Nov. 6, 2009 (PR Newswire) -- NEW YORK, Nov. 6 /PRNewswire-FirstCall/ --
Third Quarter Highlights
-- Assets under management of $32.0 billion
-- Segment management fees of $108 million and GAAP management fees of $107
million
-- Fund management distributable earnings of $51 million
-- Pre-tax distributable earnings (DE) of $57 million
-- GAAP net income, excluding principals agreement compensation, of $50
million. GAAP net loss of $190 million. GAAP net loss attributable to
Class A Shareholders of $59 million
Subsequent Events in the Fourth Quarter
-- Successfully completed RailAmerica, Inc.'s IPO on October 12, 2009
Fortress Investment Group LLC (NYSE: FIG) today reported its results for the quarter ended September 30, 2009.
Third Quarter 2009
For the quarter ended September 30, 2009, our GAAP net loss was $190 million and our GAAP net loss attributable to Class A Shareholders was $59 million, or $0.43 per diluted share, as compared to a loss of $0.66 per diluted share for the quarter ended September 30, 2008. Excluding principals agreement compensation, third quarter GAAP net income was $50 million.
For the third quarter, fund management distributable earnings was $51 million compared to $63 million in the third quarter of 2008.
Pre-tax DE for the third quarter was $57 million, or $0.11 per dividend paying share/unit, versus a loss of $20 million for the third quarter of 2008.
For reconciliations of non-GAAP measures, please see "Reconciliation of Fund Management DE to Pre-tax Distributable Earnings and GAAP Net Income (Loss)", "Reconciliation of Segment Revenues to GAAP Revenues", "Reconciliation of Segment Management Fees to GAAP Management Fees", "Reconciliation of GAAP Net Income (Loss) Excluding Principals Agreement Compensation to GAAP Net Income (Loss)" and "Reconciliation of Weighted Average Class A Shares Outstanding (Used for Basic EPS) to Weighted Average Dividend Paying Shares and Units Outstanding (Used for DEPS)" at the end of this release. Distributable earnings is a supplemental measure of our operating performance that we believe provides a meaningful basis for comparison between present and future periods.
The Company's quarterly segment revenues and distributable earnings will fluctuate materially depending upon the performance of our funds and the realization events within our private equity business, as well as other factors. Accordingly, the revenues and profits in any particular quarter should not be expected to be indicative of future results.
The following discussion of our results is based on segment reporting as presented in our Quarterly Report on Form 10-Q. Our GAAP statement of operations and balance sheet are presented following this discussion. The following table is a summary presentation of our segment performance with supplemental data provided for informational purposes. For a reconciliation of our segment results to the corresponding GAAP data, see the reconciliation information included later in this release.
Supplemental Data for Three Months :
Three Months Ended September 30, 2009
(in millions)
Hybrid Funds
Private Equity Liquid --------------- Principal
---------------- Hedge Hedge PE Invest-
Total Funds Castles Funds Funds Funds ments
----- ----- ------- ----- ----- ----- -----
AUM
AUM -
July 1,
2009 $31,041 $10,602 $3,193 $4,571 $9,918 $2,757 $-
Capital
raised 630 - - 187 170 273 -
Increase
in
invested
capital 82 - - 1 - 81 -
Redemptions
(1)(2) (766) - - (637) (129) - -
Return of
capital
distri-
butions (148) (24) - - (8) (116) -
Equity
buyback - - - - - - -
Reset Date - - - - - - -
Crystallized
Incentive
Income - - - - - - -
Income
(loss) and
foreign
exchange 1,161 479 86 361 (121) 356 -
----- --- --- --- ---- --- ---
AUM -
Ending
Balance $32,000 $11,057 $3,279 $4,483 $9,830 $3,351 $-
Third-Party
Capital
Raised $630 $- $- $187 $170 $273 $-
Segment Revenues
Management
fee $108 $32 $13 $18 $32 $13 $-
Incentive
income 10 - - 9 - 1 -
--- --- --- --- --- --- ---
Total 118 32 13 27 32 14 -
--- --- --- --- --- --- ---
Segment Expenses
Operating
expenses (58) (7) (8) (14) (24) (5) -
Profit
sharing
compensation
expenses (9) - - (7) (2) - -
--- --- --- --- --- --- ---
Total (67) (7) (8) (21) (26) (5) -
--- --- --- --- --- --- ---
Fund Management
DE 51 25 5 6 6 9 -
--- --- --- --- --- --- ---
Investment
Income 10 10
Interest
Expense (4) (4)
--- --- --- --- --- --- ---
Pre-tax
Distributable
Earnings $57 $25 $5 $6 $6 $9 $6
--- --- --- --- --- --- ---
Weighted
Average
Dividend
Paying
Shares
and Units
Outstanding 511
--- --- --- --- --- --- ---
Three Months Ended September 30, 2008
(in millions)
Hybrid Funds
Private Equity Liquid --------------- Principal
---------------- Hedge Hedge PE Invest-
Total Funds Castles Funds Funds Funds ments
----- ----- ------- ----- ----- ----- -----
AUM
AUM -
July 1,
2008 $34,966 $12,639 $3,498 $9,705 $8,266 $858 $-
Capital
raised 1,170 - - 600 536 34 -
Increase
in
invested
capital 1,548 258 - - - 1,290 -
Redemptions (185) - - (185) - - -
Return of
capital
distri-
butions (146) (123) - - (4) (19) -
Equity
buyback (31) - (31) - - - -
Reset Date - - - - - - -
Crystallized
Incentive
Income (15) - - (15) - - -
Income
(loss) and
foreign
exchange (3,018) (1,079) (240) (1,001) (577) (121) -
------ ------ ---- ------ ---- ---- ---
AUM -
Ending
Balance $34,289 $11,695 $3,227 $9,104 $8,221 $2,042 $-
Segment Revenues
Management
fee $156 $40 $13 $60 $39 $4 $-
Incentive
income (3) (16) - - 13 - -
--- --- --- --- --- --- ---
Total 153 24 13 60 52 4 -
--- --- --- --- --- --- ---
Segment Expenses
Operating
expenses (81) (12) (7) (29) (30) (3) -
Profit
sharing
compensation
expenses (9) 5 (2) (5) (7) - -
--- --- --- --- --- --- ---
Total (90) (7) (9) (34) (37) (3) -
Fund Management
DE 63 17 4 26 15 1 -
--- --- --- --- --- --- ---
Investment
Income (73) (73)
--- --- --- --- --- --- ---
Interest
Expense (10) (10)
--- --- --- --- --- --- ---
Pre-tax
Distributable
Earnings $(20) $17 $4 $26 $15 $1 $(83)
--- --- --- --- --- --- ---
Weighted
Average
Dividend
Paying
Shares and
Units
Outstanding 462
--- --- --- --- --- --- ---
Supplemental Data for Nine Months:
Nine Months Ended September 30, 2009
(in millions)
Hybrid Funds
Private Equity Liquid --------------- Principal
---------------- Hedge Hedge PE Invest-
Total Funds Castles Funds Funds Funds ments
----- ----- ------- ----- ----- ----- -----
AUM
AUM -
Jan. 1,
2009 $29,454 $10,307 $3,182 $7,169 $6,494 $2,302 $-
Capital
raised
(3) 4,012 - - 295 3,310 407 -
Increase
in
invested
capital 845 70 - 1 2 772 -
Redemp-
tions
(1)(2) (4,148) - - (3,716) (432) - -
Return
of
capital
distri-
butions (893) (117) - - (16) (760) -
Equity
buyback - - - - - - -
Reset
Date - - - - - - -
Crystal-
lized
Incentive
Income - - - - - - -
Income
(loss)
and
foreign
exchange 2,730 797 97 734 472 630 -
----- --- --- --- --- --- ---
AUM -
Ending
Balance $32,000 $11,057 $3,279 $4,483 $9,830 $3,351 $-
Third-Party
Capital
Raised $4,012 $- $- $295 $3,310 $407 $-
Segment
Revenues
Management
fee $324 $109 $37 $61 $90 $27 $-
Incentive
income 18 - - 9 1 8 -
--- --- --- --- --- --- ---
Total 342 109 37 70 91 35 -
Segment
Expenses
Operating
expenses (173) (27) (21) (39) (70) (16) -
Profit
sharing
compen-
sation
expenses (21) - - (12) (5) (4) -
--- --- --- --- --- --- ---
Total (194) (27) (21) (51) (75) (20) -
--- --- --- --- --- --- ---
Fund
Management
DE 148 82 16 19 16 15 -
--- --- --- --- --- --- ---
Investment
Income (3) (3)
Interest
Expense (20) (20)
--- --- --- --- --- --- ---
Pre-tax
Distribut-
able
Earnings $125 $82 $16 $19 $16 $15 $(23)
--- --- --- --- --- --- ---
Weighted
Average
Dividend
Paying
Shares and
Units
Outstanding 485
--- --- --- --- --- --- ---
Nine Months Ended September 30, 2008
(in millions)
Hybrid Funds
Private Equity Liquid --------------- Principal
---------------- Hedge Hedge PE Invest-
Total Funds Castles Funds Funds Funds ments
----- ----- ------- ----- ----- ----- -----
AUM
AUM -
January 1,
2008 $32,930 $12,642 $3,328 $8,128 $8,196 $636 $-
Capital
raised 5,096 745 - 2,811 1,373 167 -
Increase
in
invested
capital 2,529 1,018 - - 26 1,485 -
Redemptions(1,079) - - (606) (473) - -
Return of
capital
distri-
butions (382) (297) - - (8) (77) -
Equity
buyback (31) - (31) - - - -
Reset Date - - - - - - -
Crystallized
Incentive
Income (110) - - (15) (95) - -
Income
(loss) and
foreign
exchange (4,664) (2,413) (70) (1,214) (798) (169) -
------ ------ --- ------ ---- ---- ---
AUM -
Ending
Balance $34,289 $11,695 $3,227 $9,104 $8,221 $2,042 $-
Segment Revenues
Management
fee $451 $120 $41 $170 $112 $8 $-
Incentive
income 44 13 - 17 14 - -
--- --- --- --- --- --- ---
Total 495 133 41 187 126 8 -
Segment Expenses
Operating
expenses (225) (26) (25) (78) (89) (7) -
Profit
sharing
compensation
expenses (61) (8) (4) (38) (11) - -
--- --- --- --- --- --- ---
Total (286) (34) (29) (116) (100) (7) -
Fund Management
DE 209 99 12 71 26 1 -
--- --- --- --- --- --- ---
Investment
Income (83) (83)
Interest
Expense (30) (30)
--- --- --- --- --- --- ---
Pre-tax
Distributable
Earnings $96 $99 $12 $71 $26 $1 $(113)
--- --- --- --- --- --- -----
Weighted
Average
Dividend
Paying
Shares and
Units
Outstanding 450
--- --- --- --- --- --- ---
(1) Subsequent to quarter end, the liquid hedge funds had redemption payouts of approximately $0.7 billion in October 2009. Approximately $0.4 billion of this amount consisted of distributions from Macro Funds' SPVs.
(2)The hybrid hedge funds, which have an annual notice date for redemptions, have received redemption notices effective December 31, 2009 of approximately $1.5 billion, using September 30, 2009 values. This amount is subject to change based on performance and rescissions of redemption notices. For primarily all of these funds, redemptions will be paid out over time as the underlying investments are liquidated, in accordance with the governing documents of the applicable funds.
(3)Includes $3.3 billion of capital under management due to Fortress's takeover of management of the D.B. Zwirn funds and related investment vehicles.
Overview
We managed $32.0 billion of assets in private equity funds, liquid hedge funds and hybrid funds as of September 30, 2009. Fortress's revenues consist of (i) management fees, which are based on the size of our funds, (ii) incentive income, which is based on the performance of our funds, and (iii) investment income (loss), which is based on our principal investments.
In the third quarter of 2009, we generated fund management DE of $51 million.
