KKR & Co. Inc. Quarterly Report for Q2 Ended Jun 30, 2012

Summary

KKR & Co. Inc. (KKR) reported strong financial performance for the quarter and six months ended June 30, 2012. The company experienced significant growth in its investment income, driven by substantial net gains from investment activities, particularly in its private equity portfolio. Total revenues saw a slight decrease compared to the prior year's comparable periods, primarily due to lower incentive and monitoring fees, but this was largely offset by improved investment performance. The company's operating expenses increased, mainly driven by higher compensation and benefits, reflecting increased carry pool allocations due to strong carried interest recognition. Despite higher expenses, KKR demonstrated robust profitability, with net income attributable to KKR & Co. L.P. showing a substantial increase year-over-year. The firm's Assets Under Management (AUM) remained strong, and it continued to execute on its strategic initiatives, including the anticipated acquisition of Prisma Capital Partners LP. Overall, the report indicates a healthy financial position for KKR, characterized by strong investment returns and strategic growth initiatives, providing a positive outlook for investors.

Key Highlights

• 1Net income attributable to KKR & Co. L.P. increased significantly to $146.3 million for Q2 2012 and $336.7 million for the first six months of 2012, up from $39.6 million and $199.2 million in the prior year periods, respectively.
• 2Net gains from investment activities were robust, totaling $1.6 billion for Q2 2012 and $4.7 billion for the first six months of 2012, primarily driven by strong performance in the private equity portfolio.
• 3Fees decreased slightly year-over-year, from $117.6 million to $112.4 million in Q2 2012 and from $349.5 million to $228.7 million for the first six months, mainly due to lower incentive and monitoring fees.
• 4Total expenses increased, driven by higher compensation and benefits, including increased carry pool allocations due to strong carried interest recognition.
• 5The company had $40.4 billion in total investments as of June 30, 2012, with a significant portion ($26.7 billion) categorized as Level III assets, reflecting valuations based on unobservable inputs.
• 6KKR announced a definitive agreement to acquire Prisma Capital Partners LP and its affiliates, a move expected to close in the fourth quarter of 2012.
• 7The company reported $50.2 billion in Private Markets AUM and $16.0 billion in Public Markets AUM as of June 30, 2012.

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