The Blackstone Group Reports Full Year and Fourth Quarter 2007 Earnings (United States)
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The Blackstone Group Reports Full Year and Fourth Quarter 2007 Earnings (United States)
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Category: North America & West Indies / Carribean islands - United States - Industry economy
- Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2008-03-11
Record Pro Forma Adjusted Revenues and Pro Forma Adjusted Economic Net Income for the full year 2007.
Challenging business conditions and write-down of FGIC lead to lower fourth quarter results.
Record Assets Under Management of $102.43 billion, a 47% increase from $69.51 billion a year ago.
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.
Blackstone closes GSO acquisition on March 3, 2008.
The Blackstone Group L.P. (NYSE:BX) today reported its 2007 results.
Year Ended December 31, 2007 Business Highlights
* Record Pro Forma Adjusted Reportable Segment Revenues and Pro Forma Adjusted Economic Net Income for the full year 2007 of $3.12 billion and $2.12 billion, respectively; $1.62 per adjusted unit after tax
* GAAP revenues totaled $3.05 billion; GAAP expenses (including non-cash charges of $1.88 billion) totaled $2.76 billion; and GAAP net income totaled $1.62 billion
* Corporate Private Equity Pro Forma Adjusted Segment Revenues totaled $821.3 million vs. $999.4 million in the prior year
* Real Estate Pro Forma Adjusted Segment Revenues increased to $1.30 billion vs. $878.5 million in the prior year
* Marketable Alternative Asset Management Pro Forma Adjusted Segment Revenues increased to $628.0 million from $318.8 million in the prior year
* Financial Advisory Pro Forma Adjusted Segment Revenues increased to $367.7 million from $260.3 million in the prior year
Fourth Quarter 2007 Business Highlights
* Fourth Quarter Pro Forma Adjusted Reportable Segment Revenues and Pro Forma Adjusted Economic Net Income totaled $366.9 million and $128.2 million, respectively; $0.08 per adjusted unit after tax
* GAAP revenues totaled $345.0 million; GAAP expenses (including non-cash charges of $836.8 million) totaled $1.06 billion; GAAP net loss totaled $(170.0) million
* Corporate Private Equity revenues totaled ($15.4) million vs. Pro Forma Adjusted Revenues of $533.8 million in the prior year
* Real Estate revenues totaled $113.5 million vs. Pro Forma Adjusted Revenues of $460.9 million in the prior year
* Marketable Alternative Asset Management revenues increased to $178.2 million vs. Pro Forma Adjusted Revenues of $130.8 million in the prior year
* Financial Advisory revenues increased to $90.6 million vs. Pro Forma Adjusted Revenues of $85.0 million in the prior year
For the year ended December 31, 2007, Total Pro Forma Adjusted Reportable Segment Revenues were $3.12 billion as compared to $2.46 billion in 2006. Growth in three of the business segments - Real Estate, Marketable Alternative Asset Management and Financial Advisory - drove the year-over-year increase in revenues.
Pro Forma Adjusted Economic Net Income for the year ended December 31, 2007 totaled $2.12 billion as compared to $1.68 billion for the year ended December 31, 2006.
Economic Net Income for the quarter ended December 31, 2007 totaled $128.2 million as compared to Pro Forma Adjusted Economic Net Income of $894.9 million for the quarter ended December 31, 2006.
For the year ended December 31, 2007, GAAP revenues totaled $3.05 billion, GAAP expenses (including non-cash charges of $1.88 billion) totaled $2.76 billion and GAAP net income totaled $1.62 billion. For the year ended December 31, 2006, GAAP revenues totaled $2.62 billion, GAAP expenses totaled $553.1 million and GAAP net income totaled $2.27 billion. 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 non-cash compensation charges associated with these equity interests over their respective service periods. These non-cash charges, that arose in 2007 in connection with the reorganization and the initial public offering, are likely to result in GAAP net losses for the next 5 years depending upon the applicable service periods or useful lives, but will never have any impact on cash earnings.
For the quarter ended December 31, 2007, GAAP revenues totaled $345.0 million, GAAP expenses (including non-cash charges of $836.8 million) totaled $1.06 billion and GAAP net loss totaled $(170.0) million. For the quarter ended December 31, 2006, GAAP revenues totaled $1.28 billion, GAAP expenses totaled $182.9 million and GAAP net income totaled $1.18 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 2007 and 2006 periods presented are for the respective consolidated and combined entities.
Blackstone’s businesses are materially affected by conditions in the financial markets and economic conditions in the United States, Western Europe, Asia and to some extent elsewhere in the world. The first half of 2007 was characterized by rising global stock markets and unusually strong debt markets. In the second half of 2007, concerns over the weakness in the U.S. housing market and sub-prime mortgage market created deteriorating conditions in fixed income markets. Debt underwriting declined and the backlog resulting from pending private equity-led transactions for the industry grew to record levels. Beginning in the second half of 2007, this backlog, coupled with other poor-performing fixed income securities and rising credit losses, has materially hindered lenders' willingness to fund new, large-sized acquisitions. As a consequence of reduced borrowing ability, the volume of new private equity acquisitions has materially declined. Recently announced private equity-led acquisitions have mostly been smaller in size, with less leverage and less favorable terms for the debt provided. This environment has had an adverse impact on the pace of new investments, the level of transaction fees and the rate of appreciation of Blackstone’s portfolio investments.
Stephen A. Schwarzman, Chairman and Chief Executive Officer of Blackstone said: "While full year revenues, economic net income and assets under management reached record levels in 2007, the operating environment in the second half of the year presented significant challenges. Declining equity and fixed income markets negatively affected the valuations of the portfolio assets of the Corporate Private Equity, Real Estate and Marketable Alternative Asset Management segments as of December 31, 2007 and led to lower carried interest and incentive fee revenues, but did not adversely affect our Financial Advisory segment. Lack of available financing in the U.S. and Europe for large leveraged transactions limited our transaction fees. Difficult market conditions in the U.S. and Europe continue in 2008 and there is little visibility on when these conditions might improve. However, despite the meltdown in the credit markets, we have made eight new private equity commitments since the credit crunch representing $2.7 billion of equity and we expect to continue to see new investment opportunities, particularly in Asia. We will remain disciplined in our approach and will opportunistically purchase well priced assets throughout the globe."
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