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KKR & CO. L.P. Reports Operating Results (10-Q)

August 03, 2012 | About:
10qk

10qk

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KKR & CO. L.P. (KKR) filed Quarterly Report for the period ended 2012-06-30.

Kkr & Co. L.p. has a market cap of $3.32 billion; its shares were traded at around $13.88 with a P/E ratio of 12.4 and P/S ratio of 4.6. The dividend yield of Kkr & Co. L.p. stocks is 4.2%.

Highlight of Business Operations:

With respect to KKRs active and future funds and co-investment vehicles that provide for carried interest, KKR will allocate to its principals and other professionals a portion of the carried interest earned in relation to these funds as part of its carry pool. KKR currently allocates approximately 40% of the carry it earns from these funds and vehicles to its carry pool. These amounts are accounted for as compensatory profit-sharing arrangements in conjunction with the related carried interest income and recorded as compensation expense for KKR employees and general, administrative and other expense for certain non-employee consultants and service providers in the condensed consolidated statements of operations. Carry pool allocations totaled $112.6 million and $79.6 million for the three months ended June 30, 2012 and 2011, respectively and $304.1 million and $219.1 million for the six months ended June 30, 2012 and 2011, respectively.

Fees were $130.1 million for the three months ended June 30, 2012, a decrease of $3.3 million, compared to fees of $133.4 million for the three months ended June 30, 2011. The net decrease was primarily due to a decrease in gross monitoring fees of $2.9 million and an increase in fee credits of $3.5 million, partially offset by an increase in transaction fees of $2.7 million. The decrease in gross monitoring fees was primarily the result of having no transactions comparable to the transactions which resulted in $7.8 million in fees received during the three months ended June 30, 2011 from the termination of monitoring agreements in connection with the partial sale of Seven Media Group, which impacted fee related earnings by $1.9 million, net of associated fee credits. These types of termination payments may occur in the

For the three months ended June 30, 2012, the net unrealized gains of $35.1 million included $272.1 million of net unrealized gains reflecting net increases in the value of various portfolio companies principally related to the increase in value of one of our largest private equity investments, Alliance Boots GmbH (health care sector) in connection with its strategic sale, partially offset by $237.0 million of reversals of previously recognized net unrealized gains in the connection with the occurrence of realization events such as partial or full sales of investments. We completed a strategic sale of 45% of our interest in Alliance Boots GmbH on August 2, 2012. The buyer of Alliance Boots has an option, but not the obligation, to purchase the remaining 55%.

Fees were $256.8 million for the six months ended June 30, 2012, a decrease of $59.6 million, compared to fees of $316.4 million for the six months ended June 30, 2011. The net decrease was primarily due to a decrease in gross monitoring fees of $67.5 million and a decrease in gross transaction fees of $38.9 million, partially offset by a decrease in fee credits of $49.6 million. The decrease in gross monitoring fees was primarily the result of having no transactions comparable to the transactions which resulted in $76.6 million in fees received during the six months ended June 30, 2011 from the termination of monitoring fee arrangements in connection with the IPOs of two portfolio companies, HCA, Inc. and The Nielsen Company and the sale of Seven Media Group, which impacted fee related earnings by $39.7 million net of associated fee credits. These types of termination payments may occur in the future; however, they are infrequent in nature and are generally correlated with IPOs or other sale activity in our private equity portfolio. Excluding the impact of termination payments, during the six months ended June 30, 2012, we had 38 portfolio companies that were paying an average monitoring fee of $1.4 million compared with 30 portfolio companies that were paying an average monitoring fee of $1.4 million during the six months ended June 30, 2011. The decrease in gross transaction fees was primarily the result of a decrease in the size of fee-generating investments completed. In the six months ended June 30, 2012, there were seven transaction fee-generating investments with a total combined transaction value of approximately $1.9 billion compared to five transaction fee-generating investments with a combined transaction value of $6.4 billion during the six months ended June 30, 2011. Transaction fees vary by investment based upon a number of factors, the most significant of which are transaction size, the particular negotiations as to the amount of the fees, the complexity of the transaction and KKRs role in the transaction.

Our net cash provided by (used in) operating activities was $2.7 billion and $2.2 billion during the six months ended June 30, 2012 and 2011, respectively. These amounts primarily included: (i) proceeds from sales of investments net of purchases of investments by our funds of $1.9 billion during both the six months ended June 30, 2012 and 2011; (ii) net realized gains on investments of $2.0 billion and $2.4 billion during the six months ended June 30, 2012 and 2011, respectively; and (iii) change in unrealized gains (losses) on investments of $2.7 billion and $1.4 billion during the six months ended June 30, 2012 and 2011, respectively. Certain KKR funds are, for GAAP purposes, investment companies and reflect their investments and other financial instruments at fair value.

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