Attached files
Exhibit 99.2
INDEX TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
| Apollo Global Management, LLC Pro Forma: |
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| Unaudited Pro Forma Condensed Consolidated Statement of Operations of the Company for the Nine Months Ended September 30, 2012 |
33 | |||
| Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements |
34 |
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PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Apollo Global Management, LLC and its subsidiaries (collectively “Apollo” or the “Company”) entered into an Amended and Restated Purchase Agreement (the “Agreement”) with Stone Tower Debt Advisors LLC, Stone Tower Operating LP, Stone Tower Capital LLC, Stone Tower Credit Partners GP LLC, Stone Tower Structured Credit Recovery Partners GP LLC, Stone Tower Structured Credit Recovery Partners II GP LLC, Stone Tower Loan Value Recovery Fund GP LLC, Stone Tower Credit Solutions GP LLC, Stone Tower Credit Strategies GP LLC and certain other persons identified therein (collectively the “Sellers” or “Stone Tower”), dated as of April 2, 2012, to acquire the membership interests of Stone Tower for total consideration, of approximately $237 million (the “Acquisition”). The accompanying unaudited pro forma condensed consolidated financial statements have been prepared by Apollo to reflect its completed acquisition of Stone Tower.
The unaudited pro forma condensed consolidated statement of operations and explanatory notes of Apollo set forth below for the nine months ended September 30, 2012 give effect to the acquisition of Stone Tower accounted for as a business combination, as if the acquisition occurred on January 1, 2012.
The unaudited pro forma condensed consolidated statements of operations are provided for informational purposes only and do not purport to reflect the results of Apollo’s operations had the transaction actually been consummated on January 1, 2012. We have made, in our opinion, all adjustments that are necessary to present fairly the pro forma financial data. The pro forma provision for income taxes may not represent the amounts that would have resulted had Apollo and Stone Tower file consolidated income tax returns during the periods presented.
The purchase accounting adjustments within these unaudited pro forma condensed consolidated financial statements are based on estimates and assumptions and therefore are subject to revision. Final balances at the April 2, 2012 closing may be significantly different than the September 30, 2012 balances used solely for the purposes of developing this pro forma information. In addition, as management receives additional information its analysis of the fair value measurements of certain acquired assets and assumed liabilities could be materially different.
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APOLLO GLOBAL MANAGEMENT, LLC
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended September 30, 2012
(dollars in thousands, except share data)
| Historical | ||||||||||||||||||
| Apollo | Stone Tower (g) |
Pro
Forma Adjustments |
Note 2 | Combined Apollo Pro Forma |
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| Revenues: |
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| Advisory and transaction fees from affiliates |
$ | 112,162 | $ | 117 | $ | — | $ | 112,279 | ||||||||||
| Management fees from affiliates |
418,115 | 3,452 | 134 | (a) | 421,701 | |||||||||||||
| Carried interest income from affiliates |
1,170,467 | — | 10,235 | (b) | 1,180,702 | |||||||||||||
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| Total Revenues |
1,700,744 | 3,569 | 10,369 | 1,714,682 | ||||||||||||||
| Expenses: |
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| Compensation and benefits: |
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| Equity-based compensation |
435,387 | — | — | 435,387 | ||||||||||||||
| Salary, bonus and benefits |
204,666 | 6,702 | (1,089 | ) | (c) | 210,279 | ||||||||||||
| Profit sharing expense |
506,308 | — | 14,533 | (c) | 520,841 | |||||||||||||
| Incentive fee compensation |
372 | — | — | 372 | ||||||||||||||
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| Total Compensation and Benefits |
1,146,733 | 6,702 | 13,444 | 1,166,879 | ||||||||||||||
| Interest expense |
29,083 | 4 | (4 | ) | (a),(c) | 29,083 | ||||||||||||
| Professional fees |
39,849 | 1,845 | (137 | ) | (a),(c) | 41,557 | ||||||||||||
| General, administrative and other |
66,810 | 2,755 | 677 | (c) | 70,242 | |||||||||||||
| Placement fees |
13,344 | 482 | — | 13,826 | ||||||||||||||
| Occupancy |
27,360 | 595 | — | 27,955 | ||||||||||||||
| Depreciation and amortization |
37,021 | 133 | 5,958 | (d) | 43,112 | |||||||||||||
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| Total Expenses |
1,360,200 | 12,516 | 19,938 | 1,392,654 | ||||||||||||||
| Other Income: |
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| Net gains (losses) from investment activities |
149,957 | 3,043 | (4,019 | ) | (a) | 148,981 | ||||||||||||
| Net gains from investment activities of consolidated VIEs |
(29,913 | ) | (7,168 | ) | — | (37,081 | ) | |||||||||||
| Income from equity method investments |
83,191 | 8 | — | 83,199 | ||||||||||||||
| Interest income |
7,093 | — | (1,559 | ) | (a) | 5,534 | ||||||||||||
| Other income (loss), net |
1,959,669 | 977 | (876 | ) | (a),(c) | 1,959,770 | ||||||||||||
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| Total Other Income (loss) |
2,169,997 | (3,140 | ) | (6,454 | ) | 2,160,403 | ||||||||||||
| Income (loss) before income tax provision |
2,510,541 | (12,087 | ) | (16,023 | ) | 2,482,431 | ||||||||||||
| Income tax provision |
(47,127 | ) | (368 | ) | (6,903 | ) | (e) | (54,398 | ) | |||||||||
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| Net Income (Loss) |
2,463,414 | (12,455 | ) | (22,926 | ) | 2,428,033 | ||||||||||||
| Net (income) loss attributable to Non-Controlling Interests |
(2,323,966 | ) | 13,999 | 31,845 | (f) | (2,278,122 | ) | |||||||||||
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| Net Income Attributable to Apollo Global Management (Stone Tower unaudited amounts are not adjusted for Apollo Operating Group non-controlling interest) |
$ | 139,448 | $ | 1,544 | $ | 8,919 | $ | 149,911 | ||||||||||
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| Net Income Per Class A Share: |
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| Net Income Per Class A Share – Basic and Diluted |
$ | 0.93 | $ | 1.01 | ||||||||||||||
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| Weighted Average Number of Class A Shares – Basic |
126,909,962 | 126,909,962 | ||||||||||||||||
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| Weighted Average Number of Class A Shares – Diluted |
129,309,719 | 129,309,719 | ||||||||||||||||
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See notes to unaudited pro forma condensed consolidated financial statements.
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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
| 1. | BASIS OF PRO FORMA PRESENTATION |
The unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2012, illustrates the effect of the Acquisition as if it was completed on January 1, 2012, and includes all adjustments relating to the events that are directly attributable to the Acquisition, as long as the impact of such events are expected to continue and are factually supportable. This unaudited pro forma condensed consolidated financial information should be read in conjunction with:
| • | The accompanying notes to the unaudited pro forma condensed consolidated financial statements; |
| • | The historical unaudited consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations of Apollo as of and for the nine months ended September 30, 2012 contained in its Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2012; and |
| • | The historical unaudited combined and consolidated financial statements of Stone Tower Capital LLC and Subsidiaries and Affiliates, prepared in accordance with accounting principles generally accepted in the United States of America as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011, which are included as Exhibit 99.1 to the Form 8-K/A to which these financials are attached. |
Apollo’s estimated purchase price for Stone Tower has been allocated to the assets acquired and the liabilities assumed based upon management’s estimate of their respective fair values as of April 2, 2012 (the “Acquisition Date”). Such estimates may be subject to revision. In deriving Apollo’s pro forma condensed combined consolidated financial statements, it was assumed that Apollo’s estimated combined statutory tax rate for 2012 is 41%. See Note 2(e).
Certain reclassifications and adjustments have been made to Stone Tower’s historical balances in the unaudited pro forma condensed consolidated financial statements to conform to Apollo’s presentation and accounting policies. These reclassifications are further detailed in Note 2(g). The most significant change is related to the recognition of carried interest income in accordance with Apollo’s revenue recognition policy as further explained in Note 2(b).
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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
| 2. | PRO FORMA ADJUSTMENTS |
| (a) | Represents adjustments for the deconsolidation of certain investment entities at the Acquisition Date. |
| Nine Months Ended September 30, 2012 |
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| Deconsolidated revenues, other income and expenses |
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| Management fee revenue |
$ | 134 | ||
| Interest expense |
4 | (c) | ||
| Professional fees |
137 | (c) | ||
| General, administrative and other |
3 | (c) | ||
| Interest income |
(1,559 | ) | ||
| Other income, net |
(876 | ) (c) | ||
| Net losses from investment activities |
(4,019 | ) | ||
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| Total |
$ | (6,176 | ) | |
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| (b) | Reflects adjustments to the Stone Tower historical financial statements to conform to Apollo’s revenue recognition policy. |
Carried interest income from consolidated variable interest entities of $62.4 million was recorded as an adjustment to the amounts attributable to Non-Controlling Interests in the unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2012. Additionally, carried interest income from unconsolidated variable interest entities of $10.2 million was recorded as additional carried interest income in the unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2012.
| Nine Months Ended September 30, 2012 |
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| Carried interest income from unconsolidated variable interest entities |
$ | 10,235 | ||
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| Total |
$ | 10,235 | ||
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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
| (c) | The pro forma adjustment details for salary, bonus and benefits expenses, profit sharing expense interest expense, professional fees, general, administrative and other expenses and other income are provided below: |
| Nine Months Ended September 30, 2012 |
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| Salary, bonus and benefits |
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| Expenses that will not recur |
$ | (6,702 | ) | |
| New compensation arrangements resulting from acquisition |
5,613 | |||
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| Total Pro Forma Adjustment |
$ | (1,089 | ) | |
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| Nine Months Ended September 30, 2012 |
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| Profit sharing expense |
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| New compensation arrangements resulting from acquisition |
$ | 14,533 | ||
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| Total Pro Forma Adjustment |
$ | 14,533 | ||
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| Nine Months Ended September 30, 2012 |
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| Interest expense |
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| Deconsolidated expenses |
$ | (4 | ) (a) | |
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| Total Pro Forma Adjustment |
$ | (4 | ) | |
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| Nine Months Ended September 30, 2012 |
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| Professional Fees |
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| Deconsolidated expenses |
$ | (137 | ) (a) | |
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| Total Pro Forma Adjustment |
$ | (137 | ) | |
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| Nine Months Ended September 30, 2012 |
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| General, administrative and other |
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| Travel adjustments |
$ | 680 | ||
| Deconsolidated expenses |
(3 | ) (a) | ||
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| Total Pro Forma Adjustment |
$ | 677 | ||
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| Nine Months Ended September 30, 2012 |
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| Other income |
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| Deconsolidated expenses |
$ | (876 | ) (a) | |
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| Total Pro Forma Adjustment |
$ | (876 | ) | |
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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
| (d) | Reflects amortization expenses related to the estimated intangible assets recognized in connection with the Acquisition. The Company has determined to use an accelerated amortization method for its intangible assets arising from carried interest, senior fee, subordinate fee and management fee contracts of Stone Tower based on the projected cash flows related to such contracts in the future years. The amortization expense related to these intangible assets included in the unaudited pro forma condensed combined consolidated statement of operations for the nine months ended September 30, 2012 are as follows: |
| Nine Months Ended September 30, 2012 |
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| Intangible amortization expense |
$ | 6,091 | ||
| Reversal of Stone Tower depreciation and amortization |
(133 | ) | ||
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| Total pro forma adjustment |
$ | 5,958 | ||
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| (e) | Represents income tax impact of the pro forma historical results of Stone Tower and certain other pro forma adjustments at the statutory rate in effect during the statement of operations period. |
| (f) | Includes allocation of pro forma net income attributable to Non-Controlling Interests in certain entities within the Apollo structure (hereinafter referred to as “Apollo Operating Group”) representing their proportionate share of the pro forma historical results of Stone Tower and certain other pro forma adjustments calculated based on the ownership percentages of 65.5%. Additionally, the Non-Controlling Interests pro-forma adjustment includes the allocation of income from consolidated entities. The details of the pro forma adjustments for net income attributable to non-controlling interests are provided below. |
| Nine Months Ended September 30, 2012 |
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| Net (income) loss attributable to Non-Controlling Interests in Apollo Operating Group |
$ | (33,697 | ) | |
| Adjustment to net income attributable to Non-Controlling Interests |
65,542 | |||
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| Total Pro Forma Adjustment |
$ | 31,845 | ||
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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
| (g) | Reclassification adjustments made to Stone Tower’s historical financial statement balances for the three months ended March 31, 2012 to conform to Apollo’s presentation and accounting policies are provided below. |
| Historical Stone Tower |
Reclass | Adjusted Stone Tower |
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| Revenues: |
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| Advisory and transaction fees from affiliates |
$ | — | $ | 117 | (1) | $ | 117 | |||||||
| Management fees from affiliates |
3,452 | — | 3,452 | |||||||||||
| Carried interest income from affiliates |
— | — | — | |||||||||||
| Liquidation fees from affiliates |
117 | (117 | ) | (1) | — | |||||||||
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| Total Revenues |
3,569 | — | 3,569 | |||||||||||
| Expenses: |
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| Compensation and benefits: |
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| Equity-based compensation |
— | — | — | |||||||||||
| Salary, bonus and benefits |
6,702 | — | 6,702 | |||||||||||
| Profit sharing expense |
— | — | — | |||||||||||
| Incentive fee compensation |
— | — | — | |||||||||||
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| Total Compensation and Benefits |
6,702 | — | 6,702 | |||||||||||
| Interest expense |
4 | — | 4 | |||||||||||
| Professional fees |
1,915 | (70 | ) | (2),(3) | 1,845 | |||||||||
| Travel and entertainment |
1,001 | (1,001 | ) | (4) | — | |||||||||
| General, administrative and other |
698 | 2,057 | (4) | 2,755 | ||||||||||
| Placement fees |
— | 482 | (2) | 482 | ||||||||||
| Information services |
1,056 | (1,056 | ) | (4) | — | |||||||||
| Portfolio administration |
412 | (412 | ) | (3) | — | |||||||||
| Occupancy |
595 | — | 595 | |||||||||||
| Depreciation and amortization |
133 | — | 133 | |||||||||||
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| Total Expenses |
12,516 | — | 12,516 | |||||||||||
| Other Income: |
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| Net (losses) gains from investment activities |
3,043 | (5) | 3,043 | |||||||||||
| Net investment income from partnership investments in Master Funds |
3,043 | (3,043 | ) | (5) | — | |||||||||
| Net gains from investment activities of consolidated VIEs |
(7,168 | ) | — | (7,168 | ) | |||||||||
| Income from equity method investments |
8 | — | 8 | |||||||||||
| Other—than-temporary impairment charge on available-for-sale securities |
— | — | — | |||||||||||
| Interest income |
— | — | — | |||||||||||
| Forgiveness of debt |
977 | (977 | ) | (6) | — | |||||||||
| Other income (loss), net |
— | 977 | (6) | 977 | ||||||||||
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| Total Other Loss |
(3,140 | ) | — | (3,140 | ) | |||||||||
| Income (loss) before income tax provision |
(12,087 | ) | — | (12,087 | ) | |||||||||
| Income tax provision |
(368 | ) | — | (368 | ) | |||||||||
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| Net Loss |
(12,455 | ) | — | (12,455 | ) | |||||||||
| Net loss attributable to appropriated members’ equity |
102,681 | (102,681 | ) | (7) | — | |||||||||
| Net loss (income) attributable to Non-Controlling Interests |
(88,682 | ) | 102,681 | (7) | 13,999 | |||||||||
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| Net Income Attributable to Apollo Global Management (Stone Tower unaudited amounts are not adjusted for Apollo Operating Group non-controlling interest) |
$ | 1,544 | $ | — | $ | 1,544 | ||||||||
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| (1) | To reclass to advisory and transaction fees from affiliates |
| (2) | To reclass from professional fees |
| (3) | To reclass to professional fees |
| (4) | To reclass to general, administrative and other |
| (5) | To reclass to net (losses) gains from investment activities |
| (6) | To reclass to other income (loss), net from forgiveness of debt |
| (7) | To reclass to Net loss (income) attributable to Non-Controlling Interests |
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APOLLO GLOBAL MANAGEMENT, LLC
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
| 3. | PRO FORMA NET (LOSS) INCOME PER CLASS A SHARE |
The following table sets forth certain historical and pro forma per share financial information for the Class A shares of Apollo Global Management, LLC for the nine months ended September 30, 2012:
| Historical | Pro Forma | |||||||
| Nine Months Ended September 30, 2012 |
Nine Months Ended September 30, 2012 |
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| Numerator: |
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| Net income (loss) attributable to Apollo Global |
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| Management, LLC |
$ | 139,448 | $ | 149,912 | ||||
| Distributions declared on Class A shares |
(120,865 | ) | (120,865 | ) | ||||
| Distribution equivalents on participating securities |
(21,814 | ) | (21,814 | ) | ||||
| Earnings allocable to participating securities |
— | — | ||||||
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| Net (Loss) Income Attributable to Class A shareholders |
$ | (3,231 | ) | $ | 7,233 | |||
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| Denominator: |
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| Weighted average number of Class A shares—Basic |
126,909,962 | 126,909,962 | ||||||
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| Net (loss) income per Class A share: Basic and Diluted |
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| Distributable Earnings |
$ | 0.95 | $ | 0.95 | ||||
| Undistributed (loss) income |
(0.02 | ) | 0.06 | |||||
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| Net (loss) income per Class A share |
$ | 0.93 | $ | 1.01 | ||||
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