Earnings Release
Fortress Reports Fourth Quarter & Year End 2009 Financial Results
Company Release - 2/25/2010 6:00 AM EST
Full Year 2009 Highlights
-- Assets under managementof $31.8 billion as of December 31, 2009 -- Raised $1.4 billion of new third-party capital -- Fund management distributable earnings of $208 million -- Pre-tax distributable earnings (DE) of $126 million -- GAAP net income, excluding principals agreement compensation, of $43 million. GAAP net loss of $909 million. GAAP net loss attributable to Class A Shareholders of $255 million
Fourth Quarter Highlights
-- Fund management distributable earnings of $60 million -- Pre-tax distributable earnings (DE) of $1 million -- GAAP net loss, excluding principals agreement compensation, of $21 million. GAAP net loss of $261 million. GAAP net loss attributable to Class A Shareholders of $84 million
Subsequent Events in the First Quarter 2010
-- Fortress was issued an investment grade rating of BBB from Fitch and BBB- from S&P, in each case with a stable outlook
NEW YORK--(BUSINESS WIRE)-- Fortress Investment Group LLC (NYSE: FIG) today reported its year end and fourth quarter 2009 results.
Full Year 2009
For the year ended December 31, 2009, our GAAP net loss was $909 million versus a loss of $1,221 million for 2008. Our GAAP net loss attributable to Class A Shareholders was $255 million, or $2.08 loss per diluted share, as compared to a loss of $322 million, or $3.50 loss per diluted share, for the year ended December 31, 2008. Excluding principals agreement compensation, full year 2009 GAAP net income was $43 million, up from a net loss of $266 million in 2008.
For 2009, fund management distributable earnings was $208 million compared to $216 million in 2008.
Pre-tax DE for 2009 was $126 million, or $0.26 per dividend paying share/unit, versus a loss of $162 million, or $0.36 loss per dividend paying share/unit, for 2008.
Fourth Quarter 2009
For the quarter ended December 31, 2009, our GAAP net loss was $261 million compared to a loss of $426 million for fourth quarter 2008. Our GAAP net loss attributable to Class A Shareholders was $84 million, or $0.58 loss per diluted share, as compared to a loss of $140 million, or $1.50 loss per diluted share, for the fourth quarter 2008. Excluding principals agreement compensation, fourth quarter GAAP net loss was $21 million, up from a net loss of $187 million for fourth quarter 2008.
For the fourth quarter, fund management distributable earnings was $60 million compared to $7 million in the fourth quarter of 2008.
Pre-tax DE for the fourth quarter was $1 million versus a loss of $258 million for the fourth quarter of 2008.
The table below details Fortress's GAAP Net Income (Loss) and Distributable Earnings for the full year and fourth quarter 2009 and 2008:
Full Year $ Fourth Quarter $ 2009 2008 Change 2009 2008 Change (in millions, except per share amount) GAAP Net income $ (909 ) $ (1,221 ) $ 312 $ (261 ) $ (426 ) $ 165 (loss) Net income (loss) attributable $ (255 ) $ (322 ) $ 67 $ (84 ) $ (140 ) $ 56 to Class A Shareholders Per diluted $ (2.08 ) $ (3.50 ) $ 1.42 $ (0.58 ) $ (1.50 ) $ 0.92 share Net income (loss) excluding $ 43 $ (266 ) $ 309 $ (21 ) $ (187 ) $ 166 principals agreement compensation Distributable Earnings Fund management $ 208 $ 216 $ (8 ) $ 60 $ 7 $ 53 DE Pre-tax DE $ 126 $ (162 ) $ 288 $ 1 $ (258 ) $ 259 Per dividend paying $ 0.26 $ (0.36 ) $ 0.62 $ 0.00 $ (0.56 ) $ 0.56 share/unit Weighted Average Dividend 492 453 511 462 Paying Shares and Units Outstanding
For reconciliations of non-GAAP measures, please see Exhibit 2, "Reconciliation of Fund Management DE to Pre-tax Distributable Earnings and GAAP Net Income (Loss) and Reconciliation of Segment Revenues to GAAP Revenues," Exhibit 3, "Reconciliation of GAAP Net Income (Loss) Excluding Principals Agreement Compensation to GAAP Net Income (Loss)" and 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)" at the end of 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 businesses, 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 Annual Report on Form 10-K. 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.
Supplemental Data for Fourth Quarter 2009 and 2008:
Three Months Ended December 31, 2009 Private Equity Liquid Hybrid Funds Principal Hedge (in millions) Total Funds Castles Funds Hedge PE Funds Investments Funds Assets Under Management AUM - October $ 32,000 $ 11,057 $ 3,279 $ 4,483 $ 9,830 $ 3,351 $ - 1, 2009 Capital 616 - - 409 - 207 - raised Capital - - - - - - - acquisitions Increase in invested 503 9 - - - 494 - capital Redemptions (1,059 ) - - (765 ) (294 ) - - 1,2 Return of capital (789 ) (53 ) - - (20 ) (716 ) - distributions Equity - - - - - - - buyback Crystallized Incentive (7 ) - - (7 ) - - - Income Income (loss) and foreign 498 331 (47 ) 177 26 11 - exchange AUM - Ending $ 31,762 $ 11,344 $ 3,232 $ 4,297 $ 9,542 $ 3,347 $ - Balance Third-Party Capital $ 677 $ - $ - $ 409 $ - $ 268 $ - Raised Segment Revenues Management $ 100 $ 22 $ 13 $ 19 $ 33 $ 13 $ - fees Incentive 57 36 - 5 1 15 - income Total 157 58 13 24 34 28 - Segment Expenses Operating (70 ) (11 ) (8 ) (18 ) (27 ) (6 ) - expenses Profit sharing (26 ) (13 ) - (4 ) (1 ) (8 ) - compensation expenses Unallocated (1 ) Expenses Total (97 ) (24 ) (8 ) (22 ) (28 ) (14 ) - Fund 60 34 5 2 6 14 - Management DE Investment (55 ) (55 ) Income Interest (4 ) (4 ) Expense Pre-tax Distributable $ 1 $ 34 $ 5 $ 2 $ 6 $ 14 $ (59 ) Earnings
Three Months Ended December 31, 2008 Private Equity Liquid Hybrid Funds Principal Hedge (in millions) Total Funds Castles Funds Hedge PE Funds Investments Funds Assets Under Management AUM - October $ 34,289 $ 11,696 $ 3,227 $ 9,104 $ 8,221 $ 2,041 $ - 1, 2008 Capital 28 - - 16 12 - - raised Increase in invested 1,901 786 - - 1 1,114 - capital Redemptions (1,198 ) - - (1,198 ) - - - Return of capital (537 ) (69 ) (28 ) - (3 ) (437 ) - distributions Equity - - - - - - - buyback Crystallized Incentive - - - - - - - Income Income (loss) and foreign (5,029 ) (2,106 ) (17 ) (753 ) (1,737 ) (416 ) - exchange AUM - Ending $ 29,454 $ 10,307 $ 3,182 $ 7,169 $ 6,494 $ 2,302 $ - Balance Segment Revenues Management $ 147 $ 43 $ 13 $ 48 $ 36 $ 7 $ - fees Incentive (107 ) (107 ) - - - - - income Total 40 (64 ) 13 48 36 7 - Segment Expenses Operating (64 ) (5 ) (9 ) (19 ) (26 ) (5 ) - expenses Profit sharing 32 35 (1 ) (4 ) 2 - - compensation expenses Unallocated (1 ) Expenses Total (33 ) 30 (10 ) (23 ) (24 ) (5 ) - Fund 7 (34 ) 3 25 12 2 - Management DE Investment (255 ) (255 ) Income Interest (10 ) (10 ) Expense Pre-tax Distributable $ (258 ) $ (34 ) $ 3 $ 25 $ 12 $ 2 $ (265 ) Earnings
Supplemental Data for Full Year 2009 and 2008:
Year Ended December 31, 2009 Private Equity Liquid Hybrid Funds Principal Hedge (in millions) Total Funds Castles Funds Hedge PE Funds Investments Funds Assets Under Management AUM - January $ 29,454 $ 10,307 $ 3,182 $ 7,169 $ 6,494 $ 2,302 $ - 1, 2009 Capital 1,318 - - 704 - 614 - raised Capital acquisitions 3,310 - - - 3,310 - - 3 Increase in invested 1,348 79 - 1 2 1,266 - capital Redemptions (5,207 ) - - (4,481 ) (726 ) - - 1,2 Return of capital (1,682 ) (170 ) - - (36 ) (1,476 ) - distributions Equity - - - - - - - buyback Reset Date - - - - - - - Crystallized Incentive (7 ) - - (7 ) - - - Income Income (loss) and foreign 3,228 1,128 50 911 498 641 - exchange AUM - Ending $ 31,762 $ 11,344 $ 3,232 $ 4,297 $ 9,542 $ 3,347 $ - Balance Third-Party Capital $ 1,379 $ - $ - $ 704 $ - $ 675 $ - Raised Segment Revenues Management $ 424 $ 131 $ 50 $ 80 $ 123 $ 40 $ - fees Incentive 75 36 - 14 2 23 - income Total 499 167 50 94 125 63 - Segment Expenses Operating (243 ) (38 ) (29 ) (57 ) (97 ) (22 ) - expenses Profit sharing (47 ) (13 ) - (16 ) (6 ) (12 ) - compensation expenses Unallocated (1 ) Expenses Total (291 ) (51 ) (29 ) (73 ) (103 ) (34 ) - Fund 208 116 21 21 22 29 - Management DE Investment (58 ) (58 ) Income Interest (24 ) (24 ) Expense Pre-tax Distributable $ 126 $ 116 $ 21 $ 21 $ 22 $ 29 $ (82 ) Earnings
Year Ended December 31, 2008 Private Equity Liquid Hybrid Funds Principal Hedge (in millions) Total Funds Castles Funds Hedge PE Funds Investments Funds Assets Under Management AUM - January $ 32,930 $ 12,643 $ 3,328 $ 8,128 $ 8,196 $ 635 $ - 1, 2008 Capital 5,124 745 - 2,827 1,385 167 - raised Increase in invested 4,430 1,804 - - 27 2,599 - capital Redemptions (2,275 ) - - (1,804 ) (471 ) - - Return of capital (921 ) (366 ) (28 ) - (13 ) (514 ) - distributions Equity (31 ) - (31 ) - - - - buyback Crystallized Incentive (110 ) - - (15 ) (95 ) - - Income Income (loss) and foreign (9,693 ) (4,519 ) (87 ) (1,967 ) (2,535 ) (585 ) - exchange AUM - Ending $ 29,454 $ 10,307 $ 3,182 $ 7,169 $ 6,494 $ 2,302 $ - Balance Segment Revenues Management $ 598 $ 163 $ 54 $ 218 $ 148 $ 15 $ - fees Incentive (63 ) (94 ) - 17 14 - - income Total 535 69 54 235 162 15 - Segment Expenses Operating (289 ) (31 ) (34 ) (97 ) (115 ) (12 ) - expenses Profit sharing (29 ) 27 (5 ) (42 ) (9 ) - - compensation expenses Unallocated (1 ) Expenses Total (319 ) (4 ) (39 ) (139 ) (124 ) (12 ) - Fund 216 65 15 96 38 3 - Management DE Investment (338 ) (338 ) Income Interest (40 ) (40 ) Expense Pre-tax Distributable $ (162 ) $ 65 $ 15 $ 96 $ 38 $ 3 $ (378 ) Earnings
1 Subsequent to year end, the liquid hedge funds had redemption payouts of approximately $0.7 billion in January 2010. Approximately $0.5 billion of this amount consisted of distributions from Macro Funds' SPVs.
2 The hybrid hedge funds, which have an annual notice date for redemptions, have received redemption notices effective December 31, 2009 of approximately $1.5 billion, using December 31, 2009 values. This amount is subject to change based on performance. For primarily all of these funds, redemptions will be paid out over time as the underlying investments are liquidated, in accordance with the governing documents of the applicable funds.
3 Includes $3.3 billion of capital under management due to Fortress's takeover of management of the D.B. Zwirn funds and related investment vehicles.
Overview
We managed $31.8 billion of assets in private equity funds, liquid hedge funds and hybrid funds as of December 31, 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 2009, we generated fund management DE of $208 million. Including principal investments, Fortress generated pre-tax distributable earnings of $126 million.
For the year ended December 31, 2009, the private equity segments accounted for approximately 43% of total segment revenues, the liquid hedge funds segment accounted for approximately 19% of total segment revenues and the hybrid funds segments accounted for approximately 38% of total segment revenues.
In 2009, the private equity, liquid hedge funds and hybrid funds businesses accounted for approximately 66%, 10% and 24%, respectively, of total fund management DE.
In the fourth quarter of 2009, we generated fund management DE of $60 million. Including principal investments, Fortress generated pre-tax distributable earnings of $1 million.
For the quarter ended December 31, 2009, the private equity segments accounted for approximately 45% of total segment revenues, the liquid hedge funds segment accounted for approximately 15% of total segment revenues and the hybrid funds segments accounted for approximately 40% of total segment revenues.
For the quarter ended December 31, 2009, the private equity, liquid hedge funds and hybrid funds businesses accounted for approximately 64%, 3% and 33%, respectively, of total fund management DE.
Private Equity - Funds
For 2009, the Company's private equity funds generated pre-tax DE of $116 million compared to $65 million for 2008.
For the quarter ended December 31, 2009, the Company's private equity funds had pre-tax DE of $34 million compared to pre-tax DE loss of $34 million for the quarter ended December 31, 2008.
Assets under management for private equity funds was $11.3 billion at December 31, 2009 compared to $10.3 billion at December 31, 2008.
Private Equity - Castles
For 2009, the Company's Castles generated pre-tax DE of $21 million compared to $15 million for 2008.
For the quarter ended December 31, 2009, the Company's Castles generated pre-tax DE of $5 million compared to $3 million for the quarter ended December 31, 2008.
Assets under management for the Castles was $3.2 billion at December 31, 2009 compared to $3.2 billion at December 31, 2008.
Liquid Hedge Funds
For 2009, the Company's liquid hedge fund business generated pre-tax DE of $21 million as compared to $96 million for 2008.
For the quarter ended December 31, 2009, the Company's liquid hedge fund business generated pre-tax DE of $2 million compared to $25 million for the quarter ended December 31, 2008.
Assets under management for the liquid hedge funds was $4.3 billion at December 31, 2009 compared to $7.2 billion at December 31, 2008. Subsequent to quarter end, the liquid hedge funds had redemption payouts of approximately $0.7 billion in January 2010. Approximately $0.5 billion of this amount consisted of distributions from Macro Funds' SPVs.
The following table shows our Assets Under Management by fund:
(dollars in billions) December 31, 2009 December 31, 2008 Macro Funds 4 $3.4 $6.1 Fortress Commodities Funds5 $0.9 $1.1
The following table shows our gross and net returns by fund: 6
Three Months Ended Year Ended Estimated Month Gross Returns December 31, 2009 December Ended 31, 2009 January 31, 2010 Fortress Macro Offshore Fund L.P. 3.9% 13.7% 2.4% 7 Drawbridge Global 4.4% 26.5% 2.3% Macro Fund Ltd Fortress Commodities Fund 3.2% 11.0% 3.5% L.P. Net Returns Fortress Macro Offshore Fund L.P. 2.7% 9.8% 1.8% 7 Drawbridge Global 3.9% 24.2% 2.1% Macro Fund Ltd Fortress Commodities Fund 2.0% 7.3% 2.7% L.P.
4 Combined AUM for Fortress Macro Onshore Fund LP, Fortress Macro Offshore Fund L.P., Fortress Macro Fund Ltd, Fortress Macro managed accounts, Drawbridge Global Macro Fund L.P., Drawbridge Global Macro Intermediate Fund L.P., Drawbridge Global Macro Alpha Intermediate Fund L.P., DBGM Offshore Ltd, DBGM Onshore LP, DBGM Alpha V Ltd and Drawbridge Global Macro managed accounts.
5 Combined AUM for Fortress Commodities Fund L.P. and Commodities managed accounts.
6 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 management fees borne by the Fund and incentive allocations while net returns reflect performance data after taking into account management fees borne by the Fund and incentive allocations.
7 The date of inception of the Fund was May 1, 2009.
Hybrid - Hedge Funds
For 2009, the Company's hybrid hedge fund business generated pre-tax DE of $22 million as compared to $38 million for 2008.
For the quarter ended December 31, 2009, the Company's hybrid hedge fund business generated pre-tax DE of $6 million compared to $12 million for the quarter ended December 31, 2008.
Assets under management for the hybrid hedge funds was $9.5 billion at December 31, 2009 compared to $6.5 billion at December 31, 2008. The hybrid hedge funds, which have an annual notice date for redemptions, have received redemption notices effective December 31, 2009 of approximately $1.5 billion, using December 31, 2009 values. This amount is subject to change based on performance. For primarily all of these funds, redemptions will be paid out over time as the underlying investments are liquidated, in accordance with the governing documents of the applicable funds. During this period, such amounts continue to be subject to management fees and, as applicable, incentive income.
The following table shows our Assets Under Management by fund:
(dollars in billions) December 31, 2009 December 31, 2008 Drawbridge Special Opportunities Funds $5.2 $5.0 8 Fortress Partners Funds 9 $1.9 $1.5 Fortress Value Recovery Funds 10 $2.5 N.A.
The following table shows our gross and net returns by fund: 11
Three Months Ended Year Ended Gross Returns December 31, 2009 December 31, 2009 Drawbridge Special Opportunities LP 12 6.3% 27.5% Drawbridge Special Opportunities Ltd 7.9% 32.6% 12 Fortress Partners Fund LP 5.1% 18.0% Fortress Partners Offshore Fund LP 6.0% 20.2% Net Returns Drawbridge Special Opportunities LP 12 5.8% 25.0% Drawbridge Special Opportunities Ltd 7.4% 30.0% 12 Fortress Partners Fund LP 4.8% 16.7% Fortress Partners Offshore Fund LP 5.7% 18.9%
8 Combined AUM for Drawbridge Special Opportunities Fund Ltd, Drawbridge Special Opportunities Fund LP and Drawbridge Special Opportunities Fund managed accounts.
9 Combined AUM for Fortress Partners Offshore Fund LP and Fortress Partners Fund LP.
10 Fortress will receive management fees from these funds equal to 1% of cash receipts and up to 1% per annum on certain managed assets, subject to collectability, and may receive limited incentive income if aggregate realizations exceed an agreed threshold.
11 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 management fees borne by the Fund and incentive allocations while net returns reflect performance data after taking into account management fees borne by the Fund and incentive allocations. Specific performance may vary based on, among other things, whether fund investors are invested in one or more special investments.
12 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 2009, the Company's hybrid private equity fund business generated pre-tax DE of $29 million as compared to $3 million for 2008.
For the quarter ended December 31, 2009, the Company's hybrid private equity fund business generated pre-tax DE of $14 million as compared to $2 million for the quarter ended December 31, 2008.
Assets under management for the hybrid private equity funds was $3.3 billion at December 31, 2009 compared to $2.3 billion at December 31, 2008.
Principal Investments
At December 31, 2009, we had $0.7 billion of assets (excluding cash and cash equivalents) in our principal investments segment, compared to $0.7 billion (excluding cash and cash equivalents) at December 31, 2008. During the fourth quarter of 2009, we increased commitments to our principal investments by $1 million and funded $7 million of our commitments. We had $131 million of unfunded commitments to our principal investments as of December 31, 2009.
Our principal investments segment generated a loss of $82 million for 2009, due primarily to reserves for a non-cash impairment of $101 million on certain of our funds' investments and $24 million of net interest expense, offset by $43 million of earnings on our balance sheet investments.
Our principal investments segment generated a loss of $59 million for the three months ended December 31, 2009, due primarily to reserves for a non-cash impairment of $67 million on certain of our funds' investments and $4 million of net interest expense, offset by $12 million of earnings on our balance sheet investments.
Segment Expenses
Segment expenses for 2009 were $291 million, down from $319 million for 2008. Segment expenses for 2009 and 2008 include $47 million and $29 million of profit sharing compensation, respectively, which is a function of the performance of various funds.
Segment expenses were $97 million in the fourth quarter of 2009, up from $33 million for the fourth quarter of 2008. Segment expenses for the fourth quarter of 2009 included $26 million of profit sharing compensation, which is a function of revenues received from our various funds.
The Company had $301 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 December 31, 2009, which contributed to our reporting a GAAP net loss. Share-based compensation expense is not included in segment expenses or in the calculation of distributable earnings.
Corporate Credit Agreement
During the fourth quarter, we paid down the credit facility by $14 million. As of December 31, 2009, we have $398 million of debt outstanding and have capacity available of approximately $60 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 -- GAAP net income excluding principals agreement compensation -- Weighted Average Dividend Paying Shares and Units Outstanding (Used for DEPS)
We urge you to read the reconciliation of such data to the related GAAP measures appearing in the exhibits to this release.
Conference Call
Management will host a conference call today, Thursday, February 25, 2010 at 8:00 A.M. Eastern Time. A copy of the earnings release is posted to the Investor Relations section of Fortress's website, www.fortress.com.
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 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 until 11:59 P.M. Eastern Time on Friday, March 12, 2010 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 "54712067."
About Fortress
Fortress is a leading global alternative asset manager with approximately $31.8 billion in assets under management as of December 31, 2009. Fortress manages private equity funds, liquid hedge funds and hybrid 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 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, 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.
Fortress Investment Group LLC Consolidated Statements of Operations (dollars in thousands, except share data) Year Ended December 31, 2009 2008 2007 Revenues Management fees from $ 433,501 $ 593,007 $ 414,166 affiliates Incentive income from 50,900 56,588 442,892 affiliates Expense reimbursements from 85,186 52,627 48,191 affiliates Other revenues 14,508 29,578 21,736 Interest and dividend income - investment - - 309,030 company holdings 584,095 731,800 1,236,015 Expenses Interest expense Investment company - - 132,620 holdings Fortress debt 24,271 40,140 34,313 Compensation and 504,645 440,659 658,815 benefits Principals agreement 952,077 954,685 852,956 compensation General, administrative and 92,059 84,875 99,885 other Depreciation and 10,784 9,994 8,454 amortization 1,583,836 1,530,353 1,787,043 Other Income (Loss) Gains (losses) from investments Investment company - - (647,477 ) holdings Direct investments Net realized gains (2,522 ) (1,770 ) (2,037 ) (losses) Net realized gains (losses) from 98 (689 ) 145,449 affiliate investments Net unrealized gains - - 1,316 (losses) Net unrealized gains (losses) from 27,797 (55,846 ) (253,888 ) affiliate investments Tax receivable agreement liability (55 ) 55,115 - reduction Earnings (losses) from equity method 60,281 (304,180 ) (61,674 ) investees 85,599 (307,370 ) (818,311 ) Income (Loss) Before Deferred Incentive (914,142 ) (1,105,923 ) (1,369,339 ) Income and Income Taxes Deferred incentive - - 307,034 income Income (Loss) Before (914,142 ) (1,105,923 ) (1,062,305 ) Income Taxes Income tax benefit 5,000 (115,163 ) 5,632 (expense) Net Income (Loss) $ (909,142 ) $ (1,221,086 ) $ (1,056,673 ) Principals' and Others' Interests in Income (Loss) of $ (654,527 ) $ (898,798 ) $ (996,870 ) Consolidated Subsidiaries Net Income (Loss) Attributable to Class $ (254,615 ) $ (322,288 ) $ (59,803 ) A Shareholders Dividends Declared $ - $ 0.4500 $ 0.8424 Per Class A Share Jan 1 through Jan 16 Earnings Per Unit - Fortress Operating Group Net income per Fortress Operating $ 0.36 Group unit Weighted average number of Fortress 367,143,000 Operating Group units outstanding Jan 17 through Dec 31 Earnings (Loss) Per Class A Share - Fortress Investment Group Net income (loss) per $ (2.08 ) $ (3.50 ) $ (2.14 ) Class A share, basic Net income (loss) per Class A share, $ (2.08 ) $ (3.50 ) $ (2.14 ) diluted Weighted average number of Class A 125,740,897 94,934,487 92,214,827 shares outstanding, basic Weighted average number of Class A 125,740,897 94,934,487 92,214,827 shares outstanding, diluted
Fortress Investment Group LLC Consolidated Balance Sheets (dollars in thousands, except share data) December 31, 2009 2008 Assets Cash and cash equivalents $ 197,099 $ 263,337 Due from affiliates 64,511 38,504 Investments Equity method investees 866,467 774,382 Options in affiliates 748 39 Deferred tax asset 440,639 408,066 Other assets 90,803 93,407 $ 1,660,267 $ 1,577,735 Liabilities and Equity Liabilities Accrued compensation and benefits $ 131,134 $ 158,033 Due to affiliates 345,976 346,265 Deferred incentive income 160,097 163,635 Debt obligations payable 397,825 729,041 Other liabilities 25,921 26,741 1,060,953 1,423,715 Commitments and Contingencies Equity Class A shares, no par value, 1,000,000,000 shares authorized, 145,701,622 and 94,609,525 shares issued and outstanding at December 31, 2009 and 2008, respectively - - Class B shares, no par value, 750,000,000 shares authorized, 307,773,852 and 312,071,550 shares issued and outstanding at December 31, 2009 and 2008, respectively - - Paid-in capital 1,029,536 596,803 Retained earnings (accumulated deficit) (767,994 ) (513,379 ) Accumulated other comprehensive income (loss) (325 ) (866 ) Total Fortress shareholders' equity 261,217 82,558 Principals' and others' interests in equity of 338,097 71,462 consolidated subsidiaries Total Equity 599,314 154,020 $ 1,660,267 $ 1,577,735
Fortress Investment Group LLC Exhibit 1 Assets Under Management and Fund Management DE (dollars in millions) Three Months Ended Three Months Ended September December September December March 31, June 30, 30, 31, Full Year March 31, June 30, 30, 31, Full Year 2008 2008 2008 2008 2009 2009 2009 2009 2009 2008 Fortress Assets Under Management Private Equity & $ 15,885 $ 16,137 $ 14,923 $ 13,489 $ 13,489 $ 13,239 $ 13,795 $ 14,336 $ 14,576 $ 14,576 Castles Liquid Hedge 9,254 9,705 9,104 7,169 7,169 4,809 4,571 4,483 4,297 4,297 Funds Hybrid Hedge 8,149 8,266 8,221 6,494 6,494 6,451 9,918 9,830 9,542 9,542 Funds Hybrid Private 741 858 2,041 2,302 2,302 2,039 2,757 3,351 3,347 3,347 Equity Funds AUM - Ending $ 34,029 $ 34,966 $ 34,289 $ 29,454 $ 29,454 $ 26,538 $ 31,041 $ 32,000 $ 31,762 $ 31,762 Balance Third-Party Capital $ 2,822 $ 2,839 $ 2,581 $ 420 $ 8,662 $ 9 $ 233 $ 460 $ 677 $ 1,379 Raised Segment Revenues Management $ 145 $ 150 $ 156 $ 147 $ 598 $ 106 $ 110 $ 108 $ 100 $ 424 fees Incentive 32 15 (3 ) (107 ) (63 ) 1 7 10 57 75 income Total 177 165 153 40 535 107 117 118 157 499 Segment Expenses Operating (74 ) (70 ) (81 ) (64 ) (289 ) (59 ) (56 ) (58 ) (70 ) (243 ) expenses Profit sharing (32 ) (20 ) (9 ) 32 (29 ) (4 ) (8 ) (9 ) (26 ) (47 ) compensation expenses Unallocated - - - (1 ) (1 ) - - - (1 ) (1 ) Expenses Total (106 ) (90 ) (90 ) (33 ) (319 ) (63 ) (64 ) (67 ) (97 ) (291 ) Fund Management $ 71 $ 75 $ 63 $ 7 $ 216 $ 44 $ 53 $ 51 $ 60 $ 208 DE
Fortress Investment Group LLC Exhibit 1 Assets Under Management and Fund Management DE (dollars in millions) Three Months Ended Three Months Ended March 31, September December Full Year September December Full Year June 30, 30, 31, March 31, June 30, 30, 31, 2008 2008 2008 2008 2009 2009 2009 2009 2008 2009 Private Equity Funds & Castles Assets Under Management Private $ 12,382 $ 12,639 $ 11,696 $ 10,307 $ 10,307 $ 10,161 $ 10,602 $ 11,057 $ 11,344 $ 11,344 Equity Funds Castles 3,503 3,498 3,227 3,182 3,182 3,078 3,193 3,279 3,232 3,232 AUM - Ending $ 15,885 $ 16,137 $ 14,923 $ 13,489 $ 13,489 $ 13,239 $ 13,795 $ 14,336 $ 14,576 $ 14,576 Balance Third-Party Capital $ - $ 745 $ 500 $ - $ 1,245 $ - $ - $ - $ - $ - Raised Segment Revenues Management $ 53 $ 55 $ 53 $ 56 $ 217 $ 49 $ 52 $ 45 $ 35 $ 181 fees Incentive 29 - (16 ) (107 ) (94 ) - - - 36 36 income Total 82 55 37 (51 ) 123 49 52 45 71 217 Segment Expenses Operating (15 ) (17 ) (19 ) (14 ) (65 ) (16 ) (17 ) (15 ) (19 ) (67 ) expenses Profit sharing (13 ) (2 ) 3 34 22 - - - (13 ) (13 ) compensation expenses Total (28 ) (19 ) (16 ) 20 (43 ) (16 ) (17 ) (15 ) (32 ) (80 ) Fund Management $ 54 $ 36 $ 21 $ (31 ) $ 80 $ 33 $ 35 $ 30 $ 39 $ 137 DE
Fortress Investment Group LLC Exhibit 1 Assets Under Management and Fund Management DE (dollars in millions) Three Months Ended Three Months Ended March 31, June 30, September December Full Year March 31, June 30, September December Full Year 30, 31, 30, 31, 2008 2008 2008 2009 2009 2009 2008 2008 2009 2009 Liquid Hedge Funds Assets Under Management Fortress Macro Funds $ - $ - $ - $ - $ - $ - $ 1,174 $ 1,544 $ 1,986 $ 1,986 13 Drawbridge Global Macro 8,597 8,797 8,045 6,101 6,101 3,781 2,484 2,074 1,429 1,429 Funds 14 Fortress Commodities 657 908 1,059 1,068 1,068 1,028 913 865 882 882 Funds 15 AUM - Ending $ 9,254 $ 9,705 $ 9,104 $ 7,169 $ 7,169 $ 4,809 $ 4,571 $ 4,483 $ 4,297 $ 4,297 Balance16 Third-Party Capital $ 1,286 $ 925 $ 600 $ 16 $ 2,827 $ 9 $ 99 $ 187 $ 409 $ 704 Raised Segment Revenues Management $ 53 $ 57 $ 60 $ 48 $ 218 $ 23 $ 20 $ 18 $ 19 $ 80 fees Incentive 3 14 - - 17 - - 9 5 14 income Total 56 71 60 48 235 23 20 27 24 94 Segment Expenses Operating (24 ) (25 ) (29 ) (19 ) (97 ) (14 ) (11 ) (14 ) (18 ) (57 ) expenses Profit sharing (17 ) (16 ) (5 ) (4 ) (42 ) (3 ) (2 ) (7 ) (4 ) (16 ) compensation expenses Total (41 ) (41 ) (34 ) (23 ) (139 ) (17 ) (13 ) (21 ) (22 ) (73 ) Fund Management $ 15 $ 30 $ 26 $ 25 $ 96 $ 6 $ 7 $ 6 $ 2 $ 21 DE Returns Gross Returns17 Fortress Macro N/A N/A N/A N/A N/A N/A 4.3 % 4.9 % 3.9 % 13.7 % Offshore Fund L.P. 18 Drawbridge Global Macro 0.3 % -2.1 % -10.6 % -9.1 % -20.3 % 5.7 % 6.2 % 7.9 % 4.4 % 26.5 % Fund Ltd Fortress Commodities 1.5 % 10.6 % -1.1 % 0.1 % 11.2 % 0.0 % 2.3 % 5.2 % 3.2 % 11.0 % Fund L.P. Net Returns17 Fortress Macro N/A N/A N/A N/A N/A N/A 3.2 % 3.6 % 2.7 % 9.8 % Offshore Fund L.P. 18 Drawbridge Global Macro -0.2 % -2.5 % -11.1 % -9.6 % -21.9 % 5.2 % 5.8 % 7.4 % 3.9 % 24.2 % Fund Ltd Fortress Commodities 0.8 % 8.1 % -1.6 % -0.4 % 6.8 % -0.5 % 1.8 % 3.9 % 2.0 % 7.3 % Fund L.P.
13 Combined AUM for Fortress Macro Onshore Fund LP, Fortress Macro Offshore Fund L.P., Fortress Macro Fund Ltd and Fortress Macro managed accounts.
14 Combined AUM for Drawbridge Global Macro Fund L.P., Drawbridge Global Macro Intermediate Fund L.P., Drawbridge Global Macro Alpha Intermediate Fund L.P., DBGM Offshore Ltd, DBGM Onshore LP, DBGM Alpha V Ltd and Drawbridge Global Macro managed accounts.
15 Combined AUM for Fortress Commodities Fund L.P. and Commodities managed accounts.
16 Subsequent to year end, the liquid hedge funds had redemption payouts of approximately $0.7 billion in January 2010. Approximately $0.5 billion of this amount consisted of distributions from the Macro Funds' SPVs.
17 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 management fees borne by the Fund and incentive allocations while net returns reflect performance data after taking into account management fees borne by the Fund and incentive allocations.
18 The date of inception of the Fund was May 1, 2009.
Fortress Investment Group LLC Exhibit 1 Assets Under Management and Fund Management DE (dollars in millions) Three Months Ended Three Months Ended March 31, June 30, September December Full Year March 31, June 30, September December Full Year 30, 31, 30, 31, 2008 2008 2008 2009 2009 2009 2008 2008 2009 2009 Hybrid Hedge Funds Assets Under Management Drawbridge Special $ 6,418 $ 6,475 $ 6,391 $ 4,964 $ 4,964 $ 4,915 $ 5,097 $ 5,296 $ 5,209 $ 5,209 Opportunities Funds 19 Fortress Partners 1,731 1,791 1,830 1,530 1,530 1,536 1,681 1,783 1,870 1,870 Funds 20 Value Recovery - - - - - - 3,140 2,751 2,463 2,463 Funds 21 AUM - Ending $ 8,149 $ 8,266 $ 8,221 $ 6,494 $ 6,494 $ 6,451 $ 9,918 $ 9,830 $ 9,542 $ 9,542 Balance22 Third-Party Capital $ 757 $ 104 $ 536 $ 12 $ 1,409 $ - $ - $ - $ - $ - Raised Segment Revenues Management $ 37 $ 36 $ 39 $ 36 $ 148 $ 28 $ 30 $ 32 $ 33 $ 123 fees Incentive - 1 13 - 14 1 - - 1 2 income Total 37 37 52 36 162 29 30 32 34 125 Segment Expenses Operating (33 ) (26 ) (30 ) (26 ) (115 ) (25 ) (21 ) (24 ) (27 ) (97 ) expenses Profit sharing (2 ) (2 ) (7 ) 2 (9 ) (1 ) (2 ) (2 ) (1 ) (6 ) compensation expenses Total (35 ) (28 ) (37 ) (24 ) (124 ) (26 ) (23 ) (26 ) (28 ) (103 ) Fund $ 2 $ 9 $ 15 $ 12 $ 38 $ 3 $ 7 $ 6 $ 6 $ 22 Management DE Returns Gross Returns23 Drawbridge Special -1.1 % 1.4 % -4.6 % -21.5 % -24.9 % 3.6 % 7.8 % 7.4 % 6.3 % 27.5 % Opportunities LP 24 Drawbridge Special -1.1 % 0.2 % -4.6 % -23.5 % -27.7 % 4.0 % 6.5 % 10.8 % 7.9 % 32.6 % Opportunities LTD 24 Fortress Partners -4.3 % 0.8 % -12.5 % -19.7 % -32.2 % -1.7 % 8.8 % 5.0 % 5.1 % 18.0 % Funds LP Fortress Partners -3.7 % 1.9 % -10.0 % -14.4 % -24.3 % -1.1 % 9.5 % 4.7 % 6.0 % 20.2 % Funds LTD Net Returns23 Drawbridge Special -1.6 % 0.9 % -5.1 % -22.0 % -26.4 % 3.1 % 7.3 % 6.8 % 5.8 % 25.0 % Opportunities LP 24 Drawbridge Special -1.9 % -0.3 % -5.1 % -23.9 % -29.4 % 3.5 % 6.0 % 10.3 % 7.4 % 30.0 % Opportunities LTD 24 Fortress Partners -4.6 % 0.5 % -12.9 % -19.8 % -33.0 % -2.0 % 8.5 % 4.7 % 4.8 % 16.7 % Funds LP Fortress Partners -4.0 % 1.6 % -10.3 % -14.6 % -25.3 % -1.4 % 9.2 % 4.4 % 5.7 % 18.9 % Funds LTD
19 Combined AUM for Drawbridge Special Opportunities Fund Ltd, Drawbridge Special Opportunities Fund LP and Drawbridge Special Opportunities Fund managed accounts.
20 Combined AUM for Fortress Partners Offshore Fund LP and Fortress Partners Fund LP.
21 Fortress will receive management fees from these funds equal to 1% of cash receipts and up to 1% per annum on certain managed assets, subject to collectability, and may receive limited incentive income if aggregate realizations exceed an agreed threshold.
22 The hybrid hedge funds, which have an annual notice date for redemptions, have received redemption notices effective December 31, 2009 of approximately $1.5 billion, using December 31, 2009 values. This amount is subject to change based on performance. For primarily all of these funds, redemptions will be paid out over time as the underlying investments are liquidated, in accordance with the governing documents of the applicable funds.
23 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 management fees borne by the Fund and incentive allocations while net returns reflect performance data after taking into account management fees borne by the Fund and incentive allocations. Specific performance may vary based on, among other things, whether fund investors are invested in one or more special investments.
24 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.
Fortress Investment Group LLC Exhibit 1 Assets Under Management and Fund Management DE (dollars in millions) Three Months Ended Three Months Ended March June 30, September December Full Year March 31, June 30, September December Full Year 31, 30, 31, 30, 31, 2008 2008 2009 2009 2009 2008 2008 2008 2009 2009 Hybrid Private Equity Funds Assets Under Management Long Dated $ 517 $ 519 $ 552 $ 532 $ 532 $ 537 $ 537 $ 569 $ 623 $ 623 Value Funds Real Assets 91 107 230 212 212 207 207 178 164 164 Funds Fortress Credit 133 232 1,259 1,558 1,558 1,295 1,876 2,224 2,074 2,074 Opportunities Funds Japan Opportunities - - - - - - 137 380 486 486 Funds AUM - Ending $ 741 $ 858 $ 2,041 $ 2,302 $ 2,302 $ 2,039 $ 2,757 $ 3,351 $ 3,347 $ 3,347 Balance Third-Party Capital $ 779 $ 1,065 $ 945 $ 392 $ 3,181 $ - $ 134 $ 273 $ 268 $ 675 Raised Segment Revenues Management $ 2 $ 2 $ 4 $ 7 $ 15 $ 6 $ 8 $ 13 $ 13 $ 40 fees Incentive - - - - - - 7 1 15 23 income Total 2 2 4 7 15 6 15 14 28 63 Segment Expenses Operating (2 ) (2 ) (3 ) (5 ) (12 ) (4 ) (7 ) (5 ) (6 ) (22 ) expenses Profit sharing - - - - - - (4 ) - (8 ) (12 ) compensation expenses Total (2 ) (2 ) (3 ) (5 ) (12 ) (4 ) (11 ) (5 ) (14 ) (34 ) Fund $ - $ - $ 1 $ 2 $ 3 $ 2 $ 4 $ 9 $ 14 $ 29 Management DE
Fortress Investment Group LLC Exhibit 2 Reconciliation of Fund Management DE to Pre-tax Distributable Earnings and GAAP Net income (Loss) and Reconciliation of Segment Revenues to GAAP Revenues (dollars in millions) Three Months Ended Three Months Ended March June 30, September December Full Year March June 30, September December Full 31, 30, 31, 31, 30, 31, Year 2008 2008 2009 2008 2008 2008 2009 2009 2009 2009 Fund $ 71 $ 75 $ 63 $ 7 $ 216 $ 44 $ 53 $ 51 $ 60 $ 208 Management DE Investment (3 ) (7 ) (73 ) (255 ) (338 ) (27 ) 14 10 (55 ) (58 ) Income (Loss) Interest (10 ) (10 ) (10 ) (10 ) (40 ) (8 ) (8 ) (4 ) (4 ) (24 ) Expense Pre-tax Distributable $ 58 $ 58 $ (20 ) $ (258 ) $ (162 ) $ 9 $ 59 $ 57 $ 1 $ 126 Earnings Private Equity 6 3 1 - 10 - - - 3 3 incentive income Hedge Fund incentive - - - - - - - (2 ) 2 - income Reserve for - - 16 107 123 - - - (27 ) (27 ) clawback Distributions of earnings from equity - - - - - - - - (1 ) (1 ) method investees Earnings (losses) from (42 ) (26 ) (13 ) (155 ) (236 ) (39 ) 37 29 (7 ) 20 equity method investees Gains (losses) on (12 ) (3 ) (1 ) - (16 ) - - 1 - 1 options Gains (losses) on (18 ) (4 ) (6 ) (9 ) (37 ) (2 ) 20 19 (13 ) 24 other Investments Incentive income guarantee - - - (3 ) (3 ) - - - 3 3 recorded as a loss Impairment of - 10 50 227 287 32 - 2 67 101 investments Employee equity-based (36 ) (53 ) (57 ) (12 ) (158 ) (53 ) (53 ) (61 ) (61 ) (228 ) compensation Principal (237 ) (238 ) (240 ) (240 ) (955 ) (235 ) (237 ) (240 ) (240 ) (952 ) compensation Employee portion of 10 - - (15 ) (5 ) - - - 10 10 incentive income Principals' and Others' Interests in Income 209 195 208 279 891 220 128 133 179 660 (Losses) of Consolidated Subsidiaries Tax receivable agreement - - - 55 55 - - - - - liability reduction Taxes (7 ) 2 5 (116 ) (116 ) 1 1 3 - 5 GAAP Net Income (Loss) Attibutable to $ (69 ) $ (56 ) $ (57 ) $ (140 ) $ (322 ) $ (67 ) $ (45 ) $ (59 ) $ (84 ) $ (255 ) Class A Shareholders Principals' and Others' Interests in Income (209 ) (194 ) (210 ) (286 ) (899 ) (220 ) (126 ) (131 ) (177 ) (654 ) (Losses) of Consolidated Subsidiaries GAAP Net $ (278 ) $ (250 ) $ (267 ) $ (426 ) $ (1,221 ) $ (287 ) $ (171 ) $ (190 ) $ (261 ) $ (909 ) Income (Loss) Segment $ 177 $ 165 $ 153 $ 40 $ 535 $ 107 $ 117 $ 118 $ 157 $ 499 Revenues Adjust management (1 ) - (2 ) (2 ) (5 ) (1 ) (1 ) (1 ) 13 10 fees Adjust incentive 5 3 4 108 120 (1 ) - (2 ) (22 ) (25 ) income Other 20 20 30 12 82 17 23 29 31 100 revenues GAAP Revenues $ 201 $ 188 $ 185 $ 158 $ 732 $ 122 $ 139 $ 144 $ 179 $ 584
''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 Annual Report on Form 10-K for the quarter ended December 31, 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 Exhibit 3 Reconciliation of GAAP Net Income (Loss) Excluding Principals Agreement Compensation to GAAP Net Income (Loss) (dollars in thousands) Three Months Ended Three Months Ended December 31, 2009 December 31, 2008 GAAP net loss $ (260,825 ) $ (426,481 ) Principals agreement compensation 239,976 239,975 GAAP net income (loss) excluding $ (20,849 ) $ (186,506 ) principals agreement compensation Year Ended Year Ended December 31, 2009 December 31, 2008 GAAP net loss $ (909,142 ) $ (1,221,086 ) Principals agreement compensation 952,077 954,685 GAAP net income (loss) excluding $ 42,935 $ (266,401 ) principals agreement compensation
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, 2009 2008 Weighted Average Class A Shares 146,733,426 94,990,541 Outstanding (Used for Basic EPS) Weighted average fully vested restricted Class A share units with (1,245,658) (445,880) dividend equivalent rights Weighted average fully vested (99,520) (44,310) restricted Class A shares Weighted Average Class A Shares 145,388,248 94,500,351 Outstanding Weighted average restricted Class A 216,367 108,661 shares 25 Weighted average fully vested restricted Class A share units which 1,245,658 394,286 are entitled to dividend equivalent payments Weighted average nonvested restricted Class A share units which are entitled 25,218,073 24,101,891 to dividend equivalent payments Weighted average Fortress Operating 307,773,852 312,071,550 Group units Weighted average Fortress Operating 31,000,000 31,000,000 Group RPUs Weighted Average Dividend Paying Shares 510,842,198 462,176,739 and Units Outstanding (Used for DEPS) Year Ended December 31, 2009 2008 Weighted Average Class A Shares 125,740,897 94,934,487 Outstanding (Used for Basic EPS) Weighted average fully vested restricted Class A share units with (1,185,375) (407,255) dividend equivalent rights Weighted average fully vested (94,561) (26,881) restricted Class A shares Weighted Average Class A Shares 124,460,961 94,500,351 Outstanding Weighted average restricted Class A 158,500 104,860 shares 25 Weighted average fully vested restricted Class A share units which 1,185,375 407,255 are entitled to dividend equivalent payments Weighted average nonvested restricted Class A share units which are entitled 24,153,521 23,815,846 to dividend equivalent payments Weighted average Fortress Operating 310,576,187 312,071,550 Group units Weighted average Fortress Operating 31,000,000 21,852,459 Group RPUs Weighted Average Dividend Paying Shares 491,534,544 452,752,321 and Units Outstanding (Used for DEPS)
25 Includes both fully vested and nonvested weighted average restricted Class A shares.
Source: Fortress Investment Group LLCContact: Fortress Investment Group LLC Lilly H. Donohue, 212-798-6118