10-QPeriod: Q3 FY2015

KKR & Co. Inc. Quarterly Report for Q3 Ended Sep 30, 2015

Filed November 5, 2015For Securities:KKRKKRTKKR-PDKKRS

Summary

KKR & Co. Inc. reported a net loss attributable to KKR & Co. L.P. of $190.6 million for the third quarter of 2015, a significant decrease from the net income of $89.9 million reported in the same period of the prior year. This decline was primarily driven by a substantial net loss from investment activities, totaling $1.14 billion in Q3 2015, compared to a net investment income of $1.06 billion in Q3 2014. The Private Markets segment experienced a notable drop in performance income, largely due to unrealized carried interest losses, and a decrease in transaction and monitoring fees. The Public Markets segment also saw a decline in performance income and a significant increase in net unrealized losses. Despite these challenges, KKR announced a new distribution policy to pay $0.16 per common unit quarterly, starting in 2016, and authorized a $500 million unit repurchase program, indicating management's confidence in future performance and commitment to returning capital to shareholders.

Financial Highlights

25 data points
Beta

Net Income

-$190.59M

Total Assets

$69.06B

Cash & Equivalents

$1.76B

Free Cash Flow

$728.49M

Financial Statements
Beta
Interest Expense$151.55M
Net Income-$190.59M

Key Highlights

  • 1KKR reported a net loss attributable to KKR & Co. L.P. of $190.6 million for Q3 2015, a significant shift from the net income of $89.9 million in Q3 2014.
  • 2Total investment income (loss) for Q3 2015 was a loss of $1.14 billion, a stark contrast to the $1.06 billion income in Q3 2014, primarily due to a $1.56 billion net loss from investment activities.
  • 3The Private Markets segment saw a decrease in total segment revenues, largely driven by a substantial drop in transaction fees and a decline in monitoring fees, though management fees increased.
  • 4Performance income in the Private Markets segment turned negative at $(128.8) million due to unrealized carried interest losses, compared to positive $289.9 million in the prior year.
  • 5The Public Markets segment also experienced a decline in segment revenues, primarily due to lower performance income and a significant increase in net unrealized losses from investment activities.
  • 6KKR announced a new distribution policy of $0.16 per common unit per quarter, effective early 2016, and authorized a $500 million unit repurchase program, signaling a focus on capital return to shareholders.
  • 7Assets Under Management (AUM) in the Private Markets segment decreased slightly to $60.8 billion, primarily due to distributions, while AUM in the Public Markets segment decreased to $37.9 billion, mainly due to distributions and redemptions.

Frequently Asked Questions

The primary driver of KKR's financial performance in Q3 2015 was the significant net loss from investment activities, totaling $1.14 billion, which contrasted sharply with the net investment income reported in the prior year's quarter. This was largely due to unrealized losses in the private equity portfolio.

Effective with the distribution for the quarter ending December 31, 2015 (anticipated to be declared in early 2016), KKR intends to make equal quarterly distributions to holders of its common units in the amount of $0.16 per common unit per quarter.

KKR's AUM in the Private Markets segment decreased slightly to $60.8 billion as of September 30, 2015, primarily due to distributions to fund investors. The Public Markets segment AUM decreased to $37.9 billion, driven by distributions and redemptions.

KKR announced a new quarterly distribution policy of $0.16 per common unit starting in 2016 and authorized a $500 million unit repurchase program. Additionally, KKR entered into a strategic relationship with Marshall Wace LLP, acquiring a 24.9% interest.