Exhibit 99.1
The Blackstone Group Reports Fourth Quarter and
Full Year 2008 Results
Adverse global market and economic conditions led to lower revenues and a loss for the fourth quarter and full year 2008.
Net Fee Related Earnings for 2008 were $428 million, up 11% from Pro Forma Adjusted Net Fee Related Earnings for 2007, and Adjusted Cash Flows from Operations were $129 million during 2008.
Financial Advisory achieved record revenue of $411 million, a 12% increase from the full year 2007.
Fee-Earning Assets Under Management of $91 billion at December 31, 2008 increased 9% over year end 2007.
Blackstone’s Real Estate Funds, Funds of Hedge Funds and GSO Credit-Oriented Funds all experienced net inflows during 2008.
Blackstone ended 2008 with $504 million in available cash, which exceeded all outstanding borrowings.
Blackstone will not have a distribution to common unitholders for the fourth quarter 2008. Blackstone previously paid $0.90 per unit in total distributions for the full year 2008.
Neither Blackstone’s Chairman, Chief Executive Officer and Co-Founder, Stephen A. Schwarzman, nor its Co-Founder, Peter G. Peterson, received any bonuses in 2008.
Fourth Quarter and Full Year 2008 Business Highlights
| | • | | Economic Net Income was a loss of $(827.1) million for the fourth quarter 2008 as compared to a loss of $(509.3) million in the third quarter 2008 and Economic Net Income of $128.2 million in the fourth quarter 2007. |
| | • | | Net Fee Related Earnings was $117.9 million for the fourth quarter 2008 compared to $139.8 million in 2007, a decrease of 16%, driven by reduced Transaction and Other Fees which more than offset a 17% increase in Base Management Fees. |
| | • | | GAAP Loss for the fourth quarter 2008 was $(406.3) million as compared with a GAAP Loss of $(365.5) million in the third quarter 2008 and $(161.4) million in the fourth quarter 2007. |
| | • | | Net Fee Related Earnings of $427.7 million for the full year 2008 compared to Pro Forma Adjusted Net Fee Related Earnings of $386.7 million in 2007, an 11% increase. |
| | • | | Corporate Private Equity Segment Revenues totaled negative $(193.6) million vs. negative $(68.3) million in the third quarter 2008 and negative $(15.4) million in the fourth quarter 2007. Base Management Fees increased $1.0 million as compared to the fourth quarter 2007. |
| | • | | Real Estate Segment Revenues totaled negative $(477.8) million vs. negative $(273.7) million in the third quarter 2008 and positive revenues of $113.5 million in the fourth quarter 2007. Base Management Fees increased $16.0 million, or 25%, as compared to the fourth quarter 2007. |
| | |
| | The Blackstone Group® L.P. |
| | 345 Park Avenue |
| | New York, NY 10154 |
| | 212 583-5000 |
| | • | | Marketable Alternative Asset Management Segment Revenues totaled negative $(55.7) million vs. negative $(48.0) million in the third quarter 2008 and positive revenues of $178.2 million in the fourth quarter 2007. Base Management Fees increased 23%, or $21.4 million, to $114.3 million as compared to the fourth quarter 2007. |
| | • | | Financial Advisory Segment Revenues were $105.8 million vs. $160.7 million in the third quarter 2008 and up 17% from $90.6 million for the fourth quarter 2007. |
| | • | | Economic Net Income was a loss of $(1.33) billion for the full year 2008 as compared to Pro Forma Adjusted Economic Net Income of $2.12 billion for the full year 2007. |
New York, February 27, 2009: The Blackstone Group L.P. (NYSE: BX) today reported its 2008 results.
For the full year 2008, Total Reportable Segment Revenues were a negative $(442.1) million as compared to Total Pro Forma Adjusted Reportable Segment Revenues of $3.12 billion in 2007. Lower fair values of portfolio investments across the Corporate Private Equity, Real Estate and Marketable Alternative Asset Management segments contributed to the negative revenues, partially offset by strong results in our Financial Advisory businesses and strong growth in management fees from fee paying assets under management. For the fourth quarter 2008, Total Reportable Segment Revenues were negative $(621.4) million as compared to negative $(229.2) million for the third quarter 2008 and $366.9 million for the fourth quarter 2007.
Economic Net Income was a loss of $(1.33) billion for the full year 2008 as compared to Pro Forma Adjusted Economic Net Income of $2.12 billion for the full year 2007. Adjusted Cash Flow from Operations for the full year 2008 was $128.8 million as compared to Pro Forma Adjusted Cash Flow from Operations of $1.52 billion for the full year 2007.
Net Fee Related Earnings from Operations for the full year 2008 was $427.7 million as compared to Pro Forma Adjusted Net Fee Related Earnings from Operations of $386.7 million for the full year 2007, an increase of $41.0 million or 11%. Net Fee Related Earnings from Operations for the fourth quarter 2008 were $117.9 million as compared to $151.8 million in the third quarter 2008 and $139.8 million in the fourth quarter 2007.
Economic Net Income was a loss of $(827.1) million for the fourth quarter 2008 as compared to a loss of $(509.3) million in the third quarter 2008 and $128.2 million for the fourth quarter 2007. Adjusted Cash Flow from Operations in the fourth quarter 2008 was $(19.3) million as compared to Adjusted Cash Flow from Operations of $244.5 million for the fourth quarter 2007.
Blackstone remains well positioned from a capital and liquidity perspective, with $503.7 million in available cash as of December 31, 2008 and $767.6 million in cash as of January 31, 2009 after paying off the entire $250 million balance on its revolving credit facility.
GAAP results for the full year 2008 included negative Revenues of $(349.4) million, Other Loss of $(872.3) million and Loss Before Benefit for Taxes of $(1.20) billion. For the full year 2007, Revenues were $3.05 billion, Other Income was $5.42 billion and Income Before Provision for Taxes totaled $1.65 billion. On a GAAP basis, Net Cash Flow Provided by Operating Activities was $2.16 billion for the full year 2008 as compared to Net Cash Flow Used in Operating Activities of $(850.3) million for the prior year.
GAAP results for the fourth quarter 2008 included negative Revenues of $(611.3) million, Other Loss of $(295.6) million and Loss Before Benefit for Taxes of $(406.3) million. For the fourth quarter 2007, Revenues were $345.0 million, Other Income was $16.4 million and Loss Before Provision for Taxes totaled $(161.4) million. On a GAAP basis, Net Cash Flow Provided by Operating Activities was $1.46 billion for the fourth quarter 2008 as compared to $243.8 million for the fourth quarter 2007.
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World markets and economies deteriorated in the fourth quarter 2008, bringing the full year market results to the worst experienced since the Great Depression. A combination of de-levering by institutional investors and their need for liquidity further stressed already weak markets across many asset classes. Equity markets across North America, Europe and Asia declined in a range of 40-60% during 2008, with a broad-based sell off across not only all regions but also all sectors. Commodity prices, which increased to record highs in the first half of 2008, dropped precipitously in the second half as demand declines caused excess supply. Credit indices experienced similar trends, declining 25-30% to levels not experienced since the indices were initiated. Commercial real estate fundamentals were adversely impacted as demand weakened in the hospitality sector and office vacancy rates moved higher. Securitization markets were very limited in 2008, heavily constraining borrowing ability for new transactions.
Stephen A. Schwarzman, Chairman and Chief Executive Officer said: “2008 was one of the most challenging operating environments in the last several decades. While not immune to declining markets and weak global economies, Blackstone operates with a strong balance sheet, prudent and patient investment practices and a deep bench of talented portfolio operations executives to work with our portfolio companies. We ended the year with substantial dry powder across our real estate, private equity and credit businesses and think we are well poised to make highly attractive investments in the years ahead. Severe market dislocations have meaningfully altered the competitive landscape and our competitive position remains very strong in all our businesses.”
The table below details Blackstone’s Economic Net Income and Adjusted Cash Flow from Operations for the fourth quarter 2008 and 2007, as well as Blackstone’s Economic Net Income, Net Fee Related Earnings from Operations and Adjusted Cash Flow from Operations for the full year 2008 as compared to Pro Forma Adjusted Economic Net Income, Pro Forma Net Fee Related Earnings from Operations and Pro Forma Adjusted Cash Flow from Operations for the full year 2007. Economic Net Income, Total Reportable Segments includes unrealized gains/losses and the direct compensation impact related to those gains/losses but excludes transaction-related charges.
| | | | | | | | | | | | | | |
| | | Three Months Ended December 31, | | Year Ended December 31, |
| | | 2008 | | | 2007 | | 2008 | | | 2007 |
| | | | | | | | | | | Pro Forma
Adjusted |
| | | (Dollars in Thousands, Except per Unit Amounts) |
Economic Net Income, Total Reportable Segments (a) | | $ | (827,110 | ) | | $ | 128,166 | | $ | (1,330,018 | ) | | $ | 2,120,714 |
| | | | |
Provision (Benefit) for Income Taxes (b) | | | (63,278 | ) | | | 40,117 | | | (162,769 | ) | | | 305,206 |
| | | | | | | | | | | | | | |
Economic Net Income After Taxes | | $ | (763,832 | ) | | $ | 88,049 | | $ | (1,167,249 | ) | | $ | 1,815,508 |
| | | | | | | | | | | | | | |
| | | | |
Economic Net Income After Taxes per Adjusted Unit | | $ | (0.68 | ) | | $ | 0.08 | | $ | (1.03 | ) | | $ | 1.62 |
| | | | | | | | | | | | | | |
| | | | |
Net Fee Related Earnings from Operations | | $ | 117,854 | | | $ | 139,812 | | $ | 427,668 | | | $ | 386,697 |
| | | | | | | | | | | | | | |
| | | | |
Adjusted Cash Flow from Operations (a) | | $ | (19,321 | ) | | $ | 244,531 | | $ | 128,801 | | | $ | 1,516,604 |
| | | | | | | | | | | | | | |
| | (a) | Reconciliations of Pro Forma Adjusted Economic Net Income, Total Reportable Segments to Economic Net Income, Total Reportable Segments and of 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. |
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SEGMENT REVIEW
Corporate Private Equity
Fourth Quarter and Full Year
Corporate Private Equity had negative fourth quarter 2008 revenues of $(193.6) million, as compared with negative revenues of $(68.3) million for the third quarter 2008 and $(15.4) million for the fourth quarter 2007, driven by a net depreciation in the fair value of the portfolio investments. The primary catalyst for the depreciation was lower operating projections for some portfolio companies, reduced share prices of publicly held investments consistent with overall declines in global equity markets and the depreciation of foreign currencies against the dollar.
Net Fee Related Earnings from Operations were $31.6 million for the fourth quarter 2008, a decrease of $12.6 million as compared to the fourth quarter 2007. The primary driver of the reduction was a decrease in transaction fees.
Base Management Fees were essentially flat as compared to both the third quarter 2008 and fourth quarter 2007. Transaction and Other Fees decreased slightly compared to the third quarter 2008 and decreased $39.3 million from the fourth quarter 2007, which included a substantial fee associated with the acquisition of Hilton Hotels.
Compensation and Benefits expense declined to $22.5 million from $34.2 million in the third quarter 2008 and increased from $(1.8) million in the fourth quarter 2007. Other Operating Expenses were $23.1 million, down from $24.0 million in the third quarter 2008 and $23.6 million in the fourth quarter 2007.
Weighted-Average Fee-Earning Assets Under Management rose to $25.48 billion from $24.90 billion in the fourth quarter 2007.
Limited Partner Capital Deployed totaled $1.13 billion for the quarter, a decrease from $2.33 billion deployed in the fourth quarter 2007.
Corporate Private Equity had negative full year revenues of $(286.2) million, as compared with positive revenues of $821.3 million for the prior year. The principal driver of the change year-over-year was a net depreciation in the fair value of the portfolio investments in the corporate private equity funds. This depreciation in fair value is reflected in lower Performance Fees and Allocations and Investment Income (Loss) and Other.
Real Estate
Fourth Quarter and Full Year
Real Estate had negative revenues of $(477.8) million for the fourth quarter 2008, as compared with negative revenues of $(273.7) million for the third quarter 2008 and $113.5 million for the fourth quarter 2007. The principal driver of the decline was a net depreciation in the fair value of certain investments in the office and hospitality portfolios, which reflects both increases in capitalization rates and revised operating projections. This decrease in fair value is reflected in Performance Fees and Allocations and Investment Income (Loss) and Other.
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Net Fee Related Earnings from Operations were $43.8 million for the fourth quarter 2008, a decrease of $4.6 million as compared to the fourth quarter 2007. The principle driver of the reduction was a decrease in transaction fees, partially offset by a decrease in compensation expenses.
Base Management Fees were $80.8 million, a slight increase from $80.4 million for the third quarter 2008 and a 25% increase over the fourth quarter 2007. This change reflects higher Fee-Earning Assets Under Management.
Transaction and Other Fees declined $94.3 million from the fourth quarter 2007, which included a substantial fee associated with the acquisition of Hilton Hotels. Transaction and Other Fees in the fourth quarter 2008 increased $3.3 million from the third quarter 2008.
Compensation and Benefits was a negative $(12.1) million, reflecting the reversal of prior period carried interest allocations to certain personnel, down from $21.1 million in the third quarter 2008 and $65.4 million for the fourth quarter 2007. Other Operating Expenses were $12.2 million, down $2.6 million and $15.3 million from both the third quarter 2008 and fourth quarter 2007, respectively.
Weighted-Average Fee-Earning Assets Under Management increased 24% or $4.41 billion from the fourth quarter 2007 to $22.64 billion.
Limited Partner Capital Deployed totaled $258.6 million for the fourth quarter 2008, a decrease from the $4.04 billion deployed in the fourth quarter 2007.
Real Estate had negative revenues of $(718.0) million, as compared with positive revenues of $1.30 billion for the full year 2007. The principal driver of the decline year-over-year was a net depreciation in the fair value of the portfolio holdings in the real estate funds. This depreciation in fair value is reflected in Performance Fees and Allocations and Investment Income (Loss) and Other.
Marketable Alternative Asset Management (MAAM)
Fourth Quarter and Full Year
MAAM had negative revenues of $(55.7) million, compared with negative revenues of $(48.0) million for the third quarter 2008 and $178.2 million for the fourth quarter 2007.
Base Management Fees were $114.3 million, up 23%, as compared to the fourth quarter 2007, and down 13% as compared to the third quarter 2008.
Net Fee Related Earnings from Operations were $21.7 million for the fourth quarter 2008, a decrease of $1.4 million as compared to the fourth quarter 2007. The main driver of the change was an increase in compensation expenses, principally offset by an increase in management fees.
Base Management Fees for the full year 2008 were $476.8 million, up 51%, as compared to 2007.
Net Fee Related Earnings from Operations for the full year 2008 were $130.9 million, up 162%, as compared to 2007.
Compensation and Benefits was $40.3 million, down from $60.3 million in the third quarter 2008 and from $45.7 million for the fourth quarter 2007.
Weighted-Average Fee-Earning Assets Under Management for the fourth quarter 2008 totaled $47.47 billion compared with $38.49 billion for the prior year, a 23% increase.
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Limited Partner Capital Deployed totaled $333.8 million for the fourth quarter 2008, up from $82.2 million in the fourth quarter 2007, primarily from activity in certain of Blackstone’s newly launched credit oriented funds.
MAAM had revenues of $151.5 million for the full year 2008, after $329.5 million of investment losses, compared with revenues of $628.0 million for the full year 2007.
Financial Advisory
Fourth Quarter and Full Year
Revenues were $105.8 million for the fourth quarter 2008, up 17% compared to the fourth quarter 2007 and down 34% from the third quarter 2008. An increase in revenues in Blackstone’s corporate and mergers and acquisitions advisory service business was the primary driver for the increase from the fourth quarter 2007.
Net Fee Related Earnings from Operations were $20.8 million for the fourth quarter 2008, a decrease of $3.4 million as compared to the fourth quarter 2007. The primary catalyst for the reduction was higher compensation primarily related to business expansion and other operating expenses, partially offset by higher advisory fees.
Compensation and Benefits was $56.9 million, down from $82.3 million in the third quarter 2008 and up from $44.4 million for the fourth quarter 2007.
Revenues were $410.6 million for the full year 2008, representing an increase of 12% compared to $367.7 million in the prior year. The increase was driven by revenues in Blackstone’s corporate and mergers and acquisitions advisory service and restructuring and reorganization advisory services businesses. An increase in client mandates accounted for the increase in corporate and mergers and acquisitions advisory revenues, while the continued credit market turmoil and low levels of available liquidity led to increased bankruptcies, debt defaults and debt restructurings and drove the increase in revenues in the restructuring and reorganization advisory services business.
CAPITAL AND LIQUIDITY
For Economic Net Income purposes, the weighted-average fully diluted unit count (the “Adjusted Units”) for the fourth quarter and full year 2008 was 1,129.2 million units and 1,129.0 million units, respectively. The Adjusted Unit count for the fourth quarter 2007 was 1,127.2 million units and for the period June 19, 2007 through December 31, 2007 was 1,121.2 million units.
The total number of units used in calculating cash distributions was 1,100.2 million units for the full year 2008 and 1,089.7 million units for the period June 19, 2007 through December 31, 2007.
As of December 31, 2008, Blackstone had $503.7 million in cash, which was in excess of its total indebtedness. In January 2009, Blackstone paid down its entire corporate revolver balance of $250.0 million, further strengthening its liquidity positions.
DISTRIBUTION
Blackstone has paid total distributions to public common unitholders to date in respect of 2008 of $0.90 per unit, but will not be making any distribution to common unitholders for the fourth quarter 2008 because the distribution made to date in respect of 2008 considerably exceeds Adjusted Cash Flow from Operations for the full year. No distributions were paid to Blackstone personnel and others with respect to their Blackstone Holdings partnership units.
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Public common unitholders will continue to receive a priority distribution ahead of Blackstone personnel and others through 2009, but the amount of those distributions in respect of 2009 will be based on the amount of Adjusted Cash Flow from Operations in 2009 available for distributions and could again fall below $1.20.
Neither Mr. Schwarzman nor Mr. Peterson received any cash bonuses in 2008 and cash compensation for the other named executive officers was down in excess of 70% in aggregate for 2008 compared to 2007.
# # #
Blackstone will host a conference call on February 27, 2009 at 11:00 a.m. EST to discuss 2008 results. The conference call can be accessed by dialing (888) 713-4216 (U.S. domestic) or +1 (617) 213-4868 (international) pass code 50481501. 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 +1 (617) 801-6888 (international) pass code number 94399097, 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, funds of hedge funds, credit-oriented 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 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
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section entitled “Risk Factors” in its Annual Report on Form 10-K for the fiscal year ended December 31, 2008, 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 Operations
(Dollars in Thousands, Except Per Unit Data)
| | | | | | | | |
| | | Year Ended December 31, | |
| | | 2008 | | | 2007 | |
Revenues | | | | | | | | |
Management and Advisory Fees | | $ | 1,476,357 | | | $ | 1,566,047 | |
Performance Fees and Allocations | | | (1,247,320 | ) | | | 1,126,640 | |
Investment Income and Other (1) | | | (578,398 | ) | | | 357,461 | |
| | | | | | | | |
Total Revenues | | | (349,361 | ) | | | 3,050,148 | |
| | | | | | | | |
| | |
Expenses | | | | | | | | |
Compensation and Benefits (2) | | | 3,859,787 | | | | 2,256,647 | |
Interest (3) | | | 23,008 | | | | 32,080 | |
General, Administrative and Other (4) | | | 440,776 | | | | 324,200 | |
Fund Expenses | | | 63,031 | | | | 151,917 | |
| | | | | | | | |
Total Expenses | | | 4,386,602 | | | | 2,764,844 | |
| | | | | | | | |
| | |
Other Income (Loss) | | | | | | | | |
Net Gains (Losses) from Fund Investment Activities | | | (872,336 | ) | | | 5,423,132 | |
| | | | | | | | |
| | |
Income (Loss) Before Non-Controlling Interests in Income (Loss) of Consolidated Entities and Provision (Benefit) for Taxes | | | (5,608,299 | ) | | | 5,708,436 | |
| | |
Non-Controlling Interests in Income (Loss) of Consolidated Entities | | | (4,404,278 | ) | | | 4,059,221 | |
| | | | | | | | |
| | |
Income (Loss) Before Provision (Benefit) for Taxes | | | (1,204,021 | ) | | | 1,649,215 | |
| | |
Provision (Benefit) for Taxes | | | (40,989 | ) | | | 25,978 | |
| | | | | | | | |
Net Income (Loss) (5) | | $ | (1,163,032 | ) | | $ | 1,623,237 | |
| | | | | | | | |
| | |
| | | | | | June 19, 2007
through
December 31,
2007 | |
Net Loss per Common Unit, Basic and Diluted | | | | | | | | |
Common Units Entitled to Priority Distributions | | $ | (4.36 | ) | | $ | (1.29 | ) |
| | | | | | | | |
Common Units Not Entitled to Priority Distributions | | $ | (3.09 | ) | | | | |
| | | | | | | | |
___________________ Net transaction-related charges included above were: | | | | | | | | |
(1) Investment Income and Other | | $ | (36,575 | ) | | $ | — | |
| | |
(2) Total Compensation and Benefits | | $ | 3,859,787 | | | $ | 2,256,647 | |
Less: Compensation and Benefits – transaction-related | | | 3,291,081 | | | | 1,732,134 | |
| | | | | | | | |
Compensation – non-transactional (a) | | $ | 568,706 | | | $ | 524,513 | |
| | | | | | | | |
| | |
(3) Interest | | $ | 4,066 | | | $ | — | |
| | |
(4) General, Administrative and Other | | $ | 154,236 | | | $ | 117,607 | |
| | |
(5) Total transaction-related charges | | $ | 3,485,958 | | | $ | 1,849,741 | |
| | |
(a) Principally comprised of base pay, bonus, net carried interest allocations, benefits and non-IPO related equity-based compensation. | | | | | | | | |
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THE BLACKSTONE GROUP L.P.
Exhibit 1b. Consolidated and Combined Statements of Operations
(Dollars in Thousands, Except Per Unit Data)
| | | | | | | | |
| | | Quarter Ended December 31, | |
| | | 2008 | | | 2007 | |
Revenues | | | | | | | | |
Management and Advisory Fees | | $ | 381,416 | | | $ | 447,506 | |
Performance Fees and Allocations | | | (628,835 | ) | | | (139,542 | ) |
Investment Income and Other (1) | | | (363,863 | ) | | | 37,002 | |
| | | | | | | | |
Total Revenues | | | (611,282 | ) | | | 344,966 | |
| | | | | | | | |
| | |
Expenses | | | | | | | | |
Compensation and Benefits (2) | | | 862,311 | | | | 902,175 | |
Interest (3) | | | 8,682 | | | | 3,519 | |
General, Administrative and Other (4) | | | 116,196 | | | | 133,568 | |
Fund Expenses | | | 4,844 | | | | 25,469 | |
| | | | | | | | |
Total Expenses | | | 992,033 | | | | 1,064,731 | |
| | | | | | | | |
| | |
Other Income (Loss) | | | | | | | | |
Net Gains (Losses) from Fund Investment Activities | | | (295,623 | ) | | | 16,423 | |
| | | | | | | | |
| | |
Income (Loss) Before Non-Controlling Interests in (Loss) of Consolidated Entities and Provision for Taxes | | | (1,898,938 | ) | | | (703,342 | ) |
| | |
Non-Controlling Interests in Loss of Consolidated Entities | | | (1,492,644 | ) | | | (541,918 | ) |
| | | | | | | | |
Income (Loss) Before Provision for Taxes | | | (406,294 | ) | | | (161,424 | ) |
| | |
Provision for Taxes | | | 8,883 | | | | 8,576 | |
| | | | | | | | |
| | |
Net Income (Loss) (5) | | $ | (415,177 | ) | | $ | (170,000 | ) |
| | | | | | | | |
Net Loss per Common Unit, Basic and Diluted | | | | | | | | |
Common Units Entitled to Priority Distributions | | $ | (1.52 | ) | | $ | (0.65 | ) |
| | | | | | | | |
Common Units Not Entitled to Priority Distributions | | $ | (1.52 | ) | | | | |
| | | | | | | | |
| | |
___________________ Net transaction-related charges included above were: | | | | | | | | |
(1) Investment Income and Other | | $ | (35,066 | ) | | $ | — | |
| | |
(2) Total Compensation and Benefits | | $ | 862,311 | | | $ | 902,175 | |
Less: Compensation and Benefits – transaction-related | | | 107,574 | | | | 153,675 | |
| | | | | | | | |
Compensation – non-transactional (a) | | $ | 754,737 | | | $ | 748,500 | |
| | | | | | | | |
| | |
(3) Interest | | $ | 864 | | | $ | — | |
| | |
(4) General, Administrative and Other | | $ | 28,225 | | | $ | 55,203 | |
| | |
(5) Total transaction-related charges | | $ | 818,892 | | | $ | 803,703 | |
| | |
(a) Principally comprised of base pay, bonus, net carried interest allocations, benefits and non-IPO related equity-based compensation. | | | | | | | | |
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THE BLACKSTONE GROUP L.P.
Exhibit 2a. Consolidated Statements of Financial Condition
(Dollars in Thousands)
| | | | | | | |
| | | December 31,
2008 | | | December 31,
2007 |
Assets | | | | | | | |
Cash and Cash Equivalents | | $ | 503,737 | | | $ | 868,629 |
Cash Held by Blackstone Funds and Other | | | 907,324 | | | | 163,696 |
Investments | | | 2,830,942 | | | | 7,145,156 |
Accounts Receivable | | | 312,067 | | | | 213,086 |
Due from Brokers | | | 48,506 | | | | 812,250 |
Investment Subscriptions Paid in Advance | | | 1,916 | | | | 36,698 |
Due from Affiliates | | | 861,434 | | | | 855,854 |
Intangible Assets, Net | | | 1,077,526 | | | | 604,681 |
Goodwill | | | 1,703,602 | | | | 1,597,474 |
Other Assets | | | 165,434 | | | | 99,366 |
Deferred Tax Assets | | | 845,423 | | | | 777,310 |
| | | | | | | |
Total Assets | | $ | 9,257,911 | | | $ | 13,174,200 |
| | | | | | | |
| | |
Liabilities and Partners’ Capital | | | | | | | |
Loans Payable | | $ | 387,000 | | | $ | 130,389 |
Amounts Due to Non-Controlling Interest Holders | | | 1,103,423 | | | | 269,901 |
Securities Sold, Not Yet Purchased | | | 894 | | | | 1,196,858 |
Due to Affiliates | | | 1,285,577 | | | | 831,609 |
Accrued Compensation and Benefits | | | 413,459 | | | | 188,997 |
Accounts Payable, Accrued Expenses and Other Liabilities | | | 173,436 | | | | 250,445 |
| | | | | | | |
Total Liabilities | | | 3,363,789 | | | | 2,868,199 |
| | | | | | | |
| | |
Commitments and Contingencies | | | | | | | |
| | |
Non-Controlling Interests in Consolidated Entities | | | 2,384,965 | | | | 6,079,156 |
| | | | | | | |
| | |
Partners’ Capital | | | | | | | |
Partners’ Capital | | | 3,509,448 | | | | 4,226,500 |
Accumulated Other Comprehensive Income (Loss) | | | (291 | ) | | | 345 |
| | | | | | | |
Total Partners’ Capital | | | 3,509,157 | | | | 4,226,845 |
| | | | | | | |
Total Liabilities and Partners’ Capital | | $ | 9,257,911 | | | $ | 13,174,200 |
| | | | | | | |
11
THE BLACKSTONE GROUP L.P.
Exhibit 2b. Consolidating Statements of Financial Condition
(Dollars in Thousands)
| | | | | | | | | | | | | | | |
| | | December 31, 2008 | |
| | | Consolidated
Operating
Partnerships | | | Consolidated
Blackstone Funds | | Eliminations | | | Consolidated | |
Assets | | | | | | | | | | | | | | | |
Cash and Cash Equivalents | | $ | 503,737 | | | $ | — | | $ | — | | | $ | 503,737 | |
Cash Held by Blackstone Funds and Other | | | 57,536 | | | | 849,788 | | | — | | | | 907,324 | |
Investments | | | 1,650,071 | | | | 1,385,132 | | | (204,261 | ) | | | 2,830,942 | |
Accounts Receivable | | | 309,201 | | | | 2,866 | | | — | | | | 312,067 | |
Due from Brokers | | | — | | | | 48,506 | | | — | | | | 48,506 | |
Investment Subscriptions Paid in Advance | | | 6,697 | | | | — | | | (4,781 | ) | | | 1,916 | |
Due from Affiliates | | | 1,057,362 | | | | 216 | | | (196,144 | ) | | | 861,434 | |
Intangible Assets, Net | | | 1,077,526 | | | | — | | | — | | | | 1,077,526 | |
Goodwill | | | 1,703,602 | | | | — | | | — | | | | 1,703,602 | |
Other Assets | | | 165,212 | | | | 222 | | | — | | | | 165,434 | |
Deferred Tax Assets | | | 845,423 | | | | — | | | — | | | | 845,423 | |
| | | | | | | | | | | | | | | |
Total Assets | | $ | 7,376,367 | | | $ | 2,286,730 | | $ | (405,186 | ) | | $ | 9,257,911 | |
| | | | | | | | | | | | | | | |
| | | | |
Liabilities and Partners’ Capital | | | | | | | | | | | | | | | |
Loans Payable | | $ | 387,000 | | | $ | — | | $ | — | | | $ | 387,000 | |
Amounts Due to Non-Controlling Interest Holders | | | 105,942 | | | | 1,009,780 | | | (12,299 | ) | | | 1,103,423 | |
Securities Sold, Not Yet Purchased | | | — | | | | 894 | | | — | | | | 894 | |
Due to Affiliates | | | 1,064,980 | | | | 362,526 | | | (141,929 | ) | | | 1,285,577 | |
Accrued Compensation and Benefits | | | 410,593 | | | | 2,866 | | | — | | | | 413,459 | |
Accounts Payable, Accrued Expenses and Other Liabilities | | | 169,595 | | | | 112,699 | | | (108,858 | ) | | | 173,436 | |
| | | | | | | | | | | | | | | |
Total Liabilities | | | 2,138,110 | | | | 1,488,765 | | | (263,086 | ) | | | 3,363,789 | |
| | | | | | | | | | | | | | | |
| | | | |
Non-Controlling Interests in Consolidated Entities | | | 1,729,100 | | | | 293,403 | | | 362,462 | | | | 2,384,965 | |
| | | | | | | | | | | | | | | |
| | | | |
Partners’ Capital | | | | | | | | | | | | | | | |
Partners’ Capital | | | 3,509,448 | | | | 504,562 | | | (504,562 | ) | | | 3,509,448 | |
Accumulated Other Comprehensive Income (Loss) | | | (291 | ) | | | — | | | — | | | | (291 | ) |
| | | | | | | | | | | | | | | |
Total Partners’ Capital | | | 3,509,157 | | | | 504,562 | | | (504,562 | ) | | | 3,509,157 | |
| | | | | | | | | | | | | | | |
Total Liabilities and Partners’ Capital | | $ | 7,376,367 | | | $ | 2,286,730 | | $ | (405,186 | ) | | $ | 9,257,911 | |
| | | | | | | | | | | | | | | |
…continued
12
THE BLACKSTONE GROUP L.P.
Exhibit 2b. Consolidating Statements of Financial Condition
(Dollars in Thousands)
| | | | | | | | | | | | | |
| | | December 31, 2007 |
| | | Consolidated
Operating
Partnerships | | Consolidated
Blackstone Funds | | Eliminations | | | Consolidated |
Assets | | | | | | | | | | | | | |
Cash and Cash Equivalents | | $ | 807,571 | | $ | 61,058 | | $ | — | | | $ | 868,629 |
Cash Held by Blackstone Funds and Other | | | 163,696 | | | — | | | — | | | | 163,696 |
Investments | | | 4,012,408 | | | 3,509,683 | | | (376,935 | ) | | | 7,145,156 |
Accounts Receivable | | | 206,403 | | | 6,743 | | | (60 | ) | | | 213,086 |
Due from Brokers | | | — | | | 812,250 | | | — | | | | 812,250 |
Investment Subscriptions Paid in Advance | | | 3,092 | | | 34,549 | | | (943 | ) | | | 36,698 |
Due from Affiliates | | | 771,687 | | | 84,167 | | | — | | | | 855,854 |
Intangible Assets, Net | | | 604,681 | | | — | | | — | | | | 604,681 |
Goodwill | | | 1,597,474 | | | — | | | — | | | | 1,597,474 |
Other Assets | | | 97,891 | | | 1,475 | | | — | | | | 99,366 |
Deferred Tax Assets | | | 777,310 | | | — | | | — | | | | 777,310 |
| | | | | | | | | | | | | |
Total Assets | | $ | 9,042,213 | | $ | 4,509,925 | | $ | (377,938 | ) | | $ | 13,174,200 |
| | | | | | | | | | | | | |
| | | | |
Liabilities and Partners’ Capital | | | | | | | | | | | | | |
Loans Payable | | $ | 130,389 | | $ | — | | $ | — | | | $ | 130,389 |
Amounts Due to Non-Controlling Interest Holders | | | 153,844 | | | 117,000 | | | (943 | ) | | | 269,901 |
Securities Sold, Not Yet Purchased | | | — | | | 1,196,858 | | | — | | | | 1,196,858 |
Due to Affiliates | | | 831,364 | | | 245 | | | — | | | | 831,609 |
Accrued Compensation and Benefits | | | 188,997 | | | — | | | — | | | | 188,997 |
Accounts Payable, Accrued Expenses and Other Liabilities | | | 238,501 | | | 11,944 | | | — | | | | 250,445 |
| | | | | | | | | | | | | |
Total Liabilities | | | 1,543,095 | | | 1,326,047 | | | (943 | ) | | | 2,868,199 |
| | | | | | | | | | | | | |
| | | | |
Non-Controlling Interests in Consolidated Entities | | | 3,272,273 | | | 2,063,438 | | | 743,445 | | | | 6,079,156 |
| | | | | | | | | | | | | |
| | | | |
Partners’ Capital | | | | | | | | | | | | | |
Partners’ Capital | | | 4,226,500 | | | 1,120,440 | | | (1,120,440 | ) | | | 4,226,500 |
Accumulated Other Comprehensive Income | | | 345 | | | — | | | — | | | | 345 |
| | | | | | | | | | | | | |
Total Partners’ Capital | | | 4,226,845 | | | 1,120,440 | | | (1,120,440 | ) | | | 4,226,845 |
| | | | | | | | | | | | | |
Total Liabilities and Partners’ Capital | | $ | 9,042,213 | | $ | 4,509,925 | | $ | (377,938 | ) | | $ | 13,174,200 |
| | | | | | | | | | | | | |
13
THE BLACKSTONE GROUP L.P.
Exhibit 3. Condensed Consolidated and Combined Statements of Cash Flows
(Dollars in Thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | | | | | Quarter Ended | | | | |
| | | March 31,
2007 | | | June 30,
2007 | | | September 30,
2007 | | | December 31,
2007 | | | Full Year
2007 | | | March 31,
2008 | | | June 30,
2008 | | | September 30,
2008 | | | December 31,
2008 | | | Full Year
2008 | |
Operating Activities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Income (Loss) | | $ | 1,132,076 | | | $ | 774,351 | | | $ | (113,190 | ) | | $ | (170,000 | ) | | $ | 1,623,237 | | | $ | (250,993 | ) | | $ | (156,531 | ) | | $ | (340,331 | ) | | $ | (415,177 | ) | | $ | (1,163,032 | ) |
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Blackstone Funds Related: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-Controlling Interests in Income (Loss) of Consolidated Entities | | | 744,923 | | | | 1,625,043 | | | | (336,870 | ) | | | (511,793 | ) | | | 1,521,303 | | | | (788,477 | ) | | | (556,261 | ) | | | (1,088,351 | ) | | | (1,290,634 | ) | | | (3,723,723 | ) |
Net Realized (Gains) Losses on Investments | | | (1,050,641 | ) | | | (2,424,334 | ) | | | (350,629 | ) | | | 25,467 | | | | (3,800,137 | ) | | | 256 | | | | (118,555 | ) | | | 204,373 | | | | 78,652 | | | | 164,726 | |
Changes in Unrealized (Gains) Losses on Investments Allocable to Blackstone Group | | | (520,424 | ) | | | 507,239 | | | | (30,650 | ) | | | 30,205 | | | | (13,630 | ) | | | 62,823 | | | | (7,770 | ) | | | 182,138 | | | | 386,870 | | | | 624,061 | |
Non-Cash Performance Fees and Allocations | | | — | | | | (483,101 | ) | | | 160,808 | | | | 135,223 | | | | (187,070 | ) | | | 76,279 | | | | 37,343 | | | | 393,282 | | | | 579,154 | | | | 1,086,058 | |
Equity-Based Compensation Expense | | | — | | | | 236,228 | | | | 747,406 | | | | 781,554 | | | | 1,765,188 | | | | 914,671 | | | | 805,597 | | | | 774,431 | | | | 807,918 | | | | 3,302,617 | |
Intangible Amortization | | | — | | | | 7,200 | | | | 55,204 | | | | 55,203 | | | | 117,607 | | | | 33,528 | | | | 40,685 | | | | 39,512 | | | | 39,512 | | | | 153,237 | |
Other Non-Cash Amounts Included in Net Income | | | (13,007 | ) | | | 17,782 | | | | 713 | | | | 5,733 | | | | 11,221 | | | | 3,845 | | | | 5,102 | | | | 4,470 | | | | 6,271 | | | | 19,688 | |
Cash Flows Due to Changes in Operating Assets and Liabilities | | | 289,160 | | | | (342,933 | ) | | | (859,278 | ) | | | 724,469 | | | | (188,582 | ) | | | 311,656 | | | | 55,230 | | | | (46,198 | ) | | | 636,422 | | | | 957,110 | |
Blackstone Funds Related Investment Activity | | | (1,926,042 | ) | | | 599,372 | | | | 459,539 | | | | (832,302 | ) | | | (1,699,433 | ) | | | (248,434 | ) | | | (2,697 | ) | | | 351,860 | | | | 368,964 | | | | 469,693 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Cash Provided by (Used in) Operating Activities | | | (1,343,955 | ) | | | 516,847 | | | | (266,947 | ) | | | 243,759 | | | | (850,296 | ) | | | 115,154 | | | | 102,143 | | | | 475,186 | | | | 1,197,952 | | | | 1,890,435 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Investing Activities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Cash Provided by (Used in) Investing Activities | | | (3,068 | ) | | | (34,742 | ) | | | (2,593 | ) | | | (15,196 | ) | | | (55,599 | ) | | | (388,918 | ) | | | 20,210 | | | | (9,731 | ) | | | (3,241 | ) | | | (381,680 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financing Activities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Cash Provided by (Used in) Financing Activities | | | 1,342,302 | | | | 825,897 | | | | (553,630 | ) | | | 29,873 | | | | 1,644,442 | | | | 77,714 | | | | (577,272 | ) | | | 451,839 | | | | (1,825,928 | ) | | | (1,873,647 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Effect of Exchange Rate Changes on Cash and Cash Equivalents | | | 1,027 | | | | (388 | ) | | | — | | | | — | | | | 639 | | | | 90 | | | | (90 | ) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Increase (Decrease) in Cash and Cash Equivalents | | | (3,694 | ) | | | 1,307,614 | | | | (823,170 | ) | | | 258,436 | | | | 739,186 | | | | (195,960 | ) | | | (455,009 | ) | | | 917,294 | | | | (631,217 | ) | | | (364,892 | ) |
Cash and Cash Equivalents, Beginning of Period | | | 129,443 | | | | 125,749 | | | | 1,433,363 | | | | 610,193 | | | | 129,443 | | | | 868,629 | | | | 672,669 | | | | 217,660 | | | | 1,134,954 | | | | 868,629 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and Cash Equivalents, End of Period | | $ | 125,749 | | | $ | 1,433,363 | | | $ | 610,193 | | | $ | 868,629 | | | $ | 868,629 | | | $ | 672,669 | | | $ | 217,660 | | | $ | 1,134,954 | | | $ | 503,737 | | | $ | 503,737 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
14
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 | | | | |
| | | March 31,
2007 | | | June 30,
2007 | | | September 30,
2007 | | | December 31,
2007 | | | Full Year
2007 | | | March 31,
2008 | | | June 30,
2008 | | | September 30,
2008 | | | December 31,
2008 | | | Full Year
2008 | |
| | | 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 | | | $ | 67,009 | | | $ | 67,649 | | | $ | 268,961 | |
Transaction and Other Fees * | | | 9,128 | | | | 56,044 | | | | 48,711 | | | | 64,188 | | | | 178,071 | | | | 10,837 | | | | 19,161 | | | | 26,090 | | | | 24,862 | | | | 80,950 | |
Management Fee Offsets ** | | | (8,231 | ) | | | (12,634 | ) | | | (20,892 | ) | | | (23,278 | ) | | | (65,035 | ) | | | (8,410 | ) | | | (15,232 | ) | | | (9,330 | ) | | | (1,044 | ) | | | (34,016 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Management Fees | | | 59,758 | | | | 106,268 | | | | 94,208 | | | | 107,645 | | | | 367,879 | | | | 69,763 | | | | 70,896 | | | | 83,769 | | | | 91,467 | | | | 315,895 | |
Performance Fees and Allocations | | | 122,934 | (a) | | | 230,424 | (a) | | | 108,398 | | | | (123,371 | ) | | | 338,385 | (a) | | | (163,430 | ) | | | 21,960 | | | | (104,653 | ) | | | (184,362 | ) | | | (430,485 | ) |
Investment Income (Loss) and Other | | | 26,212 | (a) | | | 63,782 | (a) | | | 24,685 | | | | 339 | | | | 115,018 | (a) | | | (23,050 | ) | | | (408 | ) | | | (47,454 | ) | | | (100,668 | ) | | | (171,580 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Revenues | | | 208,904 | | | | 400,474 | | | | 227,291 | | | | (15,387 | ) | | | 821,282 | | | | (116,717 | ) | | | 92,448 | | | | (68,338 | ) | | | (193,563 | ) | | | (286,170 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and Benefits | | | 33,383 | (b) | | | 44,782 | (b) | | | 56,319 | | | | (1,798 | ) | | | 132,686 | (b) | | | (80,752 | ) | | | 40,283 | | | | 34,192 | | | | 22,483 | | | | 16,206 | |
Other Operating Expenses | | | 8,778 | (c) | | | 14,793 | (c) | | | 22,798 | | | | 23,603 | | | | 69,972 | (c) | | | 22,200 | | | | 20,880 | | | | 23,957 | | | | 23,093 | | | | 90,130 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Expenses | | | 42,161 | | | | 59,575 | | | | 79,117 | | | | 21,805 | | | | 202,658 | | | | (58,552 | ) | | | 61,163 | | | | 58,149 | | | | 45,576 | | | | 106,336 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Economic Net Income (Loss) | | $ | 166,743 | | | $ | 340,899 | | | $ | 148,174 | | | $ | (37,192 | ) | | $ | 618,624 | | | $ | (58,165 | ) | | $ | 31,285 | | | $ | (126,487 | ) | | $ | (239,139 | ) | | $ | (392,506 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Fee Related Earnings from Operations | | $ | 7,875 | | | $ | 40,780 | | | $ | (10,014 | ) | | $ | 44,126 | | | $ | 82,767 | | | $ | 18,297 | | | $ | 15,871 | | | $ | 16,194 | | | $ | 31,566 | | | $ | 81,928 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| * | 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 as of January 1, 2007. |
continued...
15
THE BLACKSTONE GROUP L.P.
Exhibit 4a. Economic Net Income and Pro Forma Adjusted Economic Net Income
(Dollars in Thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Emded | | | | | | Quarter Emded | | | | |
| | | March 31,
2007 | | | June 30,
2007 | | | September 30,
2007 | | | December 31,
2007 | | | Full Year
2007 | | | March 31,
2008 | | | June 30,
2008 | | | September 30,
2008 | | | December 31,
2008 | | | Full Year
2008 | |
| | | Pro Forma Adjusted | | | | | | | | | Pro Forma
Adjusted | | | | | | | | | | | | | | | | |
Real Estate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Management Fees | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Base Management Fees | | $ | 37,450 | | | $ | 60,183 | | | $ | 70,618 | | | $ | 64,821 | | | $ | 233,072 | | | $ | 66,751 | | | $ | 67,977 | | | $ | 80,361 | | | $ | 80,832 | | | $ | 295,921 | |
Transaction and Other Fees * | | | 209,451 | | | | 19,441 | | | | 14,886 | | | | 104,632 | | | | 348,410 | | | | 11,795 | | | | 6,854 | | | | 7,050 | | | | 10,347 | | | | 36,046 | |
Management Fee Offsets | | | — | | | | (691 | ) | | | (9,281 | ) | | | (1,745 | ) | | | (11,717 | ) | | | (404 | ) | | | (326 | ) | | | (1,435 | ) | | | (2,804 | ) | | | (4,969 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Management Fees | | | 246,901 | | | | 78,933 | | | | 76,223 | | | | 167,708 | | | | 569,765 | | | | 78,142 | | | | 74,505 | | | | 85,976 | | | | 88,375 | | | | 326,998 | |
Performance Fees and Allocations | | | 457,360 | (a) | | | 152,681 | (a) | | | 28,479 | | | | (38,311 | ) | | | 600,209 | (a) | | | (30,062 | ) | | | (77,133 | ) | | | (302,448 | ) | | | (409,380 | ) | | | (819,023 | ) |
Investment Income (Loss) and Other | | | 62,511 | (a) | | | 83,501 | (a) | | | 4,398 | | | | (15,896 | ) | | | 134,514 | (a) | | | (176 | ) | | | (11,788 | ) | | | (57,180 | ) | | | (156,840 | ) | | | (225,984 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Revenues | | | 766,772 | | | | 315,115 | | | | 109,100 | | | | 113,501 | | | | 1,304,488 | | | | 47,904 | | | | (14,416 | ) | | | (273,652 | ) | | | (477,845 | ) | | | (718,009 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and Benefits | | | 98,523 | (b) | | | 36,486 | (b) | | | 39,325 | | | | 65,416 | | | | 239,750 | (b) | | | 35,688 | | | | 32,083 | | | | 21,102 | | | | (12,080 | ) | | | 76,793 | |
Other Operating Expenses | | | 4,735 | (c) | | | 5,541 | (c) | | | 12,639 | | | | 27,575 | | | | 50,490 | (c) | | | 16,160 | | | | 12,581 | | | | 14,807 | | | | 12,234 | | | | 55,782 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Expenses | | | 103,258 | | | | 42,027 | | | | 51,964 | | | | 92,991 | | | | 290,240 | | | | 51,848 | | | | 44,664 | | | | 35,909 | | | | 154 | | | | 132,575 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Economic Net Income (Loss) | | $ | 663,514 | | | $ | 273,088 | | | $ | 57,136 | | | $ | 20,510 | | | $ | 1,014,248 | | | $ | (3,944 | ) | | $ | (59,080 | ) | | $ | (309,561 | ) | | $ | (477,999 | ) | | $ | (850,584 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Fee Related Earnings from Operations | | $ | 86,137 | | | $ | 34,325 | | | $ | 13,766 | | | $ | 48,356 | | | $ | 182,584 | | | $ | 20,317 | | | $ | 22,787 | | | $ | 32,739 | | | $ | 43,778 | | | $ | 119,621 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| * | 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 as of January 1, 2007. |
continued...
16
THE BLACKSTONE GROUP L.P.
Exhibit 4a. Economic Net Income and Pro Forma Adjusted Economic Net Income
(Dollars in Thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | | | | | Quarter Ended | | | | |
| | | March 31,
2007 | | | June 30,
2007 | | | September 30,
2007 | | December 31,
2007 | | | Full Year
2007 | | | March 31,
2008 | | | June 30,
2008 | | | September 30,
2008 | | | December 31,
2008 | | | Full Year
2008 | |
| | | Pro Forma Adjusted | | | | | | | | Pro
Forma
Adjusted | | | | | | | | | | | | | | | | |
Marketable Alternative Asset Management | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Management Fees | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Base Management Fees | | $ | 61,097 | | | $ | 74,595 | | | $ | 87,817 | | $ | 92,828 | | | $ | 316,337 | | | $ | 103,187 | | | $ | 127,465 | | | $ | 131,908 | | | $ | 114,276 | | | $ | 476,836 | |
Transaction and Other Fees * | | | 1,871 | | | | 1,189 | | | | 1,694 | | | 1,876 | | | | 6,630 | | | | 1,128 | | | | 2,884 | | | | 3,806 | | | | 698 | | | | 8,516 | |
Management Fee Offsets | | | — | | | | (182 | ) | | | 182 | | | (33 | ) | | | (33 | ) | | | — | | | | (16 | ) | | | (165 | ) | | | (6,425 | ) | | | (6,606 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Management Fees | | | 62,968 | | | | 75,602 | | | | 89,693 | | | 94,671 | | | | 322,934 | | | | 104,315 | | | | 130,333 | | | | 135,549 | | | | 108,549 | | | | 478,746 | |
Performance Fees and Allocations | | | 68,061 | (a) | | | 61,906 | (a) | | | 2,522 | | | 24,490 | | | | 156,979 | (a) | | | 5,058 | | | | 45,027 | | | | (12,488 | ) | | | (35,338 | ) | | | 2,259 | |
Investment Income (Loss) and Other | | | 25,259 | (a) | | | 31,138 | (a) | | | 32,658 | | | 59,027 | | | | 148,082 | (a) | | | (79,383 | ) | | | 49,885 | | | | (171,033 | ) | | | (128,954 | ) | | | (329,485 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Revenues | | | 156,288 | | | | 168,646 | | | | 124,873 | | | 178,188 | | | | 627,995 | | | | 29,990 | | | | 225,245 | | | | (47,972 | ) | | | (55,743 | ) | | | 151,520 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and Benefits | | | 59,374 | (b) | | | 78,268 | (b) | | | 34,006 | | | 45,692 | | | | 217,340 | (b) | | | 56,273 | | | | 84,162 | | | | 60,268 | | | | 40,252 | | | | 240,955 | |
Other Operating Expenses | | | 8,898 | (c) | | | 13,511 | (c) | | | 17,779 | | | 22,205 | | | | 62,393 | (c) | | | 18,307 | | | | 25,158 | | | | 26,073 | | | | 36,489 | | | | 106,027 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Expenses | | | 68,272 | | | | 91,779 | | | | 51,785 | | | 67,897 | | | | 279,733 | | | | 74,580 | | | | 109,320 | | | | 86,341 | | | | 76,741 | | | | 346,982 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Economic Net Income (Loss) | | $ | 88,016 | | | $ | 76,867 | | | $ | 73,088 | | $ | 110,291 | | | $ | 348,262 | | | $ | (44,590 | ) | | $ | 115,925 | | | $ | (134,313 | ) | | $ | (132,484 | ) | | $ | (195,462 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Fee Related Earnings from Operations | | $ | 2,921 | | | $ | 838 | | | $ | 23,012 | | $ | 23,135 | | | $ | 49,906 | | | $ | 26,322 | | | $ | 40,490 | | | $ | 42,417 | | | $ | 21,712 | | | $ | 130,941 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| * | 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 as of January 1, 2007. |
continued...
17
THE BLACKSTONE GROUP L.P.
Exhibit 4a. Economic Net Income and Pro Forma Adjusted Economic Net Income
(Dollars in Thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | | | | Quarter Ended | | |
| | | March 31,
2007 | | | June 30,
2007 | | | September 30,
2007 | | December 31,
2007 | | Full Year
2007 | | | March 31,
2008 | | June 30,
2008 | | September 30,
2008 | | December 31,
2008 | | Full Year
2008 |
| | | Pro Forma Adjusted | | | | | | | Pro Forma
Adjusted | | | | | | | | | | | |
Financial Advisory | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Advisory Fees | | $ | 92,525 | | | $ | 97,518 | | | $ | 81,911 | | $ | 88,330 | | $ | 360,284 | | | $ | 68,563 | | $ | 71,080 | | $ | 157,026 | | $ | 100,850 | | $ | 397,519 |
Investment Income and Other | | | 1,684 | | | | 1,034 | | | | 2,354 | | | 2,302 | | | 7,374 | | | | 2,597 | | | 1,826 | | | 3,716 | | | 4,908 | | | 13,047 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Revenues | | | 94,209 | | | | 98,552 | | | | 84,265 | | | 90,632 | | | 367,658 | | | | 71,160 | | | 72,906 | | | 160,742 | | | 105,758 | | | 410,566 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and Benefits | | | 49,926 | (b) | | | 45,854 | (b) | | | 50,020 | | | 44,363 | | | 190,163 | (b) | | | 46,967 | | | 48,574 | | | 82,295 | | | 56,919 | | | 234,755 |
Other Operating Expenses | | | 4,777 | (c) | | | 7,941 | (c) | | | 13,485 | | | 11,712 | | | 37,915 | (c) | | | 11,061 | | | 12,537 | | | 17,352 | | | 26,327 | | | 67,277 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Expenses | | | 54,703 | | | | 53,795 | | | | 63,505 | | | 56,075 | | | 228,078 | | | | 58,028 | | | 61,111 | | | 99,647 | | | 83,246 | | | 302,032 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Economic Net Income | | $ | 39,506 | | | $ | 44,757 | | | $ | 20,760 | | $ | 34,557 | | $ | 139,580 | | | $ | 13,132 | | $ | 11,795 | | $ | 61,095 | | $ | 22,512 | | $ | 108,534 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Fee Related Earnings from Operations | | $ | 14,437 | | | $ | 20,372 | | | $ | 12,436 | | $ | 24,195 | | $ | 71,440 | | | $ | 2,625 | | $ | 11,295 | | $ | 60,460 | | $ | 20,798 | | $ | 95,178 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 as of January 1, 2007. |
continued...
18
THE BLACKSTONE GROUP L.P.
Exhibit 4a. Economic Net Income and Pro Forma Adjusted Economic Net Income
(Dollars in Thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | | | | | Quarter Ended | | | | |
| | | March 31,
2007 | | | June 30,
2007 | | | September 30,
2007 | | | December 31,
2007 | | | Full Year
2007 | | | March 31,
2008 | | | June 30,
2008 | | | September 30,
2008 | | | December 31,
2008 | | | Full Year
2008 | |
| | | Pro Forma Adjusted | | | | | | | | | Pro Forma
Adjusted | | | | | | | | | | | | | | | | |
Economic Net Income Recap, Total Reportable Segments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Management Fees | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Base Management Fees | | $ | 157,408 | | | $ | 197,636 | | | $ | 224,824 | | | $ | 224,384 | | | $ | 804,252 | | | $ | 237,274 | | | $ | 262,409 | | | $ | 279,278 | | | $ | 262,757 | | | $ | 1,041,718 | |
Advisory Fees | | | 92,525 | | | | 97,518 | | | | 81,911 | | | | 88,330 | | | | 360,284 | | | | 68,563 | | | | 71,080 | | | | 157,026 | | | | 100,850 | | | | 397,519 | |
Transaction and Other Fees * | | | 220,450 | | | | 76,674 | | | | 65,291 | | | | 170,696 | | | | 533,111 | | | | 23,760 | | | | 28,899 | | | | 36,946 | | | | 35,907 | | | | 125,512 | |
Management Fee Offsets ** | | | (8,231 | ) | | | (13,507 | ) | | | (29,991 | ) | | | (25,056 | ) | | | (76,785 | ) | | | (8,814 | ) | | | (15,574 | ) | | | (10,930 | ) | | | (10,273 | ) | | | (45,591 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Management and Advisory Fees | | | 462,152 | | | | 358,321 | | | | 342,035 | | | | 458,354 | | | | 1,620,862 | | | | 320,783 | | | | 346,814 | | | | 462,320 | | | | 389,241 | | | | 1,519,158 | |
Performance Fees and Allocations | | | 648,355 | (a) | | | 445,011 | (a) | | | 139,399 | | | | (137,192 | ) | | | 1,095,573 | (a) | | | (188,434 | ) | | | (10,146 | ) | | | (419,589 | ) | | | (629,080 | ) | | | (1,247,249 | ) |
Investment Income (Loss) and Other | | | 115,666 | (a) | | | 179,455 | (a) | | | 64,095 | | | | 45,772 | | | | 404,988 | (a) | | | (100,012 | ) | | | 39,515 | | | | (271,951 | ) | | | (381,554 | ) | | | (714,002 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Revenues | | | 1,226,173 | | | | 982,787 | | | | 545,529 | | | | 366,934 | | | | 3,121,423 | | | | 32,337 | | | | 376,183 | | | | (229,220 | ) | | | (621,393 | ) | | | (442,093 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and Benefits | | | 241,206 | (b) | | | 205,390 | (b) | | | 179,670 | | | | 153,673 | | | | 779,939 | (b) | | | 58,176 | | | | 205,102 | | | | 197,857 | | | | 107,574 | | | | 568,709 | |
Other Operating Expenses | | | 27,188 | (c) | | | 41,786 | (c) | | | 66,701 | | | | 85,095 | | | | 220,770 | (c) | | | 67,728 | | | | 71,156 | | | | 82,189 | | | | 98,143 | | | | 319,216 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Segment Expenses | | | 268,394 | | | | 247,176 | | | | 246,371 | | | | 238,768 | | | | 1,000,709 | | | | 125,904 | | | | 276,258 | | | | 280,046 | | | | 205,717 | | | | 887,925 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Economic Net Income (Loss) | | $ | 957,779 | | | $ | 735,611 | | | $ | 299,158 | | | $ | 128,166 | | | $ | 2,120,714 | | | $ | (93,567 | ) | | $ | 99,925 | | | $ | (509,266 | ) | | $ | (827,110 | ) | | $ | (1,330,018 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Net Fee Related Earnings from Operations | | $ | 111,370 | | | $ | 96,315 | | | $ | 39,200 | | | $ | 139,812 | | | $ | 386,697 | | | $ | 67,561 | | | $ | 90,443 | | | $ | 151,810 | | | $ | 117,854 | | | $ | 427,668 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| * | 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 as of January 1, 2007. |
continued...
19
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
December 31,
2007 | | | Quarter Ended | | | Year Ended
December 31,
2007 | | | Quarter Ended | | | Year Ended
December 31,
2007 | |
| | | March 31,
2007 | | | June 30,
2007 | | | | March 31,
2007 | | June 30,
2007 | | | | March 31,
2007 | | June 30,
2007 | | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Management Fees | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Base Management Fees | | $ | 58,861 | | | $ | 62,858 | | | $ | 254,843 | | | $ | 37,450 | | $ | 60,183 | | | $ | 233,072 | | | $ | 61,097 | | $ | 74,595 | | | $ | 316,337 | |
Transaction and Other Fees | | | 9,128 | | | | 56,044 | | | | 178,071 | | | | 209,451 | | | 19,441 | | | | 348,410 | | | | 1,871 | | | 1,189 | | | | 6,630 | |
Management Fee Offsets | | | (8,231 | ) | | | (12,634 | ) | | | (65,035 | ) | | | — | | | (691 | ) | | | (11,717 | ) | | | — | | | (182 | ) | | | (33 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | | | | 379,917 | | | | 476,358 | | | 157,425 | | | | 623,951 | | | | 68,061 | | | 61,906 | | | | 156,980 | |
Investment Income and Other | | | 27,096 | | | | 65,415 | | | | 117,533 | | | | 63,472 | | | 83,853 | | | | 135,827 | | | | 25,261 | | | 31,138 | | | | 148,082 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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
December 31,
2007 | | Quarter Ended | | | Year Ended
December 31,
2007 | |
| | | March 31,
2007 | | June 30,
2007 | | | March 31,
2007 | | | June 30,
2007 | | |
Revenues | | | | | | | | | | | | | | | | | | | | | |
Management Fees | | | | | | | | | | | | | | | | | | | | | |
Base Management Fees | | $ | — | | $ | — | | $ | — | | $ | 157,408 | | | $ | 197,636 | | | $ | 804,252 | |
Advisory Fees | | | 92,525 | | | 97,518 | | | 360,284 | | | 92,525 | | | | 97,518 | | | | 360,284 | |
Transaction and Other Fees | | | — | | | — | | | — | | | 220,450 | | | | 76,674 | | | | 533,111 | |
Management Fee Offsets | | | — | | | — | | | — | | | (8,231 | ) | | | (13,507 | ) | | | (76,785 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Total Management and Advisory Fees | | | 92,525 | | | 97,518 | | | 360,284 | | | 462,152 | | | | 358,321 | | | | 1,620,862 | |
Performance Fees and Allocations | | | — | | | — | | | — | | | 684,842 | | | | 473,797 | | | | 1,160,848 | |
Investment Income and Other | | | 1,684 | | | 1,034 | | | 7,374 | | | 117,513 | | | | 181,440 | | | | 408,816 | |
| | | | | | | | | | | | | | | | | | | | | |
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 | |
| | | | | | | | | | | | | | | | | | | | | |
20
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 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
December 31, | | | Year Ended December 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
Net Cash Provided by (Used in) Operating Activities | | $ | 1,197,952 | | | $ | 243,759 | | | $ | 1,890,435 | | | $ | (850,296 | ) |
Changes in Operating Assets and Liabilities | | | (636,422 | ) | | | (724,469 | ) | | | (957,110 | ) | | | 188,582 | |
Blackstone Funds Related Investment Activities | | | (368,964 | ) | | | 832,302 | | | | (469,693 | ) | | | 1,699,433 | |
Net Realized Gains (Losses) on Investments | | | (78,652 | ) | | | (25,467 | ) | | | (164,726 | ) | | | 3,800,137 | |
Non-Controlling Interests in Income of Consolidated Entities | | | 1,290,634 | | | | 511,793 | | | | 3,723,723 | | | | (1,521,303 | ) |
Realized Gains (Losses) - Blackstone Funds | | | (186,188 | ) | | | 10,340 | | | | (197,426 | ) | | | 87,373 | |
| | | | |
| | | | | | Pro Forma | | | | | | Pro Forma | |
Cash Flow from Operations - Adjustments (a) | | | | | | | | | | | | | | | | |
Elimination of Non-Contributed Entities (b) | | | — | | | | — | | | | — | | | | (46,523 | ) |
Increase in Compensation Expense (c) | | | — | | | | — | | | | — | | | | (255,426 | ) |
Interests Held by Blackstone Holdings Limited Partners (d) | | | (1,239,709 | ) | | | (514,114 | ) | | | (3,611,955 | ) | | | (1,080,015 | ) |
Eliminate Interest Expense (e) | | | — | | | | — | | | | — | | | | 26,302 | |
Realized Gains (Losses) - Blackstone Funds | | | — | | | | (32,992 | ) | | | — | | | | (275,333 | ) |
Incremental Cash Tax Effect (f) | | | 2,028 | | | | (56,621 | ) | | | (84,447 | ) | | | (256,327 | ) |
| | | | | | | | | | | | | | | | |
Adjusted Cash Flow from Operations | | $ | (19,321 | ) | | $ | 244,531 | | | $ | 128,801 | | | $ | 1,516,604 | |
| | | | | | | | | | | | | | | | |
The following table provides the details of the components of Adjusted Cash Flow from Operations. Adjusted Cash Flow from Operations is the principal factor in determining the amount of distributions to unitholders.
| | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | Year Ended December 31, |
| | | 2008 | | | 2007 | | 2008 | | | 2007 |
| | | | | | | | | | | Pro Forma |
Fee Related Earnings | | | | | | | | | | | | | | |
Total Management and Advisory Fees (g) | | $ | 412,611 | | | $ | 463,094 | | $ | 1,561,768 | | | $ | 1,638,947 |
Total Expenses (h) | | | 294,757 | | | | 323,282 | | | 1,134,100 | | | | 1,252,250 |
| | | | | | | | | | | | | | |
Net Fee Related Earnings from Operations | | | 117,854 | | | | 139,812 | | | 427,668 | | | | 386,697 |
| | | | | | | | | | | | | | |
Performance Fees and Allocations Net of Related Compensation (i) | | | 4,639 | | | | 36,016 | | | 33,210 | | | | 829,568 |
| | | | | | | | | | | | | | |
Blackstone Investment Income (j) | | | | | | | | | | | | | | |
Liquid | | | (123,128 | ) | | | 58,402 | | | (327,453 | ) | | | 138,203 |
Illiquid | | | (18,686 | ) | | | 10,301 | | | (4,624 | ) | | | 162,136 |
| | | | | | | | | | | | | | |
| | | (141,814 | ) | | | 68,703 | | | (332,077 | ) | | | 300,339 |
| | | | | | | | | | | | | | |
Adjusted Cash Flow from Operations | | $ | (19,321 | ) | | $ | 244,531 | | $ | 128,801 | | | $ | 1,516,604 |
| | | | | | | | | | | | | | |
| (a) | 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 at the time of the IPO. |
| (b) | Represent adjustments to eliminate from 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 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. |
continued..
21
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)
| (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 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. |
| (g) | Comprised of total reportable segment Management and Advisory Fees plus Interest Income. |
| (h) | Comprised of total reportable segment compensation expense (excluding compensation expense related to Performance Fees and Allocations pursuant to Blackstone’s profit sharing plans related to carried interest and incentive fees which are included in (i) below), other operating expenses and Blackstone’s estimate of cash taxes currently due. |
| (i) | Represents realized Performance Fees and Allocations net of corresponding actual amounts due under Blackstone’s profit sharing plans related thereto. |
| (j) | Comprised of Blackstone’s investment income (realized and unrealized) on its liquid investments from its Marketable Alternative Asset Management segment as well as its net realized investment income on its illiquid investments, principally from its Corporate Private Equity and Real Estate Segments and permanent impairment charges on certain illiquid investments. |
The following table provides a reconciliation of Blackstone’s Total GAAP Weighted-Average Common Units—Diluted to Weighted-Average Economic Net Income Adjusted Units—Diluted.
| | | | | | | | |
| | | Quarter Ended
December 31,
2008 | | Quarter Ended
December 31,
2007 | | Year Ended
December 31,
2008 | | June 19, 2007
Through
December 31,
2007 |
Total GAAP Weighted-Average Common Units Outstanding - Diluted | | 273,035,192 | | 265,612,886 | | 265,547,930 | | 259,979,606 |
Adjustments: | | | | | | | | |
Weighted-Average Partnership Units | | 827,246,476 | | 826,889,642 | | 831,549,761 | | 827,151,349 |
Weighted-Average Unvested Deferred Restricted Common Units | | 28,961,596 | | 34,742,887 | | 31,946,702 | | 34,108,113 |
| | | | | | | �� | |
Weighted-Average Economic Net Income Adjusted Units - Diluted | | 1,129,243,264 | | 1,127,245,415 | | 1,129,044,393 | | 1,121,239,068 |
| | | | | | | | |
22
THE BLACKSTONE GROUP L.P.
Exhibit 6. Supplemental Metrics
(Dollars in Thousands)
| | | | | | |
| | | As of and for the Quarters Ended
December 31, |
| | | 2008 | | 2007 |
Total Assets Under Management
(End of Period) | | | | |
Corporate Private Equity | | $ | 23,933,511 | | $ | 31,802,951 |
Real Estate | | | 24,154,642 | | | 26,128,049 |
MAAM | | | 46,471,064 | | | 44,496,372 |
| | | | | | |
| | $ | 94,559,217 | | $ | 102,427,372 |
| | | | | | |
Fee-Earning Assets Under Management
(End of Period) (a) | | | | |
Corporate Private Equity | | $ | 25,509,163 | | $ | 25,040,513 |
Real Estate | | | 22,970,438 | | | 18,637,673 |
MAAM | | | 42,561,456 | | | 39,474,067 |
| | | | | | |
| | $ | 91,041,057 | | $ | 83,152,253 |
| | | | | | |
Weighted-Average Fee-Earning Assets Under Management
(For the Quarter Ended) (a) | | | | |
Corporate Private Equity | | $ | 25,476,978 | | $ | 24,901,101 |
Real Estate | | | 22,641,365 | | | 18,233,924 |
MAAM | | | 47,467,081 | | | 38,490,788 |
| | | | | | |
| | $ | 95,585,424 | | $ | 81,625,813 |
| | | | | | |
Weighted-Average Fee-Earning Assets Under Management
(Year to Date Period Ended) (a) | | | | |
Corporate Private Equity | | $ | 25,212,332 | | $ | 23,725,437 |
Real Estate | | | 21,017,915 | | | 16,527,761 |
MAAM | | | 50,765,223 | | | 33,438,382 |
| | | | | | |
| | $ | 96,995,470 | | $ | 73,691,580 |
| | | | | | |
Limited Partner Capital Deployed
(For the Quarter Ended) | | | | |
Corporate Private Equity | | $ | 1,133,134 | | $ | 2,333,634 |
Real Estate | | | 258,574 | | | 4,042,777 |
MAAM (b) | | | 333,831 | | | 82,191 |
| | | | | | |
| | $ | 1,725,539 | | $ | 6,458,602 |
| | | | | | |
Limited Partner Capital Deployed
(Year to Date Period Ended) | | | | |
Corporate Private Equity | | $ | 3,760,262 | | $ | 6,331,304 |
Real Estate | | | 968,684 | | | 8,171,854 |
MAAM (b) | | | 1,819,705 | | | 268,201 |
| | | | | | |
| | $ | 6,548,651 | | $ | 14,771,359 |
| | | | | | |
Fund Level Unrealized Value (c)
(End of Period) | | | | |
Corporate Private Equity | | | | | | |
Cost | | $ | 19,033,797 | | $ | 15,336,886 |
| | | | | | |
Unrealized Value | | $ | 15,072,940 | | $ | 18,147,055 |
| | | | | | |
Real Estate | | | | | | |
Cost | | $ | 11,483,382 | | $ | 10,541,798 |
| | | | | | |
Unrealized Value | | $ | 9,392,700 | | $ | 14,930,620 |
| | | | | | |
MAAM (b) | | | | | | |
Cost | | $ | 2,744,190 | | $ | 806,279 |
| | | | | | |
Unrealized Value | | $ | 1,761,247 | | $ | 775,844 |
| | | | | | |
| (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. |
23
