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FAIR VALUE MEASUREMENTS (Tables)
12 Months Ended
Dec. 31, 2013
FAIR VALUE MEASUREMENTS  
Schedule of investments and other financial instruments measured at fair value

Assets, at fair value:

 
  December 31, 2013  
 
  Quoted Prices in
Active Markets for
Identical Assets
(Level I)
  Significant Other
Observable Inputs
(Level II)
  Significant
Unobservable Inputs
(Level III)
  Total  

Private Equity

  $ 7,244,643   $ 548,545   $ 29,646,471   $ 37,439,659  

Credit

        3,078,789     1,944,464     5,023,253  

Real Assets

    52,931         2,736,708     2,789,639  

Other

    943,976     292,262     348,486     1,584,724  
                   

Total

    8,241,550     3,919,596     34,676,129     46,837,275  

Foreign Exchange Forward Contracts

        85,750         85,750  

Foreign Currency Options

        3,340         3,340  

Other Derivatives

        5,080         5,080  
                   

Total Assets

  $ 8,241,550   $ 4,013,766   $ 34,676,129   $ 46,931,445  
                   
                   


 

 
  December 31, 2012  
 
  Quoted Prices in
Active Markets for
Identical Assets
(Level I)
  Significant Other
Observable Inputs
(Level II)
  Significant
Unobservable Inputs
(Level III)
  Total  

Private Equity

  $ 8,015,680   $ 364,543   $ 25,734,400   $ 34,114,623  

Credit

        1,809,021     1,587,046     3,396,067  

Real Assets

            1,775,683     1,775,683  

Other

    648,108     323,306     239,230     1,210,644  
                   

Total

    8,663,788     2,496,870     29,336,359     40,497,017  

Foreign Exchange Forward Contracts

        137,786         137,786  

Foreign Currency Options

        4,992         4,992  

Other Derivatives

        882         882  
                   

Total Assets

  $ 8,663,788   $ 2,640,530   $ 29,336,359   $ 40,640,677  
                   
                   

               Liabilities, at fair value:

 
  December 31, 2013  
 
  Quoted Prices in
Active Markets for
Identical Assets
(Level I)
  Significant Other
Observable Inputs
(Level II)
  Significant
Unobservable
Inputs
(Level III)
  Total  

Securities Sold Short

  $ 624,653   $ 51,491   $   $ 676,144  

Foreign Currency Options

        4,591         4,591  

Foreign Exchange Forward Contracts

        410,191         410,191  

Unfunded Revolver Commitments

        1,902         1,902  

Other Derivatives

        14,177         14,177  
                   

Total Liabilities

  $ 624,653   $ 482,352   $   $ 1,107,005  
                   
                   


 

 
  December 31, 2012  
 
  Quoted Prices in
Active Markets for
Identical Assets
(Level I)
  Significant Other
Observable Inputs
(Level II)
  Significant
Unobservable
Inputs
(Level III)
  Total  

Securities Sold Short

  $ 321,977   $ 28,376   $   $ 350,353  

Foreign Currency Options

        3,362         3,362  

Foreign Exchange Forward Contracts

        229,314         229,314  

Unfunded Revolver Commitments

        2,568         2,568  

Other Derivatives

        3,751         3,751  
                   

Total Liabilities

  $ 321,977   $ 267,371   $   $ 589,348  
                   
                   

        

Schedule of changes in private equity, credit, real assets and other investments measured and reported at fair value for which Level III inputs have been used to determine fair value

 

 

 
  For the Year Ended December 31, 2013  
 
  Private
Equity
  Credit   Real Assets   Other   Total Level III Investments  

Balance, Beginning of Period

  $ 25,734,400   $ 1,587,046   $ 1,775,683   $ 239,230   $ 29,336,359  

Transfers In(1)

        109,568         34,978     144,546  

Transfers Out(2)

    (2,817,295 )   (272,819 )       (23,304 )   (3,113,418 )

Purchases

    4,016,510     1,189,531     1,083,682     144,884     6,434,607  

Sales

    (1,100,900 )   (791,278 )   (65,545 )   (69,866 )   (2,027,589 )

Settlements

        90,095             90,095  

Net Realized Gains (Losses)

    683,636     34,320     14,930     (6,835 )   726,051  

Net Unrealized Gains (Losses)

    3,130,120     (1,999 )   (72,042 )   29,399     3,085,478  
                       

Balance, End of Period

  $ 29,646,471   $ 1,944,464   $ 2,736,708   $ 348,486   $ 34,676,129  
                       
                       

Changes in Net Unrealized Gains (Losses) Included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign- denominated investments) related to Investments still held at Reporting Date

  $ 3,738,140   $ 71,355   $ (36,676 ) $ 23,915   $ 3,796,734  
                       
                       


 

 
  For the Year Ended December 31, 2012  
 
  Private
Equity
  Credit   Real Assets   Other   Total Level III Investments  

Balance, Beginning of Period

  $ 20,384,253   $ 1,016,759   $ 1,526,732   $ 96,179   $ 23,023,923  

Transfers In(1)

        37,157         1,061     38,218  

Transfers Out(2)

    (219,462 )   (68,099 )       (613 )   (288,174 )

Purchases

    2,100,217     686,032     558,246     154,468     3,498,963  

Sales

    (2,671,329 )   (155,788 )   (54,419 )   (61,428 )   (2,942,964 )

Settlements

        23,164             23,164  

Net Realized Gains (Losses)

    1,353,002     10,437     54,419     28,581     1,446,439  

Net Unrealized Gains (Losses)

    4,787,719     37,384     (309,295 )   20,982     4,536,790  
                       

Balance, End of Period

  $ 25,734,400   $ 1,587,046   $ 1,775,683   $ 239,230   $ 29,336,359  
                       
                       

Changes in Net Unrealized Gains (Losses) Included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign- denominated investments) related to Investments still held at Reporting Date

  $ 5,895,269   $ 43,421   $ (268,179 ) $ 43,485   $ 5,713,996  
                       
                       

(1)
The Transfers In noted in the tables above for credit and other investments are principally attributable to certain investments that experienced an insignificant level of market activity during the period and thus were valued in the absence of observable inputs.

(2)
The Transfers Out noted in the tables above for private equity investments are attributable to portfolio companies that are now valued using their publicly traded market price. The Transfers Out noted above for credit and other investments are principally attributable to certain investments that experienced a higher level of market activity during the period and thus were valued using observable inputs.
Summary of valuation methodologies used for assets, measured at fair value and categorized within Level III

 

 

 
  Fair Value
December 31,
2013
  Valuation
Methodologies
  Unobservable Input(s)(1)   Weighted
Average(2)
  Range   Impact to
Valuation
from an
Increase in
Input(3)
 

Private Equity Investments

  $ 29,646,471                          

Healthcare

 
$

6,555,714
 

Inputs to both market comparable

 

Illiquidity Discount

   
7

%

5% - 15%

   
Decrease
 

 

        and discounted cash flow   Weight Ascribed to Market Comparables     50 % 50% - 50%                      (4)

 

            Weight Ascribed to Discounted Cash Flow     50 % 50% - 50%                      (5)

 

       

Market comparables

 

Enterprise Value/LTM EBITDA Multiple

   
11x
 

10x - 13x

   
Increase
 

 

            Enterprise Value/Forward EBITDA Multiple     11x   9x - 12x     Increase  

 

       

Discounted cash flow

 

Weighted Average Cost of Capital

   
9

%

8% - 13%

   
Decrease
 

 

            Enterprise Value/LTM EBITDA Exit Multiple     11x   9x - 12x     Increase  

Retail

 
$

4,539,841
 

Inputs to both market comparable

 

Illiquidity Discount

   
8

%

5% - 20%

   
Decrease
 

        and discounted cash flow   Weight Ascribed to Market Comparables     50 % 0% - 50%                      (4)

            Weight Ascribed to Discounted Cash Flow     50 % 50% - 100%                      (5)

       

Market comparables

 

Enterprise Value/LTM EBITDA Multiple

   
11x
 

8x - 13x(6)

   
Increase
 

            Enterprise Value/Forward EBITDA Multiple     10x   8x - 11x(6)     Increase  

       

Discounted cash flow

 

Weighted Average Cost of Capital

   
11

%

8% - 23%

   
Decrease
 

            Enterprise Value/LTM EBITDA Exit Multiple     8x   6x - 9x     Increase  

Technology

 
$

4,047,332
 

Inputs to both market comparable

 

Illiquidity Discount

   
11

%

5% - 15%

   
Decrease
 

 

        and discounted cash flow   Weight Ascribed to Market Comparables     50 % 50% - 50%                      (4)

 

            Weight Ascribed to Discounted Cash Flow     50 % 50% - 50%                      (5)

 

       

Market comparables

 

Enterprise Value/LTM EBITDA Multiple

   
12x
 

6x - 15x

   
Increase
 

 

            Enterprise Value/Forward EBITDA Multiple     12x   7x - 14x     Increase  

 

       

Discounted cash flow

 

Weighted Average Cost of Capital

   
11

%

8% - 14%

   
Decrease
 

 

            Enterprise Value/LTM EBITDA Exit Multiple     9x   6x - 11x     Increase  

Consumer Products

 
$

3,707,020
 

Inputs to both market comparable

 

Illiquidity Discount

   
11

%

10% - 15%

   
Decrease
 

        and discounted cash flow   Weight Ascribed to Market Comparables     59 % 50% - 67%                      (4)

            Weight Ascribed to Discounted Cash Flow     41 % 33% - 50%                      (5)

       

Market comparables

 

Enterprise Value/LTM EBITDA Multiple

   
11x
 

8x - 17x

   
Increase
 

            Enterprise Value/Forward EBITDA Multiple     10x   8x - 14x     Increase  

       

Discounted cash flow

 

Weighted Average Cost of Capital

   
10

%

8% - 20%

   
Decrease
 

            Enterprise Value/LTM EBITDA Exit Multiple     9x   6x - 11x     Increase  

Financial Services

 
$

3,200,813
 

Inputs to both market comparable

 

Illiquidity Discount

   
10

%

5% - 15%

   
Decrease
 

 

        and discounted cash flow   Weight Ascribed to Market Comparables     52 % 50% - 100%                      (4)

 

            Weight Ascribed to Discounted Cash Flow     48 % 0% - 50%                      (5)

 

       

Market comparables

 

Enterprise Value/LTM EBITDA Multiple

   
12x
 

11x - 13x

   
Increase
 

 

            Enterprise Value/Forward EBITDA Multiple     11x   10x - 11x     Increase  

 

       

Discounted cash flow

 

Weighted Average Cost of Capital

   
9

%

9% - 10%

   
Decrease
 

 

            Enterprise Value/LTM EBITDA Exit Multiple     10x   10x - 11x     Increase  

Other

 
$

7,595,751
 

Inputs to both market comparable

 

Illiquidity Discount

   
11

%

10% - 20%

   
Decrease
 

        and discounted cash flow   Weight Ascribed to Market Comparables     47 % 0% - 67%                      (4)

            Weight Ascribed to Discounted Cash Flow     53 % 33% - 100%                      (5)

       

Market comparables

 

Enterprise Value/LTM EBITDA Multiple

   
12x
 

6x - 17x

   
Increase
 

            Enterprise Value/Forward EBITDA Multiple     10x   5x - 14x     Increase  

            Control Premium     3 % 0% - 20%(7)     Increase  

       

Discounted cash flow

 

Weighted Average Cost of Capital

   
12

%

9% - 20%

   
Decrease
 

            Enterprise Value/LTM EBITDA Exit Multiple     9x   5x - 12x     Increase  

Real Assets

 
$

2,736,708
                         

Energy/Infrastructure

 
$

2,037,673
 

Discounted cash flow

 

Weighted Average Cost of Capital

   
11

%

6% - 27%

   
Decrease
 

            Enterprise Value/LTM EBITDA Exit Multiple     7x   7x - 11x     Increase  

Real Estate

  $ 699,035   Inputs to direct income capitalization   Weight Ascribed to Direct Income Capitalization     19 % 0% - 100%                      (9)

 

        and discounted cash flow   Weight Ascribed to Discounted Cash Flow     81 % 0% - 100%                      (5)

 

       

Direct Income Capitalization

 

Current Capitalization Rate

   
7

%

6% - 9%

   
Decrease
 

 

       

Discounted cash flow

 

Unlevered Discount Rate

   
11

%

9% - 24%

   
Decrease
 

Credit Investments

 
$

1,944,464

(8)

Yield Analysis

 

Yield

   
11

%

6% - 25%

   
Decrease
 

            Net Leverage     5x   1x - 12x     Decrease  

            EBITDA Multiple     9x   5x - 13x     Increase  

        In the table above, other investments, within private equity investments, represents the following industries: Education, Forestry, Media, Services, Telecommunications, Transportation, Manufacturing and Recycling. None of these industries represents more than 10% of total Level III private equity investments as of December 31, 2013.

(1)
In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company specific developments including exit strategies and realization opportunities. Management has determined that market participants would take these inputs into account when valuing the investments. LTM means Last Twelve Months and EBITDA means Earnings Before Interest Taxes Depreciation and Amortization.

(2)
Inputs were weighted based on the fair value of the investments included in the range.

(3)
Unless otherwise noted, this column represents the directional change in the fair value of the Level III investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements.

(4)
The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level III investments if the market comparables approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach.

(5)
The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level III investments if the discounted cash flow approach results in a higher valuation than the market comparables approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach.

(6)
Ranges shown exclude inputs relating to a single portfolio company that was determined to lack comparability with other investments in KKR's private equity portfolio. This portfolio company had a fair value representing less than 0.5% of the total fair value of Private Equity Investments and had an Enterprise Value/LTM EBITDA Multiple and Enterprise Value/Forward EBITDA Multiple of 24.7x and 18.2x, respectively. The exclusion of this investment does not impact the weighted average.

(7)
Level III private equity investments whose valuations include a control premium represent less than 5% of total Level III private equity investments. The valuations for the remaining investments do not include a control premium.

(8)
Amounts include $24.1 million of investments that were valued using dealer quotes or third party valuation firms.

(9)
The directional change from an increase in the weight ascribed to the direct income capitalization approach would increase the fair value of the Level III investments if the direct income capitalization approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the direct income capitalization approach results in a lower valuation than the discounted cash flow approach.