Second Quarter Highlights - Assets under management of $31.0
billion - Segment management fees of $110 million - Fund management
distributable earnings of $53 million - Pre-tax distributable
earnings (DE) of $59 million - GAAP net income, excluding
principals agreement compensation, of $66 million. GAAP net loss of
$171 million. GAAP net loss attributable to Class A Shareholders of
$45 million - Successfully integrated the management of a large
credit fund, renamed as Fortress Value Recovery Fund I - Raised
$219.5 million in net proceeds through issuance of 46 million Class
A shares - Began operations of a new Japanese investment fund
Subsequent Events in the Third Quarter - Daniel H. Mudd, currently
member of the Fortress board of directors, will become the firm's
new CEO effective August 11, 2009 - George W. Wellde has been
elected to Fortress's board of directors NEW YORK, Aug. 5
/PRNewswire-FirstCall/ -- Fortress Investment Group LLC (NYSE:FIG)
today reported its results for the quarter ended June 30, 2009.
Second Quarter 2009 For the quarter ended June 30, 2009, our GAAP
net loss was $171 million and our GAAP net loss attributable to
Class A Shareholders was $45 million, or $0.41 per diluted share,
as compared to a loss of $0.67 per diluted share for the quarter
ended June 30, 2008. Excluding principals agreement compensation,
second quarter GAAP net income was $66 million. Fund management
distributable earnings for the second quarter was $53 million
versus $75 million in the second quarter of 2008. Pre-tax DE for
the second quarter was $59 million, or $0.12 per dividend paying
share (DEPS), versus $58 million for the second quarter of 2008.
For reconciliations from pre-tax distributable earnings and fund
management DE to GAAP net income (loss), from GAAP net income
(loss) excluding principals agreement compensation to GAAP net
income (loss), from segment revenues to GAAP revenues, from segment
assets to GAAP assets and from Weighted Average Class A Shares
Outstanding (Used for Basic EPS) to Weighted Average Dividend
Paying Shares Outstanding (Used for DEPS) see "Reconciliation of
Fund Management DE to Pre-tax Distributable Earnings and GAAP Net
Income (Loss)", "Reconciliation of GAAP Net Income (Loss) Excluding
Principals Agreement Compensation to GAAP Net Income (Loss)",
"Reconciliation of Segment Revenues to GAAP Revenues" and
"Reconciliation of Segment Assets to GAAP Assets" in this release.
Distributable earnings is a supplemental measure of our operating
performance that we believe provides a meaningful basis for
comparison between present and future periods. The Company's
quarterly segment revenues and distributable earnings will
fluctuate materially depending upon the performance of our funds
and the realization events within our private equity business, as
well as other factors. Accordingly, the revenues and profits in any
particular quarter should not be expected to be indicative of
future results. The following discussion of our results is based on
segment reporting as presented in our Quarterly Report on Form
10-Q. Our GAAP statement of operations and balance sheet are
presented following this discussion. The following table is a
summary presentation of our segment performance with supplemental
data provided for informational purposes. For a reconciliation of
our segment results to the corresponding GAAP data, see the
reconciliation information included later in this release. Due to
the increased significance of the hybrid private equity funds
segment, it has been disaggregated from the private equity fund
segment in this period and for all periods presented. Hybrid
private equity funds are comprised of a family of "credit
opportunities" funds focused on investing in distressed and
undervalued assets, a family of "long dated value" funds focused on
investing in undervalued assets with limited current cash flows and
long investment horizons, a family of "real assets" funds focused
on investing in tangible and intangible assets in four principal
categories (real estate, capital assets, natural resources and
intellectual property), and an Asian fund. Supplemental Data for
Three Months: Three Months Ended June 30, 2009 (in millions) Hybrid
Funds Princ- Private Equity Liquid ------------ ipal
--------------- Hedge Hedge PE Invest- Total Funds Castles Funds
Funds Funds ments ----- ----- ------- ----- ----- ----- ----- AUM
AUM - April 1, 2009 $26,538 $10,161 $3,078 $4,809 $6,451 $2,039 $-
Capital raised (1) 3,373 - - 99 3,140 134 - Increase in invested
capital 327 10 - - 2 315 - Redemptions (736) - - (585) (151) - -
Return of capital distributions (168) (88) - - (1) (79) - Income
(loss) and foreign exchange 1,707 519 115 248 477 348 -
------------- ----- --- --- --- --- --- --- AUM - Ending Balance
$31,041 $10,602 $3,193 $4,571 $9,918 $2,757 $- Third-Party Capital
Raised $3,373 $- $- $99 $3,140 $134 $- Segment Revenues Management
fee $110 $40 $12 $20 $30 $8 $- Incentive income 7 - - - - 7 -
---------------- --- --- --- --- --- --- --- Total 117 40 12 20 30
15 - Segment Expenses Profit sharing compensation expenses (8) - -
(2) (2) (4) - Operating expenses (56) (12) (5) (11) (21) (7) -
------------------ --- --- --- --- --- --- --- Total (64) (12) (5)
(13) (23) (11) - Fund Management DE 53 28 7 7 7 4 -
------------------ --- --- --- --- --- --- --- Investment Income 14
14 Interest Expense (8) (8) -------------- --- --- --- --- --- ---
--- Pre-tax Distributable Earnings $59 $28 $7 $7 $7 $4 $6
-------------- --- --- --- --- --- --- --- Weighted Average
Dividend Paying Shares and Units Outstanding 482 -----------------
--- Three Months Ended June 30, 2008 (in millions) Hybrid Funds
Princ- Private Equity Liquid ------------ ipal -------------- Hedge
Hedge PE Invest- Total Funds Castles Funds Funds Funds ments -----
----- ------- ----- ----- ----- ----- AUM AUM - April 1, 2008
$34,029 $12,382 $3,503 $9,254 $8,149 $741 $- Capital raised 1,772
745 - 924 103 - - Increase in invested capital 292 118 - - 2 172 -
Redemptions (311) - - (310) (1) - - Return of capital distributions
(56) (46) - - (3) (7) - Income (loss) and foreign exchange (760)
(560) (5) (163) 16 (48) - ------------- ---- ---- --- ---- --- ---
--- AUM - Ending Balance $34,966 $12,639 $3,498 $9,705 $8,266 $858
$- Segment Revenues Management fee $150 $40 $15 $57 $36 $2 $-
Incentive income 15 - - 14 1 - - ---------------- --- --- --- ---
--- --- --- Total 165 40 15 71 37 2 - Segment Expenses Profit
sharing compensation expenses (20) (1) (1) (16) (2) - - Operating
expenses (70) (7) (10) (25) (26) (2) - ------------------ --- ---
--- --- --- --- --- Total (90) (8) (11) (41) (28) (2) - Fund
Management DE 75 32 4 30 9 - - ------------------ --- --- --- ---
--- --- --- Investment Income (7) (7) Interest Expense (10) (10)
---------------- --- --- --- --- --- --- --- Pre-tax Distributable
Earnings $58 $32 $4 $30 $9 $- $(17) -------------- --- --- --- ---
--- --- ---- Weighted Average Dividend Paying Shares and Units
Outstanding 456 ----------------- --- (1) Includes $3.1 billion of
capital under management due to Fortress's take over of management
of the D.B. Zwirn funds and related investment vehicles.
Supplemental Data for Six Months: Six Months Ended June 30, 2009
(in millions) Hybrid Funds Princ- Private Equity Liquid
------------ ipal -------------- Hedge Hedge PE Invest- Total Funds
Castles Funds Funds Funds ments ----- ----- ------- ----- -----
----- ----- AUM AUM - January 1, 2009 $29,454 $10,307 $3,182 $7,169
$6,494 $2,302 $- Capital raised (1) 3,382 - - 108 3,140 134 -
Increase in invested capital 763 70 - - 2 691 - Redemptions (3,382)
- - (3,079) (303) - - Return of capital distributions (745) (93) -
- (8) (644) - Income (loss) and foreign exchange 1,569 318 11 373
593 274 - ------------- ----- --- --- --- --- --- --- AUM - Ending
Balance $31,041 $10,602 $3,193 $4,571 $9,918 $2,757 $- Third-Party
Capital Raised $3,382 $- $- $108 $3,140 $134 $- Segment Revenues
Management fee $216 $77 $24 $43 $58 $14 $- Incentive income 8 - - -
1 7 - ---------------- --- --- --- --- --- --- --- Total 224 77 24
43 59 21 - Segment Expenses Profit sharing compensation expenses
(12) - - (5) (3) (4) - Operating expenses (115) (20) (13) (25) (46)
(11) - ------------------ ---- --- --- --- --- --- --- Total (127)
(20) (13) (30) (49) (15) - Fund Management DE 97 57 11 13 10 6 -
------------------ --- --- --- --- --- --- --- Investment Income
(13) (13) Interest Expense (16) (16) ---------------- --- --- ---
--- --- --- --- Pre-tax Distributable Earnings $68 $57 $11 $13 $10
$6 $(29) -------------- --- --- --- --- --- --- ---- Weighted
Average Dividend Paying Shares and Units Outstanding 472
----------------- --- Six Months Ended June 30, 2008 (in millions)
Hybrid Funds Princ- Private Equity Liquid ------------ ipal
-------------- Hedge Hedge PE Invest- Total Funds Castles Funds
Funds Funds ments ----- ----- ------- ----- ----- ----- ----- AUM
AUM - January 1, 2008 $32,930 $12,642 $3,328 $8,128 $8,196 $636 $-
Capital raised 3,926 745 - 2,211 837 133 - Increase in invested
capital 981 760 - - 26 195 - Redemptions (894) - - (421) (473) - -
Return of capital distributions (236) (174) - - (4) (58) -
Crystallized Incentive Income (95) - - - (95) - - Income (loss) and
foreign exchange (1,646) (1,334) 170 (213) (221) (48) -
------------- ------ ------ --- ---- ---- --- --- AUM - Ending
Balance $34,966 $12,639 $3,498 $9,705 $8,266 $858 $- Segment
Revenues Management fee $295 $80 $28 $110 $73 $4 $- Incentive
income 47 29 - 17 1 - - ---------------- --- --- --- --- --- ---
--- Total 342 109 28 127 74 4 - Segment Expenses Profit sharing
compensation expenses (52) (13) (2) (33) (4) - - Operating expenses
(144) (14) (18) (49) (59) (4) - ------------------ ---- --- --- ---
--- --- --- Total (196) (27) (20) (82) (63) (4) - Fund Management
DE 146 82 8 45 11 - - ------------------ --- --- --- --- --- ---
--- Investment Income (10) (10) Interest Expense (20) (20)
---------------- --- --- --- --- --- --- --- Pre-tax Distributable
Earnings $116 $82 $8 $45 $11 $- $(30) -------------- ---- --- ---
--- --- --- ---- Weighted Average Dividend Paying Shares and Units
Outstanding 443 -------------- --- (1) Includes $3.1 billion of
capital under management due to Fortress's take over of management
of the D.B. Zwirn funds and related investment vehicles. Overview
We managed $31.0 billion of assets in private equity funds, liquid
hedge funds and hybrid funds as of June 30, 2009. Fortress's
revenues consist of (i) management fees, which are based on the
size of our funds, (ii) incentive income, which is based on the
performance of our funds, and (iii) investment income (loss), which
is based on our principal investments. In the second quarter of
2009, we generated fund management DE of $53 million. Including
principal investments, Fortress generated pre-tax distributable
earnings of $59 million. For the quarter ended June 30, 2009, the
private equity segments accounted for approximately 44% of total
segment revenues, the liquid hedge funds segment accounted for
approximately 17% of total segment revenues and the hybrid funds
segments accounted for approximately 39% of total segment revenues.
For the quarter ended June 30, 2009, the private equity, liquid
hedge funds and hybrid funds businesses accounted for approximately
66%, 13% and 21%, respectively, of total fund management DE.
Private Equity - Funds For the quarter ended June 30, 2009, the
Company's private equity funds had pre-tax DE of $28 million as
compared to pre-tax DE of $32 million for the quarter ended June
30, 2008. Assets under management for private equity funds was
$10.6 billion at June 30, 2009 compared to $12.6 billion as of June
30, 2008. As of June 30, 2009, our funds' private equity capital
invested in non-public transactions totaled approximately $11.5
billion, and our private equity funds' unfunded commitments to
investments were approximately $790 million. Private Equity -
Castles For the quarter ended June 30, 2009, the Company's Castles
generated pre-tax DE of $7 million as compared to $4 million for
the quarter ended June 30, 2008. Assets under management for the
Castles was $3.2 billion at June 30, 2009 compared to $3.5 billion
as of June 30, 2008. Liquid Hedge Funds For the quarter ended June
30, 2009, the Company's liquid hedge fund business generated
pre-tax DE of $7 million as compared to $30 million for the quarter
ended June 30, 2008. Assets under management for the liquid hedge
funds was $4.6 billion at June 30, 2009 compared to $9.7 billion as
of June 30, 2008. The following table shows our Assets Under
Management by fund: (dollars in billions) June 30, December 31,
June 30, 2009 2008 2008 ---- ---- ---- Macro Funds (2) $3.7 $6.1
$8.8 Fortress Commodities Fund $0.9 $1.1 $0.9 (2) Combined AUM for
Fortress Macro Fund, Drawbridge Global Macro Fund Ltd, Drawbridge
Global Macro Fund LP, DBGM Offshore Ltd, DBGM Onshore LP, DBGM
Alpha V Ltd and Drawbridge Global Macro managed accounts. The
following table shows our gross and net returns by fund:(3) Three
Months Ended Six Months Ended June 30, 2009 June 30, 2009
------------------- ---------------- Gross Returns Fortress Macro
Funds L.P. Offshore (4) 4.3% 4.3% Drawbridge Global Macro Fund Ltd.
6.2% 12.3% Fortress Commodities Fund L.P. 2.3% 2.3% Net Returns
Fortress Macro Funds L.P. Offshore (4) 3.2% 3.2% Drawbridge Global
Macro Fund Ltd. 5.8% 11.3% Fortress Commodities Fund L.P. 1.8% 1.3%
(3) The performance data contained herein reflects returns for a
"new issue eligible," single investor class, net of expenses borne
by the Fund (prior to any fees), as of the close of business on the
last day of the relevant period. Specific performance may vary
based on, among other things, whether fund investors are invested
in one or more special investments. (4) Fortress Macro Offshore
Fund L.P. returns reflect a new, class "A" investor from the May 1,
2009 date of inception of the fund. Hybrid - Hedge Funds For the
quarter ended June 30, 2009, the Company's hybrid hedge fund
business generated pre-tax DE of $7 million as compared to $9
million for the quarter ended June 30, 2008. Assets under
management for the hybrid hedge funds was $9.9 billion at June 30,
2009 compared to $8.3 billion as of June 30, 2008. The following
table shows our Assets Under Management by fund: (dollars in
billions) June 30, December 31, June 30, 2009 2008 2008 ---- ----
---- Drawbridge Special Opportunities Funds (5) $5.1 $5.0 $6.5
Fortress Partners Funds (6) $1.7 $1.5 $1.8 Fortress Value Recovery
Funds (7) $3.1 N.A. N.A. (5) Combined AUM for Drawbridge Special
Opportunities Fund Ltd., Drawbridge Special Opportunities Fund LP
and Drawbridge Special Opportunities Fund managed accounts. (6)
Combined AUM for Fortress Partners Offshore Fund LP and Fortress
Partners Fund LP. (7) Fortress will receive management fees from
these funds equal to 1% of realized proceeds and up to 1% per annum
on certain managed assets, and may receive limited incentive income
if aggregate realizations exceed an agreed threshold. The following
table shows our gross and net returns by fund:(8) Three Months
Ended Six Months Ended June 30, 2009 June 30, 2009
------------------- ----------------- Gross Returns Drawbridge
Special Opportunities LP (9) 7.9% 11.8% Drawbridge Special
Opportunities Ltd (9) 6.5% 10.8% Fortress Partners Fund LP 8.8%
7.0% Fortress Partners Offshore Fund LP 9.5% 8.3% Net Returns
Drawbridge Special Opportunities LP (9) 7.3% 10.7% Drawbridge
Special Opportunities Ltd (9) 6.0% 9.7% Fortress Partners Fund LP
8.5% 6.4% Fortress Partners Offshore Fund LP 9.2% 7.8% (8) 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. Gross returns reflect performance
data prior to any fees borne by the Fund while net returns reflect
performance data after taking into account any fees borne by the
Fund. Specific performance may vary based on, among other things,
whether fund investors are invested in one or more special
investments. (9) The returns for the Drawbridge Special
Opportunities Funds reflect the performance of each fund excluding
the performance of the redeeming capital accounts which relate to
December 31, 2008 redemptions. Hybrid - Private Equity Funds For
the quarter ended June 30, 2009, the Company's hybrid private
equity fund business generated pre-tax DE of $4 million as compared
to a minimal gain for the quarter ended June 30, 2008. Assets under
management for the hybrid private equity funds was $2.8 billion at
June 30, 2009 compared to $0.9 billion as of June 30, 2008.
Principal Investments At June 30, 2009, we had $0.8 billion of
assets (excluding cash and cash equivalents) in our principal
investments segment, compared to $1.1 billion (excluding cash and
cash equivalents) at June 30, 2008. During the three months ended
June 30, 2009, we increased commitments to our principal
investments by $4 million and funded $6 million of our commitments.
We had $131 million of unfunded commitments to our principal
investments as of June 30, 2009. Our principal investments segment
generated a gain of $6 million for the three months ended June 30,
2009, due primarily to a $14 million gain from the earnings on our
equity investments in our hedge funds and $8 million of net
interest expense. Segment Expenses Segment expenses were $64
million in the second quarter of 2009, down from $90 million for
the second quarter of 2008. Segment expenses for the second
quarters of 2009 and 2008 included $8 million and $20 million of
profit sharing compensation, respectively, which is a function of
revenues received from our various funds. The Company had $289
million of share-based compensation expense (primarily relating to
expense recorded in connection with the principals agreement, the
issuance of restricted stock units to Fortress employees, and the
issuance of restricted partnership units) for the quarter ended
June 30, 2009, which contributed to our reporting a GAAP net loss
per share. Share-based compensation expense is not included in
segment expenses or in the calculation of distributable earnings.
Corporate Credit Agreement As previously disclosed, in June 2009,
we amended the terms of our credit agreement, agreeing to make
additional amortization payments in association with any follow-on
equity offerings. Accordingly, during the second quarter we applied
a portion of the net proceeds from our second quarter equity
offering to pay down the credit facility by $110 million. In
addition, we also paid down $54 million on our revolving credit
facility. As a result of these payments, we now have $440 million
of debt outstanding as of June 30, 2009 and have capacity available
of $59 million under our revolving credit facility. Non-GAAP
Information Fortress discloses certain non-GAAP financial
information, which management believes provides a meaningful basis
for comparison among present and future periods. The following are
non-GAAP measures used in the accompanying financial information:
-- Pre-tax distributable earnings (DE) and pre-tax distributable
earnings per dividend paying share -- Fund management DE -- Segment
revenues -- Segment management fees -- GAAP net income excluding
principals agreement compensation -- Segment assets We urge you to
read the reconciliation of such data to the related GAAP measures
appearing later in this release. Conference Call Management will
host a conference call today, Wednesday, August 5, 2009 at 8:00
A.M. Eastern Time. A copy of the earnings release is posted to the
Investor Relations section of Fortress's website,
http://www.fortress.com/. All interested parties are welcome to
participate on the live call. The conference call may be accessed
by dialing 1-877-252-8576 (from within the U.S.) or 1-706-679-1521
(from outside of the U.S.) ten minutes prior to the scheduled start
of the call; please reference "Fortress Second Quarter Earnings
Call." A simultaneous webcast of the conference call will be
available to the public on a listen-only basis at
http://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 until 11:59 P.M. Eastern
Time on Wednesday, August 12, 2009 by dialing 1-800-642-1687 (from
within the U.S.) or 1-706-645-9291 (from outside of the U.S.);
please reference access code "21490515." About Fortress Fortress is
a leading global alternative asset manager with approximately $31.0
billion in assets under management as of June 30, 2009. Fortress
manages private equity funds and hedge funds. Fortress was founded
in 1998. For more information regarding Fortress Investment Group
LLC or to be added to our e-mail distribution list, please visit
http://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 our sources of management fees, incentive
income and investment income (loss), estimated fund performance,
the amount and source of expected capital commitments, amount of
redemptions and our effective tax rate. 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, redemption amounts or our
effective tax rate may differ, possibly materially, from these
forward-looking statements, and any such differences could cause
our 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 and Quarterly Report on Form 10-Q, which is, or will
be, available on the Company's website (http://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. Fortress Investment Group LLC
Consolidated Statements of Operations (Unaudited) (dollars in
thousands, except share data) Three Months Ended Six Months Ended
June 30, June 30, ------------------ ----------------- 2009 2008
2009 2008 ---- ---- ---- ---- Revenues Management fees from
affiliates $108,425 $149,605 $214,077 $293,662 Incentive income
from affiliates 6,958 18,300 6,958 55,444 Expense reimbursements
from affiliates 20,661 15,950 33,708 30,221 Other revenues 3,043
4,241 6,640 9,649 ----- ----- ----- ----- 139,087 188,096 261,383
388,976 ------- ------- ------- ------- Expenses Interest expense
7,605 9,888 15,791 20,224 Compensation and benefits 113,456 137,460
222,692 264,479 Principals agreement compensation 237,367 237,367
472,126 474,734 General, administrative and other 21,034 19,746
38,219 36,316 Depreciation and amortization 2,761 2,436 5,402 4,872
----- ----- ----- ----- 382,223 406,897 754,230 800,625 -------
------- ------- ------- Other Income (Loss) Gains (losses) from
investments Net realized gains (losses) (376) 61 (772) 1,674 Net
realized gains (losses) from affiliate investments 234 (92) (14)
155 Net unrealized gains (losses) - - - - Net unrealized gains
(losses) from affiliate investments 19,583 (6,584) 17,754 (36,401)
Tax receivable agreement liability reduction - - (55) - Earnings
(losses) from equity method investees 51,057 (26,500) 16,208
(75,629) ------ ------- ------ ------- 70,498 (33,115) 33,121
(110,201) ------ ------- ------ -------- Income (Loss) Before
Income Taxes (172,638) (251,916) (459,726) (521,850) Income tax
benefit (expense) 1,308 1,949 1,715 (5,303) ----- ----- -----
------ Net Income (Loss) $(171,330) $(249,967) $(458,011)
$(527,153) ========= ========= ========= ========= Principals' and
Others' Interests in Income (Loss) of Consolidated Subsidiaries
$(126,738) $(194,411) $(346,260) $(402,680) ========= =========
========= ========= Net Income (Loss) Attributable to Class A
Shareholders $(44,592) $(55,556) $(111,751) $(124,473) ========
======== ========= ========= Dividends declared per Class A share
$- $0.225 $- $0.450 === ====== === ====== Earnings Per Class A
share - Fortress Investment Group -------------------- Net income
loss) per Class A share, basic $(0.40) $(0.62) $(1.10) $(1.36)
====== ====== ====== ====== Net income (loss) per Class A share,
diluted $(0.41) $(0.67) $(1.10) $(1.37) ====== ====== ====== ======
Weighted average number of Class A shares outstanding, basic
115,547,744 94,913,677 105,447,324 94,904,157 ===========
========== =========== ========== Weighted average number of Class
A shares outstanding, diluted 427,619,294 406,985,227 417,518,874
406,975,707 =========== =========== =========== ===========
Fortress Investment Group LLC Consolidated Balance Sheets (dollars
in thousands, except share data) June 30, December 31, 2009 2008
(Unaudited) ----------- ----------- Assets Cash and cash
equivalents $90,506 $263,337 Due from affiliates 70,709 38,504
Investments Equity method investees 818,147 774,382 Options in
affiliates 116 39 Deferred tax asset 429,794 408,066 Other assets
86,028 93,407 ------ ------ $1,495,300 $1,577,735 ==========
========== Liabilities and Shareholders' Equity Liabilities Accrued
compensation and benefits $63,268 $158,033 Due to affiliates
330,194 346,265 Deferred incentive income 163,635 163,635 Debt
obligations payable 439,750 729,041 Other liabilities 23,484 26,741
------ ------ 1,020,331 1,423,715 --------- --------- Commitments
and Contingencies Equity Class A shares, no par value,
1,000,000,000 shares authorized, 140,651,044 and 94,609,525 shares
issued and outstanding at June 30, 2009 and December 31, 2008,
respectively. - - Class B shares, no par value, 750,000,000 shares
authorized, 312,071,550 shares issued and outstanding - - Paid-in
capital 830,447 596,803 Retained earnings (accumulated deficit)
(625,130) (513,379) Accumulated other comprehensive income (loss)
(1,135) (866) ------ ---- Total Fortress shareholders' equity
204,182 82,558 ------- ------ Principals' and others' interests in
equity of consolidated subsidiaries 270,787 71,462 ------- ------
Total equity 474,969 154,020 ------- ------- $1,495,300 $1,577,735
========== ========== Fortress Investment Group LLC Reconciliation
of Fund Management DE to Pre-tax Distributable Earnings and GAAP
Net Income (Loss) (dollars in millions) Three Months Ended
------------------ June 30, 2009 June 30, 2008 -------------
------------- Fund Management DE $53 $75 ------------------ --- ---
Investment Income (Loss) 14 (7) Interest Expense (8) (10) --- ---
Pre-tax Distributable Earnings 59 58 ------------------------------
--- --- Private equity incentive income - 3 Earnings from equity
method investees 38 (26) Gains/losses on options - (3) Gains/losses
on other Investments 20 (3) Impairment of investments - 10 Employee
equity-based compensation (52) (53) Principal compensation (237)
(238) Employee portion of incentive income - - Taxes 1 2 --- ---
GAAP Net Income (Loss) $(171) $(250) ---------------------- -----
----- Six Months Ended ---------------- June 30, 2009 June 30, 2008
------------- ------------- Fund Management DE $97 $146
------------------ --- ---- Investment Income (Loss) (13) (10)
Interest Expense (16) (20) --- --- Pre-tax Distributable Earnings
68 116 ------------------------------ --- --- Private equity
incentive income - 9 Earnings from equity method investees (1) (67)
Gains/losses on options - (15) Gains/losses on other Investments 18
(21) Impairment of investments 32 10 Employee equity-based
compensation (105) (89) Principal compensation (472) (475) Employee
portion of incentive income - 10 Taxes 2 (5) --- --- GAAP Net
Income (Loss) $(458) $(527) ---------------------- ----- -----
Fortress Investment Group LLC Reconciliation of Segment Revenues to
GAAP Revenues (dollars in millions) Three Months Ended
------------------ June 30, 2009 June 30, 2008 -------------
------------- Segment Revenues $117 $165 Adjust incentive income 1
3 Adjust income from the receipt of options - - Other revenues 21
20 Consolidation and elimination - - --- --- GAAP Revenues $139
$188 ------------- ---- ---- Six Months Ended ---------------- June
30, 2009 June 30, 2008 ------------- ------------- Segment Revenues
$224 $342 Adjust incentive income - 9 Adjust income from the
receipt of options - - Other revenues 37 38 Consolidation and
elimination - - --- --- GAAP Revenues $261 $389 ------------- ----
---- Fortress Investment Group LLC Reconciliation of Segment Assets
to GAAP Assets (dollars in millions) Assets as of ------------ June
30, 2009 June 30, 2008 ------------- ------------- Segment Assets
$1,445 $1,993 Adjust equity investments from fair value - - Adjust
equity investments from cost 20 (93) Adjust investments gross of
employee portion 30 43 Adjust option investments to intrinsic value
- 1 --- --- GAAP Assets $1,495 $1,944 ----------- ------ ------
'Distributable earnings' is our supplemental measure of operating
performance. 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 and it is not
necessarily indicative of liquidity or cash available to fund our
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
our financial statements included in our Quarterly Report on Form
10-Q for the quarter ended June 30, 2009. Our management uses
distributable earnings: -- in its determination of periodic
distributions to equity holders; -- in making operating decisions
and assessing the performance of each of our core businesses; --
for planning purposes, including the preparation of our annual
operating budgets; and -- as a valuation measure in strategic
analyses in connection with the performance of our funds and the
performance of our employees. Growing distributable earnings is a
key component to our business strategy and distributable earnings
is the supplemental measure used by our management to evaluate the
economic profitability of each of our businesses and our total
operations. Therefore, we believe that it provides useful
information to our investors in evaluating our operating
performance. Our definition of distributable earnings is not based
on any definition contained in our amended and restated operating
agreement. Fortress Investment Group LLC Reconciliation of GAAP Net
Income (Loss) Excluding Principals Agreement Compensation to GAAP
Net Income (Loss) (dollars in thousands) Three months ended Six
months ended June 30, 2009 June 30, 2009 ------------------
---------------- GAAP net loss $(171,330) $(458,011) Principals
agreement compensation 237,367 472,126 ------- ------- GAAP net
income excluding principals agreement compensation $66,037 $14,115
======= ======= Fortress Investment Group LLC Reconciliation of
Weighted Average Class A Shares Outstanding (Used for Basic EPS) to
Weighted Average Dividend Paying Shares Outstanding (Used for DEPS)
Three Months Ended June 30, --------------------------- 2009 2008
---- ---- Weighted Average Class A Shares Outstanding (Used for
Basic EPS) 115,547,744 94,913,677 ---------------------------------
----------- ---------- Weighted average fully vested restricted
Class A share units with dividend equivalent rights (631,260)
(394,286) Weighted average fully vested restricted Class A shares
(105,728) (19,040) Weighted average Class A shares outstanding
114,810,756 94,500,351 ------------------------------- -----------
---------- Weighted average restricted Class A shares (10) 138,160
104,219 Weighted average fully vested restricted Class A share
units which are entitled to dividend equivalent payments 631,260
394,286 Weighted average nonvested restricted Class A share units
which are entitled to dividend equivalent payments 22,955,132
23,652,206 Weighted average Fortress Operating Group units
312,071,550 312,071,550 Weighted average Fortress Operating Group
RPUs 31,000,000 25,208,791 Weighted Average Dividend Paying Shares
Outstanding (Used for DEPS) 481,606,858 455,931,403
--------------------------------------- ----------- ----------- Six
Months Ended June 30, ------------------------- 2009 2008 ---- ----
Weighted Average Class A Shares Outstanding (Used for Basic EPS)
105,447,324 94,904,157 ---------------------------------
----------- ---------- Weighted average fully vested restricted
Class A share units with dividend equivalent rights (631,260)
(394,286) Weighted average fully vested restricted Class A shares
(104,404) (9,520) Weighted average Class A shares outstanding
104,711,660 94,500,351 ------------------------------- -----------
---------- Weighted average restricted Class A shares (10) 136,836
100,757 Weighted average fully vested restricted Class A share
units which are entitled to dividend equivalent payments 631,260
394,286 Weighted average nonvested restricted Class A share units
which are entitled to dividend equivalent payments 22,955,132
23,708,849 Weighted average Fortress Operating Group units
312,071,550 312,071,550 Weighted average Fortress Operating Group
RPUs 31,000,000 12,604,396 Weighted Average Dividend Paying Shares
Outstanding (Used for DEPS) 471,506,438 443,380,189
--------------------------------------- ----------- -----------
(10) Includes both fully vested and nonvested weighted average
restricted class A shares. DATASOURCE: Fortress Investment Group
LLC CONTACT: Lilly H. Donohue, +1-212-798-6118, for Fortress
Investment Group LLC Web Site: http://www.fortress.com/
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