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| 8-K - KKR & CO. L.P. 8-K - KKR Financial Holdings LLC | q2168-kearningsreleasewrap.htm |
KKR & Co. L.P. Reports Second Quarter 2016 Results
_________________________________________________________________________________________________________________________________________________________________________
NEW YORK, July 26, 2016 - KKR & Co. L.P. (NYSE: KKR) today reported its second quarter 2016 results.
GAAP net income (loss) attributable to KKR & Co. L.P. common unitholders was $93.9 million and $(236.0) million for the quarter and six months ended June 30, 2016, respectively, compared to $376.3 million and $646.8 million in the comparable periods of 2015. On a diluted basis, net income (loss) per common unit was $0.19 and $(0.53) for the quarter and six months ended June 30, 2016, respectively, compared to $0.78 and $1.35 in the comparable periods of 2015. GAAP KKR & Co. L.P. Capital - Common Unitholder equity was $5.0 billion as of June 30, 2016, or $11.21, per outstanding common unit.
For the quarter ended June 30, 2016, After-tax Economic Net Income (Loss) and After-tax Economic Net Income (Loss) per adjusted unit were $191.2 million and $0.23, respectively, compared to $746.7 million and $0.88 for the quarter ended June 30, 2015. After-tax Distributable Earnings was $507.6 million for the quarter ended June 30, 2016 compared to $465.3 million for the quarter ended June 30, 2015.
For the six months ended June 30, 2016, After-tax Economic Net Income (Loss) and After-tax Economic Net Income (Loss) per adjusted unit were $(361.8) million and $(0.43), respectively, compared to $1,272.6 million and $1.50 for the six months ended June 30, 2015. After-tax Distributable Earnings were $676.3 million for the six months ended June 30, 2016 compared to $952.9 million for the six months ended June 30, 2015.
Quarterly Highlights
• | Monetization activity in Private Markets and Principal Activities drove After-tax Distributable Earnings of $508 million for the second quarter |
• | Assets Under Management were $131 billion as of June 30, 2016, up 14% compared to June 30, 2015 as new capital raised exceeded $27 billion over the past twelve months on an organic basis. Uncalled commitments as of June 30, 2016 were $38 billion, up 48% on a year-over-year basis |
• | Book value was $9.1 billion as of June 30, 2016, or $11.33 per outstanding adjusted unit |
• | Our regular distribution per common unit of $0.16 was declared for the quarter ended June 30, 2016 |
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“Operating fundamentals across the firm remain strong,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. “Investment performance, asset growth and capital deployment trends continued while exit activity drove one of the highest Distributable Earnings quarters in our history.”
__________________________________________________________________________________________________________________________________________________________________________
Note: Certain financial measures, including economic net income ("ENI"), After-tax ENI, After-tax distributable earnings, book value, adjusted units and outstanding 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.
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GAAP RESULTS COMMENTARY
Fees and Other
On January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated prior to such date. When an investment fund is consolidated, management fees, fee credits and carried interest earned from consolidated funds are eliminated in consolidation and as such are not recorded in Fees and Other. The economic impact of these management fees, fee credits and carried interests that are eliminated is reflected as an adjustment to noncontrolling interests and has no impact to Net Income Attributable to KKR & Co., L.P. As a result of the de-consolidation of most of our investment funds, the management fees, fee credits and carried interests associated with funds that had previously been consolidated are included in Fees and Other beginning on January 1, 2016 as such amounts are no longer eliminated. We adopted this guidance using the modified retrospective method. As a result, restatement of prior period results is not required and prior periods presented under GAAP have not been impacted.
Fees and Other were $576.8 million for the quarter ended June 30, 2016, compared to $255.9 million for the quarter ended June 30, 2015. The net increase was primarily due to the inclusion of carried interest gains earned from investment funds that are no longer consolidated in the 2016 period and an increase in management fees driven primarily by fees earned from investment funds that are no longer consolidated. These increases were partially offset by an increase in fee credits incurred, driven primarily by fee credits associated with investment funds that are no longer consolidated and a decrease in transaction and monitoring fees in our Private Markets business.
Fees and Other were $739.6 million for the six months ended June 30, 2016, compared to $547.2 million for the six months ended June 30, 2015. The net increase was due to an increase in management fees driven primarily by fees earned from investment funds that are no longer consolidated and the inclusion of carried interest gains earned from investment funds that are no longer consolidated. These increases were partially offset by a decrease in monitoring fees in our Private Markets business and an increase in fee credits incurred, driven primarily by fee credits associated with investment funds that are no longer consolidated.
Expenses
Total expenses were $423.2 million and $731.5 million for the quarter and six months ended June 30, 2016, respectively, compared to $554.2 million and $1,069.2 million in the comparable periods of 2015. The decrease for both periods was primarily due to a decrease in compensation and benefits due to a lower level of carry pool allocations reflecting a lower level of appreciation in the value of our private equity portfolio.
Total Investment Income (Loss)
As indicated above, on January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated prior to such date. Effective with the adoption of ASU 2015-02, investment income earned from our investment funds that had previously been consolidated is not included in the statement of operations.
Total investment income was $125.7 million for the quarter ended June 30, 2016, compared to $3,634.7 million for the quarter ended June 30, 2015. The decrease was primarily attributable to the impact of investment funds that are no longer consolidated in the 2016 period.
Total investment income was $(487.2) million for the six months ended June 30, 2016, compared to $5,817.6 million for the six months ended June 30, 2015. The decrease was primarily attributable to the impact of investment funds that are no longer consolidated in the 2016 period and net unrealized investment losses for the first six months of 2016.
TOTAL REPORTABLE SEGMENTS RESULTS COMMENTARY
Segment Revenues
Total segment revenues were $544.0 million for the quarter ended June 30, 2016, compared to total segment revenues of $1,247.7 million for the quarter ended June 30, 2015. The decrease was principally attributable to net unrealized investment losses and a lower level of carried interest in the current period. The net unrealized investment losses in the second quarter of 2016 includes an increase in value of our energy and credit portfolios during the quarter, but were more than offset by a decrease in value of certain of our publicly held investments, including First Data Corporation. The lower level of carried interest is primarily due to a lower level of net appreciation in KKR’s private equity portfolio in the current period. For the quarter and last twelve months ended June 30, 2016, KKR's private equity portfolio appreciated 4.5% and 6.0%, respectively.
Total segment revenues were $169.4 million for the six months ended June 30, 2016, compared to total segment revenues of $2,210.1 million for the six months ended June 30, 2015. The decrease was principally attributable to net unrealized investment losses and a lower level of carried interest in the current period. The unrealized investment losses for the first six months of 2016 were driven largely by unrealized losses on the reduction in the stock price of First Data Corporation, as well as decreases in the value of KKR's energy and credit portfolios. The lower level of carried interest for the six months ended June 30, 2016 is primarily due to a lower level of net appreciation in KKR’s private equity portfolio in the current period. For the six months ended June 30, 2016, KKR's private equity portfolio appreciated 3.5%.
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Economic Net Income
ENI was $248.8 million for the quarter ended June 30, 2016, compared to ENI of $839.9 million for the quarter ended June 30, 2015. ENI was $(258.1) million for the six months ended June 30, 2016, compared to ENI of $1,439.4 million for the six months ended June 30, 2015. The decreases were primarily attributable to lower total segment revenues as described above, partially offset by a decrease in performance income compensation primarily in our Private Markets segment reflecting a lower level of carried interest in the 2016 periods. For the quarter and six months ended June 30, 2016, the reduction in the stock price of First Data Corporation reduced ENI by approximately $180 million and $480 million, respectively.
AUM and FPAUM
AUM was $131.0 billion as of June 30, 2016, an increase of $4.6 billion, compared to AUM of $126.4 billion as of March 31, 2016. The increase was primarily attributable to new capital raised in our private equity, credit and hedge fund businesses and to a lesser extent an increase in the fair value of our private equity portfolio. The increase was partially offset by distributions to limited partners of our private equity funds arising from realizations and distributions and redemptions in our credit and hedge fund solutions businesses.
FPAUM was $94.6 billion as of June 30, 2016, an increase of $0.9 billion, compared to FPAUM of $93.7 billion as of March 31, 2016. The increase was primarily attributable to new capital raised. These increases were partially offset by distributions to limited partners of our private equity funds arising from realizations and distributions and redemptions in our credit and hedge fund solutions business.
DISTRIBUTIONS
A distribution of $0.16 per common unit has been declared, which will be paid on August 19, 2016 to holders of record of common units as of the close of business on August 5, 2016. Under KKR's distribution policy for its common units, KKR intends to make equal quarterly distributions to holders of common units in an amount of $0.16 per common unit per quarter.
On March 17, 2016, KKR issued 13,800,000 units of 6.75% Series A Preferred Units at $25.00 per unit, and on June 20, 2016, KKR issued 6,200,000 units of 6.50% Series B Preferred Units at $25.00 per unit. Distributions on each series of preferred units are payable, when and if declared, quarterly on March 15, June 15, September 15 and December 15 of each year. Distributions on the preferred units are non-cumulative. KKR’s ability to repurchase and declare distributions on its common units is subject to the declaration of distributions on the preferred units.
A distribution of $0.421875 per Series A Preferred Unit has been declared and set aside for payment on September 15, 2016 to holders of record of Series A Preferred Units as of the close of business on September 1, 2016. A distribution of $0.383681 per Series B Preferred Unit has been declared and set aside for payment on September 15, 2016 to holders of record of Series B Preferred Units as of the close of business on September 1, 2016. The first distribution on the Series B Preferred Units is calculated based on the date of the original issuance.
The declaration and payment of any future distributions on preferred or common units 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 future 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 for common units will be maintained.
Since the announcement of our common unit repurchase program on October 27, 2015 through July 20, 2016, KKR has repurchased 30.3 million common units for $439 million. In addition, 3.6 million granted equity awards were cancelled for approximately $57 million to satisfy tax obligations in connection with their vesting. In total, 33.9 million common units have been retired on a fully-diluted basis over this period.
SUPPLEMENTAL INFORMATION
A slide presentation containing supplemental commentary about KKR's financial results for the fiscal quarter ended June 30, 2016 may be accessed through the Investor Center of the KKR website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. The presentation will be referenced on the conference call discussed below.
CONFERENCE CALL
A conference call to discuss KKR's financial results will be held on Tuesday, July 26, 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 47131296, 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.
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ABOUT KKR
KKR is a leading global investment firm that manages investments across multiple asset classes including private equity, energy, infrastructure, real estate, credit and hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation at the asset level. KKR invests its own capital 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. 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 distributable earnings, capital invested, 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, 2015, filed with the SEC on February 26, 2016, quarterly reports on Form 10-Q for subsequent quarters and other filings with the SEC, which are available at www.sec.gov.
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CONTACT INFORMATION
Investor Relations:
Kohlberg Kravis Roberts & Co. L.P.
Craig Larson
Tel: +1-877-610-4910 (U.S.) / +1-212-230-9410
investor-relations@kkr.com
Media:
Kohlberg Kravis Roberts & Co. L.P.
Kristi Huller
Tel: +1-212-750-8300
media@kkr.com
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KKR | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED) | ||||||||||||||||
(Amounts in thousands, except common unit and per common unit amounts) | ||||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||||
June 30, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | |||||||||||||
Revenues | ||||||||||||||||
Fees and Other | $ | 576,757 | $ | 255,874 | $ | 739,562 | $ | 547,219 | ||||||||
Expenses | ||||||||||||||||
Compensation and Benefits | 296,412 | 411,691 | 421,901 | 776,690 | ||||||||||||
Occupancy and Related Charges | 16,188 | 16,172 | 32,754 | 31,904 | ||||||||||||
General, Administrative and Other | 110,618 | 126,314 | 276,886 | 260,616 | ||||||||||||
Total Expenses | 423,218 | 554,177 | 731,541 | 1,069,210 | ||||||||||||
Investment Income (Loss) | ||||||||||||||||
Net Gains (Losses) from Investment Activities | 9,168 | 3,110,604 | (726,055 | ) | 5,030,429 | |||||||||||
Dividend Income | 31,669 | 360,556 | 94,882 | 439,371 | ||||||||||||
Interest Income | 266,213 | 302,985 | 496,689 | 599,143 | ||||||||||||
Interest Expense | (181,313 | ) | (139,427 | ) | (352,707 | ) | (251,390 | ) | ||||||||
Total Investment Income (Loss) | 125,737 | 3,634,718 | (487,191 | ) | 5,817,553 | |||||||||||
Income (Loss) Before Taxes | 279,276 | 3,336,415 | (479,170 | ) | 5,295,562 | |||||||||||
Income Tax (Benefit) | 6,045 | 30,547 | 7,935 | 46,685 | ||||||||||||
Net Income (Loss) | 273,231 | 3,305,868 | (487,105 | ) | 5,248,877 | |||||||||||
Net Income (Loss) Attributable to | ||||||||||||||||
Redeemable Noncontrolling Interests | 1,533 | (891 | ) | 1,495 | 1,042 | |||||||||||
Net Income (Loss) Attributable to | ||||||||||||||||
Noncontrolling Interests | 172,115 | 2,930,453 | (258,244 | ) | 4,601,022 | |||||||||||
Net Income (Loss) Attributable to KKR & Co. L.P. | 99,583 | 376,306 | (230,356 | ) | 646,813 | |||||||||||
Net Income (Loss) Attributable to Series A Preferred Unitholders | 5,693 | — | 5,693 | — | ||||||||||||
Net Income (Loss) Attributable to Series B Preferred Unitholders | — | — | — | — | ||||||||||||
Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders | $ | 93,890 | $ | 376,306 | $ | (236,049 | ) | $ | 646,813 | |||||||
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit | ||||||||||||||||
Basic | $ | 0.21 | $ | 0.84 | $ | (0.53 | ) | $ | 1.47 | |||||||
Diluted (a) | $ | 0.19 | $ | 0.78 | $ | (0.53 | ) | $ | 1.35 | |||||||
Weighted Average Common Units Outstanding | ||||||||||||||||
Basic | 448,221,538 | 446,794,950 | 449,241,840 | 440,867,813 | ||||||||||||
Diluted (a) | 481,809,612 | 482,651,491 | 449,241,840 | 477,467,220 | ||||||||||||
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(a) | KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit since the exchange of these units would not dilute KKR’s respective ownership interests in the KKR Group Partnerships. For the six months ended June 30, 2016, unvested common units and other securities are excluded from the calculation of diluted earnings per common unit because inclusion of such unvested common units and other securities would be anti-dilutive having the effect of decreasing the loss per common unit. |
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KKR | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (GAAP BASIS - UNAUDITED) | ||||||||
(Amounts in thousands, except common unit and per common unit amounts) | ||||||||
As of June 30, 2016 | As of December 31, 2015 | |||||||
Assets | ||||||||
Cash and Cash Equivalents | $ | 1,512,475 | $ | 1,047,740 | ||||
Investments | 30,375,163 | 65,305,931 | ||||||
Other | 5,619,233 | 4,688,668 | ||||||
Total Assets | 37,506,871 | 71,042,339 | ||||||
Liabilities and Equity | ||||||||
Debt Obligations | 17,894,036 | 18,714,597 | ||||||
Other Liabilities | 3,928,882 | 2,860,157 | ||||||
Total Liabilities | 21,822,918 | 21,574,754 | ||||||
Redeemable Noncontrolling Interests | 339,637 | 188,629 | ||||||
Equity | ||||||||
Series A Preferred Units | 332,988 | — | ||||||
Series B Preferred Units | 149,566 | — | ||||||
KKR & Co. L.P. Capital - Common Unitholders | 5,001,602 | 5,547,182 | ||||||
Noncontrolling Interests | 9,860,160 | 43,731,774 | ||||||
Total Equity | 15,344,316 | 49,278,956 | ||||||
Total Liabilities and Equity | $ | 37,506,871 | $ | 71,042,339 | ||||
Equity Per Outstanding Common Unit - Basic | $ | 11.21 | $ | 12.12 | ||||
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Note: On January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated prior to such date. Effective with the adoption of ASU 2015-02, assets, liabilities, and noncontrolling interests from our investment funds that had previously been consolidated are no longer included in the statement of financial condition.
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KKR | ||||||||||||||||||||
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION | ||||||||||||||||||||
TOTAL REPORTABLE SEGMENTS (UNAUDITED) | ||||||||||||||||||||
(Amounts in thousands, except unit and per unit amounts) | ||||||||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | ||||||||||||||||
Segment Revenues | ||||||||||||||||||||
Management, Monitoring and Transaction Fees, Net | ||||||||||||||||||||
Management Fees | $ | 203,617 | $ | 194,600 | $ | 181,401 | $ | 398,217 | $ | 355,181 | ||||||||||
Monitoring Fees | 28,998 | 12,037 | 47,713 | 41,035 | 145,551 | |||||||||||||||
Transaction Fees | 68,564 | 96,085 | 92,951 | 164,649 | 196,237 | |||||||||||||||
Fee Credits | (39,073 | ) | (22,807 | ) | (56,458 | ) | (61,880 | ) | (136,952 | ) | ||||||||||
Total Management, Monitoring and Transaction Fees, Net | 262,106 | 279,915 | 265,607 | 542,021 | 560,017 | |||||||||||||||
Performance Income (Loss) | ||||||||||||||||||||
Realized Incentive Fees | 4,645 | 1,593 | 5,893 | 6,238 | 11,558 | |||||||||||||||
Realized Carried Interest | 305,275 | 97,288 | 252,227 | 402,563 | 554,652 | |||||||||||||||
Unrealized Carried Interest | 18,698 | (223,805 | ) | 340,366 | (205,107 | ) | 479,650 | |||||||||||||
Total Performance Income (Loss) | 328,618 | (124,924 | ) | 598,486 | 203,694 | 1,045,860 | ||||||||||||||
Investment Income (Loss) | ||||||||||||||||||||
Net Realized Gains (Losses) | 224,699 | (24,183 | ) | 176,260 | 200,516 | 356,927 | ||||||||||||||
Net Unrealized Gains (Losses) | (297,448 | ) | (564,991 | ) | 131,984 | (862,439 | ) | 121,263 | ||||||||||||
Total Realized and Unrealized | (72,749 | ) | (589,174 | ) | 308,244 | (661,923 | ) | 478,190 | ||||||||||||
Interest Income and Dividends | 74,451 | 108,120 | 127,878 | 182,571 | 224,311 | |||||||||||||||
Interest Expense | (48,447 | ) | (48,544 | ) | (52,472 | ) | (96,991 | ) | (98,230 | ) | ||||||||||
Net Interest and Dividends | 26,004 | 59,576 | 75,406 | 85,580 | 126,081 | |||||||||||||||
Total Investment Income (Loss) | (46,745 | ) | (529,598 | ) | 383,650 | (576,343 | ) | 604,271 | ||||||||||||
Total Segment Revenues | 543,979 | (374,607 | ) | 1,247,743 | 169,372 | 2,210,148 | ||||||||||||||
Segment Expenses | ||||||||||||||||||||
Compensation and Benefits | ||||||||||||||||||||
Cash Compensation and Benefits | 96,890 | 100,899 | 96,514 | 197,789 | 201,276 | |||||||||||||||
Realized Performance Income Compensation | 123,968 | 39,552 | 103,248 | 163,520 | 226,483 | |||||||||||||||
Unrealized Performance Income Compensation | 8,525 | (86,642 | ) | 136,566 | (78,117 | ) | 192,197 | |||||||||||||
Total Compensation and Benefits | 229,383 | 53,809 | 336,328 | 283,192 | 619,956 | |||||||||||||||
Occupancy and Related Charges | 15,659 | 15,950 | 15,475 | 31,609 | 30,271 | |||||||||||||||
Other Operating Expenses | 49,533 | 61,886 | 51,613 | 111,419 | 112,559 | |||||||||||||||
Total Segment Expenses | 294,575 | 131,645 | 403,416 | 426,220 | 762,786 | |||||||||||||||
Income (Loss) attributable to noncontrolling interests | 575 | 667 | 4,383 | 1,242 | 8,005 | |||||||||||||||
Economic Net Income (Loss) | 248,829 | (506,919 | ) | 839,944 | (258,090 | ) | 1,439,357 | |||||||||||||
Equity-based Compensation | 48,026 | 49,961 | 48,453 | 97,987 | 100,718 | |||||||||||||||
Pre-tax Economic Net Income (Loss) (a) | 200,803 | (556,880 | ) | 791,491 | (356,077 | ) | 1,338,639 | |||||||||||||
Provision for Income Tax (Benefit) | 3,898 | (3,892 | ) | 44,836 | 6 | 66,071 | ||||||||||||||
Preferred Distributions | 5,693 | — | — | 5,693 | — | |||||||||||||||
After-tax Economic Net Income (Loss) (b) | $ | 191,212 | $ | (552,988 | ) | $ | 746,655 | $ | (361,776 | ) | $ | 1,272,568 | ||||||||
After-tax Economic Net Income (Loss) Per Adjusted Unit | $ | 0.23 | $ | (0.65 | ) | $ | 0.88 | $ | (0.43 | ) | $ | 1.50 | ||||||||
Weighted Average Adjusted Units (Fully Diluted Basis) | 840,537,946 | 847,972,012 | 852,128,762 | 844,254,980 | 850,106,448 | |||||||||||||||
Other Operating Measures (c): | ||||||||||||||||||||
Fee Related Earnings | $ | 137,761 | $ | 140,998 | $ | 143,646 | $ | 278,759 | $ | 302,125 | ||||||||||
After-tax Distributable Earnings | $ | 507,592 | $ | 168,732 | $ | 465,252 | $ | 676,324 | $ | 952,928 | ||||||||||
Assets Under Management | $ | 130,990,500 | $ | 126,388,900 | $ | 114,472,700 | $ | 130,990,500 | $ | 114,472,700 | ||||||||||
Fee Paying Assets Under Management | $ | 94,608,100 | $ | 93,719,700 | $ | 86,880,900 | $ | 94,608,100 | $ | 86,880,900 | ||||||||||
Capital Invested and Syndicated Capital | $ | 2,150,800 | $ | 3,069,600 | $ | 2,800,400 | $ | 5,220,400 | $ | 6,307,300 | ||||||||||
Uncalled Commitments | $ | 38,366,900 | $ | 34,496,300 | $ | 25,906,300 | $ | 38,366,900 | $ | 25,906,300 | ||||||||||
Note: See "Notes to Reportable Segments" for more information about certain non-GAAP financial measures and Exhibits C and D for a reconciliation of such measures to the financial results presented in accordance with GAAP.
(a) Represents Economic Net Income (Loss) after equity-based compensation.
(b) Represents Economic Net Income (Loss) after equity-based compensation, income taxes and preferred distributions.
(c) See Exhibit A "Other Information" for the definition and calculation of Fee Related Earnings and After-tax Distributable Earnings.
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KKR | ||||||||||||||||||||
SCHEDULE OF SEGMENT REVENUES AND OTHER SELECTED FINANCIAL INFORMATION (UNAUDITED) | ||||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||
PRIVATE MARKETS | ||||||||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | ||||||||||||||||
Segment Revenues | ||||||||||||||||||||
Management, Monitoring and Transaction Fees, Net | ||||||||||||||||||||
Management Fees | $ | 118,783 | $ | 117,798 | $ | 115,346 | $ | 236,581 | $ | 224,622 | ||||||||||
Monitoring Fees | 28,998 | 12,037 | 47,713 | 41,035 | 145,551 | |||||||||||||||
Transaction Fees | 23,400 | 37,398 | 40,321 | 60,798 | 86,920 | |||||||||||||||
Fee Credits | (33,319 | ) | (22,596 | ) | (53,286 | ) | (55,915 | ) | (123,192 | ) | ||||||||||
Total Management, Monitoring and Transaction Fees, Net | 137,862 | 144,637 | 150,094 | 282,499 | 333,901 | |||||||||||||||
Performance Income (Loss) | ||||||||||||||||||||
Realized Incentive Fees | — | — | — | — | — | |||||||||||||||
Realized Carried Interest | 305,275 | 93,450 | 243,274 | 398,725 | 545,699 | |||||||||||||||
Unrealized Carried Interest | 9,974 | (194,699 | ) | 312,379 | (184,725 | ) | 439,316 | |||||||||||||
Total Performance Income (Loss) | 315,249 | (101,249 | ) | 555,653 | 214,000 | 985,015 | ||||||||||||||
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 | $ | 453,111 | $ | 43,388 | $ | 705,747 | $ | 496,499 | $ | 1,318,916 | ||||||||||
Assets Under Management | $ | 75,357,000 | $ | 71,056,700 | $ | 68,540,300 | $ | 75,357,000 | $ | 68,540,300 | ||||||||||
Fee Paying Assets Under Management | $ | 46,027,600 | $ | 46,008,000 | $ | 46,945,700 | $ | 46,027,600 | $ | 46,945,700 | ||||||||||
Capital Invested | $ | 992,900 | $ | 1,986,000 | $ | 1,258,200 | $ | 2,978,900 | $ | 3,305,600 | ||||||||||
Uncalled Commitments | $ | 31,173,300 | $ | 26,903,200 | $ | 21,078,400 | $ | 31,173,300 | $ | 21,078,400 | ||||||||||
PUBLIC MARKETS | ||||||||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | ||||||||||||||||
Segment Revenues | ||||||||||||||||||||
Management, Monitoring and Transaction Fees, Net | ||||||||||||||||||||
Management Fees | $ | 84,834 | $ | 76,802 | $ | 66,055 | $ | 161,636 | $ | 130,559 | ||||||||||
Monitoring Fees | — | — | — | — | — | |||||||||||||||
Transaction Fees | 5,888 | 1,132 | 3,873 | 7,020 | 17,303 | |||||||||||||||
Fee Credits | (5,754 | ) | (211 | ) | (3,172 | ) | (5,965 | ) | (13,760 | ) | ||||||||||
Total Management, Monitoring and Transaction Fees, Net | 84,968 | 77,723 | 66,756 | 162,691 | 134,102 | |||||||||||||||
Performance Income (Loss) | ||||||||||||||||||||
Realized Incentive Fees | 4,645 | 1,593 | 5,893 | 6,238 | 11,558 | |||||||||||||||
Realized Carried Interest | — | 3,838 | 8,953 | 3,838 | 8,953 | |||||||||||||||
Unrealized Carried Interest | 8,724 | (29,106 | ) | 27,987 | (20,382 | ) | 40,334 | |||||||||||||
Total Performance Income (Loss) | 13,369 | (23,675 | ) | 42,833 | (10,306 | ) | 60,845 | |||||||||||||
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 | $ | 98,337 | $ | 54,048 | $ | 109,589 | $ | 152,385 | $ | 194,947 | ||||||||||
Assets Under Management | $ | 55,633,500 | $ | 55,332,200 | $ | 45,932,400 | $ | 55,633,500 | $ | 45,932,400 | ||||||||||
Fee Paying Assets Under Management | $ | 48,580,500 | $ | 47,711,700 | $ | 39,935,200 | $ | 48,580,500 | $ | 39,935,200 | ||||||||||
Capital Invested | $ | 1,146,700 | $ | 418,300 | $ | 1,110,100 | $ | 1,565,000 | $ | 2,320,900 | ||||||||||
Uncalled Commitments | $ | 7,193,600 | $ | 7,593,100 | $ | 4,827,900 | $ | 7,193,600 | $ | 4,827,900 | ||||||||||
Page 8
KKR | ||||||||||||||||||||
SCHEDULE OF SEGMENT REVENUES AND OTHER SELECTED FINANCIAL INFORMATION (UNAUDITED) | ||||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||
CAPITAL MARKETS | ||||||||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | ||||||||||||||||
Segment Revenues | ||||||||||||||||||||
Management, Monitoring and Transaction Fees, Net | ||||||||||||||||||||
Management Fees | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Monitoring Fees | — | — | — | — | — | |||||||||||||||
Transaction Fees | 39,276 | 57,555 | 48,757 | 96,831 | 92,014 | |||||||||||||||
Fee Credits | — | — | — | — | — | |||||||||||||||
Total Management, Monitoring and Transaction Fees, Net | 39,276 | 57,555 | 48,757 | 96,831 | 92,014 | |||||||||||||||
Performance Income (Loss) | ||||||||||||||||||||
Realized Incentive Fees | — | — | — | — | — | |||||||||||||||
Realized Carried Interest | — | — | — | — | — | |||||||||||||||
Unrealized Carried Interest | — | — | — | — | — | |||||||||||||||
Total Performance Income (Loss) | — | — | — | — | — | |||||||||||||||
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 | $ | 39,276 | $ | 57,555 | $ | 48,757 | $ | 96,831 | $ | 92,014 | ||||||||||
Syndicated Capital | $ | 11,200 | $ | 665,300 | $ | 432,100 | $ | 676,500 | $ | 680,800 | ||||||||||
PRINCIPAL ACTIVITIES | ||||||||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | ||||||||||||||||
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 (Loss) | ||||||||||||||||||||
Realized Incentive Fees | — | — | — | — | — | |||||||||||||||
Realized Carried Interest | — | — | — | — | — | |||||||||||||||
Unrealized Carried Interest | — | — | — | — | — | |||||||||||||||
Total Performance Income (Loss) | — | — | — | — | — | |||||||||||||||
Investment Income (Loss) | ||||||||||||||||||||
Net Realized Gains (Losses) | 224,699 | (24,183 | ) | 176,260 | 200,516 | 356,927 | ||||||||||||||
Net Unrealized Gains (Losses) | (297,448 | ) | (564,991 | ) | 131,984 | (862,439 | ) | 121,263 | ||||||||||||
Total Realized and Unrealized | (72,749 | ) | (589,174 | ) | 308,244 | (661,923 | ) | 478,190 | ||||||||||||
Interest Income and Dividends | 74,451 | 108,120 | 127,878 | 182,571 | 224,311 | |||||||||||||||
Interest Expense | (48,447 | ) | (48,544 | ) | (52,472 | ) | (96,991 | ) | (98,230 | ) | ||||||||||
Net Interest and Dividends | 26,004 | 59,576 | 75,406 | 85,580 | 126,081 | |||||||||||||||
Total Investment Income (Loss) | (46,745 | ) | (529,598 | ) | 383,650 | (576,343 | ) | 604,271 | ||||||||||||
Total Segment Revenues | $ | (46,745 | ) | $ | (529,598 | ) | $ | 383,650 | $ | (576,343 | ) | $ | 604,271 | |||||||
Page 9
KKR | ||||||||||||
BALANCE SHEET | ||||||||||||
TOTAL REPORTABLE SEGMENTS (UNAUDITED) | ||||||||||||
(Amounts in thousands, except per unit amounts) | ||||||||||||
As of | As of | |||||||||||
June 30, 2016 | December 31, 2015 | |||||||||||
Cash and Short-term Investments | $ | 1,876,750 | $ | 1,287,650 | ||||||||
Investments | 7,974,032 | (a) | 8,958,089 | |||||||||
Unrealized Carry | 1,300,899 | (b) | 1,415,478 | (b) | ||||||||
Other Assets | 1,710,265 | 1,613,139 | ||||||||||
Corporate Real Estate | 161,225 | 154,942 | ||||||||||
Total Assets | $ | 13,023,171 | $ | 13,429,298 | ||||||||
Debt Obligations - KKR (ex-KFN) | $ | 2,000,000 | $ | 2,000,000 | ||||||||
Debt Obligations - KFN | 657,310 | 657,310 | ||||||||||
Preferred Shares - KFN | 373,750 | 373,750 | ||||||||||
Other Liabilities | 353,845 | 291,537 | ||||||||||
Total Liabilities | 3,384,905 | 3,322,597 | ||||||||||
Noncontrolling Interests | 21,226 | 127,472 | ||||||||||
Preferred Units | 500,000 | — | ||||||||||
Book Value | $ | 9,117,040 | $ | 9,979,229 | ||||||||
Book Value Per Outstanding Adjusted Unit | $ | 11.33 | $ | 12.18 | ||||||||
(a) See schedule of investments that follows on the next page. | ||||||||||||
As of | As of | |||||||||||
(b) Unrealized Carry | June 30, 2016 | December 31, 2015 | ||||||||||
Private Markets | $ | 1,238,458 | $ | 1,340,556 | ||||||||
Public Markets | 62,441 | 74,922 | ||||||||||
Total | $ | 1,300,899 | $ | 1,415,478 | ||||||||
Last Twelve Months Ended | ||||||||||||
June 30, 2016 | June 30, 2015 | |||||||||||
Return on Equity (After-tax Economic Net Income (Loss) ) * | (6)% | 17% | ||||||||||
Return on Equity (After-tax Distributable Earnings) ** | 12% | 17% | ||||||||||
_______________________________________________________________________________________________________________________________________________________________________________________
Note: As of June 30, 2016, KKR had a $1.0 billion revolving credit facility, which was undrawn. In addition, KKR has a $500.0 million revolving credit facility for use in its capital markets business, which was undrawn as of June 30, 2016. As of June 30, 2016, KKR’s portion of total uncalled commitments to its investment funds was $2.6 billion. See Exhibit B for details.
See reconciliation in Exhibit D for calculation of Outstanding Adjusted Units.
*Return on Equity (After-tax Economic Net Income (Loss) measures the amount of after-tax economic 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. We believe this measure is useful to unitholders as it provides a measure of the overall profitability of KKR’s businesses as a percentage of net assets in KKR's business.
**Return on Equity (After-tax Distributable Earnings) measures the amount of income excluding the impact of mark-to-market gain (losses) generated as a percentage of capital invested in KKR’s business. It is calculated by dividing after-tax distributable earnings on a trailing twelve-month basis by the average book value during the period. We believe this measure is useful to unitholders as it provides a measure of the overall profitability of KKR’s businesses, excluding the impact of mark-to-market gains (losses), as a percentage of net assets in KKR's business.
Page 10
KKR
SCHEDULE OF INVESTMENTS*
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except percentage amounts)
_______________________________________________________________________________________________________________________________________________________________________________________
As of June 30, 2016 | ||||
Investments | Fair Value | |||
Private Equity Co-Investments and Other Equity | $ | 2,132,253 | ||
Private Equity Funds | 1,010,898 | |||
Private Equity Total | 3,143,151 | |||
Energy | 517,591 | |||
Real Estate (a) | 808,041 | |||
Infrastructure | 211,949 | |||
Real Assets Total | 1,537,581 | |||
Special Situations | 680,760 | |||
Direct Lending | 73,032 | |||
Mezzanine | 28,116 | |||
Alternative Credit Total | 781,908 | |||
CLOs (a) | 878,027 | |||
Liquid Credit | 186,525 | |||
Specialty Finance | 192,683 | |||
Credit Total | 2,039,143 | |||
Other | 1,254,157 | |||
Total Investments | $ | 7,974,032 | ||
As of June 30, 2016 | |||||||
Significant Investments: (b) | Fair Value | Fair Value as a Percentage of Total Investments | |||||
First Data Corporation (NYSE: FDC) | $ | 887,455 | 11.1 | % | |||
Walgreens Boots Alliance (NASDAQ: WBA) | 547,809 | 6.9 | % | ||||
WMI Holdings Corp. (NASDAQ: WMIH) | 270,193 | 3.4 | % | ||||
Oil & Gas Royalties Investment | 154,600 | 1.9 | % | ||||
Natural Gas Midstream Investment | 130,083 | 1.6 | % | ||||
Total Significant Investments | 1,990,140 | 24.9 | % | ||||
Other Investments | 5,983,892 | 75.1 | % | ||||
Total Investments | $ | 7,974,032 | 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.
** General partner commitments in our funds are included in the various asset classes shown above. Private Equity and Other Equity includes KKR private equity funds, co-investments alongside such KKR sponsored private equity funds and other opportunistic investments. However, equity investments in other asset classes, such as real estate, special situations and energy appear in these other asset classes. Other Credit consists of liquid credit and specialty finance strategies.
(a) Includes approximately $141.6 million and $328.6 million of CLOs and our holdings of a real estate investment trust, respectively, 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 values as of June 30, 2016. The fair value figures include the co-investment and the limited partner and/or general partner interests held by KKR in the underlying investment, if applicable.
Page 11
KKR | ||||||||||||
ASSETS UNDER MANAGEMENT (UNAUDITED) | ||||||||||||
(Amounts in thousands) | ||||||||||||
Private Markets Segment | Public Markets Segment | Total Reportable Segments | ||||||||||
Quarter Ended June 30, 2016 | ||||||||||||
March 31, 2016 | $ | 71,056,700 | $ | 55,332,200 | $ | 126,388,900 | ||||||
New Capital Raised | 5,879,100 | 2,973,500 | 8,852,600 | |||||||||
Distributions | (3,519,400 | ) | (2,909,900 | ) | (a) | (6,429,300 | ) | |||||
Change in Value | 1,940,600 | 237,700 | 2,178,300 | |||||||||
June 30, 2016 | $ | 75,357,000 | $ | 55,633,500 | $ | 130,990,500 | ||||||
Six Months Ended June 30, 2016 | ||||||||||||
December 31, 2015 | $ | 66,028,600 | $ | 53,515,700 | $ | 119,544,300 | ||||||
New Capital Raised | 12,435,800 | 7,044,700 | 19,480,500 | |||||||||
Distributions | (4,537,700 | ) | (4,681,300 | ) | (b) | (9,219,000 | ) | |||||
Change in Value | 1,430,300 | (245,600 | ) | 1,184,700 | ||||||||
June 30, 2016 | $ | 75,357,000 | $ | 55,633,500 | $ | 130,990,500 | ||||||
Trailing Twelve Months Ended June 30, 2016 | ||||||||||||
June 30, 2015 | $ | 68,540,300 | $ | 45,932,400 | $ | 114,472,700 | ||||||
New Capital Raised | 14,346,600 | 13,271,700 | 27,618,300 | |||||||||
Acquisitions | — | 6,010,800 | 6,010,800 | |||||||||
Distributions | (9,956,200 | ) | (8,256,500 | ) | (c) | (18,212,700 | ) | |||||
Change in Value | 2,426,300 | (1,324,900 | ) | 1,101,400 | ||||||||
June 30, 2016 | $ | 75,357,000 | $ | 55,633,500 | $ | 130,990,500 | ||||||
_______________________________________________________________________________________________________________________________________________________________________________________
(a) Includes $1,797.3 million of redemptions by fund investors.
(b) Includes $3,012.0 million of redemptions by fund investors.
(c) Includes $4,616.3 million of redemptions by fund investors.
Page 12
KKR | ||||||||||||
FEE PAYING ASSETS UNDER MANAGEMENT (UNAUDITED) | ||||||||||||
(Amounts in thousands) | ||||||||||||
Private Markets Segment | Public Markets Segment | Total Reportable Segments | ||||||||||
Quarter Ended June 30, 2016 | ||||||||||||
March 31, 2016 | $ | 46,008,000 | $ | 47,711,700 | $ | 93,719,700 | ||||||
New Capital Raised | 817,100 | 3,461,000 | 4,278,100 | |||||||||
Distributions | (881,200 | ) | (2,818,500 | ) | (a) | (3,699,700 | ) | |||||
Change in Value | 83,700 | 226,300 | 310,000 | |||||||||
June 30, 2016 | $ | 46,027,600 | $ | 48,580,500 | $ | 94,608,100 | ||||||
Six Months Ended June 30, 2016 | ||||||||||||
December 31, 2015 | $ | 45,307,400 | $ | 46,413,100 | $ | 91,720,500 | ||||||
New Capital Raised | 1,731,800 | 6,937,400 | 8,669,200 | |||||||||
Distributions | (1,212,500 | ) | (4,582,700 | ) | (b) | (5,795,200 | ) | |||||
Change in Value | 200,900 | (187,300 | ) | 13,600 | ||||||||
June 30, 2016 | $ | 46,027,600 | $ | 48,580,500 | $ | 94,608,100 | ||||||
Trailing Twelve Months Ended June 30, 2016 | ||||||||||||
June 30, 2015 | $ | 46,945,700 | $ | 39,935,200 | $ | 86,880,900 | ||||||
New Capital Raised | 2,996,900 | 11,623,400 | 14,620,300 | |||||||||
Acquisitions | — | 6,010,800 | 6,010,800 | |||||||||
Distributions | (4,073,000 | ) | (7,979,500 | ) | (c) | (12,052,500 | ) | |||||
Change in Value | 158,000 | (1,009,400 | ) | (851,400 | ) | |||||||
June 30, 2016 | $ | 46,027,600 | $ | 48,580,500 | $ | 94,608,100 | ||||||
_______________________________________________________________________________________________________________________________________________________________________________________
(a) Includes $1,797.3 million of redemptions by fund investors.
(b) Includes $3,012.0 million of redemptions by fund investors.
(c) Includes $4,616.3 million of redemptions by fund investors.
Page 13
KKR | |||||||||||||||||||||
INVESTMENT VEHICLE SUMMARY (a) (UNAUDITED) | |||||||||||||||||||||
As of June 30, 2016 | |||||||||||||||||||||
(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 | |||||||||||||||||||||
Americas Fund XII | (c) | (d) | $ | 10,553.6 | $ | 10,553.6 | 9.5% | $ | — | $ | — | $ | — | $ | — | ||||||
European Fund IV (b) | 12/2014 | 12/2020 | 3,504.6 | 2,384.9 | 5.7% | 1,125.6 | — | 1,125.6 | 1,100.2 | ||||||||||||
Asian Fund II (b) | 4/2013 | 4/2019 | 5,825.0 | 3,114.6 | 1.3% | 3,464.3 | 753.9 | 2,710.2 | 4,489.1 | ||||||||||||
North America Fund XI (b) | 9/2012 | 9/2018 | 8,718.4 | 3,279.6 | 2.9% | 6,419.0 | 2,401.5 | 4,746.9 | 7,142.3 | ||||||||||||
China Growth Fund | 11/2010 | 11/2016 | 1,010.0 | 252.1 | 1.0% | 757.9 | 283.4 | 599.9 | 800.4 | ||||||||||||
E2 Investors (Annex Fund) | 8/2009 | 11/2013 | 195.8 | — | 4.9% | 195.8 | 195.7 | 18.1 | 12.7 | ||||||||||||
European Fund III | 3/2008 | 3/2014 | 6,135.9 | 826.2 | 4.6% | 5,309.7 | 4,819.8 | 3,017.2 | 4,486.4 | ||||||||||||
Asian Fund | 7/2007 | 4/2013 | 3,983.3 | 117.1 | 2.5% | 3,866.2 | 5,728.6 | 1,760.1 | 2,524.2 | ||||||||||||
2006 Fund | 9/2006 | 9/2012 | 17,642.2 | 466.3 | 2.1% | 17,175.9 | 19,844.8 | 7,401.1 | 11,300.1 | ||||||||||||
European Fund II | 11/2005 | 10/2008 | 5,750.8 | — | 2.1% | 5,750.8 | 7,090.6 | 452.3 | 1,484.3 | ||||||||||||
Millennium Fund | 12/2002 | 12/2008 | 6,000.0 | — | 2.5% | 6,000.0 | 13,104.4 | 479.8 | 889.3 | ||||||||||||
European Fund | 12/1999 | 12/2005 | 3,085.4 | — | 3.2% | 3,085.4 | 8,757.7 | — | — | ||||||||||||
Total Private Equity Funds | 72,405.0 | 20,994.4 | 53,150.6 | 62,980.4 | 22,311.2 | 34,229.0 | |||||||||||||||
Co-Investment Vehicles and Other (b) | Various | Various | 7,418.2 | 3,473.1 | Various | 4,056.8 | 2,722.4 | 2,949.6 | 3,668.9 | ||||||||||||
Total Private Equity | 79,823.2 | 24,467.5 | 57,207.4 | 65,702.8 | 25,260.8 | 37,897.9 | |||||||||||||||
Real Assets | |||||||||||||||||||||
Energy Income and Growth Fund | 9/2013 | 9/2018 | 1,974.2 | 1,013.4 | 12.8% | 960.8 | 174.5 | 857.3 | 598.3 | ||||||||||||
Natural Resources Fund | Various | Various | 887.4 | 2.9 | Various | 884.5 | 96.6 | 804.0 | 166.6 | ||||||||||||
Global Energy Opportunities (b) | Various | Various | 1,071.4 | 808.6 | Various | 334.1 | 61.6 | 189.7 | 210.3 | ||||||||||||
Global Infrastructure Investors (b) | 9/2011 | 10/2014 | 1,040.0 | 76.0 | 4.8% | 991.9 | 336.9 | 796.9 | 1,026.8 | ||||||||||||
Global Infrastructure Investors II (b) | 10/2014 | 10/2020 | 3,035.2 | 2,388.2 | 4.1% | 651.1 | 8.9 | 649.8 | 670.1 | ||||||||||||
Real Estate Partners Americas (b) | 5/2013 | 12/2016 | 1,229.1 | 553.0 | 16.3% | 852.5 | 361.3 | 675.7 | 793.0 | ||||||||||||
Real Estate Partners Europe (b) | 9/2015 | 6/2020 | 705.0 | 705.0 | 9.5% | — | — | — | 10.3 | ||||||||||||
Co-Investment Vehicles and Other | Various | Various | 1,672.7 | 542.7 | Various | 1,130.0 | 419.6 | 1,130.0 | 1,484.9 | ||||||||||||
Real Assets | 11,615.0 | 6,089.8 | 5,804.9 | 1,459.4 | 5,103.4 | 4,960.3 | |||||||||||||||
Unallocated Commitments | 616.0 | 616.0 | Various | — | — | — | — | ||||||||||||||
Private Markets Total | 92,054.2 | 31,173.3 | 63,012.3 | 67,162.2 | 30,364.2 | 42,858.2 | |||||||||||||||
Public Markets | |||||||||||||||||||||
Special Situations Fund | 12/2012 | 1/2016 | 2,274.3 | 65.9 | 11.6% | 2,208.4 | 483.9 | 2,085.1 | 2,054.3 | ||||||||||||
Special Situations Fund II | 12/2014 | 3/2019 | 3,347.9 | 2,607.0 | 9.0% | 740.9 | — | 740.9 | 486.0 | ||||||||||||
Mezzanine Partners | 3/2010 | 3/2015 | 1,022.8 | 136.7 | 4.4% | 886.1 | 712.4 | 515.8 | 476.6 | ||||||||||||
Lending Partners | 12/2011 | 12/2014 | 460.2 | 61.1 | 15.2% | 399.1 | 216.2 | 339.5 | 285.6 | ||||||||||||
Lending Partners II | 6/2014 | 6/2017 | 1,335.9 | 877.2 | 3.7% | 458.7 | 78.5 | 458.7 | 486.0 | ||||||||||||
Lending Partners Europe | 3/2015 | 3/2018 | 847.6 | 720.4 | 5.0% | 127.2 | — | 127.2 | 148.3 | ||||||||||||
Other Alternative Credit Vehicles | Various | Various | 5,686.9 | 2,725.3 | Various | 2,961.6 | 1,688.3 | 2,036.3 | 2,145.1 | ||||||||||||
Public Markets Total | 14,975.6 | 7,193.6 | 7,782.0 | 3,179.3 | 6,303.5 | 6,081.9 | |||||||||||||||
Grand Total | $ | 107,029.8 | $ | 38,366.9 | $ | 70,794.3 | $ | 70,341.5 | $ | 36,667.7 | $ | 48,940.1 | |||||||||
_______________________________________________________________________________________________________________________________________________________________________________________
(a) | Reflects investment vehicles for which KKR has the ability to earn carried interest and excludes open ended funds, managed accounts, CLOs and certain other investment vehicles where KKR earns an incentive fee. |
(b) | The “Invested” and “Realized” columns include the amounts of any realized investments that restored the unused capital commitments of the fund investors. |
(c) | Upon end date of predecessor fund. |
(d) | Up to six years from commencement date. |
Page 14
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.
Adjusted units are used as a measure of the total common equity ownership of KKR that is held by KKR & Co. L.P. (including equity awards issued under the KKR & Co. L.P. 2010 Equity Incentive Plan (the "Equity Incentive Plan"), but excluding preferred units), KKR Holdings and other holders of securities exchangeable into common units of KKR & Co. L.P. and represent the fully diluted common unit count using the if-converted method. We believe this measure is useful to unitholders as it provides an indication of the total common 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. The preferred units are not exchangeable for common units of KKR & Co. L.P.
Adjusted units eligible for distribution represents the portion of total adjusted units that is eligible to receive a distribution. We believe this measure is useful to unitholders as it provides insight into the calculation of amounts available for distribution on a per unit basis. Adjusted units eligible for distribution is used in the calculation of after-tax distributable earnings per unit.
After-tax distributable earnings is used by management as an operating measure of the earnings excluding mark-to-market gains (losses) of KKR. KKR believes this measure is useful to unitholders as it provides a supplemental measure to assess performance, excluding the impact of mark-to-market gains (losses). After-tax distributable 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. After-tax distributable earnings does not represent and is not used to calculate actual distributions under KKR’s current distribution policy.
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, but excluding the fair value of certain investment vehicles that generate revenue only attributable to the Principal Activities segment. 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. 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 and to the holders of the preferred units.
Capital invested is the aggregate amount of capital that has been invested by KKR’s 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 insight into KKR’s investments among its investment vehicles. Such amounts consist of capital invested by KKR’s investment vehicles, including investments made using investment financing arrangements like credit facilities. Capital invested excludes investments in liquid credit strategies.
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.
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.
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
Page 15
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.
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.
Outstanding adjusted units represents the portion of total adjusted units that would receive assets of KKR if it were to be liquidated as of a particular date. Outstanding adjusted units is used to calculate book value per outstanding adjusted unit, which we believe is useful to unitholders as it provides a measure of net assets of KKR’s reportable segments on a per unit basis.
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 capital 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.
Page 16
KKR | ||||||||||||||||||||
EXHIBIT A | ||||||||||||||||||||
OTHER FINANCIAL INFORMATION (UNAUDITED) | ||||||||||||||||||||
(Amounts in thousands) | ||||||||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | ||||||||||||||||
Fee Related Earnings | ||||||||||||||||||||
Total Management, Monitoring and Transaction Fees, Net | $ | 262,106 | $ | 279,915 | $ | 265,607 | $ | 542,021 | $ | 560,017 | ||||||||||
Less: Cash Compensation and Benefits | 96,890 | 100,899 | 96,514 | 197,789 | 201,276 | |||||||||||||||
Less: Occupancy and Related Charges | 15,659 | 15,950 | 15,475 | 31,609 | 30,271 | |||||||||||||||
Less: Other Operating expenses | 49,533 | 61,886 | 51,613 | 111,419 | 112,559 | |||||||||||||||
Plus: Expenses of Principal Activities Segment | 37,737 | 39,818 | 41,641 | 77,555 | 86,214 | |||||||||||||||
Fee Related Earnings (a) | 137,761 | 140,998 | 143,646 | 278,759 | 302,125 | |||||||||||||||
Plus: Net Interest and Dividends | 26,004 | 59,576 | 75,406 | 85,580 | 126,081 | |||||||||||||||
Plus: Depreciation and Amortization | 3,959 | 3,887 | 3,918 | 7,846 | 7,799 | |||||||||||||||
Plus: Core Interest Expense | 29,388 | 29,105 | 30,750 | 58,493 | 56,082 | |||||||||||||||
Less: Expenses of Principal Activities Segment | 37,737 | 39,818 | 41,641 | 77,555 | 86,214 | |||||||||||||||
Fee and Yield Segment EBITDA (b) | 159,375 | 193,748 | 212,079 | 353,123 | 405,873 | |||||||||||||||
Plus: Realized Performance Income (Loss), net | 185,952 | 59,329 | 154,872 | 245,281 | 339,727 | |||||||||||||||
Plus: Net Realized Gains (Losses) | 224,699 | (24,183 | ) | 176,260 | 200,516 | 356,927 | ||||||||||||||
Total Segment EBITDA (b) | $ | 570,026 | $ | 228,894 | $ | 543,211 | $ | 798,920 | $ | 1,102,527 | ||||||||||
Distributable Earnings | ||||||||||||||||||||
Management, Monitoring and Transaction Fees, Net | $ | 262,106 | $ | 279,915 | $ | 265,607 | $ | 542,021 | $ | 560,017 | ||||||||||
Realized Performance Income (Loss) | 309,920 | 98,881 | 258,120 | 408,801 | 566,210 | |||||||||||||||
Realized Investment Income (Loss) | 250,703 | 35,393 | 251,666 | 286,096 | 483,008 | |||||||||||||||
Total Distributable Segment Revenues | $ | 822,729 | $ | 414,189 | $ | 775,393 | $ | 1,236,918 | $ | 1,609,235 | ||||||||||
Less: Total Distributable Segment Expenses and Other | 286,625 | 218,954 | 271,233 | 505,579 | 578,594 | |||||||||||||||
Less: Corporate and Local Income Taxes Paid | 22,819 | 26,503 | 38,908 | 49,322 | 77,713 | |||||||||||||||
Less: Preferred Unit Distributions | 5,693 | — | — | 5,693 | — | |||||||||||||||
After-tax Distributable Earnings | $ | 507,592 | $ | 168,732 | $ | 465,252 | $ | 676,324 | $ | 952,928 | ||||||||||
Adjusted Units Eligible for Distribution | 808,716,988 | 808,784,094 | 820,963,434 | |||||||||||||||||
Core Interest Expense | ||||||||||||||||||||
GAAP Interest Expense | $ | 181,313 | $ | 171,394 | $ | 139,427 | $ | 352,707 | $ | 251,390 | ||||||||||
Less: Interest expense related to debt obligations of consolidated investment funds, CLOs and other | 132,866 | 122,850 | 86,955 | 255,716 | 153,160 | |||||||||||||||
Segment Interest Expense | 48,447 | 48,544 | 52,472 | 96,991 | 98,230 | |||||||||||||||
Less: Interest Expense related to debt obligations from KFN and other | 19,059 | 19,439 | 21,722 | 38,498 | 42,148 | |||||||||||||||
Core Interest Expense (c) | $ | 29,388 | $ | 29,105 | $ | 30,750 | $ | 58,493 | $ | 56,082 | ||||||||||
____________________________________________________________________________________________________________________________________________________________________________________
(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 Segment EBITDA and Total Segment EBITDA may be useful in evaluating KKR's ability to service its debt. Fee and Yield Segment EBITDA provides insight into the amount of KKR’s distributable 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. Total Segment EBITDA represents Fee and Yield Segment EBITDA plus the addition of realized performance income and realized investment income.
(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.
Page 17
KKR | |||
EXHIBIT B | |||
KKR'S PORTION OF TOTAL UNCALLED COMMITMENTS TO ITS INVESTMENT FUNDS (UNAUDITED) | |||
(Amounts in thousands) | |||
Uncalled Commitments | |||
Private Markets | |||
Americas Fund XII | $ | 1,000,000 | |
European Fund IV | 131,500 | ||
Energy Income and Growth | 130,900 | ||
Global Infrastructure II | 98,400 | ||
Real Estate Partners Americas | 90,000 | ||
North America Fund XI | 88,700 | ||
Real Estate Partners Europe | 66,800 | ||
Asian Fund II | 39,900 | ||
Co-Investment Vehicles | 24,400 | ||
Other Private Markets Funds | 500,000 | ||
Total Private Markets Commitments | 2,170,600 | ||
Public Markets | |||
Special Situations Fund | 6,800 | ||
Special Situations Fund II | 233,600 | ||
Mezzanine Partners | 5,900 | ||
Lending Partners | 9,500 | ||
Lending Partners II | 32,900 | ||
Lending Partners Europe | 36,200 | ||
Other Alternative Credit Vehicles | 126,400 | ||
Total Public Markets Commitments | 451,300 | ||
Total Uncalled Commitments | $ | 2,621,900 | |
Page 18
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 | ||||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | ||||||||||
Net income (loss) attributable to KKR & Co. L.P. per common unit - Basic | $ | 0.21 | $ | (0.73 | ) | $ | 0.84 | |||||
Weighted Average Common Units Outstanding - Basic | 448,221,538 | 450,262,143 | 446,794,950 | |||||||||
Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders | 93,890 | (329,939 | ) | 376,306 | ||||||||
Plus: Preferred Distribution | 5,693 | — | — | |||||||||
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings L.P. | 73,400 | (271,575 | ) | 325,703 | ||||||||
Plus: Non-cash equity-based charges | 60,657 | 63,823 | 69,478 | |||||||||
Plus: Amortization of intangibles and other, net | 9,144 | 28,882 | 37,910 | |||||||||
Plus: Income tax (benefit) | 6,045 | 1,890 | 30,547 | |||||||||
Economic Net Income (Loss) | 248,829 | (506,919 | ) | 839,944 | ||||||||
Less: Equity-based compensation associated with the KKR & Co. L.P. 2010 equity incentive plan | 48,026 | 49,961 | 48,453 | |||||||||
Pre-tax Economic Net Income (Loss) | 200,803 | (556,880 | ) | 791,491 | ||||||||
Less: Provision for income tax (benefit) | 3,898 | (3,892 | ) | 44,836 | ||||||||
Less: Preferred Distribution | 5,693 | — | — | |||||||||
After-tax Economic Net Income (Loss) | 191,212 | (552,988 | ) | 746,655 | ||||||||
Weighted Average Adjusted Units | 840,537,946 | 847,972,012 | 852,128,762 | |||||||||
After-tax Economic Net Income (Loss) Per Adjusted Unit | $ | 0.23 | $ | (0.65 | ) | $ | 0.88 | |||||
Six Months Ended | ||||||||||||
June 30, 2016 | June 30, 2015 | |||||||||||
Net income (loss) attributable to KKR & Co. L.P. per common unit - Basic | $ | (0.53 | ) | $ | 1.47 | |||||||
Weighted Average Common Units Outstanding - Basic | 449,241,840 | 440,867,813 | ||||||||||
Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders | (236,049 | ) | 646,813 | |||||||||
Plus: Preferred Distribution | 5,693 | — | ||||||||||
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings L.P. | (198,175 | ) | 564,711 | |||||||||
Plus: Non-cash equity-based charges | 124,480 | 146,028 | ||||||||||
Plus: Amortization of intangibles and other, net | 38,026 | 35,120 | ||||||||||
Plus: Income tax (benefit) | 7,935 | 46,685 | ||||||||||
Economic Net Income (Loss) | (258,090 | ) | 1,439,357 | |||||||||
Less: Equity-based compensation associated with the KKR & Co. L.P. 2010 equity incentive plan | 97,987 | 100,718 | ||||||||||
Pre-tax Economic Net Income (Loss) | (356,077 | ) | 1,338,639 | |||||||||
Less: Provision for income tax (benefit) | 6 | 66,071 | ||||||||||
Less: Preferred Distribution | 5,693 | — | ||||||||||
After-tax Economic Net Income (Loss) | (361,776 | ) | 1,272,568 | |||||||||
Weighted Average Adjusted Units | 844,254,980 | 850,106,448 | ||||||||||
After-tax Economic Net Income (Loss) Per Adjusted Unit | $ | (0.43 | ) | $ | 1.50 | |||||||
Page 19
KKR | ||||||||||||
EXHIBIT C (CONTINUED) | ||||||||||||
RECONCILIATION OF FEES AND OTHER (GAAP BASIS) TO TOTAL SEGMENT REVENUES (UNAUDITED) | ||||||||||||
(Amounts in thousands) | ||||||||||||
Quarter Ended | ||||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | ||||||||||
Fees and Other | $ | 576,757 | $ | 162,805 | $ | 255,874 | ||||||
Management fees relating to consolidated funds and other entities | 44,048 | 38,270 | 129,864 | |||||||||
Fee credits relating to consolidated funds | (1,921 | ) | (428 | ) | (53,738 | ) | ||||||
Net realized and unrealized carried interest - consolidated funds | 19,186 | (9,561 | ) | 592,593 | ||||||||
Total investment income (loss) | (46,745 | ) | (529,598 | ) | 383,650 | |||||||
Revenue earned by oil & gas producing entities | (18,225 | ) | (13,561 | ) | (35,700 | ) | ||||||
Reimbursable expenses | (18,638 | ) | (15,881 | ) | (17,542 | ) | ||||||
Other | (10,483 | ) | (6,653 | ) | (7,258 | ) | ||||||
Total Segment Revenues | $ | 543,979 | $ | (374,607 | ) | $ | 1,247,743 | |||||
Six Months Ended | ||||||||||||
June 30, 2016 | June 30, 2015 | |||||||||||
Fees and Other | $ | 739,562 | $ | 547,219 | ||||||||
Management fees relating to consolidated funds and other entities | 82,318 | 255,439 | ||||||||||
Fee credits relating to consolidated funds | (2,349 | ) | (126,687 | ) | ||||||||
Net realized and unrealized carried interest - consolidated funds | 9,625 | 1,034,302 | ||||||||||
Total investment income (loss) | (576,343 | ) | 604,271 | |||||||||
Revenue earned by oil & gas producing entities | (31,786 | ) | (60,644 | ) | ||||||||
Reimbursable expenses | (34,519 | ) | (27,320 | ) | ||||||||
Other | (17,136 | ) | (16,432 | ) | ||||||||
Total Segment Revenues | $ | 169,372 | $ | 2,210,148 | ||||||||
RECONCILIATION OF TOTAL EXPENSES (GAAP BASIS) TO TOTAL SEGMENT EXPENSES (UNAUDITED) | ||||||||||||
(Amounts in thousands) | ||||||||||||
Quarter Ended | ||||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | ||||||||||
Total Expenses | $ | 423,218 | $ | 308,323 | $ | 554,177 | ||||||
Equity based compensation | (60,657 | ) | (63,823 | ) | (69,478 | ) | ||||||
Reimbursable expenses | (30,525 | ) | (24,107 | ) | (26,547 | ) | ||||||
Operating expenses relating to consolidated funds, CFEs and other entities | (21,281 | ) | (43,671 | ) | (11,082 | ) | ||||||
Expenses incurred by oil & gas producing entities | (20,392 | ) | (17,826 | ) | (26,053 | ) | ||||||
Intangible amortization, acquisition and litigation | 3,865 | (17,393 | ) | (6,051 | ) | |||||||
Other | 347 | (9,858 | ) | (11,550 | ) | |||||||
Total Segment Expenses | $ | 294,575 | $ | 131,645 | $ | 403,416 | ||||||
Six Months Ended | ||||||||||||
June 30, 2016 | June 30, 2015 | |||||||||||
Total Expenses | $ | 731,541 | $ | 1,069,210 | ||||||||
Equity based compensation | (124,480 | ) | (146,028 | ) | ||||||||
Reimbursable expenses | (54,632 | ) | (46,406 | ) | ||||||||
Operating expenses relating to consolidated funds, CFEs and other entities | (64,952 | ) | (22,052 | ) | ||||||||
Expenses incurred by oil & gas producing entities | (38,218 | ) | (47,131 | ) | ||||||||
Intangible amortization, acquisition and litigation | (13,528 | ) | (21,522 | ) | ||||||||
Other | (9,511 | ) | (23,285 | ) | ||||||||
Total Segment Expenses | $ | 426,220 | $ | 762,786 | ||||||||
Page 20
KKR | ||||||||||||
EXHIBIT C (CONTINUED) | ||||||||||||
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. COMMON UNITHOLDERS (GAAP BASIS) | ||||||||||||
TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS, FEE AND YIELD SEGMENT EBITDA, AFTER TAX DISTRIBUTABLE EARNINGS AND TOTAL SEGMENT EBITDA (UNAUDITED) | ||||||||||||
(Amounts in thousands) | ||||||||||||
Quarter Ended | ||||||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | ||||||||||
Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders | $ | 93,890 | $ | (329,939 | ) | $ | 376,306 | |||||
Plus: Preferred Distribution | 5,693 | — | — | |||||||||
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings L.P. | 73,400 | (271,575 | ) | 325,703 | ||||||||
Plus: Non-cash equity-based charges | 60,657 | 63,823 | 69,478 | |||||||||
Plus: Amortization of intangibles and other, net | 9,144 | 28,882 | 37,910 | |||||||||
Plus: Income tax (benefit) | 6,045 | 1,890 | 30,547 | |||||||||
Economic Net Income (Loss) | 248,829 | (506,919 | ) | 839,944 | ||||||||
Plus: Income attributable to segment noncontrolling interests | 575 | 667 | 4,383 | |||||||||
Less: Total investment income (loss) | (46,745 | ) | (529,598 | ) | 383,650 | |||||||
Less: Net performance income (loss) | 196,125 | (77,834 | ) | 358,672 | ||||||||
Plus: Expenses of Principal Activities Segment | 37,737 | 39,818 | 41,641 | |||||||||
Fee Related Earnings | 137,761 | 140,998 | 143,646 | |||||||||
Plus: Net interest and dividends | 26,004 | 59,576 | 75,406 | |||||||||
Plus: Depreciation and amortization | 3,959 | 3,887 | 3,918 | |||||||||
Plus: Core interest expense | 29,388 | 29,105 | 30,750 | |||||||||
Less: Expenses of Principal Activities Segment | 37,737 | 39,818 | 41,641 | |||||||||
Fee and Yield Segment EBITDA | 159,375 | 193,748 | 212,079 | |||||||||
Less: Depreciation and amortization | 3,959 | 3,887 | 3,918 | |||||||||
Less: Core interest expense | 29,388 | 29,105 | 30,750 | |||||||||
Plus: Realized performance income (loss), net | 185,952 | 59,329 | 154,872 | |||||||||
Plus: Net realized gains (losses) | 224,699 | (24,183 | ) | 176,260 | ||||||||
Less: Corporate and local income taxes paid | 22,819 | 26,503 | 38,908 | |||||||||
Less: Preferred Unit Distributions | 5,693 | — | — | |||||||||
Less: Income attributable to segment noncontrolling interests | 575 | 667 | 4,383 | |||||||||
After-tax Distributable Earnings | 507,592 | 168,732 | 465,252 | |||||||||
Plus: Depreciation and amortization | 3,959 | 3,887 | 3,918 | |||||||||
Plus: Core interest expense | 29,388 | 29,105 | 30,750 | |||||||||
Plus: Corporate and local income taxes paid | 22,819 | 26,503 | 38,908 | |||||||||
Plus: Preferred Unit Distributions | 5,693 | — | — | |||||||||
Plus: Income attributable to segment noncontrolling interests | 575 | 667 | 4,383 | |||||||||
Total Segment EBITDA | $ | 570,026 | $ | 228,894 | $ | 543,211 | ||||||
Six Months Ended | ||||||||||||
June 30, 2016 | June 30, 2015 | |||||||||||
Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders | $ | (236,049 | ) | $ | 646,813 | |||||||
Plus: Preferred Distribution | 5,693 | — | ||||||||||
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings L.P. | (198,175 | ) | 564,711 | |||||||||
Plus: Non-cash equity-based charges | 124,480 | 146,028 | ||||||||||
Plus: Amortization of intangibles and other, net | 38,026 | 35,120 | ||||||||||
Plus: Income tax (benefit) | 7,935 | 46,685 | ||||||||||
Economic Net Income (Loss) | (258,090 | ) | 1,439,357 | |||||||||
Plus: Income attributable to segment noncontrolling interests | 1,242 | 8,005 | ||||||||||
Less: Total investment income (loss) | (576,343 | ) | 604,271 | |||||||||
Less: Net performance income (loss) | 118,291 | 627,180 | ||||||||||
Plus: Expenses of Principal Activities Segment | 77,555 | 86,214 | ||||||||||
Fee Related Earnings | 278,759 | 302,125 | ||||||||||
Plus: Net interest and dividends | 85,580 | 126,081 | ||||||||||
Plus: Depreciation and amortization | 7,846 | 7,799 | ||||||||||
Plus: Core interest expense | 58,493 | 56,082 | ||||||||||
Less: Expenses of Principal Activities Segment | 77,555 | 86,214 | ||||||||||
Fee and Yield Segment EBITDA | 353,123 | 405,873 | ||||||||||
Less: Depreciation and amortization | 7,846 | 7,799 | ||||||||||
Less: Core interest expense | 58,493 | 56,082 | ||||||||||
Plus: Realized performance income (loss), net | 245,281 | 339,727 | ||||||||||
Plus: Net realized gains (losses) | 200,516 | 356,927 | ||||||||||
Less: Corporate and local income taxes paid | 49,322 | 77,713 | ||||||||||
Less: Preferred Unit Distributions | 5,693 | — | ||||||||||
Less: Income attributable to segment noncontrolling interests | 1,242 | 8,005 | ||||||||||
After-tax Distributable Earnings | 676,324 | 952,928 | ||||||||||
Plus: Depreciation and amortization | 7,846 | 7,799 | ||||||||||
Plus: Core interest expense | 58,493 | 56,082 | ||||||||||
Plus: Corporate and local income taxes paid | 49,322 | 77,713 | ||||||||||
Plus: Preferred Unit Distributions | 5,693 | — | ||||||||||
Plus: Income attributable to segment noncontrolling interests | 1,242 | 8,005 | ||||||||||
Total Segment EBITDA | $ | 798,920 | $ | 1,102,527 | ||||||||
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KKR | |||||||||||||||||||||||
EXHIBIT C (CONTINUED) | |||||||||||||||||||||||
RECONCILIATION OF CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (GAAP BASIS) | |||||||||||||||||||||||
TO TOTAL REPORTABLE SEGMENTS BALANCE SHEET (UNAUDITED) | |||||||||||||||||||||||
JUNE 30, 2016 | |||||||||||||||||||||||
(Amounts in thousands) | |||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (GAAP BASIS) | 1 | 2 | 3 | 4 | 5 | TOTAL REPORTABLE SEGMENTS BALANCE SHEET | |||||||||||||||||
Assets | |||||||||||||||||||||||
Cash and Cash Equivalents | $ | 1,512,475 | — | — | 364,275 | — | — | $ | 1,876,750 | Cash and Short-term Investments | |||||||||||||
Investments | 30,375,163 | (19,992,654 | ) | (1,107,578 | ) | (1,300,899 | ) | — | — | 7,974,032 | Investments | ||||||||||||
— | — | 1,300,899 | — | — | 1,300,899 | Unrealized Carry | |||||||||||||||||
Other Assets | 5,619,233 | (3,093,511 | ) | — | (525,500 | ) | — | (289,957 | ) | 1,710,265 | Other Assets | ||||||||||||
— | — | 161,225 | — | — | 161,225 | Corporate Real Estate | |||||||||||||||||
Total Assets | $ | 37,506,871 | (23,086,165 | ) | (1,107,578 | ) | — | — | (289,957 | ) | $ | 13,023,171 | |||||||||||
Liabilities and Equity | |||||||||||||||||||||||
Debt Obligations | 17,894,036 | (15,236,726 | ) | — | (657,310 | ) | — | — | 2,000,000 | Debt Obligations - KKR (ex-KFN) | |||||||||||||
— | — | 657,310 | — | — | 657,310 | Debt Obligations - KFN | |||||||||||||||||
— | — | 373,750 | — | — | 373,750 | Preferred Shares - KFN | |||||||||||||||||
Other Liabilities | 3,928,882 | (2,325,229 | ) | (1,107,578 | ) | — | — | (142,230 | ) | 353,845 | Other Liabilities | ||||||||||||
Total Liabilities | 21,822,918 | (17,561,955 | ) | (1,107,578 | ) | 373,750 | — | (142,230 | ) | 3,384,905 | |||||||||||||
Redeemable Noncontrolling Interests | 339,637 | (339,637 | ) | — | — | — | — | ||||||||||||||||
Equity | |||||||||||||||||||||||
Series A Preferred Units | 332,988 | — | — | (332,988 | ) | — | — | ||||||||||||||||
Series B Preferred Units | 149,566 | — | — | (149,566 | ) | — | — | ||||||||||||||||
KKR & Co. L.P. Capital - Common Unitholders | 5,001,602 | 173,451 | — | (17,446 | ) | 4,107,160 | (147,727 | ) | 9,117,040 | Book Value | |||||||||||||
Noncontrolling Interests | 9,860,160 | (5,358,024 | ) | — | (373,750 | ) | (4,107,160 | ) | — | 21,226 | Noncontrolling Interests | ||||||||||||
— | — | 500,000 | — | — | 500,000 | Preferred Units | |||||||||||||||||
Total Liabilities and Equity | $ | 37,506,871 | (23,086,165 | ) | (1,107,578 | ) | — | — | (289,957 | ) | $ | 13,023,171 | |||||||||||
1 | IMPACT OF CONSOLIDATION OF INVESTMENT VEHICLES AND OTHER ENTITIES | ||||||||||||||||||||||
2 | CARRY POOL RECLASSIFICATION | ||||||||||||||||||||||
3 | OTHER RECLASSIFICATIONS | ||||||||||||||||||||||
4 | NONCONTROLLING INTERESTS HELD BY KKR HOLDINGS L.P. AND OTHER | ||||||||||||||||||||||
5 | EQUITY IMPACT OF KKR MANAGEMENT HOLDINGS CORP. | ||||||||||||||||||||||
Page 22
KKR | |||||||||||||||||||||||
EXHIBIT C (CONTINUED) | |||||||||||||||||||||||
RECONCILIATION OF CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (GAAP BASIS) | |||||||||||||||||||||||
TO TOTAL REPORTABLE SEGMENTS BALANCE SHEET (UNAUDITED) | |||||||||||||||||||||||
DECEMBER 31, 2015 | |||||||||||||||||||||||
(Amounts in thousands) | |||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (GAAP BASIS) | 1 | 2 | 3 | 4 | 5 | TOTAL REPORTABLE SEGMENTS BALANCE SHEET | |||||||||||||||||
Assets | |||||||||||||||||||||||
Cash and Cash Equivalents | $ | 1,047,740 | — | — | 239,910 | — | — | $ | 1,287,650 | Cash and Short-term Investments | |||||||||||||
Investments | 65,305,931 | (53,733,364 | ) | (1,199,000 | ) | (1,415,478 | ) | — | — | 8,958,089 | Investments | ||||||||||||
— | — | 1,415,478 | — | 1,415,478 | Unrealized Carry | ||||||||||||||||||
Other Assets | 4,688,668 | (2,406,048 | ) | — | (394,852 | ) | — | (274,629 | ) | 1,613,139 | Other Assets | ||||||||||||
— | 154,942 | — | — | 154,942 | Corporate Real Estate | ||||||||||||||||||
Total Assets | $ | 71,042,339 | (56,139,412 | ) | (1,199,000 | ) | — | — | (274,629 | ) | $ | 13,429,298 | |||||||||||
Liabilities and Equity | |||||||||||||||||||||||
Debt Obligations | 18,714,597 | (16,057,287 | ) | — | (657,310 | ) | — | — | 2,000,000 | Debt Obligations - KKR (ex-KFN) | |||||||||||||
— | — | 657,310 | — | — | 657,310 | Debt Obligations - KFN | |||||||||||||||||
— | — | 373,750 | — | — | 373,750 | Preferred Shares - KFN | |||||||||||||||||
Other Liabilities | 2,860,157 | (1,228,091 | ) | (1,199,000 | ) | — | — | (141,529 | ) | 291,537 | Other Liabilities | ||||||||||||
Total Liabilities | 21,574,754 | (17,285,378 | ) | (1,199,000 | ) | 373,750 | — | (141,529 | ) | 3,322,597 | |||||||||||||
Redeemable Noncontrolling Interests | 188,629 | (188,629 | ) | — | — | — | — | ||||||||||||||||
Equity | |||||||||||||||||||||||
Series A Preferred Units | — | — | — | — | — | — | |||||||||||||||||
Series B Preferred Units | — | — | — | — | — | — | Preferred Units | ||||||||||||||||
KKR & Co. L.P. Capital - Common Unitholders | 5,547,182 | 133,208 | — | — | 4,431,939 | (133,100 | ) | 9,979,229 | Book Value | ||||||||||||||
Noncontrolling Interests | 43,731,774 | (38,798,613 | ) | — | (373,750 | ) | (4,431,939 | ) | 127,472 | Noncontrolling Interests | |||||||||||||
Total Liabilities and Equity | $ | 71,042,339 | (56,139,412 | ) | (1,199,000 | ) | — | — | (274,629 | ) | $ | 13,429,298 | |||||||||||
1 | IMPACT OF CONSOLIDATION OF INVESTMENT VEHICLES AND OTHER ENTITIES | ||||||||||||||||||||||
2 | CARRY POOL RECLASSIFICATION | ||||||||||||||||||||||
3 | OTHER RECLASSIFICATIONS | ||||||||||||||||||||||
4 | NONCONTROLLING INTERESTS HELD BY KKR HOLDINGS L.P. AND OTHER | ||||||||||||||||||||||
5 | EQUITY IMPACT OF KKR MANAGEMENT HOLDINGS CORP. | ||||||||||||||||||||||
Page 23
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 | |||||||||
June 30, 2016 | March 31, 2016 | June 30, 2015 | |||||||
Weighted Average GAAP Common Units Outstanding - Basic | 448,221,538 | 450,262,143 | 446,794,950 | ||||||
Adjustments: | |||||||||
Weighted Average Unvested Common Units and Other Securities (a) | 33,588,074 | — | (c) | 35,856,541 | |||||
Weighted Average GAAP Common Units Outstanding - Diluted | 481,809,612 | 450,262,143 | 482,651,491 | ||||||
Adjustments: | |||||||||
Weighted Average KKR Holdings Units (b) | 358,728,334 | 360,317,628 | 369,477,271 | ||||||
Weighted Average Unvested Common Units and Other Securities (a) | — | 37,392,241 | (c) | — | |||||
Weighted Average Adjusted Units | 840,537,946 | 847,972,012 | 852,128,762 | ||||||
Six Months Ended | |||||||||
June 30, 2016 | June 30, 2015 | ||||||||
Weighted Average GAAP Common Units Outstanding - Basic | 449,241,840 | 440,867,813 | |||||||
Adjustments: | |||||||||
Weighted Average Unvested Common Units and Other Securities (a) | — | (c) | 36,599,407 | ||||||
Weighted Average GAAP Common Units Outstanding - Diluted | 449,241,840 | 477,467,220 | |||||||
Adjustments: | |||||||||
Weighted Average KKR Holdings Units (b) | 359,522,981 | 372,639,228 | |||||||
Weighted Average Unvested Common Units and Other Securities (a) | 35,490,159 | (c) | — | ||||||
Weighted Average Adjusted Units | 844,254,980 | 850,106,448 | |||||||
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 | ||||||||
June 30, 2016 | December 31, 2015 | ||||||||
GAAP Common Units Outstanding - Basic | 446,203,551 | 457,834,875 | |||||||
Unvested Common Units and Other Securities (a) | 33,470,695 | 27,901,910 | |||||||
GAAP Common Units Outstanding - Diluted | 479,674,246 | 485,736,785 | |||||||
Adjustments: | |||||||||
KKR Holdings Units (b) | 358,673,603 | 361,346,588 | |||||||
Adjusted Units | 838,347,849 | 847,083,373 | |||||||
Adjustments: | |||||||||
Unvested Common Units and Unvested Other Securities (a) | (29,630,861 | ) | (24,060,289 | ) | |||||
Adjusted Units Eligible for Distribution | 808,716,988 | 823,023,084 | |||||||
Adjustments: | |||||||||
Vested Other Securities | (3,839,834 | ) | (3,841,621 | ) | |||||
Outstanding Adjusted Units | 804,877,154 | 819,181,463 | |||||||
____________________________________________________________________________________________________________________________________________________________________________________
(a) | Represents equity awards granted under the 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 having the effect of decreasing the loss per common unit. |
Page 24