UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 9, 2018

KKR & CO. INC.
(Exact name of registrant as specified in its charter)

Delaware
001-34820
26-0426107
 (State or other jurisdiction of incorporation)
 (Commission File Number)
 (IRS Employer Identification No.)

9 West 57th Street, Suite 4200
New York, New York
 
10019
(Address of principal executive offices)
 
(Zip Code)

(212) 750-8300
(Registrant’s telephone number, including area code)

NOT APPLICABLE
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 8.01
Other Events.

On July 1, 2018, KKR & Co. Inc. (the “Company”) converted from a Delaware limited partnership named KKR & Co. L.P. into a Delaware corporation named KKR & Co. Inc. (the “Conversion”).  The unaudited pro forma financial information of the Company set forth in Exhibit 99.1 presents the impact of the Conversion on the Company’s statements of operations for the year ended December 31, 2017 and for the nine months ended September 30, 2018. In addition, as previously disclosed in connection with the Conversion and in the Company’s Quarterly Reports on Form 10-Q for the quarters ended June 30, 2018 and September 30, 2018, the Company has modified the presentation of certain segment financial information effective as of and for the three and six months ended June 30, 2018, which is reflected in Exhibit 99.2.

Item 9.01
Financial Statements and Exhibits.

 
(b)
Exhibits.

Exhibit No.
 
Description
     
 
KKR & Co. Inc. Unaudited Pro Forma Financial Information
 
KKR & Co. Inc. Segment Financial Information

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
KKR & CO. INC.
   
Date: November 9, 2018
By:
/s/ William J. Janetschek
 
Name:
William J. Janetschek
 
Title:
Chief Financial Officer


Exhibit 99.1

KKR & CO. INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION

On July 1, 2018, KKR & Co. Inc. (the “Company”) completed its conversion (the “Conversion”) from a Delaware limited partnership named KKR & Co. L.P. into a Delaware corporation named KKR & Co. Inc.

The following unaudited pro forma financial information is based on the historical consolidated financial statements of the Company and is intended to provide information about how the Conversion may have affected the Company’s historical consolidated financial statements if it had occurred as of January 1, 2017, in the case of the unaudited pro forma statements of operations for the year ended December 31, 2017 and for the nine months ended September 30, 2018.  An unaudited pro forma statement of financial condition as of September 30, 2018 is not presented because the Conversion is already reflected in the Company’s statement of financial condition as of such date.  The unaudited pro forma statement of operations for the year ended December 31, 2017 does not reflect the one-time tax benefit to record the initial deferred tax asset that was realized upon Conversion.  Additionally, the unaudited pro forma statement of operations for the year ended December 31, 2017 has been adjusted to exclude the impact of the Tax Cuts and Jobs Act, which was enacted in December 2017 (the “2017 Tax Act”), in order to present the pro forma tax expense based on the statutory rate in effect for 2017, which included the U.S. federal corporate tax rate of 35%.

The unaudited pro forma financial information and the pro forma adjustments described in the footnotes should be read in conjunction with the Company’s historical financial statements and the accompanying notes contained in the Company’s annual report on Form 10-K for the year ended December 31, 2017 and its quarterly report on Form 10-Q for the quarter ended September 30, 2018. The unaudited pro forma financial information is based on available information and assumptions that the Company believes are reasonable. The unaudited pro forma financial information is for illustrative and informational purposes only and is not intended to represent or be indicative of what the Company’s financial condition or results of operations would have been had the Conversion occurred on the dates indicated.  The unaudited pro forma financial information also should not be considered indicative of the Company’s future financial condition or results of operations.

1
KKR & CO. INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(Amounts in Thousands, Except Share and Per Share Data)

   
For the Year Ended December 31, 2017
 
   
As Reported
   
Adjustment
relating to
the
Conversion
         
Adjustments
relating to
the Change in
Statutory
Tax Rate
         
Pro Forma
 
Statement of Operations Data:
                                   
Total Revenues
 
$
3,282,265
                           
$
3,282,265
 
Total Expenses
   
2,336,692
                             
2,336,692
 
Total Investment Income (Loss)
   
1,838,795
                 
(67,221
)
 
(3 )

   
1,771,574
 
Income (Loss) Before Taxes
   
2,784,368
                 
(67,221
)
         
2,717,147
 
Income Tax Expense (Benefit)
   
224,326
     
366,347
   
(1 )

   
(97,915
)
 
(4 )

   
492,758
 
Net Income (Loss)
   
2,560,042
     
(366,347
)
 
(1 )

   
30,694
           
2,224,389
 
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests
   
73,972
                                 
73,972
 
Net Income (Loss) Attributable to Noncontrolling Interests
   
1,467,765
                                 
1,467,765
 
Net Income (Loss) Attributable to KKR & Co. Inc.
   
1,018,305
     
(366,347
)
 
(1 )

   
30,694
           
682,652
 
Series A Preferred Stock Dividends
   
23,288
                                 
23,288
 
Series B Preferred Stock Dividends
   
10,076
                                 
10,076
 
Net Income (Loss) Attributable to KKR & Co. Inc. Class A Common Stockholders
 
$
984,941
     
(366,347
)
 
(1)(2 )

   
30,694
   
(3)(4)

 
$
649,288
 
                                             
Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Class A Common Stock
                                           
Basic
 
$
2.10
   
$
(0.78
)
 
(1 )

 
$
0.07
         
$
1.39
 
Diluted
 
$
1.95
   
$
(0.73
)
 
(1 )

 
$
0.06
         
$
1.28
 
Weighted Average Shares of Class A Common Stock Outstanding
                                           
Basic
   
468,282,642
                                 
468,282,642
 
Diluted
   
506,288,971
                                 
506,288,971
 

(1) This adjustment represents the incremental tax expense that would have been incurred had the Company been classified as a corporation for U.S. federal tax purposes as of January 1, 2017.  This amount includes only the incremental tax expense using the U.S. federal corporate tax rate of 35% prior to the 2017 Tax Act, and excludes the impact of the 2017 Tax Act as well as the one-time tax benefit to record the initial deferred tax asset that was recognized upon the Conversion.

(2) The one-time tax benefit and one-time tax expense that were recognized upon the Conversion and the impact of the 2017 Tax Act are not included in the pro forma adjustments. The one-time tax benefit that was recognized upon the Conversion has been excluded because, due to the 2017 Tax Act and the change in the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018, the amount of deferred taxes that would have been recorded had the Conversion occurred as of January 1, 2017 would not be representative of the deferred tax asset that was recorded as of the Conversion date of July 1, 2018. Similarly, including the one-time tax expense that would have been realized in order to reflect the reduction of the deferred tax asset due to the change in the U.S. federal corporate tax rate would also not be representative of the incremental tax expense the Company may incur as a result of the Conversion.

(3) As a result of the 2017 Tax Act, the as-reported Total Investment Income included approximately $67 million of income to reflect lower expected tax benefit payments under the tax receivable agreement resulting from the change in the U.S. federal corporate tax rate from 35% to 21%. In order to present the pro forma net income based on the statutory tax rate in effect for 2017, this amount is reversed.

(4) As a result of the 2017 Tax Act, the as-reported Income Taxes included additional tax expense of approximately $98 million related to the reduction of the deferred tax asset resulting from the change in the U.S. federal corporate tax rate from 35% to 21% and the estimated one-time tax on previously unremitted foreign earnings. In order to present the pro forma tax expense based on the statutory tax rate in effect for 2017, this amount is reversed.

2
KKR & CO. INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(Amounts in Thousands, Except Share and Per Share Data)

   
For the Nine Months Ended September 30, 2018
 
   
As Reported
   
Adjustments relating to the
Conversion
         
Pro Forma
 
Statement of Operations Data:
                                   
Total Revenues
 
$
2,573,892
                           
$
2,573,892
 
Total Expenses
   
1,851,741
                             
1,851,741
 
Total Investment Income (Loss)
   
2,748,604
                             
2,748,604
 
Income (Loss) Before Taxes
   
3,470,755
                             
3,470,755
 
Income Tax Expense (Benefit)
   
(50,804
)
   
159,301
   
(1 )

   
257,070
   
(2 )

   
365,567
 
Net Income (Loss)
   
3,521,559
     
(159,301
)
 
(1 )

   
(257,070
)
         
3,105,188
 
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests
   
19,894
                                 
19,894
 
Net Income (Loss) Attributable to Noncontrolling Interests
   
1,985,961
                                 
1,985,961
 
Net Income (Loss) Attributable to KKR & Co. Inc.
   
1,515,704
     
(159,301
)
 
(1 )

   
(257,070
)
         
1,099,333
 
Series A Preferred Stock Dividends
   
17,466
                                 
17,466
 
Series B Preferred Stock Dividends
   
7,557
                                 
7,557
 
Net Income (Loss) Attributable to KKR & Co. Inc. Class A Common Stockholders
 
$
1,490,681
     
(159,301
)
 
(1 )

   
(257,070
)
 
(2 )

 
$
1,074,310
 
                                             
Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Class A Common Stock
                                           
Basic
 
$
2.94
   
$
(0.31
)
 
(1 )

 
$
(0.51
)
       
$
2.12
 
Diluted
 
$
2.83
   
$
(0.30
)
 
(1 )

 
$
(0.49
)
       
$
2.04
 
Weighted Average Shares of Class A Common Stock Outstanding
                                           
Basic
   
507,981,387
                                 
507,981,387
 
Diluted
   
528,466,390
                                 
528,466,390
 
                                             

(1) This adjustment represents the incremental tax expense that would have been incurred had the Company been classified as a corporation for U.S. federal tax purposes for the period January 1, 2018 through June 30, 2018. The pro forma tax expense for this period reflects the tax rates enacted under the 2017 Tax Act.

(2) This adjustment represents the removal of the one-time $257.1 million net tax benefit recognized on the date of the Conversion resulting from the step up in tax basis of certain assets.


3
Exhibit 99.2

KKR & CO. INC.
SEGMENT RESULTS (UNAUDITED)
(Amounts in thousands)

    For the Years Ended December 31,
 
   
2015
   
2016
   
2017
 
Segment Revenues 
                 
Fees and Other, Net
                 
Management Fees
 
$
732,033
   
$
797,862
   
$
905,188
 
Transaction Fees
   
364,994
     
344,274
     
777,247
 
Monitoring Fees
   
264,643
     
64,354
     
81,021
 
Fee Credits
   
(219,620
)
   
(131,628
)
   
(261,429
)
Total Fees and Other, Net
   
1,142,050
     
1,074,862
     
1,502,027
 
                         
Realized Performance Income (Loss)
                       
Carried Interest
   
1,027,154
     
1,256,208
     
1,198,981
 
Incentive Fees
   
19,647
     
33,346
     
73,395
 
Total Realized Performance Income (Loss)
   
1,046,801
     
1,289,554
     
1,272,376
 
                         
Realized Investment Income (Loss)
                       
Net Realized Gains (Losses)
   
337,023
     
371,563
     
194,020
 
Interest Income and Dividends
   
411,536
     
322,857
     
285,696
 
Total Realized Investment Income (Loss)
   
748,559
     
694,420
     
479,716
 
Total Segment Revenues
 
2,937,410
   
3,058,836
   
3,254,119
 
                         
Segment Expenses
                       
Compensation and Benefits (1)
   
1,015,056
     
1,119,564
     
1,282,745
 
Occupancy and Related Charges
   
62,657
     
62,400
     
56,410
 
Other Operating Expenses
   
233,618
     
234,348
     
243,772
 
Total Segment Expenses
 
1,311,331
   
1,416,312
   
1,582,927
 
                         
Segment Operating Earnings
   
1,626,079
     
1,642,524
     
1,671,192
 
                         
Interest Expense
   
203,085
     
188,761
     
181,612
 
Preferred Dividends
   
-
     
22,235
     
33,364
 
Income (Loss) Attributable to Noncontrolling Interests
   
16,007
     
2,336
     
6,551
 
Income Taxes Paid
   
140,677
     
87,723
     
94,065
 
After-tax Distributable Earnings
 
$
1,266,310
   
$
1,341,469
   
$
1,355,600
 

(1) Includes equity-based compensation of $186,346, $186,227 and $204,308 for the years ended December 31, 2015, 2016 and 2017, respectively.

1
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. INC. CLASS A COMMON STOCKHOLDERS  (GAAP BASIS) TO AFTER-TAX DISTRIBUTABLE EARNINGS (UNAUDITED)
(Amounts in thousands)

    For the Years Ended December 31,
 
   
2015
   
2016
   
2017
 
                   
Net Income (Loss) Attributable to KKR & Co. Inc. Class A Common Stockholders
 
$
488,482
   
$
287,072
   
$
984,941
 
                         
Add: Net Income (Loss) Attributable to Noncontrolling Interests held by KKR Holdings L.P.
   
433,693
     
212,878
     
791,021
 
Add: Equity-based and Other Compensation - KKR Holdings L.P. and Other
   
75,233
     
78,663
     
141,727
 
Add: Amortization of Intangibles and Other, net
   
47,599
     
(17,267
)
   
122,870
 
Deduct: Unrealized Carried Interest
   
163,545
     
(420,372
)
   
600,242
 
Deduct: Net Unrealized Gains (Losses)
   
(391,962
)
   
(584,423
)
   
395,358
 
Add: Unrealized Performance Income Compensation
   
66,927
     
(161,510
)
   
247,601
 
Deduct: Gain from remeasurement of tax receivable agreement liability
   
-
     
-
     
67,221

Add: Income tax provision
   
66,636
     
24,561
     
224,326
 
Deduct:  Income Taxes Paid
   
140,677
     
87,723
     
94,065
 
After-tax Distributable Earnings
 
$
1,266,310
   
$
1,341,469
   
$
1,355,600
 

2
RECONCILIATION OF TOTAL GAAP REVENUES AND TOTAL GAAP EXPENSES TO TOTAL SEGMENT REVENUES AND TOTAL SEGMENT EXPENSES (UNAUDITED)

(Amounts in thousands)

    For the Years Ended December 31,  
   
2015
   
2016
   
2017
 
                   
Total GAAP Revenues
 
$
1,043,768
   
$
1,908,093
   
$
3,282,265
 
Add: Management Fees - Consolidated Funds and Other
    538,986
     
196,375
     
267,032
 
Deduct: Fee Credits - Consolidated Funds
   
202,269
     
2,921
     
4,028
 
Deduct: Capital Allocation-Based Income (GAAP)
   
-
     
803,185
     
1,740,661
 
Add: Segment Realized Carried Interest
   
1,027,154
     
1,256,208
     
1,198,981
 
Add: Segment Realized Investment Income (Loss)
   
748,559
     
694,420
     
479,716
 
Deduct: Revenue Earned by Other Consolidated Entities
    152,644
     
108,605
     
106,042
 
Deduct: Expense Reimbursements
   
66,144
     
81,549
     
123,144
 
Total Segment Revenues
 
$
2,937,410
   
$
3,058,836
   
$
3,254,119
 
                         
Total GAAP Expenses
 
$
1,871,225
   
$
1,695,474
   
$
2,336,692
 
Deduct: Equity-based and Other Compensation - KKR Holdings L.P. and Other
   
75,233
     
78,663
     
141,727
 
Deduct: Segment Unrealized Performance Income Compensation
   
66,927
     
(161,510
)
   
247,601
 
Deduct: Amortization of Intangibles
   
46,362
     
41,803
     
17,821
 
Deduct: Reimbursable Expenses
   
80,712
     
111,016
     
155,173
 
Deduct: Operating Expenses relating to Other Consolidated Entities
   
264,661
     
216,958
     
172,920
 
Add: Other
   
(25,999
)
   
7,768
     
(18,523
)
Total Segment Expenses
 
$
1,311,331
   
$
1,416,312
   
$
1,582,927
 


3