KKR & Co. L.P. (Form: 8-K, Received: 02/23/2011 08:39:59)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


 

FORM 8-K

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): February 16, 2011

 

KKR & CO. L.P.

(Exact name of registrant as specified in its charter)

 

Delaware
(State or other jurisdiction
of incorporation)

 

001-34820
(Commission
File Number)

 

26-0426107
(IRS Employer
Identification No.)

 

9 West 57 th  Street, Suite 4200

New York, New York
(Address of principal executive offices)

 

10019
(Zip Code)

 

(212) 750-8300

(Registrant’s telephone number, including area code)

 

NOT APPLICABLE
(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o             Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o             Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o             Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o             Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 1.01               Entry into a Material Definitive Agreement

 

On February 22, 2011, Kohlberg Kravis Roberts & Co. L.P., KKR Fund Holdings L.P. and KKR Management Holdings L.P. (collectively, the “Borrowers”) entered into an Amended and Restated Credit Agreement (the “Restated Credit Agreement”) by and among the Borrowers and HSBC Bank plc, as Administrative Agent and Lender.  Upon the satisfaction of the conditions to effectiveness of the Restated Credit Agreement, it will supersede Kohlberg Kravis Roberts & Co. L.P.’s existing credit agreement, dated February 28, 2008.  The effectiveness of the Restated Credit Agreement is subject to the satisfaction of certain customary closing conditions on or before March 9, 2011 (such date of closing, the “Effective Date”).

 

The Restated Credit Agreement provides the Borrowers with a five-year senior unsecured multicurrency revolving credit facility (the “Credit Facility”) in an aggregate principal amount of $700 million.  The Credit Facility is scheduled to mature on the fifth anniversary of the Effective Date, and the Borrowers may prepay, terminate or reduce the commitments under the Credit Facility at any time without penalty.  Borrowings under the Credit Facility are available for general corporate purposes, subject to certain limitations.  Interest on borrowings under the Credit Facility will be charged at the London Interbank Offered Rate (LIBOR) plus applicable margin of 50 basis points per annum, or at an alternative base rate.  The Borrowers have agreed to pay a facility fee of 5 basis points per annum on the total commitment.  Borrowings under the Credit Facility will be guaranteed by KKR & Co. L.P., KKR Group Finance Co. LLC and the general partners of present and future material private equity funds managed by Kohlberg Kravis Roberts & Co. L.P. and/or its affiliates.

 

Certain other material terms of the Restated Credit Agreement include:

 

·                   financial covenants which require Kohlberg Kravis Roberts & Co. L.P. and its subsidiaries to maintain a maximum consolidated leverage ratio (the ratio of total indebtedness to Fee Related EBITDA) of no greater than 4.0x and to maintain at least $25 billion in Fee Paying Assets Under Management;

 

·                   customary affirmative and negative covenants (subject to certain customary exceptions and baskets) which limit the ability of Kohlberg Kravis Robert & Co. L.P., its subsidiaries and certain other affiliates of KKR & Co. L.P. to, among other things, incur indebtedness and create liens; and

 

·                   customary events of default, upon the occurrence of which, after any applicable grace period, the lenders will have the ability to accelerate all outstanding loans thereunder and terminate the commitments.

 

HSBC Bank plc or its affiliates have provided, and may in the future from time to time provide, certain commercial and investment banking, financial advisory and other services in the ordinary course of business for KKR & Co. L.P. and its subsidiaries, for which they have in the past and may in the future receive customary fees and commissions.

 

Item 2.02               Results of Operations

 

On February 23, 2011, KKR & Co. L.P. issued a press release announcing financial results for its fourth quarter and year ended December 31, 2010.

 

The press release is furnished as Exhibit 99.1 to this Report.

 

As provided in General Instruction B.2 of Form 8-K, the information in this Item 2.02 and Exhibit 99.1 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

 

Item 2.03               Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant.

 

The information set forth in Item 1.01 is incorporated by reference into this Item 2.03.

 

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Item 5.02               Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

Appointment of Thomas M. Schoewe as Director

 

On February 22, 2011, Thomas M. Schoewe was appointed to the Board of Directors of KKR Management LLC, the managing partner of KKR & Co. L.P., and its Audit Committee and Conflicts Committee, effective March 14, 2011.

 

Mr. Schoewe will receive the standard independent director compensation arrangement, consisting of a prorated annual cash retainer of $75,000 for independent directors and a prorated annual cash retainer of $25,000 as a member of the Audit Committee.  Mr. Schoewe has also entered into an indemnification agreement with KKR Management LLC and KKR & Co. L.P.

 

A copy of the press release announcing the appointment of Mr. Schoewe to the Board of Directors of KKR Management LLC is furnished as Exhibit 99.2 to this Current Report on Form 8-K.

 

Grant of Equity to Named Executive Officers

 

To the extent required, the disclosure in Item 8.01 is incorporated herein by reference.

 

Item 7.01               Regulation FD Disclosure

 

A copy of the press release announcing the appointment of Mr. Schoewe to the Board of Directors of KKR Management LLC is furnished as Exhibit 99.2 to this Current Report on Form 8-K.

 

As provided in General Instruction B.2 of Form 8-K, the information in this Item 7.01 and Exhibit 99.2 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

 

Item 8.01               Other Events

 

On February 16, 2011, KKR Holdings L.P. granted units in KKR Holdings L.P. to certain of our named executive officers in the amounts as follows: Todd A. Fisher (108,392), William J. Janetschek (29,021) and David J. Sorkin (31,819).  The amount of the grant was calculated in accordance with a formula, the result of which became fixed after the close of trading on December 31, 2010.  The units will vest over a period of four years, with vesting occurring in 25% increments beginning on April 1, 2012 and each anniversary thereafter, and are exchangeable for KKR & Co. L.P. common units on a one-for-one basis.

 

Item 9.01               Financial Statements and Exhibits.

 

(d)        Exhibits

 

Exhibit No.

 

Description

 

 

 

Exhibit 99.1

 

Press release of KKR & Co. L.P., dated February 23, 2011, announcing results for the fourth quarter and year ended December 31, 2010 (This exhibit is furnished and not filed)

 

 

 

Exhibit 99.2

 

Press release of KKR & Co. L.P., dated February 23, 2011, announcing the appointment of Thomas M. Schoewe as director (This exhibit is furnished and not filed)

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

KKR & CO. L.P.

 

By:

KKR Management LLC, its general partner

 

 

 

 

 

 

Date: February 23, 2011

By:

/s/ William J. Janetschek

 

Name:

William J. Janetschek

 

Title:

Chief Financial Officer

 

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EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

Exhibit 99.1

 

Press release of KKR & Co. L.P., dated February 23, 2011, announcing results for the fourth quarter and year ended December 31, 2010 (This exhibit is furnished and not filed)

 

 

 

Exhibit 99.2

 

Press release of KKR & Co. L.P., dated February 23, 2011, announcing the appointment of Thomas M. Schoewe as director (This exhibit is furnished and not filed)

 

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Exhibit 99.1

 

GRAPHIC

 

KKR & Co. L.P. Announces

Fourth Quarter and Full Year 2010 Results

 

Assets under management (“AUM”) totaled $61.0 billion as of December 31, 2010, up 16.8% from $52.2 billion as of December 31, 2009.

 

Fee related earnings (“FRE”) were $95.1 million and $318.3 million for the fourth quarter and year ended December 31, 2010, respectively, up from FRE of $87.5 million and pro forma (1)  FRE of $247.4 million in the comparable periods of 2009.

 

Economic net income (“ENI”) was $714.6 million and $2,139.8 million for the fourth quarter and year ended December 31, 2010, respectively, up from ENI of $515.3 million and pro forma ENI of $1,953.9 million in the comparable periods of 2009.

 

GAAP net income attributable to KKR & Co. L.P. was $180.6 million and $333.2 million for the fourth quarter and year ended December 31, 2010, respectively (2) .

 

Book value was $5.7 billion on a segment basis as of December 31, 2010, representing $8.38 per adjusted unit.

 

After-tax ENI was $1.02 and $2.83 per adjusted unit for the fourth quarter and year ended December 31, 2010, respectively.

 

KKR & Co. L.P. declares a fourth quarter distribution of $0.29 per common unit, bringing total distributions for 2010 results to $0.60 per common unit.

 

NEW YORK, February 23, 2011—KKR & Co. L.P. (NYSE: KKR) today reported its fourth quarter and full year 2010 results.  ENI was $2.1 billion for the year, an increase of 9.5% versus 2009 driven by accelerated performance across each of KKR’s businesses.  The continued appreciation of KKR’s private equity investments, by 11% for the quarter and 33% for the full year, was the key contributor to the strong results.

 

AUM and fee paying assets under management (“FPAUM”) ended the year at $61.0 billion and $46.0 billion, respectively. The strong growth over the prior quarter and year was a result of continued success in capital raising and significant investment appreciation.

 

“We continue to show great progress in the two areas that drive our business: investment performance and capital raising.  Our investment returns across all strategies compared favorably to their benchmarks. Our private equity funds returned 33% for the year, significantly outperforming the S&P 500 return of 15%, while each of our credit strategies also beat benchmark indices. In addition, despite a challenging fundraising environment in 2010, we raised $5 billion of capital to support our China growth equity, oil & gas, infrastructure, mezzanine, special situations and other strategies. All of this provides us with strong momentum heading into 2011,” said Henry R. Kravis and George R. Roberts, Co-Founders, Co-Chairmen and Co-Chief Executive Officers of KKR.

 


Note: Certain financial measures, including FRE, ENI, after-tax ENI 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.

 

(1)  On October 1, 2009, KKR & Co. L.P. and KKR & Co. (Guernsey) L.P. completed a transaction to combine their businesses (the “Business Combination”).  Amounts indicated in this press release as being presented on a pro forma basis give effect to the Business Combination and related transactions as if they had been completed on January 1, 2009.

 

(2)  For the years ended December 31, 2010 and 2009, the GAAP financial information is not directly comparable as GAAP financial information prior to October 1, 2009 did not reflect certain adjustments that are applicable as a result of the Business Combination.

 

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GAAP Results

 

GAAP results for the quarter and year ended December 31, 2010 included net income attributable to KKR & Co. L.P. of $180.6 million and $333.2 million, respectively, and net income per common unit attributable to KKR & Co. L.P. of $0.86 and $1.62, respectively. For the quarter and year ended December 31, 2009, net income (loss) attributable to KKR & Co. L.P. was ($78.2) million and $849.7 million, respectively.

 

The quarter over quarter increase is primarily due to a higher level of appreciation of KKR’s investments and a one-time recognition of non-cash compensation charges in connection with the Business Combination and related transactions in the fourth quarter of 2009.

 

The year over year decrease is primarily due to certain adjustments applicable to periods after October 1, 2009 as a result of the Business Combination and related transactions including: (i) the allocation of earnings of KKR to KKR Holdings L.P. (the vehicle through which KKR principals own interests in KKR), (ii) the recognition of non-cash compensation charges, and (iii) the recognition of corporate income taxes. These factors were partially offset by the inclusion of income from KKR’s principal investments for all of 2010.

 

Total Reportable Segments

 

AUM was $61.0 billion as of December 31, 2010, an increase of $5.5 billion or 9.9% compared to AUM of $55.5 billion as of September 30, 2010.  The increase was primarily due to appreciation in the fair value of KKR’s private equity portfolio as well as new capital raised, partially offset by distributions to limited partners arising from realizations.

 

FPAUM was $46.0 billion as of December 31, 2010, an increase of $3.3 billion or 7.7% compared to FPAUM of $42.7 billion as of September 30, 2010.  The increase was primarily due to new capital raised across many of KKR’s strategies.

 

FRE was $95.1 million for the quarter ended December 31, 2010, an increase of $7.6 million or 8.7% compared to FRE of $87.5 million for the quarter ended December 31, 2009.  The increase is primarily due to higher capital markets fees as a result of increased activity and incentive fees earned in the public markets segment.  These increases were partially offset by lower monitoring fees in the private markets segment as a result of a termination payment on a monitoring agreement with a portfolio company received during the fourth quarter of 2009.

 

For the year ended December 31, 2010, FRE was $318.3 million, an increase of $70.9 million or 28.7% compared to pro forma FRE of $247.4 million for the year ended December 31, 2009.  The increase was primarily due to (i) higher capital markets fees as a result of increased activity, (ii) higher incentive fees earned in the public markets segment, and (iii) higher transaction fees in the private markets segment as a result of more transactions closing. These increases were partially offset by higher compensation expense as a result of improved performance and the expansion of KKR’s business as well as lower monitoring fees as a result of monitoring agreement termination payments received during 2009.

 

ENI was $714.6 million for the quarter ended December 31, 2010, an increase of $199.3 million or 38.7% compared to ENI of $515.3 million for the quarter ended December 31, 2009.  The increase primarily reflects a higher level of appreciation of KKR’s private equity portfolio, which drove increases in both net carried interest and the income from principal investments.

 

For the year ended December 31, 2010, ENI was $2,139.8 million, an increase of $185.9 million or 9.5% compared to pro forma ENI of $1,953.9 million for the year ended December 31, 2009.  The increase primarily reflects a higher level of net carried interest and the growth in FRE discussed above.

 

Private Markets

 

AUM in the private markets segment was $46.2 billion as of December 31, 2010, an increase of $4.3 billion or 10.3% compared to AUM of $41.9 billion as of September 30, 2010.  The increase was primarily due to appreciation in the fair value of KKR’s private equity portfolio as well as new capital raised, partially offset by distributions to limited partners arising from realizations.

 

FPAUM in the private markets segment was $38.2 billion as of December 31, 2010, an increase of $2.2 billion or 6.1% compared to FPAUM of $36.0 billion as of September 30, 2010.  The increase was primarily due to new capital raised.

 

FRE in the private markets segment was $41.1 million for the quarter ended December 31, 2010, a decrease of $28.1 million or 40.6% compared to FRE of $69.2 million for the quarter ended December 31, 2009.  The decrease was primarily due to (i) lower monitoring fees as a result of a $46.1 million termination payment on a monitoring agreement with a portfolio company during the fourth quarter of 2009, which impacted FRE by $28.6 million net of associated fee credits, and (ii) higher compensation and other operating expenses in connection with the expansion of KKR’s business and increased transaction activity. These downward drivers were partially offset by higher transaction fees as a result of more transactions closing.

 

2



 

FRE in the private markets segment was $182.3 million for the year ended December 31, 2010, a decrease of $34.7 million or 16.0% compared to pro forma FRE of $217.0 million for the year ended December 31, 2009.  The decrease was primarily due to (i) lower monitoring fees as a result of $72.2 million in payments received during 2009 related to the termination of monitoring agreements with portfolio companies, which impacted FRE by $37.8 million net of associated fee credits, and (ii) higher compensation and other operating expenses in connection with the expansion of KKR’s business and increased transaction activity. These downward drivers were partially offset by higher transaction fees as a result of more transactions closing.

 

ENI in the private markets segment was $262.0 million for the quarter ended December 31, 2010, an increase of $116.4 million or 79.9% compared to ENI of $145.6 million for the quarter ended December 31, 2009. The increase was primarily due to higher net carried interest resulting from a higher level of appreciation of KKR’s private equity portfolio.

 

ENI in the private markets segment was $784.6 million for the year ended December 31, 2010, an increase of $123.1 million or 18.6% compared to pro forma ENI of $661.5 million for the year ended December 31, 2009. The increase was primarily due to higher net carried interest driven by certain private equity funds that were not in a carry-earning position during 2009 earning carried interest in 2010 as a result of appreciation above their cost basis.

 

Public Markets

 

AUM in the public markets segment was $14.8 billion as of December 31, 2010, an increase of $1.2 billion or 8.8% compared to AUM of $13.6 billion as of September 30, 2010.  The increase was primarily due to new capital raised during the quarter and appreciation in the net asset value of certain vehicles.

 

FPAUM in the public markets segment was $7.8 billion as of December 31, 2010, an increase of $1.1 billion or 16.4% compared to FPAUM of $6.7 billion as of September 30, 2010.  The increase was primarily due to new capital raised during the quarter and appreciation in the net asset value of certain vehicles.

 

FRE in the public markets segment was $16.3 million for the quarter ended December 31, 2010, an increase of $13.9 million compared to FRE of $2.4 million for the quarter ended December 31, 2009.  For the year ended December 31, 2010, FRE was $57.0 million, an increase of $45.2 million compared to pro forma FRE of $11.8 million for the year ended December 31, 2009.  The increase in both comparative periods was primarily due to (i) higher incentive fees and (ii) higher transaction fees arising primarily from new strategies that drive such fees.

 

ENI in the public markets segment was $17.8 million for the quarter ended December 31, 2010, an increase of $16.3 million compared to ENI of $1.5 million for the quarter ended December 31, 2009.  For the year ended December 31, 2010, ENI was $60.1 million, an increase of $53.7 million compared to pro forma ENI of $6.4 million for the year ended December 31, 2009.  The increase in both comparative periods was primarily due to the growth in FRE discussed above.

 

Capital Markets and Principal Activities

 

FRE in the capital markets and principal activities segment was $37.7 million for the quarter ended December 31, 2010, an increase of $21.9 million compared to FRE of $15.8 million for the quarter ended December 31, 2009.  For the year ended December 31, 2010, FRE was $79.1 million, an increase of $60.4 million compared to pro forma FRE of $18.7 million for the year ended December 31, 2009. The increase in both comparative periods was primarily due to an increase in overall capital markets transaction activity resulting from an improved environment and the continued growth of this business.

 

ENI in the capital markets and principal activities segment was $434.9 million for the quarter ended December 31, 2010, an increase of $66.7 million or 18.1% compared to ENI of $368.2 million for the quarter ended December 31, 2009. The increase was primarily due to a higher level of investment income.

 

For the year ended December 31, 2010, ENI was $1,295.1 million, an increase of $9.1 million or 0.7% compared to pro forma ENI of $1,286.0 million for the year ended December 31, 2009. The increase was primarily due to the growth in FRE discussed above partially offset by a lower level of investment income. While the fair value of KKR’s principal investments increased in 2010, the overall level of appreciation was slightly lower than in 2009.

 

CAPITAL AND LIQUIDITY

 

As of December 31, 2010, KKR had an available cash balance of $756.3 million and $500.0 million of outstanding debt obligations. On February 22, 2011, KKR entered into an amended and restated credit agreement with HSBC Bank plc, which will become effective upon the satisfaction of certain customary closing conditions.  Upon effectiveness, the current availability for borrowings under this facility will be reduced from $1.0 billion to $700.0 million, and the scheduled maturity will be extended by three years to expire on the fifth anniversary of the date of closing.  The rates for borrowings and the facility fee will remain the

 

3



 

same. Following the amendment, KKR’s availability for further borrowings was approximately $1.6 billion (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, 2010).

 

As of December 31, 2010, KKR’s portion of total uncalled commitments to its investment funds was $923.7 million, consisting of the following (amounts in thousands):

 

 

 

Commitments

 

Private Markets

 

 

 

2006 Fund

 

$

362,684

 

European Fund III

 

300,540

 

Asian Fund

 

117,396

 

Infrastructure Fund

 

50,000

 

E2 Investors (Annex Fund)

 

30,833

 

China Growth Fund

 

8,506

 

Natural Resources I

 

5,413

 

Other Private Markets Commitments

 

1,264

 

Total Private Markets Commitments

 

876,636

 

 

 

 

 

Public Markets

 

 

 

Mezzanine Fund

 

34,100

 

Capital Solutions Vehicles

 

13,000

 

Total Public Markets Commitments

 

47,100

 

 

 

 

 

Total Uncalled Commitments

 

$

 923,736

 

 

DISTRIBUTION

 

A distribution of $0.29 per common unit will be paid on March 21, 2011 to unitholders of record as of the close of business on March 7, 2011.

 

OTHER

 

KKR will hold its first investor day on March 15, 2011. Additional details will follow in a press release that will be issued prior to the event. The investor day will be broadcast live over the Internet and will be accessible by all interested parties.

 

CONFERENCE CALL

 

A conference call to discuss KKR’s financial results will be held on Wednesday, February 23, 2011 at 10:00 a.m. EST. The conference call may be accessed by dialing (877) 857-6144 (U.S. callers) or +1 (719) 325-4932 (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 Relations section of KKR’s website at http://www.kkr.com/kkr_ir/kkr_events.cfm.  A replay of the live broadcast will be available on KKR’s website or by dialing (888) 203-1112 (U.S. callers) and +1 (719) 457-0820 (non-U.S. callers), pass code 2815232, 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 Relations section of KKR’s website at www.kkr.com. In addition, you may automatically receive email alerts and other information about KKR by enrolling your email within the “Email Alerts” area of the Investor Relations 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 $61.0 billion in assets under management as of December 31, 2010.  With 14 offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with investors through its client relationships and capital markets platforms. KKR is

 

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publicly traded on the New York Stock Exchange (NYSE: KKR). 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 assets under management, fee paying assets under management, fee related earnings, economic net income, committed dollars invested, uncalled commitments 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; 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 prospectus filed with the SEC on October 5, 2010 and other filings with the SEC, which are available at www.sec.gov.

 

CONTACT INFORMATION

 

Investor Relations:

Jonathan Levin

Kohlberg Kravis Roberts & Co. L.P.

Tel: +1 (877) 610-4910 (U.S.) / +1 (212) 230-9410

investor-relations@kkr.com

 

Media Contact:

Peter McKillop or Kristi Huller

Kohlberg Kravis Roberts & Co. L.P.

Tel: +1 (212) 750-8300
media@kkr.com

 

* * * * *

 

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KKR

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)

(Amounts in thousands, except common unit and per common unit amounts)

 

 

 

 Quarter Ended 

 

 Year Ended 

 

 

 

December 31, 2010

 

December 31, 2009

 

December 31, 2010

 

December 31, 2009

 

Revenues

 

 

 

 

 

 

 

 

 

Fees

 

$

146,267

 

$

129,856

 

$

435,386

 

$

331,271

 

Expenses

 

 

 

 

 

 

 

 

 

Employee Compensation and Benefits

 

299,123

 

686,021

 

1,344,455

 

838,072

 

Occupancy and Related Charges

 

10,124

 

9,896

 

39,692

 

38,013

 

General, Administrative and Other

 

81,377

 

124,498

 

311,147

 

264,396

 

Fund Expenses

 

28,278

 

18,218

 

67,369

 

55,229

 

Total Expenses

 

418,902

 

838,633

 

1,762,663

 

1,195,710

 

Investment Income (Loss)

 

 

 

 

 

 

 

 

 

Net Gains (Losses) from Investment Activities

 

2,986,845

 

1,959,537

 

7,755,090

 

7,505,005

 

Dividend Income

 

441,781

 

3,831

 

1,250,293

 

186,324

 

Interest Income

 

55,766

 

45,137

 

226,824

 

142,117

 

Interest Expense

 

(18,706

)

(18,797

)

(53,099

)

(79,638

)

Total Investment Income (Loss)

 

3,465,686

 

1,989,708

 

9,179,108

 

7,753,808

 

Income (Loss) Before Taxes

 

3,193,051

 

1,280,931

 

7,851,831

 

6,889,369

 

Income Taxes

 

14,362

 

31,193

 

75,360

 

36,998

 

Net Income (Loss)

 

3,178,689

 

1,249,738

 

7,776,471

 

6,852,371

 

Less: Net Income (Loss) Attributable to

 

 

 

 

 

 

 

 

 

Noncontrolling Interests in Consolidated Entities

 

2,586,697

 

1,444,655

 

6,544,016

 

6,119,382

 

Less: Net Income (Loss) Attributable to

 

 

 

 

 

 

 

 

 

Noncontrolling Interests Held by KKR Holdings L.P.

 

411,413

 

(116,696

)

899,277

 

(116,696

)

Net Income (Loss) Attributable to KKR & Co. L.P.

 

$

180,579

 

$

(78,221

)

$

333,178

 

$

849,685

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit

 

 

 

 

 

 

 

 

 

Basic

 

$

0.86

 

$

(0.38

)

$

1.62

 

 

 

Diluted (a)

 

$

0.86

 

$

(0.38

)

$

1.62

 

 

 

Weighted Average Common Units

 

 

 

 

 

 

 

 

 

Basic

 

209,383,219

 

204,902,226

 

206,031,682

 

 

 

Diluted (a)

 

209,413,219

 

204,902,226

 

206,039,244

 

 

 

 


Note: Prior to the Business Combination and related transactions, there was no single capital structure upon which to calculate historical earnings per common unit since KKR’s business was conducted through a large number of entities for which there was no single holding entity. Accordingly, earnings per common unit has not been presented for periods prior to the Transactions.

 

(a) KKR Holdings 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.

 

6



 

KKR

STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION

TOTAL REPORTABLE SEGMENTS (UNAUDITED)

(Amounts in thousands, except unit and per unit amounts)

 

 

 

Quarter Ended

 

Year Ended

 

 

 

Actual

 

Actual

 

Actual

 

Actual

 

Pro Forma*

 

 

 

December 31, 2010

 

September 30, 2010

 

December 31, 2009

 

December 31, 2010

 

December 31, 2009

 

Fees

 

 

 

 

 

 

 

 

 

 

 

Management and incentive fees:

 

 

 

 

 

 

 

 

 

 

 

Management fees

 

$

119,043

 

$

112,545

 

$

113,615

 

$

453,286

 

$

437,716

 

Incentive fees

 

8,427

 

9,555

 

 

38,832

 

4,472

 

Management and incentive fees

 

127,470

 

122,100

 

113,615

 

492,118

 

442,188

 

 

 

 

 

 

 

 

 

 

 

 

 

Monitoring and transaction fees:

 

 

 

 

 

 

 

 

 

 

 

Monitoring fees

 

22,108

 

21,780

 

68,383

 

86,932

 

158,243

 

Transaction fees

 

86,774

 

40,634

 

39,842

 

220,383

 

91,828

 

Fee credits

 

(21,671

)

(13,683

)

(26,260

)

(64,899

)

(73,901

)

Net monitoring and transaction fees

 

87,211

 

48,731

 

81,965

 

242,416

 

176,170

 

 

 

 

 

 

 

 

 

 

 

 

 

Total fees

 

214,681

 

170,831

 

195,580

 

734,534

 

618,358

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

55,594

 

49,056

 

48,018

 

206,334

 

168,597

 

Occupancy and related charges

 

10,124

 

10,373

 

9,896

 

39,715

 

38,013

 

Other operating expenses

 

53,872

 

41,896

 

50,199

 

170,163

 

164,331

 

Total expenses

 

119,590

 

101,325

 

108,113

 

416,212

 

370,941

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee Related Earnings

 

95,091

 

69,506

 

87,467

 

318,322

 

247,417

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income (loss)

 

 

 

 

 

 

 

 

 

 

 

Gross carried interest

 

416,442

 

237,923

 

139,034

 

1,207,070

 

602,427

 

Less: allocation to KKR carry pool

 

(169,305

)

(91,156

)

(40,077

)

(455,872

)

(153,827

)

Less: management fee refunds

 

(24,412

)

(17,387

)

(22,720

)

(143,446

)

(22,720

)

Net carried interest

 

222,725

 

129,380

 

76,237

 

607,752

 

425,880

 

Other investment income (loss)

 

398,389

 

120,006

 

352,576

 

1,218,128

 

1,283,338

 

Total investment income (loss)

 

621,114

 

249,386

 

428,813

 

1,825,880

 

1,709,218

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) before noncontrolling interests in Income of consolidated entities

 

716,205

 

318,892

 

516,280

 

2,144,202

 

1,956,635

 

Income (Loss) attributable to noncontrolling interests

 

1,592

 

1,567

 

1,025

 

4,409

 

2,691

 

 

 

 

 

 

 

 

 

 

 

 

 

Economic Net Income (Loss)

 

$

714,613

 

$

317,325

 

$

515,255

 

$

2,139,793

 

$

1,953,944

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

17,400

 

47,784

 

97,014

 

210,196

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Economic Net Income, After Taxes (a)

 

$

697,213

 

$

269,541

 

$

418,241

 

$

1,929,597

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Economic Net Income, After Taxes per Adjusted Unit (b)

 

$

1.02

 

$

0.39

 

$

0.61

 

$

2.83

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets Under Management

 

$

60,997,500

 

$

55,498,500

 

$

52,204,200

 

$

60,997,500

 

$

52,204,200

 

Fee Paying Assets Under Management

 

$

46,011,100

 

$

42,705,200

 

$

42,779,800

 

$

46,011,100

 

$

42,779,800

 

Committed Dollars Invested

 

$

2,691,000

 

$

540,400

 

$

456,700

 

$

5,253,300

 

$

2,107,700

 

Uncalled Commitments

 

$

14,074,700

 

$

13,750,900

 

$

14,544,427

 

$

14,074,700

 

$

14,544,427

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Information

 

 

 

 

 

 

 

 

 

 

 

Fee Related Earnings

 

$

95,091

 

$

69,506

 

$

87,467

 

$

318,322

 

$

247,417

 

Plus: Depreciation and Amortization

 

2,790

 

2,674

 

3,191

 

11,664

 

9,799

 

Fee Related EBITDA

 

$

97,881

 

$

72,180

 

$

90,658

 

$

329,986

 

$

257,216

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP interest expense

 

$

18,706

 

$

10,432

 

$

18,797

 

$

53,099

 

$

79,638

 

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

 

7,535

 

6,849

 

9,673

 

$

28,622

 

$

42,458

 

Core Interest Expense (c)

 

$

11,171

 

$

3,583

 

$

9,124

 

$

24,477

 

$

37,180

 

 


(a)

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.

 

 

(b)

Adjusted units represents the weighted-average fully diluted unit count for Economic Net Income purposes using the if-converted method. See Exhibit B for a reconciliation of this item to the comparable GAAP measure.

 

 

(c)

Core interest expense excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR’s private equity funds 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.

 

* All amounts indicated in this press release as being presented on a pro forma basis give effect to the Business Combination and related transactions as if they were completed on January 1, 2009.  See notes to reportable segments on page 22 of this press release.

 

7



 

KKR

STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION

PRIVATE MARKETS SEGMENT (UNAUDITED)

(Amounts in thousands)

 

 

 

Quarter Ended

 

Year Ended

 

 

 

Actual

 

Actual

 

Actual

 

Actual

 

Pro Forma*

 

 

 

December 31, 2010

 

September 30, 2010

 

December 31, 2009

 

December 31, 2010

 

December 31, 2009

 

Fees

 

 

 

 

 

 

 

 

 

 

 

Management and incentive fees:

 

 

 

 

 

 

 

 

 

 

 

Management fees

 

$

102,684

 

$

98,337

 

$

99,221

 

$

396,227

 

$

387,112

 

Incentive fees

 

 

 

 

 

 

Management and incentive fees

 

102,684

 

98,337

 

99,221

 

396,227

 

387,112

 

 

 

 

 

 

 

 

 

 

 

 

 

Monitoring and transaction fees:

 

 

 

 

 

 

 

 

 

 

 

Monitoring fees

 

22,108

 

21,780

 

68,383

 

86,932

 

158,243

 

Transaction fees

 

30,942

 

19,816

 

20,269

 

96,000

 

57,699

 

Fee credits

 

(15,673

)

(12,941

)

(26,260

)

(52,563

)

(73,901

)

Net monitoring and transaction fees

 

37,377

 

28,655

 

62,392

 

130,369

 

142,041

 

 

 

 

 

 

 

 

 

 

 

 

 

Total fees

 

140,061

 

126,992

 

161,613

 

526,596

 

529,153

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

42,396

 

37,861

 

39,399

 

159,561

 

136,465

 

Occupancy and Related Charges

 

9,206

 

9,513

 

9,080

 

36,395

 

34,747

 

Other operating expenses

 

47,392

 

36,733

 

43,911

 

148,357

 

140,989

 

Total expenses

 

98,994

 

84,107

 

92,390

 

344,313

 

312,201

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee Related Earnings

 

41,067

 

42,885

 

69,223

 

182,283

 

216,952

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income (loss)

 

 

 

 

 

 

 

 

 

 

 

Gross carried interest

 

414,025

 

236,792

 

139,034

 

1,202,070

 

602,427

 

Less: allocation to KKR carry pool

 

(168,338

)

(90,704

)

(40,077

)

(453,872

)

(153,827

)

Less: management fee refunds

 

(24,412

)

(17,387

)

(22,720

)

(143,446

)

(22,720

)

Net carried interest

 

221,275

 

128,701

 

76,237

 

604,752

 

425,880

 

Other investment income (loss)

 

(111

)

2,524

 

605

 

(1,643

)

20,621

 

Total investment income (loss)

 

221,164

 

131,225

 

76,842

 

603,109

 

446,501

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) before noncontrolling interests in Income of consolidated entities

 

262,231

 

174,110

 

146,065

 

785,392

 

663,453

 

Income (Loss) attributable to noncontrolling interests

 

259

 

394

 

497

 

839

 

1,973

 

 

 

 

 

 

 

 

 

 

 

 

 

Economic Net Income (Loss)

 

$

261,972

 

$

173,716

 

$

145,568

 

$

784,553

 

$

661,480

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets Under Management

 

$

46,223,900

 

$

41,878,700

 

$

38,842,900

 

$

46,223,900

 

$

38,842,900

 

Fee Paying Assets Under Management

 

$

38,186,700

 

$

36,032,300

 

$

36,484,400

 

$

38,186,700

 

$

36,484,400

 

Committed Dollars Invested

 

$

2,371,500

 

$

349,500

 

$

456,700

 

$

4,555,700

 

$

2,107,700

 

Uncalled Commitments

 

$

12,625,900

 

$

12,495,400

 

$

13,728,100

 

$

12,625,900

 

$

13,728,100

 

 


* All amounts indicated in this press release as being presented on a pro forma basis give effect to the Business Combination and related transactions as if they were completed on January 1, 2009.  See notes to reportable segments on page 22 of this press release.

 

8



 

KKR

STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION

PUBLIC MARKETS SEGMENT (UNAUDITED)

(Amounts in thousands)

 

 

 

Quarter Ended

 

Year Ended

 

 

 

Actual

 

Actual

 

Actual

 

Actual

 

Pro Forma*

 

 

 

December 31, 2010

 

September 30, 2010

 

December 31, 2009

 

December 31, 2010

 

December 31, 2009

 

Fees

 

 

 

 

 

 

 

 

 

 

 

Management and incentive fees:

 

 

 

 

 

 

 

 

 

 

 

Management fees

 

$

16,359

 

$

14,208

 

$

14,394

 

$

57,059

 

$

50,604

 

Incentive fees

 

8,427

 

9,555

 

 

38,832

 

4,472

 

Management and incentive fees

 

24,786

 

23,763

 

14,394

 

95,891

 

55,076

 

 

 

 

 

 

 

 

 

 

 

 

 

Monitoring and transaction fees:

 

 

 

 

 

 

 

 

 

 

 

Monitoring fees

 

 

 

 

 

 

Transaction fees

 

9,292

 

1,672

 

 

19,117

 

 

Fee credits

 

(5,998

)

(742

)

 

(12,336

)

 

Net monitoring and transaction fees

 

3,294

 

930

 

 

6,781

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total fees

 

28,080

 

24,693

 

14,394

 

102,672

 

55,076

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

7,586

 

7,708

 

6,909

 

29,910

 

22,677

 

Occupancy and related charges

 

612

 

615

 

624

 

2,375

 

2,483

 

Other operating expenses

 

3,580

 

3,160

 

4,444

 

13,430

 

18,104

 

Total expenses

 

11,778

 

11,483

 

11,977

 

45,715

 

43,264

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee Related Earnings

 

16,302

 

13,210

 

2,417

 

56,957

 

11,812

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income (loss)

 

 

 

 

 

 

 

 

 

 

 

Gross carried interest

 

2,417

 

1,131

 

 

5,000

 

 

Less: allocation to KKR carry pool

 

(967

)

(452

)

 

(2,000

)

 

Less: management fee refunds

 

 

 

 

 

 

Net carried interest

 

1,450

 

679

 

 

3,000

 

 

Other investment income (loss)

 

188

 

148

 

(952

)

718

 

(5,259

)

Total investment income (loss)

 

1,638

 

827

 

(952

)

3,718

 

(5,259

)

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) before noncontrolling interests in Income of consolidated entities

 

17,940

 

14,037

 

1,465

 

60,675

 

6,553

 

Income (Loss) attributable to noncontrolling interests

 

157

 

125

 

15

 

537

 

109

 

 

 

 

 

 

 

 

 

 

 

 

 

Economic Net Income (Loss)

 

$

17,783

 

$

13,912

 

$

1,450

 

$

60,138

 

$

6,444

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets Under Management

 

$

14,773,600

 

$

13,619,800

 

$

13,361,300

 

$

14,773,600

 

$

13,361,300

 

Fee Paying Assets Under Management

 

$

7,824,400

 

$

6,672,900

 

$

6,295,400

 

$

7,824,400

 

$

6,295,400

 

Committed Dollars Invested

 

$

319,500

 

$

190,900

 

$

 

$

697,600

 

$

 

Uncalled Commitments

 

$

1,448,800

 

$

1,255,500

 

$

816,327

 

$

1,448,800

 

$

816,327

 

 


* All amounts indicated in this press release as being presented on a pro forma basis give effect to the Business Combination and related transactions as if they were completed on January 1, 2009.  See notes to reportable segments on page 22 of this press release.

 

9



 

KKR

STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION

CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT (UNAUDITED)

(Amounts in thousands)

 

 

 

Quarter Ended

 

Year Ended

 

 

 

Actual

 

Actual

 

Actual

 

Actual

 

Pro Forma*

 

 

 

December 31, 2010

 

September 30, 2010

 

December 31, 2009

 

December 31, 2010

 

December 31, 2009

 

Fees

 

 

 

 

 

 

 

 

 

 

 

Management and incentive fees:

 

 

 

 

 

 

 

 

 

 

 

Management fees

 

$

 

$

 

$

 

$

 

$

 

Incentive fees

 

 

 

 

 

 

Management and incentive fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Monitoring and transaction fees:

 

 

 

 

 

 

 

 

 

 

 

Monitoring fees

 

 

 

 

 

 

Transaction fees

 

46,540

 

19,146

 

19,573

 

105,266

 

34,129

 

Fee credits

 

 

 

 

 

 

Net monitoring and transaction fees

 

46,540

 

19,146

 

19,573

 

105,266

 

34,129

 

 

 

 

 

 

 

 

 

 

 

 

 

Total fees

 

46,540

 

19,146

 

19,573

 

105,266

 

34,129

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

5,612

 

3,487

 

1,710

 

16,863

 

9,455

 

Occupancy and related charges

 

306

 

245

 

192

 

945

 

783

 

Other operating expenses

 

2,900

 

2,003

 

1,844

 

8,376

 

5,238

 

Total expenses

 

8,818

 

5,735

 

3,746

 

26,184

 

15,476

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee Related Earnings

 

37,722

 

13,411

 

15,827

 

79,082

 

18,653

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income (loss)

 

 

 

 

 

 

 

 

 

 

 

Gross carried interest

 

 

 

 

 

 

Less: allocation to KKR carry pool

 

 

 

 

 

 

Less: management fee refunds

 

 

 

 

 

 

Net carried interest

 

 

 

 

 

 

Other investment income (loss)

 

398,312

 

117,334

 

352,923

 

1,219,053

 

1,267,976

 

Total investment income (loss)

 

398,312

 

117,334

 

352,923

 

1,219,053

 

1,267,976

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) before noncontrolling interests in Income of consolidated entities

 

436,034

 

130,745

 

368,750

 

1,298,135

 

1,286,629

 

Income (Loss) attributable to noncontrolling interests

 

1,176

 

1,048

 

513

 

3,033

 

609

 

 

 

 

 

 

 

 

 

 

 

 

 

Economic Net Income (Loss)

 

$

434,858

 

$

129,697

 

$

368,237

 

$

1,295,102

 

$

1,286,020

 

 


* All amounts indicated in this press release as being presented on a pro forma basis give effect to the Business Combination and related transactions as if they were completed on January 1, 2009.  See notes to reportable segments on page 22 of this press release.

 

10



 

KKR

STATEMENTS OF OPERATIONS

TOTAL REPORTABLE SEGMENTS - ACTUAL (UNAUDITED)

Quarter Ended December 31, 2010

(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

 

$

102,684

 

$

16,359

 

$

 

$

119,043

 

Incentive fees

 

 

8,427

 

 

8,427

 

Management and incentive fees

 

102,684

 

24,786

 

 

127,470

 

 

 

 

 

 

 

 

 

 

 

Monitoring and transaction fees:

 

 

 

 

 

 

 

 

 

Monitoring fees

 

22,108

 

 

 

22,108

 

Transaction fees

 

30,942

 

9,292

 

46,540

 

86,774

 

Fee credits

 

(15,673

)

(5,998

)

 

(21,671

)

Net monitoring and transaction fees

 

37,377

 

3,294

 

46,540

 

87,211

 

 

 

 

 

 

 

 

 

 

 

Total fees

 

140,061

 

28,080

 

46,540

 

214,681

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

42,396

 

7,586

 

5,612

 

55,594

 

Occupancy and related charges

 

9,206

 

612

 

306

 

10,124

 

Other operating expenses

 

47,392

 

3,580

 

2,900

 

53,872

 

Total expenses

 

98,994

 

11,778

 

8,818

 

119,590

 

 

 

 

 

 

 

 

 

 

 

Fee Related Earnings

 

41,067

 

16,302

 

37,722

 

95,091

 

 

 

 

 

 

 

 

 

 

 

Investment income (loss)

 

 

 

 

 

 

 

 

 

Gross carried interest

 

414,025

 

2,417

 

 

416,442

 

Less: allocation to KKR carry pool

 

(168,338

)

(967

)

 

(169,305

)

Less: management fee refunds

 

(24,412

)

 

 

(24,412

)

Net carried interest

 

221,275

 

1,450

 

 

222,725

 

Other investment income (loss)

 

(111

)

188

 

398,312

 

398,389

 

Total investment income (loss)

 

221,164

 

1,638

 

398,312

 

621,114

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) before noncontrolling interests in Income of consolidated entities

 

262,231

 

17,940

 

436,034

 

716,205

 

Income (Loss) attributable to noncontrolling interests

 

259

 

157

 

1,176

 

1,592

 

 

 

 

 

 

 

 

 

 

 

Economic Net Income (Loss)

 

$

261,972

 

$

17,783

 

$

434,858

 

$

714,613

 

 

11



 

KKR

STATEMENTS OF OPERATIONS

TOTAL REPORTABLE SEGMENTS - ACTUAL (UNAUDITED)

Quarter Ended September 30, 2010

(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

 

$

98,337

 

$

14,208

 

$

 

$

112,545

 

Incentive fees

 

 

9,555

 

 

9,555

 

Management and incentive fees

 

98,337

 

23,763

 

 

122,100

 

 

 

 

 

 

 

 

 

 

 

Monitoring and transaction fees:

 

 

 

 

 

 

 

 

 

Monitoring fees

 

21,780

 

 

 

21,780

 

Transaction fees

 

19,816

 

1,672

 

19,146

 

40,634

 

Fee credits

 

(12,941

)

(742

)

 

(13,683

)

Net monitoring and transaction fees

 

28,655

 

930

 

19,146

 

48,731

 

 

 

 

 

 

 

 

 

 

 

Total fees

 

126,992

 

24,693

 

19,146

 

170,831

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

37,861

 

7,708

 

3,487

 

49,056

 

Occupancy and related charges

 

9,513

 

615

 

245

 

10,373

 

Other operating expenses

 

36,733

 

3,160

 

2,003

 

41,896

 

Total expenses

 

84,107

 

11,483

 

5,735

 

101,325

 

 

 

 

 

 

 

 

 

 

 

Fee Related Earnings

 

42,885

 

13,210

 

13,411

 

69,506

 

 

 

 

 

 

 

 

 

 

 

Investment income (loss)

 

 

 

 

 

 

 

 

 

Gross carried interest

 

236,792

 

1,131

 

 

237,923

 

Less: allocation to KKR carry pool

 

(90,704

)

(452

)

 

(91,156

)

Less: management fee refunds

 

(17,387

)

 

 

(17,387

)

Net carried interest

 

128,701

 

679

 

 

129,380

 

Other investment income (loss)

 

2,524

 

148

 

117,334

 

120,006

 

Total investment income (loss)

 

131,225

 

827

 

117,334

 

249,386

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) before noncontrolling interests in Income of consolidated entities

 

174,110

 

14,037

 

130,745

 

318,892

 

Income (Loss) attributable to noncontrolling interests

 

394

 

125

 

1,048

 

1,567

 

 

 

 

 

 

 

 

 

 

 

Economic Net Income (Loss)

 

$

173,716

 

$

13,912

 

$

129,697

 

$

317,325

 

 

12


 


 

KKR

STATEMENTS OF OPERATIONS

TOTAL REPORTABLE SEGMENTS - ACTUAL (UNAUDITED)

Quarter Ended December 31, 2009

(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

 

$

99,221

 

$

14,394

 

$

 

$

113,615

 

Incentive fees

 

 

 

 

 

Management and incentive fees

 

99,221

 

14,394

 

 

113,615

 

 

 

 

 

 

 

 

 

 

 

Monitoring and transaction fees:

 

 

 

 

 

 

 

 

 

Monitoring fees

 

68,383

 

 

 

68,383

 

Transaction fees

 

20,269

 

 

19,573

 

39,842

 

Fee credits

 

(26,260

)

 

 

(26,260

)

Net monitoring and transaction fees

 

62,392

 

 

19,573

 

81,965

 

 

 

 

 

 

 

 

 

 

 

Total fees

 

161,613

 

14,394

 

19,573

 

195,580

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

39,399

 

6,909

 

1,710

 

48,018

 

Occupancy and related charges

 

9,080

 

624

 

192

 

9,896

 

Other operating expenses

 

43,911

 

4,444

 

1,844

 

50,199

 

Total expenses

 

92,390

 

11,977

 

3,746

 

108,113

 

 

 

 

 

 

 

 

 

 

 

Fee Related Earnings

 

69,223

 

2,417

 

15,827

 

87,467

 

 

 

 

 

 

 

 

 

 

 

Investment income (loss)

 

 

 

 

 

 

 

 

 

Gross carried interest

 

139,034

 

 

 

139,034

 

Less: allocation to KKR carry pool

 

(40,077

)

 

 

(40,077

)

Less: management fee refunds

 

(22,720

)

 

 

(22,720

)

Net carried interest

 

76,237

 

 

 

76,237

 

Other investment income (loss)

 

605

 

(952

)

352,923

 

352,576

 

Total investment income (loss)

 

76,842

 

(952

)

352,923

 

428,813

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) before noncontrolling interests in Income of consolidated entities

 

146,065

 

1,465

 

368,750

 

516,280

 

Income (Loss) attributable to noncontrolling interests

 

497

 

15

 

513

 

1,025

 

 

 

 

 

 

 

 

 

 

 

Economic Net Income (Loss)

 

$

145,568

 

$

1,450

 

$

368,237

 

$

515,255

 

 

13



 

KKR

STATEMENTS OF OPERATIONS

TOTAL REPORTABLE SEGMENTS - ACTUAL (UNAUDITED)

Year Ended December 31, 2010

(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

 

396,227

 

$

57,059

 

$

 

$

453,286

 

Incentive fees

 

 

38,832

 

 

38,832

 

Management and incentive fees

 

396,227

 

95,891

 

 

492,118

 

 

 

 

 

 

 

 

 

 

 

Monitoring and transaction fees:

 

 

 

 

 

 

 

 

 

Monitoring fees

 

86,932

 

 

 

86,932

 

Transaction fees

 

96,000

 

19,117

 

105,266

 

220,383

 

Fee credits

 

(52,563

)

(12,336

)

 

(64,899

)

Net monitoring and transaction fees

 

130,369

 

6,781

 

105,266

 

242,416

 

 

 

 

 

 

 

 

 

 

 

Total fees

 

526,596

 

102,672

 

105,266

 

734,534

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

159,561

 

29,910

 

16,863

 

206,334

 

Occupancy and related charges

 

36,395

 

2,375

 

945

 

39,715

 

Other operating expenses

 

148,357

 

13,430

 

8,376

 

170,163

 

Total expenses

 

344,313

 

45,715

 

26,184

 

416,212

 

 

 

 

 

 

 

 

 

 

 

Fee Related Earnings

 

182,283

 

56,957

 

79,082

 

318,322

 

 

 

 

 

 

 

 

 

 

 

Investment income (loss)

 

 

 

 

 

 

 

 

 

Gross carried interest

 

1,202,070

 

5,000

 

 

1,207,070

 

Less: allocation to KKR carry pool

 

(453,872

)

(2,000

)

 

(455,872

)

Less: management fee refunds

 

(143,446

)

 

 

(143,446

)

Net carried interest

 

604,752

 

3,000

 

 

607,752

 

Other investment income (loss)

 

(1,643

)

718

 

1,219,053

 

1,218,128

 

Total investment income (loss)

 

603,109

 

3,718

 

1,219,053

 

1,825,880

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) before noncontrolling interests in Income of consolidated entities

 

785,392

 

60,675

 

1,298,135

 

2,144,202

 

Income (Loss) attributable to noncontrolling interests

 

839

 

537

 

3,033

 

4,409

 

 

 

 

 

 

 

 

 

 

 

Economic Net Income (Loss)

 

$

784,553

 

$

60,138

 

$

1,295,102

 

$

2,139,793

 

 

14



 

KKR

STATEMENTS OF OPERATIONS

TOTAL REPORTABLE SEGMENTS - PRO FORMA* (UNAUDITED)

Year Ended December 31, 2009

(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

 

$

387,112

 

$

50,604

 

$

 

$

437,716

 

Incentive fees

 

 

4,472

 

 

4,472

 

Management and incentive fees

 

387,112

 

55,076

 

 

442,188

 

 

 

 

 

 

 

 

 

 

 

Monitoring and transaction fees:

 

 

 

 

 

 

 

 

 

Monitoring fees

 

158,243

 

 

 

158,243

 

Transaction fees

 

57,699

 

 

34,129

 

91,828

 

Fee credits

 

(73,901

)

 

 

(73,901

)

Net monitoring and transaction fees

 

142,041

 

 

34,129

 

176,170

 

 

 

 

 

 

 

 

 

 

 

Total fees

 

529,153

 

55,076

 

34,129

 

618,358

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

136,465

 

22,677

 

9,455

 

168,597

 

Occupancy and related charges

 

34,747

 

2,483

 

783

 

38,013

 

Other operating expenses

 

140,989

 

18,104

 

5,238

 

164,331

 

Total expenses

 

312,201

 

43,264

 

15,476

 

370,941

 

 

 

 

 

 

 

 

 

 

 

Fee Related Earnings

 

216,952

 

11,812

 

18,653

 

247,417

 

 

 

 

 

 

 

 

 

 

 

Investment income (loss)

 

 

 

 

 

 

 

 

 

Gross carried interest

 

602,427

 

 

 

602,427

 

Less: allocation to KKR carry pool

 

(153,827

)

 

 

(153,827

)

Less: management fee refunds

 

(22,720

)

 

 

(22,720

)

Net carried interest

 

425,880

 

 

 

425,880

 

Other investment income (loss)

 

20,621

 

(5,259

)

1,267,976

 

1,283,338

 

Total investment income (loss)

 

446,501

 

(5,259

)

1,267,976

 

1,709,218

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) before noncontrolling interests in Income of consolidated entities

 

663,453

 

6,553

 

1,286,629

 

1,956,635

 

Income (Loss) attributable to noncontrolling interests

 

1,973

 

109

 

609

 

2,691

 

 

 

 

 

 

 

 

 

 

 

Economic Net Income (Loss)

 

$

661,480

 

$

6,444

 

$

1,286,020

 

$

1,953,944

 

 


* All amounts indicated in this press release as being presented on a pro forma basis give effect to the Business Combination and related transactions as if they were completed on January 1, 2009.  See notes to reportable segments on page 22 of this press release.

 

15


 


 

KKR

BALANCE SHEETS

TOTAL REPORTABLE SEGMENTS (UNAUDITED)

(Amounts in thousands, except per unit amounts)

 

As of December 31, 2010

 

 

 

Private Markets
Segment

 

Public Markets
Segment

 

Capital Markets
and Principal
Activities
Segment

 

Total Reportable
Segments

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

229,729

 

$

10,007

 

$

516,544

 

$

756,280

 

Investments

 

 

 

4,831,798

(a)

4,831,798

 

Unrealized carry

 

523,002

 

3,001

 

 

526,003

 

Other assets

 

194,424

 

53,222

 

39,730

 

287,376

 

Total assets

 

$

947,155

 

$

66,230

 

$

5,388,072

 

$

6,401,457

 

 

 

 

 

 

 

 

 

 

 

Debt obligations

 

$

 

$

 

$

500,000

 

$

500,000

 

Other liabilities

 

104,248

 

10,193

 

45,837

 

160,278

 

Total liabilities

 

104,248

 

10,193

 

545,837

 

660,278

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interests

 

(1,750

)

766

 

16,537

 

15,553

 

 

 

 

 

 

 

 

 

 

 

Partners’ capital

 

$

844,657

 

$

55,271

 

$

4,825,698

 

$

5,725,626

 

 

 

 

 

 

 

 

 

 

 

Book value per adjusted unit (b)

 

$

1.24

 

$

0.08

 

$

7.06

 

$

8.38

 

 

As of December 31, 2009

 

 

 

Private Markets
Segment

 

Public Markets
Segment

 

Capital Markets
and Principal
Activities
Segment

 

Total Reportable
Segments

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

51,015

 

$

9,089

 

$

496,554

 

$

556,658

 

Investments

 

 

 

4,108,359

 

4,108,359

 

Unrealized carry

 

156,149

 

 

 

156,149

 

Other assets

 

154,964

 

53,319

 

55,219

 

263,502

 

Total assets

 

$

362,128

 

$

62,408

 

$

4,660,132

 

$

5,084,668

 

 

 

 

 

 

 

 

 

 

 

Debt obligations

 

$

 

$

 

$

733,697

 

$

733,697

 

Other liabilities

 

84,936

 

12,300

 

85,802

 

183,038

 

Total liabilities

 

84,936

 

12,300

 

819,499

 

916,735

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interests

 

130

 

527

 

14,392

 

15,049

 

 

 

 

 

 

 

 

 

 

 

Partners’ capital

 

$

277,062

 

$

49,581

 

$

3,826,241

 

$

4,152,884

 

 

 

 

 

 

 

 

 

 

 

Book value per adjusted unit (b)

 

$

0.41

 

$

0.07

 

$

5.60

 

$

6.08

 

 


(a)           See capital markets and principal activities segment schedule of investments that follows in this press release.

 

(b)          Adjusted units represents the fully diluted unit count using the if-converted method. See Exhibit B for a reconciliation of this item to the comparable GAAP measure.

 

16



 

KKR

CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS

(Amounts in thousands, except percentage amounts)

 

 

 

As of December 31, 2010

 

Investment

 

Cost

 

Fair
Value

 

Fair Value as
a Percentage
of Investments

 

 

 

 

 

 

 

 

 

Private Equity Investments:

 

 

 

 

 

 

 

Co-investments in portfolio companies of private equity funds:

 

 

 

 

 

 

 

Dollar General Corporation

 

$

164,291

 

$

575,862

 

11.9

%

HCA Inc.

 

201,444

 

436,473

 

9.0

 

Alliance Boots GmbH.

 

301,352

 

304,192

 

6.3

 

The Nielsen Company B.V.

 

156,839

 

235,258

 

4.9

 

NXP B.V.

 

250,000

 

198,253

 

4.1

 

Biomet, Inc.

 

151,443

 

151,443

 

3.1

 

U.S. Foodservice, Inc.

 

100,000

 

120,000

 

2.5

 

ProSiebenSat.1 Media AG

 

226,913

 

106,731

 

2.2

 

First Data Corporation

 

135,258

 

81,155

 

1.7

 

KION Group GmbH.

 

128,058

 

55,199

 

1.1

 

Energy Future Holdings Corp.

 

200,000

 

40,000

 

0.9

 

PagesJaunes Groupe S.A.

 

235,201

 

 

 

Capmark Financial Group Inc.

 

137,321

 

 

 

 

 

2,388,120

 

2,304,566

 

47.7

%

Private equity funds:

 

 

 

 

 

 

 

KKR 2006 Fund L.P.

 

1,080,930

 

1,148,646

 

23.8

%

KKR Asian Fund L.P.

 

177,996

 

237,606

 

4.9

 

KKR European Fund III, Limited Partnership

 

183,368

 

193,090

 

4.0

 

KKR European Fund, Limited Partnership

 

144,133

 

189,240

 

3.9

 

KKR Millennium Fund L.P.

 

195,164

 

181,989

 

3.8

 

KKR European Fund II, Limited Partnership

 

95,974

 

83,923

 

1.7

 

KKR E2 Investors, L.P.

 

9,432

 

13,334

 

0.3

 

KKR China Growth Fund

 

1,479

 

1,479

 

 

 

 

1,888,476

 

2,049,307

 

42.4

%

 

 

 

 

 

 

 

 

Other Investments

 

505,820

 

477,925

 

9.9

%

 

 

 

 

 

 

 

 

Total Investments

 

$

4,782,416

 

$

4,831,798

 

100.0

%

 

17



 

KKR

CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS, CONTINUED

(Amounts in thousands, except percentage amounts)

 

 

 

As of December 31, 2010

 

Investment

 

Cost

 

Fair
Value

 

Fair Value as
a Percentage
of Investments

 

 

 

 

 

 

 

 

 

Significant Aggregate Investments: (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dollar General Corporation

 

$

227,972

 

$

767,168

 

15.9

%

HCA Inc.

 

255,307

 

540,618

 

11.2

 

Alliance Boots GmbH

 

426,523

 

437,905

 

9.1

 

The Nielsen Company B.V.

 

172,841

 

257,662

 

5.3

 

Biomet, Inc.

 

242,866

 

242,866

 

5.0

 

 

 

1,325,509

 

2,246,219

 

46.5

 

Other portfolio companies (b) 

 

2,951,087

 

2,107,654

 

43.6

 

Other investments

 

505,820

 

477,925

 

9.9

 

 

 

$

4,782,416

 

$

4,831,798

 

100.0

%

 

 

 

 

 

 

 

 

Investments by Geography:

 

 

 

 

 

 

 

North America

 

$

2,613,189

 

$

3,071,011

 

63.6

%

Europe

 

1,738,313

 

1,250,258

 

25.9

 

Asia Pacific

 

430,914

 

510,529

 

10.5

 

 

 

$

4,782,416

 

$

4,831,798

 

100.0

%

 

 

 

 

 

 

 

 

Investments by Industry:

 

 

 

 

 

 

 

Healthcare

 

$

992,269

 

$

1,286,435

 

26.6

%

Retail

 

544,719

 

1,093,883

 

22.6

 

Financial Services

 

999,425

 

693,866

 

14.4

 

Media/Telecom

 

811,348

 

541,846

 

11.2

 

Technology

 

532,138

 

538,496

 

11.1

 

Industrial

 

326,163

 

305,948

 

6.3

 

Energy

 

454,412

 

213,564

 

4.4

 

Consumer Products

 

100,850

 

124,543

 

2.6

 

Other

 

21,092

 

33,217

 

0.8

 

 

 

$

4,782,416

 

$

4,831,798

 

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, 2010. The fair value figures include the co-investment and the limited partner and/or general partner interests in the underlying portfolio company.

 

(b)          Other portfolio companies includes investments in private equity portfolio companies with individual fair values less than 5% of the capital markets and principal activities segment investments balance as of December 31, 2010.

 

18



 

KKR

ASSETS UNDER MANAGEMENT AND FEE PAYING ASSETS UNDER MANAGEMENT

(Amounts in thousands)

 

Assets Under Management

 

 

 

Private Markets
Segment

 

Public Markets
Segment

 

Total Reportable
Segments

 

Quarter Ended December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AUM as of September 30, 2010

 

$

41,878,700

 

$

13,619,800

 

$

55,498,500

 

New Capital Raised

 

2,483,100

 

993,200

 

3,476,300

 

Distributions

 

(1,400,500

)

(59,100

)

(1,459,600

)

Foreign Exchange

 

(45,900

)

 

(45,900

)

Change in Value

 

3,308,500

 

219,700

 

3,528,200

 

AUM as of December 31, 2010

 

$

46,223,900

 

$

14,773,600

 

$

60,997,500

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AUM as of December 31, 2009

 

$

38,842,900

 

$

13,361,300

 

$

52,204,200

 

New Capital Raised

 

3,025,500

 

1,970,100

 

4,995,600

 

Distributions

 

(4,085,200

)

(1,281,700

)

(5,366,900

)

Foreign Exchange

 

(274,800

)

 

(274,800

)

Change in Value

 

8,715,500

 

723,900

 

9,439,400

 

AUM as of December 31, 2010

 

$

46,223,900

 

$

14,773,600

 

$

60,997,500

 

 

Fee Paying Assets Under Management

 

 

 

Private Markets
Segment

 

Public Markets
Segment

 

Total Reportable
Segments

 

Quarter Ended December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FPAUM as of September 30, 2010

 

$

36,032,300

 

$

6,672,900

 

$

42,705,200

 

New Capital Raised

 

2,437,100

 

991,700

 

3,428,800

 

Distributions

 

(152,000

)

(59,100

)

(211,100

)

Foreign Exchange

 

(137,900

)

 

(137,900

)

Change in Value

 

7,200

 

218,900

 

226,100

 

FPAUM as of December 31, 2010

 

$

38,186,700

 

$

7,824,400

 

$

46,011,100

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FPAUM as of December 31, 2009

 

$

36,484,400

 

$

6,295,400

 

$

42,779,800

 

New Capital Raised

 

2,971,600

 

1,893,000

 

4,864,600

 

Distributions

 

(650,300

)

(1,281,700

)

(1,932,000

)

Foreign Exchange

 

(658,800

)

 

(658,800

)

Change in Value

 

39,800

 

917,700

 

957,500

 

FPAUM as of December 31, 2010

 

$

38,186,700

 

$

7,824,400

 

$

46,011,100

 

 

19



 

KKR

INVESTMENT VEHICLE SUMMARY (UNAUDITED)

As of December 31, 2010

(Amounts in millions, except percentages)

 

 

 

Investment Period

 

Amount

 

Private Markets

 

Commencement
Date

 

End
Date

 

Commitment

 

Uncalled
Commitments

 

Percentage
Committed
by General
Partner

 

Invested

 

Realized

 

Remaining
Cost

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private Equity Funds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

China Growth Fund

 

11/2010

 

11/2016

 

$

943.8

 

$

837.5

 

1.1%

 

$

106.3

 

$

 

$

106.3

 

$

106.3

 

E2 Investors (Annex Fund)

 

8/2009

 

11/2011

 

539.4

 

424.6

 

4.2%

 

114.8

 

 

114.8

 

165.9

 

European Fund III

 

3/2008

 

3/2014

 

5,956.2

 

3,709.6

 

4.5%

 

2,246.6

 

 

2,246.6

 

2,342.8

 

Asian Fund

 

7/2007

 

7/2013

 

3,983.2

 

1,567.6

 

2.5%

 

2,415.6

 

 

2,415.6

 

3,442.2

 

2006 Fund

 

9/2006

 

9/2012

 

17,642.2

 

4,726.5

 

2.1%

 

12,915.7

 

2,405.1

 

11,836.5

 

13,410.2

 

European Fund II

 

11/2005

 

10/2008

 

5,750.8

 

 

2.1%

 

5,750.8

 

761.6

 

5,335.9

 

4,594.0

 

Millennium Fund

 

12/2002

 

12/2008

 

6,000.0

 

 

2.5%

 

6,000.0

 

6,056.3

 

3,965.3

 

5,742.5

 

European Fund

 

12/1999

 

12/2005

 

3,085.4

 

 

3.2%

 

3,085.4

 

6,525.0

 

492.3

 

2,249.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Private Equity Funds

 

 

 

 

 

43,901.0

 

11,265.8

 

 

 

32,635.2

 

15,748.0

 

26,513.3

 

32,053.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Co-Investment Vehicles

 

Various

 

Various

 

3,194.4

 

659.3

 

Various

 

2,535.1

 

316.4

 

2,447.8

 

3,057.5

 

Natural Resources I

 

3/2010

 

10/2013

 

257.5

 

185.8

 

2.9%

 

71.7

 

 

71.7

 

71.7

 

Infrastructure Fund

 

9/2010

 

9/2016

 

515.0

 

515.0

 

9.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private Markets Total

 

 

 

 

 

47,867.9

 

12,625.9

 

 

 

35,242.0

 

16,064.4

 

29,032.8

 

35,182.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Solutions Vehicles

 

Various

 

Various

 

1,757.0

 

1,018.2

 

Various

 

738.8

 

 

738.8

 

787.7

 

Mezzanine Fund

 

3/2010

 

3/2015

 

558.6

 

430.6

 

8.1%

 

128.0

 

 

128.0

 

125.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public Markets Total

 

 

 

 

 

2,315.6

 

1,448.8

 

 

 

866.8

 

 

866.8

 

912.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

$

50,183.5

 

$

14,074.7

 

 

 

$

36,108.8

 

$

16,064.4

 

$

29,899.6

 

$

36,095.4

 

 

20



 

KKR

DISTRIBUTION CALCULATION

(Amounts in thousands, except unit and per unit amounts)

 

 

 

Quarter Ended

 

 

 

December 31, 2010

 

 

 

 

 

FRE

 

$

95,091

 

Realized cash carry

 

68,958

 

Less: local income taxes

 

(5,111

)

Less: noncontrolling interests

 

(1,592

)

Gross distributable earnings

 

157,346

 

 

 

 

 

Distributable earnings to KKR & Co. L.P.

 

49,014

 

 

 

 

 

Less: estimated current corporate income taxes

 

(13,880

)

Net cash available for distribution

 

$

35,134

 

 

 

 

 

Additional distribution (a)

 

$

27,000

 

 

 

 

 

Total distribution

 

$

62,134

 

 

 

 

 

Distribution per KKR & Co. L.P. common unit

 

$

0.29

 

 

 

 

 

Outstanding KKR & Co. L.P. common units

 

212,770,091

 

 


(a)           Additional distribution is provided primarily from certain realizations on investments within KKR’s capital markets and principal activities segment and was calculated in accordance with our distribution policy to cover certain tax liabilities. 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 gains on principal investments, 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 the purposes of KKR’s distribution policy, its distributions are expected to consist of an amount consisting 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) certain tax distributions, if any. This amount is expected to be reduced by (i) corporate and applicable local taxes, if any, (ii) noncontrolling 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.

 

21



 

KKR

 

Notes to Reportable Segments (Unaudited)

 

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 .

 

Business Combination

 

FRE and ENI previously reported for periods prior to October 1, 2009 did not reflect certain adjustments that are applicable for periods after October 1, 2009 as a result of the Business Combination, which include items such as:

 

·                   the exclusion of approximately 40% of the carry allocated to KKR principals pursuant to its carry pool;

·                   the exclusion of carry allocated to former KKR principals;

·                   the exclusion of the capital invested by or on behalf of the general partners of KKR’s private equity funds before the completion of the Business Combination and any returns thereon;

·                   the exclusion of the economic interests associated with the KKR 1996 Fund;

·                   the elimination of management fees paid by KKR & Co. (Guernsey) L.P. formerly known as KKR Private Equity Investors, L.P. (“KPE”), prior to the Business Combination, to KKR’s management companies;

·                   the inclusion of the financial results of KPE; and

·                   certain compensation adjustments including: (i) the exclusion of bonuses earned by certain of KKR’s principals which will not be borne by public investors and (ii) the inclusion of salaries for KKR’s senior principals.

 

Given the significance of these adjustments, the comparisons to all periods prior to October 1, 2009 in this press release are on a pro forma basis giving effect to the adjustments above.  For a further discussion of adjustments related to the Business Combination please refer to KKR & Co. L.P.’s prospectus filed on October 5, 2010, which is available at the SEC’s website at www.sec.gov.

 

Definitions

 

Fee related earnings (“FRE”) is comprised of segment operating revenues, less segment operating expenses. The components of FRE on a segment basis differ from the equivalent U.S. GAAP amounts on a combined basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of expenses of consolidated funds; (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; (vi) the exclusion of certain reimbursable expenses and (vii) the exclusion of certain non-recurring items .

 

Economic net income (“ENI”) is a measure of profitability for KKR’s reportable segments and is comprised of: (i) FRE; plus (ii) segment investment income, 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 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 relating to noncontrolling interests; and (iii) the exclusion of income taxes.

 

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.

 

Assets under management (“AUM”) represent the assets from which KKR is entitled to receive fees or a carried interest and general partner capital. 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; and (iv) the value of outstanding structured finance vehicles. You should note that KKR’s calculation of AUM may differ from the calculations of other asset managers and, as a result, its measurements of AUM may not be comparable to similar measures presented by other asset managers. KKR’s definition of AUM is not based on any definition of AUM that is set forth in the agreements governing the investment funds, vehicles or accounts that it manages.

 

22



 

KKR

 

Notes to Reportable Segments (Unaudited) (Continued)

 

Fee paying AUM (“FPAUM”) represents only those assets under management from which KKR receives 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 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 during a given period. Such amounts include: (i) capital invested by fund investors and co-investors with respect to which KKR is entitled to a carried interest and (ii) capital invested by KKR.

 

Uncalled commitments represent 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.

 

Fee Credits require KKR to share a portion of any monitoring and transaction fees received from portfolio companies with limited partners in certain of its investment funds.  Fee credits exclude fees that are not attributable to a fund’s investment in a portfolio company and generally amount to 80% of monitoring and transaction fees after fund related expenses are recovered.

 

KKR Carry Pool represents a portion of the carried interest earned in relation to certain of KKR’s active and future investment funds and co-investment vehicles that will be allocated to its principals, other professionals and selected other individuals.

 

Management Fee Refunds represent 20% of any cash management fees earned from limited partners in the event that certain of KKR’s investment funds recognize a carried interest.  At such time as the fund recognizes a carried interest in an amount sufficient to cover 20% of the management fees earned or a portion thereof, carried interest is reduced, not to exceed 20% of management fees earned. As of December 31, 2010, the amount subject to management fee refunds, which may reduce carried interest in future periods, totaled $58.7 million.

 

Noncontrolling interests represent economic interests that will (i) allocate to a former principal an aggregate of 1% of profits and losses of its management companies until a future date and (ii) allocate to a third party investor an aggregate of 2% of the equity in its capital markets business.

 

23



 

 

KKR

EXHIBIT A

RECONCILIATION OF TOTAL REPORTABLE SEGMENTS FEE RELATED EARNINGS AND ECONOMIC NET INCOME

TO NET INCOME ATTRIBUTABLE TO KKR & CO. L.P.  (GAAP BASIS - UNAUDITED)

(Amounts in thousands)

 

 

 

Quarter Ended

 

Quarter Ended

 

Year Ended

 

 

 

December 31, 2010

 

December 31, 2009

 

December 31, 2010

 

Total reportable segments fee related earnings

 

$

95,091

 

$

87,467

 

$

318,322

 

Investment income

 

621,114

 

428,813

 

1,825,880

 

Less: Income attributable to noncontrolling interests

 

(1,592

)

(1,025

)

(4,409

)

Economic net income (loss)

 

714,613

 

515,255

 

2,139,793

 

Income taxes

 

(14,362

)

(31,193

)

(75,360

)

Amortization of intangibles and other, net

 

(1,219

)

(1,066

)

(7,785

)

Non-cash equity based charges

 

(107,040

)

(562,373

)

(824,193

)

Allocations to carry pool recorded in connection with the Transactions

 

 

(115,540

)

 

Allocation to noncontrolling interests held by KKR Holdings L.P.

 

(411,413

)

116,696

 

(899,277

)

Net (income) loss attributable to KKR & Co. L.P.

 

$

180,579

 

$

(78,221

)

$

333,178

 

 

 

 

Year Ended

 

 

 

December 31, 2009 (a)

 

Total pro forma reportable segments fee related earnings

 

$

247,417

 

Investment income

 

1,709,218

 

Less: Income attributable to noncontrolling interests

 

(2,691

)

Pro forma economic net income (loss)

 

1,953,944

 

Allocation to carry pool

 

95,857

 

Carry allocated to former KKR principals

 

172,637

 

Income on capital invested by or on behalf of KKR principals prior to completion of the Business Combination

 

86,452

 

Economic interests associated with the KKR 1996 Fund

 

67,163

 

Elimination of management fees paid by KPE prior to completion of Business Combination

 

28,244

 

Financial results of KPE

 

(906,492

)

Certain compensation adjustments

 

(12,753

)

Income attributable to noncontrolling interests

 

1,601

 

Total actual economic net income (loss)

 

$

1,486,653

 

Costs relating to the Business Combination and related transactions

 

(34,846

)

Income taxes

 

(36,998

)

Amortization of intangibles and other, net

 

(3,907

)

Non-cash equity based charges

 

(562,373

)

Allocations to carry pool recorded in connection with the Transactions

 

(115,540

)

Allocation to noncontrolling interests held by KKR Holdings L.P.

 

116,696

 

Net income attributable to KKR & Co. L.P.

 

$

849,685

 

 


(a)    The segment financial information for the year ended December 31, 2009 is presented on a pro forma basis to give effect to the Business Combination and related transactions as if they were completed on January 1, 2009 whereas the 2009 GAAP financial information is presented on an actual basis.  Accordingly, the reconciliation of segment financial information to GAAP financial information for the year ended December 31, 2009 is presented in two parts:  (i) a reconciliation of 2009 pro forma segment financial information to 2009 actual segment financial information and (ii) a reconciliation of 2009 actual segment financial information to 2009 actual GAAP information.

 

24



 

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

 

Year Ended

 

 

 

December 31, 2010

 

September 30, 2010

 

December 31, 2009

 

December 31, 2010

 

Weighted Average GAAP Common Units Outstanding - Basic

 

209,383,219

 

204,902,226

 

204,902,226

 

206,031,682

 

Weighted Average Unvested Common Units(a)

 

30,000

 

 

 

7,562

 

Weighted Average GAAP Common Units Outstanding - Diluted

 

209,413,219

 

204,902,226

 

204,902,226

 

206,039,244

 

Adjustments:

 

 

 

 

 

 

 

 

 

Weighted Average KKR Holdings Units (b)

 

473,624,201

 

478,105,194

 

478,105,194

 

476,975,738

 

Weighted Average Adjusted Units

 

683,037,420

 

683,007,420

 

683,007,420

 

683,014,982

 

 

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, 2010

 

December 31, 2009

 

GAAP Common Units Outstanding - Basic

 

212,770,091

 

204,902,226

 

Unvested Common Units(a)

 

30,000

 

 

GAAP Common Units Outstanding - Diluted

 

212,800,091

 

204,902,226

 

Adjustments:

 

 

 

 

 

KKR Holdings Units (b)

 

470,237,329

 

478,105,194

 

Adjusted Units

 

683,037,420

 

683,007,420

 

 


(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.

 

25


Exhibit 99.2

 

 

KKR Appoints New Independent Director to Board

 

NEW YORK, February 23, 2011—KKR & Co. L.P. (NYSE: KKR) today announced that Thomas M. Schoewe is being appointed to the Board of Directors of KKR Management LLC, the managing partner of KKR, and its Audit Committee and Conflicts Committee, effective on March 14, 2011.

 

Mr. Schoewe, 59, is the former executive vice president and chief financial officer of Wal-Mart Stores, Inc.   In this position, he was responsible for accounting and control, business planning and analysis, internal auditing, treasury and tax.  Before Wal-Mart, he served as senior vice president and chief financial officer of Black and Decker Corp., a position he held from 1993 to 1999. Prior to his work at Black and Decker, he served as chief financial officer of Beatrice Consumer Durables, a division of Beatrice Companies.

 

Mr. Schoewe is currently a member of the Board of Directors of PulteGroup (NYSE: PHM) and a trustee for The First Tee Foundation, a charitable youth organization. A member of Financial Executives International, Mr. Schoewe holds a Bachelor of Business Administration degree in Finance from Loyola University of Chicago.

 

KKR’s other independent directors include Joseph A. Grundfest, Stanford Law Professor and former Commissioner of the Securities and Exchange Commission, Dieter Rampl, Chairman of Unicredit Group, and Robert W. Scully, former member of the Office of the Chairman of Morgan Stanley, who were appointed on July 15, 2010.

 

ABOUT KKR

Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $61.0 billion in assets under management as of December 31, 2010. With 14 offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with investors through its client relationships and capital markets platforms. KKR is publicly traded on the New York Stock Exchange (NYSE: KKR). For additional information, please visit KKR’s website at www.kkr.com.

 

CONTACT INFORMATION

 

 

 

 

 

Investor Relations:

 

Media Contact:

Jonathan Levin

Kohlberg Kravis Roberts & Co. L.P.

Tel: +1 (877) 610-4910 (U.S.) /

+1 (212) 230-9410

investor-relations@kkr.com

 

Peter McKillop or Kristi Huller

Kohlberg Kravis Roberts & Co. L.P. Tel:+

1 (212) 750-8300 media@kkr.com

 


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