Second Quarter Highlights
-- Assets under management(1) of $35.1 billion, up 23% from 2Q2007
-- Segment management fee revenues of $150 million, up 27% from 2Q2007
-- Raised $2.8 billion of total third-party capital, or $2.5 billion net
third-party capital raised
-- Pre-tax distributable earnings of $58 million, versus $143 million from
2Q2007. Fund management DE of $75 million
-- GAAP net loss, excluding principals agreement compensation, of $345,000.
GAAP net loss of $55 million
Subsequent Events in the Third Quarter
-- Since quarter-end, raised an additional $1.9 billion of total third-
party capital, bringing our year to date total third-party capital raised
to $7.5 billion, or $6.4 billion net third-party capital raised
NEW YORK, Aug. 7 /PRNewswire-FirstCall/ -- Fortress Investment Group
LLC (NYSE: FIG) today reported its results for the second quarter ended
June 30, 2008.
Second Quarter 2008
For the quarter ended June 30, 2008, our GAAP net loss was $55 million,
or $0.67 per diluted share. Excluding principals agreement compensation,
second quarter GAAP net loss was $345,000.
Pre-tax distributable earnings for the quarter were $58 million, or
$0.13 per dividend paying share, versus $143 million for the second quarter
2007.
For reconciliations from pre-tax distributable earnings and fund
management DE to GAAP net income (loss), and from GAAP net income (loss)
excluding principals agreement compensation to GAAP net income (loss) see
"Reconciliation of Fund Management DE to Pre-tax Distributable Earnings and
GAAP Net Income (Loss)" and "Reconciliation of GAAP Net Income (Loss)
Excluding Principals Agreement Compensation to GAAP Net Income (Loss)" in
this release. Distributable earnings and distributable earnings per
dividend paying share are supplemental measures of our operating
performance that we believe provide a meaningful basis for comparison
between present and future periods(2).
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. Quarterly
dividends are not necessarily representative of the Company's earnings in
the current quarter.
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.
(1) Assets under management in this press release refers to management fee
paying assets under management.
(2) Comparisons of after tax or per share amounts to periods prior to our
reorganization, including the first quarter of 2007 (prior to
January 17), may not be meaningful because of the impact of the
reorganization transactions on our financial statements.
Supplemental Data for Three Months:
Three Months Ended Private Equity Hedge Funds Principal
June 30, 2008 Invest-
(in millions) Total Funds Castles Liquid Hybrid ments
AUM
AUM - April 1, 2008 $34,187 $12,993 $3,503 $9,254 $8,437 $-
New capital raised,
increase in invested
capital 2,195 1,165 - 925 105 -
Return of Capital
(PE) / Redemptions
(Hedge Funds) (546) (54) - (311) (181) -
Reset Date - - - - - -
Crystallized Incentive
Income - - - - - -
+/- Net Asset Value &
Foreign Exchange rate
change (747) (608) (5) (163) 29 -
AUM - Ending Balance $35,089 $13,496 $3,498 $9,705 $8,390 $-
Segment Revenues
Management fee $150 $42 $15 $57 $36 $-
Incentive income 15 - - 14 1 -
Total 165 42 15 71 37 -
Segment Expenses
Profit sharing
compensation expenses (20) (1) (1) (16) (2) -
Operating expenses (70) (9) (10) (25) (26) -
Unallocated Expenses -
Total (90) (10) (11) (41) (28) -
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
Three Months Ended Private Equity Hedge Funds Principal
June 30, 2007 Invest-
(in millions) Total Funds Castles Liquid Hybrid ments
AUM
AUM - April 1, 2007 $23,426 $8,398 $2,967 $5,915 $6,146 $-
New capital raised,
increase in invested
capital 5,862 4,048 206 1,024 584 -
Return of Capital
(PE) / Redemptions
(Hedge Funds) (51) - - (42) (9) -
Reset Date (1,367) (1,367) - - - -
+/- Net Asset Value &
Foreign Exchange rate
change 699 (86) - 519 266 -
AUM - Ending Balance $28,569 $10,993 $3,173 $7,416 $6,987 $-
Segment Revenues
Management fee $118 $36 $12 $38 $32 $-
Incentive income 165 - 14 113 38 -
Total 283 36 26 151 70 -
Segment Expenses
Profit sharing
compensation expenses (82) (1) (5) (58) (18) -
Operating expenses (67) (7) (8) (18) (34) -
Unallocated Expenses (4)
Total (153) (8) (13) (76) (52) -
Fund Management DE 130 28 13 75 18 -
Investment Income 20 20
Interest Expense (7) (7)
Pre-tax Distributable
Earnings $143 $28 $13 $75 $18 $13
Weighted Average Dividend
Paying Shares and Units
Outstanding 431
Supplemental Data for Six Months:
Six Months Ended Private Equity Hedge Funds Principal
June 30, 2008 Invest-
(in millions) Total Funds Castles Liquid Hybrid ments
AUM
AUM - January 1, 2008 $33,234 $13,278 $3,328 $8,128 $8,500 $-
New capital raised,
increase in invested
capital 4,867 1,793 - 2,211 863 -
Return of Capital (PE)
/ Redemptions (Hedge
Funds) (1,294) (194) - (421) (679) -
Reset Date - - - - - -
Crystallized Incentive
Income (95) - - - (95)
+/- Net Asset Value &
Foreign Exchange rate
change (1,623) (1,381) 170 (213) (199) -
AUM - Ending Balance $35,089 $13,496 $3,498 $9,705 $8,390 $-
Segment Revenues
Management fee $295 $84 $28 $110 $73 $-
Incentive income 47 29 - 17 1 -
Total 342 113 28 127 74 -
Segment Expenses
Profit sharing
compensation expenses (52) (13) (2) (33) (4) -
Operating expenses (144) (18) (18) (49) (59) -
Unallocated Expenses -
Total (196) (31) (20) (82) (63) -
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
Six Months Ended Private Equity Hedge Funds Principal
June 30, 2007 Invest-
(in millions) Total Funds Castles Liquid Hybrid ments
AUM
AUM - January 1, 2007 $20,853 $7,539 $2,842 $5,022 $5,450 $-
New capital raised,
increase in invested
capital 8,829 5,618 331 1,776 1,104 -
Return of Capital (PE)
/ Redemptions (Hedge
Funds) (822) (691) - (78) (53) -
Reset Date (1,367) (1,367) - - - -
+/- Net Asset Value &
Foreign Exchange rate
change 1,076 (106) - 696 486 -
AUM - Ending Balance $28,569 $10,993 $3,173 $7,416 $6,987 $-
Segment Revenues
Management fee $216 $63 $23 $69 $61 $-
Incentive income 450 190 18 158 84 -
Total 666 253 41 227 145 -
Segment Expenses
Profit sharing
compensation expenses (205) (73) (7) (87) (38) -
Operating expenses (121) (13) (15) (35) (58) -
Unallocated Expenses (7)
Total (333) (86) (22) (122) (96) -
Fund Management DE 333 167 19 105 49 -
Investment Income 49 49
Interest Expense (19) (19)
Pre-tax Distributable
Earnings $363 $167 $19 $105 $49 $30
Weighted Average
Dividend Paying Shares
and Units Outstanding 417
Overview
We manage $35.1 billion of assets in private equity funds and hedge
funds as of June 30, 2008. 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, which is based on our principal investments.
In the second quarter of 2008, we generated fund management revenues of
$165 million, which included management fees of $150 million and incentive
income of $15 million. After segment expenses and principal investments,
Fortress generated pre-tax distributable earnings of $58 million for the
quarter ended June 30, 2008.
For the quarter ended June 30, 2008, the private equity segments
accounted for approximately 35% of total segment revenues and the hedge
fund segments accounted for approximately 65% of total segment revenues.
For the quarter ended June 30, 2008, the private equity and hedge fund
businesses accounted for approximately 48% and 52%, respectively, of total
fund management DE.
Private Equity - Funds
For the quarter ended June 30, 2008, the Company's private equity funds
generated $32 million of pre-tax distributable earnings as compared to $28
million for the quarter ended June 30, 2007.
Assets under management as of June 30, 2008 increased 23% to $13.5
billion from $11.0 billion as of June 30, 2007.
As of June 30, 2008, our funds' private equity capital invested in non-
public transactions totaled approximately $10.8 billion, and our private
equity funds' unfunded commitments were approximately $1.5 billion.
Private Equity - Castles
For the quarter ended June 30, 2008, the Company's Castles generated $4
million of pre-tax distributable earnings as compared to $13 million for
the quarter ended June 30, 2007.
Assets under management increased 10% to $3.5 billion as of June 30,
2008 from $3.2 billion as of June 30, 2007.
Liquid Hedge Funds
For the quarter ended June 30, 2008, the Company's liquid hedge fund
business generated $30 million of pre-tax distributable earnings as
compared to $75 million for the quarter ended June 30, 2007.
Assets under management increased 31% to $9.7 billion as of June 30,
2008 from $7.4 billion as of June 30, 2007.
The following table shows our Assets Under Management by fund:
(dollars in billions) June 30, 2008 December 31, 2007 June 30, 2007
Drawbridge Global Macro
Funds(3) $8.8 $8.1 $7.4
Fortress Commodities Fund(4) $0.9 N/A N/A
The following table shows our gross and net returns by fund:
Three months ended Six months ended
June 30, 2008 June 30, 2008
Gross Returns(5)
Drawbridge Global Macro Fund Ltd -2.07% -1.82%
Fortress Commodities Fund LP 10.63% 12.33%
Net Returns(6)
Drawbridge Global Macro Fund Ltd -2.55% -2.76%
Fortress Commodities Fund LP 8.11% 9.01%
Hybrid Hedge Funds
For the quarter ended June 30, 2008, the Company's hybrid hedge fund
business generated $9 million of pre-tax distributable earnings as compared
to $18 million for the quarter ended June 30, 2007.
Assets under management increased 20% to $8.4 billion as of June 30,
2008 from $7.0 billion as of June 30, 2007.
The following table shows our Assets Under Management by fund:
(dollars in billions) June 30, 2008 December 31, 2007 June 30, 2007
Drawbridge Special
Opportunities Funds(7) $6.6 $6.8 $6.1
Fortress Partners Funds(8) $1.8 $1.7 $0.9
The following table shows our gross and net returns by fund:
Three months ended Six months ended
June 30, 2008 June 30, 2008
Gross Returns(5)
Drawbridge Special Opportunities LP 1.44% 0.35%
Drawbridge Special Opportunities Ltd 0.18% -0.96%
Fortress Partners Fund LP 0.85% -3.50%
Fortress Partners Fund Ltd 1.92% -1.82%
Net Returns(6)
Drawbridge Special Opportunities LP 0.94% -0.65%
Drawbridge Special Opportunities Ltd -0.32% -2.18%
Fortress Partners Fund LP 0.50% -4.15%
Fortress Partners Fund Ltd 1.58% -2.52%
(3) Consolidated AUM for Drawbridge Global Macro Fund Ltd, Drawbridge
Global Macro Fund LP and Drawbridge Global Macro Managed Accounts.
(4) Fund commenced operations in January 2008.
(5) 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.
(6) The performance data contained herein reflects returns for a "new
issue eligible," single investor class, net of all fees and expenses
borne by the Fund, 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.
(7) Consolidated AUM for Drawbridge Special Opportunities Fund Ltd,
Drawbridge Special Opportunities Fund LP and Drawbridge Special
Opportunities Managed Accounts.
(8) Consolidated AUM for Fortress Partners Fund Ltd and Fortress Partners
Fund LP.
Principal Investments
At June 30, 2008, we had $1.1 billion of assets (excluding $0.3 billion
of cash and cash equivalents) in our principal investments segment, up from
$0.7 billion (excluding $0.3 billion of cash and cash equivalents) at June
30, 2007. During the three months ended June 30, 2008, we increased our
commitments to our principal investments by $17 million and funded $11
million of our commitments. We had $183 million of unfunded commitments to
our principal investments as of June 30, 2008.
Our principal investments segment generated a loss of $17 million for
the three months ended June 30, 2008 primarily due to an impairment of $10
million on our investment in Newcastle Investment Corp. and $8 million of
net interest expense.
Segment Expenses
Segment expenses were $90 million in the second quarter of 2008, down
from $153 million from the second quarter of 2007. Segment expenses for the
second quarters of 2008 and 2007 included $20 million and $82 million of
profit sharing compensation, respectively, which is a function of the
performance of various funds.
Fortress's headcount increased by approximately 24% since the second
quarter of 2007. As of June 30, 2008, the firm and its affiliates employed
880 people around the world.
The Company had $291 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 in
the IPO, and the issuance of restricted partnership units during this
quarter) for the quarter ended June 30, 2008, 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.
Dividend
The Company paid a second quarter cash dividend of $0.225 per share on
its common stock, for the quarter ending June 30, 2008, on July 11, 2008 to
stockholders of record on June 30, 2008.
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)
-- Fund management DE
-- Segment revenues
-- GAAP net income excluding principals agreement compensation
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, Thursday, August 7, 2008
at 10:00 AM eastern time. A copy of the earnings release will be 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 1-877-717-3044 (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 Friday, August 15, 2008 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 "57630061."
Fortress is a leading global alternative asset manager with
approximately $35.1 billion in assets under management as of June 30, 2008.
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 public company surplus,
dividends sources of management fees, incentive income and investment
income, estimated fund performance, the amount and source of expected
capital commitments for the new fund 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 actual amounts of future dividends, our public company
surplus, sources of management fees, incentive income and investment
income, the amount and source of expected capital commitments for any new
fund 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, each of 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
(Prior to January 17, 2007, Fortress Operating Group)
Consolidated and Combined Statements of Operations
(dollars in thousands, except share data)
Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
Revenues
Management fees
from affiliates $149,605 $118,678 $293,662 $161,965
Incentive income from
affiliates 18,300 132,961 55,444 177,189
Other revenues 20,191 16,480 39,870 36,265
Interest and dividend
income - investment
company holdings
Interest income - - - 243,713
Interest income from
controlled affiliate
investments - - - 4,707
Dividend income - - - 7,436
Dividend income from
controlled affiliate
investments - - - 53,174
188,096 268,119 388,976 684,449
Expenses
Interest expense
Investment company
holdings - - - 132,620
Other 9,888 6,711 20,224 18,731
Compensation and
benefits 137,460 187,783 264,479 405,300
Principals agreement
compensation 237,367 242,659 474,734 380,933
General, administrative
and other 19,746 23,603 36,316 62,908
Depreciation and
amortization 2,436 2,184 4,872 4,193
406,897 462,940 800,625 1,004,685
Other Income (Loss)
Gains (losses) from
investments
Investment company
holdings
Net realized gains
(losses) - - - 86,264
Net realized gains
(losses) from
controlled affiliate
investments - - - 715,024
Net unrealized gains
(losses) - - - (19,928)
Net unrealized gains
(losses) from
controlled affiliate
investments - - - (1,428,837)
Other investments
Net realized gains
(losses) 61 (1,735) 1,674 54
Net realized gains
(losses) from
affiliate investments (92) 9,452 155 145,493
Net unrealized gains
(losses) - (396) - (677)
Net unrealized gains
(losses) from
affiliate investments (6,584) (36,338) (36,401) (167,166)
Earnings (losses) from
equity method investees (26,500) 7,231 (75,629) 7,427
(33,115) (21,786) (110,201) (662,346)
Income (Loss) Before
Deferred Incentive Income,
Principals' and Others'
Interests in Income of
Consolidated Subsidiaries
and Income Taxes (251,916) (216,607) (521,850) (982,582)
Deferred incentive
income - - - 307,034
Principals' and others'
interests in (income)
loss of consolidated
subsidiaries 194,411 166,485 402,680 702,016
Income (Loss) Before
Income Taxes (57,505) (50,122) (119,170) 26,468
Income tax benefit
(expense) 1,949 (5,009) (5,303) (19,456)
Net Income (Loss) $(55,556) $(55,131) $(124,473) $7,012
Dividends declared per
Class A share $0.2250 $0.2250 $0.4500 $0.3924
Earnings Per Unit - January 1
Fortress Operating Group through
January 16
Net income per
Fortress Operating
Group unit $0.36
Weighted average
number of Fortress
Operating Group
units outstanding 367,143,000
Earnings Per Class A
share - Fortress January 17
Investment Group through
January 30
Net income (loss) per
Class A share, basic $(0.62) $(0.59) $(1.36) $(1.43)
Net income (loss) per
Class A share,
diluted $(0.67) $(0.66) $(1.37) $(1.43)
Weighted average
number of Class A
shares outstanding,
basic 94,913,677 94,894,636 94,904,157 89,226,434
Weighted average
number of Class A
shares outstanding,
diluted 406,985,227 406,966,186 406,975,707 89,226,434
Fortress Investment Group LLC
(Prior to January 17, 2007, Fortress Operating Group)
Consolidated Balance Sheets
(dollars in thousands, except share data)
June 30, December 31,
2008 2007
(Unaudited)
Assets
Cash and cash equivalents $255,155 $100,409
Due from affiliates 141,765 198,669
Investments
Equity method investees 961,123 1,091,918
Options in affiliates 871 16,001
Deferred tax asset 512,237 511,204
Other assets 72,684 71,580
$1,943,835 $1,989,781
Liabilities and Shareholders' Equity
Liabilities
Accrued compensation and benefits $126,040 $269,324
Due to affiliates 464,709 455,734
Dividends payable 21,286 21,285
Deferred incentive income 164,144 173,561
Debt obligations payable 800,000 535,000
Other liabilities 40,239 36,729
1,616,418 1,491,633
Commitments and Contingencies
Principals' and Others' Interests in
Equity of Consolidated Subsidiaries 173,104 308,023
Shareholders' Equity
Class A shares, no par value,
1,000,000,000 shares authorized,
94,604,806 and 94,597,646 shares
issued and outstanding at June 30,
2008 and December 31, 2007,
respectively. - -
Class B shares, no par value,
750,000,000 shares authorized,
312,071,550 shares issued and
outstanding - -
Paid-in capital 469,319 384,700
Retained earnings (accumulated
deficit) (315,564) (193,200)
Accumulated other comprehensive
income (loss) 558 (1,375)
154,313 190,125
$1,943,835 $1,989,781
Fortress Investment Group LLC
(Prior to January 17, 2007, Fortress Operating Group)
Reconciliation of Fund Management DE to Pre-tax Distributable
Earnings and GAAP Net Income (Loss)
(dollars in millions)
Three Months Ended
June 30, 2008 June 30, 2007
Fund Management DE $75 $130
Investment Income (Loss) (7) 20
Interest Expense (10) (7)
Pre-tax Distributable Earnings 58 143
Private equity incentive income 3 6
Hybrid hedge fund incentive income - (37)
Castle options incentive income - -
Castle options management fee - 1
Distributions of earnings from equity method
investees - (2)
Earnings from equity method investees (27) (8)
Gains/losses on options (2) (30)
Gains/losses on other investments (3) -
Impairment of investments 10 -
Employee equity-based compensation (53) (29)
Principal compensation (238) (243)
Employee portion of incentive income - (20)
Principals' interest in income of
consolidated subsidiaries 195 169
Taxes 2 (5)
GAAP Net Income (Loss)(9) $(55) $(55)
Six Months Ended
June 30, 2008 June 30, 2007
Fund Management DE $146 $333
Investment Income (Loss) (10) 49
Interest Expense (20) (19)
Pre-tax Distributable Earnings 116 363
Private equity incentive income 9 21
Hybrid hedge fund incentive income - (83)
Castle options incentive income - -
Castle options management fee - 2
Distributions of earnings from equity method
investees - (12)
Earnings from equity method investees (68) (19)
Gains/losses on options (15) (25)
Gains/losses on other investments (21) -
Impairment of investments 10 -
Employee equity-based compensation (89) (67)
Principal compensation (475) (381)
Employee portion of incentive income 10 (20)
Principals' interest in income of consolidated
subsidiaries 404 247
Taxes (5) (19)
GAAP Net Income (Loss)(9) $(124) $7
(9) We had GAAP net income of $133.4 million for the period from
January 1, 2007 through January 16, 2007 and a GAAP net loss of
$126.4 million for the period from January 17, 2007 through
June 30, 2007.
Fortress Investment Group LLC
(Prior to January 17, 2007, Fortress Operating Group)
Reconciliation of Segment Revenues to GAAP Revenues
(dollars in millions)
Three Months Ended
June 30, 2008 June 30, 2007
Segment Revenues $165 $283
Adjust incentive income 3 (33)
Adjust income from the receipt of options - 1
Other revenues 20 16
Consolidation and elimination - 1
GAAP Revenues $188 $268
Six Months Ended
June 30, 2008 June 30, 2007
Segment Revenues $342 $666
Adjust incentive income 9 (62)
Adjust income from the receipt of options - 2
Other revenues 38 30
Consolidation and elimination - 48
GAAP Revenues $389 $684
"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 Company 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, see note 10 to our financial statements included in our Quarterly
Report on Form 10-Q for the quarter ended June 30, 2008.
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
(Prior to January 17, 2007, Fortress Operating Group)
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, 2008 June 30, 2008
GAAP net loss $(55,556) $(124,473)
Principals agreement compensation 237,367 474,734
Portion not allocable to public shareholders (182,156) (364,311)
GAAP net loss excluding principals agreement
compensation $(345) $(14,050)
SOURCE Fortress Investment Group LLC
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Related links:
http://www.fortress.com
CONTACT:
Lilly H. Donohue, +1-212-798-6118, for
Fortress Investment Group LLC
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