09.02.2012 14:00
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KKR & Co. L.P. Announces Fourth Quarter and Full Year 2011 Results

KKR & Co. L.P. (NYSE: KKR) today reported its fourth quarter and full year 2011 results.

FRE was $116.6 million and $417.2 million for the quarter and year ended December 31, 2011, respectively, up 22.6% and 31.1% from the comparable periods of 2010. The increase in both comparative periods was principally attributable to higher transaction fees resulting from greater capital markets transaction activity and an increase in private equity capital deployment as well as additional management fees reflecting new capital raised.

AUM and fee paying assets under management ("FPAUM”) were $59.0 billion and $46.4 billion, respectively as of December 31, 2011. Both AUM and FPAUM were up slightly from September 30, 2011 due to new capital raised as well as investment appreciation during the period, partially offset by distributions to limited partners of our investment funds. Neither of these measures includes capital-raising for our 11th North American private equity fund, which at this preliminary stage has so far reached approximately $6 billion. This figure includes a first close on over $5.5 billion of commitments with the expectation of at least another $500 million in the near term, subject to documentation. The final size of the fund will not be known until the final close of the fund in approximately one year.

Our private equity investments appreciated 1.8% and 4.0% for the quarter and year ended December 31, 2011, respectively. ENI was $285.5 million and $750.9 million for the quarter and year ended December 31, 2011, respectively, down from $714.6 million and $2,139.8 million in the comparable periods of 2010. The decrease in both comparable periods was primarily due to a lower level of net carried interest earned from our private equity funds and investment income earned from our principal investments. While the fair value of our private equity portfolio and principal investments increased during the quarter and year ended December 31, 2011, the level of appreciation was lower than that in the comparable periods of 2010.

"By working across businesses in a volatile environment, we were able to monetize our ideas more effectively in 2011, resulting in 31% growth in annual fee related earnings and our highest-ever unitholder distribution as a public company,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. "This progress has carried over into 2012 with strong momentum in fundraising since the start of the year.”

Note: Certain financial measures, including FRE, ENI, after-tax ENI, after-tax ENI per adjusted unit, fee related EBITDA, book value, cash and short-term investments and adjusted units, are not presented in accordance with accounting principles generally accepted in the United States of America ("GAAP”). See Exhibits A and B for a reconciliation of such measures to financial results prepared in accordance with GAAP. See calculation of gross distributable earnings under "Distribution Calculation.”

GAAP RESULTS

GAAP results for the quarter and year ended December 31, 2011 included net income (loss) attributable to KKR & Co. L.P. of $46.1 million and $1.9 million, respectively, and net income (loss) per common unit attributable to KKR & Co. L.P. of $0.20 and $0.01, respectively. For the quarter and year ended December 31, 2010, net income (loss) attributable to KKR & Co. L.P. was $180.6 million and $333.2 million, respectively, and net income (loss) per common unit attributable to KKR & Co. L.P. was $0.86 and $1.62, respectively. The decrease in both comparative periods was primarily due to a lower level of investment appreciation recorded in net gains (losses) from investment activities in the consolidated and combined statements of operations. While the fair value of our private equity portfolio and principal investments increased during the quarter and year ended December 31, 2011, the level of appreciation was lower than that in the comparable periods of 2010.

SEGMENT RESULTS

Private Markets

AUM and FPAUM as of December 31, 2011 were $43.6 billion and $37.9 billion, respectively, both relatively unchanged from September 30, 2011. New capital raised during the period as well as appreciation in the fair value of our private equity portfolio was largely offset by distributions to the limited partners of our private equity funds arising from realizations.

FRE was $57.0 million for the quarter ended December 31, 2011, an increase of $15.9 million, or 38.7%, compared to FRE of $41.1 million for the quarter ended December 31, 2010. The increase was primarily attributable to higher transaction fees and an increase in management fees related to new capital raised.

FRE was $226.6 million for the year ended December 31, 2011, an increase of $44.3 million, or 24.3%, compared to FRE of $182.3 million for the year ended December 31, 2010. The increase was primarily driven by (i) higher monitoring fees as a result of $76.6 million of termination payments on monitoring agreements with three portfolio companies during the year ended December 31, 2011, which impacted FRE by $39.7 million net of associated fee credits; (ii) higher transaction fees resulting from closing more transaction fee-generating investments; and (iii) an increase in management fees related to new capital raised. These increases were partially offset by higher compensation and other operating expenses in connection with the expansion of this business.

ENI was $109.8 million for the quarter ended December 31, 2011, a decrease of $152.2 million, or 58.1%, compared to ENI of $262.0 million for the quarter ended December 31, 2010. ENI was $362.8 million for the year ended December 31, 2011, a decrease of $421.8 million, or 53.8%, compared to ENI of $784.6 million for the year ended December 31, 2010. The decrease in both comparative periods was primarily due to lower net carried interest driven by a lower level of appreciation in our private equity portfolio. While the fair value of our private equity portfolio increased during the quarter and year ended December 31, 2011, the level of appreciation was lower than that in the comparable periods of 2010.

Public Markets

AUM was $15.4 billion as of December 31, 2011, an increase of $0.4 billion, or 2.7%, compared to AUM of $15.0 billion as of September 30, 2011. FPAUM was $8.5 billion as of December 31, 2011, an increase of $0.2 billion, or 2.4%, compared to FPAUM of $8.3 billion as of September 30, 2011. For both AUM and FPAUM, the increases were principally attributable to new capital raised as well as appreciation in the net asset value of certain investment vehicles, partially offset by distributions and redemptions.

FRE was $11.8 million for the quarter ended December 31, 2011, a decrease of $4.5 million, or 27.6%, compared to FRE of $16.3 million for the quarter ended December 31, 2010. The decrease was primarily due to higher compensation expense as a result of the expansion of this business as well as lower incentive and transaction fees earned in the fourth quarter of 2011. These factors were partially offset by an increase in management fees related to new capital raised.

FRE was $59.6 million for the year ended December 31, 2011, an increase of $2.6 million, or 4.6%, compared to FRE of $57.0 million for the year ended December 31, 2010. The increase was primarily due to growth in management fees related to new capital raised, partially offset by higher compensation and other operating expenses in connection with the expansion of this business including the development of the equity strategies platform.

ENI was $11.8 million for the quarter ended December 31, 2011, a decrease of $6.0 million, or 33.7%, compared to ENI of $17.8 million for the quarter ended December 31, 2010. The decrease was primarily due to the decline in FRE discussed above.

ENI was $58.0 million for the year ended December 31, 2011, a decrease of $2.1 million, or 3.5%, compared to ENI of $60.1 million for the year ended December 31, 2010. The decrease was primarily due to a reversal of previously recognized net carried interest as a result of a decline in the carrying value of certain carry-earning investment vehicles.

Capital Markets and Principal Activities

FRE was $47.8 million for the quarter ended December 31, 2011, an increase of $10.1 million, or 26.8%, compared to FRE of $37.7 million for the quarter ended December 31, 2010. FRE was $130.9 million for the year ended December 31, 2011, an increase of $51.8 million, or 65.5%, compared to FRE of $79.1 million for the year ended December 31, 2010. The increase in both comparative periods was primarily driven by a higher level of capital markets transaction activity, partially offset by higher compensation and other operating expenses in connection with the expansion of this business.

ENI was $163.8 million for the quarter ended December 31, 2011, a decrease of $271.1 million, or 62.3%, compared to ENI of $434.9 million for the quarter ended December 31, 2010. ENI was $330.2 million for the year ended December 31, 2011, a decrease of $964.9 million, or 74.5%, compared to ENI of $1,295.1 million for the year ended December 31, 2010. The decrease in both comparative periods was primarily attributable to a lower level of investment income. While the fair value of our principal investments increased during the fourth quarter and full year of 2011, the level of appreciation was lower than in the comparable periods of 2010.

CAPITAL AND LIQUIDITY

As of December 31, 2011, KKR had cash and short-term investments on a segment basis of $989.4 million and $500.0 million of outstanding debt obligations under its senior notes. KKR’s availability for further borrowings was approximately $750.0 million (which does not include a $500.0 million revolving credit facility for use in its capital markets business that was undrawn as of December 31, 2011).

As of December 31, 2011, KKR’s portion of total uncalled commitments to its investment funds was $665.2 million, consisting of the following (amounts in thousands):

     
Commitments

Private Markets

European Fund III $ 266,900
2006 Fund 126,200
Asian Fund 64,300
Infrastructure Fund 36,000
E2 Investors (Annex Fund) 28,100
Natural Resources 18,800
China Growth Fund 7,200
Other Private Markets Commitments   9,100
Total Private Markets Commitments   556,600
 

Public Markets

Lending Partners 71,000
Mezzanine Fund 32,800
Special Situations Vehicles   4,800
Total Public Markets Commitments   108,600
 
Total Uncalled Commitments $ 665,200
 

DISTRIBUTION

A distribution of $0.32 per common unit will be paid on March 6, 2012 to unitholders of record as of the close of business on February 20, 2012.

CONFERENCE CALL

A conference call to discuss KKR’s financial results will be held on Thursday, February 9, 2012 at 10:00 a.m. EDT. The conference call may be accessed by dialing (888) 811-5456 (U.S. callers) or +1 (913) 312-0391 (non-U.S. callers); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Public Investor 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 (888) 203-1112 (U.S. callers) and +1 (719) 457-0820 (non-U.S. callers), pass code 5999497, beginning approximately two hours after the broadcast.

From time to time, KKR may use its website as a channel of distribution of material company information. Financial and other important information regarding KKR is routinely posted and accessible on the Public Investor 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 address at the "Email Alerts” area of the Public Investors section of the website.

ABOUT KKR

Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $59.0 billion in assets under management as of December 31, 2011. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with investors through its client relationships and capital markets platform. KKR is 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 AUM, FPAUM, FRE, gross distributable earnings, ENI, after-tax ENI, fee related EBITDA, committed dollars invested, uncalled commitments, core interest expense, cash and short-term investments and book value, may vary materially from those expressed in the forward-looking statements. The following factors, among others, could cause actual results to vary from the forward-looking statements: the general volatility of the capital markets; failure to realize the benefits of or changes in KKR’s business strategies; availability, terms and deployment of capital; availability of qualified personnel and expense of recruiting and retaining such personnel; changes in the asset management industry, interest rates or the general economy; underperformance of KKR's investments and decreased ability to raise funds; and the degree and nature of KKR’s competition. KKR does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made except as required by law. In addition, KKR’s business strategy is focused on the long term and financial results are subject to significant volatility. Additional information about factors affecting KKR is available in KKR & Co. L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed with the SEC on March 7, 2011, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2011, June 30, 2011 and September 30, 2011, filed with the SEC on May 5, 2011, August 5, 2011 and November 8, 2011, and other filings with the SEC, which are available at www.sec.gov.

       
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, 2011

December 31, 2010

December 31, 2011

December 31, 2010

Revenues
Fees $ 209,357   $ 146,267   $ 723,620   $ 435,386  
 
Expenses
Compensation and Benefits 190,832 299,123 868,749 1,344,455
Occupancy and Related Charges 15,197 10,124 54,282 39,692
General, Administrative and Other   124,108     109,655     290,974     378,516  
Total Expenses   330,137     418,902     1,214,005     1,762,663  
 
Investment Income (Loss)
Net Gains (Losses) from Investment Activities 514,580 2,986,845 981,858 7,755,090
Dividend Income 117,944 441,781 225,073 1,250,293
Interest Income 102,968 55,766 321,943 226,824
Interest Expense   (20,393 )   (18,706 )   (72,758 )   (53,099 )
Total Investment Income (Loss)   715,099     3,465,686     1,456,116     9,179,108  
 
Income (Loss) Before Taxes 594,319 3,193,051 965,731 7,851,831
 
Income Taxes   21,322     14,362     89,245     75,360  
 
Net Income (Loss) 572,997 3,178,689 876,486 7,776,471
 
Net Income (Loss) Attributable to
Redeemable Noncontrolling Interests 4,318 - 4,318 -
Net Income (Loss) Attributable to
Noncontrolling Interests 522,542 2,998,110 870,247 7,443,293
       
Net Income (Loss) Attributable to KKR & Co. L.P. $ 46,137   $ 180,579   $ 1,921   $ 333,178  
 
Distributions Declared per KKR & Co. L.P. Common Unit $ 0.32 $ 0.29 $ 0.74 $ 0.60
 
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic $ 0.20 $ 0.86 $ 0.01 $ 1.62
Diluted (a) $ 0.20 $ 0.86 $ 0.01 $ 1.62
Weighted Average Common Units Outstanding
Basic 225,382,001 209,383,219 220,235,469 206,031,682
Diluted (a) 231,361,032 209,413,219 222,519,174 206,039,244
 

(a)

 

KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit given that the exchange of these units would proportionally increase KKR & Co. L.P.’s interests in KKR’s business and would have an anti-dilutive effect on earnings per common unit as a result of certain tax benefits KKR & Co. L.P. is assumed to receive upon the exchange.

         
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
 
Quarter Ended Year Ended

December 31, 2011

September 30, 2011

December 31, 2010

December 31, 2011

 

December 31, 2010

Fees
Management and incentive fees:
Management fees $ 127,556 $ 134,049 $ 119,043 $ 515,384 $ 453,286
Incentive fees   6,084     -     8,427     34,243     38,832  
Management and incentive fees   133,640     134,049     127,470     549,627     492,118  
 
Monitoring and transaction fees:
Monitoring fees 21,797 20,892 22,108 163,769 86,932
Transaction fees 128,338 98,631 86,774 349,130 220,383
Fee credits   (36,862 )   (28,793 )   (21,671 )   (150,858 )   (64,899 )
Net monitoring and transaction fees   113,273     90,730     87,211     362,041     242,416  
 
Total fees   246,913     224,779     214,681     911,668     734,534  
 
Expenses
Compensation and benefits (a) 65,038 66,663 55,594 257,951 206,334
Occupancy and related charges 14,353 12,675 10,124 51,009 39,715
Other operating expenses   50,947     47,199     53,872     185,555     170,163  
Total expenses   130,338     126,537     119,590     494,515     416,212  
 
Fee Related Earnings   116,575     98,242     95,091     417,153     318,322  
 
Investment income (loss)
Gross carried interest 96,503 (366,387 ) 416,442 263,621 1,207,070
Less: allocation to KKR carry pool (40,410 ) 151,191 (169,305 ) (108,325 ) (455,872 )
Less: management fee refunds (b)   (1,993 )   21,115     (24,412 )   (17,587 )   (143,446 )
Net carried interest 54,100 (194,081 ) 222,725 137,709 607,752
Other investment income (loss)   117,039     (494,412 )   398,389     202,758     1,218,128  
Total investment income (loss)   171,139     (688,493 )   621,114     340,467     1,825,880  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 287,714 (590,251 ) 716,205 757,620 2,144,202
Income (Loss) attributable to
noncontrolling interests   2,220     1,840     1,592     6,671     4,409  
 
Economic Net Income (Loss) $ 285,494   $ (592,091 ) $ 714,613   $ 750,949   $ 2,139,793  
 
Provision for Income Taxes 59,988 29,634 17,400 248,082 210,196
 
Economic Net Income (Loss), After Taxes (c) $ 225,506   $ (621,725 ) $ 697,213   $ 502,867   $ 1,929,597  
 
Economic Net Income (Loss), After Taxes per Adjusted Unit (c) $ 0.33 $ (0.91 ) $ 1.02 $ 0.73 $ 2.83

 

Assets Under Management $ 59,008,600 $ 58,720,800 $ 60,997,500 $ 59,008,600 $ 60,997,500
Fee Paying Assets Under Management $ 46,397,300 $ 46,221,200 $ 46,011,100 $ 46,397,300 $ 46,011,100
Committed Dollars Invested $ 2,582,600 $ 1,807,200 $ 2,691,000 $ 6,014,000 $ 5,253,300
Uncalled Commitments   $ 11,400,500     $ 12,807,200     $ 14,074,700     $ 11,400,500     $ 14,074,700  
 

Other Information

Fee Related Earnings $ 116,575 $ 98,242 $ 95,091 $ 417,153 $ 318,322
Plus: depreciation and amortization   2,528     2,147     2,790       9,925       11,664  
Fee Related EBITDA $ 119,103   $ 100,389   $ 97,881     $ 427,078     $ 329,986  
 
Gross Distributable Earnings $ 195,725 $ 104,395 $ 157,346 $ 596,306 $ 486,035
 
GAAP interest expense $ 20,393 $ 17,742 $ 18,706 $ 72,758 $ 53,099
Less: interest expense related to debt obligations
from investment financing arrangements   9,598     7,233     7,535       30,160       28,622  
Core Interest Expense (c) $ 10,795   $ 10,509   $ 11,171     $ 42,598     $ 24,477  
                                         

(a)

 

Excludes a $5.5 million and $16.7 million charge for non-cash equity based compensation during the quarter and year ended December 31, 2011, respectively, associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. Excludes a $6.8 million charge for non-cash equity based compensation during the quarter ended September 30, 2011 associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan.

(b)

As of December 31, 2011, $91.4 million of carried interest is subject to management fee refunds, which may reduce carried interest in future periods.

(c)

See definitions for After-tax ENI, adjusted units, and core interest expense under "Notes to Reportable Segments.”

       
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
 
Quarter Ended Year Ended

December 31, 2011

September 30, 2011

December 31, 2010

December 31, 2011

December 31, 2010

Fees
Management and incentive fees:
Management fees $ 106,716 $ 106,748 $ 102,684 $ 430,400 $ 396,227
Incentive fees   -     -     -     -     -  
Management and incentive fees   106,716     106,748     102,684     430,400     396,227  
 
Monitoring and transaction fees:
Monitoring fees 21,797 20,892 22,108 163,769 86,932
Transaction fees 65,148 40,196 30,942 166,654 96,000
Fee credits   (34,799 )   (27,229 )   (15,673 )   (144,928 )   (52,563 )
Net monitoring and transaction fees   52,146     33,859     37,377     185,495     130,369  
 
Total fees   158,862     140,607     140,061     615,895     526,596  
 
Expenses
Compensation and benefits (a) 46,139 47,390 42,396 185,709 159,561
Occupancy and related charges 12,902 11,273 9,206 45,694 36,395
Other operating expenses   42,825     40,768     47,392     157,901     148,357  
Total expenses   101,866     99,431     98,994     389,304     344,313  
 
Fee Related Earnings   56,996     41,176     41,067     226,591     182,283  
 
Investment income (loss)
Gross carried interest 96,115 (360,282 ) 414,025 266,211 1,202,070
Less: allocation to KKR carry pool (40,255 ) 148,749 (168,338 ) (109,361 ) (453,872 )
Less: management fee refunds   (1,993 )   21,115     (24,412 )   (17,587 )   (143,446 )
Net carried interest 53,867 (190,418 ) 221,275 139,263 604,752
Other investment income (loss)   (364 )   (1,942 )   (111 )   (549 )   (1,643 )
Total investment income (loss)   53,503     (192,360 )   221,164     138,714     603,109  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 110,499 (151,184 ) 262,231 365,305 785,392
Income (Loss) attributable to
noncontrolling interests   651     790     259     2,536     839  
 
Economic Net Income (Loss) $ 109,848   $ (151,974 ) $ 261,972   $ 362,769   $ 784,553  
 
 
Assets Under Management $ 43,627,900 $ 43,744,400 $ 46,223,900 $ 43,627,900 $ 46,223,900
Fee Paying Assets Under Management $ 37,869,700 $ 37,936,800 $ 38,186,700 $ 37,869,700 $ 38,186,700
Committed Dollars Invested $ 2,148,400 $ 1,654,900 $ 2,371,500 $ 5,033,300 $ 4,555,700
Uncalled Commitments $ 10,070,300 $ 11,243,600 $ 12,625,900 $ 10,070,300 $ 12,625,900
 
(a)   Excludes a $3.4 million and $8.3 million charge for non-cash equity based compensation during the quarter and year ended December 31, 2011, respectively, associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. Excludes a $4.2 million charge for non-cash equity based compensation during the quarter ended September 30, 2011 associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan.

         
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
 
Quarter Ended Year Ended

December 31, 2011

September 30, 2011

December 31, 2010

December 31, 2011

December 31, 2010

Fees
Management and incentive fees:
Management fees $ 20,840 $ 27,301 $ 16,359 $ 84,984 $ 57,059
Incentive fees   6,084     -     8,427     34,243     38,832  
Management and incentive fees   26,924     27,301     24,786     119,227     95,891  
 
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 4,151 3,760 9,292 11,996 19,117
Fee credits   (2,063 )   (1,564 )   (5,998 )   (5,930 )   (12,336 )
Net monitoring and transaction fees   2,088     2,196     3,294     6,066     6,781  
 
Total fees   29,012     29,497     28,080     125,293     102,672  
 
Expenses
Compensation and benefits (a) 12,166 12,144 7,586 46,133 29,910
Occupancy and related charges 1,189 1,097 612 4,059 2,375
Other operating expenses   3,834     3,807     3,580     15,483     13,430  
Total expenses   17,189     17,048     11,778     65,675     45,715  
 
Fee Related Earnings   11,823     12,449     16,302     59,618     56,957  
 
Investment income (loss)
Gross carried interest 388 (6,105 ) 2,417 (2,590 ) 5,000
Less: allocation to KKR carry pool (155 ) 2,442 (967 ) 1,036 (2,000 )
Less: management fee refunds   -     -     -     -     -  
Net carried interest 233 (3,663 ) 1,450 (1,554 ) 3,000
Other investment income (loss)   (93 )   288     188     505     718  
Total investment income (loss)   140     (3,375 )   1,638     (1,049 )   3,718  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 11,963 9,074 17,940 58,569 60,675
Income (Loss) attributable to
noncontrolling interests   119     164     157     599     537  
 
Economic Net Income (Loss) $ 11,844   $ 8,910   $ 17,783   $ 57,970   $ 60,138  
 
Assets Under Management $ 15,380,700 $ 14,976,400 $ 14,773,600 $ 15,380,700 $ 14,773,600
Fee Paying Assets Under Management $ 8,527,600 $ 8,284,400 $ 7,824,400 $ 8,527,600 $ 7,824,400
Committed Dollars Invested $ 434,200 $ 152,300 $ 319,500 $ 980,700 $ 697,600
Uncalled Commitments $ 1,330,200 $ 1,563,600 $ 1,448,800 $ 1,330,200 $ 1,448,800
 

(a)

 

Excludes a $1.8 million and $8.0 million charge for non-cash equity based compensation during the quarter and year ended December 31, 2011, respectively, associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. Excludes a $2.5 million charge for non-cash equity based compensation during the quarter ended September 30, 2011 associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan.

         
KKR
STATEMENTS OF OPERATIONS
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT (UNAUDITED)
(Amounts in thousands)
 
Quarter Ended Year Ended

December 31, 2011

September 30, 2011

December 31, 2010

December 31, 2011

December 31, 2010

Fees
Management and incentive fees:
Management fees $ - $ - $ - $ - $ -
Incentive fees   -     -     -     -     -  
Management and incentive fees   -     -     -     -     -  
 
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 59,039 54,675 46,540 170,480 105,266
Fee credits   -     -     -     -     -  
Net monitoring and transaction fees   59,039     54,675     46,540     170,480     105,266  
 
Total fees   59,039     54,675     46,540     170,480     105,266  
 
Expenses
Compensation and benefits (a) 6,733 7,129 5,612 26,109 16,863
Occupancy and related charges 262 305 306 1,256 945
Other operating expenses   4,288     2,624     2,900     12,171     8,376  
Total expenses   11,283     10,058     8,818     39,536     26,184  
 
Fee Related Earnings   47,756     44,617     37,722     130,944     79,082  
 
Investment income (loss)
Gross carried interest - - - - -
Less: allocation to KKR carry pool - - - - -
Less: management fee refunds   -     -     -     -     -  
Net carried interest - - - - -
Other investment income (loss)  

117,496

 

  (492,758 )  

398,312

)

 

202,802

 

 

1,219,053

 

Total investment income (loss)   117,496     (492,758 )   398,312     202,802     1,219,053  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 165,252 (448,141 ) 436,034 333,746 1,298,135
Income (Loss) attributable to
noncontrolling interests   1,450     886     1,176     3,536     3,033  
 
Economic Net Income (Loss) $ 163,802   $ (449,027 ) $ 434,858   $ 330,210   $ 1,295,102  
 

(a)

 

Excludes a $0.3 million and $0.4 million charge for non-cash equity based compensation during the quarter and year ended December 31, 2011 associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. Excludes a $0.1 million charge for non-cash equity based compensation during the quarter ended September 30, 2011 associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan

       
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS - ACTUAL (UNAUDITED)
Quarter Ended December 31, 2011
(Amounts in thousands)
 
Private Markets
Segment
Public Markets
Segment
Capital Markets
and Principal
Activities Segment
Total
Reportable
Segments
 
Fees
Management and incentive fees:
Management fees $ 106,716 $ 20,840 $

-

 

$ 127,556
Incentive fees   -     6,084     -     6,084  
Management and incentive fees   106,716     26,924     -     133,640  
 
Monitoring and transaction fees:
Monitoring fees 21,797 - - 21,797
Transaction fees 65,148 4,151 59,039 128,338
Fee credits   (34,799 )   (2,063 )   -     (36,862 )
Net monitoring and transaction fees   52,146     2,088     59,039     113,273  
 
Total fees   158,862     29,012     59,039     246,913  
 
Expenses
Compensation and benefits (a) 46,139 12,166 6,733 65,038
Occupancy and related charges 12,902 1,189 262 14,353
Other operating expenses   42,825       3,834     4,288     50,947  
Total expenses   101,866       17,189     11,283     130,338  
 
Fee Related Earnings   56,996     11,823     47,756     116,575  
 
Investment income (loss)
Gross carried interest 96,115 388 - 96,503
Less: allocation to KKR carry pool (40,255 ) (155 ) - (40,410 )
Less: management fee refunds   (1,993 )   -     -     (1,993 )
Net carried interest 53,867 233 - 54,100
Other investment income (loss)   (364 )   (93 )   117,496     117,039  
Total investment income (loss)   53,503     140     117,496     171,139  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 110,499 11,963 165,252 287,714
Income (Loss) attributable to
noncontrolling interests 651 119 1,450 2,220
       
Economic Net Income (Loss) $ 109,848   $ 11,844   $ 163,802   $ 285,494  
 

(a)

 

Excludes a $5.5 million charge for non-cash equity based compensation associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan (Private Markets – $3.4 million; Public Markets – $1.8 million; Capital Markets and Principal Activities – $0.3 million).

       
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS - ACTUAL (UNAUDITED)
Quarter Ended September 30, 2011
(Amounts in thousands)
 
 
Private Markets
Segment
Public Markets
Segment
Capital Markets
and Principal
Activities Segment
Total
Reportable
Segments
 
Fees
Management and incentive fees:
Management fees $ 106,748 $ 27,301 $ - $ 134,049
Incentive fees   -     -     -     -  
Management and incentive fees   106,748     27,301     -     134,049  
 
Monitoring and transaction fees:
Monitoring fees 20,892 - - 20,892
Transaction fees 40,196 3,760 54,675 98,631
Fee credits   (27,229 )   (1,564 )   -     (28,793 )
Net monitoring and transaction fees   33,859     2,196     54,675     90,730  
 
Total fees   140,607     29,497     54,675     224,779  
 
Expenses
Compensation and benefits (a) 47,390 12,144 7,129 66,663
Occupancy and related charges 11,273 1,097 305 12,675
Other operating expenses   40,768       3,807     2,624     47,199  
Total expenses   99,431       17,048     10,058     126,537  
 
Fee Related Earnings   41,176     12,449     44,617     98,242  
 
Investment income (loss)
Gross carried interest (360,282 ) (6,105 ) - (366,387 )
Less: allocation to KKR carry pool 148,749 2,442 - 151,191
Less: management fee refunds   21,115     -     -     21,115  
Net carried interest (190,418 ) (3,663 ) - (194,081 )
Other investment income (loss)   (1,942 )   288     (492,758 )   (494,412 )
Total investment income (loss)   (192,360 )   (3,375 )   (492,758 )   (688,493 )
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities (151,184 ) 9,074 (448,141 ) (590,251 )
Income (Loss) attributable to
noncontrolling interests 790 164 886 1,840
       
Economic Net Income (Loss) $ (151,974 ) $ 8,910   $ (449,027 ) $ (592,091 )
 

(a)

 

Excludes a $6.8 million charge for non-cash equity based compensation associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan (Private Markets – $4.2 million; Public Markets – $2.5 million; Capital Markets and Principal Activities – $0.1 million).

       
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS - ACTUAL (UNAUDITED)
Quarter Ended December 31, 2010
(Amounts in thousands)
 
 
Private Markets
Segment
Public Markets
Segment
Capital Markets
and Principal
Activities Segment
Total
Reportable
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
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  
 

       
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS - ACTUAL (UNAUDITED)
Year Ended December 31, 2011
(Amounts in thousands)
 
 
Private Markets
Segment
Public Markets
Segment
Capital Markets
and Principal
Activities Segment
Total
Reportable
Segments
 
Fees
Management and incentive fees:
Management fees $ 430,400 $ 84,984 $ - $ 515,384
Incentive fees   -     34,243     -     34,243  
Management and incentive fees   430,400     119,227     -     549,627  
 
Monitoring and transaction fees:
Monitoring fees 163,769 - - 163,769
Transaction fees 166,654 11,996 170,480 349,130
Fee credits   (144,928 )   (5,930 )   -     (150,858 )
Net monitoring and transaction fees   185,495     6,066     170,480     362,041  
 
Total fees   615,895     125,293     170,480     911,668  
 
Expenses
Compensation and benefits (a) 185,709 46,133

26,109

 

257,951
Occupancy and related charges 45,694 4,059 1,256 51,009
Other operating expenses   157,901       15,483     12,171     185,555  
Total expenses   389,304       65,675     39,536     494,515  
 
Fee Related Earnings   226,591     59,618     130,944     417,153  
 
Investment income (loss)
Gross carried interest 266,211 (2,590 ) - 263,621
Less: allocation to KKR carry pool (109,361 ) 1,036 - (108,325 )
Less: management fee refunds   (17,587 )   -     -     (17,587 )

Net carried interest

139,263 (1,554 ) - 137,709
Other investment income (loss)   (549 )   505     202,802     202,758  
Total investment income (loss)   138,714     (1,049 )   202,802     340,467  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 365,305 58,569 333,746 757,620
Income (Loss) attributable to
noncontrolling interests 2,536 599 3,536 6,671
       
Economic Net Income (Loss) $ 362,769   $ 57,970   $ 330,210   $ 750,949  
 

(a)

 

Excludes a $16.7 million charge for non-cash equity based compensation associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan (Private Markets – $8.3 million; Public Markets – $8.0 million; Capital Markets and Principal Activities – $0.4 million).

       
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS - ACTUAL (UNAUDITED)
Year Ended December 31, 2010
(Amounts in thousands)
 
 
Private Markets
Segment
Public Markets
Segment
Capital Markets
and Principal
Activities Segment
Total
Reportable
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
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  
 

                       
KKR
BALANCE SHEETS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
 
As of December 31, 2011

Private
Markets
Segment

Public
Markets
Segment

Capital
Markets and
Principal
Activities
Segment

Total
Reportable
Segments

 
Cash and short-term investments $ 296,717 $ 8,087 $ 684,637 $ 989,441
Investments - - 4,743,406

 

(a)

4,743,406
Unrealized carry 419,523 1,447 - 420,970
Other assets   139,432     58,360   63,799   261,591
Total assets $ 855,672   $ 67,894 $ 5,491,842 $ 6,415,408
 
Debt obligations $ - $ - $ 500,000 $ 500,000
Other liabilities   128,590     8,153   49,329   186,072
Total liabilities   128,590     8,153   549,329   686,072
 
Noncontrolling interests (1,358 ) 729 19,381 18,752
       
Book value $ 728,440   $ 59,012 $ 4,923,132 $ 5,710,584
 
Book value per adjusted unit $ 1.06 $ 0.09 $ 7.14 $ 8.29
 
 
 
As of December 31, 2010

Private
Markets
Segment

Public
Markets
Segment

Capital
Markets and
Principal
Activities
Segment

Total
Reportable
Segments

 
Cash and short-term investments $ 229,729 $ 10,007 $ 516,544 $ 756,280
Investments - - 4,831,798 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
       
Book value $ 844,657   $ 55,271 $ 4,825,698 $ 5,725,626
 
Book value per adjusted unit $ 1.24 $ 0.08 $ 7.06 $ 8.38
 

(a) See Capital Markets and Principal Activities segment schedule of investments that follows on pages 16 and 17.

     
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS
(Amounts in thousands, except percentage amounts)
 
As of December 31, 2011

 


Investment

 


Cost

Fair
Value
Fair Value as
a Percentage
of Investments
 
Co-investments in portfolio companies of
private equity funds:
Dollar General Corporation $ 122,998 $ 578,299 12.2 %
HCA Inc. 171,227 333,205 7.0 %
The Nielsen Company B.V. 156,839 309,545 6.5 %
Alliance Boots GmbH 301,352 303,081 6.4 %
Samson Resources 263,586 263,586 5.6 %
U.S. Foodservice, Inc. 100,000 130,000 2.7 %
Biomet, Inc. 151,443 121,155 2.6 %
NXP B.V. 207,963 121,108 2.6 %
ProSiebenSat.1 Media AG 226,913 103,458 2.2 %
First Data Corporation 135,258 81,155 1.7 %
KION Group GmbH 128,058 58,882 1.2 %
Energy Future Holdings Corp. 200,000 20,000 0.4 %
PagesJaunes Groupe S.A.   235,201   - 0.0 %
  2,400,838   2,423,474 51.1 %
 
Private Equity Investment Vehicles
KKR 2006 Fund L.P. 852,474 891,266 18.8 %
KKR European Fund III L.P. 164,042 169,312 3.6 %
KKR Millennium Fund L.P. 148,223 152,284 3.2 %
KKR Asian Fund L.P. 94,799 127,049 2.7 %
KKR European Fund II L.P. 89,611 67,539 1.4 %
KKR European Fund L.P. 82,529 59,416 1.3 %
KKR E2 Investors, L.P. 12,187 18,318 0.4 %
KKR China Growth Fund L.P. 2,749 3,944 0.1 %
Co-Investment Vehicles   770   804 0.0 %
Private Equity Investment Vehicles   1,447,384   1,489,932 31.5 %
 
Private Equity Total   3,848,222   3,913,406 82.6 %
 
Energy & Infrastructure
Infrastructure Fund 13,887 13,402 0.3 %
Co-Investment Vehicles 10,453 11,817 0.2 %
Natural Resources   4,220   3,076 0.1 %
Energy & Infrastructure Total   28,560   28,295 0.6 %
 
Private Markets Total   3,876,782   3,941,701 83.2 %
 
Public Markets Investment Vehicles
Liquid Credit SMAs/Funds 170,000 176,759 3.7 %
Long/Short Equities Funds 100,000 97,155 2.0 %
Lending Partners 29,000 29,658 0.6 %
Special Situations Vehicles 17,998 18,397 0.4 %
Mezzanine Fund   12,065   12,847 0.3 %
Public Markets Total   329,063   334,816 7.0 %
 
Other   479,351   466,889 9.8 %
 
Total Investments $ 4,685,196 $ 4,743,406 100.0 %
 

 
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS, CONTINUED
(Amounts in thousands, except percentage amounts)
     
As of December 31, 2011

 


Investment

 


Cost

Fair
Value
Fair Value as
a Percentage
of Investments
 
Significant Aggregate Investments: (a)
Dollar General Corporation $ 170,654 $ 767,417 16.2 %
HCA Inc. 217,011 413,637 8.7 %
Alliance Boots GmbH 352,382 357,690 7.5 %
Samson Resources 339,287 339,287 7.2 %
The Nielsen Company B.V.   172,841   338,189 7.1 %
1,252,175 2,216,220 46.7 %
Other investments   3,433,021   2,527,186 53.3 %
Total Investments $ 4,685,196 $ 4,743,406 100.0 %
 
 
Investments by Geography:
North America $ 2,963,056 $ 3,556,986 75.0 %
Europe 1,534,843 958,045 20.2 %
Asia-Pacific   187,297   228,375 4.8 %
Total Investments $ 4,685,196 $ 4,743,406 100.0 %
 
 
Investments by Industry:
Retail $ 427,425 $ 1,014,440 21.4 %
Healthcare 817,646 979,100 20.6 %
Financial Services 1,203,158 889,697 18.8 %
Media/Telecom 763,764 566,047 11.9 %
Other 36,183 331,342 6.9 %
Technology 401,351 316,627 6.7 %
Energy 664,056 311,748 6.6 %
Industrial 268,992 236,416 5.0 %
Consumer Products   102,621   97,989 2.1 %
Total Investments $ 4,685,196 $ 4,743,406 100.0 %
 

(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, 2011. The fair value figures include the co-investment and the limited partner and/or general partner interests in the underlying portfolio company.

             
KKR
ASSETS UNDER MANAGEMENT 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, 2011

 
September 30, 2011 $ 43,744,400 $ 14,976,400 $ 58,720,800
 
New Capital Raised 1,358,100 423,600 1,781,700
Distributions (2,043,800 ) (248,800 ) (a) (2,292,600 )
Foreign Exchange (70,200 ) - (70,200 )
Change in Value 639,400 229,500 868,900
     
December 31, 2011 $ 43,627,900   $ 15,380,700   $ 59,008,600  
 
 

Year Ended December 31, 2011

 
December 31, 2010 $ 46,223,900 $ 14,773,600 $ 60,997,500
 
New Capital Raised 2,347,100 1,559,100 3,906,200
Distributions (6,463,100 ) (1,435,000 ) (b) (7,898,100 )
Foreign Exchange (57,100 ) - (57,100 )
Change in Value 1,577,100 483,000 2,060,100
     
December 31, 2011 $ 43,627,900   $ 15,380,700   $ 59,008,600  
 
 
 
 
Fee Paying Assets Under Management

Private Markets
Segment

Public Markets
Segment

Total
Reportable
Segments

Quarter Ended December 31, 2011

 
September 30, 2011 $ 37,936,800 $ 8,284,400 $ 46,221,200
 
New Capital Raised 1,277,700 322,300 1,600,000
Distributions (1,142,900 ) (243,800 ) (a) (1,386,700 )
Foreign Exchange (213,000 ) - (213,000 )
Change in Value 11,100 164,700 175,800
     
December 31, 2011 $ 37,869,700   $ 8,527,600   $ 46,397,300  
 
 
Year Ended December 31, 2011
 
December 31, 2010 $ 38,186,700 $ 7,824,400 $ 46,011,100
 
New Capital Raised 2,197,400 1,346,300 3,543,700
Distributions (2,276,500 ) (1,070,600 ) (b) (3,347,100 )
Foreign Exchange (222,900 ) - (222,900 )
Change in Value (15,000 ) 427,500 412,500
     
December 31, 2011 $ 37,869,700   $ 8,527,600   $ 46,397,300  
 

(a) Includes $200.0 million of redemptions.

(b) Includes $801.1 million of redemptions.

   
KKR
INVESTMENT VEHICLE SUMMARY* (UNAUDITED)
As of December 31, 2011
(Amounts in millions, except percentages)
 
Investment Period Amount

Commencement
Date

End
Date

Commitment

Uncalled
Commitments

Percentage
Committed by
General
Partner

Invested

Realized

Remaining
Cost

Fair Value

Private Markets

 

 
Private Equity Funds
China Growth Fund 11/2010 11/2016 $ 1,010.0 $ 767.4 1.0 % $ 242.6 $ - $ 242.6 $ 331.3
E2 Investors (Annex Fund) 8/2009 11/2012 535.5 381.3 4.2 % 154.2 - 154.2 230.4
European Fund III 3/2008 3/2014 5,902.9 3,216.3 4.6 % 2,686.6 - 2,686.5 2,668.1
Asian Fund 7/2007 7/2013 3,983.2 1,230.0 2.5 % 2,753.2 191.9 2,635.1 4,027.5
2006 Fund 9/2006 9/2012 17,642.2 1,821.3 2.1 % 15,820.9 4,297.5 13,528.0 15,377.8
European Fund II 11/2005 10/2008 5,750.8 - 2.1 % 5,750.8 1,554.1 4,654.1 3,665.0
Millennium Fund 12/2002 12/2008 6,000.0 - 2.5 % 6,000.0 6,916.1 3,435.3 4,811.1
European Fund 12/1999 12/2005   3,085.4   - 3.2 %   3,085.4   7,981.2   164.0   715.8
 
Total Private Equity Funds 43,910.0 7,416.3 36,493.7 20,940.8 27,499.8 31,827.0
 
Co-Investment Vehicles Various Various   2,240.7   335.2 Various   1,905.5   715.7   1,707.7   2,346.2
 
Total Private Equity   46,150.7   7,751.5   38,399.2   21,656.5   29,207.5   34,173.2
 
Energy & Infrastructure
Natural Resources Various Various 1,094.7 1,001.4 Various 93.3 14.4 88.4 59.8
Infrastructure Various Various 780.2 633.6 Various 146.6 - 146.6 139.5
Co-Investment Vehicles Various Various   1,863.3   683.8 Various   1,179.5   68.8   1,179.5   1,331.6
 
Energy & Infrastructure Total   3,738.2   2,318.8   1,419.4   83.2   1,414.5   1,530.9
 
Private Markets Total   49,888.9   10,070.3   39,818.6   21,739.7   30,622.0   35,704.1
 
Public Markets
 
Special Situations Vehicles Various Various 2,007.5 437.7 Various 1,569.8 29.2 1,569.8 1,596.6
Mezzanine Fund 3/2010 8/2015 987.0 719.5 4.6 % 267.5 3.4 267.5 282.4
Lending Partners 12/2011 12/2014   202.0   173.0 49.5 %   29.0   -   29.0   29.7
 
Public Markets Total   3,196.5   1,330.2   1,866.3   32.6   1,866.3   1,908.7
 
Grand Total $ 53,085.4 $ 11,400.5 $ 41,684.9 $ 21,772.3 $ 32,488.3 $ 37,612.8
 

* Reflects investment vehicles for which KKR has the ability to earn carried interest.

         
KKR
DISTRIBUTION CALCULATION
(Amounts in thousands, except unit and per unit amounts)
 
 
Quarter Ended Year Ended

December 31,
2011

September 30,
2011

December 30,
2010

December 31,
2011

December 30,
2010

 
FRE $ 116,575 $ 98,242 $ 95,091 $ 417,153 $ 318,322
Realized cash carry 83,226 12,937 68,958 202,115 184,153
Less: local income taxes (1,856 ) (4,944 ) (5,111 ) (16,291 ) (12,031 )
Less: noncontrolling interests   (2,220 )   (1,840 )   (1,592 )   (6,671 )   (4,409 )
Gross distributable earnings   195,725     104,395     157,346     596,306     486,035  
 
Distributable earnings to KKR & Co. L.P. 65,059 34,075 49,014 193,876 147,621
 
Less: estimated current corporate income taxes (22,924 ) (11,035 ) (13,880 ) (57,048 ) (48,897 )
         
Net cash available for distribution $ 42,135 $ 23,040 $ 35,134 $ 136,828 $ 98,724
 
Additional distribution (a) 29,530 - 27,000 29,530 27,000
         
Total distribution $ 71,665   $ 23,040   $ 62,134   $ 166,358   $ 125,724  
 
Distribution per KKR & Co. L.P. common unit $ 0.32 $ 0.10 $ 0.29 $ 0.74 $ 0.60
 
Outstanding KKR & Co. L.P. common units   227,150,182     222,944,668     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 purposes of KKR’s distribution policy, its distributions are expected to consist of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool, and (iii) any additional distributions for certain taxes as described above. This amount is expected to be reduced by (i) corporate and applicable local taxes, if any, (ii) non-controlling interests, and (iii) amounts determined by KKR to be necessary or appropriate for the conduct of its business and other matters as discussed above.

The declaration and payment of any distributions are subject to the discretion of the board of directors of the general partner of KKR & Co. L.P. and the terms of its limited partnership agreement. There can be no assurance that distributions will be made as intended or at all or that such distributions will be sufficient to pay any particular KKR unit holder’s actual U.S. or non-U.S. tax liability.

KKR

Notes to Reportable Segments (Unaudited)

The 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.

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 investors in assessing the overall performance of KKR’s businesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP. We caution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included elsewhere within this earnings release.

Fee related earnings ("FRE”) is comprised of segment operating revenues less segment operating expenses and is used by management as an alternative measurement of the operating earnings of KKR and its business segments before investment income. We believe this measure is useful to investors as it provides additional insight into the operating profitability of our fee generating management companies and capital markets businesses. The components of FRE on a segment basis differ from the equivalent GAAP amounts on a consolidated basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of charges relating to carry pool allocations; (v) the exclusion of non-cash equity charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR & Co. L.P. 2010 Equity Incentive Plan; (vi) the exclusion of certain reimbursable expenses; and (vii) the exclusion of certain non-recurring items.

Economic net income (loss) ("ENI”) is a measure of profitability for KKR’s reportable segments and is used by management as an alternative measurement of the operating and investment earnings of KKR and its business segments. We believe this measure is useful to investors as it provides additional insight into the overall profitability of KKR’s businesses inclusive of investment income and carried interest. ENI is comprised of: (i) FRE; plus (ii) segment investment income (loss), which is reduced for carry pool allocations and management fee refunds; less (iii) certain economic interests in KKR’s segments held by third parties. ENI differs from net income (loss) on a GAAP basis as a result of: (i) the exclusion of the items referred to in FRE above; (ii) the exclusion of investment income (loss) relating to noncontrolling interests; and (iii) the exclusion of income taxes.

After-tax ENI is used to measure KKR’s implied ENI on a fully diluted basis. We believe this measure is useful to investors as it provides an indication of KKR’s ENI as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P. After-tax ENI is calculated by deducting from ENI the implied income tax provision that has been calculated assuming that all income is allocated to KKR & Co. L.P., which would occur following an exchange of all KKR Holdings units for common units of KKR & Co. L.P. The assumptions and methodology used to calculate the implied income tax provision are consistent with those used in calculating the tax provision for KKR & Co. L.P. under GAAP. The implied income tax provision does not give effect to any tax savings or deductions that may result from the exchange of KKR Holdings units.

Assets under management ("AUM”) represent the assets from which KKR is entitled to receive fees or a carried interest and general partner capital. We believe this measure is useful to investors as it provides additional insight into KKR’s capital raising activities and the overall activity in its investment funds and vehicles. KKR calculates the amount of AUM as of any date as the sum of: (i) the fair value of the investments of KKR’s investment funds plus uncalled capital commitments from these funds; (ii) the fair value of investments in KKR’s co-investment vehicles; (iii) the net asset value of certain of KKR's fixed income products; (iv) the value of outstanding structured finance vehicles; and (v) the fair value of other assets managed by KKR. KKR’s definition of AUM is not based on any definition of AUM that is set forth in the agreements governing the investment funds, vehicles or accounts that it manages or calculated pursuant to any regulatory requirements.

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

Committed dollars invested is the aggregate amount of capital commitments that have been invested by KKR’s investment funds and carry-yielding co-investment vehicles and is used as a measure of investment activity for KKR and its business segments during a given period. We believe this measure is useful to investors as it provides additional insight into KKR’s investment of committed capital. Such amounts include: (i) capital invested by fund investors and co-investors with respect to which KKR is entitled to a fee or carried interest and (ii) capital invested by KKR’s investment funds and vehicles.

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 investors as it provides additional insight into the amount of capital that is available to KKR’s investment funds and vehicles to make future investments.

Adjusted units are used as a measure of the total equity ownership of KKR that is held by KKR & Co. L.P. and KKR Holdings and represent the fully diluted unit count using the if-converted method. We believe this measure is useful to investors as it provides an indication of the total equity ownership of KKR as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P.

Core interest expense is used by management as an alternative measurement of interest expense incurred by KKR on a segment basis and excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR’s private equity funds, investment vehicles and principal investments. These financing arrangements are not direct obligations of the general partners of KKR’s private equity funds or its management companies. On a segment basis, interest expense is included in other investment income. We believe this measure is useful to investors as it provides an indication of the amount of interest expense borne by KKR excluding interest expense that is allocated to KKR’s investment funds and vehicles and other noncontrolling interest holders. Additionally, we believe this measure is useful for analyzing KKR’s ability to service its debt obligations.

Book value is a measure of the net assets of KKR’s reportable segments and is used by management primarily in assessing the unrealized value of our investment portfolio, including carried interest, as well as our overall liquidity position. We believe this measure is useful to investors as it provides additional insight into the assets and liabilities of KKR excluding the assets and liabilities that are allocated to noncontrolling interest holders. Book value differs from the equivalent GAAP amounts on a consolidated basis primarily as a result of the exclusion of ownership interests in consolidated investment vehicles and other entities that are attributable to noncontrolling interests.

Fee related EBITDA is comprised of FRE before the impact of depreciation of fixed assets and amortization of intangible assets and is used by management as a measure of the cash earnings of KKR and its business segments before investment income. We believe this measure is useful to investors as it provides additional insight into the amount of cash earnings generated by KKR’s management companies and capital markets businesses.

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

         
KKR

EXHIBIT A

RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT (GAAP BASIS - UNAUDITED)
TO AFTER TAX ENI PER ADJUSTED UNIT
(Amounts in thousands)
 
 
Quarter Ended Quarter Ended Quarter Ended Year Ended Year Ended
December 31, 2011 September 30, 2011 December 31, 2010 December 31, 2011 December 31, 2010
 
Net income (loss) attributable to KKR & Co. L.P. per common unit $ 0.20   $ (1.09 ) $ 0.86   $ 0.01   $ 1.62  
Weighted Average Common Units Outstanding 225,382,001 222,733,648 209,383,219 220,235,469 206,031,682
Net income (loss) attributable to KKR & Co. L.P. 46,137 (243,402 ) 180,579 1,921 333,178
Plus: Net income (loss) attributable to noncontrolling

interests held by KKR Holdings L.P.

133,301 (484,879 ) 411,413 185,352 899,277
Plus: Non-cash equity based charges 83,688 123,858 107,040 470,221 824,193
Plus: Amortization of intangibles and other, net 1,046 797 1,219 4,210 7,785
Plus: Income taxes   21,322     11,535     14,362     89,245     75,360  
Economic net income (loss) 285,494 (592,091 ) 714,613 750,949 2,139,793
Less: Provision for income taxes   (59,988 )   (29,634 )   (17,400 )   (248,082 )   (210,196 )
Economic net income (loss) after taxes 225,506 (621,725 ) 697,213 502,867 1,929,597
Adjusted units   689,335,706     683,024,625     683,037,420     685,386,132     683,014,982  
Economic net income (loss) after taxes per adjusted unit $ 0.33   $ (0.91 ) $ 1.02   $ 0.73   $ 2.83  
 
 
 
   

 

               
 
 
 
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. (GAAP BASIS - UNAUDITED)
TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS AND FEE RELATED EBITDA
(Amounts in thousands)
 
Quarter Ended Quarter Ended Quarter Ended Year Ended Year Ended
December 31, 2011 September 30, 2011 December 31, 2010 December 31, 2011 December 31, 2010
 
Net income (loss) attributable to KKR & Co. L.P. $ 46,137 $ (243,402 ) $ 180,579 $ 1,921 $ 333,178
Plus: Net income (loss) attributable to noncontrolling

interests held by KKR Holdings L.P.

133,301 (484,879 ) 411,413 185,352 899,277
Plus: Non-cash equity based charges 83,688 123,858 107,040 470,221 824,193
Plus: Amortization of intangibles and other, net 1,046 797 1,219 4,210 7,785
Plus: Income taxes   21,322     11,535     14,362     89,245     75,360  
Economic net income (loss) 285,494 (592,091 ) 714,613 750,949 2,139,793
Plus: Income attributable to segment noncontrolling interests 2,220 1,840 1,592 6,671 4,409
Plus: Investment income (loss)   (171,139 )   688,493     (621,114 )   (340,467 )   (1,825,880 )
Fee related earnings 116,575 98,242 95,091 417,153 318,322
Plus: depreciation and amortization   2,528     2,147     2,790     9,925     11,664  
Fee related EBITDA $ 119,103   $ 100,389   $ 97,881   $ 427,078   $ 329,986  
 

   
KKR

EXHIBIT A (CONTINUED)

RECONCILIATION OF KKR & CO. L.P. PARTNERS' CAPITAL (GAAP BASIS - UNAUDITED)
TO BOOK VALUE AND BOOK VALUE PER ADJUSTED UNIT
(Amounts in thousands, except common unit and per common unit amounts)
 
 
As of As of
December 31, 2011 December 31, 2010
 
KKR & Co. L.P. partners’ capital $ 1,328,698 $ 1,326,493
 
Plus: Noncontrolling interests held by KKR Holdings L.P. 4,342,157 4,346,388
 
Plus: Equity impact of KKR Management Holdings Corp. and other   39,729   52,745
 
Book value 5,710,584 5,725,626
 
Adjusted units 689,392,861 683,037,420
   
Book value per adjusted unit $ 8.29 $ 8.38
 
 

 

       
 
 
 
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS - UNAUDITED)
TO CASH AND SHORT-TERM INVESTMENTS (SEGMENT BASIS)
(Amounts in thousands)
 
 
As of As of
December 31, 2011 December 31, 2010
 
Cash and cash equivalents $ 843,261 $ 738,693
 
Plus: Liquid short-term investments 146,180 17,587
   
Cash and short-term investments $ 989,441 $ 756,280
 

       
KKR

EXHIBIT B

 
RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING TO WEIGHTED AVERAGE ADJUSTED UNITS
 
The following table provides a reconciliation of KKR's Weighted Average GAAP Common Units Outstanding to Weighted Average Adjusted Units.
 
Quarter Ended
December 31, 2011 September 30, 2011 December 31, 2010
Weighted Average GAAP Common Units Outstanding - Basic 225,382,001 222,733,648 209,383,219
Weighted Average Unvested Common Units(a) 5,979,031 - 30,000
Weighted Average GAAP Common Units Outstanding - Diluted 231,361,032 222,733,648 209,413,219
Adjustments:
Weighted Average KKR Holdings Units(b) 457,974,674 460,290,977 473,624,201
Weighted Average Adjusted Units 689,335,706 683,024,625 683,037,420
 
 
 
Year Ended
December 31, 2011 December 31, 2010
Weighted Average GAAP Common Units Outstanding - Basic 220,235,469 206,031,682
Adjustments:
Weighted Average Unvested Common Units(a) 2,283,705 7,562
Weighted Average GAAP Common Units Outstanding - Diluted 222,519,174 206,039,244
Adjustments:
Weighted Average KKR Holdings Units(b) 462,866,958 476,975,738
Weighted Average Adjusted Units 685,386,132 683,014,982
 
 
                     
 
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, 2011 December 31, 2010
GAAP Common Units Outstanding - Basic 227,150,182 212,770,091
Unvested Common Units(a) 6,028,444 30,000
GAAP Common Units Outstanding - Diluted 233,178,626 212,800,091
Adjustments:
KKR Holdings Units(b) 456,214,235 470,237,329
Adjusted Units 689,392,861 683,037,420
 
(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.

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