10-QPeriod: Q1 FY2015

KKR & Co. Inc. Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 7, 2015For Securities:KKRKKRTKKR-PDKKRS

Summary

KKR & Co. Inc. reported its first quarter 2015 financial results, showing a net income attributable to KKR & Co. L.P. of $270.5 million, an increase from $210.0 million in the prior year's quarter. This growth was primarily driven by an increase in KKR & Co. L.P.'s ownership percentage in the KKR Group Partnerships, largely due to the acquisition of KKR Financial Holdings LLC (KFN). Total segment revenues saw a decrease, primarily in the Public Markets and Capital Markets segments, offset by growth in the Private Markets segment. The company's Assets Under Management (AUM) remained robust, with Private Markets AUM increasing to $62.1 billion and Public Markets AUM holding steady at $37.0 billion. The company's Private Markets segment demonstrated strong performance, with an increase in Economic Net Income (ENI) driven by higher carried interest, partially offset by a decrease in transaction fees. The Public Markets segment saw a significant decrease in ENI, largely due to reduced performance income and investment income. The Capital Markets segment also experienced a decline in ENI, primarily due to lower transaction fees. Despite segment-specific fluctuations, the overall increase in net income attributable to KKR & Co. L.P. reflects the company's strategic positioning and effective management of its diverse investment portfolio.

Financial Highlights

26 data points
Beta

Net Income

$270.51M

Total Assets

$67.29B

Cash & Equivalents

$1.31B

Free Cash Flow

$939.59M

Financial Statements
Beta
Interest Expense$111.96M
Net Income$270.51M

Key Highlights

  • 1Net income attributable to KKR & Co. L.P. increased to $270.5 million for Q1 2015, up from $210.0 million in Q1 2014, primarily due to increased ownership in the KKR Group Partnerships following the KFN acquisition.
  • 2Private Markets segment revenue increased by $137.2 million, largely driven by a significant rise in monitoring fees related to investment exits and higher realized carried interest.
  • 3Total segment revenues decreased by $95.5 million, primarily due to a sharp decline in the Public Markets segment's revenues ($95.5 million decrease) and Capital Markets segment's revenues ($24.8 million decrease).
  • 4Assets Under Management (AUM) in the Private Markets segment grew to $62.1 billion as of March 31, 2015, up from $61.5 billion at the end of 2014, driven by portfolio appreciation and new capital raised.
  • 5Public Markets segment AUM slightly decreased to $37.0 billion as of March 31, 2015, from $37.1 billion at the end of 2014, impacted by redemptions and distributions, partially offset by new capital raised in alternative credit and hedge funds.
  • 6The company reported $1.5 billion in cash and short-term investments on a segment basis as of March 31, 2015, indicating a healthy liquidity position.
  • 7Interest income significantly increased by $134.2 million, largely attributed to the consolidation of KFN's debt instruments and growth in credit and CLO platforms.

Frequently Asked Questions

The primary driver for the increase in Net Income Attributable to KKR & Co. L.P. was the increase in KKR & Co. L.P.'s ownership percentage in the KKR Group Partnerships, primarily due to the acquisition of KKR Financial Holdings LLC (KFN) on April 30, 2014. This increased ownership subjected a greater portion of income to corporate taxes at the KKR & Co. L.P. level.

The Private Markets segment showed improved performance with total segment revenues increasing by $137.2 million. This was mainly due to a significant rise in monitoring fees from investment exits ($61.5 million increase) and higher realized carried interest ($133.6 million increase), although transaction fees decreased by $46.4 million due to fewer and smaller deals.

As of March 31, 2015, KKR reported cash and short-term investments on a segment basis of $1.5 billion. This indicates a solid liquidity position to manage operational needs, fund commitments, and support business growth.

The acquisition of KFN impacted the financial results in several ways. It contributed to the increase in KKR & Co. L.P.'s ownership in the KKR Group Partnerships, thereby boosting net income. KFN's operations also led to an increase in interest income and expenses due to consolidated debt instruments and its own debt obligations. Additionally, revenues from consolidated oil and gas producing entities of KFN were recognized.