10-QPeriod: Q1 FY2012

KKR & Co. Inc. Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 4, 2012For Securities:KKRKKRTKKR-PDKKRS

Summary

KKR & Co. Inc. reported solid financial results for the first quarter of 2012. The company saw a significant increase in net income attributable to KKR & Co. L.P., reaching $190.4 million, a substantial jump from $159.6 million in the same period last year. This growth was primarily driven by strong performance in investment activities, particularly within the private equity segment, which experienced a notable increase in net gains. Despite a decrease in fee income compared to the prior year, largely due to the absence of certain one-time termination fees, the company's expenses were managed effectively, leading to overall profitability growth. Assets under management (AUM) across KKR's various segments remained robust, indicating continued investor confidence and successful capital deployment. The firm's diversified business model, spanning private markets, public markets, and capital markets, contributed to its resilient performance amidst a fluctuating global economic environment. Investors should note the significant unrealized gains contributing to the overall investment income, highlighting the market-sensitive nature of KKR's performance.

Financial Highlights

25 data points
Beta

Net Income

$190.44M

Total Assets

$43.52B

Cash & Equivalents

$611.21M

Free Cash Flow

$358.01M

Financial Statements
Beta
Interest Expense$18.00M
Net Income$190.44M

Key Highlights

  • 1Net income attributable to KKR & Co. L.P. increased by approximately 19.3% to $190.4 million for Q1 2012 compared to $159.6 million for Q1 2011.
  • 2Total revenues decreased by approximately 50% to $116.3 million from $231.8 million year-over-year, primarily due to a significant drop in monitoring and transaction fees.
  • 3Net gains from investment activities more than doubled to $3.1 billion in Q1 2012 from $2.5 billion in Q1 2011, driven largely by strong performance in private equity investments.
  • 4Total expenses increased slightly to $445.3 million from $423.8 million, with equity-based compensation and other operating expenses being key drivers of the increase.
  • 5Assets Under Management (AUM) for the Private Markets segment increased to $46.0 billion as of March 31, 2012, from $43.6 billion as of December 31, 2011.
  • 6The company maintained a strong liquidity position with cash and short-term investments of $855.5 million as of March 31, 2012.

Frequently Asked Questions

The primary driver of KKR's increased net income was the substantial growth in net gains from investment activities, particularly from its private equity portfolio, which benefited from favorable market conditions and strong portfolio company performance.

The decrease in fee income was mainly due to the absence of significant one-time termination fees from monitoring agreements that were recognized in the prior year's first quarter. Transaction fees also saw a reduction due to a decrease in the size of fee-generating investments.

KKR's AUM across its segments remained strong. Specifically, AUM in the Private Markets segment grew to $46.0 billion as of March 31, 2012, up from $43.6 billion at the end of 2011, primarily driven by market appreciation in its private equity portfolio.

KKR values most of its investments at fair value. For Level III investments, which are typically private equity holdings with unobservable inputs, KKR uses a combination of market comparable analysis and discounted cash flow analysis, assigning weights to each methodology. These valuations involve significant management judgment and are subject to market conditions and the availability of observable data.