Announces Dividend of $0.08 per
Share
Fortress Investment Group LLC (NYSE: FIG) (“Fortress” or the
“Company”) today reported its fourth quarter and year end 2015
financial results.
FINANCIAL SUMMARY
- Fortress declares a cash dividend of
$0.08 per dividend paying share for the fourth quarter of 2015
- Management Fee Paying Assets Under
Management (“AUM”) of $70.5 billion as of December 31, 2015, a
decrease of 5% from the previous quarter and an increase of 4% from
December 31, 2014
- GAAP net income of $116 million and
$182 million (per diluted Class A share of $0.20 and $0.28) for the
fourth quarter and year ended December 31, 2015, respectively;
compared to GAAP net income of $141 million and $240 million (per
diluted Class A share of $0.23 and $0.43) for the fourth quarter
and year ended December 31, 2014, respectively
- Pre-tax distributable earnings (“DE”)
of $130 million and $391 million for the fourth quarter and year
ended December 31, 2015, respectively; compared to pre-tax DE of
$123 million and $446 million for the fourth quarter and year ended
December 31, 2014, respectively
- Pre-tax DE per dividend paying share of
$0.30 and $0.87 for the fourth quarter and year ended December 31,
2015, respectively, compared to pre-tax DE per dividend paying
share of $0.28 and $0.99 for the fourth quarter and year ended
December 31, 2014, respectively
- Net cash and investments of $1.2
billion, or $2.94 per dividend paying share, as of December 31,
2015
- $1.0 billion of gross embedded
incentive income across funds and permanent capital vehicles as of
December 31, 2015, that has not been recognized in DE
- Total uncalled capital, or “dry
powder,” of $7.5 billion as of December 31, 2015, including $4.6
billion available for general investment purposes
RECENT DEVELOPMENTS
- Repurchased 56.8 million dividend
paying shares at a price of $4.50 per share, representing
approximately 13% of dividend paying shares outstanding
- Subsequent to year end, Fortress
announced the commencement of a modified “Dutch auction”
self-tender offer to repurchase up to $100 million in cash of its
Class A shares, at a price per share within the range of $4.25 to
$4.75
- Subsequent to year end, entered into a
new $275 million unsecured revolving credit facility maturing in
January 2021
BUSINESS HIGHLIGHTS
- Raised $9.0 billion of capital across
alternative investment businesses in 2015
- Closed Fortress Credit Opportunity Fund
(“FCO”) IV at its targeted cap of approximately $5.0 billion
- Closed Fortress Japan Opportunity Fund
(“FJOF”) III at its targeted cap of approximately $1.1 billion
- Closed Fortress Real Estate
Opportunities Fund (“FROF”) II at its targeted cap of approximately
$1.0 billion
- Raised $2.4 billion of new capital
across the Permanent Capital Vehicles
- Raised $0.6 billion of new capital
across Credit and Liquid hedge funds
- Investment performance summary as of
December 31, 2015:
- Annualized inception-to-date net IRRs
for FCO, FCO II and FCO III of 24.2%, 16.9% and 10.5%,
respectively
- Fourth quarter and full year 2015 net
returns of 0.9% and 5.8%, respectively, for Drawbridge Special
Opportunities Fund (“DBSO”) LP
- 15 of 16 Logan Circle strategies have
outperformed respective benchmarks since inception
“We recorded our highest ever fourth quarter of distributable
earnings to cap off a very solid full year for Fortress,” said
Fortress CEO Randal Nardone. “We raised $9 billion in new
alternative capital in 2015 – our strongest full year since 2007 –
with virtually all new commitments made in long-term or permanent
structures. We closed the year with $7.5 billion in dry powder, and
believe current and developing market dynamics play well to our
greatest investment strengths. With strong levels of activity in
our main funds and permanent capital vehicles, and substantial
levels of embedded value generated by existing investments, we see
significant upside potential for earnings and value creation in the
years ahead.”
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 twelve months ended
December 31, 2015. The consolidated GAAP statement of operations
and balance sheet are presented on pages 13-14 of this press
release.
4Q
3Q 4Q % Change FY FY %
Change 2015 2015 2014 QoQ YoY 2015 2014 YoY (in
millions, except per share amount)
GAAP Revenues $ 415 $ 264
$ 455 57 % (9 )% $ 1,214 $ 1,206 1 % Expenses 242 224 310 8 % (22
)% 1,053 992 6 % Other Income (loss) (18 ) (62 ) (14 ) (71 )% 29 %
76 33 130 % Net income (loss) 116 (26 ) 141 N/A (18 )% 182 240 (24
)% Net income (loss) attributable to Class A Shareholders 54
(14 ) 61 N/A (11 )% 78
101 (23 )% Per diluted share $ 0.20 $ (0.07 ) $ 0.23
N/A (13 )% $ 0.28 $ 0.43 (35 )% Weighted average Class A shares
outstanding, diluted 425 216 450 443 455
Distributable
Earnings Fund management DE $ 113 $ 67 $ 110 69 % 3 % $ 364 $
340 7 % Pre-tax DE 130 69 123
88 % 6 % 391 446 (12 )% Per dividend paying
share/unit $ 0.30 $ 0.15 $ 0.28 100 % 7 % $
0.87 $ 0.99 (12 )% Weighted average dividend paying shares and
units outstanding 430 454 442 447 448
Assets Under
Management Private Equity and Permanent Capital $ 15,807 $
16,091 $ 13,933 (2 )% 13 % $ 15,807 $ 13,933 13 % Credit1 18,107
17,426 13,128 4 % 38 % 18,107 13,128 38 % Liquid Markets2 5,409
7,367 8,128 (27 )% (33 )% 5,409 8,128 (33 )% Logan Circle
31,178 33,446 32,342 (7 )% (4 )%
31,178 32,342 (4 )% Total Assets Under Management $
70,501 $ 74,330 $ 67,531 (5 )% 4 % $ 70,501 $
67,531 4 %
______________________________
1 The Assets Under Management presented for Credit includes AUM
related to co-managed funds in 2015, which was $2,853 million as of
4Q 2015. 2 The Assets Under Management presented for Liquid Markets
includes AUM related to Fortress's affiliated manager platform
("Affiliated Managers") in 2015, which was $4,496 million as of 4Q
2015.
CONSOLIDATED GAAP RESULTS
Fortress recorded GAAP net income of $116 million, or $0.20 per
diluted Class A share, for the fourth quarter of 2015, compared to
GAAP net income of $141 million, or $0.23 per diluted Class A
share, for the fourth quarter of 2014. For the full year of 2015,
Fortress recorded GAAP net income of $182 million, or $0.28 per
diluted Class A share, compared to GAAP net income of $240 million,
or $0.43 per diluted Class A share, for the full year 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 fourth quarter
2015 GAAP net income was primarily driven by a $40 million decrease
in revenues and a $49 million increase in income tax expense,
partially offset by a $68 million decrease in expenses. The
decrease in revenues was primarily related to lower incentive
income, while the decrease in expenses was primarily related to
lower compensation and benefits expense. The year-over-year
decrease in Fortress’s full year 2015 GAAP net income was primarily
driven by a $49 million increase in income tax 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 December 31, 2015 Private
Equity Credit Funds
(in millions)
Total Funds
PermanentCapital
Vehicles
Hedge Funds PE Funds
Liquid HedgeFunds
Logan CirclePartners
Assets Under Management3 $ 70,501 $ 8,991 $
6,816 $ 8,799 $ 9,308 $ 5,409 $ 31,178
Dry Powder $ 7,472 $
581 $ - $ 322 $ 6,569 N/A N/A
Average Management Fee
Rate4 1.2 % 1.5 % 2.0 % 1.3 % 1.3 % 0.2 %
Incentive Eligible NAV Above Incentive Income
Threshold5 $ 21,888 $ 1,238 $ 3,691 $ 5,520 $ 11,231 $
86 $ 122 Undistributed Incentive Income: Unrecognized $ 986
$ 31 $ 21 $ 62 $ 867 $ 5 $ - Undistributed Incentive Income:
Recognized - - - -
- - $ -
Undistributed
Incentive Income6 $ 986 $ 31 $ 21 $
62 $ 867 $ 5 $ -
Three
Months Ended December 31, 2015 Private Equity Credit
Funds
(in millions)
Total Funds
PermanentCapital
Vehicles
Hedge Funds
PE Funds
Liquid HedgeFunds
Logan CirclePartners
Third-Party Capital Raised $ 215 $ - $ - $ 21 $ 166 $
28 $ -
Segment Revenues Management fees $ 148 $ 29 $
27 $ 38 $ 32 $ 8 $ 14 Incentive income 132 -
30 11 90 1
- Total 280 29 57 49 122 9 14
Segment
Expenses Operating expenses (105 ) (3 ) (19 ) (27 ) (26 ) (16 )
(14 ) Profit sharing compensation expenses (47 ) 1
(3 ) (5 ) (41 ) 1
- Total (152 ) (2 ) (22 ) (32 ) (67 ) (15 ) (14 )
Earnings From Affiliated Managers (1 ) - - - - (1 ) -
Principal Performance Payments (14 ) - (5 ) (4 ) (5 ) - -
Fund Management
DE $ 113 $ 27 $ 30 $ 13 $ 50
$ (7 ) $ - Net Investment Income7 17 - 1 1 12 5 (1 )
Pre-tax
Distributable Earnings $ 130 $ 27 $ 31 $
14 $ 62 $ (2 ) $ (1 )
______________________________
3 The Assets Under Management presented for the Credit Hedge Funds
includes $2,853 million related to co-managed funds and $102
million related to the third-party originated Value Recovery Funds
(Fortress earns fees from the Value Recovery Funds based only on
collections). The Assets Under Management presented for the Liquid
Hedge Funds includes $4,496 million related to Affiliated Managers.
4 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). The Average Management
Fee Rate presented for the Liquid Hedge Funds excludes Affiliated
Managers. 5 The Incentive Eligible NAV Above Incentive Income
Threshold presented for Credit Hedge Funds excludes co-managed
funds and sidepocket investments and for Liquid Hedge Funds,
excludes Affiliated Managers 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
LDVF I, of which a portion of the fund’s capital was above the
incentive income threshold as of December 31, 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 Credit Hedge Funds
excludes co-managed funds and for Liquid Hedge Funds, excludes
Affiliated Managers. Undistributed Incentive Income includes the
impact of sidepocket investments on Credit and Liquid 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
December 31, 2015 closing price. 7 Net Investment Income includes
Unallocated Expenses of $1 million.
Pre-tax DE was $130 million in the fourth quarter of 2015, up
from $123 million in the fourth quarter of 2014, primarily due to
lower profit sharing and operating expenses, partially offset by
lower incentive income. Pre-tax DE was $391 million in the full
year of 2015, down from $446 million in full year 2014, primarily
due to lower net investment income, management fees and incentive
income, partially offset by lower profit sharing expenses.
Management fees were $148 million and $582 million in the fourth
quarter and full year of 2015, respectively, down from $153 million
and $601 million in the fourth quarter and full year of 2014.
Management fees included approximately $16 million and $58 million
for the fourth quarter and full year of 2014, respectively,
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
(“Graticule”) in the first quarter of 2015. Adjusting for this
transition, Fortress’s management fees increased by approximately
$11 million and $39 million year-over-year in the fourth quarter
and full year of 2015, respectively. The increase was primarily due
to higher management fees from the Permanent Capital Vehicles,
Credit Hedge Funds, Credit PE Funds and Logan Circle, partially
offset by lower management fees from the Private Equity Funds and
Liquid Hedge Funds.
Incentive income in the fourth quarter and full year of 2015
totaled $132 million and $436 million, respectively, down from $191
million and $461 million in the fourth quarter and full year of
2014, respectively. The year-over-year decline was primarily due to
lower incentive income from the Credit Hedge Funds, Credit PE Funds
and Liquid Hedge Funds, partially offset by higher incentive income
from the Permanent Capital Vehicles.
Earnings from Affiliated Managers totaled $9 million in 2015,
related to our interests in Graticule.
Additionally, Fortress had $986 million in gross undistributed,
unrecognized incentive income based on investment valuations as of
December 31, 2015. This includes $965 million from our funds and
$21 million from options and common shares in our permanent capital
vehicles.
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 December 31, 2015, AUM totaled $70.5 billion, down from
$74.3 billion as of September 30, 2015. During the quarter,
Fortress had (i) $1.9 billion of net client outflows for Logan
Circle, (ii) $1.5 billion of Liquid Hedge Fund redemptions,
primarily related to the closing of the Fortress Macro Funds, (iii)
$0.8 billion of capital distributions to investors, (iv) $0.8
billion of market-driven valuation losses, and (v) a $0.6 billion
decline in the AUM of Affiliated Managers and co-managed funds.
These decreases to AUM were partially offset by a $1.6 billion
increase in invested capital and $0.2 billion of capital raised
that was directly added to AUM.
As of December 31, 2015, the Credit Funds and Private Equity
Funds had $6.9 billion and $0.6 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 $2.9 billion
that is only available for follow-on investments, management fees
and other fund expenses. Notably, approximately 86% of alternative
AUM was in funds with long-term investment structures as of
December 31, 2015.
BUSINESS SEGMENT RESULTS
Below is a discussion of fourth quarter and full year 2015
segment results and business highlights.
Credit:
- DBSO LP net returns of 5.8% for the
full year ended December 31, 2015
- FCO, FCO II, FCO III, FJOF and FJOF
II (Yen) recorded annualized inception-to-date net IRRs of 24.2%,
16.9%, 10.5%, 32.9% and 25.9%, respectively, through December 31,
2015
- Increase in invested capital of $3.0
billion in 2015, including $1.4 billion in the fourth
quarter
- Completed fundraising for three
successor funds at their targeted caps: FCO IV, FJOF III and FROF
II
(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 $76 million in the
fourth quarter of 2015, down from $81 million in the fourth quarter
of 2014. The year-over-year decrease in DE was primarily driven by
lower incentive income, partially offset by lower profit sharing
expenses and higher management fees. For the full year of 2015, the
Credit business generated record pre-tax DE of $224 million, up
from $208 million for the full year of 2014. The year-over-year
increase in DE was primarily due to higher management fees and net
investment income, partially offset by lower incentive income.
The Credit PE Funds generated pre-tax DE of $62 million in the
quarter, down slightly from $68 million in the fourth quarter of
2014, as higher management fees were offset by lower incentive
income in the quarter. For full year 2015, the Credit PE Funds
generated a record $139 million of pre-tax DE, a 14% increase
compared to full year 2014, primarily attributable to higher
management fees and net investment income. During 2015, the Credit
PE Funds generated $244 million of incentive income, while gross
unrecognized Credit PE incentive income increased $43 million
year-over-year to $867 million at year end.
The Credit Hedge Funds generated pre-tax DE of $14 million and
$85 million in the fourth quarter and full year of 2015, roughly
flat to the comparable periods in 2014, as higher management fees
and lower profit sharing expenses were offset by lower incentive
income. Fortress’s flagship credit hedge fund, DBSO LP, had net
returns of 0.9% in the fourth quarter, bringing net returns for the
full year 2015 to 5.8%.
The Credit business raised a record $6.2 billion of capital in
2015, including $5.9 billion for the Credit PE Funds and $0.3
billion for the Credit Hedge Funds. During the year, the Credit
business closed their fourth Credit Opportunities fund, FCO IV, at
its cap of approximately $5.0 billion, closed their third Japan
Real Estate fund, FJOF III, at its cap of approximately $1.1
billion, and closed their second global Real Estate fund, FROF II,
at its cap of approximately $1.0 billion.
Private Equity and Permanent Capital Vehicles:
- AUM increased 13% year-over-year to
$15.8 billion, including $9.0 billion in the Private Equity Funds
and $6.8 billion in the Permanent Capital Vehicles
- Raised a record $2.4 billion of
permanent equity capital in 2015
- Permanent Capital Vehicles generated
a record $105 million of pre-tax DE in 2015
(See supplemental data on pages 18-19 for more detail on Private
Equity results)
The Private Equity business recorded pre-tax DE of $58 million
in the fourth quarter of 2015, including $31 million for the
Permanent Capital Vehicles and $27 million for the Private Equity
Funds, up from $34 million in the fourth quarter of 2014. The
year-over-year increase was primarily driven by higher management
fees and incentive income for the Permanent Capital Vehicles as
well as lower operating expenses for the Private Equity Funds.
For the full year of 2015, the Permanent Capital Vehicles
recorded pre-tax DE of $105 million, up from $41 million in full
year 2014, primarily due to higher incentive income and management
fees. The Permanent Capital Vehicles generated $106 million of
incentive income in 2015, primarily related to New Residential
Investment Corp. (NYSE: NRZ) and New Media Investment Group Inc.
(NYSE: NEWM).
For the full year of 2015, the Private Equity Funds recorded
pre-tax DE of $72 million, down from $183 million in full year
2014, primarily due to lower net investment income and lower
management fees. Private Equity Fund valuations declined 3.1% in
the fourth quarter, primarily due to changes in value of OneMain
Holdings, Inc. (NYSE: OMF) and certain private portfolio company
investments.
Liquid Hedge Funds:
- Raised $333 million of capital in
2015, primarily for the Fortress Centaurus Global Funds
- During the quarter, closed the
Fortress Macro Funds and related managed accounts
(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 $2 million
in the fourth quarter of 2015, down from pre-tax DE of $10 million
in the fourth quarter of 2014, primarily due to lower management
fees and incentive income, partially offset by lower expenses.
The Liquid Hedge Funds recorded a pre-tax DE loss of $3 million
for the full year of 2015, down from pre-tax DE of $22 million for
the full year of 2014, primarily due to a one-time $18 million
impairment of certain software and technology-related assets, lower
management fees and lower incentive income, partially offset by
lower expenses and $9 million in Earnings from Affiliated
Managers.
Full year 2015 net returns for the Fortress Convex Asia Funds,
Fortress Centaurus Global Funds and Fortress Partners Funds were
(2.8)%, 1.4% and (5.0)%, respectively. Net returns year-to-date
through February 19, 2016 for the Fortress Convex Asia Funds and
Fortress Centaurus Global Funds were 5.1% and (2.0)%,
respectively.*
During the quarter, Fortress closed the Fortress Macro Funds and
related managed accounts. The Fortress Macro Funds had $1.8 billion
of AUM, or 2% of Fortress’s total AUM, as of September 30, 2015 and
generated a pre-tax DE loss of $12 million for the full year of
2015. Michael Novogratz, a Fortress principal, officer and director
and Macro Fund CIO, retired effective January 2016.
The Liquid Hedge Funds had $5.4 billion of AUM at year end,
including $4.5 billion related to Affiliated Managers. As of year
end, the Liquid Hedge Funds had $275 million of outstanding
redemption notices that will be paid in the first quarter of
2016.
______________________________
* 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:
- 11 out of 16 Logan Circle fixed
income investment strategies outperformed their respective
benchmarks in the fourth quarter of 2015, and 7 of 16 strategies
outperformed respective benchmarks in full year 2015
- AUM totaled $31.2 billion at
December 31, 2015, a decrease of 4% compared to December 31,
2014
(See supplemental data on page 23 for more detail on Logan
Circle results)
Logan Circle, our traditional asset management business,
recorded a pre-tax DE loss of $1 million in the fourth quarter of
2015, roughly flat compared to the fourth quarter of 2014.
For the full year of 2015, Logan Circle recorded a pre-tax DE
loss of $2 million, compared to a $5 million loss in the full year
2014, primarily due to higher revenues, partially offset by lower
investment income.
Logan Circle ended the year with $31.2 billion in AUM, a 4%
decline compared to year end 2014, primarily due to market-driven
valuation losses in 2015.
For the three and five year period through December 31, 2015, 13
and 12 Logan Circle fixed income strategies, respectively,
outperformed their respective benchmarks. Since inception, 15 of 16
Logan Circle fixed income strategies have outperformed their
respective benchmarks and eight were ranked in the top quartile of
performance for their competitor universe.
LIQUIDITY & CAPITAL
As of December 31, 2015, Fortress had cash and cash equivalents
of $340 million and debt obligations of $231 million.
As of December 31, 2015, Fortress had $1.1 billion of
investments in Fortress funds and options in publicly traded
permanent capital vehicles. As of December 31, 2015, Fortress had a
total of $154 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 $485 million at year end,
representing net unrealized gains that have not yet been recognized
for segment reporting purposes.
In connection with the purchase of 56.8 million class A or
equivalent shares from a former Principal for an aggregate of $256
million in November 2015, Fortress paid $100 million in cash and
issued a $156 million promissory note to the Principal, which
matures based on the following schedule: $78 million in November
2016 and $78 million in November 2017.
In January 2016, Fortress refinanced its existing $150 million
secured revolving credit facility and entered into a new $275
million unsecured facility with a $15 million letter of credit
subfacility. After giving effect to the initial extensions of
credit thereunder of $75 million, and an additional extension of
$100 million in February 2016, approximately $97 million was
available to be drawn.
In February 2016, Fortress announced the commencement of a
modified "Dutch auction" self-tender offer to repurchase up to $100
million in cash of its Class A shares, at a price per share within
the range of $4.25 to $4.75, less applicable withholding taxes and
without interest.
DIVIDEND
Fortress’s Board of Directors declared a fourth quarter 2015
cash dividend of $0.08 per dividend paying share. The dividend is
payable on March 21, 2016 to Class A shareholders of record as of
the close of business on March 16, 2016.
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 11 to the financial statements included in the Company’s
most recent annual report on Form 10-K.
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, February
25th 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 Fourth 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
“45855916.”
ABOUT FORTRESS
Fortress Investment Group LLC (NYSE: FIG) is a leading, highly
diversified global investment management firm with $70.5 billion in
assets under management as of December 31, 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 1,700
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 and the
amount and source of expected capital commitments. 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 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 Annual Report on Form
10-K, 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 February 2016 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) $0.0480 U.S. Dividend Income (3) $0.0000 Income
Not from U.S. Sources (4) $0.0320 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 December 31, Twelve Months
Ended December 31, 2015 2014 2015
2014 Revenues Management fees: affiliates $
134,052 $ 135,710 $ 547,109 $ 539,600 Management fees:
non-affiliates 13,823 16,836 59,480 68,948 Incentive income:
affiliates 189,898 236,944 345,052 362,578 Incentive income:
non-affiliates 78 704 813 1,734 Expense reimbursements: affiliates
68,614 59,600 237,158 213,048 Expense reimbursements:
non-affiliates 1,432 3,498 11,005 13,429 Other revenues
6,763 1,654 13,239 6,243
Total Revenues 414,660 454,946
1,213,856 1,205,580
Expenses Compensation and benefits 196,839 251,479 743,862
795,361 General, administrative and other 38,141 51,791 164,194
173,113 Depreciation and amortization 5,042 5,494 39,243 19,829
Interest expense 1,783 889 4,579 3,443 Transfer of interest in
Graticule - - 101,000
-
Total Expenses 241,805
309,653 1,052,878 991,746
Other Income (Loss) Gains (losses) (3,805 ) 18,351 (18,919 )
(11,757 ) Tax receivable agreement liability adjustment 1,749
(29,080 ) (6,141 ) (33,116 ) Earnings (losses) from equity method
investees (16,107 ) (3,551 ) (32,915 ) 78,199 Gain on transfer of
Graticule - - 134,400
-
Total Other Income (Loss) (18,163 )
(14,280 ) 76,425 33,326
Income (Loss) Before Income Taxes 154,692 131,013 237,403
247,160 Income tax benefit (expense) (39,004 ) 9,987
(55,788 ) (6,947 )
Net Income (Loss) $
115,688 $ 141,000 $ 181,615 $ 240,213
Allocation of Net Income (Loss) Principals' and Others'
Interests in Income (Loss) of Consolidated Subsidiaries 60,980
79,156 103,129 139,956 Redeemable Non-Controlling Interests in
Income (Loss) of Consolidated Subsidiaries - 1,176 (6 ) (709 ) Net
Income (Loss) Attributable to Class A Shareholders 54,708
60,668 78,492 100,966
$ 115,688 $ 141,000 $ 181,615 $ 240,213
Earnings (Loss) Per
Class A Share
Net income (loss) per Class A share, basic $ 0.24 $ 0.28
$ 0.35 $ 0.47 Net income (loss) per Class A
share, diluted $ 0.20 $ 0.23 $ 0.28 $ 0.43
Weighted average number of Class A shares outstanding, basic
217,587,096 208,607,680
216,503,554 210,303,241 Weighted average
number of Class A shares outstanding, diluted 425,302,366
449,618,855 442,686,774
455,154,136
Fortress Investment
Group LLC Consolidated Balance Sheets
(dollars in thousands)
December 31, 2015 December 31, 2014
Assets Cash and cash equivalents $ 339,842 $ 391,089 Due
from affiliates 273,811 326,575 Investments 1,055,789 1,121,545
Investments in options 30,427 71,844 Deferred tax asset, net
427,102 417,623 Other assets 148,310 173,708
Total Assets $ 2,275,281 $ 2,502,384
Liabilities and Equity Liabilities
Accrued compensation and benefits $ 318,750 $ 374,709 Due to
affiliates 365,218 375,424 Deferred incentive income 332,329
304,526 Debt obligations payable 230,677 75,000 Other liabilities
86,503 88,053
Total Liabilities
$ 1,333,477 $ 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, 216,790,409 and 208,535,157
shares issued and outstanding at December 31, 2015 and December 31,
2014, respectively - - Class B shares, no par value, 750,000,000
shares authorized, 169,514,478 and 226,331,513 shares issued and
outstanding at December 31, 2015 and December 31, 2014,
respectively - - Paid-in capital 1,988,707 1,996,137 Retained
earnings (accumulated deficit) (1,415,113 ) (1,350,122 )
Accumulated other comprehensive income (loss) (2,909 )
(2,416 ) Total Fortress shareholders' equity 570,685 643,599
Principals' and others' interests in equity of consolidated
subsidiaries 371,119 639,356
Total
Equity 941,804 1,282,955 $
2,275,281 $ 2,502,384
Fortress
Investment Group LLC Exhibit 1-a
Supplemental Data for the Three Months
Ended December 31, 2015 and 2014
Three Months Ended December 31, 2015
Private Equity Credit Funds
(in millions)
Total Funds
Permanent
CapitalVehicles
Hedge Funds PE Funds
Liquid HedgeFunds
Logan Circle
Assets Under Management AUM - October 1, 2015 $
74,330 $ 9,195 $ 6,896 $ 9,070 $ 8,356 $ 7,367 $ 33,446 Capital
raised 194 - - - 166 28 - Equity raised (Permanent Capital
Vehicles) - - - - - - - Increase in invested capital 1,609 227 9 -
1,373 - - Redemptions (1,499 ) - - (1 ) - (1,498 ) - RCA
distributions8 (73 ) - - (73 ) - - - Return of capital
distributions (800 ) (148 ) (90 ) (19 ) (530 ) (13 ) - Equity
buyback (14 ) - (14 ) - - - - Crystallized Incentive Income (2 ) -
- (2 ) - - - Change in AUM of Affiliated Managers and co-managed
funds (613 ) - - (165 ) - (448 ) - Net Client Flows (1,867 ) - - -
- - (1,867 ) Income (loss) and foreign exchange (764 )
(283 ) 15 (11 ) (57 ) (27
) (401 )
AUM - Ending Balance $ 70,501 $ 8,991 $
6,816 $ 8,799 $ 9,308 $ 5,409 $ 31,178
Third-Party
Capital Raised $ 215 $ - $ - $ 21 $
166 $ 28 $ -
Segment Revenues
Management fees $ 148 $ 29 $ 27 $ 38 $ 32 $ 8 $ 14 Incentive income
132 - 30 11
90 1 - Total 280 29 57 49
122 9 14
Segment Expenses Operating expenses (105 )
(3 ) (19 ) (27 ) (26 ) (16 ) (14 ) Profit sharing compensation
expenses (47 ) 1 (3 ) (5 )
(41 ) 1 - Total (152 ) (2 ) (22
) (32 ) (67 ) (15 ) (14 )
Earnings From Affiliated
Managers (1 ) - - - - (1 ) -
Fund Management DE (before Principal Performance
Payments) 127 27 35
17 55 (7 ) -
Principal Performance Payments (14 ) - (5 ) (4 ) (5 ) - -
Fund Management
DE 113 27 30
13 50 (7 ) -
Investment Income 18 - 1 1 12 5 (1 ) Unallocated Investment Income
- - - - - - - Unallocated Expenses (1 ) - - - - - -
Pre-tax Distributable
Earnings $ 130 $ 27 $ 31 $ 14 $ 62
$ (2 ) $ (1 )
Pre-tax Distributable Earnings per Dividend
Paying Share $ 0.30
Three Months Ended
December 31, 2014 Private Equity Credit
Funds
(in millions)
Total Funds
Permanent
CapitalVehicles
Hedge Funds
PE Funds
Liquid HedgeFunds
Logan Circle
Assets Under Management AUM - October 1, 2014 $
66,046 $ 9,787 $ 4,411 $ 6,140 $ 7,083 $ 7,529 $ 31,096 Capital
raised 885 - - 49 91 745 - Equity raised (Permanent Capital
Vehicles) - - - - - - - Increase in invested capital 1,154 104 195
31 822 2 - Redemptions (329 ) - - - - (329 ) - RCA distributions8
(129 ) - - (129 ) - - - Return of capital distributions (1,150 )
(657 ) (18 ) (31 ) (404 ) (40 ) - Adjustment for capital reset (528
) - - - (528 ) - - Net Client Flows 1,035 - - - - - 1,035 Income
(loss) and foreign exchange 547 132
(21 ) 113 (109 ) 221
211
AUM - Ending Balance $ 67,531 $ 9,366 $
4,567 $ 6,173 $ 6,955 $ 8,128 $ 32,342
Third-Party
Capital Raised $ 1,692 $ - $ - $ 48
$ 899 $ 745 $ -
Segment Revenues
Management fees $ 153 $ 32 $ 19 $ 30 $ 25 $ 35 $ 12 Incentive
income 191 - 25 19
134 13 - Total 344
32 44 49 159 48 12
Segment Expenses Operating
expenses (126 ) (13 ) (20 ) (19 ) (29 ) (31 ) (14 ) Profit sharing
compensation expenses (96 ) - (6 )
(10 ) (68 ) (12 ) - Total (222 )
(13 ) (26 ) (29 ) (97 ) (43 ) (14 )
Earnings From
Affiliated Managers - - - - - - -
Fund Management DE (before Principal
Performance Payments) 122 19
18 20 62 5
(2 ) Principal Performance Payments (12 ) - (3 ) (8 ) (1 ) -
-
Fund
Management DE 110 19 15
12 61 5 (2
) Investment Income 15 - - 1 7 5 2 Unallocated Investment
Income (1 ) - - - - - - Unallocated Expenses (1 ) - - - - - -
Pre-tax
Distributable Earnings $ 123 $ 19 $ 15 $
13 $ 68 $ 10 $ -
Pre-tax
Distributable Earnings per Dividend Paying Share $ 0.28
______________________________
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 Twelve Months
Ended December 31, 2015 and 2014
Twelve Months Ended December 31, 2015
Private Equity Credit Funds
(in millions)
Total Funds
Permanent
CapitalVehicles
Hedge Funds PE Funds
Liquid HedgeFunds
Logan Circle
Assets Under Management AUM - January 1, 2015 $
67,531 $ 9,366 $ 4,567 $ 6,173 $ 6,955 $ 8,128 $ 32,342
Capital raised
1,565 - - 254 978 333 - Equity raised (Permanent Capital Vehicles)
2,441 - 2,441 - - - - Increase in invested capital 3,764 419 296 46
3,003 - - Redemptions (3,328 ) - - (265 ) - (3,063 ) - RCA
distributions9 (361 ) - - (361 ) - - - Return of capital
distributions (2,532 ) (560 ) (200 ) (50 ) (1,547 ) (175 ) - Equity
Buyback (14 ) - (14 ) - - - - Adjustment for capital reset (168 ) -
(168 ) - - - - Crystallized Incentive Income (120 ) - - (120 ) - -
- Change in AUM of Affiliated Managers and co-managed funds 3,354 -
- 2,853 - 501 - Net Client Flows (121 ) - - - - - (121 ) Income
(loss) and foreign exchange (1,510 ) (234 )
(106 ) 269 (81 ) (315 ) (1,043 )
AUM - Ending Balance $ 70,501 $ 8,991 $ 6,816 $ 8,799 $
9,308 $ 5,409 $ 31,178
Third-Party Capital Raised $
8,992 $ - $ 2,441 $ 275 $ 5,943
$ 333 $ -
Segment Revenues Management
fees $ 582 $ 116 $ 96 $ 134 $ 118 $ 64 $ 54 Incentive income
436 - 106 85
244 1 - Total 1,018 116
202 219 362 65 54
Segment Expenses Operating expenses
(453 ) (45 ) (69 ) (85 ) (115 ) (84 ) (55 ) Profit sharing
compensation expenses (168 ) 1 (11 )
(36 ) (121 ) (1 ) - Total (621 )
(44 ) (80 ) (121 ) (236 ) (85 ) (55 )
Earnings From
Affiliated Managers 9 - - - - 9 -
Fund Management DE (before Principal
Performance Payments) 406 72
122 98 126 (11 )
(1 ) Principal Performance Payments (42 ) - (19 ) (15 ) (8 )
- -
Fund
Management DE 364 72 103
83 118 (11 ) (1 )
Investment Income 32 - 2 2 21 8 (1 ) Unallocated Investment
Income (1 ) Unallocated Expenses (4 )
Pre-tax Distributable Earnings $ 391
$ 72 $ 105 $ 85 $ 139 $ (3 ) $
(2 )
Pre-tax Distributable Earnings per Dividend Paying
Share $ 0.87
Twelve Months Ended
December 31, 2014 Private Equity Credit
Funds
(in millions)
Total Funds
Permanent
CapitalVehicles
Hedge Funds PE Funds
Liquid HedgeFunds
Logan Circle
Assets Under Management AUM - January 1, 2014 $
61,750 $ 11,861 $ 3,722 $ 5,856 $ 7,527 $ 7,398 $ 25,386 Capital
raised 3,500 - - 561 122 2,817 - Equity raised (Permanent Capital
Vehicles) 483 - 483 - - - - Increase in invested capital 2,680 231
543 46 1,858 2 - Redemptions (1,804 ) - - (37 ) - (1,767 ) - RCA
distributions9 (616 ) - - (616 ) - - - Return of capital
distributions (5,607 ) (3,455 ) (115 ) (78 ) (1,799 ) (160 ) -
Adjustment for capital reset (614 ) - - - (614 ) - - Crystallized
Incentive Income (299 ) - - (169 ) - (130 ) - Net Client Flows
5,420 - - - - - 5,420 Income (loss) and foreign exchange
2,638 729 (66 ) 610
(139 ) (32 ) 1,536
AUM - Ending
Balance $ 67,531 $ 9,366 $ 4,567 $ 6,173 $ 6,955 $ 8,128 $
32,342
Third-Party Capital Raised $ 6,279 $
206 $ 1,078 $ 995 $ 1,183 $ 2,817
$ -
Segment Revenues Management fees $
601 $ 136 $ 69 $ 114 $ 97 $ 138 $ 47 Incentive income 461
3 66 122
254 16 - Total 1,062 139 135 236
351 154 47
Segment Expenses Operating expenses (451 )
(51 ) (69 ) (70 ) (108 ) (99 ) (54 ) Profit sharing compensation
expenses (242 ) - (21 ) (59 )
(132 ) (30 ) - Total (693 ) (51 ) (90 )
(129 ) (240 ) (129 ) (54 )
Earnings From Affiliated
Managers - - - - - - -
Fund Management DE (before Principal Performance
Payments) 369 88 45
107 111 25 (7 )
Principal Performance Payments (29 ) - (6 ) (20 ) (2 ) (1 )
-
Fund
Management DE 340 88 39
87 109 24
(7 ) Investment Income 109 95 2 (1 ) 13 (2 ) 2 Unallocated
Investment Income - Unallocated Expenses (3 )
Pre-tax Distributable Earnings $
446 $ 183 $ 41 $ 86 $ 122 $ 22
$ (5 )
Pre-tax Distributable Earnings per Dividend Paying
Share $ 0.99
______________________________
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
December 31,2015
Full Year 2015
Assets Under Management Private Equity Funds $ 11,512 $
9,810 $ 9,787 $ 9,366 $ 9,366 $ 10,179 $ 9,587 $ 9,195 $ 8,991 $
8,991 Permanent Capital Vehicles 3,731 4,021 4,411 4,567 4,567
4,622 6,948 6,896 6,816 6,816 Credit Hedge Funds10 5,968 6,084
6,140 6,173 6,173 6,271 6,244 9,070 8,799 8,799 Credit Private
Equity Funds 6,979 6,898 7,083 6,955 6,955 7,563 8,247 8,356 9,308
9,308 Liquid Hedge Funds11 7,738 7,867 7,529 8,128 8,128 7,838
7,377 7,367 5,409 5,409 Logan Circle 26,592
29,133 31,096 32,342
32,342 33,416 33,564
33,446 31,178 31,178
AUM -
Ending Balance $ 62,520 $ 63,813 $ 66,046
$ 67,531 $ 67,531 $ 69,889 $ 71,967 $
74,330 $ 70,501 $ 70,501
Third-Party
Capital Raised $ 1,609 $ 1,762 $ 1,216 $
1,692 $ 6,279 $ 5,360 $ 3,213 $ 204
$ 215 $ 8,992
Segment Revenues
Management fees $ 147 $ 152 $ 149 $ 153 $ 601 $ 139 $ 144 $ 151 $
148 $ 582 Incentive income 104 78
88 191 461 51
183 70 132
436 Total 251 230 237 344 1,062 190 327 221 280 1,018
Segment Expenses Operating expenses (104 ) (109 ) (112 )
(126 ) (451 ) (115 ) (121 ) (112 ) (105 ) (453 ) Profit sharing
compensation expenses (53 ) (39 ) (54 )
(96 ) (242 ) (30 ) (54 ) (37 )
(47 ) (168 ) Total (157 ) (148 ) (166 ) (222 ) (693 ) (145 )
(175 ) (149 ) (152 ) (621 )
Earnings From Affiliated
Managers - - - - - 9 (1 ) 2 (1 ) 9
Fund Management DE
(before Principal Performance Payments) 94
82 71 122 369
54 151 74 127
406 Principal Performance Payments (7 )
(6 ) (4 ) (12 ) (29 ) (3 ) (18 ) (7 ) (14 ) (42 )
Fund
Management DE $ 87 $ 76 $ 67 $ 110
$ 340 $ 51 $ 133 $ 67 $ 113 $
364 Net Investment Income 10 96 (12 ) 13 106 4 4 2 17
27
Pre-tax Distributable Earnings $ 97 $ 172
$ 55 $ 123 $ 446 $ 55 $ 137
$ 69 $ 130 $ 391
______________________________
10 The Assets Under Management presented for the Credit Hedge Funds
includes $2,853 million related to co-managed funds as of December
31, 2015. 11 The Assets Under Management presented for the Liquid
Hedge Funds includes $4,496 million related to Affiliated Managers
as of December 31, 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 Year 2014
March 31, 2015
June 30, 2015
September 30, 2015
December 31, 2015
Full Year 2015
Assets Under Management Main Funds12 $ 7,787 $ 7,053
$ 7,347 $ 6,934 $ 6,934 $ 7,726 $ 7,128 $ 6,874 $ 6,530 $ 6,530
Coinvestment Funds13 3,393 2,401 2,088 2,006 2,006 1,994 1,902
1,785 1,729 1,729 MSR Opportunities Funds14 332 344 341 326 326 336
417 388 360 360 Italian NPL Opportunities Fund - 12 11 25 25 19 20
20 225 225 Fortress Equity Partners - -
- 75 75 104
120 128 147 147
AUM - Ending Balance $ 11,512 $ 9,810 $
9,787 $ 9,366 $ 9,366 $ 10,179 $ 9,587
$ 9,195 $ 8,991 $ 8,991
Third-Party Capital Raised $ 79 $ 26 $ 101
$ - $ 206 $ - $ - $ - $ -
$ -
Segment Revenues Management fees $
35 $ 36 $ 33 $ 32 $ 136 $ 29 $ 29 $ 29 $ 29 $ 116 Incentive income
2 1 - -
3 - - -
- - Total 37 37 33 32 139 29 29 29 29
116
Segment Expenses Operating expenses (11 ) (12 )
(15 ) (13 ) (51 ) (14 ) (15 ) (13 ) (3 ) (45 ) Profit sharing
compensation expenses (1 ) 1 -
- - - -
- 1 1 Total (12 ) (11 )
(15 ) (13 ) (51 ) (14 ) (15 ) (13 ) (2 ) (44 )
Fund Management
DE (before Principal Performance Payments) 25
26 18 19 88
15 14 16 27
72 Principal Performance Payments - - - - - -
- - - -
Fund Management DE $ 25 $ 26 $
18 $ 19 $ 88 $ 15 $ 14 $ 16
$ 27 $ 72 Net Investment Income 4 91 -
- 95 - - - - -
Pre-tax Distributable Earnings $ 29
$ 117 $ 18 $ 19 $ 183 $ 15
$ 14 $ 16 $ 27 $ 72
______________________________
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 Year 2014
March 31, 2015
June 30, 2015
September 30, 2015
December 31, 2015
Full Year 2015
Assets Under Management Newcastle Investment Corp. $
1,321 $ 1,381 $ 1,579 $ 768 $ 768 $ 680 $ 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 2,689 Eurocastle Investment Limited 556 553 510
488 488 432 626 605 567 567 New Media Investment Group Inc. 391 390
505 487 487 637 637 637 637 637 New Senior Investment Group Inc. -
- - 812 812 813 1,089 1,089 1,076 1,076 Fortress Transportation and
Infrastructure Investors LLC15 267 330
451 645 645 693
1,191 1,196 1,167
1,167
AUM - Ending Balance $ 3,731 $
4,021 $ 4,411 $ 4,567 $ 4,567 $ 4,622
$ 6,948 $ 6,896 $ 6,816 $ 6,816
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 $ 27 $ 96
Incentive income 4 21 16
25 66 3 74
(1 ) 30 106 Total 20 38 33 44
135 22 97 26 57 202
Segment Expenses Operating
expenses (14 ) (17 ) (18 ) (20 ) (69 ) (18 ) (16 ) (16 ) (19 ) (69
) Profit sharing compensation expenses - (6 )
(9 ) (6 ) (21 ) - (9 )
1 (3 ) (11 ) Total (14 ) (23 ) (27 )
(26 ) (90 ) (18 ) (25 ) (15 ) (22 ) (80 )
Fund Management
DE (before Principal Performance Payments) 6
15 6 18 45
4 72 11 35
122 Principal Performance Payments (1 ) (2 ) -
(3 ) (6 ) - (11 ) (3 ) (5 ) (19 )
Fund Management DE
$ 5 $ 13 $ 6 $ 15 $ 39 $ 4
$ 61 $ 8 $ 30 $ 103 Net
Investment Income - 1 1 - 2 - 1 - 1 2
Pre-tax Distributable
Earnings $ 5 $ 14 $ 7 $ 15 $ 41
$ 4 $ 62 $ 8 $ 31 $ 105
______________________________
15 All of the capital of Worldwide
Transportation and Infrastructure Investors ("WWTAI"), a private
fund formerly 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 Year 2014
March 31, 2015
June 30, 2015
September 30, 2015
December 31, 2015
Full Year 2015
Assets Under Management Drawbridge Special
Opportunities Funds16 $ 5,616 $ 5,745 $ 5,817 $ 5,929 $ 5,929 $
6,023 $ 6,021 $ 5,808 $ 5,756 $ 5,756 Value Recovery Funds17 338
324 309 200 200 189 156 150 102 102 Japan Income Fund 14 15 14 44
44 59 67 94 88 88 Co-Managed Funds18 - -
- - - -
- 3,018 2,853
2,853
AUM - Ending Balance $ 5,968 $
6,084 $ 6,140 $ 6,173 $ 6,173 $ 6,271
$ 6,244 $ 9,070 $ 8,799 $ 8,799
Third-Party Capital Raised $ 228 $ 554
$ 165 $ 48 $ 995 $ 175 $ 79 $ -
$ 21 $ 275
Segment Revenues
Management fees $ 27 $ 28 $ 29 $ 30 $ 114 $ 30 $ 29 $ 37 $ 38 $ 134
Incentive income 32 42 29
19 122 23 50
1 11 85 Total 59
70 58 49 236 53 79 38 49 219
Segment Expenses
Operating expenses (17 ) (17 ) (17 ) (19 ) (70 ) (18 ) (19 ) (21 )
(27 ) (85 ) Profit sharing compensation expenses (15 )
(20 ) (14 ) (10 ) (59 ) (12 )
(18 ) (1 ) (5 ) (36 ) Total (32 ) (37 )
(31 ) (29 ) (129 ) (30 ) (37 ) (22 ) (32 ) (121 )
Fund
Management DE (before Principal Performance Payments) 27
33 27 20
107 23 42 16
17 98 Principal Performance
Payments (5 ) (3 ) (4 ) (8 ) (20 ) (2 ) (6 ) (3 ) (4 ) (15 )
Fund Management DE $ 22 $ 30 $ 23 $ 12
$ 87 $ 21 $ 36 $ 13 $ 13
$ 83 Net Investment Income 1 2 (5 ) 1 (1 ) 1 - - 1 2
Pre-tax Distributable Earnings $ 23 $ 32
$ 18 $ 13 $ 86 $ 22 $ 36
$ 13 $ 14 $ 85
Net
Returns19
Drawbridge Special Opportunities Fund LP 3.2 % 2.6 % 1.9 % 2.1 %
10.0 % 2.2 % 2.3 % 0.3 % 0.9 % 5.8 % Drawbridge Special
Opportunities Fund Ltd 2.2 % 1.7 % 1.7 % 0.2 % 6.0 % 1.1 % 0.4 %
(0.8
%)
0.0 % 0.6 %
______________________________
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 Year 2014
March 31, 2015
June 30, 2015
September 30, 2015
December 31, 2015
Full Year 2015
Assets Under Management Long Dated Value Funds20 $
395 $ 375 $ 361 $ 361 $ 361 $ 352 $ 315 $ 315 $ 315 $ 315 Real
Assets Funds 78 70 64 66 66 52 40 41 24 24 Fortress Credit
Opportunities Funds21 4,712 4,649 4,960 5,465 5,465 6,029 6,802
6,796 6,848 6,848 Japan Opportunity Funds22 1,794
1,804 1,698 1,063
1,063 1,130 1,090 1,204
2,120 2,120
AUM - Ending
Balance $ 6,979 $ 6,898 $ 7,083 $ 6,955
$ 6,955 $ 7,563 $ 8,247 $ 8,356
$ 9,308 $ 9,308
Third-Party Capital
Raised $ - $ 254 $ 30 $ 899 $ 1,183
$ 4,949 $ 672 $ 156 $ 166 $
5,943
Segment Revenues Management fees $ 25 $
23 $ 24 $ 25 $ 97 $ 27 $ 30 $ 29 $ 32 $ 118 Incentive income
66 13 41 134
254 24 60 70
90 244 Total 91 36 65 159 351 51
90 99 122 362
Segment Expenses Operating expenses (26
) (26 ) (27 ) (29 ) (108 ) (30 ) (30 ) (29 ) (26 ) (115 ) Profit
sharing compensation expenses (35 ) (7 ) (22 )
(68 ) (132 ) (14 ) (30 ) (36 )
(41 ) (121 ) Total (61 ) (33 ) (49 ) (97 ) (240 ) (44
) (60 ) (65 ) (67 ) (236 )
Fund Management DE (before
Principal Performance Payments) 30 3
16 62 111 7
30 34 55
126 Principal Performance Payments (1 ) - - (1 ) (2 )
(1 ) (1 ) (1 ) (5 ) (8 )
Fund Management DE $ 29 $
3 $ 16 $ 61 $ 109 $ 6 $ 29
$ 33 $ 50 $ 118 Net Investment
Income 4 - 2 7 13 1 3 5 12 21
Pre-tax Distributable
Earnings $ 33 $ 3 $ 18 $ 68 $ 122
$ 7 $ 32 $ 38 $ 62 $ 139
______________________________
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 Year 2014
March 31, 2015
June 30, 2015
September 30, 2015
December 31, 2015
Full Year 2015
Assets Under Management Fortress Macro Funds23 $
3,503 $ 3,391 $ 3,083 $ 3,249 $ 3,249 $ 2,779 $ 2,326 $ 1,791 N/A
N/A Drawbridge Global Macro Funds24 286 261 223 229 229 227 210 193
101 101 Fortress Convex Asia Funds25 130 136 189 197 197 226 220
208 134 134 Fortress Centaurus Global Funds26 - - - 33 33 64 191
222 204 204 Fortress Partners Funds27 952 965 935 913 913 541 534
497 474 474 Fortress Asia Macro Funds28 2,867 3,114 3,099 3,507
3,507 N/A N/A N/A N/A N/A Affiliated Managers28 -
- - - -
4,001 3,896 4,456
4,496 4,496
AUM - Ending Balance $
7,738 $ 7,867 $ 7,529 $ 8,128 $ 8,128
$ 7,838 $ 7,377 $ 7,367 $ 5,409
$ 5,409
Third-Party Capital Raised $ 1,302
$ 523 $ 247 $ 745 $ 2,817 $ 86
$ 171 $ 48 $ 28 $ 333
Segment Revenues Management fees $ 33 $ 37 $ 33 $ 35 $ 138 $
21 $ 19 $ 16 $ 8 $ 64 Incentive income - 1
2 13 16 1
(1 ) - 1 1
Total
33 38 35 48 154 22 18 16 9 65
Segment Expenses
Operating expenses (23 ) (24 ) (21 ) (31 ) (99 ) (21 ) (27 ) (20 )
(16 ) (84 ) Profit sharing compensation expenses (2 )
(7 ) (9 ) (12 ) (30 ) (4 ) 3
(1 ) 1 (1 ) Total (25 ) (31 )
(30 ) (43 ) (129 ) (25 ) (24 ) (21 ) (15 ) (85 )
Earnings
From Affiliated Managers - - - - - 9 (1 ) 2 (1 ) 9
Fund Management DE (before Principal Performance Payments)
8 7 5 5
25 6 (7 ) (3 ) (7
) (11 ) Principal Performance Payments - (1 ) - - (1
) - - - - -
Fund Management DE $ 8 $ 6 $ 5
$ 5 $ 24 $ 6 $ (7 ) $ (3 ) $ (7 ) $ (11
) Net Investment Income 1 1 (9 ) 5 (2 ) 3 1 (1 ) 5 8
Pre-tax Distributable Earnings $ 9 $ 7 $ (4 )
$ 10 $ 22 $ 9 $ (6 ) $ (4 ) $ (2 ) $ (3 )
Net
Returns29
Fortress Macro Fund Ltd (5.5 %) (0.4 %) 1.1 % 3.4 % (1.6 %) (4.7 %)
(6.3 %) (7.8 %) (0.0 %) (17.6 %) Drawbridge Global Macro Fund Ltd
(5.5 %) (0.6 %) 0.7 % 3.8 % (1.8 %) (4.9 %) (6.5 %) (8.0 %) 0.0 %
(18.2 %) Fortress Convex Asia Fund Ltd (1.1 %) (2.6 %) (0.6 %) (0.6
%) (4.9 %) (0.6 %) (0.7 %) 3.3 % (4.6 %) (2.8 %) Fortress Centaurus
Global Fund Ltd n/a n/a n/a n/a n/a 3.9 % (4.1 %) (3.0 %) 5.0 % 1.4
% Fortress Partners Fund LP30 1.1 % 2.1 % (1.4 %) (1.8 %) (0.1 %)
1.2 % (1.2 %) (4.9 %) (0.1 %) (5.0 %) Fortress Partners Offshore
Fund LP30 0.9 % 2.2 % (1.4 %) (1.3 %) 0.4 % 0.3 % (2.5 %) (3.4 %)
0.5 % (5.1 %) Fortress Asia Macro Fund Ltd28 (3.6 %) (1.9 %) 1.4 %
3.1 % (1.2 %) n/a 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 4Q 2015, Fortress closed the
Fortress Macro Funds and related managed accounts. 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 Year 2014
March 31, 2015
June 30, 2015
September 30, 2015
December 31, 2015
Full Year 2015
Assets Under Management AUM - Ending Balance $
26,592 $ 29,133 $ 31,096 $ 32,342 $
32,342 $ 33,416 $ 33,564 $ 33,446 $
31,178 $ 31,178
Net Client Flows $ 477
$ 1,730 $ 2,178 $ 1,035 $ 5,420
$ 589 $ 1,056 $ 101 $ (1,867 ) $ (121 )
Segment Revenues Management fees $ 11 $ 11 $ 13 $ 12 $ 47 $
13 $ 14 $ 13 $ 14 $ 54 Incentive income - -
- - - -
- - - -
Total 11 11 13 12 47 13 14 13 14 54
Segment
Expenses Operating expenses (13 ) (13 ) (14 ) (14 ) (54 ) (14 )
(14 ) (13 ) (14 ) (55 ) Profit sharing compensation expenses
- - - - -
- - - -
- Total (13 ) (13 ) (14 ) (14 ) (54 ) (14 )
(14 ) (13 ) (14 ) (55 )
Fund Management DE $ (2 ) $ (2 )
$ (1 ) $ (2 ) $ (7 ) $ (1 ) $ - $ - $ - $ (1 )
Net Investment Income - 1 (1 ) 2 2 - - - (1 ) (1 )
Pre-tax Distributable Earnings $ (2 ) $ (1 ) $ (2 ) $ -
$ (5 ) $ (1 ) $ - $ - $ (1 ) $ (2 )
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 Year 2014
March 31, 2015
June 30, 2015
September 30, 2015
December 31, 2015
Full Year 2015
GAAP Net Income (Loss) $ 9
$ 73 $ 17 $
141 $ 240 $ 87
$ 5 $ (26 )
$ 116 $ 182 Principals'
and Others' Interests in (Income) Loss of Consolidated Subsidiaries
(6 ) (42 ) (13 ) (79 ) (140 ) (52 ) (2 ) 12 (62 ) (104 ) 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 ) $ 54 $ 78
Private Equity incentive income 37 (10 ) 29 29 85 3 19 21
(16 ) 27 Hedge Fund, PCV and Logan Circle incentive income 30 26 21
(77 ) - 23 23 1 (47 ) - Incentive income received related to
exercise of options - 2 7 - 9 - 57 - 1 58 Reserve for clawback 2 -
- - 2 - - - - - Distributions of earnings from equity method
investees 9 47 6 10 72 4 9 5 17 35 Losses (earnings) from equity
method investees (17 ) (20 ) (38 ) 7 (68 ) (27 ) 33 23 17 46 Losses
(gains) on options 5 1 23 1 30 (32 ) 9 27 2 6 Losses (gains) on
other Investments 5 42 (16 ) (17 ) 14 (1 ) (5 ) 14 (1 ) 7
Impairment of investments - - (3 ) - (3 ) (3 ) - (1 ) (2 ) (6 )
Adjust income from the receipt of options - (1 ) (5 ) - (6 ) (4 )
(21 ) - - (25 ) Gain on transfer of Graticule - - - - - (134 ) - -
- (134 ) Amortization of intangible assets and impairment of
goodwill - - - - - - - 1 1 Employee, Principal and director
compensation 12 6 6 12 36 20 6 2 5 33 Adjust non-controlling
interests related to Fortress Operating Group units 5 40 11 78 134
52 1 (12 ) 62 103 Tax receivable agreement liability reduction - -
4 29 33 - 8 - (2 ) 6 Adjust income taxes 6 8 3 (10 ) 7 18 (5 ) 3 39
55 Adjust transfer of interest in Graticule -
- - - - 101
- - - 101
Pre-tax Distributable Earnings $ 97
$ 172 $ 55
$ 123 $ 446 $
55 $ 137 $ 69
$ 130 $ 391
Investment Loss (income) (10 ) (97 ) 11 (14 ) (109 ) (5 ) (4 ) (3 )
(19 ) (31 ) Interest Expense - 1
1 1 3 1 -
1 2 4
Fund
Management DE $ 87 $ 76
$ 67 $ 110
$ 340 $ 51 $
133 $ 67 $ 113
$ 364
GAAP Revenues
$ 237 $ 270 $
243 $ 455 $ 1,205
$ 227 $ 308
$ 264 $ 415 $
1,214 Adjust management fees - - - (1 ) (1 ) (1 ) 1 -
- - Adjust incentive income 69 17 57 (47 ) 96 27 100 22 (59 ) 90
Adjust income from the receipt of options - (1 ) (5 ) - (6 ) (4 )
(21 ) - - (25 ) Other revenues (55 ) (56 ) (57
) (65 ) (233 ) (59 ) (61 ) (65 )
(76 ) (261 )
Segment Revenues $
251 $ 230 $ 238
$ 343 $ 1,062
$ 190 $ 327 $
221 $ 280 $ 1,018
GAAP Expenses $ 231
$ 216 $ 235 $
310 $ 992 $ 329
$ 258 $ 224
$ 242 $ 1,053 Adjust
interest expense - (1 ) (1 ) (1 ) (3 ) (1 ) - (1 ) (2 ) (4 ) Adjust
employee, Principal and director compensation (12 ) (6 ) (3 ) (3 )
(24 ) (18 ) (2 ) (1 ) (5 ) (26 ) Adjust amortization of intangible
assets and impairment of goodwill - - - - - - - - (1 ) (1 ) Adjust
expense reimbursements from affiliates and non-affiliates (54 ) (52
) (55 ) (70 ) (231 ) (59 ) (61 ) (64 ) (68 ) (252 ) Adjust
Principal Performance Payments (9 ) (9 ) (9 ) (15 ) (42 ) (5 ) (20
) (9 ) (14 ) (48 ) Adjust transfer of interest in Graticule - - - -
- (101 ) - - - (101 ) Other - -
(1 ) 1 - - -
- - -
Segment
Expenses $ 157 $ 148
$ 166 $ 221 $
692 $ 145 $ 175
$ 149 $ 152
$ 621
‘‘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 11 to the financial statements
included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 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 December 31,
Twelve Months Ended December 31, 2015 2014
2015 2014
Weighted Average Class A Shares
Outstanding (Used for Basic EPS)
217,587,096 208,607,680 216,503,554
210,303,241
Weighted average fully vested restricted Class A share units with
dividend equivalent rights (1,495,044) (164,866) (3,272,595)
(1,379,649) Weighted average restricted Class A shares (729,348)
(1,045,134) (766,420) (1,016,240)
Weighted Average Class A Shares
Outstanding
215,362,704 207,397,680 212,464,539
207,907,352 Weighted average restricted Class A
shares31 729,348 1,045,134 766,420 1,016,240 Weighted average fully
vested restricted Class A share units which are entitled to
dividend equivalent payments 1,495,044 164,866 3,272,595 1,379,649
Weighted average unvested restricted Class A share units which are
entitled to dividend equivalent payments 9,738,355 7,018,682
10,023,561 7,017,047 Weighted average Fortress Operating Group
units 202,863,607 226,331,513 220,416,315 231,162,793
Weighted Average Class A Shares
Outstanding (Used for DEPS)
430,189,058 441,957,875 446,943,430
448,483,081 Weighted average vested and unvested restricted
Class A share units which are not entitled to dividend equivalent
payments 10,963,693 13,735,896 12,139,050
13,310,978
Weighted Average Fully Diluted Shares
and Units Outstanding (Used for Diluted DEPS)
441,152,751 455,693,771 459,082,480
461,794,059
“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 December 31, 2015
As of December 31, 2014
GAAP Book Value
Net Cash and Investments
GAAP Book Value
Net Cash and Investments
Cash and Cash equivalents $ 339,842 $ 339,842 $ 391,089
$ 391,089 Investments 1,055,789 1,055,789 1,121,545
1,121,545 Investments in options32 30,427 - 71,844 - Due from
Affiliates 273,811 - 326,575 - Deferred Tax Asset, net 427,102 -
417,623 - Other Assets 148,310 - 173,708
-
Total Assets 2,275,281 1,395,631
2,502,384 1,512,634 Debt Obligations Payable $
230,677 $ 230,677 $ 75,000 $ 75,000 Accrued Compensation and
Benefits 318,750 - 374,709 - Due to Affiliates 365,218 - 375,424 -
Deferred Incentive Income 332,329 - 304,526 - Other Liabilities
86,503 - 88,053 -
Total
Liabilities 1,333,477 230,677 1,217,712
75,000 Less: Redeemable Non-controlling Interests - -
1,717 -
Net $ 941,804 $
1,164,954 $ 1,282,955 $ 1,437,634
Shares Outstanding
Dividend Paying Shares and
Units Outstanding
Shares Outstanding
Dividend Paying Shares and
Units Outstanding
Class A Shares 216,061 216,061 207,490 207,490 Restricted Class A
Shares 729 729 1,045 1,045 Fortress Operating Group Units 169,515
169,515 226,332 226,332 Fully Vested Class A Shares - Dividend
Paying - 1,361 - 194 Unvested Class A Shares - Dividend Paying
- 9,175 - 7,002
Shares
Outstanding 386,305 396,841 434,867
442,063
Per Share $
2.44 $ 2.94 $ 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 $17 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 December 31, 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/20160225005753/en/
Investor & Media Relations:Fortress Investment
GroupGordon E. Runté, +1-212-798-6082grunte@fortress.com
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