What was the primary reason for the significant change in the "Fees and Other" revenue line item compared to the prior year?

The significant increase in "Fees and Other" revenue was primarily due to the adoption of ASU 2015-02 on January 1, 2016. This accounting change resulted in the de-consolidation of most of KKR's investment funds, meaning that management fees, monitoring fees, and carried interest from these funds, which were previously eliminated in consolidation, are now recognized as revenue.

How did the "Net Gains (Losses) from Investment Activities" change compared to the prior year's quarter, and what was the impact?

Net Gains (Losses) from Investment Activities saw a substantial decrease from $3,110,604 thousand in Q2 2015 to $9,168 thousand in Q2 2016. This was mainly driven by a significant reduction in net unrealized gains, particularly in the Private Equity portfolio. This decline in investment gains had a material impact on the overall Income (Loss) Before Taxes and Net Income Attributable to KKR & Co. L.P.

What is the significance of the "KKR Group Partnership Units" and the "Tax Receivable Agreement" mentioned in the filing?

The KKR Group Partnership Units represent ownership interests in the operating partnerships of KKR. The Tax Receivable Agreement is an arrangement where KKR's intermediate holding companies may pay KKR Holdings (or its transferees) a portion of the tax savings realized from increases in the tax basis of KKR's assets, which can occur when KKR Group Partnership Units are exchanged for KKR common units. This agreement impacts the company's tax liabilities and cash flows.

KKR & Co. Inc. 10-Q Quarterly Report Q2 FY2016

Summary

KKR & Co. Inc. reported its quarterly results for the period ending June 29, 2016. The company's financial performance was significantly impacted by a change in accounting standards (ASU 2015-02) which led to the de-consolidation of most investment funds. This change, while not impacting net income, altered the presentation of revenue and expenses. Despite a notable decrease in Net Gains (Losses) from Investment Activities compared to the prior year's second quarter, driven by lower unrealized gains, the company saw an increase in "Fees and Other" primarily due to the inclusion of carried interest and management fees from previously consolidated funds. The "Private Markets" segment experienced a decrease in total segment revenues, mainly due to lower monitoring and transaction fees, and a significant drop in performance income, largely attributable to reduced carried interest from lower appreciation in the private equity portfolio. Conversely, the "Public Markets" segment saw an increase in management fees, driven by strategic investments and new capital raised, though performance income declined. The "Capital Markets" segment reported a decrease in transaction fees due to smaller deal sizes, while "Principal Activities" showed a significant decline in investment income, largely due to net investment losses and a decrease in net interest and dividends. The company's Assets Under Management (AUM) in the Private Markets segment grew, driven by new capital raised and an increase in portfolio value, while the Public Markets segment also saw an increase in AUM due to new capital inflows. The company's liquidity remained robust, with significant cash and short-term investments. KKR also announced the issuance of Series A and Series B Preferred Units during the quarter, bolstering its capital structure.

Financial Highlights

24 data points

Beta

Net Income

$99.58M

Total Assets

$37.51B

Cash & Equivalents

$1.51B

Free Cash Flow

-$454.44M

Financial Statements

Beta

Interest Expense	$181.31M
Net Income	$99.58M

Key Highlights

1KKR adopted ASU 2015-02, leading to the de-consolidation of most investment funds, which impacts the presentation of revenues and expenses but not net income.
2Total segment revenues decreased year-over-year, primarily driven by lower performance income in Private Markets and lower investment income in Principal Activities, offset by increases in Public Markets management fees.
3Private Markets segment saw a decrease in monitoring and transaction fees, alongside a significant drop in carried interest due to lower portfolio appreciation.
4Public Markets segment benefited from increased management fees from strategic investments and new capital, but experienced a decline in performance income.
5The company's AUM increased across both Private Markets ($75.4B) and Public Markets ($55.6B) segments, indicating growth in managed capital.
6KKR repurchased approximately 5.18 million common units during the quarter under its $500 million repurchase program, returning capital to shareholders.
7The company issued Series A and Series B Preferred Units, raising significant capital and impacting its capital structure.

KKR & Co. Inc. Quarterly Report for Q2 Ended Jun 30, 2016

Summary

Financial Highlights

Key Highlights

Frequently Asked Questions