Market Overview

Fortress Reports Fourth Quarter and Year End 2014 Results and Announces Dividend of $0.38 per Share

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NEW YORK--(BUSINESS WIRE)--

Fortress Investment Group LLC (NYSE: FIG) ("Fortress" or the "Company") today reported its fourth quarter and year end 2014 financial results.

FINANCIAL SUMMARY

  • Fortress declares a cash dividend of $0.38 per dividend paying share for the fourth quarter of 2014
  • Management Fee Paying Assets Under Management ("AUM") of $67.5 billion as of December 31, 2014, an increase of 2% from the previous quarter and an increase of 9% from December 31, 2013
  • GAAP net income of $148 million and $233 million (per diluted Class A share of $0.24 and $0.43) for the fourth quarter and year ended December 31, 2014, respectively; compared to GAAP net income of $318 million and $484 million (per diluted Class A share of $0.49 and $0.79) for the fourth quarter and year ended December 31, 2013, respectively
  • Pre-tax distributable earnings ("DE") of $123 million and $446 million for the fourth quarter and year ended December 31, 2014, respectively; compared to pre-tax DE of $121 million and $434 million for the fourth quarter and year ended December 31, 2013, respectively
  • Pre-tax DE per dividend paying share of $0.28 and $0.99 for the fourth quarter and year ended December 31, 2014, respectively, compared to pre-tax DE per dividend paying share of $0.24 and $0.88 for the fourth quarter and year ended December 31, 2013, respectively
  • Net cash and investments of $3.25 per dividend paying share as of December 31, 2014, up from $3.18 per dividend paying share as of September 30, 2014
  • $1.0 billion of gross embedded incentive income across funds and permanent capital vehicles as of December 31, 2014, that has not been recognized in DE
  • Total uncalled capital, or "dry powder," of $7.8 billion as of December 31, 2014, including $5.5 billion available for general investment purposes

BUSINESS HIGHLIGHTS

  • Raised $1.8 billion of capital across alternative investment businesses during the quarter, bringing total third-party alternative capital raised in 2014 to $6.4 billion
  • Recorded $1.0 billion of net client inflows for Logan Circle during the quarter, bringing total net client inflows to $5.4 billion in 2014
  • Investment performance summary as of December 31, 2014:
    • Fourth quarter 2014 net returns of 2.1% for Drawbridge Special Opportunities Fund ("DBSO") LP, 3.4% for Fortress Macro Fund Ltd and 3.1% for Fortress Asia Macro Fund Ltd
    • Full year 2014 net returns of 9.9% for DBSO LP, (1.6)% for Fortress Macro Fund Ltd and (1.2)% for Fortress Asia Macro Fund Ltd
    • Private Equity fund valuations increased 4.0% in 2014
    • Annualized inception-to-date net IRRs for the Credit Opportunities Fund and Credit Opportunities Fund II of 25.6% and 18.2%, respectively
    • 11 out of 16 Logan Circle fixed income strategies outperformed respective benchmarks for the year ended December 31, 2014 and 15 of 16 strategies have outperformed respective benchmarks since inception

"Record earnings in the fourth quarter capped off a terrific year for Fortress," said Fortress Chief Executive Officer Randy Nardone. "We closed 2014 with AUM at an all-time high of $67.5 billion, driven by $12 billion in aggregate of new capital raised for our alternative funds, equity raised for our permanent capital vehicles and net client inflows for Logan Circle Partners. Strong investment performance and increased realization activity contributed to full-year pre-tax DE of $0.99 per share, a 13% increase over the prior year and our highest full year of pre-tax DE since 2007. With these outstanding results, we are pleased to announce a $0.38 per share fourth quarter dividend, bringing full year dividends to $0.80 per share, or 100% of our after-tax DE."

"With strong investor demand for our strategies, major positive developments in some of our largest portfolio investments, and tremendous embedded value both in our funds and on our balance sheet, we have great visibility and optimism about the value we can create and distribute in the coming years."

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 full year period ended December 31, 2014. 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
2014 2014 2013 QoQ     YoY 2014 2013 YoY
(in millions, except per share amount)
GAAP
Revenues $ 671 $ 404 $ 566 66 % 19 % $ 1,812 $ 1,265 43 %
Expenses 529 398 243 33 % 118 % 1,614 898 80 %
Other Income (2 ) 11 19 N/A N/A 45 182 (75 )%
Net income (loss) 148 10 318 N/A (53 )% 233 484 (52 )%
Net income (loss) attributable to Class A Shareholders   61     4   146 N/A (58 )%   100   200 (50 )%
Per diluted share $ 0.24   $ 0.02 $ 0.49 N/A (51 )% $ 0.43 $ 0.79 (46 )%
Weighted average Class A shares outstanding, diluted 450 221 504 455 501
 
Distributable Earnings
Fund management DE $ 110 $ 67 $ 109 64 % 1 % $ 340 $ 403 (16 )%
Pre-tax DE   123     55   121 124 % 2 %   446   434 3 %

Per dividend paying share/unit

$ 0.28   $ 0.12 $ 0.24 133 % 17 % <
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