business newsKKR & Co. L.P. Announces Fourth Quarter and Full Year 2012 Results
KKR & Co. L.P. (NYSE: KKR) today reported its fourth quarter and full year 2012 results.
For the fourth quarter and full year 2012, the carrying value of KKR’s private equity investment portfolio appreciated 4.0% and 23.8%, respectively, driving meaningful ENI.
ENI was $347.7 million for the quarter ended December 31, 2012, an increase of $62.2 million compared to the quarter ended December 31, 2011. The increase was primarily attributable to higher net carried interest earned from our investment funds. ENI was $2,130.9 million for the year ended December 31, 2012, an increase of $1,380.0 million compared to the year ended December 31, 2011. The increase was primarily due to a higher level of appreciation in the carrying value of our principal investments and greater net carried interest earned from our investment funds.
Total distributable earnings was $546.3 million and $1,449.4 million for the quarter and year ended December 31, 2012, respectively, an increase of $399.8 million and $666.8 million from the comparable periods in 2011. The increase in both comparative periods is due to a higher level of realization activity in our private equity investment portfolio.
On October 1, 2012, we closed our acquisition of Prisma Capital Partners LP and its affiliates (“Prisma”), a leading provider of customized hedge fund solutions. Prisma’s results have been reported as part of our Public Markets segment in the fourth quarter of 2012. As of December 31, 2012, Prisma had $8.5 billion of assets under management.
AUM was $75.5 billion as of December 31, 2012, an increase of $9.2 billion, or 13.9%, compared to AUM of $66.3 billion as of September 30, 2012. Fee paying assets under management (“FPAUM”) was $60.8 billion as of December 31, 2012, an increase of $10.5 billion, or 20.9%, compared to FPAUM of $50.3 billion as of September 30, 2012. The increases in both AUM and FPAUM were primarily attributable to new capital from the acquisition of Prisma and to a lesser extent new capital raised and appreciation in the fair value of our investment vehicles. The increases were partially offset by distributions to limited partners of our investment funds. Neither AUM nor FPAUM include $4.0 biillion (includes general partner commitment) of capital raised for our second Asian private equity fund.
On January 23, 2013, we announced the acquisition of a 24.9% interest in Nephila Capital Ltd. (“Nephila”). Nephila is a leading investment manager that offers a broad range of investment products focusing on reinsurance risk, investing in instruments such as insurance-linked securities, catastrophe bonds, and weather derivatives. Nephila has assets under management of approximately $8 billion as of January 1, 2013 and has been managing institutional assets in this space since it was founded in 1998. This strategic partnership increases our breadth of liquid product offerings through a strategy which is uncorrelated to the global financial markets relative to other asset classes. Nephila’s assets under management are not included in KKR’s results.
“Our private equity portfolio and our balance sheet both appreciated 24% in 2012, outperforming the S&P 500 and MSCI World indices by over 700 basis points,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. “In addition, in 2012 we completed transactions which returned over $9 billion to all investors in our private equity funds and co-investment vehicles, the highest figure in our 36-year history, and contributed to a record annual distribution of $1.22 per common unit. We are pleased with our results.”
| Note: Certain financial measures, including FRE, ENI, after-tax ENI, after-tax ENI per adjusted unit, fee related EBITDA, book value, cash and short-term investments and adjusted units, are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Exhibits A and B for a reconciliation of such measures to financial results prepared in accordance with GAAP. See calculation and reconciliation of total distributable earnings under “Distribution Calculation.” |
GAAP RESULTS
GAAP results for the quarter and year ended December 31, 2012 included net income attributable to KKR & Co. L.P. of $96.7 million and $560.8 million, respectively, and net income attributable to KKR & Co. L.P. per common unit of $0.36 and $2.21, respectively, on a diluted basis. For the quarter and year ended December 31, 2011, net income attributable to KKR & Co. L.P. was $46.1 million and $1.9 million, respectively, and net income attributable to KKR & Co. L.P. per common unit was $0.20 and $0.01, respectively, on a diluted basis. The increases in both comparable periods were primarily due to a greater level of investment appreciation for the quarter and year ended December 31, 2012 compared to the quarter and year ended December 31, 2011. This increase in investment appreciation, which is recorded in net gains (losses) from investment activities, was partially offset by an increase in compensation and benefits expense
SEGMENT RESULTS
Private Markets
AUM was $49.1 billion as of December 31, 2012, a decrease of $0.7 billion, or 1.4%, compared to AUM of $49.8 billion as of September 30, 2012. The decrease was primarily attributable to distributions to the limited partners of our private equity funds arising from realizations. The decrease was partially offset by the appreciation in the fair value of our private equity portfolio and new capital raised.
FPAUM was $41.2 billion as of December 31, 2012, an increase of $0.8 billion, or 2.0%, compared to FPAUM of $40.4 billion as of September 30, 2012. The increase was primarily due to new capital raised, partially offset by distributions to the limited partners of our private equity funds arising from realizations.
FRE was $32.4 million for the quarter ended December 31, 2012, a decrease of $24.6 million, or 43.2%, compared to FRE of $57.0 million for the quarter ended December 31, 2011. The decrease was principally attributable to (i) a lower level of transaction fees during the quarter ended December 31, 2012, as a result of closing relatively smaller transaction fee-generating investments, which in turn produced lower transaction fees and (ii) higher compensation expense in connection with increased headcount. The decrease was partially offset by a higher level of monitoring fees as a result of new monitoring agreements with portfolio companies acquired over the past year.
FRE was $151.0 million for the year ended December 31, 2012, a decrease of $75.6 million, or 33.4%, compared to FRE of $226.6 million for year ended December 31, 2011. The decrease was primarily attributable to (i) a lower level of transaction fees during the year ended December 31, 2012 as a result of closing relatively smaller transaction fee-generating investments, which in turn produced lower transaction fees; (ii) lower monitoring fees as a result of $76.6 million of termination payments on monitoring agreements with three portfolio companies during the year ended December 31, 2011, which increased FRE by $39.7 million net of associated fee credits and (iii) higher compensation expense in connection with increased headcount.
ENI was $177.8 million for the quarter ended December 31, 2012, an increase of $68.0 million, or 61.9%, compared to ENI of $109.8 million for the quarter ended December 31, 2011. ENI was $831.7 million for the year ended December 31, 2012, an increase of $468.9 million, or 129.2%, compared to ENI of $362.8 million for the year ended December 31, 2011. The increase in both comparative periods was primarily attributable to higher net carried interest driven by a greater level of appreciation in our private equity portfolio, partially offset by the decrease in FRE discussed above.
Public Markets
AUM was $26.4 billion as of December 31, 2012, an increase of $9.9 billion, or 60.0%, compared to AUM of $16.5 billion as of September 30, 2012. FPAUM was $19.7 billion as of December 31, 2012, an increase of $9.8 billion, or 99.0%, compared to FPAUM of $9.9 billion as of September 30, 2012. The increase in both AUM and FPAUM were primarily attributable to new capital from the acquisition of Prisma and to a lesser extent net new capital raised.
FRE was $29.4 million for the quarter ended December 31, 2012, an increase of $17.6 million compared to FRE of $11.8 million for the quarter ended December 31, 2011. FRE was $80.5 million for the year ended December 31, 2012, an increase of $20.9 million compared to FRE of $59.6 million for year ended December 31, 2011. The increase in both comparable periods was primarily due to (i) higher management fees related to new capital raised as well as the acquisition of Prisma and (ii) higher incentive fees earned.
ENI was $37.4 million for the quarter ended December 31, 2012, an increase of $25.6 million compared to ENI of $11.8 million for the quarter ended December 31, 2011. The increase was primarily attributable to the increase in FRE discussed above and to a lesser extent a higher level of net carried interest recognized driven by the appreciation in the net asset value of certain carry-eligible investment vehicles.
ENI was $102.9 million for the year ended December 31, 2012, an increase of $44.9 million compared to ENI of $58.0 million for year ended December 31, 2011. The increase was principally attributable to the increase in FRE discussed above and net carried interest recognized for the year ended December 31, 2012 driven by the appreciation in the net asset value of certain carry-eligible investment vehicles. For the year ended December 31, 2011, there was a reversal of previously recognized net carried interest due to a decline in the carrying value of certain carry-eligible investment vehicles.
Capital Markets and Principal Activities
FRE was $24.2 million for the quarter ended December 31, 2012, a decrease of $23.6 million, or 49.4%, compared to FRE of $47.8 million for the quarter ended December 31, 2011. FRE was $88.3 million for the year ended December 31, 2012, a decrease of $42.6 million, or 32.5%, compared to FRE of $130.9 million for year ended December 31, 2011. The decrease in both comparative periods was primarily driven by a lower level of overall capital markets transaction activity.
ENI was $132.6 million for the quarter ended December 31, 2012, a decrease of $31.2 million, or 19.0%, compared to ENI of $163.8 million for the quarter ended December 31, 2011. The decrease was principally attributable to the decrease in FRE discussed above and to a lesser extent a lower level of investment income. While the fair value of our principal investments increased during the fourth quarter of 2012, the level of appreciation was lower than in the comparable period of 2011.
ENI was $1,196.2 million for the year ended December 31, 2012, an increase of $866.0 million compared to ENI of $330.2 million for year ended December 31, 2011. The increase was primarily driven by a higher level of appreciation in the carrying value of our principal investments, partially offset by the decrease in FRE discussed above.
CAPITAL AND LIQUIDITY
As of December 31, 2012, KKR had $1,534.3 million of cash and short-term investments on a segment basis and $500.0 million of outstanding debt obligations under its senior notes. KKR’s availability for further borrowings was approximately $750.0 million (which does not include a $500.0 million revolving credit facility for use in its capital markets business that was undrawn as of December 31, 2012).
On February 1, 2013, KKR issued $500.0 million of 5.5% senior notes due in 2043. The senior notes are rated A and A- by Fitch and Standard & Poor’s, respectively.
As of December 31, 2012, KKR’s portion of total uncalled commitments to its investment funds was $677.9 million, consisting of the following (amounts in thousands):
| Uncalled Commitments | |||
Private Markets | |||
| North America Fund XI | $ | 232,100 | |
| European Fund III | 174,000 | ||
| 2006 Fund | 64,700 | ||
| Asian Fund | 35,400 | ||
| Infrastructure | 34,100 | ||
| E2 Investors (Annex Fund) | 14,000 | ||
| Natural Resources | 13,600 | ||
| China Growth Fund | 6,400 | ||
| Other | 10,800 | ||
| Total Private Markets Commitments | 585,100 | ||
Public Markets | |||
| Direct Lending Vehicles | 33,700 | ||
| Special Situations Vehicles | 29,200 | ||
| Mezzanine Fund | 29,900 | ||
| Total Public Markets Commitments | 92,800 | ||
| Total Uncalled Commitments | $ | 677,900 | |
DISTRIBUTION
A distribution of $0.70 per common unit will be paid on March 5, 2013 to unitholders of record as of the close of business on February 19, 2013.
CONFERENCE CALL
A conference call to discuss KKR’s financial results will be held on Thursday, February 7, 2013 at 10:00 a.m. EST. The conference call may be accessed by dialing (877) 303-2917 (U.S. callers) or +1 (253) 237-1135 (non-U.S. callers); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Public Investors section of KKR’s website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. A replay of the live broadcast will be available on KKR’s website or by dialing (855) 859-2056 (U.S. callers) and +1 (404) 537-3406 (non-U.S. callers), pass code 86899275, 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 Public Investors section of KKR’s website at http://ir.kkr.com/kkr_ir/alerts.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 Public Investors section of the website.
ABOUT KKR
Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $75.5 billion in assets under management as of December 31, 2012. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with fund investors through its client relationships and capital markets platform. KKR & Co. L.P. is publicly traded on the New York Stock Exchange (NYSE: KKR), and "KKR," as used in this release, includes its subsidiaries, their managed investment funds and accounts, and/or their affiliated investment vehicles, as appropriate. For additional information, please visit KKR's website at www.kkr.com.
FORWARD-LOOKING STATEMENTS
This release contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements are based on KKR’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or are within its control. If a change occurs, KKR’s business, financial condition, liquidity and results of operations, including but not limited to AUM, FPAUM, FRE, total distributable earnings, ENI, after-tax ENI, fee related EBITDA, committed dollars invested and syndicated capital, uncalled commitments, core interest expense, cash and short-term investments 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 the acquisitions or strategic partnerships such as Prisma or Nephila; availability, terms and deployment of capital; availability of qualified personnel and expense of recruiting and retaining such personnel; changes in the asset management industry, interest rates or the general economy; underperformance of KKR's investments and decreased ability to raise funds; and the degree and nature of 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, 2011, filed with the SEC on February 27, 2012 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 filed with the SEC on November 2, 2012, and other filings with the SEC, which are available at www.sec.gov.
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| CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED) | ||||||||||||||||
| (Amounts in thousands, except common unit and per common unit amounts) | ||||||||||||||||
| Quarter Ended | Year Ended | |||||||||||||||
| December 31, 2012 | December 31, 2011 | December 31, 2012 | December 31, 2011 | |||||||||||||
| Revenues | ||||||||||||||||
| Fees | $ | 177,621 | $ | 209,357 | $ | 568,442 | $ | 723,620 | ||||||||
| Expenses | ||||||||||||||||
| Compensation and Benefits | 261,454 | 190,832 | 1,280,854 | 868,749 | ||||||||||||
| Occupancy and Related Charges | 14,569 | 15,197 | 58,205 | 54,282 | ||||||||||||
| General, Administrative and Other | 82,249 | 124,108 | 259,729 | 290,974 | ||||||||||||
| Total Expenses | 358,272 | 330,137 | 1,598,788 | 1,214,005 | ||||||||||||
| Investment Income (Loss) | ||||||||||||||||
| Net Gains (Losses) from Investment Activities | 874,507 | 514,580 | 7,871,673 | 981,858 | ||||||||||||
| Dividend Income | 677,590 | 117,944 | 940,888 | 225,073 | ||||||||||||
| Interest Income | 98,929 | 102,968 | 358,598 | 321,943 | ||||||||||||
| Interest Expense | (16,407 | ) | (20,393 | ) | (69,164 | ) | (72,758 | ) | ||||||||
| Total Investment Income (Loss) | 1,634,619 | 715,099 | 9,101,995 | 1,456,116 | ||||||||||||
| Income (Loss) Before Taxes | 1,453,968 | 594,319 | 8,071,649 | 965,731 | ||||||||||||
| Income Taxes | 5,628 | 21,322 | 43,405 | 89,245 | ||||||||||||
| Net Income (Loss) | 1,448,340 | 572,997 | 8,028,244 | 876,486 | ||||||||||||
| Net Income (Loss) Attributable to | ||||||||||||||||
| Redeemable Noncontrolling Interests | 16,412 | 4,318 | 34,963 | 4,318 | ||||||||||||
| Net Income (Loss) Attributable to | ||||||||||||||||
| Noncontrolling Interests | 1,335,200 | 522,542 | 7,432,445 | 870,247 | ||||||||||||
| Net Income (Loss) Attributable to KKR & Co. L.P. | $ | 96,728 | $ | 46,137 | $ | 560,836 | $ | 1,921 | ||||||||
| Distributions Declared per KKR & Co. L.P. Common Unit | $ | 0.70 | $ | 0.32 | $ | 1.22 | $ | 0.74 | ||||||||
| Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit | ||||||||||||||||
| Basic | $ | 0.39 | $ | 0.20 | $ | 2.35 | $ | 0.01 | ||||||||
| Diluted (a) | $ | 0.36 | $ | 0.20 | $ | 2.21 | $ | 0.01 | ||||||||
| Weighted Average Common Units Outstanding | ||||||||||||||||
| Basic | 249,303,558 | 225,382,001 | 238,503,257 | 220,235,469 | ||||||||||||
| Diluted (a) | 268,192,128 | 231,361,032 | 254,093,160 | 222,519,174 | ||||||||||||
| (a) | KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit given that the exchange of these units would proportionally increase KKR & Co. L.P.’s interests in KKR’s business and would have an anti-dilutive effect on earnings per common unit as a result of certain tax benefits KKR & Co. L.P. is assumed to receive upon the exchange. |
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| 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, 2012 | September 30, 2012 | December 31, 2011 | December 31, 2012 | December 31, 2011 | ||||||||||||||||
| Fees | ||||||||||||||||||||
| Management and incentive fees: | ||||||||||||||||||||
| Management fees | $ | 144,355 | $ | 126,483 | $ | 127,556 | $ | 529,107 | $ | 515,384 | ||||||||||
| Incentive fees | 12,350 | 17,768 | 6,084 | 43,845 | 34,243 | |||||||||||||||
| Management and incentive fees | 156,705 | 144,251 | 133,640 | 572,952 | 549,627 | |||||||||||||||
| Monitoring and transaction fees: | ||||||||||||||||||||
| Monitoring fees | 32,988 | 29,969 | 21,797 | 116,565 | 163,769 | |||||||||||||||
| Transaction fees | 76,840 | 75,264 | 128,338 | 240,108 | 349,130 | |||||||||||||||
| Fee credits | (37,991 | ) | (31,707 | ) | (36,862 | ) | (105,730 | ) | (150,858 | ) | ||||||||||
| Net monitoring and transaction fees | 71,837 | 73,526 | 113,273 | 250,943 | 362,041 | |||||||||||||||
| Total fees | 228,542 | 217,777 | 246,913 | 823,895 | 911,668 | |||||||||||||||
| Expenses | ||||||||||||||||||||
| Compensation and benefits | 76,001 | 71,340 | 65,038 | 272,811 | 257,951 | |||||||||||||||
| Occupancy and related charges | 13,763 | 13,605 | 14,353 | 55,068 | 51,009 | |||||||||||||||
| Other operating expenses | 52,799 | 42,128 | 50,947 | 176,205 | 185,555 | |||||||||||||||
| Total expenses (a) | 142,563 | 127,073 | 130,338 | 504,084 | 494,515 | |||||||||||||||
| Fee Related Earnings | 85,979 | 90,704 | 116,575 | 319,811 | 417,153 | |||||||||||||||
| Investment income (loss) | ||||||||||||||||||||
| Gross carried interest | 268,936 | 410,736 | 96,503 | 1,431,910 | 263,621 | |||||||||||||||
| Less: allocation to KKR carry pool | (107,514 | ) | (169,633 | ) | (40,410 | ) | (581,206 | ) | (108,325 | ) | ||||||||||
| Less: management fee refunds (b) | (8,712 | ) | (61,499 | ) | (1,993 | ) | (143,723 | ) | (17,587 | ) | ||||||||||
| Net carried interest | 152,710 | 179,604 | 54,100 | 706,981 | 137,709 | |||||||||||||||
| Other investment income (loss) | 110,236 | 240,876 | 117,039 | 1,111,122 | 202,758 | |||||||||||||||
| Total investment income (loss) | 262,946 | 420,480 | 171,139 | 1,818,103 | 340,467 | |||||||||||||||
| Income (Loss) before noncontrolling interests | ||||||||||||||||||||
| in Income of consolidated entities | 348,925 | 511,184 | 287,714 | 2,137,914 | 757,620 | |||||||||||||||
| Income (Loss) attributable to | ||||||||||||||||||||
| noncontrolling interests | 1,245 | 1,310 | 2,220 | 7,043 | 6,671 | |||||||||||||||
| Economic Net Income (Loss) | $ | 347,680 | $ | 509,874 | $ | 285,494 | $ | 2,130,871 | $ | 750,949 | ||||||||||
| Provision for Income Taxes | 10,632 | 22,548 | 59,988 | 102,420 | 248,082 | |||||||||||||||
| Economic Net Income (Loss), After Taxes (c) | $ | 337,048 | $ | 487,326 | $ | 225,506 | $ | 2,028,451 | $ | 502,867 | ||||||||||
| Economic Net Income (Loss), After Taxes per Adjusted Unit (c) | $ | 0.48 | $ | 0.69 | $ | 0.33 | $ | 2.90 | $ | 0.73 | ||||||||||
| Assets Under Management | $ | 75,527,500 | $ | 66,278,700 | $ | 59,008,600 | $ | 75,527,500 | $ | 59,008,600 | ||||||||||
| Fee Paying Assets Under Management | $ | 60,846,000 | $ | 50,266,000 | $ | 46,397,300 | $ | 60,846,000 | $ | 46,397,300 | ||||||||||
| Committed Dollars Invested and Syndicated Capital | $ | 1,715,700 | $ | 926,000 | $ | 2,582,600 | $ | 4,354,900 | $ | 6,014,000 | ||||||||||
| Uncalled Commitments | $ | 16,071,900 | $ | 15,845,900 | $ | 11,400,500 | $ | 16,071,900 | $ | 11,400,500 | ||||||||||
Other Information | ||||||||||||||||||||
| Fee Related Earnings | $ | 85,979 | $ | 90,704 | $ | 116,575 | $ | 319,811 | $ | 417,153 | ||||||||||
| Plus: depreciation and amortization | 3,580 | 3,273 | 2,528 | 12,499 | 9,925 | |||||||||||||||
| Fee Related EBITDA | $ | 89,559 | $ | 93,977 | $ | 119,103 | $ | 332,310 | $ | 427,078 | ||||||||||
| Distributed Earnings | $ | 179,412 | $ | 187,174 | $ | 195,725 | $ | 582,620 | $ | 596,306 | ||||||||||
| Plus: Net realized principal investment income | 366,878 | 145,700 | (49,237 | ) | 866,776 | 186,288 | ||||||||||||||
| Total Distributable Earnings (c) | $ | 546,290 | $ | 332,874 | $ | 146,488 | $ | 1,449,396 | $ | 782,594 | ||||||||||
| GAAP interest expense | $ | 16,407 | $ | 17,868 | $ | 20,393 | $ | 69,164 | $ | 72,758 | ||||||||||
| Less: interest expense related to debt obligations | ||||||||||||||||||||
| from investment financing arrangements | 7,014 | 8,502 | 9,598 | 31,050 | 30,160 | |||||||||||||||
| Core Interest Expense (c) | $ | 9,393 | $ | 9,366 | $ | 10,795 | $ | 38,114 | $ | 42,598 | ||||||||||
| (a) | Excludes a $15.2 million, $17.4 million and $5.5 million charge for non-cash equity based compensation during the quarters ended December 31, 2012, September 30, 2012, and December 31, 2011, respectively, associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. Excludes a $62.9 million and $16.7 million charge for non-cash equity based compensation during the years ended December 31, 2012 and 2011, respectively, associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. | |
| (b) | As of December 31, 2012, there is no carried interest subject to management fee refunds, which may reduce carried interest in future periods. | |
| (c) | See definitions for after-tax ENI, adjusted units, total distributable earnings, and core interest expense under “Notes to Reportable Segments.” | |
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| STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION | ||||||||||||||||||||
| PRIVATE MARKETS SEGMENT (UNAUDITED) | ||||||||||||||||||||
| (Amounts in thousands) | ||||||||||||||||||||
| Quarter Ended | Year Ended | |||||||||||||||||||
| December 31, 2012 | September 30, 2012 | December 31, 2011 | December 31, 2012 | December 31, 2011 | ||||||||||||||||
| Fees | ||||||||||||||||||||
| Management and incentive fees: | ||||||||||||||||||||
| Management fees | $ | 104,804 | $ | 105,035 | $ | 106,716 | $ | 423,921 | $ | 430,400 | ||||||||||
| Incentive fees | - | - | - | - | - | |||||||||||||||
| Management and incentive fees | 104,804 | 105,035 | 106,716 | 423,921 | 430,400 | |||||||||||||||
| Monitoring and transaction fees: | ||||||||||||||||||||
| Monitoring fees | 32,988 | 29,969 | 21,797 | 116,565 | 163,769 | |||||||||||||||
| Transaction fees | 41,231 | 32,788 | 65,148 | 96,454 | 166,654 | |||||||||||||||
| Fee credits | (37,721 | ) | (26,293 | ) | (34,799 | ) | (97,362 | ) | (144,928 | ) | ||||||||||
| Net monitoring and transaction fees | 36,498 | 36,464 | 52,146 | 115,657 | 185,495 | |||||||||||||||
| Total fees | 141,302 | 141,499 | 158,862 | 539,578 | 615,895 | |||||||||||||||
| Expenses | ||||||||||||||||||||
| Compensation and benefits | 53,383 | 48,905 | 46,139 | 192,765 | 185,709 | |||||||||||||||
| Occupancy and related charges | 12,075 | 12,049 | 12,902 | 48,562 | 45,694 | |||||||||||||||
| Other operating expenses | 43,463 | 35,885 | 42,825 | 147,253 | 157,901 | |||||||||||||||
| Total expenses | 108,921 | 96,839 | 101,866 | 388,580 | 389,304 | |||||||||||||||
| Fee Related Earnings | 32,381 | 44,660 | 56,996 | 150,998 | 226,591 | |||||||||||||||
| Investment income (loss) | ||||||||||||||||||||
| Gross carried interest | 255,296 | 391,168 | 96,115 | 1,392,755 | 266,211 | |||||||||||||||
| Less: allocation to KKR carry pool | (102,058 | ) | (161,805 | ) | (40,255 | ) | (565,543 | ) | (109,361 | ) | ||||||||||
| Less: management fee refunds | (8,712 | ) | (61,499 | ) | (1,993 | ) | (143,723 | ) | (17,587 | ) | ||||||||||
| Net carried interest | 144,526 | 167,864 | 53,867 | 683,489 | 139,263 | |||||||||||||||
| Other investment income (loss) | 1,158 | 1,779 | (364 | ) | 599 | (549 | ) | |||||||||||||
| Total investment income (loss) | 145,684 | 169,643 | 53,503 | 684,088 | 138,714 | |||||||||||||||
| Income (Loss) before noncontrolling interests | ||||||||||||||||||||
| in Income of consolidated entities | 178,065 | 214,303 | 110,499 | 835,086 | 365,305 | |||||||||||||||
| Income (Loss) attributable to | ||||||||||||||||||||
| noncontrolling interests | 292 | 444 | 651 | 3,390 | 2,536 | |||||||||||||||
| Economic Net Income (Loss) | $ | 177,773 | $ | 213,859 | $ | 109,848 | $ | 831,696 | $ | 362,769 | ||||||||||
| Assets Under Management | $ | 49,127,600 | $ | 49,771,000 | $ | 43,627,900 | $ | 49,127,600 | $ | 43,627,900 | ||||||||||
| Fee Paying Assets Under Management | $ | 41,173,000 | $ | 40,354,200 | $ | 37,869,700 | $ | 41,173,000 | $ | 37,869,700 | ||||||||||
| Committed Dollars Invested | $ | 1,220,800 | $ | 623,000 | $ | 2,148,400 | $ | 3,026,300 | $ | 5,033,300 | ||||||||||
| Uncalled Commitments | $ | 14,271,100 | $ | 14,594,700 | $ | 10,070,300 | $ | 14,271,100 | $ | 10,070,300 | ||||||||||
KKR | ||||||||||||||||||||
| STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION | ||||||||||||||||||||
| PUBLIC MARKETS SEGMENT (UNAUDITED) | ||||||||||||||||||||
| (Amounts in thousands) | ||||||||||||||||||||
| Quarter Ended | Year Ended | |||||||||||||||||||
| December 31, 2012 | September 30, 2012 | December 31, 2011 | December 31, 2012 | December 31, 2011 | ||||||||||||||||
| Fees | ||||||||||||||||||||
| Management and incentive fees: | ||||||||||||||||||||
| Management fees | $ | 39,551 | $ | 21,448 | $ | 20,840 | $ | 105,186 | $ | 84,984 | ||||||||||
| Incentive fees | 12,350 | 17,768 | 6,084 | 43,845 | 34,243 | |||||||||||||||
| Management and incentive fees | 51,901 | 39,216 | 26,924 | 149,031 | 119,227 | |||||||||||||||
| Monitoring and transaction fees: | ||||||||||||||||||||
| Monitoring fees | - | - | - | - | - | |||||||||||||||
| Transaction fees | 1,974 | 8,780 | 4,151 | 14,495 | 11,996 | |||||||||||||||
| Fee credits | (270 | ) | (5,414 | ) | (2,063 | ) | (8,368 | ) | (5,930 | ) | ||||||||||
| Net monitoring and transaction fees | 1,704 | 3,366 | 2,088 | 6,127 | 6,066 | |||||||||||||||
| Total fees | 53,605 | 42,582 | 29,012 | 155,158 | 125,293 | |||||||||||||||
| Expenses | ||||||||||||||||||||
| Compensation and benefits | 16,097 | 13,997 | 12,166 | 50,705 | 46,133 | |||||||||||||||
| Occupancy and related charges | 1,479 | 1,343 | 1,189 | 5,606 | 4,059 | |||||||||||||||
| Other operating expenses | 6,596 | 3,897 | 3,834 | 18,350 | 15,483 | |||||||||||||||
| Total expenses | 24,172 | 19,237 | 17,189 | 74,661 | 65,675 | |||||||||||||||
| Fee Related Earnings | 29,433 | 23,345 | 11,823 | 80,497 | 59,618 | |||||||||||||||
| Investment income (loss) | ||||||||||||||||||||
| Gross carried interest | 13,640 | 19,568 | 388 | 39,155 | (2,590 | ) | ||||||||||||||
| Less: allocation to KKR carry pool | (5,456 | ) | (7,828 | ) | (155 | ) | (15,663 | ) | 1,036 | |||||||||||
| Less: management fee refunds | - | - | - | - | - | |||||||||||||||
| Net carried interest | 8,184 | 11,740 | 233 | 23,492 | (1,554 | ) | ||||||||||||||
| Other investment income (loss) | 30 | 25 | (93 | ) | 20 | 505 | ||||||||||||||
| Total investment income (loss) | 8,214 | 11,765 | 140 | 23,512 | (1,049 | ) | ||||||||||||||
| Income (Loss) before noncontrolling interests | ||||||||||||||||||||
| in Income of consolidated entities | 37,647 | 35,110 | 11,963 | 104,009 | 58,569 | |||||||||||||||
| Income (Loss) attributable to | ||||||||||||||||||||
| noncontrolling interests | 292 | 233 | 119 | 1,079 | 599 | |||||||||||||||
| Economic Net Income (Loss) | $ | 37,355 | $ | 34,877 | $ | 11,844 | $ | 102,930 | $ | 57,970 | ||||||||||
| Assets Under Management | $ | 26,399,900 | $ | 16,507,700 | $ | 15,380,700 | $ | 26,399,900 | $ | 15,380,700 | ||||||||||
| Fee Paying Assets Under Management | $ | 19,673,000 | $ | 9,911,800 | $ | 8,527,600 | $ | 19,673,000 | $ | 8,527,600 | ||||||||||
| Committed Dollars Invested | $ | 226,400 | $ | 278,300 | $ | 434,200 | $ | 784,800 | $ | 980,700 | ||||||||||
| Uncalled Commitments | $ | 1,800,800 | $ | 1,251,200 | $ | 1,330,200 | $ | 1,800,800 | $ | 1,330,200 | ||||||||||
| KKR | |||||||||||||||
| STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION | |||||||||||||||
| CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT (UNAUDITED) | |||||||||||||||
| (Amounts in thousands) | |||||||||||||||
| Quarter Ended | Year Ended | ||||||||||||||
| December 31, 2012 | September 30, 2012 | December 31, 2011 | December 31, 2012 | December 31, 2011 | |||||||||||
| Fees | |||||||||||||||
| Management and incentive fees: | |||||||||||||||
| Management fees | $ | - | $ | - | $ | - | $ | - | $ | - | |||||
| Incentive fees | - | - | - | - | - | ||||||||||
| Management and incentive fees | - | - | - | - | - | ||||||||||
| Monitoring and transaction fees: | |||||||||||||||
| Monitoring fees | - | - | - | - | - | ||||||||||
| Transaction fees | 33,635 | 33,696 | 59,039 | 129,159 | 170,480 | ||||||||||
| Fee credits | - | - | - | - | - | ||||||||||
| Net monitoring and transaction fees | 33,635 | 33,696 | 59,039 | 129,159 | 170,480 | ||||||||||
| Total fees | 33,635 | 33,696 | 59,039 | 129,159 | 170,480 | ||||||||||
| Expenses | |||||||||||||||
| Compensation and benefits | 6,521 | 8,438 | 6,733 | 29,341 | 26,109 | ||||||||||
| Occupancy and related charges | 209 | 213 | 262 | 900 | 1,256 | ||||||||||
| Other operating expenses | 2,740 | 2,346 | 4,288 | 10,602 | 12,171 | ||||||||||
| Total expenses | 9,470 | 10,997 | 11,283 | 40,843 | 39,536 | ||||||||||
| Fee Related Earnings | 24,165 | 22,699 | 47,756 | 88,316 | 130,944 | ||||||||||
| Investment income (loss) | |||||||||||||||
| Gross carried interest | - | - | - | - | - | ||||||||||
| Less: allocation to KKR carry pool | - | - | - | - | - | ||||||||||
| Less: management fee refunds | - | - | - | - | - | ||||||||||
| Net carried interest | - | - | - | - | - | ||||||||||
| Other investment income (loss) | 109,048 | 239,072 | 117,496 | 1,110,503 | 202,802 | ||||||||||
| Total investment income (loss) | 109,048 | 239,072 | 117,496 | 1,110,503 | 202,802 | ||||||||||
| Income (Loss) before noncontrolling interests | |||||||||||||||
| in Income of consolidated entities | 133,213 | 261,771 | 165,252 | 1,198,819 | 333,746 | ||||||||||
| Income (Loss) attributable to | |||||||||||||||
| noncontrolling interests | 661 | 633 | 1,450 | 2,574 | 3,536 | ||||||||||
| Economic Net Income (Loss) | $ | 132,552 | $ | 261,138 | $ | 163,802 | $ | 1,196,245 | $ | 330,210 | |||||
| Syndicated Capital | $ | 268,500 | $ | 24,700 | $ | 1,151,900 | $ | 543,800 | $ | 2,426,600 | |||||
| KKR | |||||||||||||||
| STATEMENTS OF OPERATIONS | |||||||||||||||
| TOTAL REPORTABLE SEGMENTS (UNAUDITED) | |||||||||||||||
| Quarter Ended December 31, 2012 | |||||||||||||||
| (Amounts in thousands) | |||||||||||||||
| Capital Markets | Total | ||||||||||||||
| Private Markets | Public Markets | and Principal | Reportable | ||||||||||||
| Segment | Segment | Activities Segment | Segments | ||||||||||||
| Fees | |||||||||||||||
| Management and incentive fees: | |||||||||||||||
| Management fees | $ | 104,804 | $ | 39,551 | $ | - | $ | 144,355 | |||||||
| Incentive fees | - | 12,350 | - | 12,350 | |||||||||||
| Management and incentive fees | 104,804 | 51,901 | - | 156,705 | |||||||||||
| Monitoring and transaction fees: | |||||||||||||||
| Monitoring fees | 32,988 | - | - | 32,988 | |||||||||||
| Transaction fees | 41,231 | 1,974 | 33,635 | 76,840 | |||||||||||
| Fee credits | (37,721 | ) | (270 | ) | - | (37,991 | ) | ||||||||
| Net monitoring and transaction fees | 36,498 | 1,704 | 33,635 | 71,837 | |||||||||||
| Total fees | 141,302 | 53,605 | 33,635 | 228,542 | |||||||||||
| Expenses | |||||||||||||||
| Compensation and benefits | 53,383 | 16,097 | 6,521 | 76,001 | |||||||||||
| Occupancy and related charges | 12,075 | 1,479 | 209 | 13,763 | |||||||||||
| Other operating expenses | 43,463 | 6,596 | 2,740 | 52,799 | |||||||||||
| Total expenses | 108,921 | 24,172 | 9,470 | 142,563 | |||||||||||
| Fee Related Earnings | 32,381 | 29,433 | 24,165 | 85,979 | |||||||||||
| Investment income (loss) | |||||||||||||||
| Gross carried interest | 255,296 | 13,640 | - | 268,936 | |||||||||||
| Less: allocation to KKR carry pool | (102,058 | ) | (5,456 | ) | - | (107,514 | ) | ||||||||
| Less: management fee refunds | (8,712 | ) | - | - | (8,712 | ) | |||||||||
| Net carried interest | 144,526 | 8,184 | - | 152,710 | |||||||||||
| Other investment income (loss) | 1,158 | 30 | 109,048 | 110,236 | |||||||||||
| Total investment income (loss) | 145,684 | 8,214 | 109,048 | 262,946 | |||||||||||
| Income (Loss) before noncontrolling interests | |||||||||||||||
| in Income of consolidated entities | 178,065 | 37,647 | 133,213 | 348,925 | |||||||||||
| Income (Loss) attributable to | |||||||||||||||
| noncontrolling interests | 292 | 292 | 661 | 1,245 | |||||||||||
| Economic Net Income (Loss) | $ | 177,773 | $ | 37,355 | $ | 132,552 | $ | 347,680 | |||||||
| KKR | |||||||||||||||
| STATEMENTS OF OPERATIONS | |||||||||||||||
| TOTAL REPORTABLE SEGMENTS (UNAUDITED) | |||||||||||||||
| Quarter Ended September 30, 2012 | |||||||||||||||
| (Amounts in thousands) | |||||||||||||||
| Capital Markets | Total | ||||||||||||||
| Private Markets | Public Markets | and Principal | Reportable | ||||||||||||
| Segment | Segment | Activities Segment | Segments | ||||||||||||
| Fees | |||||||||||||||
| Management and incentive fees: | |||||||||||||||
| Management fees | $ | 105,035 | $ | 21,448 | $ | - | $ | 126,483 | |||||||
| Incentive fees | - | 17,768 | - | 17,768 | |||||||||||
| Management and incentive fees | 105,035 | 39,216 | - | 144,251 | |||||||||||
| Monitoring and transaction fees: | |||||||||||||||
| Monitoring fees | 29,969 | - | - | 29,969 | |||||||||||
| Transaction fees | 32,788 | 8,780 | 33,696 | 75,264 | |||||||||||
| Fee credits | (26,293 | ) | (5,414 | ) | - | (31,707 | ) | ||||||||
| Net monitoring and transaction fees | 36,464 | 3,366 | 33,696 | 73,526 | |||||||||||
| Total fees | 141,499 | 42,582 | 33,696 | 217,777 | |||||||||||
| Expenses | |||||||||||||||
| Compensation and benefits | 48,905 | 13,997 | 8,438 | 71,340 | |||||||||||
| Occupancy and related charges | 12,049 | 1,343 | 213 | 13,605 | |||||||||||
| Other operating expenses | 35,885 | 3,897 | 2,346 | 42,128 | |||||||||||
| Total expenses | 96,839 | 19,237 | 10,997 | 127,073 | |||||||||||
| Fee Related Earnings | 44,660 | 23,345 | 22,699 | 90,704 | |||||||||||
| Investment income (loss) | |||||||||||||||
| Gross carried interest | 391,168 | 19,568 | - | 410,736 | |||||||||||
| Less: allocation to KKR carry pool | (161,805 | ) | (7,828 | ) | - | (169,633 | ) | ||||||||
| Less: management fee refunds | (61,499 | ) | - | - | (61,499 | ) | |||||||||
| Net carried interest | 167,864 | 11,740 | - | 179,604 | |||||||||||
| Other investment income (loss) | 1,779 | 25 | 239,072 | 240,876 | |||||||||||
| Total investment income (loss) | 169,643 | 11,765 | 239,072 | 420,480 | |||||||||||
| Income (Loss) before noncontrolling interests | |||||||||||||||
| in Income of consolidated entities | 214,303 | 35,110 | 261,771 | 511,184 | |||||||||||
| Income (Loss) attributable to | |||||||||||||||
| noncontrolling interests | 444 | 233 | 633 | 1,310 | |||||||||||
| Economic Net Income (Loss) | $ | 213,859 | $ | 34,877 | $ | 261,138 | $ | 509,874 | |||||||
| KKR | |||||||||||||||
| STATEMENTS OF OPERATIONS | |||||||||||||||
| TOTAL REPORTABLE SEGMENTS (UNAUDITED) | |||||||||||||||
| Quarter Ended December 31, 2011 | |||||||||||||||
| (Amounts in thousands) | |||||||||||||||
| Capital Markets | Total | ||||||||||||||
| Private Markets | Public Markets | and Principal | Reportable | ||||||||||||
| Segment | Segment | Activities Segment | Segments | ||||||||||||
| Fees | |||||||||||||||
| Management and incentive fees: | |||||||||||||||
| Management fees | $ | 106,716 | $ | 20,840 | $ | - | $ | 127,556 | |||||||
| Incentive fees | - | 6,084 | - | 6,084 | |||||||||||
| Management and incentive fees | 106,716 | 26,924 | - | 133,640 | |||||||||||
| Monitoring and transaction fees: | |||||||||||||||
| Monitoring fees | 21,797 | - | - | 21,797 | |||||||||||
| Transaction fees | 65,148 | 4,151 | 59,039 | 128,338 | |||||||||||
| Fee credits | (34,799 | ) | (2,063 | ) | - | (36,862 | ) | ||||||||
| Net monitoring and transaction fees | 52,146 | 2,088 | 59,039 | 113,273 | |||||||||||
| Total fees | 158,862 | 29,012 | 59,039 | 246,913 | |||||||||||
| Expenses | |||||||||||||||
| Compensation and benefits | 46,139 | 12,166 | 6,733 | 65,038 | |||||||||||
| Occupancy and related charges | 12,902 | 1,189 | 262 | 14,353 | |||||||||||
| Other operating expenses | 42,825 | 3,834 | 4,288 | 50,947 | |||||||||||
| Total expenses | 101,866 | 17,189 | 11,283 | 130,338 | |||||||||||
| Fee Related Earnings | 56,996 | 11,823 | 47,756 | 116,575 | |||||||||||
| Investment income (loss) | |||||||||||||||
| Gross carried interest | 96,115 | 388 | - | 96,503 | |||||||||||
| Less: allocation to KKR carry pool | (40,255 | ) | (155 | ) | - | (40,410 | ) | ||||||||
| Less: management fee refunds | (1,993 | ) | - | - | (1,993 | ) | |||||||||
| Net carried interest | 53,867 | 233 | - | 54,100 | |||||||||||
| Other investment income (loss) | (364 | ) | (93 | ) | 117,496 | 117,039 | |||||||||
| Total investment income (loss) | 53,503 | 140 | 117,496 | 171,139 | |||||||||||
| Income (Loss) before noncontrolling interests | |||||||||||||||
| in Income of consolidated entities | 110,499 | 11,963 | 165,252 | 287,714 | |||||||||||
| Income (Loss) attributable to | |||||||||||||||
| noncontrolling interests | 651 | 119 | 1,450 | 2,220 | |||||||||||
| Economic Net Income (Loss) | $ | 109,848 | $ | 11,844 | $ | 163,802 | $ | 285,494 | |||||||
| KKR | |||||||||||||||
| STATEMENTS OF OPERATIONS | |||||||||||||||
| TOTAL REPORTABLE SEGMENTS (UNAUDITED) | |||||||||||||||
| Year Ended December 31, 2012 | |||||||||||||||
| (Amounts in thousands) | |||||||||||||||
| Capital Markets | Total | ||||||||||||||
| Private Markets | Public Markets | and Principal | Reportable | ||||||||||||
| Segment | Segment | Activities Segment | Segments | ||||||||||||
| Fees | |||||||||||||||
| Management and incentive fees: | |||||||||||||||
| Management fees | $ | 423,921 | $ | 105,186 | $ | - | $ | 529,107 | |||||||
| Incentive fees | - | 43,845 | - | 43,845 | |||||||||||
| Management and incentive fees | 423,921 | 149,031 | - | 572,952 | |||||||||||
| Monitoring and transaction fees: | |||||||||||||||
| Monitoring fees | 116,565 | - | - | 116,565 | |||||||||||
| Transaction fees | 96,454 | 14,495 | 129,159 | 240,108 | |||||||||||
| Fee credits | (97,362 | ) | (8,368 | ) | - | (105,730 | ) | ||||||||
| Net monitoring and transaction fees | 115,657 | 6,127 | 129,159 | 250,943 | |||||||||||
| Total fees | 539,578 | 155,158 | 129,159 | 823,895 | |||||||||||
| Expenses | |||||||||||||||
| Compensation and benefits | 192,765 | 50,705 | 29,341 | 272,811 | |||||||||||
| Occupancy and related charges | 48,562 | 5,606 | 900 | 55,068 | |||||||||||
| Other operating expenses | 147,253 | 18,350 | 10,602 | 176,205 | |||||||||||
| Total expenses | 388,580 | 74,661 | 40,843 | 504,084 | |||||||||||
| Fee Related Earnings | 150,998 | 80,497 | 88,316 | 319,811 | |||||||||||
| Investment income (loss) | |||||||||||||||
| Gross carried interest | 1,392,755 | 39,155 | - | 1,431,910 | |||||||||||
| Less: allocation to KKR carry pool | (565,543 | ) | (15,663 | ) | - | (581,206 | ) | ||||||||
| Less: management fee refunds | (143,723 | ) | - | - | (143,723 | ) | |||||||||
| Net carried interest | 683,489 | 23,492 | - | 706,981 | |||||||||||
| Other investment income (loss) | 599 | 20 | 1,110,503 | 1,111,122 | |||||||||||
| Total investment income (loss) | 684,088 | 23,512 | 1,110,503 | 1,818,103 | |||||||||||
| Income (Loss) before noncontrolling interests | |||||||||||||||
| in Income of consolidated entities | 835,086 | 104,009 | 1,198,819 | 2,137,914 | |||||||||||
| Income (Loss) attributable to | |||||||||||||||
| noncontrolling interests | 3,390 | 1,079 | 2,574 | 7,043 | |||||||||||
| Economic Net Income (Loss) | $ | 831,696 | $ | 102,930 | $ | 1,196,245 | $ | 2,130,871 | |||||||
| KKR | |||||||||||||||
| STATEMENTS OF OPERATIONS | |||||||||||||||
| TOTAL REPORTABLE SEGMENTS (UNAUDITED) | |||||||||||||||
| Year Ended December 31, 2011 | |||||||||||||||
| (Amounts in thousands) | |||||||||||||||
| Capital Markets | Total | ||||||||||||||
| Private Markets | Public Markets | and Principal | Reportable | ||||||||||||
| Segment | Segment | Activities Segment | Segments | ||||||||||||
| Fees | |||||||||||||||
| Management and incentive fees: | |||||||||||||||
| Management fees | $ | 430,400 | $ | 84,984 | $ | - | $ | 515,384 | |||||||
| Incentive fees | - | 34,243 | - | 34,243 | |||||||||||
| Management and incentive fees | 430,400 | 119,227 | - | 549,627 | |||||||||||
| Monitoring and transaction fees: | |||||||||||||||
| Monitoring fees | 163,769 | - | - | 163,769 | |||||||||||
| Transaction fees | 166,654 | 11,996 | 170,480 | 349,130 | |||||||||||
| Fee credits | (144,928 | ) | (5,930 | ) | - | (150,858 | ) | ||||||||
| Net monitoring and transaction fees | 185,495 | 6,066 | 170,480 | 362,041 | |||||||||||
| Total fees | 615,895 | 125,293 | 170,480 | 911,668 | |||||||||||
| Expenses | |||||||||||||||
| Compensation and benefits | 185,709 | 46,133 | 26,109 | 257,951 | |||||||||||
| Occupancy and related charges | 45,694 | 4,059 | 1,256 | 51,009 | |||||||||||
| Other operating expenses | 157,901 | 15,483 | 12,171 | 185,555 | |||||||||||
| Total expenses | 389,304 | 65,675 | 39,536 | 494,515 | |||||||||||
| Fee Related Earnings | 226,591 | 59,618 | 130,944 | 417,153 | |||||||||||
| Investment income (loss) | |||||||||||||||
| Gross carried interest | 266,211 | (2,590 | ) | - | 263,621 | ||||||||||
| Less: allocation to KKR carry pool | (109,361 | ) | 1,036 | - | (108,325 | ) | |||||||||
| Less: management fee refunds | (17,587 | ) | - | - | (17,587 | ) | |||||||||
| Net carried interest | 139,263 | (1,554 | ) | - | 137,709 | ||||||||||
| Other investment income (loss) | (549 | ) | 505 | 202,802 | 202,758 | ||||||||||
| Total investment income (loss) | 138,714 | (1,049 | ) | 202,802 | 340,467 | ||||||||||
| Income (Loss) before noncontrolling interests | |||||||||||||||
| in Income of consolidated entities | 365,305 | 58,569 | 333,746 | 757,620 | |||||||||||
| Income (Loss) attributable to | |||||||||||||||
| noncontrolling interests | 2,536 | 599 | 3,536 | 6,671 | |||||||||||
| Economic Net Income (Loss) | $ | 362,769 | $ | 57,970 | $ | 330,210 | $ | 750,949 | |||||||
| KKR | |||||||||||||||
| BALANCE SHEETS | |||||||||||||||
| TOTAL REPORTABLE SEGMENTS (UNAUDITED) | |||||||||||||||
| (Amounts in thousands, except per unit amounts) | |||||||||||||||
| As of December 31, 2012 | |||||||||||||||
Private | Public | Capital | Total | ||||||||||||
| Cash and short-term investments | $ | 358,237 | $ | 28,690 | $ | 1,147,360 | $ | 1,534,287 | |||||||
| Investments | - | - | 4,758,157 | (a) | 4,758,157 | ||||||||||
| Unrealized carry | 730,292 | 24,939 | - | 755,231 | |||||||||||
| Other assets | 207,047 | 280,472 | 62,119 | 549,638 | |||||||||||
| Total assets | $ | 1,295,576 | $ | 334,101 | $ | 5,967,636 | $ | 7,597,313 | |||||||
| Debt obligations | $ | - | $ | - | $ | 500,000 | $ | 500,000 | |||||||
| Other liabilities | 78,724 | 16,433 | 24,275 | 119,432 | |||||||||||
| Total liabilities | 78,724 | 16,433 | 524,275 | 619,432 | |||||||||||
| Noncontrolling interests | 1,339 | 739 | 18,619 | 20,697 | |||||||||||
| Book value | $ | 1,215,513 | $ | 316,929 | $ | 5,424,742 | $ | 6,957,184 | |||||||
| Book value per adjusted unit | $ | 1.72 | $ | 0.45 | $ | 7.70 | $ | 9.87 | |||||||
| As of December 31, 2011 | |||||||||||||||
Private | Public | Capital | Total | ||||||||||||
| Cash and short-term investments | $ | 296,717 | $ | 8,087 | $ | 684,637 | $ | 989,441 | |||||||
| Investments | - | - | 4,743,406 | 4,743,406 | |||||||||||
| Unrealized carry | 419,523 | 1,447 | - | 420,970 | |||||||||||
| Other assets | 139,432 | 58,360 | 63,799 | 261,591 | |||||||||||
| Total assets | $ | 855,672 | $ | 67,894 | $ | 5,491,842 | $ | 6,415,408 | |||||||
| Debt obligations | $ | - | $ | - | $ | 500,000 | $ | 500,000 | |||||||
| Other liabilities | 128,590 | 8,153 | 49,329 | 186,072 | |||||||||||
| Total liabilities | 128,590 | 8,153 | 549,329 | 686,072 | |||||||||||
| Noncontrolling interests | (1,358 | ) | 729 | 19,381 | 18,752 | ||||||||||
| Book value | $ | 728,440 | $ | 59,012 | $ | 4,923,132 | $ | 5,710,584 | |||||||
| Book value per adjusted unit | $ | 1.06 | $ | 0.09 | $ | 7.14 | $ | 8.29 | |||||||
| (a) | See Capital Markets and Principal Activities segment schedule of investments that follows. | |
| KKR | ||||||
| CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS | ||||||
| (Amounts in thousands, except percentage amounts) | ||||||
| As of December 31, 2012 | ||||||
| Fair Value as | ||||||
| Fair | a Percentage of | |||||
Investment | Cost | Value | Total Investments | |||
| Co-Investments in Portfolio Companies of | ||||||
| Private Equity Investment Vehicles: | ||||||
| Alliance Boots GmbH | 195,640 | 426,561 | 9.0% | |||
| HCA Inc. | 141,983 | 378,387 | 8.0% | |||
| The Nielsen Company B.V. | 134,603 | 273,712 | 5.8% | |||
| NXP B.V. | 207,964 | 207,388 | 4.4% | |||
| Samson Resources Corporation | 237,514 | 190,012 | 4.0% | |||
| Dollar General Corporation | 37,733 | 185,107 | 3.9% | |||
| KION Group GmbH | 128,058 | 172,748 | 3.6% | |||
| ProSiebenSat.1 Media AG | 226,913 | 144,919 | 3.0% | |||
| US Foods | 100,000 | 140,000 | 2.9% | |||
| Biomet, Inc. | 151,444 | 121,155 | 2.5% | |||
| First Data Corporation | 135,258 | 94,681 | 2.0% | |||
| Energy Future Holdings Corp. | 200,000 | 10,000 | 0.2% | |||
| PagesJaunes Groupe S.A. | 235,201 | - | 0.0% | |||
| 2,132,311 | 2,344,670 | 49.3% | ||||
| Private Equity Investment Vehicles | ||||||
| KKR 2006 Fund L.P. | 380,803 | 436,552 | 9.2% | |||
| KKR European Fund III L.P. | 189,441 | 221,393 | 4.7% | |||
| KKR Asian Fund L.P. | 64,324 | 82,641 | 1.7% | |||
| KKR European Fund II L.P. | 65,649 | 57,616 | 1.2% | |||
| KKR Millennium Fund L.P. | 59,426 | 50,111 | 1.1% | |||
| KKR North America Fund XI L.P. | 22,788 | 22,788 | 0.5% | |||
| KKR E2 Investors, L.P. | 10,418 | 19,261 | 0.4% | |||
| KKR European Fund L.P. | 47,664 | 4,299 | 0.1% | |||
| KKR China Growth Fund L.P. | 3,611 | 4,051 | 0.1% | |||
| Co-Investment Vehicles | 528 | 598 | 0.0% | |||
| 844,652 | 899,310 | 19.0% | ||||
| Private Equity Total | 2,976,963 | 3,243,980 | 68.3% | |||
| Energy & Infrastructure Investment Vehicles | ||||||
| Royalties and Drilling | 93,755 | 93,755 | 2.0% | |||
| Infrastructure Fund | 24,447 | 25,678 | 0.5% | |||
| Co-Investment Vehicles | 10,718 | 13,217 | 0.3% | |||
| Natural Resources | 9,747 | 5,796 | 0.1% | |||
| Energy & Infrastructure Total | 138,667 | 138,446 | 2.9% | |||
| Private Markets Total | 3,115,630 | 3,382,426 | 71.2% | |||
| Public Markets Investment Vehicles | ||||||
| Liquid Credit SMAs/Funds | 187,163 | 194,658 | 4.1% | |||
| Long/Short Equities Funds | 100,000 | 105,648 | 2.2% | |||
| Credit Relative Value Fund | 50,000 | 52,507 | 1.1% | |||
| Direct Lending | 36,739 | 39,649 | 0.8% | |||
| Special Situations Vehicles | 20,148 | 22,172 | 0.5% | |||
| Mezzanine Fund | 14,735 | 17,235 | 0.4% | |||
| Public Markets Total | 408,785 | 431,869 | 9.1% | |||
| Other | 947,040 | 943,862 | 19.7% | |||
| Total Investments | $ 4,471,455 | $ 4,758,157 | 100.0% | |||
| KKR | |||||||||
| CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS, CONTINUED | |||||||||
| (Amounts in thousands, except percentage amounts) | |||||||||
As of December 31, 2012 | |||||||||
Fair Value as | |||||||||
a Percentage | |||||||||
Fair | of Total | ||||||||
Investment | Cost | Value | Investments | ||||||
| Significant Aggregate Investments: (a) | |||||||||
| Alliance Boots GmbH | $ | 228,769 | $ | 491,530 | 10.3 | % | |||
| HCA Inc. | 173,443 | 451,752 | 9.5 | % | |||||
| The Nielsen Company B.V. | 134,603 | 273,712 | 5.8 | % | |||||
| Dollar General Corporation | 52,359 | 245,432 | 5.2 | % | |||||
| 589,174 | 1,462,426 | 30.8 | % | ||||||
| Other investments | 3,882,281 | 3,295,731 | 69.2 | % | |||||
| Total Investments | $ | 4,471,455 | $ | 4,758,157 | 100.0 | % | |||
| Investments by Geography: | |||||||||
| North America | $ | 2,911,143 | $ | 3,232,122 | 67.9 | % | |||
| Europe | 1,391,256 | 1,355,801 | 28.5 | % | |||||
| Asia-Pacific | 169,056 | 170,234 | 3.6 | % | |||||
| Total Investments | $ | 4,471,455 | $ | 4,758,157 | 100.0 | % | |||
| (a) | The significant aggregate investments include investments in portfolio companies with individual fair values of 5% or more of the Capital Markets and Principal Activities segment investments balance as of December 31, 2012. The fair value figures include the co-investment and the limited partner and/or general partner interests in the underlying portfolio company. |
| KKR | ||||||||||||||
| ASSETS UNDER MANAGEMENT | ||||||||||||||
| (Amounts in thousands) | ||||||||||||||
Private | Public | Total | ||||||||||||
Quarter Ended December 31, 2012 | ||||||||||||||
| September 30, 2012 | $ | 49,771,000 | $ | 16,507,700 | $ | 66,278,700 | ||||||||
| New Capital Raised | 934,100 | 1,794,000 | 2,728,100 | |||||||||||
| Acquisitions (a) | - | 8,086,900 | 8,086,900 | |||||||||||
| Distributions | (3,097,100 | ) | (485,600 | ) | (b) | (3,582,700 | ) | |||||||
| Foreign Exchange | 17,400 | - | 17,400 | |||||||||||
| Change in Value | 1,502,200 | 496,900 | 1,999,100 | |||||||||||
| December 31, 2012 | $ | 49,127,600 | $ | 26,399,900 | $ | 75,527,500 | ||||||||
Year Ended December 31, 2012 | ||||||||||||||
| December 31, 2011 | $ | 43,627,900 | $ | 15,380,700 | $ | 59,008,600 | ||||||||
| New Capital Raised | 7,360,100 | 3,219,600 | 10,579,700 | |||||||||||
| Acquisitions (a) | - | 8,086,900 | 8,086,900 | |||||||||||
| Distributions | (9,023,900 | ) | (1,543,200 | ) | (c) | (10,567,100 | ) | |||||||
| Net Changes in Fee Base of Certain Funds (d) | (1,327,900 | ) | - | (1,327,900 | ) | |||||||||
| Foreign Exchange | 16,000 | - | 16,000 | |||||||||||
| Change in Value | 8,475,400 | 1,255,900 | 9,731,300 | |||||||||||
| December 31, 2012 | $ | 49,127,600 | $ | 26,399,900 | $ | 75,527,500 | ||||||||
| KKR | ||||||||||||||
| FEE PAYING ASSETS UNDER MANAGEMENT | ||||||||||||||
| (Amounts in thousands) | ||||||||||||||
Private | Public | Total | ||||||||||||
Quarter Ended December 31, 2012 | ||||||||||||||
| September 30, 2012 | $ | 40,354,200 | $ | 9,911,800 | $ | 50,266,000 | ||||||||
| New Capital Raised | 1,272,000 | 1,559,100 | 2,831,100 | |||||||||||
| Acquisitions (a) | - | 8,078,400 | 8,078,400 | |||||||||||
| Distributions | (551,100 | ) | (257,200 | ) | (b) | (808,300 | ) | |||||||
| Foreign Exchange | 83,600 | - | 83,600 | |||||||||||
| Change in Value | 14,300 | 380,900 | 395,200 | |||||||||||
| December 31, 2012 | $ | 41,173,000 | $ | 19,673,000 | $ | 60,846,000 | ||||||||
Year Ended December 31, 2012 | ||||||||||||||
| December 31, 2011 | $ | 37,869,700 | $ | 8,527,600 | $ | 46,397,300 | ||||||||
| New Capital Raised | 7,451,700 | 2,999,200 | 10,450,900 | |||||||||||
| Acquisitions (a) | - | 8,078,400 | 8,078,400 | |||||||||||
| Distributions | (1,089,400 | ) | (851,400 | ) | (c) | (1,940,800 | ) | |||||||
| Net Changes in Fee Base of Certain Funds (d) | (3,205,400 | ) | - | (3,205,400 | ) | |||||||||
| Foreign Exchange | 99,600 | - | 99,600 | |||||||||||
| Change in Value | 46,800 | 919,200 | 966,000 | |||||||||||
| December 31, 2012 | $ | 41,173,000 | $ | 19,673,000 | $ | 60,846,000 | ||||||||
| (a) | Represents AUM and FPAUM of Prisma as of October 1, 2012, the date of acquisition. These figures exclude new capital raised and distributions during the quarter ended December 31, 2012. | |
| (b) | Includes $169.9 million of redemptions by fund investors. | |
| (c) | Includes $421.8 million of redemptions by fund investors. | |
| (d) | Represents the impact of including certain funds entering the post-investment period including KKR 2006 Fund L.P. | |
| KKR | ||||||||||||||||||||||||||
| INVESTMENT VEHICLE SUMMARY* (UNAUDITED) | ||||||||||||||||||||||||||
| As of December 31, 2012 | ||||||||||||||||||||||||||
| (Amounts in millions, except percentages) | ||||||||||||||||||||||||||
| Investment Period | Amount | |||||||||||||||||||||||||
Commencement | End Date | Commitment | Uncalled | Percentage | Invested | Realized | Remaining | Remaining | ||||||||||||||||||
Private Markets | ||||||||||||||||||||||||||
| Private Equity Funds | ||||||||||||||||||||||||||
| North America Fund XI | 9/2012 | 9/2018 | $ | 6,331.2 | $ | 5,908.7 | 3.9% | $ | 422.5 | $ | - | $ | 422.5 | $ | 422.5 | |||||||||||
| China Growth Fund | 11/2010 | 11/2016 | 1,010.0 | 674.9 | 1.0% | 335.1 | - | 335.1 | 370.8 | |||||||||||||||||
| E2 Investors (Annex Fund) | 8/2009 | 11/2013 | 346.3 | 192.1 | 4.3% | 154.2 | - | 154.2 | 303.7 | |||||||||||||||||
| European Fund III | 3/2008 | 3/2014 | 6,087.7 | 2,410.9 | 4.6% | 3,676.8 | - | 3,676.8 | 4,360.3 | |||||||||||||||||
| Asian Fund | 7/2007 | 7/2013 | 3,983.2 | 860.5 | 2.5% | 3,122.7 | 732.0 | 2,612.9 | 4,783.5 | |||||||||||||||||
| 2006 Fund | 9/2006 | 9/2012 | 17,642.2 | 1,315.2 | 2.1% | 16,327.0 | 9,291.5 | 10,594.0 | 14,422.5 | |||||||||||||||||
| European Fund II | 11/2005 | 10/2008 | 5,750.8 | - | 2.1% | 5,750.8 | 2,271.7 | 4,091.5 | 4,855.1 | |||||||||||||||||
| Millennium Fund | 12/2002 | 12/2008 | 6,000.0 | - | 2.5% | 6,000.0 | 7,907.9 | 3,050.9 | 4,362.3 | |||||||||||||||||
| European Fund | 12/1999 | 12/2005 | 3,085.4 | - | 3.2% | 3,085.4 | 8,720.0 | - | 51.5 | |||||||||||||||||
| Total Private Equity Funds | 50,236.8 | 11,362.3 | 38,874.5 | 28,923.1 | 24,937.9 | 33,932.2 | ||||||||||||||||||||
| Co-Investment Vehicles | Various | Various | 2,133.5 | 213.1 | Various | 1,920.4 | 2,032.4 | 1,363.0 | 1,830.2 | |||||||||||||||||
| Total Private Equity | 52,370.3 | 11,575.4 | 40,794.9 | 30,955.5 | 26,300.9 | 35,762.4 | ||||||||||||||||||||
| Energy & Infrastructure | ||||||||||||||||||||||||||
| Natural Resources | Various | Various | 1,225.8 | 805.0 | Various | 420.8 | 35.2 | 408.1 | 253.7 | |||||||||||||||||
| Infrastructure | Various | Various | 1,041.7 | 736.2 | 4.8% | 305.5 | 1.7 | 305.5 | 323.9 | |||||||||||||||||
| Co-Investment Vehicles | Various | Various | 2,369.8 | 1,154.5 | Various | 1,215.3 | 150.9 | 1,215.3 | 1,491.6 | |||||||||||||||||
| Energy & Infrastructure Total | 4,637.3 | 2,695.7 | 1,941.6 | 187.8 | 1,928.9 | 2,069.2 | ||||||||||||||||||||
| Private Markets Total | 57,007.6 | 14,271.1 | 42,736.5 | 31,143.3 | 28,229.8 | 37,831.6 | ||||||||||||||||||||
| Public Markets | ||||||||||||||||||||||||||
| Special Situations Vehicles | Various | Various | 2,189.3 | 641.4 | Various | 1,547.9 | 164.2 | 1,547.9 | 1,800.4 | |||||||||||||||||
| Mezzanine Fund | 3/2010 | 8/2015 | 987.0 | 655.8 | 4.6% | 331.2 | 31.9 | 331.2 | 378.5 | |||||||||||||||||
| Direct Lending | Various | Various | 668.5 | 503.6 | Various | 164.9 | - | 164.9 | 175.1 | |||||||||||||||||
| Public Markets Total | 3,844.8 | 1,800.8 | 2,044.0 | 196.1 | 2,044.0 | 2,354.0 | ||||||||||||||||||||
| Grand Total | $ | 60,852.4 | $ | 16,071.9 | $ | 44,780.5 | $ | 31,339.4 | $ | 30,273.8 | $ | 40,185.6 | ||||||||||||||
| * Reflects only investment vehicles for which KKR has the ability to earn carried interest. |
| KKR | ||||||||||||||||||||
| DISTRIBUTION CALCULATION | ||||||||||||||||||||
| (Amounts in thousands, except unit and per unit amounts) | ||||||||||||||||||||
| Quarter Ended | Year Ended | |||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
| FRE (a) | $ | 85,979 | $ | 90,704 | $ | 116,575 | $ | 319,811 | $ | 417,153 | ||||||||||
| Realized cash carry | 100,992 | 100,145 | 83,226 | 285,424 | 202,115 | |||||||||||||||
| Net realized principal investment income | 366,878 | 145,700 | (49,237 | ) | 866,776 | 186,288 | ||||||||||||||
| Less: local income taxes | (6,314 | ) | (2,365 | ) | (1,856 | ) | (15,572 | ) | (16,291 | ) | ||||||||||
| Less: noncontrolling interests | (1,245 | ) | (1,310 | ) | (2,220 | ) | (7,043 | ) | (6,671 | ) | ||||||||||
| Total Distributable Earnings | 546,290 | 332,874 | 146,488 | 1,449,396 | 782,594 | |||||||||||||||
| Less: net realized principal investment income | (366,878 | ) | (145,700 | ) | 49,237 | (866,776 | ) | (186,288 | ) | |||||||||||
| Distributed Earnings | 179,412 | 187,174 | 195,725 | 582,620 | 596,306 | |||||||||||||||
| Distributed Earnings to KKR & Co. L.P. (b) | 66,275 | 66,015 | 65,059 | 206,491 | 193,876 | |||||||||||||||
| Less: estimated current corporate income taxes | (8,525 | ) | (6,890 | ) | (22,924 | ) | (23,705 | ) | (57,048 | ) | ||||||||||
| Distributed Earnings to KKR & Co. L.P., After Taxes | 57,750 | 59,125 | 42,135 | 182,786 | 136,828 | |||||||||||||||
| Additional Distribution (c) | 119,081 | - | 29,530 | 119,081 | 29,530 | |||||||||||||||
| Total Distribution to KKR & Co. L.P. | $ | 176,831 | $ | 59,125 | $ | 71,665 | $ | 301,867 | $ | 166,358 | ||||||||||
| Distribution per KKR & Co. L.P. common unit | $ | 0.70 | $ | 0.24 | $ | 0.32 | $ | 1.22 | $ | 0.74 | ||||||||||
| Outstanding KKR & Co. L.P. common units | 253,363,691 | 241,407,805 | 227,150,182 | |||||||||||||||||
| (a) | See Exhibit A for a reconciliation of such measure to financial results prepared in accordance with GAAP. | |
| (b) | Represents the amount of distributed earnings allocable to KKR & Co. L.P. based on its ownership in the KKR business as of December 31, 2012. | |
| (c) | Additional distribution is provided primarily from certain realizations on investments within KKR’s capital markets and principal activities segment and was calculated for certain taxes as described in our distribution policy. The amount of any additional distribution in the future should not be expected to be consistent or regularly declared. | |
DISTRIBUTION POLICY
KKR intends to make quarterly cash distributions in amounts that in the aggregate are expected to constitute substantially all of the cash earnings of its investment management business each year in excess of amounts determined by KKR to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and its investment funds and to comply with applicable law and any of its debt instruments or other agreements. KKR does not intend to distribute net realized principal investment income, other than certain additional distributions that KKR may determine to make. These additional distributions, if any, are intended to cover certain tax liabilities, as calculated by KKR. When KKR & Co. L.P. receives distributions from the KKR Group Partnerships (the holding companies of the KKR business), KKR Holdings receives its pro rata share of such distributions from the KKR Group Partnerships. For purposes of KKR’s distribution policy, its distributions are expected to consist of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool, and (iii) any additional distributions for certain taxes as described above. This amount is expected to be reduced by (i) corporate and applicable local taxes, if any, (ii) non-controlling interests, and (iii) amounts determined by KKR to be necessary or appropriate for the conduct of its business and other matters as discussed above.
The declaration and payment of any distributions are subject to the discretion of the board of directors of the general partner of KKR & Co. L.P. and the terms of its limited partnership agreement. There can be no assurance that distributions will be made as intended or at all or that such distributions will be sufficient to pay any particular KKR unit holder’s actual U.S. or non-U.S. tax liability.
KKR
Notes to Reportable Segments (Unaudited)
The segment key performance measures that follow are used by management in making operating and resource deployment decisions as well as assessing the overall performance of each of KKR’s reportable business segments. The reportable segments for KKR’s business are presented prior to giving effect to the allocation of income (loss) between KKR & Co. L.P. and KKR Holdings L.P. and as such represent the business in total. In addition, KKR’s reportable segments are presented without giving effect to the consolidation of the funds that KKR manages.
KKR discloses the following financial measures in this earnings release that are calculated and presented using methodologies other than in accordance with GAAP. We believe that providing these performance measures on a supplemental basis to our GAAP results is helpful to unitholders in assessing the overall performance of KKR’s businesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP. We caution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included elsewhere within this earnings release.
Fee related earnings (“FRE”) is comprised of segment operating revenues less segment operating expenses and is used by management as an alternative measurement of the operating earnings of KKR and its business segments before investment income. We believe this measure is useful to unitholders as it provides additional insight into the operating profitability of our fee generating management companies and capital markets businesses. The components of FRE on a segment basis differ from the equivalent GAAP amounts on a consolidated basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of charges relating to carry pool allocations; (v) the exclusion of non-cash equity charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR & Co. L.P. 2010 Equity Incentive Plan; (vi) the exclusion of certain reimbursable expenses; and (vii) the exclusion of certain non-recurring items.
Economic net income (loss) (“ENI”) is a measure of profitability for KKR’s reportable segments and is used by management as an alternative measurement of the operating and investment earnings of KKR and its business segments. We believe this measure is useful to unitholders as it provides additional insight into the overall profitability of KKR’s businesses inclusive of investment income and carried interest. ENI is comprised of: (i) FRE; plus (ii) segment investment income (loss), which is reduced for carry pool allocations and management fee refunds; less (iii) certain economic interests in KKR’s segments held by third parties. ENI differs from net income (loss) on a GAAP basis as a result of: (i) the exclusion of the items referred to in FRE above; (ii) the exclusion of investment income (loss) relating to noncontrolling interests; and (iii) the exclusion of income taxes.
After-tax ENI is used to measure KKR’s implied ENI on a fully diluted basis. We believe this measure is useful to unitholders as it provides an indication of KKR’s ENI as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P. After-tax ENI is calculated by deducting from ENI the implied income tax provision that has been calculated assuming that all income is allocated to KKR & Co. L.P., which would occur following an exchange of all KKR Holdings units for common units of KKR & Co. L.P. The assumptions and methodology used to calculate the implied income tax provision are consistent with those used in calculating the tax provision for KKR & Co. L.P. under GAAP. The implied income tax provision does not give effect to any tax savings or deductions that may result from the exchange of KKR Holdings units.
Total distributable earnings is the sum of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool and (iii) net realized principal investment income; less (i) applicable local income taxes, if any, and (ii) noncontrolling interests. Net realized principal investment income includes, with respect to KKR’s principal investments (i) realized investment gains and losses, (ii) dividend income and (iii) interest income, net of interest expense, earned from KKR’s principal investments. KKR does not intend to distribute net realized principal investment income other than certain additional distributions that KKR may determine to make, which are intended to cover certain tax liabilities, as calculated by KKR. See “Distribution Policy.” 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 and vehicles. KKR calculates the amount of AUM as of any date as the sum of: (i) the fair value of the investments of KKR’s investment funds plus uncalled capital commitments from these funds; (ii) the fair value of investments in KKR’s co-investment vehicles; (iii) the net asset value of certain of KKR's fixed income products; (iv) the value of outstanding structured finance vehicles; and (v) the fair value of other assets managed by KKR. KKR’s definition of AUM is not based on any definition of AUM that may be set forth in the agreements governing the investment funds, vehicles or accounts that it manages or calculated pursuant to any regulatory definitions.
Fee paying AUM (“FPAUM”) represents only those assets under management from which KKR receives fees. We believe this measure is useful to unitholders as it provides additional insight into the capital base upon which KKR earns management fees. This relates to KKR’s capital raising activities and the overall activity in its investment funds and vehicles, for only those funds and vehicles where KKR receives fees (i.e., excluding vehicles that receive only carried interest or general partner capital). FPAUM is the sum of all of the individual fee bases that are used to calculate KKR’s fees and differs from AUM in the following respects: (i) assets from which KKR does not receive a fee are excluded (i.e., assets with respect to which it receives only carried interest) and (ii) certain assets, primarily in its private equity funds, are reflected based on capital commitments and invested capital as opposed to fair value because fees are not impacted by changes in the fair value of underlying investments.
Committed dollars invested is the aggregate amount of capital commitments that have been invested by KKR’s investment funds and carry-yielding co-investment vehicles and is used as a measure of investment activity for KKR and its business segments during a given period. We believe this measure is useful to unitholdersas it provides additional insight into KKR’s investment of committed capital. Such amounts include: (i) capital invested by fund investors and co-investors with respect to which KKR is entitled to a fee or carried interest and (ii) capital invested by KKR’s investment funds and vehicles.
Syndicated capital is the aggregate amount of debt or equity capital in transactions originated by KKR investment funds and vehicles, which has been distributed to third parties in exchange for a fee. It does not include capital committed to such transactions by carry-yielding co-investment vehicles, which is instead reported in committed dollars invested. Syndicated capital is used as a measure of investment activity for KKR and its business segments during a given period, and we believe that this measure is useful to unitholders as it provides additional insight into levels of syndication activity in KKR’s Capital Markets and Principal Activities segment and across its investment platform.
Uncalled commitments are used as a measure of unfunded capital commitments that KKR’s investment funds and carry-paying co-investment vehicles have received from partners to contribute capital to fund future investments. We believe this measure is useful to unitholders as it provides additional insight into the amount of capital that is available to KKR’s investment funds and vehicles to make future investments.
Adjusted units are used as a measure of the total equity ownership of KKR that is held by KKR & Co. L.P. and KKR Holdings and represent the fully diluted unit count using the if-converted method. We believe this measure is useful to unitholders as it provides an indication of the total equity ownership of KKR as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P.
Core interest expense is used by management as an alternative measurement of interest expense incurred by KKR on a segment basis and excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR’s private equity funds, investment vehicles and principal investments. These financing arrangements are not direct obligations of the general partners of KKR’s private equity funds or its management companies. On a segment basis, interest expense is included in other investment income. We believe this measure is useful to unitholders as it provides an indication of the amount of interest expense borne by KKR excluding interest expense that is allocated to KKR’s investment funds and vehicles and other noncontrolling interest holders. Additionally, we believe this measure is useful for analyzing KKR’s ability to service its debt obligations.
Book value is a measure of the net assets of KKR’s reportable segments and is used by management primarily in assessing the unrealized value of our investment portfolio, including carried interest, as well as our overall liquidity position. We believe this measure is useful to unitholders as it provides additional insight into the assets and liabilities of KKR excluding the assets and liabilities that are allocated to noncontrolling interest holders. Book value differs from the equivalent GAAP amounts on a consolidated basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings L.P.
Fee related EBITDA is comprised of FRE before the impact of depreciation of fixed assets and amortization of intangible assets and is used by management as a measure of the cash earnings of KKR and its business segments before investment income. We believe this measure is useful to unitholders as it provides additional insight into the amount of cash earnings generated by KKR’s management companies and capital markets businesses.
Cash and short-term investments represent cash and liquid short-term investments in high-grade, short-duration cash management strategies used by KKR to generate additional yield on our excess liquidity and is used by management in evaluating KKR’s liquidity position. We believe this measure is useful to unitholders as it provides additional insight into KKR’s available liquidity. Cash and short-term investments differ from cash and cash equivalents on a GAAP basis as a result of the inclusion of liquid short-term investments in cash and short-term investments.
| KKR | |||||||||
EXHIBIT A | |||||||||
| RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT (GAAP BASIS - UNAUDITED) | |||||||||
| TO AFTER TAX ENI PER ADJUSTED UNIT | |||||||||
| (Amounts in thousands, except common unit and per common unit amounts) | |||||||||
| Quarter Ended | Quarter Ended | Quarter Ended | |||||||
| December 31, 2012 | September 30, 2012 | December 31, 2011 | |||||||
| Net income (loss) attributable to KKR & Co. L.P. per common unit | $ | 0.39 | $ | 0.53 | $ | 0.20 | |||
| Weighted Average Common Units Outstanding | 249,303,558 | 239,696,358 | 225,382,001 | ||||||
| Net income (loss) attributable to KKR & Co. L.P. | 96,728 | 127,411 | 46,137 | ||||||
|
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P. | 170,256 | 249,460 | 133,301 | ||||||
| Plus: Non-cash equity based charges | 70,170 | 122,157 | 83,688 | ||||||
| Plus: Amortization of intangibles and other, net | 4,898 | 1,234 | 1,046 | ||||||
| Plus: Income taxes | 5,628 | 9,612 | 21,322 | ||||||
| Economic net income (loss) | 347,680 | 509,874 | 285,494 | ||||||
| Less: Provision for income taxes | 10,632 | 22,548 | 59,988 | ||||||
| Economic net income (loss) after taxes | 337,048 | 487,326 | 225,506 | ||||||
| Weighted Average Adjusted Units | 704,805,537 | 702,252,548 | 689,335,706 | ||||||
| Economic net income (loss) after taxes per adjusted unit | $ | 0.48 | $ | 0.69 | $ | 0.33 | |||
| Year Ended | Year Ended | ||||||||
| December 31, 2012 | December 31, 2011 | ||||||||
| Net income (loss) attributable to KKR & Co. L.P. per common unit | $ | 2.35 | $ | 0.01 | |||||
| Weighted Average Common Units Outstanding | 238,503,257 | 220,235,469 | |||||||
| Net income (loss) attributable to KKR & Co. L.P. | 560,836 | 1,921 | |||||||
|
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P. | 1,116,740 | 185,352 | |||||||
| Plus: Non-cash equity based charges | 400,207 | 470,221 | |||||||
| Plus: Amortization of intangibles and other, net | 9,683 | 4,210 | |||||||
| Plus: Income taxes | 43,405 | 89,245 | |||||||
| Economic net income (loss) | 2,130,871 | 750,949 | |||||||
| Less: Provision for income taxes | 102,420 | 248,082 | |||||||
| Economic net income (loss) after taxes | 2,028,451 | 502,867 | |||||||
| Weighted Average Adjusted Units | 699,988,443 | 685,386,132 | |||||||
| Economic net income (loss) after taxes per adjusted unit | $ | 2.90 | $ | 0.73 | |||||
| RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. (GAAP BASIS - UNAUDITED) | |||||||||
| TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS AND FEE RELATED EBITDA | |||||||||
| (Amounts in thousands) | |||||||||
| Quarter Ended | Quarter Ended | Quarter Ended | |||||||
| December 31, 2012 | September 30, 2012 | December 31, 2011 | |||||||
| Net income (loss) attributable to KKR & Co. L.P. | $ | 96,728 | $ | 127,411 | $ | 46,137 | |||
|
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P. | 170,256 | 249,460 | 133,301 | ||||||
| Plus: Non-cash equity based charges | 70,170 | 122,157 | 83,688 | ||||||
| Plus: Amortization of intangibles and other, net | 4,898 | 1,234 | 1,046 | ||||||
| Plus: Income taxes | 5,628 | 9,612 | 21,322 | ||||||
| Economic net income (loss) | 347,680 | 509,874 | 285,494 | ||||||
| Plus: Income attributable to segment noncontrolling interests | 1,245 | 1,310 | 2,220 | ||||||
| Less: Investment income (loss) | 262,946 | 420,480 | 171,139 | ||||||
| Fee related earnings | 85,979 | 90,704 | 116,575 | ||||||
| Plus: depreciation and amortization | 3,580 | 3,273 | 2,528 | ||||||
| Fee related EBITDA | $ | 89,559 | $ | 93,977 | $ | 119,103 | |||
| Year Ended | Year Ended | ||||||||
| December 31, 2012 | December 31, 2011 | ||||||||
| Net income (loss) attributable to KKR & Co. L.P. | $ | 560,836 | $ | 1,921 | |||||
|
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P. | 1,116,740 | 185,352 | |||||||
| Plus: Non-cash equity based charges | 400,207 | 470,221 | |||||||
| Plus: Amortization of intangibles and other, net | 9,683 | 4,210 | |||||||
| Plus: Income taxes | 43,405 | 89,245 | |||||||
| Economic net income (loss) | 2,130,871 | 750,949 | |||||||
| Plus: Income attributable to segment noncontrolling interests | 7,043 | 6,671 | |||||||
| Less: Investment income (loss) | 1,818,103 | 340,467 | |||||||
| Fee related earnings | 319,811 | 417,153 | |||||||
| Plus: depreciation and amortization | 12,499 | 9,925 | |||||||
| Fee related EBITDA | $ | 332,310 | $ | 427,078 | |||||
| KKR | |||||||
EXHIBIT A (CONTINUED) | |||||||
| RECONCILIATION OF KKR & CO. L.P. PARTNERS' CAPITAL (GAAP BASIS - UNAUDITED) | |||||||
| TO BOOK VALUE AND BOOK VALUE PER ADJUSTED UNIT | |||||||
| (Amounts in thousands, except common unit and per common unit amounts) | |||||||
| As of | As of | ||||||
| December 31, 2012 | December 31, 2011 | ||||||
| KKR & Co. L.P. partners’ capital | $ | 2,004,359 | $ | 1,328,698 | |||
| Noncontrolling interests held by KKR Holdings L.P. | 4,981,864 | 4,342,157 | |||||
| Equity impact of KKR Management Holdings Corp. and other | (29,039 | ) | 39,729 | ||||
| Book value | 6,957,184 | 5,710,584 | |||||
| Adjusted units | 704,780,484 | 689,392,861 | |||||
| Book value per adjusted unit | $ | 9.87 | $ | 8.29 | |||
| RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS - UNAUDITED) | |||||||
| TO CASH AND SHORT-TERM INVESTMENTS (SEGMENT BASIS) | |||||||
| (Amounts in thousands) | |||||||
| As of | As of | ||||||
| December 31, 2012 | December 31, 2011 | ||||||
| Cash and cash equivalents | $ | 1,230,464 | $ | 843,261 | |||
| Liquid short-term investments | 303,823 | 146,180 | |||||
| Cash and short-term investments | $ | 1,534,287 | $ | 989,441 | |||
| KKR | ||||||
EXHIBIT B | ||||||
| RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING TO WEIGHTED AVERAGE ADJUSTED UNITS | ||||||
| The following table provides a reconciliation of KKR's Weighted Average GAAP Common Units Outstanding to Weighted Average Adjusted Units. | ||||||
| Quarter Ended | ||||||
| December 31, 2012 | September 30, 2012 | December 31, 2011 | ||||
| Weighted Average GAAP Common Units Outstanding - Basic | 249,303,558 | 239,696,358 | 225,382,001 | |||
| Weighted Average Unvested Common Units(a) | 18,888,570 | 17,950,264 | 5,979,031 | |||
| Weighted Average GAAP Common Units Outstanding - Diluted | 268,192,128 | 257,646,622 | 231,361,032 | |||
| Adjustments: | ||||||
| Weighted Average KKR Holdings Units(b) | 436,613,409 | 444,605,926 | 457,974,674 | |||
| Weighted Average Adjusted Units | 704,805,537 | 702,252,548 | 689,335,706 | |||
| Year Ended | ||||||
| December 31, 2012 | December 31, 2011 | |||||
| Weighted Average GAAP Common Units Outstanding - Basic | 238,503,257 | 220,235,469 | ||||
| Weighted Average Unvested Common Units(a) | 15,589,903 | 2,283,705 | ||||
| Weighted Average GAAP Common Units Outstanding - Diluted | 254,093,160 | 222,519,174 | ||||
| Adjustments: | ||||||
| Weighted Average KKR Holdings Units(b) | 445,895,283 | 462,866,958 | ||||
| Weighted Average Adjusted Units | 699,988,443 | 685,386,132 | ||||
| RECONCILIATION OF GAAP COMMON UNITS OUTSTANDING TO ADJUSTED UNITS | ||||||
| The following table provides a reconciliation of KKR's GAAP Common Units Outstanding to Adjusted Units. | ||||||
| As of | As of | |||||
| December 31, 2012 | December 31, 2011 | |||||
| GAAP Common Units Outstanding - Basic | 253,363,691 | 227,150,182 | ||||
| Unvested Common Units(a) | 18,863,517 | 6,028,444 | ||||
| GAAP Common Units Outstanding - Diluted | 272,227,208 | 233,178,626 | ||||
| Adjustments: | ||||||
| KKR Holdings Units(b) | 432,553,276 | 456,214,235 | ||||
| Adjusted Units | 704,780,484 | 689,392,861 | ||||
| (a) | Represents equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. The issuance of common units of KKR & Co. L.P. pursuant to awards under its equity incentive plan dilutes KKR common unitholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business. | |
| (b) | Common units that may be issued by KKR & Co. L.P. upon exchange of units in KKR Holdings L.P. for KKR common units. |
Contacts:
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
Investor Relations:
Craig Larson
+1-877-610-4910 (U.S.) / +1-212-230-9410
investor-relations@kkr.com
or
Media:
Kristi Huller
+1-212-750-8300
media@kkr.com
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