10-QPeriod: Q3 FY2014

KKR & Co. Inc. Quarterly Report for Q3 Ended Sep 30, 2014

Filed November 6, 2014For Securities:KKRKKRTKKR-PDKKRS

Summary

KKR & Co. Inc. (KKR) reported its quarterly results for the period ending September 29, 2014, showcasing strong growth and expansion. The company's financial performance saw a significant increase in total assets, reaching $66.3 billion, up from $51.4 billion at the end of the previous year. This growth was fueled by a substantial increase in investments, which grew to $59.9 billion from $47.4 billion. The company also reported a significant rise in debt obligations, increasing from $1.9 billion to $10.3 billion, primarily due to strategic acquisitions and financing activities. Revenues, driven by strong fee income and investment gains, increased to $344.8 million for the quarter, up from $220.0 million in the same period last year. The company experienced a notable rise in net income attributable to KKR & Co. L.P. to $89.9 million from $204.7 million in the prior year's quarter, though this was primarily driven by a large one-time investment gain in the prior year. The company's strategic acquisitions of KKR Financial Holdings LLC and Avoca Capital were completed during the period, contributing to the expanded asset base and revenue streams. Investors will be closely watching the integration and performance of these newly acquired entities.

Financial Highlights

26 data points
Beta

Net Income

$89.94M

Total Assets

$66.33B

Cash & Equivalents

$1.47B

Free Cash Flow

-$350.71M

Financial Statements
Beta
Interest Expense$96.62M
Net Income$89.94M

Key Highlights

  • 1Total Assets increased by approximately 28.9% year-over-year, reaching $66.3 billion.
  • 2Total Revenues for the quarter increased by approximately 56.7% year-over-year to $344.8 million.
  • 3Net Income Attributable to KKR & Co. L.P. decreased by 56.1% year-over-year to $89.9 million, largely due to a significant investment gain in the prior year's quarter.
  • 4Investments grew by 26.7% year-over-year to $59.9 billion.
  • 5Debt Obligations saw a substantial increase of 440.7% year-over-year, rising to $10.3 billion, reflecting financing activities and acquisitions.
  • 6The company completed the acquisitions of KKR Financial Holdings LLC and Avoca Capital, impacting segment results and asset base.
  • 7Assets Under Management (AUM) in the Private Markets segment were $59.2 billion as of September 30, 2014.

Frequently Asked Questions

KKR's primary revenue drivers were fees, which significantly increased year-over-year, and investment income. Fees were boosted by higher transaction fees and increased revenues from consolidated oil and gas producing entities, largely due to the acquisition of KFN. Investment income was positively impacted by dividend income and interest income, though net gains from investment activities decreased compared to the prior year quarter.

The acquisitions of KFN and Avoca Capital significantly impacted KKR's financial results by increasing total assets, investments, and revenues. The KFN acquisition, in particular, contributed oil and gas revenue and interest income. Both acquisitions also led to an increase in expenses, including interest expense due to new debt obligations, and impacted segment reporting presentations. The full integration and performance of these acquired entities will be key going forward.

KKR's debt obligations increased substantially to $10.3 billion from $1.9 billion year-over-year. This increase is primarily attributed to the issuance of new senior notes, including $500 million in 2044 Senior Notes, and the consolidation of KFN's debt obligations following its acquisition. The company also has revolving credit facilities and investment financing facilities in place.

KKR modified its segment reporting to reflect the impact of the KFN acquisition. The Private Markets segment experienced a decrease in fee-generating revenue but saw an increase in overall equity invested. The Public Markets segment saw an increase in management fees and incentive fees, driven by the Avoca acquisition and new capital raised. The Capital Markets and Other segment reported higher transaction fees, reflecting larger deal sizes and an increased number of transactions, including a significant syndication fee.