Market Overview

Fortress Reports Third Quarter 2014 Results and Announces Dividend of $0.08 per Share

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NEW YORK--(BUSINESS WIRE)--

Fortress Investment Group LLC (NYSE: FIG) (“Fortress” or the “Company”) today reported its third quarter 2014 financial results.

FINANCIAL SUMMARY

  • Fortress declares a cash dividend of $0.08 per dividend paying share for the third quarter of 2014
  • Management Fee Paying Assets Under Management (“AUM”) of $66.0 billion as of September 30, 2014, an increase of 3% from the previous quarter and an increase of 14% from September 30, 2013
  • GAAP net income of $10 million, or $0.02 per diluted Class A share, for the third quarter of 2014, compared to GAAP net income of $101 million, or $0.12 per diluted Class A share, for the third quarter of 2013
  • GAAP net income of $85 million, or $0.17 per diluted Class A share, for the nine months ended September 30, 2014, compared to GAAP net income of $166 million, or $0.21 per diluted Class A share, for the nine months ended September 30, 2013
  • Pre-tax distributable earnings (“DE”) of $55 million, or $0.12 per dividend paying share, for the third quarter of 2014, compared to pre-tax DE of $65 million, or $0.13 per dividend paying share, for the third quarter of 2013
  • Pre-tax DE of $323 million, or $0.72 per dividend paying share, for the nine months ended September 30, 2014, compared to pre-tax DE of $313 million, or $0.64 per dividend paying share, for the nine months ended September 30, 2013
  • Net cash and investments of $3.18 per dividend paying share as of September 30, 2014, up 5% from June 30, 2014
  • $1.0 billion, or $2.29 per dividend paying share, of gross embedded incentive income across funds and permanent capital vehicles as of September 30, 2014, that has not been recognized in DE
  • Total uncalled capital, or “dry powder,” of $7.5 billion as of September 30, 2014, including approximately $5.4 billion available for general investment purposes

BUSINESS HIGHLIGHTS

  • Raised $1.2 billion of capital across alternative investment businesses during the quarter, bringing total third-party alternative capital raised year-to-date through September 30, 2014 to $4.6 billion
  • Recorded $2.2 billion of net client inflows for Logan Circle during the quarter, bringing total net client inflows to $4.4 billion year-to-date through September 30, 2014
  • Investment performance summary as of September 30, 2014:
    • Third quarter 2014 net returns of 1.8% for Drawbridge Special Opportunities Fund (“DBSO”) LP, 1.1% for Fortress Macro Fund Ltd and 1.5% for Fortress Asia Macro Fund Ltd
    • Year-to-date 2014 net returns of 7.7% for DBSO LP, (4.9)% for Fortress Macro Fund Ltd and (4.0)% for Fortress Asia Macro Fund Ltd
    • Private Equity fund valuations increased 3.2% during the quarter and 5.2% year-to-date through September 30, 2014
    • Annualized inception-to-date net IRRs for the Credit Opportunities Fund and Credit Opportunities Fund II of 25.4% and 18.2%, respectively
    • 14 out of 16 Logan Circle fixed income strategies outperformed respective benchmarks year-to-date through September 30, 2014 and 15 of 16 strategies have outperformed respective benchmarks since inception

“Fortress is on track to deliver another strong full year of financial results,” said Fortress Chief Executive Officer Randy Nardone. “At $0.72 per share, we recorded our highest first three quarters of pre-tax distributable earnings since 2007. AUM closed the quarter at an all-time high of $66 billion, reflecting robust investor demand for Fortress and Logan Circle strategies and our permanent capital vehicles. Strong investment performance has continued to contribute to very substantial embedded value, both in our funds and on our balance sheet. Given these strengths, we are confident that we will have another strong full year, with catalysts in place for considerable upside in 2015 and 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 quarter and year-to-date period ended September 30, 2014. The consolidated GAAP statement of operations and balance sheet are presented on pages 13-14 of this press release.

                                                           
3Q 2Q 3Q   % Change   YTD YTD % Change
2014 2014 2013   QoQ     YoY   2014 2013 YoY
(in millions, except per share amount)
GAAP
Revenues $   404 $   427 $   232 (5)% 74% $   1,141 $   699 63%
Expenses 398 379 184 5% 116% 1,084 655 65%
Other Income 11 27 68 (59)% (84)% 47 163 (71)%
Net income (loss) 10 69 101 (86)% (90)% 85 166 (49)%
Net income (loss) attributable to Class A Shareholders     4     31     42   (87)%     (90)%       39     55 (29)%
Per diluted share $   0.02 $   0.12 $   0.12   (83)%     (83)%   $   0.17 $   0.21 (19)%
Weighted average Class A shares outstanding, diluted 221 445 502 (50)% (56)% 457 500 (9)%
 
Distributable Earnings
Fund management DE <
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