36,797     (19,505 )   3,951  
After-tax Economic Net Income (Loss)   70,508     (314,796 )   46,034  
Weighted Average Adjusted Units   852,446,702     851,704,303     838,067,975  
After-tax Economic Net Income (Loss) Per Adjusted Unit   $ 0.08     $ (0.37 )   $ 0.05  
             
             
    Year Ended    
    December 31, 2015   December 31, 2014    
             

Net income (loss) attributable to KKR & Co. L.P. per common unit
- Basic

  $ 1.09     $ 1.25      
Weighted Average Common Units Outstanding - Basic   448,884,185     381,092,394      
Net income (loss) attributable to KKR & Co. L.P.   488,482     477,611      

Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.

  433,693     585,135      
Plus: Non-cash equity-based charges   261,579     310,403      
Plus: Amortization of intangibles and other, net   47,599     290,348      
Plus: Income tax (benefit)   66,636     63,669      
Economic Net Income (Loss)   1,297,989     1,727,166      

Less: Equity-based compensation associated with the KKR & Co. L.P.
2010 equity incentive plan

  186,346     158,927      
Pre-tax Economic Net Income (Loss)   1,111,643     1,568,239      
Less: Provision for income tax (benefit)   83,363     94,223      
After-tax Economic Net Income (Loss)   1,028,280     1,474,016      
Weighted Average Adjusted Units   851,099,066     800,247,988      
After-tax Economic Net Income (Loss) Per Adjusted Unit   $ 1.21     $ 1.84      
                     

 

KKR

EXHIBIT C (CONTINUED)

 
 
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. (GAAP BASIS)

TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS, FEE AND YIELD EBITDA, AFTER TAX CASH EARNINGS AND
TOTAL EBITDA (UNAUDITED)

(Amounts in thousands)
     
    Quarter Ended
    December 31, 2015   September 30, 2015   December 31, 2014
Net income (loss) attributable to KKR & Co. L.P.   $ 32,257     $ (190,588 )   $ (583 )
Plus: Net income (loss) attributable to noncontrolling

interests held by KKR Holdings L.P.

  35,060     (166,078 )   (3,365 )
Plus: Non-cash equity-based charges   47,730     67,821     55,968  
Plus: Amortization of intangibles and other, net   2,293     10,186     28,048  
Plus: Income tax (benefit)   27,341     (7,390 )   6,524  
Economic Net Income (Loss)   144,681     (286,049 )   86,592  
Plus: Income attributable to segment noncontrolling interests   5,100     2,902     3,349  
Less: Total investment income (loss)   (176,375 )   (274,384 )   (142,872 )
Less: Net performance income (loss)   195,691     (98,170 )   150,550  
Plus: Expenses of Principal Activities Segment   50,383     38,116     44,153  
Fee Related Earnings   180,848     127,523     126,416  
Plus: Net interest and dividends   33,733     48,637     119,325  
Plus: Depreciation and amortization   3,775     3,745     3,830  
Plus: Core interest expense   29,516     30,429     27,050  
Less: Expenses of Principal Activities Segment   50,383     38,116     44,153  
Fee and Yield EBITDA   197,489     172,218     232,468  
Less: Depreciation and amortization   3,775     3,745     3,830  
Less: Core interest expense   29,516     30,429     27,050  
Plus: Realized performance income (loss), net   128,654     159,702     125,938  
Plus: Net realized gains (losses)   (81,343 )   61,439     62,219  
Less: Corporate and local income taxes paid   37,791     25,173     25,183  
Less: Income attributable to segment noncontrolling interests   5,100     2,902     3,349  
After-tax Cash Earnings   168,618     331,110     361,213  
Plus: Depreciation and amortization   3,775     3,745     3,830  
Plus: Core interest expense   29,516     30,429     27,050  
Plus: Corporate and local income taxes paid   37,791     25,173     25,183  
Plus: Income attributable to segment noncontrolling interests   5,100     2,902     3,349  
Total EBITDA   $ 244,800     $ 393,359     $ 420,625  
             
    Year Ended    
    December 31, 2015   December 31, 2014    
Net income (loss) attributable to KKR & Co. L.P.   $ 488,482     $ 477,611      
Plus: Net income (loss) attributable to noncontrolling

interests held by KKR Holdings L.P.

  433,693     585,135      
Plus: Non-cash equity-based charges   261,579     310,403      
Plus: Amortization of intangibles and other, net   47,599     290,348      
Plus: Income tax (benefit)   66,636     63,669      
Economic Net Income (Loss)   1,297,989     1,727,166      
Plus: Income attributable to segment noncontrolling interests   16,007     14,946      
Less: Total investment income (loss)   153,512     505,153      
Less: Net performance income (loss)   724,701     805,553      
Plus: Expenses of Principal Activities Segment   174,713     199,938      
Fee Related Earnings   610,496     631,344      
Plus: Net interest and dividends   208,451     273,175      
Plus: Depreciation and amortization   15,319     15,782      
Plus: Core interest expense   116,027     88,002      
Less: Expenses of Principal Activities Segment   174,713     199,938      
Fee and Yield EBITDA   775,580     808,365      
Less: Depreciation and amortization   15,319     15,782      
Less: Core interest expense   116,027     88,002      
Plus: Realized performance income (loss), net   628,083     744,879      
Plus: Net realized gains (losses)   337,023     628,403      
Less: Corporate and local income taxes paid   140,677     131,081      
Less: Income attributable to segment noncontrolling interests   16,007     14,946      
After-tax Cash Earnings   1,452,656     1,931,836      
Plus: Depreciation and amortization   15,319     15,782      
Plus: Core interest expense   116,027     88,002      
Plus: Corporate and local income taxes paid   140,677     131,081      
Plus: Income attributable to segment noncontrolling interests   16,007     14,946      
Total EBITDA   $ 1,740,686     $ 2,181,647      
                     

 

KKR

EXHIBIT C (CONTINUED)

 
 
RECONCILIATION OF KKR & CO. L.P. PARTNERS' CAPITAL (GAAP BASIS)
TO BOOK VALUE AND BOOK VALUE PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
         
         
    As of   As of
    December 31, 2015   December 31, 2014
         
KKR & Co. L.P. partners' capital   $ 5,547,182     $ 5,382,691
Noncontrolling interests held by KKR Holdings L.P.   4,347,153     4,661,679
Equity impact of KKR Management Holdings Corp. and other   84,894     73,855
         
Book value   9,979,229     10,118,225
Adjusted units   847,083,373     838,020,974
Book value per adjusted unit   $ 11.78     $ 12.07
         
         
         
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS)
TO CASH AND SHORT-TERM INVESTMENTS (UNAUDITED)
(Amounts in thousands)
         
         
    As of   As of
    December 31, 2015   December 31, 2014
         
Cash and cash equivalents   $ 1,047,740     $ 918,080
Liquid short-term investments   239,910     203,305
Cash and short-term investments   $ 1,287,650     $ 1,121,385
               

 

KKR

EXHIBIT D

 
 
RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING (UNAUDITED)
 
The following table provides a reconciliation of KKR's Weighted Average GAAP Common Units Outstanding to Weighted Average Adjusted Units:
     
    Quarter Ended
    December 31, 2015   September 30, 2015   December 31, 2014
Weighted Average GAAP Common Units Outstanding - Basic   461,374,013     452,165,697     431,432,521
Adjustments:            
Weighted Average Unvested Common Units and Other Securities (a)   28,330,774       (c) 27,550,338
Weighted Average GAAP Common Units Outstanding - Diluted   489,704,787     452,165,697     458,982,859
Adjustments:            
Weighted Average KKR Holdings Units (b)   362,741,915     365,717,358     379,085,116
Weighted Average Unvested Common Units and Other Securities (a)       33,821,248   (c)
Weighted Average Adjusted Units   852,446,702     851,704,303     838,067,975
             
             
    Year Ended    
    December 31, 2015   December 31, 2014    
Weighted Average GAAP Common Units Outstanding - Basic   448,884,185     381,092,394      
Adjustments:            
Weighted Average Unvested Common Units and Other Securities (a)   33,815,009     30,956,881      
Weighted Average GAAP Common Units Outstanding - Diluted   482,699,194     412,049,275      
Adjustments:            
Weighted Average KKR Holdings Units (b)   368,399,872     388,198,713      
Weighted Average Adjusted Units   851,099,066     800,247,988      
             
             
             
RECONCILIATION OF GAAP COMMON UNITS OUTSTANDING (UNAUDITED)
 

The following table provides a reconciliation of KKR's GAAP Common Units Outstanding to Adjusted Units, Adjusted Units Eligible for Distribution and
Outstanding Adjusted Units:

             
    As of   As of    
    December 31, 2015   December 31, 2014    
GAAP Common Units Outstanding - Basic   457,834,875     433,330,540      
Unvested Common Units and Other Securities (a)   27,901,910     27,493,685      
GAAP Common Units Outstanding - Diluted   485,736,785     460,824,225      
Adjustments:            
KKR Holdings Units (b)   361,346,588     377,196,749      
Adjusted Units   847,083,373     838,020,974      
Adjustments:            
Unvested Common Units and Unvested Other Securities (a)   (24,060,289 )   (24,373,441 )    
Adjusted Units Eligible for Distribution   823,023,084     813,647,533      
Adjustments:            
Vested Other Securities   (3,841,621 )   (3,120,244 )    
Outstanding Adjusted Units   819,181,463     810,527,289      

______________________________________________________________________________________________________________________________________________________

(a)   Represents equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan and other securities that are exchangeable into KKR & Co. L.P common units. The issuance of common units of KKR & Co. L.P. pursuant to such equity awards or other securities dilutes KKR common unitholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business.
(b)   Common units that may be issued by KKR & Co. L.P. upon exchange of units in KKR Holdings L.P. for KKR common units.
(c)   Unvested common units and other securities are excluded from the calculation of diluted earnings per common unit on a GAAP basis because inclusion of such unvested common units and other securities would be anti-dilutive (decrease the loss per common unit).

 

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

 

Source: KKR & Co. L.P.

 

 

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