News Column

KKR & Co. L.P. Announces First Quarter 2014 Results

April 24, 2014

Exit Activity and Record Fee Revenue Drive Strong Distributable Earnings

GAAP net income (loss) attributable to KKR & Co. L.P. was $210.0 million for the quarter ended March 31, 2014, up from $193.4 million for the quarter ended March 31, 2013.

Assets under management (“AUM”) totaled $102.3 billion as of March 31, 2014, up from $94.3 billion as of December 31, 2013. Fee paying assets under management (“FPAUM”) totaled $83.6 billion as of March 31, 2014, up from $77.4 billion as of December 31, 2013.

Total distributable earnings was $446.8 million for the quarter ended March 31, 2014, up from $290.6 million for the quarter ended March 31, 2013.

Economic net income (“ENI”) was $630.3 million for the quarter ended March 31, 2014, down from $647.7 million for the quarter ended March 31, 2013.

Return on equity was 25.9% on a trailing twelve month basis.

Carrying value of our private equity portfolio appreciated 4.5% for the quarter ended March 31, 2014.

After-tax ENI was $0.82 per adjusted unit for the quarter ended March 31, 2014, down from $0.88 per adjusted unit for the quarter ended March 31, 2013.

Fee related earnings (“FRE”) was $151.7 million for the quarter ended March 31, 2014, up from $88.0 million for the quarter ended March 31, 2013.

Book value was $8.1 billion on a total reportable segment basis as of March 31, 2014 or $11.18 per adjusted unit.

KKR & Co. L.P. declares a first quarter of 2014 distribution of $0.43 per common unit, up from $0.27 in the first quarter of 2013.

Previously announced acquisition of Avoca Capital (Unlimited) and its affiliates has closed.





NEW YORK--(BUSINESS WIRE)-- KKR & Co. L.P. (NYSE:KKR) today reported its first quarter 2014 results.

On February 19, 2014, we closed our acquisition of Avoca Capital (Unlimited) and its affiliates (“Avoca”), a European credit investment manager. Avoca’s financial results have been reported as part of our Public Markets segment in the first quarter of 2014. The acquisition of Avoca contributed $8.4 billion to our Public Markets segment’s assets under management.

In March 2014, we held our final close for our first Energy Income and Growth Fund L.P., which including general partner and employee commitments closed with approximately $2.0 billion of commitments.

On December 16, 2013, KKR announced the signing of a definitive merger agreement where KKR will acquire KFN through a stock-for-stock merger. The merger, which is subject to KFN shareholder approval and other customary closing conditions, is expected to close in the second quarter of 2014.

“Our investment portfolio and balance sheet continue to perform, resulting in a 26% return on equity over the last twelve months,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. “Additionally, our realization activity and record fee revenue both contributed to a 60% year-over-year increase in our first quarter distribution per unit to $0.43 per share.”

   
    Note: Certain financial measures, including FRE, ENI, after-tax ENI, ENI after taxes and equity-based charges, 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.
 



GAAP RESULTS

GAAP results for the quarter ended March 31, 2014, included net income attributable to KKR & Co. L.P. of $210.0 million and net income attributable to KKR & Co. L.P. per common unit of $0.65, on a diluted basis. For the quarter ended March 31, 2013, net income attributable to KKR & Co. L.P. was $193.4 million and net income attributable to KKR & Co. L.P. per common unit was $0.69, on a diluted basis. The increase quarter over quarter was primarily due to (i) an increase in management fees attributable to new capital raised; (ii) higher transaction fees; and (iii) an increase in KKR & Co. L.P.’s ownership percentage in the KKR business. The increase was partially offset by a lower level of investment income.

SEGMENT RESULTS

Private Markets

AUM was $60.5 billion as of March 31, 2014, a decrease of $0.7 billion, or 1.1%, compared to AUM of $61.2 billion as of December 31, 2013. The decrease was primarily attributable to distributions to the limited partners of our private equity funds arising from realizations and to a lesser extent a reduction in AUM as a result of the European Fund III entering the post-investment period. The decrease was largely offset by appreciation in the fair value of our private equity portfolio and new capital raised primarily from our Energy Income and Growth Fund.

FPAUM was $48.2 billion as of March 31, 2014, a decrease of $2.0 billion, or 4.0%, compared to FPAUM of $50.2 billion as of December 31, 2013. The decrease was primarily attributable to distributions to the limited partners of our private equity funds arising from realizations and to a lesser extent a reduction in FPAUM as a result of the European Fund III entering the post-investment period. The decrease was partially offset by new capital raised primarily from our Energy Income and Growth Fund.

FRE was $53.6 million for the quarter ended March 31, 2014, an increase of $12.9 million, or 31.7%, compared to FRE of $40.7 million for the quarter ended March 31, 2013. The increase was primarily driven by higher transaction fees and higher management fees resulting from new capital raised, partially offset by higher compensation expense.

ENI was $241.1 million for the quarter ended March 31, 2014, a decrease of $25.6 million, or 9.6%, compared to ENI of $266.7 million for the quarter ended March 31, 2013. The decrease was primarily attributable to lower net carried interest resulting from a lower level of appreciation in our private equity portfolio. The decrease was partially offset by the increase in FRE discussed above.

Public Markets

AUM was $41.8 billion as of March 31, 2014, an increase of $8.7 billion, or 26.3%, compared to AUM of $33.1 billion as of December 31, 2013. FPAUM was $35.4 billion as of March 31, 2014, an increase of $8.2 billion, or 30.1%, compared to FPAUM of $27.2 billion as of December 31, 2013. For both AUM and FPAUM, the increases were primarily attributable to new capital from the acquisition of Avoca.

FRE was $53.6 million for the quarter ended March 31, 2014, an increase of $16.4 million, or 44.1%, compared to FRE of $37.2 million for the quarter ended March 31, 2013. The increase was principally attributable to higher management fees related to new capital raised from fund investors, partially offset by higher compensation expense.

ENI was $67.9 million for the quarter ended March 31, 2014, an increase of $18.8 million, or 38.3%, compared to ENI of $49.1 million for the quarter ended March 31, 2013. The increase was primarily driven by the increase in FRE discussed above.

Capital Markets and Principal Activities

FRE was $44.5 million for the quarter ended March 31, 2014, an increase of $34.4 million, or 340.6%, compared to FRE of $10.1 million for the quarter ended March 31, 2013. The increase was primarily driven by a higher level of overall capital markets transaction activity, partially offset by higher compensation expense.

ENI was $321.2 million for the quarter ended March 31, 2014, a decrease of $10.7 million, or 3.2%, compared to ENI of $331.9 million for the quarter ended March 31, 2013. The decrease was primarily due to a lower level of investment income from our principal investments, partially offset by the increase in FRE discussed above. While the fair value of our principal investments increased during the quarter ended March 31, 2014, the level of appreciation was lower than in the first quarter of 2013.

CAPITAL AND LIQUIDITY

As of March 31, 2014, KKR had $2.1 billion of cash and short-term investments on a total reportable segment basis and $1.0 billion of outstanding debt obligations. KKR’s availability for borrowings was $750.0 million (which is reduced by an outstanding letter of credit), which does not include a $500.0 million revolving credit facility for use in its capital markets business that was undrawn as of March 31, 2014.

As of March 31, 2014, KKR’s portion of total uncalled commitments to its investment funds was $1.0 billion, consisting of the following (amounts in thousands):

   
Uncalled

Commitments

Private Markets

North America Fund XI $ 274,100
Energy Income and Growth Fund 191,600
Real Estate Partners Americas 154,700
European Fund III 68,500
Asian Fund II 67,300
2006 Fund 61,700
Infrastructure 16,300
Natural Resources 11,100
Other Private Equity Funds 11,000
Co-Investment Vehicles   32,900
Total Private Markets Commitments   889,200
 

Public Markets

Special Situations Vehicles 98,300
Mezzanine Fund 20,300
Direct Lending Vehicles   12,400
Total Public Markets Commitments   131,000
 
Total Uncalled Commitments$1,020,200
 


DISTRIBUTION

A distribution of $0.43 per common unit has been declared, comprised of (i) $0.15 per common unit from after-tax FRE, (ii) $0.17 per common unit from realized cash carry, and (iii) $0.11 per common unit from net realized principal investment income. The distribution will be paid on May 23, 2014 to unitholders of record as of the close of business on May 9, 2014. Please refer to the distribution policy presented later in this release.

CONFERENCE CALL

A conference call to discuss KKR’s financial results will be held on Thursday, April 24, 2014 at 10:00 a.m. EST. The conference call may be accessed by dialing (877) 303-2917 (U.S. callers) or +1 (253) 237-1135 (non-U.S. callers); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Investors Center section of KKR’s website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. A replay of the live broadcast will be available on KKR’s website or by dialing (855) 859-2056 (U.S. callers) or +1 (404) 537-3406 (non-U.S. callers), pass code 26683527 beginning approximately two hours after the broadcast.

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

ABOUT KKR

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

FORWARD-LOOKING STATEMENTS

This release contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements are based on KKR’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or are within its control. If a change occurs, KKR’s business, financial condition, liquidity and results of operations, including but not limited to AUM, FPAUM, FRE, total distributable earnings, ENI, after-tax ENI, ENI after taxes and equity-based charges, fee related EBITDA, committed dollars invested and syndicated capital, uncalled commitments, core interest expense, cash and short-term investments, net realized principal investment income and book value, may vary materially from those expressed in the forward-looking statements. The following factors, among others, could cause actual results to vary from the forward-looking statements: the general volatility of the capital markets; failure to realize the benefits of or changes in KKR’s business strategies including the ability to realize the anticipated synergies from acquisitions or strategic partnerships such as Prisma, Nephila, Avoca or KFN; 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, 2013, filed with the SEC on February 24, 2014, and other filings with the SEC, which are available at www.sec.gov.

         
KKR
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
 
 
Quarter Ended
March 31, 2014March 31, 2013
Revenues
Fees $ 302,926   $ 151,240  
 
Expenses
Compensation and Benefits 331,038 331,121
Occupancy and Related Charges 15,408 14,521
General, Administrative and Other   126,725     93,688  
Total Expenses   473,171     439,330  
 
Investment Income (Loss)
Net Gains (Losses) from Investment Activities 1,972,180 2,269,817
Dividend Income 96,704 39,469
Interest Income 161,960 109,369
Interest Expense   (34,731 )   (23,023 )
Total Investment Income (Loss)   2,196,113     2,395,632  
 
Income (Loss) Before Taxes2,025,8682,107,542
 
Income Taxes   21,702     9,356  
 
Net Income (Loss)2,004,1662,098,186
 
Net Income (Loss) Attributable to
Redeemable Noncontrolling Interests 10,637 24,623
Net Income (Loss) Attributable to
Noncontrolling Interests 1,783,488 1,880,124
   
Net Income (Loss) Attributable to KKR & Co. L.P.$210,041   $193,439  
 
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic $ 0.72 $ 0.75
Diluted (a) $ 0.65 $ 0.69
Weighted Average Common Units Outstanding
Basic 293,490,461 257,044,184
Diluted (a) 325,104,229 282,042,521
 
   

 

   

(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
March 31, 2014December 31, 2013March 31, 2013
Fees
Management and incentive fees:
Management fees $ 195,393 $ 175,246 $ 152,963
Incentive fees   17,019     36,695     18,849  
Management and incentive fees   212,412     211,941     171,812  
 
Monitoring and transaction fees:
Monitoring fees 36,363 26,282 32,068
Transaction fees 163,516 104,475 40,299
Fee credits   (84,668 )   (47,014 )   (23,065 )
Net monitoring and transaction fees   115,211     83,743     49,302  
 
Total fees   327,623     295,684     221,114  
 
Expenses
Compensation and benefits 108,915 95,945 75,162
Occupancy and related charges 14,189 14,264 13,322
Other operating expenses   52,801     65,342     44,630  
Total expenses   175,905     175,551     133,114  
 
Fee Related Earnings   151,718     120,133     88,000  
 
Investment income (loss)
Realized carried interest 193,550 250,500 88,167
Unrealized carried interest   148,966     347,239     331,198  
Gross carried interest 342,516 597,739 419,365
Less: allocation to KKR carry pool (136,110 ) (241,397 ) (169,504 )
Less: management fee refunds (a)   (3,319 )   (8,564 )   (9,216 )
Net carried interest   203,087     347,778     240,645  
Realized other investment income (loss) 192,892 250,856 153,156
Unrealized other investment income (loss)   85,759     72,825     167,042  
Total other investment income (loss)   278,651     323,681     320,198  
Total investment income (loss)   481,738     671,459     560,843  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 633,456 791,592 648,843
Income (Loss) attributable to
noncontrolling interests   3,202     1,943     1,101  
 
Economic Net Income (Loss)$630,254   $789,649   $647,742  
 
Provision for Income Taxes 36,581 16,048 20,117
 
Economic Net Income (Loss), After Taxes (b)$593,673   $773,601   $627,625  
 
Economic Net Income (Loss), After Taxes per Adjusted Unit (b)$0.82$1.08$0.88
                           
Assets Under Management $ 102,277,500 $ 94,320,300 $ 78,253,400
Fee Paying Assets Under Management $ 83,611,600 $ 77,397,500 $ 62,454,100
Committed Dollars Invested and Syndicated Capital $ 3,377,300 $ 2,943,500 $ 824,400
Uncalled Commitments     $ 19,985,100       $ 22,463,900       $ 16,207,300  
                           

Other Information

Fee Related Earnings $ 151,718 $ 120,133 $ 88,000
Plus: depreciation and amortization   4,035     3,658     3,681  
Fee Related EBITDA$155,753   $123,791   $91,681  
 
Total Distributable Earnings (b)$446,808$510,351$290,614
 
GAAP interest expense $ 34,731 $ 26,923 $ 23,023
Less: interest expense related to debt obligations
from investment financing arrangements   16,331     9,919     6,790  
Core Interest Expense (b)$18,400   $17,004   $16,233  
 
Economic Net Income (Loss),
After Taxes and Equity-based Charges (b)$554,320$743,473$600,207
                               
     
     

(a)

As of March 31, 2014, there is no carried interest subject to management fee refunds, which may reduce carried interest in future periods.

 

(b)

See definitions for economic net income (loss), after taxes, adjusted units, total distributable earnings, core interest expense and economic net income (loss), after taxes and equity-based charges under “Notes to Reportable Segments.”

 


             
KKR
SUPPLEMENTAL STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION (SAMPLE)
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
 
Quarter Ended
March 31, 2014   December 31, 2013   March 31, 2013
Segment Revenues
Fees $ 327,623 $ 295,684 $ 221,114
Gross Carried Interest - net of Management Fee Refunds 339,197 589,175 410,149
Investment Income (Loss)   278,651   323,681   320,198
Total Segment Revenues   945,471   1,208,540   951,461
 
Segment Expenses
Allocation to Carry Pool 136,110 241,397 169,504
Compensation and Benefits 108,915 95,945 75,162
Equity-based Charges 39,353 30,128 27,418
Occupancy and Related Charges 14,189 14,264 13,322
Other Operating Expenses   52,801   65,342   44,630
Total Segment Expenses   351,368   447,076   330,036
 
Income (Loss) attributable to noncontrolling interests   3,202   1,943   1,101
 
 
Economic Net Income (Loss) After Equity-based Charges$590,901$759,521$620,324
 
Provision for Income Taxes 36,581 16,048 20,117
 
Economic Net Income (Loss),
After Taxes and Equity-based Charges$554,320$743,473$600,207
 
Economic Net Income (Loss),
After Taxes and Equity-based Charges Per Adjusted Unit$0.77$1.04$0.84
 
Weighted Average Adjusted Units (Fully Diluted Basis)724,579,220716,807,180711,229,881
 


             
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENTS (UNAUDITED)
(Amounts in thousands)
 
Quarter Ended
March 31, 2014December 31, 2013March 31, 2013
Fees
Management and incentive fees:
Management fees $ 123,039 $ 118,781 $ 106,605
Incentive fees   -     -     -  
Management and incentive fees   123,039     118,781     106,605  
 
Monitoring and transaction fees:
Monitoring fees 36,363 26,282 32,068
Transaction fees 93,020 53,507 16,412
Fee credits   (80,338 )   (39,509 )   (21,009 )
Net monitoring and transaction fees   49,045     40,280     27,471  
 
Total fees   172,084     159,061     134,076  
 
Expenses
Compensation and benefits 66,898 66,994 48,001
Occupancy and related charges 11,560 12,110 11,425
Other operating expenses   40,059     49,466     33,942  
Total expenses   118,517     128,570     93,368  
 
Fee Related Earnings   53,567     30,491     40,708  
 
Investment income (loss)
Realized carried interest 168,800 250,500 88,167
Unrealized carried interest   149,095     330,113     310,799  
Gross carried interest 317,895 580,613 398,966
Less: allocation to KKR carry pool (126,263 ) (234,547 ) (161,344 )
Less: management fee refunds   (3,319 )   (8,564 )   (9,216 )
Net carried interest   188,313     337,502     228,406  
Realized other investment income (loss) - - -
Unrealized other investment income (loss)   (221 )   824     (2,035 )
Total other investment income (loss)   (221 )   824     (2,035 )
Total investment income (loss)   188,092     338,326     226,371  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 241,659 368,817 267,079
Income (Loss) attributable to
noncontrolling interests   515     256     398  
 
Economic Net Income (Loss)$241,144   $368,561   $266,681  
                         
Assets Under Management $ 60,520,300 $ 61,242,900 $ 50,340,400
Fee Paying Assets Under Management $ 48,211,000 $ 50,156,300 $ 41,218,000
Committed Dollars Invested $ 2,551,800 $ 2,122,600 $ 598,500
Uncalled Commitments     $ 18,256,800       $ 20,101,600       $ 14,560,900  
 


 
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENTS (UNAUDITED)
(Amounts in thousands)
               
Quarter Ended
March 31, 2014December 31, 2013March 31, 2013
Fees
Management and incentive fees:
Management fees $ 72,354 $ 56,465 $ 46,358
Incentive fees   17,019     36,695     18,849  
Management and incentive fees   89,373     93,160     65,207  
 
Monitoring and transaction fees:
Monitoring fees - - -
Transaction fees 6,022 9,431 3,106
Fee credits   (4,330 )   (7,505 )   (2,056 )
Net monitoring and transaction fees   1,692     1,926     1,050  
 
Total fees   91,065     95,086     66,257  
 
Expenses
Compensation and benefits 26,745 17,082 19,700
Occupancy and related charges 2,172 1,800 1,542
Other operating expenses   8,507     12,567     7,826  
Total expenses   37,424     31,449     29,068  
 
Fee Related Earnings   53,641     63,637     37,189  
 
Investment income (loss)
Realized carried interest 24,750 - -
Unrealized carried interest   (129 )   17,126     20,399  
Gross carried interest 24,621 17,126 20,399
Less: allocation to KKR carry pool (9,847 ) (6,850 ) (8,160 )
Less: management fee refunds   -     -     -  

Net carried interest

  14,774     10,276     12,239  
Realized other investment income (loss) - - -
Unrealized other investment income (loss)   16     36     62  
Total other investment income (loss)   16     36     62  
Total investment income (loss)   14,790     10,312     12,301  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 68,431 73,949 49,490
Income (Loss) attributable to
noncontrolling interests   522     625     355  
 
Economic Net Income (Loss)$67,909   $73,324   $49,135  
                           
Assets Under Management $ 41,757,200 $ 33,077,400 $ 27,913,000
Fee Paying Assets Under Management $ 35,400,600 $ 27,241,200 $ 21,236,100
Committed Dollars Invested $ 734,100 $ 690,900 $ 164,900
Uncalled Commitments $ 1,728,300 $ 2,362,300 $ 1,646,400
Gross Dollars Invested     $ 989,700       $ 1,481,100       $ 378,000  
 


             
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENTS (UNAUDITED)
(Amounts in thousands)
 
Quarter Ended
March 31, 2014December 31, 2013March 31, 2013
Fees
Management and incentive fees:
Management fees $ - $ - $ -
Incentive fees   -   -   -
Management and incentive fees   -   -   -
 
Monitoring and transaction fees:
Monitoring fees - - -
Transaction fees 64,474 41,537 20,781
Fee credits   -   -   -
Net monitoring and transaction fees   64,474   41,537   20,781
 
Total fees   64,474   41,537   20,781
 
Expenses
Compensation and benefits 15,272 11,869 7,461
Occupancy and related charges 457 354 355
Other operating expenses   4,235   3,309   2,862
Total expenses   19,964   15,532   10,678
 
Fee Related Earnings   44,510   26,005   10,103
 
Investment income (loss)
Realized carried interest - - -
Unrealized carried interest   -   -   -
Gross carried interest - - -
Less: allocation to KKR carry pool - - -
Less: management fee refunds   -   -   -
Net carried interest   -   -   -
Realized other investment income (loss) 192,892 250,856 153,156
Unrealized other investment income (loss)   85,964   71,965   169,015
Total other investment income (loss)   278,856   322,821   322,171
Total investment income (loss)   278,856   322,821   322,171
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 323,366 348,826 332,274
Income (Loss) attributable to
noncontrolling interests   2,165   1,062   348
 
Economic Net Income (Loss)$321,201$347,764$331,926
                           
Syndicated Capital       $ 91,400     $ 130,000     $ 61,000
 


             
KKR
BALANCE SHEET
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
 
 
As of

March 31, 2014

As of

December 31, 2013

 
Cash and short-term investments $ 2,139,940 $ 2,161,097
Investments 5,380,306 (a) 4,980,265
Unrealized carry (b) 1,276,776 1,179,338
Other assets   695,246   662,357
Total assets $ 9,492,268 $ 8,983,057
 
Debt obligations $ 1,000,000 $ 1,000,000
Other liabilities   271,668   149,196
Total liabilities   1,271,668   1,149,196
 
Noncontrolling interests 74,838 71,261
   
Book value$8,145,762$7,762,600
 
Book value per adjusted unit$11.18$10.83
 
 

(b)Unrealized Carry

Private Markets $ 1,214,510 $ 1,116,996
Public Markets   62,266   62,342
Total$1,276,776$1,179,338
 
         
   

(a)

 

See Capital Markets and Principal Activities segment schedule of investments that follows.

 


           
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS (UNAUDITED)
(Amounts in thousands, except percentage amounts)
 
As of March 31, 2014
InvestmentCostFair

Value

Fair Value as

a Percentage

of Investments

 
 
Co-investments in Portfolio Companies of
Private Equity Investment Vehicles$1,501,980$2,025,03337.6%
 
Private Equity Investment Vehicles
KKR 2006 Fund L.P. 323,290 392,969 7.3 %
KKR European Fund III L.P. 296,955 387,243 7.2 %
KKR North America Fund XI L.P. 141,659 154,614 2.9 %
KKR Asian Fund L.P. 88,735 110,090 2.0 %
KKR Millennium Fund L.P. 40,782 39,969 0.7 %
KKR European Fund II L.P. 30,679 35,203 0.7 %
Co-Investments 23,191 24,866 0.5 %
KKR E2 Investors, L.P. 12,278 22,597 0.4 %
KKR Asian Fund II L.P. 8,364 8,375 0.2 %
KKR European Fund L.P. - 4,292 0.1 %
KKR China Growth Fund L.P.   3,452   4,274 0.1 %
  969,385   1,184,49222.1%
 
Private Equity Total   2,471,365   3,209,52559.7%
 
Real Assets
Energy Income and Growth 289,668 292,946 5.4 %
Real Estate Fund 44,812 61,712 1.1 %
Infrastructure Fund 38,349 40,829 0.8 %
Co-Investments 11,564 13,331 0.2 %
Natural Resources   12,842   8,049 0.1 %
Real Assets Total   397,235   416,8677.6%
 
Private Markets Total   2,868,600   3,626,39267.3%
 
Public Markets Investment Vehicles
Liquid Credit 187,263 197,194 3.7 %
Special Situations 152,782 174,457 3.2 %
Credit Relative Value 122,000 144,579 2.7 %
Long/Short Equities 100,000 121,762 2.3 %
Direct Lending 56,741 63,305 1.2 %
Mezzanine Fund 21,154 26,264 0.5 %
Interests in Collateralized Loan Obligations   156,768   157,504 2.9 %
Public Markets Total   796,708   885,06516.5%
 
Other   723,946   868,84916.2%
 
Total Investments$4,389,254$5,380,306100.0%
 
                   
 
Significant Aggregate Portfolio Company Investments: (a)
Alliance Boots GmbH $ 228,769 $ 665,009 12.3 %
HCA Inc. 70,117 315,916 5.9 %
First Data Corporation 327,212 264,239 4.9 %
Kion Group 103,033 168,360 3.1 %
The Nielsen Company B.V.   52,900   157,646 2.9 %
  782,031   1,571,17029.1%
 
Other investments   3,607,223   3,809,136 70.9 %
Total Investments$4,389,254$5,380,306100.0%
 
         
   

(a)

 

The significant aggregate portfolio company investments include the top five investments in portfolio companies based on their fair market value as of March 31, 2014. 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* (UNAUDITED)
(Amounts in thousands)
 
PrivatePublicTotal
MarketsMarketsReportable
SegmentSegmentSegments

Quarter Ended March 31, 2014

 
December 31, 2013$61,242,900$33,077,400$94,320,300
New Capital Raised 588,900 1,121,000 1,709,900
Acquisitions - 8,423,000 (a) 8,423,000
Distributions (2,189,600 ) (1,326,300 ) (c) (3,515,900 )
Net Changes in Fee Base of Certain Funds (b) (933,800 ) - (933,800 )
Change in Value   1,811,900     462,100     2,274,000  
March 31, 2014$60,520,300   $41,757,200   $102,277,500  
 
 

Trailing Twelve Months Ended March 31, 2014

 
March 31, 2013$50,340,400$27,913,000$78,253,400
New Capital Raised 13,234,800 7,169,800 20,404,600
Acquisitions - 8,423,000 (a) 8,423,000
Distributions (9,555,500 ) (3,334,200 ) (d) (12,889,700 )
Net Changes in Fee Base of Certain Funds (b) (1,206,100 ) - (1,206,100 )
Foreign Exchange 56,400 - 56,400
Change in Value   7,650,300     1,585,600     9,235,900  
March 31, 2014$60,520,300   $41,757,200   $102,277,500  
 
 
 
KKR
FEE PAYING ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
 
PrivatePublicTotal
MarketsMarketsReportable
SegmentSegmentSegments

Quarter Ended March 31, 2014

 
December 31, 2013$50,156,300$27,241,200$77,397,500
New Capital Raised 435,300 1,110,200 1,545,500
Acquisitions - 7,971,000 (a) 7,971,000
Distributions (1,426,500 ) (1,235,500 ) (c) (2,662,000 )
Net Changes in Fee Base of Certain Funds (b) (964,700 ) - (964,700 )
Change in Value   10,600     313,700     324,300  
March 31, 2014$48,211,000   $35,400,600   $83,611,600  
 
 

Trailing Twelve Months Ended March 31, 2014

 
March 31, 2013$41,218,000$21,236,100$62,454,100
New Capital Raised 12,674,100 7,506,400 20,180,500
Acquisitions - 7,971,000 (a) 7,971,000
Distributions (4,446,200 ) (2,574,900 ) (d) (7,021,100 )
Net Changes in Fee Base of Certain Funds (b) (1,619,400 ) - (1,619,400 )
Foreign Exchange 276,400 - 276,400
Change in Value   108,100     1,262,000     1,370,100  
March 31, 2014$48,211,000   $35,400,600   $83,611,600  
 
         
   

*

 

Exclude those assets managed by entities where KKR holds less than a 50% ownership interest.

 

(a)

Represents the AUM and FPAUM of Avoca.

(b)

Represents the impact of certain funds entering the post-investment period.

(c)

Includes $542.5 million of redemptions by fund investors.

(d)

Includes $1,218.6 million of redemptions by fund investors.

 


 
KKR
INVESTMENT VEHICLE SUMMARY (a) (UNAUDITED)
As of March 31, 2014
(Amounts in millions, except percentages)
                                 
Investment PeriodAmount
Percentage
CommittedRemaining
CommencementEndUncalledby GeneralRemainingFair
Date     DateCommitment     Commitments     Partner     Invested     Realized     Cost     Value

Private Markets

 
Private Equity Funds
Asian Fund II 4/2013 4/2019 $ 5,825.0 $ 5,222.8 1.3% $ 602.2 $ - $ 602.2 $ 599.1
North America Fund XI 9/2012 9/2018 8,718.4 5,001.0 2.9% 3,717.4 3.9 3,717.4 4,081.8
China Growth Fund 11/2010 11/2016 1,010.0 674.5 1.0% 335.5 32.6 318.0 397.3
E2 Investors (Annex Fund) 8/2009 11/2013 209.5 13.7 4.5% 195.8 144.4 54.5 291.1
European Fund III 3/2008 3/2014 6,237.9 931.9 4.6% 5,306.0 653.5 4,923.1 6,851.8
Asian Fund 7/2007 4/2013 3,983.3 134.1 2.5% 3,849.2 1,717.3 2,955.4 5,421.1
2006 Fund 9/2006 9/2012 17,642.2 1,205.3 2.1% 16,436.9 12,333.3 9,477.5 15,125.0
European Fund II 11/2005 10/2008 5,750.8 - 2.1% 5,750.8 5,141.2 1,781.7 3,371.3
Millennium Fund 12/2002 12/2008 6,000.0 - 2.5% 6,000.0 10,853.6 1,507.0 2,577.8
European Fund 12/1999 12/2005   3,085.4       - 3.2%   3,085.4       8,720.0       -       51.8
Total Private Equity Funds 58,462.5 13,183.3 45,279.2 39,599.8 25,336.8 38,768.1
 
Co-Investment Vehicles Various Various   2,864.1   837.0 Various   2,027.1       982.9       1,713.0       2,234.1
Total Private Equity   61,326.6       14,020.3   47,306.3       40,582.7       27,049.8       41,002.2
 
Real Assets
Energy Income and Growth Fund 9/2013 9/2018 1,974.2 1,621.8 12.8% 352.4 11.5 343.7 350.9
Natural Resources Fund Various Various 876.1 303.1 Various 573.0 73.2 519.4 333.2
Global Energy Opportunities Various Various 962.2 817.7 Various 144.5 1.2 144.5 132.1
Infrastructure Fund Various Various 1,042.5 294.7 4.8% 747.8 30.0 747.8 792.0
Infrastructure Co-Investments Various Various 1,355.7 251.2 Various 1,104.5 239.9 1,104.5 1,306.4
Real Estate Partners Americas 5/2013 12/2016   1,226.2       948.0 16%   278.2       -       278.2       404.0
Real Assets   7,436.9       4,236.5   3,200.4       355.8       3,138.1       3,318.6
 
Private Markets Total   68,763.5       18,256.8   50,506.7       40,938.5       30,187.9       44,320.8
 

Public Markets

 
Special Situations Vehicles Various Various 3,519.3 1,099.1 Various 2,420.2 793.4 2,002.5 2,363.3
Mezzanine Fund 3/2010 8/2015 987.0 444.8 4.6% 542.2 163.2 482.1 578.3
Direct Lending Vehicles Various Various 748.9 184.4 Various 564.5 39.8 564.5 612.4
               
Public Markets Total   5,255.2       1,728.3   3,526.9       996.4       3,049.1       3,554.0
 
Grand Total$74,018.7     $19,985.1$54,033.6     $41,934.9     $33,237.0     $47,874.8
 
         
   

(a)

 

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

 


 

             
KKR
DISTRIBUTION CALCULATION (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
 
Quarter Ended
March 31, 2014December 31, 2013   March 31, 2013
Cash Revenues
Fees $ 327,623 $ 295,684 $ 221,114
Realized cash carry 193,550 250,500 88,167
Net realized principal investment income   192,892     250,856     153,156  
Total Cash Revenue   714,065     797,040     462,437  
 
Cash Expenses
Realized cash carry allocated to carry pool 77,420 100,200 35,267
Compensation and benefits 108,915 95,945 75,162
Occupancy and related charges 14,189 14,264 13,322
Other operating expenses   52,801     65,342     44,630  
Total Cash Expenses   253,325     275,751     168,381  
 
Cash income (loss) before noncontrolling interests and local taxes460,740521,289294,056
 
Less: local income taxes (10,730 ) (8,995 ) (2,341 )
Less: noncontrolling interests   (3,202 )   (1,943 )   (1,101 )
Total distributable earnings446,808510,351290,614
 
Less: estimated current corporate income taxes   (33,445 )   (26,809 )   (16,727 )
 
Distributable Earnings, net of taxes413,363483,542273,887
 
Less: Undistributed net realized principal investment income   (115,735 )   (150,514 )   (91,894 )
 
Distributed Earnings$297,628   $333,028   $181,993  
 
Distributable Earnings, net of taxes per KKR & Co. L.P. common unit$0.59$0.70$0.40
 
Distribution per KKR & Co. L.P. common unit$0.43$0.48$0.27
                           

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

 
After-tax FRE $ 0.15 $ 0.12 $ 0.10
Realized Cash Carry $ 0.17 $ 0.22 $ 0.08
Distributed Net Realized Principal Investment Income     $ 0.11       $ 0.14       $ 0.09  
 
Adjusted Units Eligible For Distribution696,070,615692,512,345686,761,268
 
Payout Ratio         72.0%       68.9%       66.4%
 


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 and 40% of the net cash income from realized principal investments, in each case 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 obligations. 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) a percentage of net realized principal investment income. 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., which may change the distribution policy at any time, 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 unitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR & Co. L.P. 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.

KKR

Notes to Reportable Segments (Unaudited)

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

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

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

Economic net income (loss) (“ENI”) is a measure of profitability for KKR’s reportable segments and is used by management as an alternative measurement of the operating and investment earnings of KKR and its business segments. We believe this measure is useful to unitholders as it provides additional insight into the overall profitability of KKR’s businesses inclusive of investment income and carried interest. ENI is comprised of: (i) FRE plus (ii) segment investment income (loss), which is reduced for carry pool allocations, management fee refunds, interest expense and certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income; 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.

Net realized principal investment income refers to net cash income from (i) realized investment gains and losses excluding certain realized investment losses from principal investments during the first quarter of 2014 to the extent unrealized losses on these investments were recognized prior to the combination with KPE on October 1, 2009, (ii) dividend income and (iii) interest income net of interest expense less certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income in each case generated by KKR’s principal investments held on or through KKR’s balance sheet in our Capital Markets and Principal Activities segment. This is a term to describe a portion of KKR’s quarterly distribution.

Total distributable earnings is the sum of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool and (iii) net realized principal investment income; less (i) applicable local income taxes, if any, and (ii) noncontrolling interests. We believe this measure is useful to unitholders as it provides a supplemental measure to assess performance, excluding the impact of mark-to-market gains (losses), and also assess amounts available for distribution to KKR unitholders. However, total distributable earnings is not a measure that calculates actual distributions under KKR’s current distribution policy.

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

Fee paying AUM (“FPAUM”) represents only those assets under management from which KKR receives fees. We believe this measure is useful to unitholders as it provides additional insight into the capital base upon which KKR earns management fees. This relates to KKR’s capital raising activities and the overall activity in its investment funds, for only those funds, 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 unitholders 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 carried interest and (ii) capital invested by KKR’s investment funds.

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

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

Uncalled commitments are used as a measure of unfunded capital commitments that KKR’s investment funds and carry-paying co-investment vehicles have received from partners to contribute capital to fund future investments. We believe this measure is useful to unitholders as it provides additional insight into the amount of capital that is available to KKR’s investment funds to make future investments.

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

Core interest expense is used by management as an alternative measurement of interest expense incurred by KKR on a segment basis and excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR’s private equity funds, investment vehicles and principal investments. These financing arrangements are not direct obligations of the general partners of KKR’s private equity funds or its management companies. On a segment basis, interest expense is included in other investment income. We believe this measure is useful to unitholders as it provides an indication of the amount of interest expense borne by KKR excluding interest expense that is allocated to KKR’s investment funds and 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 KKR’s investment portfolio, including carried interest, as well as KKR’s overall liquidity position. We believe this measure is useful to unitholders as it provides additional insight into the assets and liabilities of KKR excluding the assets and liabilities that are allocated to noncontrolling interest holders. Book value differs from KKR & Co. L.P. Partners’ Capital on a GAAP basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings.

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

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

           
KKR

EXHIBIT A

RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT (GAAP BASIS)
TO ENI AFTER TAXES AND EQUITY-BASED CHARGES PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
 
 
Quarter Ended
March 31, 2014December 31, 2013March 31, 2013
 
Net income (loss) attributable to KKR & Co. L.P. per common unit - Basic$0.72$0.96$0.75
Weighted Average Common Units Outstanding - Basic 293,490,461 288,045,501 257,044,184
Net income (loss) attributable to KKR & Co. L.P. 210,041 277,913 193,439

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

300,814 393,739 334,112
Plus: Non-cash equity based charges 77,528 60,331 81,650
Plus: Amortization of intangibles and other, net 20,169 45,265 29,185
Plus: Income taxes   21,702   12,401   9,356
Economic net income (loss)630,254789,649647,742
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan   39,353   30,128   27,418
Economic net income (loss) after equity-based charges590,901759,521620,324
Less: Provision for income taxes   36,581   16,048   20,117
Economic net income (loss) after taxes and equity-based charges554,320743,473600,207
Plus: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan   39,353   30,128   27,418
Economic net income (loss) after taxes593,673773,601627,625
Weighted Average Adjusted Units   724,579,220   716,807,180   711,229,881
Economic net income (loss) after taxes per adjusted unit0.821.080.88
Weighted Average Adjusted Units   724,579,220   716,807,180   711,229,881
Economic net income (loss) after taxes593,673773,601627,625
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan   39,353   30,128   27,418
Economic net income (loss) after taxes and equity-based charges554,320743,473600,207
Weighted Average Adjusted Units   724,579,220   716,807,180   711,229,881
Economic net income (loss) after taxes and equity-based charges per adjusted unit$0.77$1.04$0.84
 
                   
 
KKR

EXHIBIT A (CONTINUED)

RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. (GAAP BASIS)
TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS, FEE RELATED EBITDA, AND TOTAL DISTRIBUTABLE EARNINGS (UNAUDITED)
(Amounts in thousands)
 
Quarter Ended
March 31, 2014December 31, 2013March 31, 2013
 
Net income (loss) attributable to KKR & Co. L.P.$210,041$277,913$193,439

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

300,814 393,739 334,112
Plus: Non-cash equity based charges 77,528 60,331 81,650
Plus: Amortization of intangibles and other, net 20,169 45,265 29,185
Plus: Income taxes   21,702   12,401   9,356
Economic net income (loss)630,254789,649647,742
Plus: Income attributable to segment noncontrolling interests 3,202 1,943 1,101
Less: Investment income (loss)   481,738   671,459   560,843
Fee related earnings151,718120,13388,000
Plus: Depreciation and amortization   4,035   3,658   3,681
Fee related EBITDA$155,753$123,791$91,681
Less: Depreciation and amortization 4,035 3,658 3,681
Plus: Realized cash carry, net of realized cash carry allocated to carry pool 116,130 150,300 52,900
Plus: Net realized principal investment income 192,892 250,856 153,156
Less: Local income taxes and noncontrolling interests   13,932   10,938   3,442
Total distributable earnings$446,808$510,351$290,614
 


       
KKR

EXHIBIT A (CONTINUED)

RECONCILIATION OF KKR & CO. L.P. PARTNERS' CAPITAL (GAAP BASIS)
TO BOOK VALUE AND BOOK VALUE PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
 
As ofAs of
March 31, 2014December 31, 2013
 
KKR & Co. L.P. partners’ capital$3,011,683$2,722,010
 
Noncontrolling interests held by KKR Holdings L.P. 5,118,491 5,116,761
 
Equity impact of KKR Management Holdings Corp. and other   15,588   (76,171 )
 
Book value8,145,7627,762,600
 
Adjusted units 728,714,599 716,676,699
   
Book value per adjusted unit$11.18$10.83  
 
             
 
 
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS)
TO CASH AND SHORT-TERM INVESTMENTS (SEGMENT BASIS) (UNAUDITED)
(Amounts in thousands)
 
As ofAs of
March 31, 2014December 31, 2013
 
Cash and cash equivalents$1,324,925$1,306,383
 
Liquid short-term investments 815,015 854,714
   
Cash and short-term investments$2,139,940$2,161,097  
 


             
KKR

EXHIBIT B

 
RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING TO WEIGHTED AVERAGE ADJUSTED UNITS (UNAUDITED)
 
The following table provides a reconciliation of KKR's Weighted Average GAAP Common Units Outstanding to Weighted Average Adjusted Units.
 
Quarter Ended
March 31, 2014December 31, 2013March 31, 2013
Weighted Average GAAP Common Units Outstanding - Basic293,490,461288,045,501257,044,184
Weighted Average Unvested Common Units(a) 29,379,509 24,294,835 24,998,337
Weighted Average Other Exchangable Securities 2,234,259   -   -
Weighted Average GAAP Common Units Outstanding - Diluted325,104,229312,340,336282,042,521
Adjustments:
Weighted Average KKR Holdings Units (b) 399,474,991   404,466,844   429,187,360
Weighted Average Adjusted Units724,579,220   716,807,180   711,229,881
 
                             
 
RECONCILIATION OF GAAP COMMON UNITS OUTSTANDING TO ADJUSTED UNITS (UNAUDITED)
 
The following table provides a reconciliation of KKR's GAAP Common Units Outstanding to Adjusted Units.
 
As ofAs of
March 31, 2014December 31, 2013
GAAP Common Units Outstanding - Basic300,354,288288,143,327
Unvested Common Units(a) 30,098,382 24,164,354
Other Exchangable Securities 4,904,472   -  
GAAP Common Units Outstanding - Diluted335,357,142312,307,681
Adjustments:
KKR Holdings Units (b) 393,357,457   404,369,018  
Adjusted Units728,714,599   716,676,699  
Adjustments:
Unvested Common Units (30,098,382 ) (24,164,354 )
Unvested Other Exchangable Securities (2,545,602 ) -  
Adjusted Units Eligible For Distribution696,070,615   692,512,345  
 
     
         

(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.






Kohlberg Kravis Roberts & Co. L.P.

Investor Relations:

Craig Larson

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

investor-relations@kkr.com

or

Media:

Kristi Huller

Tel: +1 212-750-8300

media@kkr.com

Source: KKR & Co. L.P.


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