Exhibit 99.1
The Blackstone Group Reports Second Quarter 2008 Earnings
| | • | | Economic Net Income for the Second Quarter 2008 totaled $99.9 million as compared to a loss of $(93.6) million in the first quarter of 2008. GAAP Net Loss of $(185.5) million reflected net transaction related costs of $858.7 million offset by Non-Controlling Interests of $573.3 million. |
| | • | | Record Assets Under Management of $119.41 billion, a 30% increase from $91.77 billion a year ago and up from $113.53 billion at March 31, 2008. |
| | • | | Blackstone declares a quarterly distribution of $0.30 per common unit and reaffirms priority distributions to public common unitholders of $1.20 per year through 2009, to be paid quarterly. |
New York, August 6, 2008: The Blackstone Group L.P. (NYSE: BX) today reported its second quarter 2008 results. For the quarter ended June 30, 2008, Total Net Reportable Segment Revenues were $376.2 million as compared to $32.3 million in this year’s first quarter. Total Pro Forma Adjusted Reportable Segment Revenues were $982.8 million in the second quarter of 2007. The year over year change was largely driven by lower Performance Fees and Allocations and lower Transaction Fees which were offset by higher Base Management Fees across all asset management segments. For the six months ended June 30, 2008, Total Net Reportable Segment Revenues were $408.5 million as compared to Total Pro Forma Adjusted Reportable Segment Revenues of $2.21 billion for the same period in 2007.
Economic Net Income for the second quarter of 2008 totaled $99.9 million as compared to a loss of $(93.6) million in this year’s first quarter and Pro Forma Adjusted Economic Net Income of $735.6 million for the second quarter of 2007. Economic Net Income for the six months ended June 30, 2008 was $6.4 million as compared to Pro Forma Adjusted Economic Net Income of $1.69 billion for the six months ended June 30, 2007. Declines in all business segments drove the year-over-year decrease in both revenues and Economic Net Income.
A significant amount of equity interests held by senior managing directors and other employees is subject to future vesting, minimum retained ownership interests and transfer restrictions. As a result of the future vesting, Blackstone has and will continue to show significant compensation charges associated with these equity interests over their respective service periods. These as well as certain other transactional charges, which arose in 2007 in connection with the reorganization, the initial public offering and subsequent corporate actions including acquisitions, are likely to result in GAAP net losses for the next five years depending upon the applicable service periods or useful lives.
GAAP results for the second quarter of 2008 included Revenues of $353.7 million, Other Income of $189.7 million and Loss Before Benefit for Taxes of $(185.5) million. For the second quarter of 2007, Revenues were $952.1 million, Other Income was $2.36 billion and Income Before Benefit for Taxes totaled $771.9 million.
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The Blackstone Group® L.P. 345 Park Avenue New York, NY 10154 212 583-5000 |
GAAP results for the six months ended June 30, 2008 included Revenues of $422.2 million, Other Loss of $(26.0) million and Loss Before Benefit for Taxes of $(432.2) million. For the six months ended June 30, 2007, Revenues were $2.18 billion, Other Income was $5.40 billion and Income Before Provision for Taxes totaled $1.92 billion.
In connection with the initial public offering of the common units of The Blackstone Group L.P. (the publicly traded partnership), Blackstone effected a reorganization on June 18, 2007, which affects the comparison of the current year’s periods with those of the prior year’s. Blackstone’s business was historically conducted through a large number of entities as to which there was no single holding entity. Accordingly, operating results for the 2007 periods presented are for the respective consolidated and combined entities.
Market conditions remained challenging during the second quarter of 2008 as global economic growth slowed and commodity prices soared. U.S. and European economic indicators continue to point to a slowdown in growth. Emerging economies, while still growing, have moderated. At the same time, the price of global commodities has risen. The economic backdrop challenged fixed income and equity markets, and volatility was high. Lenders continue to severely restrict commitments to new debt, limiting industry-wide leveraged acquisition activity levels in both corporate and real estate markets.
Stephen A. Schwarzman, Chairman and Chief Executive Officer said: “Slowing growth of world economies and volatile markets continue to present challenges as well as opportunities for our firm. We are sourcing an increasing number of attractive investment opportunities, some as a result of the market dislocation, and we committed $2.4 billion of new equity in private equity from April through July. We continue to see client asset inflows across our products and we are opportunistically hiring as we create new product offerings for our LPs. Our balance sheet remains strong and we are extremely well positioned in the current environment.”
SEGMENT REVIEW
For the second quarter of 2008, Total Net Reportable Segment Revenues increased to $376.2 million from $32.3 million in the first quarter of 2008. This compares to Total Pro Forma Adjusted Reportable Segment Revenues of $982.8 million for the second quarter of 2007. Revenue increases since the first quarter of 2008 were in the Corporate Private Equity and Marketable Alternative Asset Management segments offset by a decline in the Real Estate segment. Revenue declines in the second quarter of 2008 compared to the second quarter of 2007 were experienced by the Corporate Private Equity, Real Estate and Financial Advisory segments. Blackstone revenues include Performance Fees and Allocations that are determined and accounted for on a quarterly basis as if the net unrealized fair value of the managed funds’ investments were realized as of such date, although there is no intention to realize the overwhelming majority of such investments at the present time. Economic Net Income After Taxes increased to $165.6 million for the second quarter of 2008 versus a loss of $(66.5) million in the first quarter of 2008. This compares to Pro Forma Adjusted Economic Net Income After Taxes of $655.0 million for the second quarter of 2007.
For the six months ended June 30, 2008, Total Net Reportable Segment Revenues decreased to $408.5 million from Total Pro Forma Adjusted Reportable Segment Revenues of $2.21 billion for the six months ended June 30, 2007. Revenue declines were experienced by all four business segments — Corporate Private Equity, Real Estate, Marketable Alternative Asset Management and Financial
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Advisory. Economic Net Income After Taxes was $99.1 million for the six months ended June 30, 2008 as compared to Pro Forma Adjusted Economic Net Income After Taxes of $1.49 billion for the six months ended June 30, 2007.
Net Cash Flow Provided by Operating Activities was $102.1 million for the three months ended June 30, 2008 as compared to $516.8 million for the comparable prior year period. Adjusted Cash Flow from Operations for the second quarter of 2008 was $161.5 million as compared to Pro Forma Adjusted Cash Flow from Operations of $668.3 million for the comparable prior period.
The table below details Blackstone’s Economic Net Income and Adjusted Cash Flow from Operations for the quarter and six months ended June 30, 2008 as compared to Blackstone’s Pro Forma Adjusted Economic Net Income for the comparable prior year periods. Economic Net Income Before Taxes includes unrealized gains/losses and compensation and compensation reductions related to those gains/losses but excludes transaction related charges.
| | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
June 30, | | % Variance | | | Six Months Ended
June 30, | | % Variance | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| | | | | | Pro
Forma
Adjusted | | | | | | | | Pro Forma
Adjusted | | | |
| | | (Dollars in Thousands, Except per Unit Amounts) | |
Economic Net Income, Total Reportable Segments (a) | | $ | 99,925 | | | $ | 735,611 | | (86 | )% | | $ | 6,358 | | | $ | 1,693,390 | | (100 | )% |
Provision (Benefit) for Income Taxes (b) | | | (65,717 | ) | | | 80,581 | | (182 | )% | | | (92,771 | ) | | | 199,885 | | (146 | )% |
| | | | | | | | | | | | | | | | | | | | |
Economic Net Income After Taxes | | $ | 165,642 | | | $ | 655,030 | | (75 | )% | | $ | 99,129 | | | $ | 1,493,505 | | (93 | )% |
| | | | | | | | | | | | | | | | | | | | |
Economic Net Income After Taxes per Adjusted Unit | | $ | 0.15 | | | $ | 0.58 | | | | | $ | 0.09 | | | $ | 1.33 | | | |
| | | | | | | | | | | | | | | | | | | | |
Adjusted Cash Flow from Operations (a) | | $ | 161,525 | | | $ | 668,334 | | | | | $ | 157,123 | | | $ | 960,878 | | | |
| | | | | | | | | | | | | | | | | | | | |
| (a) | Reconciliations of Pro Forma Adjusted Economic Net Income, Total Reportable Segments to Economic Net Income, Total Reportable Segments and of Pro Forma Adjusted Cash Flow from Operations to Net Cash Provided by (Used in) Operating Activities are presented in Exhibits 4 and 5, respectively, to this release. |
| (b) | Represents the implied provision (benefit) for income taxes calculated using the same methodology applied in calculating the tax provision (benefit) for The Blackstone Group L.P. |
Corporate Private Equity
Corporate Private Equity had second quarter revenues of $92.4 million, as compared with revenues of $400.5 million for the second quarter of 2007. The greatest driver of change year over year was a reduction in Performance Fees and Allocations and Investment Income (Loss) and Other which offset an increase in Base Management Fees. The increase in Base Management Fees reflected growth in Weighted-Average Fee-Earning Assets Under Management.
Compensation expense was $40.3 million in the second quarter, down from $44.8 million for the second quarter of 2007. Other operating expenses rose to $20.9 million from $14.8 million, and remained in line with the previous three quarters.
Weighted-Average Fee-Earning Assets Under Management for the quarter totaled $25.08 billion compared with $23.48 billion in the second quarter of 2007.
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LP Capital deployed totaled $775.9 million for the second quarter of 2008 reflecting several investments including acquisitions and add-ons to current fund investments.
Real Estate
For the quarter ended June 30, 2008, Real Estate had negative second quarter revenues of $(14.4) million, as compared with revenues of $315.1 million for the second quarter of 2007. The main driver of the decline year-over-year was a modest reduction in the net carrying value of the real estate managed funds, which is reflected in Performance Fees and Allocations and Investment Income (Loss). During the quarter ended June 30, 2007, the funds achieved a significant increase in the carrying value relating primarily to accretive sales within the segment’s real estate portfolio.
Base Management Fees increased in the second quarter 2008, reflecting higher Fee-Earning Assets Under Management. Blackstone announced the $10.9 billion closing of its Blackstone Real Estate Partners VI Fund on April 1, 2008. Transaction fees declined as a result of lower transaction volume in the quarter as compared with a year ago.
Weighted-Average Fee-Earning Assets Under Management for the quarter increased 25% or $3.88 billion to $19.17 billion.
LP capital deployed totaled $209.8 million for the quarter ended June 30, 2008 reflecting additional capital invested within the existing portfolio.
Marketable Alternative Asset Management (MAAM)
For the second quarter of 2008, MAAM generated revenues of $225.2 million, an increase of 34% from the second quarter of 2007. The second quarter 2008 marks the first quarter fully inclusive of GSO’s results of operations. In addition to the inclusion of GSO, the increase in revenues was largely driven by an increase in Base Management Fees, reflective of greater Fee-Earning Assets Under Management. Revenues from Performance Fees and Allocations declined modestly as positive performance was below that achieved in the second quarter of 2007. Investment Income and Other, which reflects Blackstone’s investment in its funds, increased year-over-year.
Weighted-Average Fee-Earning Assets Under Management for the quarter ended June 30, 2008 totaled $52.12 billion (including $10.06 billion relating to GSO) compared with $32.68 billion for the prior year period, a 59% increase. MAAM includes funds of hedge funds and proprietary hedge funds investing across several asset classes and geographies.
LP Capital Deployed totaled $808.9 million for the quarter ended June 30, 2008 primarily from activity in Blackstone’s credit liquidity funds.
Financial Advisory
Revenues decreased 26% to $72.9 million in the second quarter of 2008 compared to the same period in 2007. Revenues in Blackstone’s restructuring and reorganization advisory business increased year over year, while revenues in its fund placement business, Park Hill, and the corporate and mergers and acquisitions advisory business declined. The pipeline remains higher across all three businesses compared to the second quarter of 2007.
CAPITAL
For Economic Net Income purposes, the weighted-average fully diluted unit count for the three month and six month periods ended June 30, 2008 was 1,131 million units and 1,129 million units (the “Adjusted Units”), respectively. The total number of units used
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in calculating cash distributions was 1,101 million units for the six month period ended June 30, 2008.
DISTRIBUTION
The Blackstone Group L.P. is pleased to declare a quarterly distribution of $0.30 per common unit payable to record holders of common units at the close of business on August 29, 2008. This distribution will be paid on September 12, 2008. In addition, Blackstone reaffirms its intention to make priority distributions to its common unitholders of $1.20 per common unit per year through 2009, to be paid quarterly. These distribution amounts differ from Blackstone’s earnings/loss per unit.
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Blackstone will host a conference call on August 6, 2008 at 11:00 a.m. EDT to discuss second quarter 2008 results. The conference call can be accessed by dialing (888) 713-4218 (U.S. domestic) and (617) 213-4870 (international) pass code 60801794. Additionally the conference call will be broadcast live over the internet and can be accessed by all interested parties through the Investor Relations section of The Blackstone Group’s website http://ir.blackstone.com. For those unable to listen to the live broadcast, a replay will be available on Blackstone’s website or by dialing (888) 286-8010 (U.S. domestic) or (617) 801-6888 (international) pass code number 24559833, beginning approximately two hours after the event.
About The Blackstone Group
Blackstone is one of the world’s leading investment and advisory firms. We seek to create positive economic impact and long-term value for our investors, the companies we invest in, the companies we advise and the broader global economy. We do this through the commitment of our extraordinary people and flexible capital. Our alternative asset management businesses include the management of corporate private equity funds, real estate funds, hedge funds, funds of funds, debt funds, collateralized loan obligation vehicles (CLOs) and closed-end mutual funds. The Blackstone Group also provides various financial advisory services, including mergers and acquisitions advisory, restructuring and reorganization advisory and fund placement services. Further information is available at www.blackstone.com.
Investor Relations Contact:
Joan Solotar
The Blackstone Group
Tel: +1 212 583 5068
solotar@blackstone.com
Media Relations Contact:
Peter Rose
The Blackstone Group
Tel: +1 212 583 5871
rose@blackstone.com
Forward-Looking Statements
This release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 which reflect Blackstone’s current views with respect to, among other things, Blackstone’s operations and financial performance. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking
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statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Blackstone believes these factors include but are not limited to those described under the section entitled “Risk Factors” in its Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as such factors may be updated from time to time in its periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in the prospectus. Blackstone undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
This release does not constitute an offer of any Blackstone Fund.
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THE BLACKSTONE GROUP L.P.
Exhibit 1a. Consolidated and Combined Statements of Income
(Dollars in Thousands, Except Per Unit Data)
| | | | | | | | | | | |
| | | Quarter Ended
June 30, | | | | |
| | | 2008 | | | 2007 | | | % Variance | |
Revenues | | | | | | | | | | | |
Management and Advisory Fees | | $ | 338,159 | | | $ | 341,694 | | | (1 | )% |
Performance Fees and Allocations | | | (13,722 | ) | | | 453,749 | | | (103 | )% |
Investment Income and Other (1) | | | 29,215 | | | | 156,685 | | | (81 | )% |
| | | | | | | | | | | |
Total Revenues | | | 353,652 | | | | 952,128 | | | (63 | )% |
| | | | | | | | | | | |
Expenses | | | | | | | | | | | |
Compensation and Benefits (1) | | | 1,028,808 | | | | 345,545 | | | 198 | % |
Interest (1) | | | 5,690 | | | | 15,180 | | | (63 | )% |
General, Administrative and Other (1) | | | 107,517 | | | | 50,686 | | | 112 | % |
Fund Expenses | | | 21,793 | | | | 65,557 | | | (67 | )% |
| | | | | | | | | | | |
Total Expenses | | | 1,163,808 | | | | 476,968 | | | 144 | % |
| | | | | | | | | | | |
Other Income | | | | | | | | | | | |
Net Gains from Fund Investment Activities | | | 189,678 | | | | 2,360,343 | | | (92 | )% |
| | | | | | | | | | | |
Income (Loss) Before Non-Controlling Interests in Income of Consolidated Entities and Provision (Benefit) for Taxes | | | (620,478 | ) | | | 2,835,503 | | | (122 | )% |
Non-Controlling Interests in Income (Loss) of Consolidated Entities | | | (434,969 | ) | | | 2,063,561 | | | (121 | )% |
| | | | | | | | | | | |
Income (Loss) Before Benefit for Taxes | | | (185,509 | ) | | | 771,942 | | | (124 | )% |
Benefit for Taxes | | | (28,978 | ) | | | (2,409 | ) | | 1103 | % |
| | | | | | | | | | | |
Net Income (Loss) (1) | | $ | (156,531 | ) | | $ | 774,351 | | | (120 | )% |
| | | | | | | | | | | |
| | | |
| | | | | | June 19, 2007
through
June 30, 2007 | | | | |
Net Loss Per Common Unit, Basic and Diluted | | $ | (0.60 | ) | | $ | (0.20 | ) | |
| | | | | | | | | |
(1) Net transaction-related charges included above were: | | | | | | | | | |
Investment Income and Other | | $ | 8,031 | | | $ | — | | |
| | | | | | | | | |
Compensation and Benefits | | | 823,705 | | | | 236,228 | | |
Interest | | | 2,352 | | | | — | | |
General, Administrative and Other | | | 40,685 | | | | 7,200 | | |
| | | | | | | | | |
| | | 866,742 | | | | 243,428 | | |
| | | | | | | | | | | |
| | $ | 858,711 | | | $ | 243,428 | | | | |
| | | | | | | | | | | |
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THE BLACKSTONE GROUP L.P.
Exhibit 1b. Consolidated and Combined Statements of Income
(Dollars in Thousands, Except Per Unit Data)
| | | | | | | | | | | |
| | | Six Months Ended
June 30, | | | | |
| | | 2008 | | | 2007 | | | % Variance | |
Revenues | | | | | | | | | | | |
Management and Advisory Fees | | $ | 647,568 | | | $ | 789,096 | | | (18 | )% |
Performance Fees and Allocations | | | (202,409 | ) | | | 1,116,247 | | | (118 | )% |
Investment Income and Other (1) | | | (22,984 | ) | | | 273,153 | | | (108 | )% |
| | | | | | | | | | | |
Total Revenues | | | 422,175 | | | | 2,178,496 | | | (81 | )% |
| | | | | | | | | | | |
Expenses | | | | | | | | | | | |
Compensation and Benefits (1) | | | 2,005,955 | | | | 424,752 | | | 372 | % |
Interest (1) | | | 8,433 | | | | 26,302 | | | (68 | )% |
General, Administrative and Other (1) | | | 202,738 | | | | 78,819 | | | 157 | % |
Fund Expenses | | | 44,745 | | | | 119,246 | | | (62 | )% |
| | | | | | | | | | | |
Total Expenses | | | 2,261,871 | | | | 649,119 | | | 248 | % |
| | | | | | | | | | | |
Other Income (Loss) | | | | | | | | | | | |
Net Gains (Losses) from Fund Investment Activities | | | (25,958 | ) | | | 5,396,825 | | | (100 | )% |
| | | | | | | | | | | |
Income (Loss) Before Non-Controlling Interests in Income (Loss) of Consolidated Entities and Provision (Benefit) for Taxes | | | (1,865,654 | ) | | | 6,926,202 | | | (127 | )% |
Non-Controlling Interests in Income (Loss) of Consolidated Entities | | | (1,433,426 | ) | | | 5,008,215 | | | (129 | )% |
| | | | | | | | | | | |
Income (Loss) Before Provision (Benefit) for Taxes | | | (432,228 | ) | | | 1,917,987 | | | (123 | )% |
Provision (Benefit) for Taxes | | | (24,704 | ) | | | 11,560 | | | (314 | )% |
| | | | | | | | | | | |
Net Income (Loss) (1) | | $ | (407,524 | ) | | $ | 1,906,427 | | | (121 | )% |
| | | | | | | | | | | |
| | | |
| | | | | | June 19, 2007
through
June 30, 2007 | | | | |
Net Loss Per Common Unit, Basic and Diluted | | $ | (1.57 | ) | | $ | (0.20 | ) | |
| | | | | | | | | |
(1) Net transaction-related charges included above were: | | | | | | | | | |
Investment Income and Other | | $ | 8,031 | | | $ | — | | |
| | | | | | | | | |
Compensation and Benefits | | | 1,742,676 | | | | 236,228 | | |
Interest | | | 2,352 | | | | — | | |
General, Administrative and Other | | | 74,213 | | | | 7,200 | | |
| | | | | | | | | |
| | | 1,819,241 | | | | 243,428 | | |
| | | | | | | | | | | |
| | $ | 1,811,210 | | | $ | 243,428 | | | | |
| | | | | | | | | | | |
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THE BLACKSTONE GROUP L.P.
Exhibit 2. Consolidated Statements of Financial Condition
(Dollars in Thousands)
| | | | | | |
| | | June 30,
2008 | | December 31,
2007 |
Assets | | | | | | |
Cash and Cash Equivalents | | $ | 217,660 | | $ | 868,629 |
Cash Held by Blackstone Funds | | | 79,426 | | | 163,696 |
Investments | | | 7,195,586 | | | 7,145,156 |
Accounts Receivable | | | 243,865 | | | 213,086 |
Due from Brokers | | | 658,894 | | | 812,250 |
Investment Subscriptions Paid in Advance | | | 54,999 | | | 36,698 |
Due from Affiliates | | | 1,249,954 | | | 855,854 |
Intangible Assets, Net | | | 1,206,450 | | | 604,681 |
Goodwill | | | 1,689,976 | | | 1,597,474 |
Other Assets | | | 148,100 | | | 99,366 |
Deferred Tax Assets | | | 745,008 | | | 777,310 |
| | | | | | |
Total Assets | | $ | 13,489,918 | | $ | 13,174,200 |
| | | | | | |
| | |
Liabilities and Partners’ Capital | | | | | | |
Loans Payable | | $ | 378,056 | | $ | 130,389 |
Amounts Due to Non-Controlling Interest Holders | | | 734,802 | | | 269,901 |
Securities Sold, Not Yet Purchased | | | 1,062,141 | | | 1,196,858 |
Due to Affiliates | | | 1,040,911 | | | 831,609 |
Accrued Compensation and Benefits | | | 291,443 | | | 188,997 |
Accounts Payable, Accrued Expenses and Other Liabilities | | | 175,150 | | | 250,445 |
| | | | | | |
Total Liabilities | | | 3,682,503 | | | 2,868,199 |
| | | | | | |
| | |
Commitments and Contingencies | | | | | | |
| | |
Non-Controlling Interests in Consolidated Entities | | | 5,806,592 | | | 6,079,156 |
| | | | | | |
| | |
Partners’ Capital | | | | | | |
Partners’ Capital | | | 3,999,764 | | | 4,226,500 |
Accumulated Other Comprehensive Income | | | 1,059 | | | 345 |
| | | | | | |
Total Partners’ Capital | | | 4,000,823 | | | 4,226,845 |
| | | | | | |
Total Liabilities and Partners’ Capital | | $ | 13,489,918 | | $ | 13,174,200 |
| | | | | | |
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THE BLACKSTONE GROUP L.P.
Exhibit 3. Condensed Consolidated and Combined Statements of Cash Flows
(Dollars in Thousands)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | | Six Months Months Ended | |
| | | June 30,
2008 | | | June 30,
2007 | | | March 31,
2008 | | | March 31,
2007 | | | June 30,
2008 | | | June 30,
2007 | |
Operating Activities | | | | | | | | | | | | | | | | | | | | | | | | |
Net Income (Loss) | | $ | (156,531 | ) | | $ | 774,351 | | | $ | (250,993 | ) | | $ | 1,132,076 | | | $ | (407,524 | ) | | $ | 1,906,427 | |
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities: | | | | | | | | | | | | | | | | | | | | | | | | |
Net Cash Provided by (Used in) Operating Activities | | | | | | | | | | | | | | | | | | | | | | | | |
Blackstone Funds Related: | | | | | | | | | | | | | | | | | | | | | | | | |
Non-Controlling Interests in Income (Loss) of Consolidated Entities | | | (556,261 | ) | | | 1,625,043 | | | | (788,477 | ) | | | 744,923 | | | | (1,344,738 | ) | | | 2,369,966 | |
Net Realized (Gains) Losses on Investments | | | (118,555 | ) | | | (2,424,334 | ) | | | 256 | | | | (1,050,641 | ) | | | (118,299 | ) | | | (3,474,975 | ) |
Changes in Unrealized (Gains) Losses on Investments Allocable to Blackstone Group | | | (7,770 | ) | | | 507,239 | | | | 62,823 | | | | (520,424 | ) | | | 55,053 | | | | (13,185 | ) |
Non-Cash Performance Fees and Allocations | | | 37,343 | | | | (483,101 | ) | | | 76,279 | | | | — | | | | 113,622 | | | | (483,101 | ) |
Equity-Based Compensation Expense | | | 805,597 | | | | 236,228 | | | | 914,671 | | | | — | | | | 1,720,268 | | | | 236,228 | |
Intangible Amortization | | | 40,685 | | | | 7,200 | | | | 33,528 | | | | — | | | | 74,213 | | | | 7,200 | |
Other Non-Cash Amounts Included in Net Income | | | 5,102 | | | | 17,782 | | | | 3,845 | | | | (13,007 | ) | | | 8,947 | | | | 4,775 | |
Cash Flows Due to Changes in Operating Assets and Liabilities: | | | 55,230 | | | | (342,933 | ) | | | 311,656 | | | | 289,160 | | | | 366,886 | | | | (53,773 | ) |
Blackstone Funds Related Investment Activity | | | (2,697 | ) | | | 599,372 | | | | (248,434 | ) | | | (1,926,042 | ) | | | (251,131 | ) | | | (1,326,670 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net Cash Provided by (Used in) Operating Activities | | | 102,143 | | | | 516,847 | | | | 115,154 | | | | (1,343,955 | ) | | | 217,297 | | | | (827,108 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Investing Activities | | | | | | | | | | | | | | | | | | | | | | | | |
Net Cash Provided by (Used in) Investing Activities | | | 20,210 | | | | (34,742 | ) | | | (388,918 | ) | | | (3,068 | ) | | | (368,708 | ) | | | (37,810 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Financing Activities | | | | | | | | | | | | | | | | | | | | | | | | |
Net Cash Provided by (Used in) Financing Activities | | | (577,272 | ) | | | 825,897 | | | | 77,714 | | | | 1,342,302 | | | | (499,558 | ) | | | 2,168,199 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Effect of Exchange Rate Changes on Cash and Cash Equivalents | | | (90 | ) | | | (388 | ) | | | 90 | | | | 1,027 | | | | — | | | | 639 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net Increase (Decrease) in Cash and Cash Equivalents | | | (455,009 | ) | | | 1,307,614 | | | | (195,960 | ) | | | (3,694 | ) | | | (650,969 | ) | | | 1,303,920 | |
Cash and Cash Equivalents, Beginning of Period | | | 672,669 | | | | 125,749 | | | | 868,629 | | | | 129,443 | | | | 868,629 | | | | 129,443 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Cash and Cash Equivalents, End of Period | | $ | 217,660 | | | $ | 1,433,363 | | | $ | 672,669 | | | $ | 125,749 | | | $ | 217,660 | | | $ | 1,433,363 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
10
THE BLACKSTONE GROUP L.P.
Exhibit 4a. Economic Net Income and Pro Forma Adjusted Economic Net Income
(Dollars in Thousands)
The tables below detail Blackstone’s Economic Net Income, except for the quarters ended March 31, 2007 and June 30, 2007 and the year ended December 31, 2007, for which periods Pro Forma Adjusted Economic Net Income is presented. Exhibit 4b includes the presentation of Economic Net Income for each of the periods for which Pro Forma Adjusted Economic Net Income is presented below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | | | | | Quarter Ended | | | Six Months Ended
June 30, | |
| | | March 31,
2007 | | | June 30,
2007 | | | September 30,
2007 | | | December 31,
2007 | | | Full Year
2007 | | | March 31,
2008 | | | June 30,
2008 | | | 2008 | | | 2007 | |
| | | Pro Forma
Adjusted | | | | | | | | | Pro Forma
Adjusted | | | | | | | | | | | | Pro Forma
Adjusted | |
Corporate Private Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Management Fees | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Base Management Fees | | $ | 58,861 | | | $ | 62,858 | | | $ | 66,389 | | | $ | 66,735 | | | $ | 254,843 | | | $ | 67,336 | | | $ | 66,967 | | | $ | 134,303 | | | $ | 121,719 | |
Transaction and Other Fees * | | | 9,128 | | | | 56,044 | | | | 48,711 | | | | 64,188 | | | | 178,071 | | | | 10,837 | | | | 19,161 | | | | 29,998 | | | | 65,172 | |
Management Fee Offsets ** | | | (8,231 | ) | | | (12,634 | ) | | | (20,892 | ) | | | (23,278 | ) | | | (65,035 | ) | | | (8,410 | ) | | | (15,232 | ) | | | (23,642 | ) | | | (20,865 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Management Fees | | | 59,758 | | | | 106,268 | | | | 94,208 | | | | 107,645 | | | | 367,879 | | | | 69,763 | | | | 70,896 | | | | 140,659 | | | | 166,026 | |
| | | | | | | | | |
Performance Fees and Allocations | | | 122,934 | (a) | | | 230,424 | (a) | | | 109,051 | | | | (124,460 | ) | | | 337,949 | (a) | | | (163,430 | ) | | | 21,960 | | | | (141,470 | ) | | | 353,358 | |
Investment Income (Loss) and Other | | | 26,212 | (a) | | | 63,782 | (a) | | | 24,032 | | | | 1,428 | | | | 115,454 | (a) | | | (23,050 | ) | | | (408 | ) | | | (23,458 | ) | | | 89,994 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Revenues | | | 208,904 | | | | 400,474 | | | | 227,291 | | | | (15,387 | ) | | | 821,282 | | | | (116,717 | ) | | | 92,448 | | | | (24,269 | ) | | | 609,378 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and Benefits | | | 33,383 | (b) | | | 44,782 | (b) | | | 56,319 | | | | (1,798 | ) | | | 132,686 | (b) | | | (80,752 | ) | | | 40,283 | | | | (40,469 | ) | | | 78,165 | |
Other Operating Expenses | | | 8,778 | (c) | | | 14,793 | (c) | | | 22,798 | | | | 23,603 | | | | 69,972 | (c) | | | 22,200 | | | | 20,880 | | | | 43,080 | | | | 23,571 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Expenses | | | 42,161 | | | | 59,575 | | | | 79,117 | | | | 21,805 | | | | 202,658 | | | | (58,552 | ) | | | 61,163 | | | | 2,611 | | | | 101,736 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Economic Net Income (Loss) | | $ | 166,743 | | | $ | 340,899 | | | $ | 148,174 | | | $ | (37,192 | ) | | $ | 618,624 | | | $ | (58,165 | ) | | $ | 31,285 | | | $ | (26,880 | ) | | $ | 507,642 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Real Estate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Management Fees | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Base Management Fees | | $ | 37,450 | | | $ | 59,876 | | | $ | 70,964 | | | $ | 61,053 | | | $ | 229,343 | | | $ | 66,751 | | | $ | 67,977 | | | $ | 134,728 | | | $ | 97,326 | |
Transaction and Other Fees * | | | 209,451 | | | | 19,748 | | | | 14,540 | | | | 108,400 | | | | 352,139 | | | | 11,795 | | | | 6,854 | | | | 18,649 | | | | 229,199 | |
Management Fee Offsets | | | — | | | | (691 | ) | | | (9,281 | ) | | | (1,745 | ) | | | (11,717 | ) | | | (404 | ) | | | (326 | ) | | | (730 | ) | | | (691 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Management Fees | | | 246,901 | | | | 78,933 | | | | 76,223 | | | | 167,708 | | | | 569,765 | | | | 78,142 | | | | 74,505 | | | | 152,647 | | | | 325,834 | |
| | | | | | | | | |
Performance Fees and Allocations | | | 457,360 | (a) | | | 152,681 | (a) | | | 28,479 | | | | (39,062 | ) | | | 599,458 | (a) | | | (30,062 | ) | | | (77,133 | ) | | | (107,195 | ) | | | 610,041 | |
Investment Income (Loss) and Other | | | 62,511 | (a) | | | 83,501 | (a) | | | 4,398 | | | | (15,145 | ) | | | 135,265 | (a) | | | (176 | ) | | | (11,788 | ) | | | (11,964 | ) | | | 146,012 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Revenues | | | 766,772 | | | | 315,115 | | | | 109,100 | | | | 113,501 | | | | 1,304,488 | | | | 47,904 | | | | (14,416 | ) | | | 33,488 | | | | 1,081,887 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and Benefits | | | 98,523 | (b) | | | 36,486 | (b) | | | 39,325 | | | | 65,416 | | | | 239,750 | (b) | | | 35,688 | | | | 32,083 | | | | 67,771 | | | | 135,009 | |
Other Operating Expenses | | | 4,735 | (c) | | | 5,541 | (c) | | | 12,639 | | | | 27,575 | | | | 50,490 | (c) | | | 16,160 | | | | 12,581 | | | | 28,741 | | | | 10,276 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Expenses | | | 103,258 | | | | 42,027 | | | | 51,964 | | | | 92,991 | | | | 290,240 | | | | 51,848 | | | | 44,664 | | | | 96,512 | | | | 145,285 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Economic Net Income (Loss) | | $ | 663,514 | | | $ | 273,088 | | | $ | 57,136 | | | $ | 20,510 | | | $ | 1,014,248 | | | $ | (3,944 | ) | | $ | (59,080 | ) | | $ | (63,024 | ) | | $ | 936,602 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| * | Transaction and Other Fees are net of amounts, if any, shared with limited partners. |
| ** | Primarily broken deal expenses. |
| (a) | Pro Forma adjustments reflect the elimination of the revenues of the businesses that were not contributed as part of the Reorganization. |
| (b) | Pro Forma adjustments reflect the addition of expenses related to employee compensation and profit arrangements that were not effective prior to the Reorganization. |
| (c) | Pro Forma adjustments reflect the elimination of interest expense based on the assumption that the revolving credit facility was repaid in full from the proceeds of the offering and as of January 1, 2007. |
continued…
11
THE BLACKSTONE GROUP L.P.
Exhibit 4a. Economic Net Income and Pro Forma Adjusted Economic Net Income
(Dollars in Thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | | | | Quarter Ended | | Six Months Ended
June 30, |
| | | March 31,
2007 | | | June 30,
2007 | | | September 30,
2007 | | December 31,
2007 | | Full Year
2007 | | | March 31,
2008 | | | June 30,
2008 | | 2008 | | | 2007 |
| | | Pro Forma
Adjusted | | | | | | | Pro Forma
Adjusted | | | | | | | | | | | Pro Forma
Adjusted |
Marketable Alternative Asset Management | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Management Fees | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Base Management Fees | | $ | 61,097 | | | $ | 74,413 | | | $ | 87,999 | | $ | 92,795 | | $ | 316,304 | | | $ | 103,187 | | | $ | 127,449 | | $ | 230,636 | | | $ | 135,510 |
Transaction and Other Fees * | | | 1,871 | | | | 1,189 | | | | 1,694 | | | 1,876 | | | 6,630 | | | | 1,128 | | | | 2,884 | | | 4,012 | | | | 3,060 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Management Fees | | | 62,968 | | | | 75,602 | | | | 89,693 | | | 94,671 | | | 322,934 | | | | 104,315 | | | | 130,333 | | | 234,648 | | | | 138,570 |
| | | | | | | | | |
Performance Fees and Allocations | | | 68,061 | (a) | | | 61,906 | (a) | | | 2,522 | | | 24,094 | | | 156,583 | (a) | | | 5,058 | | | | 45,027 | | | 50,085 | | | | 129,967 |
Investment Income (Loss) and Other | | | 25,259 | (a) | | | 31,138 | (a) | | | 32,658 | | | 59,423 | | | 148,478 | (a) | | | (79,383 | ) | | | 49,885 | | | (29,498 | ) | | | 56,397 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Revenues | | | 156,288 | | | | 168,646 | | | | 124,873 | | | 178,188 | | | 627,995 | | | | 29,990 | | | | 225,245 | | | 255,235 | | | | 324,934 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and Benefits | | | 59,374 | (b) | | | 78,268 | (b) | | | 34,006 | | | 45,692 | | | 217,340 | (b) | | | 56,273 | | | | 84,162 | | | 140,435 | | | | 137,642 |
Other Operating Expenses | | | 8,898 | (c) | | | 13,511 | (c) | | | 17,779 | | | 22,205 | | | 62,393 | (c) | | | 18,307 | | | | 25,158 | | | 43,465 | | | | 22,409 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Expenses | | | 68,272 | | | | 91,779 | | | | 51,785 | | | 67,897 | | | 279,733 | | | | 74,580 | | | | 109,320 | | | 183,900 | | | | 160,051 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Economic Net Income (Loss) | | $ | 88,016 | | | $ | 76,867 | | | $ | 73,088 | | $ | 110,291 | | $ | 348,262 | | | $ | (44,590 | ) | | $ | 115,925 | | $ | 71,335 | | | $ | 164,883 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Financial Advisory | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Advisory Fees | | $ | 92,525 | | | $ | 97,518 | | | $ | 81,911 | | $ | 88,330 | | $ | 360,284 | | | $ | 68,563 | | | $ | 71,080 | | $ | 139,643 | | | $ | 190,043 |
Investment Income and Other | | | 1,684 | | | | 1,034 | | | | 2,354 | | | 2,302 | | | 7,374 | | | | 2,597 | | | | 1,826 | | | 4,423 | | | | 2,718 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Revenues | | | 94,209 | | | | 98,552 | | | | 84,265 | | | 90,632 | | | 367,658 | | | | 71,160 | | | | 72,906 | | | 144,066 | | | | 192,761 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and Benefits | | | 49,926 | (b) | | | 45,854 | (b) | | | 50,020 | | | 44,363 | | | 190,163 | (b) | | | 46,967 | | | | 48,574 | | | 95,541 | | | | 95,780 |
Other Operating Expenses | | | 4,777 | (c) | | | 7,941 | (c) | | | 13,485 | | | 11,712 | | | 37,915 | (c) | | | 11,061 | | | | 12,537 | | | 23,598 | | | | 12,718 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Expenses | | | 54,703 | | | | 53,795 | | | | 63,505 | | | 56,075 | | | 228,078 | | | | 58,028 | | | | 61,111 | | | 119,139 | | | | 108,498 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Economic Net Income | | $ | 39,506 | | | $ | 44,757 | | | $ | 20,760 | | $ | 34,557 | | $ | 139,580 | | | $ | 13,132 | | | $ | 11,795 | | $ | 24,927 | | | $ | 84,263 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| * | Transaction and Other Fees are net of amounts, if any, shared with limited partners. |
| (a) | Pro Forma adjustments reflect the elimination of the revenues of the businesses that were not contributed as part of the Reorganization. |
| (b) | Pro Forma adjustments reflect the addition of expenses related to employee compensation and profit arrangements that were not effective prior to the Reorganization. |
| (c) | Pro Forma adjustments reflect the elimination of interest expense based on the assumption that the revolving credit facility was repaid in full from the proceeds of the offering and as of January 1, 2007. |
continued…
12
THE BLACKSTONE GROUP L.P.
Exhibit 4a. Economic Net Income and Pro Forma Adjusted Economic Net Income
(Dollars in Thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | | | | | Quarter Ended | | | Six Months Ended
June 30, | |
| | | March 31,
2007 | | | June 30,
2007 | | | September 30,
2007 | | | December 31,
2007 | | | Full Year
2007 | | | March 31,
2008 | | | June 30,
2008 | | | 2008 | | | 2007 | |
| | | Pro Forma
Adjusted | | | | | | | | | Pro Forma
Adjusted | | | | | | | | | | | | Pro Forma
Adjusted | |
Economic Net Income Recap, Total Reportable Segments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Management Fees | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Base Management Fees | | $ | 157,408 | | | $ | 197,147 | | | $ | 225,352 | | | $ | 220,583 | | | $ | 800,490 | | | $ | 237,274 | | | $ | 262,393 | | | $ | 499,667 | | | $ | 354,555 | |
Advisory Fees | | | 92,525 | | | | 97,518 | | | | 81,911 | | | | 88,330 | | | | 360,284 | | | | 68,563 | | | | 71,080 | | | | 139,643 | | | | 190,043 | |
Transaction and Other Fees * | | | 220,450 | | | | 76,981 | | | | 64,945 | | | | 174,464 | | | | 536,840 | | | | 23,760 | | | | 28,899 | | | | 52,659 | | | | 297,431 | |
Management Fee Offsets | | | (8,231 | ) | | | (13,325 | ) | | | (30,173 | ) | | | (25,023 | ) | | | (76,752 | ) | | | (8,814 | ) | | | (15,558 | ) | | | (24,372 | ) | | | (21,556 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Management Fees | | | 462,152 | | | | 358,321 | | | | 342,035 | | | | 458,354 | | | | 1,620,862 | | | | 320,783 | | | | 346,814 | | | | 667,597 | | | | 820,473 | |
| | | | | | | | | |
Performance Fees and Allocations | | | 648,355 | (a) | | | 445,011 | (a) | | | 140,052 | | | | (139,428 | ) | | | 1,093,990 | (a) | | | (188,434 | ) | | | (10,146 | ) | | | (198,580 | ) | | | 1,093,366 | |
Investment Income (Loss) and Other | | | 115,666 | (a) | | | 179,455 | (a) | | | 63,442 | | | | 48,008 | | | | 406,571 | (a) | | | (100,012 | ) | | | 39,515 | | | | (60,497 | ) | | | 295,121 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Revenues | | | 1,226,173 | | | | 982,787 | | | | 545,529 | | | | 366,934 | | | | 3,121,423 | | | | 32,337 | | | | 376,183 | | | | 408,520 | | | | 2,208,960 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and Benefits | | | 241,206 | (b) | | | 205,390 | (b) | | | 179,670 | | | | 153,673 | | | | 779,939 | (b) | | | 58,176 | | | | 205,102 | | | | 263,278 | | | | 446,596 | |
Other Operating Expenses | | | 27,188 | (c) | | | 41,786 | (c) | | | 66,701 | | | | 85,095 | | | | 220,770 | (c) | | | 67,728 | | | | 71,156 | | | | 138,884 | | | | 68,974 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Expenses | | | 268,394 | | | | 247,176 | | | | 246,371 | | | | 238,768 | | | | 1,000,709 | | | | 125,904 | | | | 276,258 | | | | 402,162 | | | | 515,570 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Economic Net Income (Loss) | | $ | 957,779 | | | $ | 735,611 | | | $ | 299,158 | | | $ | 128,166 | | | $ | 2,120,714 | | | $ | (93,567 | ) | | $ | 99,925 | | | $ | 6,358 | | | $ | 1,693,390 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| * | Transaction and Other Fees are net of amounts, if any, shared with limited partners. |
| (a) | Pro Forma adjustments reflect the elimination of the revenues of the businesses that were not contributed as part of the Reorganization. |
| (b) | Pro Forma adjustments reflect the addition of expenses related to employee compensation and profit arrangements that were not effective prior to the Reorganization. |
| (c) | Pro Forma adjustments reflect the elimination of interest expense based on the assumption that the revolving credit facility was repaid in full from the proceeds of the offering and as of January 1, 2007. |
continued…
13
THE BLACKSTONE GROUP L.P.
Exhibit 4b. Economic Net Income
(Dollars in Thousands)
The table below details Blackstone’s Economic Net Income for each reportable segment for the quarters ended March 31, 2007 and June 30, 2007 and the year ended December 31, 2007.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Corporate Private Equity | | | Real Estate | | | Marketable Alternative
Asset Management |
| | | Quarter Ended | | | Year Ended | | | Quarter Ended | | | Year Ended | | | Quarter Ended | | Year Ended |
| | | March 31,
2007 | | | June 30,
2007 | | | December 31,
2007 | | | March 31,
2007 | | | June 30,
2007 | | | December 31,
2007 | | | March 31,
2007 | | June 30,
2007 | | December 31,
2007 |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Management Fees | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Base Management Fees | | $ | 58,861 | | | $ | 62,858 | | | $ | 254,843 | | | $ | 37,450 | | | $ | 59,876 | | | $ | 229,343 | | | $ | 61,097 | | $ | 74,413 | | $ | 316,304 |
Transaction and Other Fees | | | 9,128 | | | | 56,044 | | | | 178,071 | | | | 209,451 | | | | 19,748 | | | | 352,139 | | | | 1,871 | | | 1,189 | | | 6,630 |
Management Fee Offsets | | | (8,231 | ) | | | (12,634 | ) | | | (65,035 | ) | | | — | | | | (691 | ) | | | (11,717 | ) | | | — | | | — | | | — |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Management Fees | | | 59,758 | | | | 106,268 | | | | 367,879 | | | | 246,901 | | | | 78,933 | | | | 569,765 | | | | 62,968 | | | 75,602 | | | 322,934 |
| | | | | | | | | |
Performance Fees and Allocations | | | 140,423 | | | | 254,466 | | | | 379,479 | | | | 476,358 | | | | 157,425 | | | | 623,200 | | | | 68,061 | | | 61,906 | | | 156,583 |
Investment Income and Other | | | 27,096 | | | | 65,415 | | | | 117,971 | | | | 63,472 | | | | 83,853 | | | | 136,578 | | | | 25,261 | | | 31,138 | | | 148,479 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Revenues | | | 227,277 | | | | 426,149 | | | | 865,329 | | | | 786,731 | | | | 320,211 | | | | 1,329,543 | | | | 156,290 | | | 168,646 | | | 627,996 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and Benefits | | | 17,278 | | | | 24,603 | | | | 96,402 | | | | 18,328 | | | | 22,077 | | | | 145,146 | | | | 28,631 | | | 42,000 | | | 150,330 |
Other Operating Expenses | | | 12,185 | | | | 19,887 | | | | 78,473 | | | | 6,429 | | | | 8,183 | | | | 54,829 | | | | 14,495 | | | 20,253 | | | 74,728 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Expenses | | | 29,463 | | | | 44,490 | | | | 174,875 | | | | 24,757 | | | | 30,260 | | | | 199,975 | | | | 43,126 | | | 62,253 | | | 225,058 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Economic Net Income | | $ | 197,814 | | | $ | 381,659 | | | $ | 690,454 | | | $ | 761,974 | | | $ | 289,951 | | | $ | 1,129,568 | | | $ | 113,164 | | $ | 106,393 | | $ | 402,938 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| | | Financial Advisory | | | Recap, Total Reportable Segments | | | |
| | | Quarter Ended | | | Year Ended | | | Quarter Ended | | | Year Ended | | |
| | | March 31,
2007 | | | June 30,
2007 | | | December 31,
2007 | | | March 31,
2007 | | | June 30,
2007 | | | December 31,
2007 | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | |
Management Fees | | | | | | | | | | | | | | | | | | | | | | | | | |
Base Management Fees | | $ | — | | | $ | — | | | $ | — | | | $ | 157,408 | | | $ | 197,147 | | | $ | 800,490 | | |
Advisory Fees | | | 92,525 | | | | 97,518 | | | | 360,284 | | | | 92,525 | | | | 97,518 | | | | 360,284 | | |
Transaction and Other Fees | | | — | | | | — | | | | — | | | | 220,450 | | | | 76,981 | | | | 536,840 | | |
Management Fee Offsets | | | — | | | | — | | | | — | | | | (8,231 | ) | | | (13,325 | ) | | | (76,752 | ) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total Management Fees | | | 92,525 | | | | 97,518 | | | | 360,284 | | | | 462,152 | | | | 358,321 | | | | 1,620,862 | | |
Performance Fees and Allocations | | | — | | | | — | | | | — | | | | 684,842 | | | | 473,797 | | | | 1,159,262 | | |
Investment Income and Other | | | 1,684 | | | | 1,034 | | | | 7,374 | | | | 117,513 | | | | 181,440 | | | | 410,402 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Revenues | | | 94,209 | | | | 98,552 | | | | 367,658 | | | | 1,264,507 | | | | 1,013,558 | | | | 3,190,526 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and Benefits | | | 15,911 | | | | 22,342 | | | | 132,633 | | | | 80,148 | | | | 111,022 | | | | 524,511 | | |
Other Operating Expenses | | | 5,204 | | | | 8,638 | | | | 39,037 | | | | 38,313 | | | | 56,961 | | | | 247,067 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Expenses | | | 21,115 | | | | 30,980 | | | | 171,670 | | | | 118,461 | | | | 167,983 | | | | 771,578 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Economic Net Income | | $ | 73,094 | | | $ | 67,572 | | | $ | 195,988 | | | $ | 1,146,046 | | | $ | 845,575 | | | $ | 2,418,948 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
14
THE BLACKSTONE GROUP L.P.
Exhibit 5. Reconciliation of Pro Forma Adjusted Cash Flow from Operations to Net Cash Provided
by (Used in) Operating Activities and of Economic Net Income Adjusted Units—Diluted to GAAP
Weighted-Average Common Units—Diluted
(Dollars in Thousands, Except Unit Data)
The following table provides a reconciliation of Blackstone’s Adjusted Cash Flow from Operations and Pro Forma Adjusted Cash Flow from Operations to Blackstone’s Net Cash Provided by (Used in) Operating Activities. Adjusted Cash Flow from Operations is a supplemental measure of liquidity to assess liquidity and amounts available for distributions to Blackstone unitholders, including Blackstone personnel.
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
June 30, | | | Six Months Ended
June 30, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
Net Cash Provided by (Used in) Operating Activities | | $ | 102,143 | | | $ | 516,847 | | | $ | 217,297 | | | $ | (827,108 | ) |
Changes in Operating Assets and Liabilities | | | (55,230 | ) | | | 342,933 | | | | (366,886 | ) | | | 53,773 | |
Blackstone Funds Related Investment Activities | | | 2,697 | | | | (599,372 | ) | | | 251,131 | | | | 1,326,670 | |
Net Realized Gains on Investments | | | 118,555 | | | | 2,424,334 | | | | 118,299 | | | | 3,474,975 | |
Non-Controlling Interests in Income of Consolidated Entities | | | 556,261 | | | | (1,625,043 | ) | | | 1,344,738 | | | | (2,369,966 | ) |
Realized Gains—Blackstone Funds | | | 44,089 | | | | 120,448 | | | | 20,235 | | | | 97,855 | |
| | | | | | | | | | | | | | | | |
Adjusted Cash Flow from Operations | | | 768,515 | | | | 1,180,147 | | | | 1,584,814 | | | | 1,756,199 | |
| | | | |
| | | | | | Pro Forma | | | | | | Pro Forma | |
Adjusted Cash Flow from Operations | | | 768,515 | | | | 1,180,147 | | | | 1,584,814 | | | | 1,756,199 | |
Cash Flow from Operations—Adjustments (a) | | | | | | | | | | | | | | | | |
Elimination of Non-Contributed Entities (b) | | | — | | | | (21,008 | ) | | | — | | | | (46,523 | ) |
Increase in Compensation Expense (c) | | | — | | | | (94,369 | ) | | | — | | | | (255,426 | ) |
Interests Held by Blackstone Holdings Limited Partners (d) | | | (573,279 | ) | | | (169,833 | ) | | | (1,372,626 | ) | | | (169,833 | ) |
Eliminate Interest Expense (e) | | | — | | | | 15,180 | | | | — | | | | 26,302 | |
Realized Gains—Blackstone Funds | | | — | | | | (193,094 | ) | | | — | | | | (195,817 | ) |
Incremental Cash Tax Effect (f) | | | (33,711 | ) | | | (48,689 | ) | | | (55,065 | ) | | | (154,024 | ) |
| | | | | | | | | | | | | | | | |
Adjusted Cash Flow from Operations | | $ | 161,525 | | | $ | 668,334 | | | $ | 157,123 | | | $ | 960,878 | |
| | | | | | | | | | | | | | | | |
| (a) | Pro Forma Adjusted Cash Flow from Operations is based upon historical results of operations and gives effect to the pre-initial public offering reorganization and the initial public offering as if they were completed as of January 1, 2007. These pro forma adjustments are consistent with Rule 11.01 of Regulation S–X. |
| (b) | Represent adjustments to eliminate from Pro Forma Adjusted Cash Flow from Operations the cash flows of the businesses that were not contributed as part of the reorganization. |
| (c) | Represent adjustments to reflect in Pro Forma Adjusted Cash Flow from Operations the cash portion of expenses related to employee compensation that were not effective prior to the reorganization as well as vested carried interest for departed partners. |
| (d) | Represents an adjustment to add back net income (loss) allocable to interest holders of Blackstone Holdings Limited Partners after the Reorganization recorded as Non-Controlling Interests. |
| (e) | Represent adjustments to eliminate interest expense in Pro Forma Adjusted Cash Flow from Operations on the assumption that the revolving credit facility was repaid in full from the proceeds of the offering. |
| (f) | Represent the provisions for and/or adjustments to income taxes that were calculated using the same methodology applied in calculating such amounts for the period after the reorganization. |
The following table provides a reconciliation of Blackstone’s GAAP Weighted-Average Common Units—Diluted to Weighted-Average Economic Net Income Adjusted Units—Diluted.
| | | | | | |
| | | Three Months | | Six Months | | June 19, 2007 |
| | | Ended | | Ended | | through |
| | | June 30, 2008 | | June 30, 2008 | | June 30, 2007 |
GAAP Weighted-Average Common Units Outstanding—Diluted | | 260,394,534 | | 260,127,602 | | 259,504,480 |
Adjustments: | | | | | | |
Weighted-Average Partnership Units | | 836,010,555 | | 833,995,410 | | 827,516,625 |
Weighted-Average Unvested Deferred Restricted Common Units | | 34,559,729 | | 34,995,854 | | 34,230,122 |
| | | | | | |
Weighted-Average Economic Net Income Adjusted Units—Diluted | | 1,130,964,818 | | 1,129,118,866 | | 1,121,251,227 |
| | | | | | |
15
THE BLACKSTONE GROUP L.P.
Exhibit 6. Supplemental Metrics
(Dollars in Thousands)
| | | | | | | | | |
| | | As of and for the Quarters Ended
June 30, | | | |
| | | 2008 | | 2007 | | % Variance | |
Total Assets Under Management (End of Period) | | | | | | | |
Corporate Private Equity | | $ | 30,299,340 | | $ | 31,758,025 | | (5 | )% |
Real Estate | | | 29,176,414 | | | 23,060,599 | | 27 | % |
MAAM | | | 59,937,279 | | | 36,950,246 | | 62 | % |
| | | | | | | | | |
| | $ | 119,413,033 | | $ | 91,768,870 | | 30 | % |
| | | | | | | | | |
| | | |
Fee-Earning Assets Under Management (End of Period) (a) | | | | | | | |
Corporate Private Equity | | $ | 25,229,438 | | $ | 23,611,474 | | 7 | % |
Real Estate | | | 21,084,770 | | | 15,089,702 | | 40 | % |
MAAM | | | 53,414,459 | | | 34,319,376 | | 56 | % |
| | | | | | | | | |
| | $ | 99,728,667 | | $ | 73,020,552 | | 37 | % |
| | | | | | | | | |
| | | |
Weighted-Average Fee-Earning Assets Under Management (For the Quarter Ended) (a) | | | | | | | |
Corporate Private Equity | | $ | 25,076,359 | | $ | 23,483,800 | | 7 | % |
Real Estate | | | 19,171,496 | | | 15,294,258 | | 25 | % |
MAAM | | | 52,123,029 | | | 32,680,550 | | 59 | % |
| | | | | | | | | |
| | $ | 96,370,884 | | $ | 71,458,608 | | 35 | % |
| | | | | | | | | |
| | | |
Limited Partner Capital Deployed (For the Quarter Ended) | | | | | | | |
Corporate Private Equity | | $ | 775,944 | | $ | 1,603,508 | | (52 | )% |
Real Estate | | | 209,779 | | | 71,088 | | 195 | % |
MAAM (b) | | | 808,875 | | | 55,318 | | 1362 | % |
| | | | | | | | | |
| | $ | 1,794,598 | | $ | 1,729,914 | | 4 | % |
| | | | | | | | | |
| | | |
Fund Level Unrealized Value (c) (End of Period) | | | | | | | |
Corporate Private Equity | | | | | | | | | |
Cost | | $ | 15,646,836 | | $ | 10,972,121 | | 43 | % |
| | | | | | | | | |
Unrealized Value | | $ | 17,355,494 | | $ | 14,716,870 | | 18 | % |
| | | | | | | | | |
| | | |
Real Estate | | | | | | | | | |
Cost | | $ | 11,114,394 | | $ | 6,650,861 | | 67 | % |
| | | | | | | | | |
Unrealized Value | | $ | 15,038,501 | | $ | 11,531,535 | | 30 | % |
| | | | | | | | | |
| | | |
MAAM(b) | | | | | | | | | |
Cost | | $ | 1,862,250 | | $ | 611,530 | | 205 | % |
| | | | | | | | | |
Unrealized Value | | $ | 2,002,163 | | $ | 646,133 | | 210 | % |
| | | | | | | | | |
| (a) | Excludes unrealized values which Blackstone is entitled to receive in carried interest. |
| (b) | Limited Partner Capital Deployed and Fund Level Unrealized Value for the MAAM segment represent activity in Blackstone’s mezzanine and credit liquidity funds. |
| (c) | Cost and unrealized value represents the cost of those fund investments, including co-investments arranged by Blackstone, and related unrealized value on which Blackstone is entitled to receive carried interest when a fund achieves cumulative investment returns in excess of a specified rate. |
16
