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News Detail
News vom 10.02.2015
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KKR & Co. L.P. Announces Fourth Quarter and Full Year 2014 Results GAAP net income (loss) attributable to KKR & Co. L.P. was ($0.6) million and $477.6 million for the quarter and year ended December 31, 2014, respectively, down from $277.9 million and $691.2 million in the comparable periods of 2013. Total distributable earnings was $376.3 million for the quarter ended December 31, 2014, down from $510.4 million in the quarter ended December 31, 2013. Total distributable earnings was $2,028.9 million for the year ended December 31, 2014, up from $1,455.9 million for the year ended December 31, 2013. Distribution per common unit was $0.35 for the quarter ended December 31, 2014, down from $0.48 in the quarter ended December 31, 2013. Distribution per common unit was $1.90 for the year ended December 31, 2014, up from $1.40 in the year ended December 31, 2013. Economic net income ("ENI") was $86.6 million and $1,727.2 million for the quarter and year ended December 31, 2014, respectively, down from $789.6 million and $2,195.6 million in the comparable periods of 2013. ENI after taxes per adjusted unit(1) was $0.05 and $1.84 for the quarter and year ended December 31, 2014, respectively, down from $1.04 and $2.82 in the comparable periods of 2013. Fee and yield earnings were $208.4 million and $733.3 million for the quarter and year ended December 31, 2014, respectively, up from $140.1 million and $433.9 million in the comparable periods of 2013. Book value was $10.1 billion on a total reportable segment basis as of December 31, 2014 or $12.07 per adjusted unit. Return on equity and cash return on equity were 16% and 21%, respectively. Assets under management ("AUM") and fee paying assets under management ("FPAUM") totaled $98.6 billion and $83.0 billion, respectively, as of December 31, 2014. NEW YORK--(BUSINESS WIRE)-- KKR & Co. L.P. (NYSE: KKR) today reported its fourth quarter and full year 2014 results. For the quarter and year ended December 31, 2014, the fair value of our private equity portfolio appreciated 2.7% and 12.8%, respectively. During the fourth quarter of 2014, KKR held the first closes of its European Fund IV, Infrastructure Fund II and Special Situations Fund II, and held the second close for its Lending Partners II Fund, which added capital commitments of $1.6 billion, $2.0 billion, $0.7 billion and $0.5 billion, respectively. KKR declares a distribution of $0.35 per common unit, which includes $0.15 of realized cash carry, the 19th consecutive quarter that realized cash carry has been a component of the distribution, bringing full-year distributions to $1.90 per common unit. "Our realization activity and increasing balance sheet yield translated into $2.0 billion of total distributable earnings and an annual distribution of $1.90 per unit for the year ended December 31, 2014, both of which are the highest figures we've reported as a public company," said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. "Additionally, our balance sheet continued to generate strong cash flow, resulting in a 21% cash return on equity in 2014." Note: Certain financial measures, including FRE, ENI, ENI after taxes, fee and yield earnings, book value, cash and short-term investments and adjusted units, are not presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). See Exhibits B and C for a reconciliation of such measures to financial results prepared in accordance with GAAP. (1) KKR's reporting of ENI after taxes now includes a reduction for equity-based charges. GAAP RESULTS GAAP net income (loss) for the quarter and year ended December 31, 2014, included net income (loss) attributable to KKR & Co. L.P. of ($0.6) million and $477.6 million, respectively, and net income (loss) attributable to KKR & Co. L.P. per common unit of $0.00 and $1.16, respectively, on a diluted basis. For the quarter and year ended December 31, 2013, net income (loss) attributable to KKR & Co. L.P. was $277.9 million and $691.2 million, respectively, and net income (loss) attributable to KKR & Co. L.P. per common unit was $0.89 and $2.30, respectively, on a diluted basis. The decreases in net income (loss) were primarily due to a decrease in investment income, partially offset by an increase in KKR & Co. L.P.'s ownership percentage in the KKR business. SEGMENT RESULTS*
* All segment financial information presented in this release reflects a new presentation as of the second quarter of 2014 following the closing of the acquisition of KFN. Private Markets AUM was $61.5 billion as of December 31, 2014, an increase of $2.3 billion, compared to AUM of $59.2 billion as of September 30, 2014. The increase was primarily attributable to new capital raised in our European Fund IV and Infrastructure Investors Fund II as well as appreciation in the fair value of our private equity portfolio. These increases were offset by distributions to limited partners of our private equity funds arising from realizations. FPAUM was $47.3 billion as of December 31, 2014, an increase of $1.7 billion, compared to FPAUM of $45.6 billion as of September 30, 2014. The increase was primarily attributable to new capital raised in our European Fund IV and Infrastructure Fund II offset by distributions to limited partners of our private equity funds arising from realizations. Total segment revenues were $283.4 million for the quarter ended December 31, 2014, a decrease of $730.3 million, compared to total segment revenues of $1,013.7 million for the quarter ended December 31, 2013. Total segment revenues were $2,288.5 million for the year ended December 31, 2014, a decrease of $532.6 million, compared to total segment revenues of $2,821.1 million for the year ended December 31, 2013. The decrease in revenues for the quarter and year ended December 31, 2014 was principally attributable to a decrease in investment income due primarily to net unrealized losses in our energy portfolio, which were only partially offset by appreciation in our private equity portfolio. Additionally, the 2014 period reflected a lower level of carried interest as a result of a lower level of appreciation in our private equity portfolio in the 2014 periods. While the value of our private equity portfolio increased in the 2014 periods, the amount of appreciation was less than that in the prior periods. ENI was $76.8 million for the quarter ended December 31, 2014, a decrease of $573.5 million, compared to ENI of $650.3 million for the quarter ended December 31, 2013. ENI was $1,337.4 million for the year ended December 31, 2014, a decrease of $489.3 million, compared to ENI of $1,826.7 million for the year ended December 31, 2013. The decreases are primarily the result of the decreases in total segment revenues discussed above. Public Markets AUM was $37.1 billion as of December 31, 2014, an increase of $0.1 billion, compared to AUM of $37.0 billion as of September 30, 2014. FPAUM was $35.8 billion as of December 31, 2014, unchanged from FPAUM of $35.8 billion as of September 30, 2014. For both AUM and FPAUM, new capital raised, primarily in our Lending Partners II Fund and our CLOs was largely offset by distributions and redemptions across multiple strategies. Total segment revenues were $33.5 million for the quarter ended December 31, 2014, a decrease of $116.6 million, compared to total segment revenues of $150.1 million for the quarter ended December 31, 2013. Total segment revenues were $429.9 million for the year ended December 31, 2014, an increase of $10.4 million, compared to total segment revenues of $419.5 million for the year ended December 31, 2013. The decrease in revenues for the quarter ended December 31, 2014 was principally attributable to a decrease in investment income due primarily to net unrealized losses in our CLO and credit portfolios, partially offset by an increase in net interest and dividends relating to the inclusion of yielding assets held by KKR Financial Holdings LLC ("KFN"). The increase in revenues for the year ended December 31, 2014 was principally attributable to an increase in net interest and dividends relating to the inclusion of yielding assets held by KFN as well as a higher level of management fees reflecting new capital raised and acquisitions. These increases were offset by net unrealized losses in our CLO portfolio. ENI was ($11.4) million for the quarter ended December 31, 2014, a decrease of $122.6 million, compared to ENI of $111.2 million for the quarter ended December 31, 2013. ENI was $240.1 million for the year ended December 31, 2014, a decrease of $19.4 million, compared to ENI of $259.5 million for the year ended December 31, 2013. The decrease for the quarter ended December 31, 2014 was principally attributable to a decrease in investment income due primarily to net unrealized losses in our CLO and credit portfolios, partially offset by an increase in net interest and dividends relating to the inclusion of yielding assets held by KFN. The decrease for the year ended December 31, 2014 was principally attributable to net unrealized losses in our CLO portfolio and higher expenses reflecting acquisitions. These decreases were partially offset by an increase in net interest and dividends relating to the inclusion of yielding assets held by KFN as well as a higher level of management fees reflecting new capital raised and acquisitions. KFN was acquired on April 30, 2014 and its results are included in KKR's results beginning on May 1, 2014. Capital Markets and Other Total segment revenues were $40.6 million for the quarter ended December 31, 2014, a decrease of $4.1 million, compared to total segment revenues of $44.7 million for the quarter ended December 31, 2013. Total segment revenues were $237.1 million for the year ended December 31, 2014, an increase of $76.8 million, compared to total segment revenues of $160.3 million for the year ended December 31, 2013. The fluctuations in revenues primarily reflect a lower level of overall capital markets transaction activity for the quarter ended December 31, 2014 and a higher level of overall capital markets transaction activity for the year ended December 31, 2014. ENI was $21.1 million for the quarter ended December 31, 2014, a decrease of $7.0 million, compared to ENI of $28.1 million for the quarter ended December 31, 2013. ENI was $149.6 million for the year ended December 31, 2014, an increase of $40.2 million, compared to ENI of $109.4 million for the year ended December 31, 2013. The decrease for the quarter ended December 31, 2014 primarily reflects a lower level of overall capital markets transaction activity in the 2014 period. The increase for the year ended December 31, 2014 reflects a higher level of overall capital markets transaction activity in the 2014 period, partially offset by higher compensation expense. CAPITAL AND LIQUIDITY As of December 31, 2014, KKR had $1.1 billion of cash and short-term investments and $2.6 billion of outstanding debt and preferred share obligations on a total reportable segment basis. This includes KFN's debt obligations of $657.3 million and KFN's 7.375% Series A LLC preferred shares of $373.8 million, which are non-recourse to KKR beyond the assets of KFN. As of December 31, 2014, KKR had a $1.0 billion revolving credit facility, which was undrawn. In addition, KKR has a $500.0 million revolving credit facility for use in its capital markets business that had $27.0 million drawn as of December 31, 2014. As of December 31, 2014, KKR's portion of total uncalled commitments to its investment funds was $1.2 billion. See Exhibit A for details. DISTRIBUTION A distribution of $0.35 per common unit has been declared, comprised of (i) $0.07 per common unit from after-tax FRE, (ii) $0.15 per common unit from realized cash carry, (iii) $0.06 per common unit from KKR's net realized investment income and (iv) $0.07 per common unit from KFN's net realized investment income. The distribution will be paid on March 6, 2015 to unitholders of record as of the close of business on February 20, 2015. CONFERENCE CALL A conference call to discuss KKR's financial results will be held on Tuesday, February 10, 2015 at 10:00 a.m. EDT. The conference call may be accessed by dialing (877) 303-2917 (U.S. callers) or +1 (253) 237-1135 (non-U.S. callers); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Investor Center section of KKR's website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. A replay of the live broadcast will be available on KKR's website or by dialing (855) 859-2056 (U.S. callers) or +1 (404) 537-3406 (non-U.S. callers), pass code 70933841, beginning approximately two hours after the broadcast. From time to time, KKR may use its website as a channel of distribution of material company information. Financial and other important information regarding KKR is routinely posted and accessible on the Investor Center for KKR & Co. L.P. at http://ir.kkr.com/kkr_ir/kkr_events.cfm. In addition, you may automatically receive email alerts and other information about KKR by enrolling your email address at the "Email Alerts" area of the Investor Center on the website. ABOUT KKR KKR is a leading global investment firm that manages investments across multiple asset classes including private equity, energy, infrastructure, real estate, credit and hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation at the asset level. KKR invests its own capital alongside its partners' capital and brings opportunities to others through its capital markets business. References to KKR's investments may include the activities of its sponsored funds. For additional information about KKR & Co. L.P. (NYSE: KKR), please visit KKR's website at www.kkr.com. FORWARD-LOOKING STATEMENTS This release contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements are based on KKR's beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or are within its control. If a change occurs, KKR's business, financial condition, liquidity and results of operations, including but not limited to AUM, FPAUM, FRE, total distributable earnings, ENI, ENI after taxes, fee and yield earnings, fee and yield EBITDA, equity invested and syndicated capital, uncalled commitments, core interest expense, cash and short-term investments, net realized principal investment income and book value, may vary materially from those expressed in the forward-looking statements. The following factors, among others, could cause actual results to vary from the forward-looking statements: the general volatility of the capital markets; failure to realize the benefits of or changes in KKR's business strategies including the ability to realize the anticipated synergies from acquisitions or strategic partnerships such as Prisma, Nephila, Avoca or KFN; availability, terms and deployment of capital; availability of qualified personnel and expense of recruiting and retaining such personnel; changes in the asset management industry, interest rates or the general economy; underperformance of KKR's investments and decreased ability to raise funds; and the degree and nature of KKR's competition. KKR does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made except as required by law. In addition, KKR's business strategy is focused on the long term and financial results are subject to significant volatility. Additional information about factors affecting KKR is available in KKR & Co. L.P.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the SEC on February 24, 2014, quarterly reports on Form 10-Q for subsequent quarters and other filings with the SEC, which are available at www.sec.gov.
DISTRIBUTION POLICY KKR intends to make quarterly cash distributions in amounts that in the aggregate are expected to constitute substantially all of the cash earnings of the KKR's investment management business, 40% of the net realized investment income of KKR (other than KFN), and 100% of the net realized investment income of KFN, in each case in excess of amounts determined by KKR to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and its investment funds and to comply with applicable law and any of its debt instruments or other obligations. For purposes of KKR's distribution policy, its distributions are expected to consist of (i) FRE, (ii) carry distributions received from KKR's investment funds which have not been allocated as part of its carry pool, (iii) 40% of the net realized investment income from KKR (other than KFN) and (iv) 100% of the net realized investment income from KFN. This amount is expected to be reduced by (i) corporate and applicable local taxes, if any, (ii) non-controlling interests, and (iii) amounts determined by KKR to be necessary or appropriate for the conduct of its business and other matters as discussed above. The declaration and payment of any distributions are subject to the discretion of the board of directors of the general partner of KKR & Co. L.P., which may change the distribution policy at any time, and the terms of its limited partnership agreement. There can be no assurance that distributions will be made as intended or at all or that unitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR & Co. L.P. When KKR & Co. L.P. receives distributions from the KKR Group Partnerships (the holding companies of the KKR business), KKR Holdings receives its pro rata share of such distributions from the KKR Group Partnerships. KKR Notes to Reportable Segments (Unaudited) The segment key performance measures that follow are used by management in making operating and resource deployment decisions as well as assessing the overall performance of each of KKR's reportable business segments. The reportable segments for KKR's business are presented prior to giving effect to the allocation of income (loss) between KKR & Co. L.P. and KKR Holdings L.P. and as such represent the business in total. In addition, KKR's reportable segments are presented without giving effect to the consolidation of the funds that KKR manages. KKR discloses the following financial measures in this earnings release that are calculated and presented using methodologies other than in accordance with GAAP. We believe that providing these performance measures on a supplemental basis to our GAAP results is helpful to unitholders in assessing the overall performance of KKR's businesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP. We caution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included elsewhere within this earnings release. Fee related earnings ("FRE") is comprised of (i) total management, monitoring and transaction fees, net, plus incentive fees, less (ii) cash compensation and benefits, occupancy and related charges and other operating expenses. This measure is used by management as an alternative measurement of the operating earnings of KKR and its business segments before carried interest and related carry pool allocations and investment income. We believe this measure is useful to unitholders as it provides additional insight into the operating profitability of our fee generating management companies and capital markets businesses. The components of FRE on a segment basis differ from the equivalent GAAP amounts on a consolidated basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of charges relating to carry pool allocations; (v) the exclusion of non-cash equity-based charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR & Co. L.P. 2010 Equity Incentive Plan ("Equity Incentive Plan"); (vi) the exclusion of certain reimbursable expenses; and (vii) the exclusion of certain non-recurring items. Economic net income (loss) ("ENI") is a measure of profitability for KKR's reportable segments and is used by management as an alternative measurement of the operating and investment earnings of KKR and its business segments. We believe this measure is useful to unitholders as it provides additional insight into the overall profitability of KKR's businesses inclusive of carried interest and related carry pool allocations and investment income. ENI is comprised of total segment revenues less total segment expenses and certain economic interests in KKR's segments held by third parties. ENI differs from net income (loss) on a GAAP basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of non-cash equity-based charges and other non-cash compensation charges borne by KKR Holdings or incurred under the Equity Incentive Plan or other securities that are exchangeable for common units of KKR & Co. L.P.; (v) the exclusion of certain non-recurring items; (vi) the exclusion of investment income (loss) relating to noncontrolling interests; and (vii) the exclusion of income taxes. Fee and Yield Earnings is comprised of FRE and net interest and dividends from KKR's business segments. This measure is used by management as a measure of the cash earnings of KKR and its business segments' investment income. We believe this measure is useful to unitholders as it provides insight into the amount of KKR's cash earnings, significant portions of which tend to be more recurring than realized carried interest and net realized gains from quarter to quarter. Fee and Yield EBITDA is comprised of Fee and Yield Earnings before the impact of depreciation of fixed assets and core interest expense. This is used by management as another measure of the cash earnings of KKR and its business segments investment income. We believe this measure is also useful to unitholders as it provides insight into the amount of KKR's cash earnings before the impact of interest expense, significant portions of which tend to be more recurring than realized carried interest and realized investment income from quarter to quarter. Net realized investment income - KKR (ex-KFN) refers to net cash income from (i) realized investment gains and losses excluding certain realized investment losses to the extent unrealized losses on these investments were recognized prior to the combination with KPE on October 1, 2009, (ii) dividend income, and (iii) interest income net of interest expense in each case generated by KKR (excluding KFN). This term describes a portion of KKR's quarterly distribution and excludes net realized investment income of KFN. Net realized investment income - KFN refers to net cash income from (i) realized investment gains and losses, (ii) dividend income and (iii) interest income net of interest expense less certain general and administrative expenses incurred in the generation of net realized investment income in each case generated by KFN. This term describes a portion of KKR's quarterly distribution. Investments is a term used solely for purposes of financial presentation of a portion of KKR's balance sheet and includes majority investments in subsidiaries that operate KKR's asset management and broker-dealer businesses, including the general partner interests of KKR's investment funds. Total distributable earnings is the sum of (i) FRE, (ii) carry distributions received from KKR's investment funds which have not been allocated as part of its carry pool, (iii) net realized investment income — KKR (ex-KFN) and (iv) net realized investment income — KFN; less (i) applicable local income taxes, if any, and (ii) noncontrolling interests. We believe this measure is useful to unitholders as it provides a supplemental measure to assess performance, excluding the impact of mark-to-market gains (losses), and amounts available for distribution to KKR unitholders. However, total distributable earnings is not a measure that calculates actual distributions under KKR's current distribution policy. Assets under management ("AUM") represent the assets from which KKR is entitled to receive fees or a carried interest and general partner capital. We believe this measure is useful to unitholders as it provides additional insight into KKR's capital raising activities and the overall activity in its investment funds. KKR calculates the amount of AUM as of any date as the sum of: (i) the fair value of the investments of KKR's investment funds plus uncalled capital commitments from these funds; (ii) the fair value of investments in KKR's co-investment vehicles; (iii) the net asset value of certain of KKR's fixed income products; (iv) the value of outstanding CLOs (excluding CLOs wholly-owned by KKR); and (v) the fair value of other assets managed by KKR. AUM excludes those assets managed by entities where KKR does not hold more than a 50% ownership interest. KKR's definition of AUM is not based on any definition of AUM that may be set forth in the agreements governing the investment funds, vehicles or accounts that it manages or calculated pursuant to any regulatory definitions. Fee paying AUM ("FPAUM") represents only those assets under management from which KKR receives management fees. We believe this measure is useful to unitholders as it provides additional insight into the capital base upon which KKR earns management fees. This relates to KKR's capital raising activities and the overall activity in its investment funds or CLOs, for only those funds or CLOs where KKR receives fees (i.e., excluding vehicles that receive only carried interest or general partner capital). FPAUM is the sum of all of the individual fee bases that are used to calculate KKR's fees and differs from AUM in the following respects: (i) assets from which KKR does not receive a fee are excluded (i.e., assets with respect to which it receives only carried interest) and (ii) certain assets, primarily in its private equity funds, are reflected based on capital commitments and invested capital as opposed to fair value because fees are not impacted by changes in the fair value of underlying investments. Equity invested is the aggregate amount of equity capital that has been invested by KKR's investment funds and carry-yielding co-investment vehicles and is used as a measure of investment activity for KKR and its business segments during a given period. We believe this measure is useful to unitholders as it provides additional insight into KKR's investments among its investment funds and carry-yielding co-investment vehicles and replaces committed dollars invested. Such amounts include: (i) capital invested by fund investors and co-investors with respect to which KKR is entitled to a carried interest and (ii) capital invested by KKR's investment funds, including investments made using investment financing arrangements. Gross dollars invested is the aggregate amount of capital that has been invested by all of KKR's Public Markets investment vehicles in our private credit non-liquid strategies and is used as a measure of investment activity for a portion of KKR's Public Markets segment in a given period. We believe this measure is useful to unitholders as it provides additional insight into KKR's investment of capital across private credit non-liquid strategies for all the investment vehicles in the Public Markets segment. Such amounts include capital invested by fund investors and co-investors with respect to which KKR's Public Markets business is entitled to a fee or carried interest. Syndicated capital is generally the aggregate amount of capital in transactions originated by KKR investment funds and carry-yielding co-investment vehicles, which has been distributed to third parties in exchange for a fee. It does not include (i) capital invested in such transactions by KKR investment funds and carry-yielding co-investment vehicles, which is instead reported in equity invested and (ii) debt capital that is arranged as part of the acquisition financing of transactions originated by KKR investment funds. Syndicated capital is used as a measure of investment activity for KKR and its business segments during a given period, and we believe that this measure is useful to unitholders as it provides additional insight into levels of syndication activity in KKR's Capital Markets and Other segment and across its investment platform. Uncalled commitments are used as a measure of unfunded capital commitments that KKR's investment funds and carry-paying co-investment vehicles have received from partners to contribute capital to fund future investments. We believe this measure is useful to unitholders as it provides additional insight into the amount of capital that is available to KKR's investment funds to make future investments. Uncalled commitments are not reduced for investments completed using fund-level investment financing arrangements. Adjusted units are used as a measure of the total equity ownership of KKR that is held by KKR & Co. L.P. (including equity awards issued under the Equity Incentive Plan), KKR Holdings and other holders of securities exchangeable into common units of KKR & Co. L.P. and represent the fully diluted unit count using the if-converted method. We believe this measure is useful to unitholders as it provides an indication of the total equity ownership of KKR as if all outstanding KKR Holdings units, equity awards issued under the Equity Incentive Plan and other exchangeable securities had been exchanged for common units of KKR & Co. L.P. Core interest expense is used by management as an alternative measurement of interest expense incurred by KKR on a segment basis and excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR's investment funds, investment vehicles and principal investments and also excludes interest expense incurred by KFN. The financing arrangements excluded from core interest expense are not direct obligations of the general partners of KKR's private equity funds or its management companies, and in the case of debt obligations of KFN are non-recourse to KKR beyond the assets of KFN. On a segment basis, interest expense is included in net interest and dividends within total investment income. We believe this measure is useful to unitholders as it provides an indication of the amount of interest expense borne by KKR excluding interest expense that is allocated to KKR's investment funds, other noncontrolling interest holders and KFN. Additionally, we believe this measure is useful for analyzing KKR's ability to service its debt obligations other than the debt obligations of KFN. Book value is a measure of the net assets of KKR's reportable segments and is used by management primarily in assessing the unrealized value of KKR's investment portfolio, including carried interest, as well as KKR's overall liquidity position. We believe this measure is useful to unitholders as it provides additional insight into the assets and liabilities of KKR excluding the assets and liabilities that are allocated to noncontrolling interest holders. Book value differs from KKR & Co. L.P. partners' capital on a GAAP basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings. Cash and short-term investments represent cash and liquid short-term investments in high-grade, short-duration cash management strategies used by KKR to generate additional yield on our excess liquidity and is used by management in evaluating KKR's liquidity position. We believe this measure is useful to unitholders as it provides additional insight into KKR's available liquidity. Cash and short-term investments differ from cash and cash equivalents on a GAAP basis as a result of the inclusion of liquid short-term investments in cash and short-term investments. Return on equity measures the amount of net income generated as a percentage of capital invested in KKR's business. Return on equity is calculated by dividing Economic Net Income (Loss), After Taxes on a trailing twelve-month basis by the average book value during the period. Cash return on equity measures the amount of cash income generated as a percentage of capital invested in KKR's business. Cash return on equity is calculated by dividing Distributable Earnings, net of taxes on a trailing twelve-month basis by the average book value during the period.
Kohlberg Kravis Roberts & Co. L.P.
Source: Kohlberg Kravis Roberts & Co. L.P.
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