Blackstone results show the firm does things its own way

Date: Wednesday, February 9, 2011
Author: Altassets.com

However, the firm chose to downplay the importance of the loss by pointing to a doubling in ‘Economic Net Income’ (ENI) to $1.4bn.

By both generally accepted accounting principles (GAAP) and ENI measures, Blackstone’s performance was significantly better in 2010 than the year before.

On GAAP measures, the firm lost $370m in 2010, less than half its 2009 loss of $715.3m. ENI rose 102 per cent to $1.4bn, from $513m. Revenues almost doubled to $1.08bn.

ENI is a little known accounting metric that measures income before income taxes, as well as non-cash charges associated with compensation arising from IPO unit awards and the amortisation of intangibles, which in Blackstone’s case amounted to $802.6m last year.

A Reuters blogger pointed out when Blackstone first proposed the metric that ENI has been used by only one other publicly traded company in the last year – US-based Southwest Airlines.

Blackstone believes that income as measured by GAAP is not a fair reflection of its earning power, something it addressed in its IPO filing.

"We expect to record significant net losses for a number of years following this offering as a result of the amortisation of finite-lived intangible assets and noncash equity-based compensation," the firm said.

It likewise emphasised that it expected earnings to be highly variable and warned that it was not a stock for short-term investors.

Blackstone judges itself on the commitment of limited partner investors and the returns it generates for them as much as it does on its earnings per share.

“In 2010, we continued to provide our limited partner investors with best-in class returns across all of our businesses, and our LPs entrusted us with nearly $18bn in new capital,” the firm said in a statement.

Paramount leader Stephen Schwarzman said the firm had delivered a “truly extraordinary performance”.

“We are entering 2011 in the strongest position I have seen in our history, in contrast to almost all other asset managers in the developed world,” he said in a conference call.

Investors seem broadly convinced, with Blackstone’s share price up about 2.5 per cent to $17.10 in the first three hours of trading today. It has risen 71 per cent since September.