Fortress Investment Group LLC (NYSE:FIG) (“Fortress” or the
“Company”) today reported its third quarter 2015 financial
results.
FINANCIAL SUMMARY
- Fortress declares a cash dividend of
$0.08 per dividend paying share for the third quarter of 2015
- Management Fee Paying Assets Under
Management (“AUM”) of $74.3 billion as of September 30, 2015, an
increase of 3% from the previous quarter and an increase of 13%
from September 30, 2014
- GAAP net loss of $26 million, or
$(0.07) per diluted Class A share, for the third quarter of 2015,
compared to GAAP net income of $17 million, or $0.02 per diluted
Class A share, for the third quarter of 2014
- GAAP net income of $66 million, or
$0.09 per diluted Class A share, for the nine months ended
September 30, 2015, compared to GAAP net income of $99 million, or
$0.17 per diluted Class A share, for the nine months ended
September 30, 2014
- Pre-tax distributable earnings (“DE”)
of $69 million, or $0.15 per dividend paying share, for the third
quarter of 2015, compared to pre-tax DE of $55 million, or $0.12
per dividend paying share for the third quarter of 2014
- Pre-tax DE of $261 million, or $0.58
per dividend paying share, for the nine months ended September 30,
2015, compared to pre-tax DE of $323 million, or $0.72 per dividend
paying share, for the nine months ended September 30, 2014
- Net cash and investments of $1.4
billion, or $3.06 per dividend paying share, as of September 30,
2015
- $0.9 billion of gross embedded
incentive income across funds and permanent capital vehicles as of
September 30, 2015, that has not been recognized in DE
- Total uncalled capital, or “dry
powder,” of $8.8 billion as of September 30, 2015, including $5.8
billion available for general investment purposes
- Post quarter end, announced agreement
to repurchase 56.8 million Class A equivalent shares at a price of
$4.50 per share, representing approximately 13% of dividend paying
shares outstanding
BUSINESS HIGHLIGHTS & DEVELOPMENTS
- Raised $8.8 billion of capital across
alternative investment businesses and recorded $1.7 billion of net
client inflows for Logan Circle during the first nine months of
2015
- Added $3.0 billion of AUM after
becoming co-manager with Mount Kellett Capital Management LP
(“Mount Kellett”) of the Mount Kellett investment funds and related
accounts (the “Mount Kellett Funds” or “co-managed funds”)
- Post quarter end, Fortress Japan
Opportunity Fund (“FJOF”) III expected to close at its targeted cap
of approximately $1.1 billion
- Post quarter end, announced the closing
of the Fortress Macro Funds and related managed accounts (the
“Fortress Macro Funds”); as of September 30, 2015, the Fortress
Macro Funds accounted for approximately 2% of total Fortress AUM
and had generated a year-to-date pre-tax DE loss of $8 million
- Investment performance summary as of
September 30, 2015:
- Annualized inception-to-date net IRRs
for FCO, FCO II and FCO III of 24.7%, 16.8% and 10.8%,
respectively
- Third quarter and year-to-date 2015 net
returns of 0.3% and 4.9%, respectively, for Drawbridge Special
Opportunities Fund (“DBSO”) LP
- 15 of 16 Logan Circle strategies have
outperformed respective benchmarks since inception
“It has been a very active and productive year for Fortress,”
said Chief Executive Officer Randal Nardone. “We closed the third
quarter with record assets under management, more new commitments
to our alternative strategies through September than in any full
year since 2007, and embedded value in our funds and on our balance
sheet that now represents over 70% of our share price today. These
results underscore the strength of our core businesses, and
potential for significant earnings upside in future periods.”
“Our recently announced agreement to repurchase nearly 57
million Fortress shares represents a very positive use of capital
that will provide ongoing economic benefit to shareholders. We
remain committed to distributing substantially all of our after-tax
DE to shareholders as dividends, or in the event additional
opportunities arise, as buybacks.”
SUMMARY FINANCIAL RESULTS
Fortress’s business model is highly diversified, and management
believes that this positions the Company to capitalize on
opportunities for investing, capital formation and harvesting
profits that can occur at different points in any cycle for our
individual businesses. Fortress’s business model generates stable
and predictable management fees, which is a function of the
majority of Fortress’s alternative AUM residing in long-term
investment structures. Fortress’s alternative investment businesses
also generate variable incentive income based on performance, and
this incentive income can contribute meaningfully to financial
results. Balance sheet investments represent a third component of
Fortress’s business model, and the Company has built substantial
value in these investments, which are made in Fortress funds
alongside the funds’ limited partners. The table below summarizes
Fortress’s operating results for the three and nine months ended
September 30, 2015. The consolidated GAAP statement of operations
and balance sheet are presented on pages 13-14 of this press
release.
3Q
2Q
3Q
% Change YTD YTD % Change
2015
2015 2014
QoQ
YoY
2015 2014
YoY
(in millions, except per share amount)
GAAP Revenues $
264 $ 308 $ 243 (14)% 9% $ 799 $
761 5% Expenses 224 258 234 (13)% (4)% 811 682 19% Other Income
(loss) (62 ) (51 ) 11 N/A N/A 95 48 97% Net income (loss) (26 ) 5
17 N/A N/A 66 99 (33)% Net income (loss) attributable to Class A
Shareholders (14 ) 3
6 N/A N/A 24 40 (41)% Per
diluted share $ (0.07 ) $ 0.00 $ 0.02
N/A N/A $ 0.09 $ 0.17 (47)% Weighted average Class A
shares outstanding, diluted 216 449 221 222 457
Distributable Earnings Fund management DE $ 67 $ 133 $ 67
(50)% 0% $ 251 $ 230 9% Pre-tax DE 69
137 55 (50)% 25% 261
323 (19)% Per dividend paying share/unit $
0.15 $ 0.30 $ 0.12 (50)% 25% $
0.58 $ 0.72 (19)% Weighted average dividend paying shares
and units outstanding 454 454 442 453 451
Assets Under
Management Private Equity and Permanent Capital $ 16,091 $
16,535 $ 14,198 (3)% 13% $ 16,091 $ 14,198 13% Credit1 17,426
14,491 13,223 20% 32% 17,426 13,223 32% Liquid Markets2 7,367 7,377
7,529 0% (2)% 7,367 7,529 (2)% Logan Circle 33,446
33,564 31,096 0% 8%
33,446 31,096 8% Total Assets Under
Management $ 74,330 $ 71,967 $
66,046 3% 13% $ 74,330 $ 66,046 13%
______________________________
1The Assets Under Management presented for Credit includes AUM
related to co-managed funds in 2015, which was $3,018 million as of
3Q 2015. 2The Assets Under Management presented for Liquid Markets
includes AUM related to Fortress's affiliated manager platform
("Affiliated Managers") in 2015, which was $4,456 million as of 3Q
2015.
CONSOLIDATED GAAP RESULTS
Fortress recorded a GAAP net loss of $26 million, or $(0.07) per
diluted Class A share, for the third quarter of 2015, compared to
GAAP net income of $17 million, or $0.02 per diluted Class A share,
for the third quarter of 2014. Our diluted earnings per share for
all periods presented includes the income tax effects to net income
(loss) attributable to Class A shareholders from the assumed
conversion of Fortress Operating Group units and fully vested
restricted partnership units to Class A shares.
The year-over-year decrease in Fortress’s third quarter 2015
GAAP net income was primarily driven by a $73 million decrease in
other income, partially offset by a $21 million increase in
revenues and an $11 million decrease in expenses. The decrease in
other income was primarily related to a $61 million net decrease in
earnings from equity method investees primarily related to
investments in our alternative investment funds. The increase in
revenues was primarily related to higher incentive income and
expense reimbursements from affiliates while the decrease in
expenses was primarily related to lower compensation and benefits
expense.
CONSOLIDATED SEGMENT RESULTS (NON-GAAP)
This section provides information about each of Fortress’s
businesses: (i) Credit Hedge Funds and Credit PE Funds, (ii)
Private Equity Funds and Permanent Capital Vehicles, (iii) Liquid
Hedge Funds, and (iv) Logan Circle.
Fortress uses DE as the primary metric to manage its businesses
and gauge the Company’s performance, and it uses DE exclusively to
report segment results. All DE figures are presented on a pre-tax
basis. Consolidated segment results are non-GAAP information and
are not presented as a substitute for Fortress’s GAAP results.
Fortress urges you to read “Non-GAAP Information” below.
As of
September 30, 2015 Private Equity
Credit Funds
(in millions)
Total Funds
PermanentCapital
Vehicles
Liquid HedgeFunds
Hedge Funds PE Funds
Logan CirclePartners
Assets Under Management3 $
74,330 $ 9,195 $ 6,896 $
7,367 $ 9,070 $ 8,356 $
33,446
Dry Powder $ 8,795 $ 736 $ - N/A $ 332 $ 7,727 N/A
Average Management Fee Rate4 1.2 % 1.4 % 1.5 % 2.0 %
1.3 % 0.2 %
Incentive Eligible NAV Above Incentive Income
Threshold5 $ 20,635 $ 942 $ 3,431 $ 81 $ 5,531 $ 10,596
$ 54 Undistributed Incentive Income: Unrecognized $ 938 $ 26
$ 25 $ 5 $ 64 $ 818 $ - Undistributed Incentive Income: Recognized
45 -
1 -
44 - $
-
Undistributed Incentive
Income6 $ 983 $ 26
$ 26 $ 5 $
108 $ 818 $
-
Three Months Ended September 30, 2015
Private Equity
Credit Funds
(in millions)
Total Funds
PermanentCapital
Vehicles
Liquid HedgeFunds
Hedge Funds PE Funds
Logan CirclePartners
Third-Party Capital Raised $ 204 $ - $ - $ 48 $ - $
156 $ -
Segment Revenues Management fees $ 151 $ 29 $
27 $ 16 $ 37 $ 29 $ 13 Incentive income 70
- (1 )
- 1
70 -
Total 221 29 26 16 38 99 13
Segment Expenses Operating
expenses (112 ) (13 ) (16 ) (20 ) (21 ) (29 ) (13 ) Profit sharing
compensation expenses (37 )
- 1
(1 ) (1 )
(36 ) - Total (149 ) (13 ) (15 ) (21 )
(22 ) (65 ) (13 )
Earnings From Affiliated Managers 2
- - 2 - - -
Principal Performance Payments (7 ) - (3
) - (3 ) (1 ) -
Fund Management DE $ 67 $
16 $ 8 $ (3 ) $
13 $ 33 $
- Net Investment Income7 2 - - (1 ) - 5 -
Pre-tax
Distributable Earnings $ 69 $
16 $ 8 $ (4 )
$ 13 $ 38 $
-
______________________________
3 The Assets Under Management presented for the Liquid Hedge Funds
includes $4,456 million related to Affiliated Managers. The Assets
Under Management presented for the Credit Hedge Funds includes
$3,018 million related to co-managed funds and $150 million related
to the third-party originated Value Recovery Funds. Fortress earns
fees from the Value Recovery Funds based only on collections. 4 The
Average Management Fee Rate presented for the Liquid Hedge Funds
excludes Affiliated Managers. The Average Management Fee Rate
presented for the Credit Hedge Funds excludes the co-managed funds
and third-party originated Value Recovery Funds. See footnote (3)
above. 5 The Incentive Eligible NAV Above Incentive Income
Threshold presented for Liquid Hedge Funds excludes Affiliated
Managers and sidepocket investments and for Credit Hedge Funds,
excludes co-managed funds and sidepocket investments. The Incentive
Eligible NAV Above Incentive Income Threshold presented for Private
Equity Funds and Credit PE Funds (except for Fund V and Real Estate
Opportunities Fund II, of which a portion of the fund’s capital was
above the incentive income threshold as of September 30, 2015),
represents total fund NAV. The Incentive Eligible NAV Above
Incentive Income Threshold presented for the Permanent Capital
Vehicles represents the equity basis that is used to calculate
incentive income. 6 The Undistributed Incentive Income presented
for the Liquid Hedge Funds excludes Affiliated Managers and for
Credit Hedge Funds, excludes co-managed funds. Undistributed
Incentive Income includes the impact of sidepocket investments on
Liquid and Credit Hedge Funds. Undistributed Incentive Income for
Private Equity Funds, Credit PE Funds and Liquid and Credit Hedge
Fund sidepocket and redeeming capital account (RCA) investments has
not been recognized in Distributable Earnings and will be
recognized when realized; Undistributed Incentive Income for other
Hedge Fund investments was recognized in Distributable Earnings
when earned. Undistributed Incentive Income for Permanent Capital
Vehicles includes incentive income that would have been recorded in
Distributable Earnings if Fortress had (i) exercised all of its
in-the-money options it holds in the Permanent Capital Vehicles and
sold all of the resulting shares and (ii) sold all of its Permanent
Capital Vehicle common shares which it received as incentive
income, based on their September 30, 2015 closing price. 7 Net
Investment Income includes Unallocated Investment Income of $1
million and Unallocated Expenses of $1 million.
Pre-tax DE was $69 million in the third quarter of 2015, up from
$55 million in the third quarter of 2014, primarily due to lower
profit-sharing expenses and higher net investment income, partially
offset by lower incentive income.
Management fees were $151 million in the third quarter of 2015,
up slightly from $149 million in the third quarter of 2014.
Management fees for the third quarter of 2014 included
approximately $15 million attributable to the former Fortress Asia
Macro Funds (“FAMF”), which transitioned to an autonomous business
in which we have a minority interest named Graticule Asset
Management Asia L.P. (“Graticule”) in the first quarter of 2015.
Adjusting for this transition, Fortress’s management fees increased
by approximately $17 million year-over-year in the third quarter of
2015. The increase was primarily due to higher management fees from
the Permanent Capital Vehicles, Credit Hedge Funds and Credit PE
Funds, partially offset by lower management fees from the Private
Equity Funds and Liquid Hedge Funds.
Incentive income in the third quarter of 2015 totaled $70
million, down from $88 million in the third quarter of 2014,
primarily due to lower incentive income from the Credit Hedge Funds
and Permanent Capital Vehicles, partially offset by higher
incentive income from the Credit PE Funds.
Earnings from Affiliated Managers totaled $2 million in the
third quarter of 2015, up from a loss of $1 million in the second
quarter of 2015, related to our interests in Graticule.
Additionally, Fortress had $938 million in gross undistributed,
unrecognized incentive income based on investment valuations as of
September 30, 2015. This includes $913 million from our funds, $20
million from options in our permanent capital vehicles and $5
million in common shares Fortress received in connection with the
IPO of Fortress Transportation and Infrastructure Investors LLC
(NYSE: FTAI).
The Company’s segment revenues and distributable earnings
will fluctuate materially depending upon the performance of its
funds and the realization events within its Private Equity
businesses, as well as other factors. Accordingly, the
revenues and distributable earnings in any particular period should
not be expected to be indicative of future results.
ASSETS UNDER MANAGEMENT
As of September 30, 2015, AUM totaled $74.3 billion, up from
$72.0 billion as of June 30, 2015. During the quarter, Fortress
recorded a $3.6 billion positive change in AUM of Affiliated
Managers and co-managed funds, had a $0.6 billion increase in
invested capital, raised $0.2 billion of capital that was directly
added to AUM, and recorded $0.1 billion of net client inflows for
Logan Circle. These increases to AUM were partially offset by (i)
$0.9 billion of capital distributions to investors, (ii) $0.6
billion of market-driven valuation losses, (iii) $0.5 billion of
Liquid Hedge Fund redemptions, and (iv) $0.2 billion of Credit
Hedge Fund redemptions and payments to Credit Hedge Fund investors
from redeeming capital accounts.
As of September 30, 2015, the Credit Funds and Private Equity
Funds had $8.1 billion and $0.7 billion of uncalled capital,
respectively, that will become AUM if deployed/called. Uncalled
capital or dry powder – capital committed to the funds but not
invested and generating management fees – includes $3.0 billion
that is only available for follow-on investments, management fees
and other fund expenses. Notably, approximately 82% of alternative
AUM was in funds with long-term investment structures as of
September 30, 2015, which provides for a stable, predictable base
of management fees.
BUSINESS SEGMENT RESULTS
Below is a discussion of third quarter 2015 segment results and
business highlights.
Credit:
- DBSO LP net returns of 4.9% for the
nine months ended September 30, 2015
- FCO, FCO II, FCO III, FJOF and FJOF
II (Yen) recorded annualized inception-to-date net IRRs of 24.7%,
16.8%, 10.8%, 32.3% and 23.5%, respectively, through September 30,
2015
- Agreed to become co-manager of the
Mount Kellett Funds, adding $3.0 billion of AUM
- Post quarter end, the Credit PE
Funds expect to close their third Japan Real Estate fund, FJOF III,
at its cap of approximately $1.1 billion
(See supplemental data on pages 20-21 for more detail on Credit
results)
The Credit business, which includes our Credit PE Funds and
Credit Hedge Funds, generated pre-tax DE of $51 million in the
third quarter of 2015, up from $36 million in the third quarter of
2014. The 42% year-over-year increase in DE was primarily driven by
higher management fees and investment income, partially offset by
higher expenses. Credit incentive income totaled $71 million in the
quarter, up $1 million from the third quarter of 2014, as higher
incentive income from the Credit PE Funds were largely offset by
lower incentive income from the Credit Hedge Funds.
The Credit PE Funds generated pre-tax DE of $38 million in the
quarter, up significantly from $18 million in the third quarter of
2014, as increased realization activity resulted in $70 million of
incentive income in the quarter. For the nine months ended
September 30, 2015, the Credit PE Funds generated $154 million of
incentive income, greater than the amount generated in any
comparable period since the Credit PE Funds were launched in
2008.
Gross unrecognized Credit PE incentive income totaled $818
million at quarter end, representing the amount of gross incentive
income that would be recorded in DE if the related Credit funds
were liquidated on September 30, 2015 at their net asset
values.
The Credit Hedge Funds generated pre-tax DE of $13 million in
the quarter, compared to $18 million in the third quarter of 2014,
primarily due to lower incentive income earned in the quarter.
Fortress’s flagship credit hedge fund, DBSO LP, had net returns of
0.3% in the third quarter, bringing net returns for the nine months
ended September 30, 2015 to 4.9%.
During the quarter, Fortress agreed to become co-manager of the
Mount Kellett Funds, which have been included as part of the Credit
Hedge Fund segment. As of September 30, 2015, the Mount Kellett
Funds had $3.0 billion of AUM.
Post quarter end, the Credit PE Funds expect to close their
third Japan Real Estate fund, FJOF III, at its cap of approximately
$1.1 billion. At quarter end, approximately 14% of the fund’s
capital has already been committed or invested in real estate
related investments in Japan.
Private Equity and Permanent Capital Vehicles:
- AUM increased 13% year-over-year to
$16.1 billion, including $9.2 billion in the Private Equity Funds
and $6.9 billion in the Permanent Capital Vehicles
- Raised $2.4 billion of permanent
equity capital year-to-date through September 30, 2015
- Permanent Capital Vehicles generated
$74 million of pre-tax DE in the first nine months of 2015, more
pre-tax DE than in any full year since Fortress has been
public
(See supplemental data on pages 18-19 for more detail on Private
Equity results)
The Private Equity business recorded pre-tax DE of $24 million
in the third quarter of 2015, including $16 million for the Private
Equity Funds and $8 million for the Permanent Capital Vehicles.
Pre-tax DE declined from $25 million in the third quarter of 2014,
primarily due to a $17 million decrease in Permanent Capital
Vehicle incentive income year-over-year, partially offset by a $10
million year-over-year increase in Permanent Capital Vehicle
management fees.
Private Equity Fund valuations declined 3.9% in the third
quarter, primarily due to depreciation of Nationstar Mortgage
Holdings Inc. (NYSE: NSM) and Springleaf Holdings, Inc. (NYSE:
LEAF). As of October 28, 2015, public company valuations had
increased 7.3% in the fourth quarter, primarily due to a 10.9%
increase in Springleaf’s stock price.
Liquid Hedge Funds:
- Post quarter end, announced closing
of the Fortress Macro Funds; anticipated return of most capital to
investors by the end of 2015
(See supplemental data on page 22 for more detail on Liquid
Hedge Funds results)
The Liquid Hedge Funds recorded a pre-tax DE loss of $4 million
in the third quarter of 2015, flat compared to the third quarter of
2014. The pre-tax DE loss in the quarter was primarily due to an
$11 million impairment of certain software and technology-related
assets.
Earnings from Affiliated Managers totaled $2 million in the
third quarter of 2015, compared to a loss of $1 million in the
second quarter of 2015.
Third quarter 2015 net returns for the Fortress Macro Funds,
Fortress Convex Asia Funds, Fortress Centaurus Global Funds and
Fortress Partners Funds were (7.6)%, 3.3%, (3.1)% and (4.8)%,
respectively. Net returns year-to-date through October 23, 2015 for
the Fortress Convex Asia Funds and Fortress Centaurus Global Funds
were (1.0)% and (2.3)%, respectively.*
Post quarter end, Fortress announced it will close the Fortress
Macro Funds and expects to return most capital to investors by the
end of 2015. The Fortress Macro Funds accounted for 2% of
Fortress’s total AUM at quarter end and had generated a pre-tax DE
loss of $8 million year-to-date through September 30, 2015. Michael
Novogratz, a Fortress principal, officer and director and Macro
Fund CIO, is expected to retire at the end of 2015.
Excluding $1.8 billion of AUM related to the Fortress Macro
Funds, the Liquid Hedge Funds had $5.6 billion of AUM at quarter
end, including $4.5 billion related to Affiliated Managers.
______________________________
* The net returns for the Fortress Convex Asia Funds reflect
returns for the Fortress Convex Asia Funds and Fortress Convex Asia
PF Funds collectively. The calculation of net returns for the
Fortress Convex Asia PF Funds reflect all expenses, including
management fees, accrued incentive allocation (if any), and other
expenses over the fund’s Trading Level. “Trading Level” is defined
as the product of the fund’s NAV multiplied by the Funding Factor.
The “Funding Factor” is 2x for Fortress Convex Asia Fund PF Ltd and
Fortress Convex Asia Fund PF LP. The net returns for the Fortress
Partners Funds represent the performance of Fortress Partners Fund
LP. Please see supplemental data on page 22 for more detail on the
returns of each Fortress Partners Fund.
Logan Circle:
- 15 out of 16 Logan Circle fixed
income investment strategies have outperformed their respective
benchmarks since inception, and 8 of 16 strategies have
outperformed respective benchmarks for the nine months ended
September 30, 2015
- AUM totaled $33.4 billion at
September 30, 2015, an increase of 8% compared to September 30,
2014
- Net client inflows totaled $1.7
billion for the nine months ended September 30, 2015
(See supplemental data on page 23 for more detail on Logan
Circle results)
Logan Circle, our traditional asset management business,
recorded breakeven pre-tax DE in the quarter, as $0.3 million of
fund management DE was offset by $0.3 million of net investment
losses. Pre-tax DE increased from a pre-tax DE loss of $2 million
in the third quarter of 2014, primarily due to higher revenues and
lower operating expenses.
Logan Circle ended the quarter with $33.4 billion in AUM, a
slight decline compared to the prior quarter and an 8% increase
compared to the third quarter of 2014. AUM declined slightly
quarter-over-quarter as $0.1 billion of net inflows were offset by
$0.2 billion of market-driven valuation losses.
Since inception, 15 of 16 Logan Circle fixed income strategies
have outperformed their respective benchmarks and seven were ranked
in the top quartile of performance for their competitor universe.
For the year-to-date period through September 30, 2015, 8 out of
Logan Circle’s 16 fixed income strategies outperformed their
respective benchmarks.
LIQUIDITY & CAPITAL
As of September 30, 2015, Fortress had cash and cash equivalents
of $337 million and debt obligations of $75 million.
As of September 30, 2015, Fortress had $1.2 billion of
investments in Fortress funds and options in publicly traded
permanent capital vehicles. As of September 30, 2015, Fortress had
a total of $153 million of outstanding commitments to its funds. In
addition, the NAV of Fortress’s investments in its own funds
exceeded its segment cost basis by $506 million at quarter end,
representing net unrealized gains that have not yet been recognized
for segment reporting purposes.
In October 2015, Fortress announced that it has agreed to
purchase 56.8 million Class A equivalent shares at $4.50 per share,
or an aggregate amount of $255.7 million. In connection with this
purchase, it is anticipated that Fortress will pay $100.0 million
of cash in November 2015 and issue an $155.7 million promissory
note. In addition, Fortress expects to enter into a consent and
waiver with lenders under its credit agreement for their consent to
this transaction.
DIVIDEND
Fortress’s Board of Directors declared a third quarter 2015 cash
dividend of $0.08 per dividend paying share. The dividend is
payable on November 13, 2015 to Class A shareholders of record as
of the close of business on November 10, 2015.
The declaration and payment of any dividends are at the sole
discretion of the Board of Directors, which may decide to change
its dividend policy at any time. Please see below for information
on the U.S. federal income tax implications of the dividend.
NON-GAAP INFORMATION
DE is a primary metric used by management to measure Fortress’s
operating performance. Consistent with GAAP, DE is the sole
measure that management uses to manage, and thus report on,
Fortress’s segments, namely: Private Equity, Permanent Capital
Vehicles, Credit Hedge Funds, Credit PE Funds, Liquid Hedge Funds
and Logan Circle. DE differs from GAAP net income in a number
of material ways. For a detailed description of the calculation of
pre-tax DE and fund management DE, see Exhibit 3 to this release
and note 10 to the financial statements included in the Company’s
most recent quarterly report on Form 10-Q.
Fortress aggregates its segment results to report consolidated
segment results, as shown in the table under “Summary Financial
Results” and in the “Total” column of the table under “Consolidated
Segment Results (Non-GAAP).” The consolidated segment results are
non-GAAP financial information. Management believes that
consolidated segment results provide a meaningful basis for
comparison among present and future periods. However, consolidated
segment results should not be considered a substitute for
Fortress’s consolidated GAAP results. The exhibits to this release
contain reconciliations of the components of Fortress’s
consolidated segment results to the comparable GAAP measures, and
Fortress urges you to review these exhibits. Fortress also uses
weighted average dividend paying shares and units outstanding (used
to calculate pre-tax DE per dividend paying share) and net cash and
investments. The exhibits to this release contain reconciliations
of these measures to the comparable GAAP measures, and Fortress
urges you to review these exhibits.
CONFERENCE CALL
Management will host a conference call today, Thursday, October
29th at 10:00 A.M. Eastern Time. A copy of the earnings release is
posted to the Investor Relations section of Fortress’s website,
www.fortress.com. The conference call may be accessed by dialing
1-877-694-6694 (from within the U.S.) or 1-970-315-0985 (from
outside of the U.S.) ten minutes prior to the scheduled start of
the call; please reference “Fortress Third Quarter Earnings Call.”
A simultaneous webcast of the conference call will be available to
the public on a listen-only basis at www.fortress.com. Please allow
extra time prior to the call to visit the site and download the
necessary software required to listen to the internet broadcast. A
telephonic replay of the conference call will also be available by
dialing 1-855-859-2056 (from within the U.S.) or 1-404-537-3406
(from outside of the U.S.); please reference access code
“57023583.”
ABOUT FORTRESS
Fortress Investment Group LLC (NYSE: FIG) is a leading, highly
diversified global investment management firm with $74.3 billion in
assets under management as of September 30, 2015. Fortress applies
its deep experience and specialized expertise across a range of
investment strategies - private equity, credit, liquid hedge funds
and traditional asset management - on behalf of over 1,800
institutional clients and private investors worldwide. For more
information regarding Fortress Investment Group LLC or to be added
to its e-mail distribution list, please visit www.fortress.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this press release may constitute
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995, including statements
regarding Fortress’s sources of management fees, incentive income
and investment income (loss), estimated fund performance, the
amount and source of expected capital commitments, the closing of
the Fortress Macro Funds and repurchase of shares/units from a
retiring principal (the “transaction”). These statements are
not historical facts, but instead represent only the Company’s
beliefs regarding future events, many of which, by their nature,
are inherently uncertain and outside of the Company’s control. It
is possible that the sources and amounts of management fees,
incentive income and investment income, the amount and source of
expected capital commitments for any new fund or redemption amounts
may differ, possibly materially, from these forward-looking
statements. Such differences or other changes to forward looking
statements including with respect to the transaction could cause
the Company’s actual results to differ materially from the results
expressed or implied by these forward-looking statements. For a
discussion of some of the risks and important factors that could
affect such forward-looking statements, see the sections entitled
“Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in the
Company’s Quarterly Report on Form 10-Q, which is, or will be,
available on the Company’s website (www.fortress.com). In addition,
new risks and uncertainties emerge from time to time, and it is not
possible for the Company to predict or assess the impact of every
factor that may cause its actual results to differ from those
contained in any forward-looking statements. Accordingly, you
should not place undue reliance on any forward-looking statements
contained in this press release. The Company can give no assurance
that the expectations of any forward-looking statement will be
obtained. Such forward-looking statements speak only as of the date
of this press release. The Company expressly disclaims any
obligation to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change
in the Company’s expectations with regard thereto or any change in
events, conditions or circumstances on which any statement is
based.
U.S. FEDERAL INCOME TAX IMPLICATIONS OF DIVIDEND
This announcement is intended to be a qualified notice as
provided in the Internal Revenue Code (the “Code”) and the
Regulations thereunder. For U.S. federal income tax purposes, the
dividend declared in October 2015 will be treated as a partnership
distribution. The per share distribution components are as
follows:
U.S. Long Term Capital Gain (1)
$0.0000 Non-U.S. Long Term Capital Gain $0.0000 U.S.
Portfolio Interest Income (2) $0.0520 U.S. Dividend Income (3)
$0.0000 Income Not from U.S. Sources (4) $0.0280 Return of Capital
$0.0000 Distribution Per Share $0.0800 (1) U.S. Long Term
Capital Gain realized on the sale of a United States Real Property
Holding Corporation. As a result, the gain from the sale will be
treated as income that is effectively connected with a U.S. trade
or business. (2) Eligible for the U.S. portfolio interest
exemption for any holder not considered a 10-Percent shareholder
under §871(h)(3)(B) of the Code. (3) This income is subject
to withholding under §1441 of the Code. (4) This income is
not subject to withholding under §1441 or §1446 of the Code.
Fortress Investment Group LLC
Consolidated Statements of Operations
(Unaudited)
(dollars in thousands, except share
data)
Three Months Ended
September 30, Nine Months Ended September 30,
2015 2014
2015 2014
Revenues Management fees: affiliates $ 134,414 $
138,135 $ 413,057 $ 403,890 Management fees: non-affiliates 15,400
16,774 45,657 52,112 Incentive income: affiliates 48,773 30,941
155,154 125,634 Incentive income: non-affiliates 439 343 735 1,030
Expense reimbursements: affiliates 59,988 50,600 168,544 153,448
Expense reimbursements: non-affiliates 2,757 4,869 9,573 9,931
Other revenues 2,248 1,518 6,476
4,589
Total Revenues 264,019
243,180 799,196 750,634
Expenses Compensation and benefits 169,027
187,249 547,023 543,882 General, administrative and other 37,887
41,313 126,053 121,322 Depreciation and amortization 16,102 4,997
34,201 14,335 Interest expense 918 916 2,796 2,554 Transfer of
interest in Graticule - -
101,000 -
Total Expenses 223,934
234,475 811,073 682,093
Other Income (Loss) Gains (losses) (39,888 )
(23,917 ) (15,114 ) (30,108 ) Tax receivable agreement liability
adjustment (390 ) (4,036 ) (7,890 ) (4,036 ) Earnings (losses) from
equity method investees (22,195 ) 38,928 (16,808 ) 81,750 Gain on
transfer of Graticule - -
134,400 -
Total Other Income (Loss)
(62,473 ) 10,975 94,588
47,606
Income (Loss) Before Income Taxes
(22,388 ) 19,680 82,711 116,147 Income tax benefit (expense)
(3,584 ) (3,024 ) (16,784 ) (16,934 )
Net
Income (Loss) $ (25,972 ) $ 16,656 $ 65,927 $
99,213
Allocation of Net Income (Loss) Principals'
and Others' Interests in Income (Loss) of Consolidated Subsidiaries
(11,727 ) 12,623 42,149 60,800 Redeemable Non-Controlling Interests
in Income (Loss) - (2,042 ) (6 ) (1,885 ) Net Income (Loss)
Attributable to Class A Shareholders (14,245 ) 6,075
23,784 40,298 $ (25,972 ) $
16,656 $ 65,927 $ 99,213
Earnings (Loss) Per
Class A Share
Net income (loss) per Class A share, basic $ (0.07 ) $ 0.03
$ 0.10 $ 0.19 Net income (loss) per Class A share,
diluted $ (0.07 ) $ 0.02 $ 0.09 $ 0.17
Weighted average number of Class A shares outstanding, basic
216,439,077 208,014,692 216,138,405
210,874,640 Weighted average number of Class A
shares outstanding, diluted 216,439,077
220,792,711 222,213,743 457,019,507
Fortress Investment Group LLC
Consolidated Balance Sheets
(dollars in thousands)
September 30,
2015(Unaudited)
December 31, 2014 Assets Cash and cash equivalents $
337,109 $ 391,089 Due from affiliates 195,619 326,575 Investments
1,125,443 1,121,545 Investments in options 33,849 71,844 Deferred
tax asset, net 426,274 417,623 Other assets 158,420
173,708
Total Assets $ 2,276,714 $
2,502,384
Liabilities and Equity
Liabilities Accrued compensation and benefits $ 242,492 $
374,709 Due to affiliates 383,685 375,424 Deferred incentive income
348,267 304,526 Debt obligations payable 75,000 75,000 Other
liabilities 124,303 88,053
Total
Liabilities $ 1,173,747 $ 1,217,712
Commitments and Contingencies Redeemable
Non-controlling Interests 1,717
Equity Class A
shares, no par value, 1,000,000,000 shares authorized, 215,714,060
and 208,535,157 shares issued and outstanding at September 30, 2015
and December 31, 2014, respectively - - Class B shares, no par
value, 750,000,000 shares authorized, 226,331,513 shares issued and
outstanding at September 30, 2015 and December 31, 2014,
respectively - - Paid-in capital 1,909,349 1,996,137 Retained
earnings (accumulated deficit) (1,326,338 ) (1,350,122 )
Accumulated other comprehensive income (loss) (1,900 )
(2,416 ) Total Fortress shareholders' equity 581,111
643,599 Principals' and others' interests in equity of consolidated
subsidiaries 521,856 639,356
Total
Equity 1,102,967 1,282,955 $
2,276,714 $ 2,502,384
Fortress Investment Group LLC
Exhibit 1-a
Supplemental Data for the Three Months
Ended September 30, 2015 and 2014
Three Months Ended September 30,
2015
Private Equity
Credit Funds
(in millions)
Total Funds
Permanent
CapitalVehicles
Liquid HedgeFunds
Hedge Funds PE Funds
Logan Circle
Assets Under Management AUM - July 1, 2015 $
71,967 $ 9,587 $ 6,948 $
7,377 $ 6,244 $ 8,247 $
33,564 Capital raised 201 - - 48 - 153 - Equity
raised (Permanent Capital Vehicles) - - - - - - - Increase in
invested capital 641 11 - - 25 605 - Redemptions (669 ) - - (457 )
(212 ) - - RCA distributions8 (22 ) - - - (22 ) - - Return of
capital distributions (862 ) (134 ) (11 ) (100 ) - (617 ) -
Adjustment for capital reset - - - - - - - Crystallized Incentive
Income (2 ) - - - (2 ) - - Change in AUM of Affiliated Managers and
co-managed funds 3,579 - - 561 3,018 - - Net Client Flows 101 - - -
- - 101 Income (loss) and foreign exchange
(604 ) (269 ) (41 )
(62 ) 19
(32 ) (219 )
AUM - Ending Balance $ 74,330 $ 9,195 $ 6,896 $ 7,367 $
9,070 $ 8,356 $ 33,446
Third-Party Capital Raised $
204 $ - $ -
$ 48 $ -
$ 156 $ -
Segment Revenues Management fees $ 151 $ 29 $ 27 $ 16 $ 37 $
29 $ 13 Incentive income 70
- (1 )
- 1
70 - Total 221 29
26 16 38 99 13
Segment Expenses Operating expenses
(112 ) (13 ) (16 ) (20 ) (21 ) (29 ) (13 ) Profit sharing
compensation expenses (37 )
- 1
(1 ) (1 )
(36 ) - Total (149 ) (13 ) (15 ) (21 )
(22 ) (65 ) (13 )
Earnings From Affiliated Managers 2
- - 2 - - -
Fund Management DE (before Principal Performance Payments)
74 16
11 (3 )
16 34
- Principal Performance
Payments (7 ) - (3 ) - (3 ) (1 ) -
Fund Management DE
67 16 8
(3 ) 13
33 -
Investment Income 4 - - (1 ) - 5 - Unallocated
Investment Income (1 )
Unallocated Expenses (1 )
Pre-tax Distributable Earnings $ 69
$ 16 $ 8 $
(4 ) $ 13 $
38 $ -
Pre-tax Distributable
Earnings per Dividend Paying Share $ 0.15
Three Months Ended September
30, 2014
Private Equity
Credit Funds
(in millions)
Total Funds
Permanent
CapitalVehicles
Liquid
Hedge Funds
Hedge Funds PE Funds
Logan Circle
Assets Under Management AUM - July 1, 2014 $
63,813 $ 9,810 $ 4,021 $
7,867 $ 6,084 $ 6,898 $
29,133 Capital raised 433 - - 247 155 31 - Equity raised
(Permanent Capital Vehicles) 312 - 312 - - - - Increase in invested
capital 938 67 133 - - 738 - Redemptions (563 ) - - (562 ) (1 ) - -
RCA distributions8 (180 ) - - - (180 ) - - Return of capital
distributions (1,170 ) (644 ) (13 ) (83 ) (19 ) (411 ) - Adjustment
for capital reset (86 ) - - - - (86 ) - Crystallized Incentive
Income (10 ) - - (1 ) (9 ) - - Net Client Flows 2,178 - - - - -
2,178 Income (loss) and foreign exchange 381
554 (42 )
61 110
(87 ) (215 )
AUM -
Ending Balance $ 66,046 $ 9,787 $ 4,411 $ 7,529 $ 6,140 $ 7,083
$ 31,096
Third-Party Capital Raised $
1,216 $ 101 $ 673
$ 247 $ 165 $
30 $ -
Segment
Revenues Management fees $ 149 $ 33 $ 17 $ 33 $ 29 $ 24 $ 13
Incentive income 88
- 16
2 29 41
- Total 237 33 33 35 58 65 13
Segment Expenses Operating expenses (112 ) (15 ) (18
) (21 ) (17 ) (27 ) (14 ) Profit sharing compensation expenses
(54 ) -
(9 ) (9 )
(14 ) (22 ) -
Total (166 ) (15 ) (27 ) (30 ) (31 ) (49 ) (14 )
Fund Management DE (before
Principal Performance Payments) 71
18 6
5 27
16 (1 ) Principal
Performance Payments (4 ) - - - (4 ) - -
Fund Management DE
67 18
6 5
23 16 (1 )
Investment Income (12 ) - 1 (9 ) (5 ) 2 (1 ) Unallocated
Investment Income - Unallocated Expenses -
Pre-tax Distributable Earnings $
55 $ 18 $ 7
$ (4 ) $ 18 $
18 $ (2 )
Pre-tax Distributable
Earnings per Dividend Paying Share $ 0.12
______________________________
8 Represents distributions from (i) assets held by redeeming
capital accounts in the Drawbridge Special Opportunities Funds, and
(ii) the Value Recovery Funds.
Fortress Investment Group LLC
Exhibit 1-b
Supplemental Data for the Nine Months
Ended September 30, 2015 and 2014
Nine Months Ended September 30, 2015
Private Equity
Credit Funds
(in millions)
Total Funds
Permanent
CapitalVehicles
Liquid HedgeFunds
Hedge Funds PE Funds
Logan Circle
Assets Under Management AUM - January 1, 2015 $
67,531 $ 9,366 $ 4,567 $
8,128 $ 6,173 $ 6,955 $
32,342 Capital raised 1,371 - - 305 254 812 - Equity
raised (Permanent Capital Vehicles) 2,441 - 2,441 - - - - Increase
in invested capital 2,155 192 287 - 46 1,630 - Redemptions (1,829 )
- - (1,565 ) (264 ) - - RCA distributions9 (288 ) - - - (288 ) - -
Return of capital distributions (1,732 ) (412 ) (110 ) (162 ) (31 )
(1,017 ) - Adjustment for reset date (168 ) - (168 ) - - - -
Crystallized Incentive Income (118 ) - - - (118 ) - - Change in AUM
of Affiliated Managers and co-managed funds 3,967 - - 949 3,018 - -
Net Client Flows 1,746 - - - - - 1,746 Income (loss) and foreign
exchange (746 ) 49
(121 ) (288 )
280 (24 )
(642 )
AUM - Ending Balance $ 74,330 $ 9,195 $ 6,896
$ 7,367 $ 9,070 $ 8,356 $ 33,446
Third-Party Capital
Raised $ 8,777 $ - $
2,441 $ 305 $
254 $ 5,777 $ -
Segment Revenues Management fees $ 434 $ 87 $
69 $ 56 $ 96 $ 86 $ 40 Incentive income 304
- 76
- 74
154 - Total 738 87
145 56 170 240 40
Segment Expenses Operating expenses
(348 ) (42 ) (50 ) (68 ) (58 ) (89 ) (41 ) Profit sharing
compensation expenses (121 )
- (8 ) (2 )
(31 ) (80 )
- Total (469 ) (42 ) (58 ) (70 ) (89 ) (169 ) (41 )
Earnings From Affiliated Managers
10 -
- 10 -
- -
Fund Management DE (before Principal Performance
Payments) 279
45 87 (4 )
81 71
(1 ) Principal Performance Payments (28
) - (14 ) - (11 ) (3 ) -
Fund Management DE 251
45 73
(4 ) 70
68 (1 ) Investment
Income 14 - 1 3 1 9 - Unallocated Investment Income (1 )
Unallocated Expenses (3 )
Pre-tax Distributable Earnings $ 261
$ 45 $ 74 $
(1 ) $ 71 $ 77 $
(1 )
Pre-tax Distributable Earnings per Dividend
Paying Share $ 0.58
Nine Months Ended September 30, 2014
Private Equity
Credit Funds
(in millions)
Total Funds
Permanent
CapitalVehicles
Liquid HedgeFunds
Hedge Funds PE Funds
Logan Circle
Assets Under Management AUM - January 1, 2014 $
61,750 $ 11,861 $ 3,722 $
7,398 $ 5,856 $ 7,527 $
25,386 Capital raised 2,615 - - 2,072 512 31 - Equity
raised (Permanent Capital Vehicles) 483 - 483 - - - - Increase in
invested capital 1,526 127 348 - 15 1,036 - Redemptions (1,475 ) -
- (1,438 ) (37 ) - - RCA distributions9 (487 ) - - - (487 ) - -
Return of capital distributions (4,457 ) (2,798 ) (97 ) (120 ) (47
) (1,395 ) - Adjustment for capital reset (86 ) - - - - (86 ) -
Crystallized Incentive Income (299 ) - - (130 ) (169 ) - - Net
Client Flows 4,385 - - - - - 4,385 Income (loss) and foreign
exchange 2,091 597
(45 ) (253 )
497 (30 )
1,325
AUM - Ending Balance $ 66,046 $
9,787 $ 4,411 $ 7,529 $ 6,140 $ 7,083 $ 31,096
Third-Party Capital Raised $ 4,587 $
206 $ 1,078 $
2,072 $ 947 $ 284
$ -
Segment Revenues
Management fees $ 448 $ 104 $ 50 $ 103 $ 84 $ 72 $ 35 Incentive
income 270 3
41 3
103 120
- Total 718 107 91 106 187 192 35
Segment Expenses Operating expenses (325 ) (38 ) (49
) (68 ) (51 ) (79 ) (40 ) Profit sharing compensation expenses
(146 ) -
(15 ) (18 )
(49 ) (64 ) -
Total (471 ) (38 ) (64 ) (86 ) (100 ) (143 ) (40 )
Fund Management DE (before
Principal Performance Payments) 247
69 27
20 87
49 (5 )
Principal Performance Payments (17 ) - (3 ) (1 ) (12 ) (1 ) -
Fund Management
DE 230 69
24 19
75 48
(5 ) Investment Income 94 95 2
(7 ) (2 ) 6 - Unallocated Investment Income 1 Unallocated Expenses
(2 )
Pre-tax
Distributable Earnings $ 323 $
164 $ 26 $ 12
$ 73 $ 54 $
(5 )
Pre-tax Distributable Earnings per Dividend Paying
Share $ 0.72
______________________________
9 Represents distributions from (i) assets held by redeeming
capital accounts in the Drawbridge Special Opportunities Funds, and
(ii) the Value Recovery Funds.
Fortress Investment Group LLC
Exhibit 2-a
Assets Under Management and Fund
Management DE
(dollars in millions)
Three Months Ended Three Months Ended
Fortress
March 31,2014
June 30,2014
September 30,2014
December 31,2014
Full Year2014
March 31,2015
June 30,2015
September 30,2015
Nine Months EndedSeptember 30,
2015
Assets Under Management Private Equity Funds $ 11,512
$ 9,810 $ 9,787 $ 9,366 $ 9,366 $ 10,179 $
9,587 $ 9,195 $ 9,195 Permanent Capital Vehicles 3,731 4,021
4,411 4,567 4,567 4,622 6,948 6,896 6,896 Liquid Hedge Funds10
7,738 7,867 7,529 8,128 8,128 7,838 7,377 7,367 7,367 Credit Hedge
Funds11 5,968 6,084 6,140 6,173 6,173 6,271 6,244 9,070 9,070
Credit Private Equity Funds 6,979 6,898 7,083 6,955 6,955 7,563
8,247 8,356 8,356 Logan Circle 26,592
29,133 31,096 32,342
32,342 33,416
33,564 33,446 33,446
AUM - Ending Balance $ 62,520 $ 63,813
$ 66,046 $ 67,531 $ 67,531 $
69,889 $ 71,967 $ 74,330 $
74,330
Third-Party Capital Raised $
1,609 $ 1,762 $ 1,216 $ 1,692 $
6,279 $ 5,360 $ 3,213 $
204 $ 8,777
Segment Revenues Management
fees $ 147 $ 152 $ 149 $ 153 $ 601 $ 139 $ 144 $ 151 $ 434
Incentive income 104 78
88 191 461
51 183 70
304 Total 251 230 237 344 1,062 190 327 221 738
Segment Expenses Operating expenses (104 ) (109 ) (112 )
(126 ) (451 ) (115 ) (121 ) (112 ) (348 ) Profit sharing
compensation expenses (53 ) (39 )
(54 ) (96 ) (242 ) (30 )
(54 ) (37 ) (121 ) Total (157 ) (148 )
(166 ) (222 ) (693 ) (145 ) (175 ) (149 ) (469 )
Earnings
From Affiliated Managers - -
- - -
9 (1 ) 2 10
Fund Management DE (before Principal Performance
Payments) 94 82
71 122 369
54 151 74
279 Principal Performance Payments (7 ) (6 ) (4 ) (12
) (29 ) (3 ) (18 ) (7 ) (28 )
Fund Management DE $ 87
$ 76 $ 67 $ 110 $ 340
$ 51 $ 133 $ 67 $ 251
Net Investment Income 10 96 (12 ) 13 106 4 4 2 10
Pre-tax Distributable Earnings $ 97 $
172 $ 55 $ 123 $ 446 $ 55
$ 137 $ 69 $ 261
______________________________
10 The Assets Under Management presented for the Liquid Hedge Funds
includes $4,456 million related to Affiliated Managers as of
September 30, 2015. 11 The Assets Under Management presented for
the Credit Hedge Funds includes $3,018 million related to
co-managed funds as of September 30, 2015.
Fortress Investment Group LLC
Exhibit 2-b
Assets Under
Management and Fund Management DE
(dollars in millions)
Three Months Ended Three Months Ended
Private Equity Funds
March 31,2014
June 30,2014
September 30,2014
December 31,2014
Full Year2014
March 31,2015
June 30,2015
September 30,
2015
Nine Months EndedSeptember 30,
2015
Assets Under Management Main Funds12 $ 7,787 $
7,053 $ 7,347 $ 6,934 $ 6,934 $ 7,726 $
7,128 $ 6,874 $ 6,874 Coinvestment Funds13 3,393 2,401 2,088
2,006 2,006 1,994 1,902 1,785 1,785 MSR Opportunities Funds14 332
344 341 326 326 336 417 388 388 Italian NPL Opportunities Fund - 12
11 25 25 19 20 20 20 Fortress Equity Partners -
- -
75 75
104 120 128
128
AUM - Ending Balance $
11,512 $ 9,810 $ 9,787
$ 9,366 $ 9,366 $
10,179 $ 9,587 $ 9,195
$ 9,195
Third-Party Capital
Raised $ 79 $ 26 $ 101
$ - $ 206 $
- $ - $ - $
-
Segment Revenues Management fees $ 35 $ 36 $
33 $ 32 $ 136 $ 29 $ 29 $ 29 $ 87 Incentive income 2
1 -
- 3
- - -
- Total 37 37 33 32 139 29 29 29 87
Segment Expenses Operating expenses (11 ) (12 ) (15 ) (13 )
(51 ) (14 ) (15 ) (13 ) (42 ) Profit sharing compensation expenses
(1 ) 1 -
- -
- -
- - Total (12 )
(11 ) (15 ) (13 )
(51 ) (14 ) (15 )
(13 ) (42 )
Fund Management DE (before
Principal Performance Payments) 25
26 18 19
88 15
14 16
45 Principal Performance Payments - - -
- - - - - -
Fund
Management DE $ 25 $ 26 $ 18
$ 19 $ 88 $
15 $ 14 $ 16 $
45 Net Investment Income 4 91 - - 95 - - - -
Pre-tax
Distributable Earnings $ 29 $ 117
$ 18 $ 19 $ 183
$ 15 $ 14 $
16 $ 45
______________________________
12 Combined AUM for Fund III, Fund IV and Fund V. 13 Combined AUM
for Fund III Coinvestment, Fund IV Coinvestment, Fund V
Coinvestment, FRID, FRIC, FICO, FHIF, FECI and MAPS. FRID and FRIC
were closed in the fourth quarter of 2014. 14 Combined AUM for MSR
Opportunities Fund I A, MSR Opportunities Fund I B, MSR
Opportunities Fund II A, MSR Opportunities Fund II B and MSR
Opportunities Fund MA I.
Fortress Investment Group LLC
Exhibit 2-c
Assets Under Management and Fund Management DE
(dollars in millions)
Three
Months Ended Three Months Ended
Permanent Capital Vehicles
March 31,2014
June 30,2014
September 30,2014
December 31,2014
Full Year2014
March 31,2015
June 30,2015
September 30,2015
Nine Months EndedSeptember 30,
2015
Assets Under Management Newcastle Investment Corp. $
1,321 $ 1,381 $ 1,579 $ 768 $
768 $ 680 $ 680 $ 680 $ 680 New Residential
Investment Corp. 1,196 1,367 1,366 1,367 1,367 1,367 2,725 2,689
2,689 Eurocastle Investment Limited 556 553 510 488 488 432 626 605
605 New Media Investment Group Inc. 391 390 505 487 487 637 637 637
637 New Senior Investment Group Inc. - - - 812 812 813 1,089 1,089
1,089 Fortress Transportation and Infrastructure Investors LLC15
267 330
451 645
645 693
1,191 1,196 1,196
AUM - Ending Balance $ 3,731 $
4,021 $ 4,411 $
4,567 $ 4,567 $ 4,622
$ 6,948 $ 6,896 $ 6,896
Third-Party Capital Raised $ -
$ 405 $ 673 $
- $ 1,078 $ 150
$ 2,291 $ - $ 2,441
Segment Revenues Management fees $ 16 $ 17 $
17 $ 19 $ 69 $ 19 $ 23 $ 27 $ 69 Incentive income 4
21 16
25 66
3 74
(1 ) 76 Total 20 38 33 44 135 22 97 26
145
Segment Expenses Operating expenses (14 ) (17 )
(18 ) (20 ) (69 ) (18 ) (16 ) (16 ) (50 ) Profit sharing
compensation expenses -
(6 ) (9 ) (6 )
(21 ) -
(9 ) 1 (8 ) Total
(14 ) (23 ) (27 )
(26 ) (90 )
(18 ) (25 ) (15 ) (58 )
Fund Management DE (before Principal Performance Payments)
6 15
6 18
45 4 72
11 87 Principal
Performance Payments (1 ) (2 ) - (3 ) (6 ) - (11 ) (3 ) (14 )
Fund Management
DE $ 5 $ 13 $
6 $ 15 $ 39
$ 4 $ 61 $ 8 $ 73
Net Investment Income - 1 1 - 2 - 1 - 1
Pre-tax Distributable
Earnings $ 5 $ 14 $
7 $ 15 $ 41
$ 4 $ 62 $ 8
$ 74
______________________________
15 All of the capital of Worldwide Transportation and
Infrastructure Investors ("WWTAI"), a private fund managed by
Fortress, was contributed to FTAI which completed its initial
public offering in 2Q 2015.
Fortress Investment Group LLC
Exhibit 2-d
Assets Under Management and Fund
Management DE
(dollars in millions)
Three Months Ended Three Months Ended
Credit Hedge Funds
March 31,2014
June 30,2014
September 30,2014
December 31,2014
Full Year2014
March 31,2015
June 30,2015
September 30,2015
Nine Months EndedSeptember 30,
2015
Assets Under Management Drawbridge Special
Opportunities Funds16 $ 5,616 $ 5,745 $ 5,817
$ 5,929 $ 5,929 $ 6,023 $ 6,021 $ 5,808
$ 5,808 Value Recovery Funds17 338 324 309 200 200 189 156 150 150
Japan Income Fund 14 15 14 44 44 59 67 94 94 Co-Managed Funds18
- -
- -
- - -
3,018 3,018
AUM
- Ending Balance $ 5,968 $ 6,084
$ 6,140 $ 6,173
$ 6,173 $ 6,271 $
6,244 $ 9,070 $ 9,070
Third-Party Capital Raised $ 228
$ 554 $ 165 $ 48
$ 995 $ 175
$ 79 $ - $ 254
Segment Revenues Management fees $ 27 $ 28 $ 29 $ 30 $ 114 $
30 $ 29 $ 37 $ 96 Incentive income 32
42 29
19 122
23 50
1 74 Total 59 70 58 49 236 53 79
38 170
Segment Expenses Operating expenses (17 ) (17
) (17 ) (19 ) (70 ) (18 ) (19 ) (21 ) (58 ) Profit sharing
compensation expenses (15 ) (20
) (14 ) (10 )
(59 ) (12 )
(18 ) (1 ) (31 ) Total
(32 ) (37 ) (31 )
(29 ) (129 )
(30 ) (37 ) (22 )
(89 )
Fund Management DE (before Principal Performance
Payments) 27 33
27 20
107 23
42 16
81 Principal Performance Payments (5 )
(3 ) (4 ) (8 ) (20 ) (2 ) (6 ) (3 ) (11 )
Fund Management DE $
22 $ 30 $ 23
$ 12 $ 87 $
21 $ 36 $ 13
$ 70 Net Investment Income 1 2 (5 ) 1 (1 ) 1 -
- 1
Pre-tax
Distributable Earnings $ 23 $ 32
$ 18 $ 13 $
86 $ 22 $ 36
$ 13 $ 71
Net
Returns19
Drawbridge Special Opportunities Fund LP 3.2 % 2.6 % 1.9 % 2.1 %
10.0 % 2.2 % 2.3 % 0.3 % 4.9 % Drawbridge Special Opportunities
Fund Ltd 2.2 % 1.7 % 1.7 % 0.2 % 6.0 % 1.1 % 0.4 % -0.8 % 0.7 %
______________________________
16 Combined AUM for Drawbridge Special Opportunities Fund LP,
Drawbridge Special Opportunities Fund Ltd, Drawbridge Special
Opportunities Fund managed accounts, Worden Fund LP and Worden Fund
II LP. 17 Fortress will receive management fees from these funds
equal to 1% of cash receipts and may receive limited incentive
income if aggregate realizations exceed an agreed threshold. 18
Combined AUM for the Mount Kellett investment funds and related
accounts. In July 2015, Fortress became co-manager of the Mount
Kellett Funds. 19 The performance data contained herein reflects
returns for a "new issue eligible," single investor class as of the
close of business on the last day of the relevant period. Net
returns reflect performance data after taking into account
management fees borne by the Fund and incentive allocations. The
returns for the Drawbridge Special Opportunities Funds reflect the
performance of each fund excluding special investments and the
performance of the redeeming capital accounts which relate to
December 31, 2009, December 31, 2010, December 31, 2011, December
31, 2012, December 31, 2013 and December 31, 2014 redemptions.
Fortress Investment Group LLC
Exhibit 2-e
Assets Under Management and Fund
Management DE
(dollars in millions)
Three Months Ended Three Months Ended
Credit Private Equity Funds
March 31,2014
June 30,2014
September 30,2014
December 31,2014
Full Year2014
March 31,2015
June 30,2015
September 30,2015
Nine Months EndedSeptember 30,
2015
Assets Under Management Long Dated Value Funds20 $
395 $ 375 $ 361 $ 361 $ 361 $
352 $ 315 $ 315 $ 315 Real Assets Funds 78 70
64 66 66 52 40 41 41 Fortress Credit Opportunities Funds21 4,712
4,649 4,960 5,465 5,465 6,029 6,802 6,796 6,796 Japan Opportunity
Funds22 1,794 1,804
1,698 1,063
1,063 1,130
1,090 1,204
1,204
AUM - Ending Balance $
6,979 $ 6,898 $ 7,083
$ 6,955 $ 6,955 $
7,563 $ 8,247 $
8,356 $ 8,356
Third-Party Capital
Raised $ - $ 254 $
30 $ 899 $ 1,183
$ 4,949 $ 672 $
156 $ 5,777
Segment
Revenues Management fees $ 25 $ 23 $ 24 $ 25 $ 97 $ 27 $ 30 $
29 $ 86 Incentive income 66
13 41
134 254 24
60 70
154 Total 91 36 65 159 351 51 90 99 240
Segment Expenses Operating expenses (26 ) (26 ) (27 )
(29 ) (108 ) (30 ) (30 ) (29 ) (89 ) Profit sharing compensation
expenses (35 ) (7 )
(22 ) (68 ) (132 )
(14 ) (30 )
(36 ) (80 ) Total (61 )
(33 ) (49 )
(97 ) (240 ) (44 )
(60 ) (65 ) (169 )
Fund Management DE (before Principal Performance Payments)
30 3
16 62 111
7 30
34 71
Principal Performance Payments (1 ) - - (1 ) (2 ) (1 ) (1 ) (1 ) (3
)
Fund Management
DE $ 29 $ 3 $
16 $ 61 $ 109 $
6 $ 29 $ 33
$ 68 Net Investment Income 4 - 2 7 13 1 3 5 9
Pre-tax
Distributable Earnings $ 33 $ 3
$ 18 $ 68 $
122 $ 7 $ 32
$ 38 $ 77
______________________________
20 Combined AUM for Long Dated Value Fund I, Long Dated Value Fund
II, Long Dated Value Fund III and LDVF Patent Fund. 21 Combined AUM
for Credit Opportunities Fund, Credit Opportunities Fund II, Credit
Opportunities Fund III, Credit Opportunities Fund IV, FCO Managed
Accounts, Net Lease Fund I, Global Opportunities Funds, Life
Settlements Fund, Life Settlements Fund MA, SIP managed account,
Real Estate Opportunities Fund, Real Estate Opportunities Fund II
and Real Estate Opportunities REOC Fund. 22 Combined AUM for Japan
Opportunity Fund, Japan Opportunity Fund II (Dollar), Japan
Opportunity Fund II (Yen) Japan Opportunity Fund III (Dollar) and
Japan Opportunity Fund III (Yen).
Fortress Investment Group LLC
Exhibit 2-f
Assets Under Management and Fund
Management DE
(dollars in millions)
Three
Months Ended Three Months Ended
Liquid Hedge Funds
March 31,2014
June 30,2014
September 30,2014
December 31,2014
Full Year2014
March 31,2015
June 30,2015
September 30,2015
Nine Months Ended
September 30, 2015
Assets Under Management Fortress Macro Funds23 $
3,503 $ 3,391 $ 3,083 $ 3,249 $
3,249 $ 2,779 $ 2,326 $ 1,791 $ 1,791
Drawbridge Global Macro Funds24 286 261 223 229 229 227 210 193 193
Fortress Convex Asia Funds25 130 136 189 197 197 226 220 208 208
Fortress Centaurus Global Funds26 - - - 33 33 64 191 222 222
Fortress Partners Funds27 952 965 935 913 913 541 534 497 497
Fortress Asia Macro Funds28 2,867 3,114 3,099 3,507 3,507 N/A N/A
N/A N/A Affiliated Managers28 -
- -
- - 4,001
3,896 4,456
4,456
AUM - Ending Balance $
7,738 $ 7,867 $ 7,529
$ 8,128 $ 8,128
$ 7,838 $ 7,377 $
7,367 $ 7,367
Third-Party Capital
Raised $ 1,302 $ 523
$ 247 $ 745 $
2,817 $ 86 $ 171
$ 48 $ 305
Segment
Revenues Management fees $ 33 $ 37 $ 33 $ 35 $ 138 $ 21 $ 19 $
16 $ 56 Incentive income -
1 2
13 16 1
(1 ) -
-
Total
33 38 35 48 154 22 18 16 56
Segment Expenses
Operating expenses (23 ) (24 ) (21 ) (31 ) (99 ) (21 ) (27 ) (20 )
(68 ) Profit sharing compensation expenses (2 )
(7 ) (9 )
(12 ) (30 ) (4 )
3 (1 ) (2 )
Total (25 ) (31 ) (30 ) (43 ) (129 ) (25 ) (24 ) (21 ) (70 )
Earnings From Affiliated Managers - - - - - 9 (1 ) 2 10
Fund Management
DE (before Principal Performance Payments) 8
7 5
5 25
6 (7 ) (3 )
(4 ) Principal Performance Payments - (1 ) - -
(1 ) - - - -
Fund Management DE $ 8 $ 6
$ 5 $ 5 $
24 $ 6 $ (7 )
$ (3 ) $ (4 ) Net Investment Income 1 1 (9 ) 5
(2 ) 3 1 (1 ) 3
Pre-tax Distributable Earnings $ 9 $
7 $ (4 ) $ 10
$ 22 $ 9 $
(6 ) $ (4 ) $ (1 )
Net
Returns29
Fortress Macro Fund Ltd (5.5 %) (0.4 %) 1.1 % 3.4 % (1.6 %) (4.7 %)
(6.3 %) (7.6 %) (17.5 %) Drawbridge Global Macro Fund Ltd (5.5 %)
(0.6 %) 0.7 % 3.3 % (2.2 %) (4.9 %) (6.5 %) (7.9 %) (18.1 %)
Fortress Convex Asia Fund Ltd (1.1 %) (2.6 %) (0.6 %) (0.6 %) (4.9
%) (0.7 %) (0.8 %) 3.3 % 1.9 % Fortress Centaurus Global Fund Ltd
n/a n/a n/a n/a n/a 3.9 % (4.1 %) (3.1 %) (3.5 %) Fortress Partners
Fund LP30 1.1 % 2.1 % (1.4 %) (1.8 %) (0.1 %) 1.2 % (1.2 %) (4.8 %)
(4.8 %) Fortress Partners Offshore Fund LP30 0.9 % 2.2 % (1.4 %)
(1.3 %) 0.4 % 0.3 % (2.5 %) (3.4 %) (5.5 %) Fortress Asia Macro
Fund Ltd28 (3.6 %) (1.9 %) 1.4 % 3.1 % (1.2 %) n/a n/a n/a n/a
______________________________
23 Combined AUM for Fortress Macro Onshore Fund LP, Fortress Macro
Fund Ltd, Fortress Macro MA1, Fortress Redwood Fund Ltd and
Fortress Macro managed accounts. In October 2015, Fortress
announced it was closing the Fortress Macro Funds and returning
capital to investors by the end of 2015. 24 Combined AUM for
Drawbridge Global Macro Fund LP and Drawbridge Global Macro
Intermediate Fund LP. 25Combined AUM for Fortress Convex Asia Fund
LP, Fortress Convex Asia Fund Ltd, Fortress Convex Asia Fund PF LP
and Fortress Convex Asia Fund PF Ltd. 26 Combined AUM for Fortress
Centaurus Global Fund LP and Fortress Centaurus Global Fund Ltd. 27
Combined AUM for Fortress Partners Fund LP and Fortress Partners
Offshore Fund LP. 28 Combined AUM for Fortress Asia Macro Fund Ltd,
Fortress Asia Macro Fund LP and Fortress Asia Macro managed
accounts. In January 2015, the Fortress Asia Macro Funds and
related managed accounts transitioned to Graticule Asset Management
on Fortress's affiliated manager platform. 29 The performance data
contained herein reflects returns for a "new issue eligible,"
single investor class as of the close of business on the last day
of the relevant period. Net returns reflect performance data after
taking into account management fees borne by the Fund and incentive
allocations. 30 The returns for the Fortress Partners Funds include
gains and losses from Special Investments. Investors' specific
performance may vary dependent upon their ownership in one or more
Special Investments.
Fortress Investment Group LLC
Exhibit 2-g
Assets Under Management and Fund
Management DE
(dollars in millions)
Three Months Ended Three Months Ended
Logan Circle
March 31,2014
June 30,
2014
September 30,2014
December 31,2014
Full Year2014
March 31,2015
June 30,2015
September 30,2015
Nine Months EndedSeptember 30,
2015
Assets Under Management AUM - Ending Balance $
26,592 $ 29,133 $
31,096 $ 32,342 $ 32,342
$ 33,416 $ 33,564
$ 33,446 $ 33,446
Net Client
Flows $ 477 $ 1,730 $
2,178 $ 1,035 $
5,420 $ 589 $ 1,056
$ 101 $ 1,746
Segment
Revenues Management fees $ 11 $ 11 $ 13 $
12 $ 47 $ 13 $ 14 $ 13 $ 40
Incentive income - -
- -
- -
- - -
Total 11 11 13 12 47 13 14 13 40
Segment
Expenses Operating expenses (13 ) (13 ) (14 ) (14 ) (54 ) (14 )
(14 ) (13 ) (41 ) Profit sharing compensation expenses
- -
- - -
- -
- - Total (13 ) (13 ) (14
) (14 ) (54 ) (14 ) (14 ) (13 ) (41 )
Fund Management DE $ (2 )
$ (2 ) $ (1 ) $ (2 ) $
(7 ) $ (1 ) $ - $
- $ (1 ) Net Investment Income - 1 (1 ) 2 2 -
- - -
Pre-tax
Distributable Earnings $ (2 ) $ (1 )
$ (2 ) $ - $ (5 )
$ (1 ) $ - $ -
$ (1 )
Fortress Investment Group LLC
Exhibit 3
Reconciliation of GAAP Net Income
(Loss) to Pre-tax Distributable Earnings and Fund Management
DE
Reconciliation of GAAP Revenues to
Segment Revenues and Reconciliation of GAAP Expenses to Segment
Expenses
(dollars in millions)
Three Months Ended
Three Months Ended
March 31,2014
June 30,2014
September 30,2014
December 31,2014
Full Year2014
March 31,2015
June 30,2015
September 30,2015
Nine Months EndedSeptember 30,
2015
GAAP Net
Income (Loss) $ 9
$ 73 $ 17
$ 141 $ 240
$ 87 $
5 $ (26 )
$ 66 Principals' and Others' Interests
in (Income) Loss of Consolidated Subsidiaries (6 )
(42 ) (13 ) (79 ) (140 ) (52 )
(2 ) 12 (42 ) Redeemable non-controlling interests in Income
(Loss) - -
2 (1 ) 1
- -
- -
GAAP Net
Income (Loss) Attributable to Class A Shareholders $
3 $
31 $ 6 $
61 $ 101 $
35 $ 3
$ (14 ) $
24 Private Equity incentive income 37 (8 ) 36 29 94 3
19 21 43 Hedge Fund, PCV and Logan Circle incentive income 30 26 21
(77 ) - 23 80 1 104 Reserve for clawback 2 - - - 2 - - - -
Distributions of earnings from equity method investees 9 47 6 10 72
4 9 5 18 Losses (earnings) from equity method investees (17 ) (20 )
(38 ) 7 (68 ) (27 ) 33 23 29 Losses (gains) on options 5 1 23 1 30
(32 ) 9 27 4 Losses (gains) on other Investments 5 42 (16 ) (17 )
14 (1 ) (5 ) 14 8 Impairment of investments - - (3 ) - (3 ) (3 ) -
(1 ) (4 ) Adjust income from the receipt of options - (1 ) (5 ) -
(6 ) (4 ) (21 ) - (25 ) Gain on transfer of Graticule - - - - -
(134 ) - - (134 ) Employee, Principal and director compensation 12
6 6 12 36 20 6 2 28 Adjust non-controlling interests related to
Fortress Operating Group units 5 40 11 78 134 52 1 (12 ) 41 Tax
receivable agreement liability reduction - - 4 29 33 - 8
-
8 Adjust income taxes 6 8 3 (10 ) 7 18 (5 ) 3 16 Adjust transfer of
interest in Graticule -
- - -
- 101
- -
101
Pre-tax Distributable Earnings $
97 $
172 $ 55 $
123 $ 446 $
55 $ 137
$ 69 $ 261
Investment Loss (income) (10 ) (97 ) 11 (14 ) (109 ) (5 ) (4
) (3 ) (12 ) Interest Expense -
1 1
1 3 1
- 1
2
Fund Management DE $
87 $ 76
$ 67 $ 110
$ 340 $ 51
$ 133
$ 67 $ 251
GAAP Revenues
$ 237 $
270 $ 243
$ 455 $ 1,205
$ 227 $
308 $ 264
$ 799 Adjust management fees - - - (1 ) (1 )
(1 ) 1 - - Adjust incentive income 69 17 57 (47 ) 96 27 100 22 149
Adjust income from the receipt of options - (1 ) (5 ) - (6 ) (4 )
(21 ) - (25 ) Other revenues (55 )
(56 ) (57 ) (65 )
(233 ) (59 )
(61 ) (65 ) (185 )
Segment Revenues $ 251
$ 230 $
238 $ 343 $
1,062 $ 190
$ 327 $ 221
$ 738
GAAP Expenses $
231 $ 216
$ 235 $ 310
$ 992 $
329 $ 258
$ 224 $ 811
Adjust interest expense - (1 ) (1 ) (1 ) (3 ) (1 ) - (1 ) (2 )
Adjust employee, Principal and director compensation (12 ) (6 ) (3
) (3 ) (24 ) (18 ) (2 )
(1
) (21 ) Adjust expense reimbursements from affiliates and
non-affiliates (54 ) (52 ) (55 ) (70 ) (231 ) (59 ) (61 ) (64 )
(184 ) Adjust Principal Performance Payments (9 ) (9 ) (9 ) (15 )
(42 ) (5 ) (20 ) (9 ) (34 ) Adjust transfer of interest in
Graticule - - - - - (101 ) -
-
(101 ) Other -
- (1 ) 1
- -
-
-
-
Segment Expenses $
157 $ 148
$ 166 $ 221
$ 692 $
145 $ 175
$ 149 $ 469
‘‘Distributable earnings’’ is Fortress’s supplemental measure of
operating performance used by management in analyzing segment and
overall results. It reflects the value created which management
considers available for distribution during any period. As compared
to generally accepted accounting principles (‘‘GAAP’’) net income,
distributable earnings excludes the effects of unrealized gains (or
losses) on illiquid investments, reflects contingent revenue which
has been received as income to the extent it is not expected to be
reversed, and disregards expenses which do not require an outlay of
assets, whether currently or on an accrued basis. Distributable
earnings is reflected on an unconsolidated and pre-tax basis, and,
therefore, the interests in consolidated subsidiaries related to
Fortress Operating Group units (held by the principals) and income
tax expense are added back in its calculation. Distributable
earnings is not a measure of cash generated by operations which is
available for distribution nor should it be considered in isolation
or as an alternative to cash flow or net income in accordance with
GAAP and it is not necessarily indicative of liquidity or cash
available to fund the Company’s operations. For a complete
discussion of distributable earnings and its reconciliation to
GAAP, as well as an explanation of the calculation of distributable
earnings impairment, see note 10 to the financial statements
included in the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2015.
Fortress’s management uses distributable earnings:
- in its determination of periodic
distributions to equity holders;
- in making operating decisions and
assessing the performance of each of the Company’s core
businesses;
- for planning purposes, including the
preparation of annual operating budgets; and
- as a valuation measure in strategic
analyses in connection with the performance of its funds and the
performance of its employees.
Growing distributable earnings is a key component to the
Company’s business strategy and distributable earnings is the
supplemental measure used by management to evaluate the economic
profitability of each of the Company’s businesses and total
operations. Therefore, Fortress believes that it provides useful
information to investors in evaluating its operating performance.
Fortress’s definition of distributable earnings is not based on any
definition contained in its amended and restated operating
agreement.
“Fund management DE” is equal to pre-tax distributable earnings
excluding our direct investment-related results. Fund management DE
is comprised of “Pre-tax Distributable Earnings” excluding
“Investment Loss (Income)” and “Interest Expense.” Fund management
DE and its components are used by management to analyze and measure
the performance of our investment management business on a
stand-alone basis. Fortress defines segment operating margin to be
equal to fund management DE divided by segment revenues. The
Company believes that it is useful to provide investors with the
opportunity to review our investment management business using the
same metrics. Fund management DE and its components are subject to
the same limitations as pre-tax distributable earnings, as
described above.
Fortress Investment Group LLC
Exhibit 4
Reconciliation of Weighted Average
Class A Shares Outstanding (Used for Basic EPS) to Weighted Average
Dividend Paying Shares and Units Outstanding (Used for
DEPS)
Three
Months Ended September 30, Nine Months Ended September
30, 2015 2014 2015
2014
Weighted Average Class A Shares
Outstanding (Used for Basic EPS)
216,439,077
208,014,692 216,138,405
210,874,640 Weighted average fully vested restricted Class A
share units with dividend equivalent rights (737,423) (88,508)
(3,871,624) (1,789,026) Weighted average restricted Class A shares
(716,942) (1,045,134) (778,913) (1,006,503)
Weighted Average Class A Shares
Outstanding
214,984,712
206,881,050 211,487,868
208,079,111 Weighted average restricted Class A shares31
716,942 1,045,134 778,913 1,006,503 Weighted average fully vested
restricted Class A share units which are entitled to dividend
equivalent payments 737,423 88,508 3,871,624 1,789,026 Weighted
average unvested restricted Class A share units which are entitled
to dividend equivalent payments 10,825,209 7,513,984 10,119,674
7,016,497 Weighted average Fortress Operating Group units
226,331,513 226,331,513 226,331,513 232,790,917
Weighted Average Class A Shares
Outstanding (Used for DEPS)
453,595,799
441,860,189 452,589,592
450,682,054 Weighted average vested and unvested restricted Class A
share units which are not entitled to dividend equivalent payments
12,477,524
13,592,852 12,535,142
13,167,782
Weighted Average Fully Diluted Shares
and Units Outstanding (Used for Diluted DEPS)
466,073,323
455,453,041 465,124,734
463,849,836
“Dividend paying shares and units” represents the number of
shares and units outstanding at the end of the period which were
entitled to receive dividends or related distributions. The Company
believes it is useful for investors in computing the aggregate
amount of cash required to make a current per share distribution of
a given amount per share. It excludes certain potentially dilutive
equity instruments, primarily non-dividend paying restricted Class
A share units, and, therefore, is limited in its usefulness in
computing per share amounts. Accordingly, dividend paying shares
and units should be considered only as a supplement and not an
alternative to GAAP basic and diluted shares outstanding. The
Company’s calculation of dividend paying shares and units may be
different from the calculation used by other companies and,
therefore, comparability may be limited.
______________________________
31 Includes both fully vested and unvested restricted Class A
shares.
Fortress Investment Group LLC
Exhibit 5
Reconciliation of GAAP Book Value Per
Share to Net Cash and Investments Per Share
(dollars and shares in
thousands)
As of
September 30, 2015 As of December 31, 2014
GAAPBook Value
Net Cash andInvestments
GAAPBook Value
Net Cash andInvestments
Cash and Cash equivalents
$
337,109 $ 337,109 $
391,089 $ 391,089 Investments 1,125,443 1,125,443 1,121,545
1,121,545 Investments in options32 33,849 - 71,844 - Due from
Affiliates 195,619 - 326,575 - Deferred Tax Asset, net 426,274 -
417,623 - Other Assets 158,420 -
173,708 -
Total Assets
2,276,714 1,462,552
2,502,384 1,512,634 Debt
Obligations Payable
$
75,000
$
75,000 $ 75,000
$
75,000 Accrued Compensation and Benefits 242,492 - 374,709 - Due to
Affiliates 383,685 - 375,424 - Deferred Incentive Income 348,267 -
304,526 - Other Liabilities 124,303
- 88,053 -
Total
Liabilities 1,173,747 75,000
1,217,712 75,000 Less:
Redeemable Non-controlling Interests - - 1,717 -
Net $ 1,102,967 $
1,387,552 $ 1,282,955 $ 1,437,634
SharesOutstanding
Dividend PayingShares and
UnitsOutstanding
Shares Outstanding
Dividend PayingShares and
UnitsOutstanding
Class A Shares 214,985 214,985 207,490 207,490 Restricted Class A
Shares 729 729 1,045 1,045 Fortress Operating Group Units 226,332
226,332 226,332 226,332
Fully Vested Class A Shares - Dividend
Paying
- 1,123 - 194 Unvested Class A Shares - Dividend Paying
- 10,135 -
7,002
Shares Outstanding
442,046 453,304 434,867
442,063
Per Share $
2.50 $ 3.06 $
2.95 $ 3.25
Net cash and investments represents cash and cash equivalents
plus investments less debt outstanding. The Company believes that
net cash and investments is a useful supplemental measure because
it provides investors with information regarding the Company’s net
investment assets. Net cash and investments excludes certain assets
(investments in options, due from affiliates, deferred tax asset,
other assets) and liabilities (due to affiliates, accrued
compensation and benefits, deferred incentive income and other
liabilities) and its utility as a measure of financial position is
limited. Accordingly, net cash and investments should be considered
only as a supplement and not an alternative to GAAP book value as a
measure of the Company’s financial position. The Company’s
calculation of net cash and investments may be different from the
calculation used by other companies and, therefore, comparability
may be limited.
______________________________
32 The intrinsic value of options in
equity method investees totaled $20 million at quarter end and is
included in our undistributed, unrecognized incentive income. This
value represents incentive income that would have been recorded in
Distributable Earnings if Fortress had exercised all of its
in-the-money options it holds in the permanent capital vehicles and
sold all of the resulting shares at their September 30, 2015
closing price and differs from the fair value derived from option
pricing models included in the table above.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151029005684/en/
Investor & Media Relations:Fortress Investment
GroupGordon E. Runté, +1-212-798-6082grunte@fortress.com
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