Apollo Global Management, LLC Reports Second Quarter 2013 Results

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Apollo Global Management, LLC Reports Second Quarter 2013 Results

  • Apollo declares a distribution of $1.32 per Class A share for the second quarter of 2013
  • Total economic net income ("ENI") of $198 million for the second quarter ended June 30, 2013 compared to $19 million for the same period in 2012
  • ENI after taxes per share of $0.50 for the second quarter ended June 30, 2013, compared to $0.05 per share for the same period in 2012
  • Total realized gains from carried interest income of $841 million for the second quarter ended June 30, 2013, compared to $56 million for the same period in 2012
  • Total assets under management ("AUM") of $113.1 billion as of June 30, 2013, compared to $104.9 billion as of June 30, 2012, which includes new capital raised of $6.9 billion and $2.3 billion for the second quarter ended June 30, 2013 and 2012, respectively
  • U.S. GAAP net income attributable to Apollo Global Management, LLC of $59 million for the second quarter ended June 30, 2013, compared to a net loss of $41 million for the same period in 2012

NEW YORK--(BUSINESS WIRE)-- Apollo Global Management, LLC (NYS: APO) (together with its consolidated subsidiaries, "Apollo") today reported results for the second quarter ended June 30, 2013.


Apollo reported ENI after taxes of $197.8 million for the second quarter ended June 30, 2013, compared to $18.7 million for the same period in 2012. The $179.1 million increase in ENI was driven by favorable performance in Apollo's Management and Incentive Businesses, which reported ENI of $89.1 million and $152.2 million for the second quarter ended June 30, 2013, respectively, compared to $70.4 million and $(28.4) million, respectively, for the same period in 2012. The $180.6 million quarter over quarter increase in ENI for the Incentive Business was largely the result of higher carried interest income from Apollo's private equity and credit segments during the second quarter of 2013 compared to the same period in 2012.

Apollo's total AUM was $113.1 billion as of June 30, 2013, an increase of $8.2 billion, or 8%, compared to $104.9 billion as of June 30, 2012. The $8.2 billion quarter over quarter increase in total AUM was primarily driven by a change in fair value of investments of $13.5 billion and new capital raised of $11.2 billion, offset in part by distributions of $17.9 billion. Fee-generating AUM was $79.3 billion as of June 30, 2013, an increase of $1.8 billion, or 2%, compared to $77.5 billion as of June 30, 2012.

U.S. GAAP results for the second quarter ended June 30, 2013 included net income attributable to Apollo of $58.7 million, or $0.32 per Class A share, compared to a net loss of $41.4 million, or $0.38 per Class A share, for the second quarter ended June 30, 2012.

"Our results for the second quarter of 2013 reflect the continued strength of Apollo's integrated global platform and value-oriented investment approach," said Leon Black, Chairman and Chief Executive Officer. "During the quarter we raised nearly $7 billion of new capital across all of our business segments, and we generated more than $7 billion of realizations for our investors."

Combined Segments

Total revenue for Apollo's combined segments was $510.1 million for the second quarter ended June 30, 2013, an increase of $271.3 million, or 114%, compared to the same period in 2012, driven primarily by a $262.4 million increase in total carried interest income.

Total revenue for Apollo's Management Business was $244.5 million for the second quarter ended June 30, 2013, an increase of $8.9 million, or 4%, from the same period in 2012. This includes management fee revenues of $169.3 million for the second quarter ended June 30, 2013, an increase of $12.9 million, or 8%, from the same period in 2012, which was primarily driven by growth in fee-generating AUM within Apollo's credit segment. There was also $65.1 million of advisory and transaction fees for the second quarter ended June 30, 2013, a decrease of $4.9 million, or 7%, from the same period in 2012, which fees were primarily due to net transaction fees earned in connection with the acquisition of EP Energy by funds affiliated with Apollo during the second quarter of 2012.

Apollo's Incentive Business reported $265.6 million of total carried interest income for the second quarter ended June 30, 2013, an increase of $262.4 million from the same period in 2012. The increase in total carried interest income during the second quarter of 2013 was driven by increased valuations of investments held by funds managed within Apollo's private equity and credit segments. During the second quarter ended June 30, 2013 the Incentive Business generated $840.5 million of realized gains, which was largely attributable to dispositions relating to a number of investments held by funds managed by Apollo, including Realogy, Charter Communications, LyondellBasell, Metals USA, Evertec and CKE.

Total expenses for Apollo's Management Business were $157.4 million for the second quarter ended June 30, 2013, a decrease of $0.9 million from the same period in 2012. Total compensation expenses, including salary and benefits and equity-based compensation, were $86.1 million for the second quarter of 2013, a decrease of $2.9 million, or 3%, compared to the same period in 2012. Non-compensation expenses for Apollo's Management Business were $71.3 million during the second quarter of 2013, an increase of $2.0 million, or 3%, from the second quarter of 2012. The increase in non-compensation expenses during the second quarter of 2013 was largely driven by increased general and administrative and professional fees, partially offset by lower placement fees and interest expense.

Private Equity Segment

ENI from Apollo's private equity segment was $176.8 million for the second quarter ended June 30, 2013, compared to $52.2 million for the second quarter ended June 30, 2012. The $124.6 million quarter over quarter increase was largely driven by total carried interest income of $228.5 million for the second quarter of 2013, compared to $5.7 million for the second quarter of 2012.

Apollo's private equity funds continued to perform well as measured by internal rate of return ("IRR") and appreciated by 5% during the second quarter ended June 30, 2013. From its inception in 2008 through June 30, 2013, Fund VII generated an annual gross and net IRR of 37% and 28%, respectively. Fund VI, which began investing in 2006, generated an annual gross and net IRR of 12% and 10%, respectively, since its inception through June 30, 2013. The combined fair value of Apollo's private equity funds, including AP Alternative Assets, L.P. ("AAA"), was 52% above cost as of June 30, 2013. Uncalled private equity commitments were $13.0 billion as of June 30, 2013 and $0.2 billion of private equity capital was deployed during the second quarter ended June 30, 2013.

On June 28, 2013, Apollo held a first closing of more than $6.6 billion for its newest flagship private equity fund, Apollo Investment Fund VIII, L.P. ("Fund VIII"), and as of today, Apollo has received commitments of approximately $8.4 billion for Fund VIII.

Credit Segment

ENI from Apollo's credit segment was $66.4 million for the second quarter ended June 30, 2013, compared to a loss of $10.8 million for the second quarter of 2012. The quarter over quarter increase in ENI was largely driven by total carried interest income of $43.3 million for the second quarter of 2013, compared to a loss of $6.7 million for the second quarter of 2012.

Management fees from Apollo's credit segment were $90.4 million for the second quarter ended June 30, 2013, which increased by $16.1 million, or 22%, compared to the same period in 2012. The increase in management fees was largely driven by growth in the fee-generating AUM within the credit segment. Total Management Business expenses within the credit segment were $77.3 million for the second quarter of 2013, which increased by $2.6 million, or 3%, compared to the same period in 2012.

Real Estate Segment

Apollo's real estate segment had an economic net loss of $1.6 million for the second quarter of 2013, compared to economic net income of $0.6 million for the second quarter of 2012. Total revenues for the real estate segment during the second quarter of 2013 were $8.3 million, a decrease of $9.4 million, or 53%, compared to $17.7 million for the same period in 2012. The revenue decline during the second quarter of 2013 was due to a $6.2 million carried interest loss primarily driven by an unrealized loss in the CPI Capital Partners Europe fund. As of June 30, 2013, Apollo's real estate AUM was $9.5 billion, compared to $7.9 billion at June 30, 2012.

Capital and Liquidity

As of June 30, 2013, Apollo had $1,203 million of cash and cash equivalents and $728 million of debt. These amounts exclude cash and debt associated with Apollo's consolidated funds and consolidated variable interest entities ("VIEs"). As of June 30, 2013, Apollo had a $2,014.7 million carried interest receivable and corresponding profit sharing payable of $908.2 million, as well as total investments in its private equity, credit and real estate funds of $448 million, excluding investments held by consolidated VIEs and consolidated funds.

Distribution

Apollo Global Management, LLC has declared a second quarter 2013 cash distribution of $1.32 per Class A share, which comprises a regular distribution of $0.07 per Class A share and a quarterly distribution of $1.25 per Class A share primarily attributable to fund realizations and interest and dividend income earned by our funds. This distribution will be paid on August 30, 2013 to holders of record at the close of business on August 26, 2013.

Apollo intends to distribute to its shareholders on a quarterly basis substantially all of its net after-tax cash flow in excess of amounts determined by its manager to be necessary or appropriate to provide for the conduct of its business. However, Apollo cannot assure its shareholders that they will receive any distributions.

Conference Call

Apollo will host a conference call on Thursday, August 8, 2013 at 10:00 a.m. EDT. During the call, Marc Spilker, President, Martin Kelly, Chief Financial Officer, and Gary Stein, Head of Corporate Communications, will review Apollo's financial results for the second quarter ended June 30, 2013. The conference call may be accessed by dialing (888) 868-4188 (U.S. domestic) or +1 (615) 800-6914 (international), and providing conference call ID 18390943 when prompted by the operator. The number should be dialed at least ten minutes prior to the start of the call. A simultaneous webcast of the conference call will be available to the public on a listen-only basis and can be accessed through the Investor Relations section of Apollo's website at www.agm.com.

Following the call, a replay of the event may be accessed either telephonically or via audio webcast. A telephonic replay of the live broadcast will be available approximately two hours after the live broadcast by dialing (800) 585-8367 (U.S. callers) or +1 (404) 537-3406 (non-U.S. callers), pass code 18390943. To access the audio webcast, please visit Events in the Investor Relations section of Apollo's website at www.agm.com.

About Apollo

Apollo is a leading global alternative investment manager with offices in New York, Los Angeles, Houston, London, Frankfurt, Luxembourg, Singapore, Mumbai and Hong Kong. Apollo had assets under management of approximately $113 billion as of June 30, 2013, in private equity, credit and real estate funds invested across a core group of nine industries where Apollo has considerable knowledge and resources. For more information about Apollo, please visit www.agm.com.

Forward-Looking Statements

This press release may contain forward looking statements that are within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, discussions related to Apollo's expectations regarding the performance of its business, its liquidity and capital resources and the other non-historical statements in the discussion and analysis. These forward-looking statements are based on management's beliefs, as well as assumptions made by, and information currently available to, management. When used in this press release, the words "believe," "anticipate," "estimate," "expect," "intend" and similar expressions are intended to identify forward-looking statements. Although management believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. These statements are subject to certain risks, uncertainties and assumptions, including risks relating to our dependence on certain key personnel, our ability to raise new private equity, credit or real estate funds, market conditions, generally, our ability to manage our growth, fund performance, changes in our regulatory environment and tax status, the variability of our revenues, net income and cash flow, our use of leverage to finance our businesses and investments by our funds and litigation risks, among others. We believe these factors include but are not limited to those described under the section entitled "Risk Factors" in the Company's Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 1, 2013, and such factors may be updated from time to time in our 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 press release and in other filings. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable law. This press release does not constitute an offer of any Apollo fund.

 

APOLLO GLOBAL MANAGEMENT, LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012


(dollars in thousands, except share data)

   
 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 2013   2012  2013   2012 
Revenues:
Advisory and transaction fees from affiliates$65,085$69,777$112,504$97,013
Management fees from affiliates155,070143,326305,517270,504
Carried interest income (loss) from affiliates 277,106  (1,475) 1,388,313  620,854 
Total Revenues 497,261  211,628  1,806,334  988,371 
 
Expenses:
Compensation and benefits:
Equity-based compensation43,501142,11488,787290,980
Salary, bonus and benefits69,28274,948142,678140,019
Profit sharing expense124,22919,851547,849268,875
Incentive fee compensation 3,015  (27) 3,015  8 
Total Compensation and Benefits240,027236,886782,329699,882
 
Interest expense7,59410,56715,11221,947
Professional fees21,66516,83237,72528,359
General, administrative and other26,03723,57548,97842,782
Placement fees3,1208,13112,4789,052
Occupancy10,1498,99019,95417,716
Depreciation and amortization 14,195  11,981  28,813  20,454 
Total Expenses 322,787  316,962  945,389  840,192 
 
Other (Loss) Income:
Net gains (losses) from investment activities1,116(28,214)53,249129,494
Net (losses) gains from investment activities of consolidated variable interest entities(35,198)31,76312,66315,562
Income (loss) from equity method investments20,090(839)47,88042,412
Interest income3,0492,2026,1403,816
Other income, net 2,778  1,945,549  4,076  1,951,365 
Total Other (Loss) Income (8,165) 1,950,461  124,008  2,142,649 
Income before income tax provision166,3091,845,127984,9532,290,828
Income tax provision (18,139) (10,650) (36,718) (25,210)
Net Income148,1701,834,477948,2352,265,618
Net income attributable to Non-controlling Interests (89,433) (1,875,863) (640,520) (2,208,961)
Net Income (Loss) Attributable to Apollo Global Management, LLC$58,737 $(41,386)$307,715 $56,657 
 
Distributions Declared per Class A Share$0.57 $0.25 $1.62 $0.71 
 
Net Income Per Class A Share:
Net Income (Loss) Available to Class A Share - Basic$0.32 $(0.38)$1.94 $0.32 
Net Income (Loss) Available to Class A Share -Diluted$0.32 $(0.38)$1.93 $0.32 
Weighted Average Number of Class A Shares - Basic 137,289,147  126,457,443  134,285,776  125,863,348 
Weighted Average Number of Class A Shares - Diluted 137,289,147  126,457,443  138,104,463  126,260,767 
 
 

APOLLO GLOBAL MANAGEMENT, LLC

SEGMENT RESULTS (UNAUDITED)

(dollars in millions, except share data)


Summary of Combined Segment Results for Management Business and Incentive Business:

  
Three Months EndedSix Months Ended

March 31,

2012

 

June 30,

2012

 

September 30,

2012

 

December 31,

2012

 

March 31,

2013

 

June 30,

2013

June 30,

2012

 

June 30,

2013

Management Business:
 
Advisory and transaction fees from affiliates$27.3$70.0$15.2$37.5$47.4$65.1$97.3$112.5
Management fees from affiliates130.0156.4160.2176.4164.3169.3286.4333.6
Carried interest income from affiliates:
Realized gains9.6 9.2 9.7 9.3 9.0 10.1 18.8 19.1 
Total management business revenues166.9235.6185.1223.2220.7244.5402.5
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