v2.4.1.9

SEGMENT REPORTING

3 Months Ended

Mar. 31, 2015

SEGMENT REPORTING

18. SEGMENT REPORTING

Blackstone transacts its primary business in the United States and substantially all of its revenues are generated domestically.

Blackstone conducts its alternative asset management and financial advisory businesses through five segments:

• Private Equity — Blackstone’s Private Equity segment comprises its management of private equity funds, certain multi-asset class investment funds and secondary private funds of funds.

• Real Estate — Blackstone’s Real Estate segment primarily comprises its management of global, European focused and Asian focused opportunistic real estate funds. In addition, the segment has debt investment funds and a publicly traded REIT targeting non-controlling real estate debt-related investment opportunities in the public and private markets, primarily in the United States and Europe.

• Hedge Fund Solutions — Blackstone’s Hedge Fund Solutions segment is comprised principally of Blackstone Alternative Asset Management (“BAAM”), an institutional solutions provider utilizing hedge funds across a variety of strategies.

• Credit — Blackstone’s Credit segment, which principally includes GSO Capital Partners LP (“GSO”), manages credit-focused products within private and public debt market strategies. GSO’s products include senior credit-focused funds, distressed debt funds, mezzanine funds, general credit-focused funds, registered investment companies, separately managed accounts and CLO vehicles.

• Financial Advisory — Blackstone’s Financial Advisory segment comprises its financial and strategic advisory services, restructuring and reorganization advisory services, capital markets services and Park Hill Group, which provides fund placement services for alternative investment funds.

These business segments are differentiated by their various sources of income. The Private Equity, Real Estate, Hedge Fund Solutions and Credit segments primarily earn their income from management fees and investment returns on assets under management, while the Financial Advisory segment primarily earns its income from fees related to investment banking services and advice and fund placement services.

Blackstone uses Economic Income (“EI”) as a key measure of value creation, a benchmark of its performance and in making resource deployment and compensation decisions across its five segments. EI represents segment net income before taxes excluding transaction-related charges. Transaction-related charges arise from Blackstone’s IPO and long-term retention programs outside of annual deferred compensation and other corporate actions, including acquisitions. Transaction-related charges include equity-based compensation charges, the amortization of intangible assets and contingent consideration associated with acquisitions. EI presents revenues and expenses on a basis that deconsolidates the investment funds Blackstone manages. Economic Net Income (“ENI”) represents EI adjusted to include current period taxes. Taxes represent the current tax provision (benefit) calculated on Income (Loss) Before Provision for Taxes.

Management makes operating decisions and assesses the performance of each of Blackstone’s business segments based on financial and operating metrics and data that is presented without the consolidation of any of the Blackstone Funds that are consolidated into the Condensed Consolidated Financial Statements. Consequently, all segment data excludes the assets, liabilities and operating results related to the Blackstone Funds.

The following table presents the financial data for Blackstone’s five segments as of and for the three months ended March 31, 2015 and 2014:

		March 31, 2015 and the Three Months Then Ended
		Private Equity				Real Estate				Hedge Fund Solutions				Credit				Financial Advisory				Total Segments
Segment Revenues
Management and Advisory Fees, Net
Base Management Fees		$	108,383			$	152,348			$	130,637			$	125,029			$	—			$	516,397
Advisory Fees			—				—				—				—				84,238				84,238
Transaction and Other Fees, Net			20,359				15,216				25				1,457				16				37,073
Management Fee Offsets			(4,949	)			(4,866	)			(280	)			(7,850	)			—				(17,945	)
Total Management and Advisory Fees, Net			123,793				162,698				130,382				118,636				84,254				619,763
Performance Fees
Realized
Carried Interest			382,978				811,249				—				13,367				—				1,207,594
Incentive Fees			—				723				10,516				18,431				—				29,670
Unrealized
Carried Interest			566,822				(181,019	)			—				(11,951	)			—				373,852
Incentive Fees			—				6,069				47,427				9,124				—				62,620
Total Performance Fees			949,800				637,022				57,943				28,971				—				1,673,736
Investment Income (Loss)
Realized			44,816				71,344				(10,375	)			2,237				(230	)			107,792
Unrealized			31,487				37,510				4,483				6,887				1,482				81,849
Total Investment Income (Loss)			76,303				108,854				(5,892	)			9,124				1,252				189,641
Interest and Dividend Revenue			7,617				9,997				3,949				5,651				3,237				30,451
Other			(1,825	)			(3,977	)			(1,607	)			3,493				(956	)			(4,872	)
Total Revenues			1,155,688				914,594				184,775				165,875				87,787				2,508,719
Expenses
Compensation and Benefits Compensation			70,089				84,834				56,104				49,877				68,934				329,838
Performance Fee Compensation
Realized
Carried Interest			39,482				246,496				—				6,270				—				292,248
Incentive Fees			—				356				3,470				8,401				—				12,227
Unrealized
Carried Interest			178,120				(98,084	)			—				(5,656	)			—				74,380
Incentive Fees			—				2,575				15,651				6,735				—				24,961
Total Compensation and Benefits			287,691				236,177				75,225				65,627				68,934				733,654
Other Operating Expenses			38,755				40,143				21,206				21,836				21,342				143,282
Total Expenses			326,446				276,320				96,431				87,463				90,276				876,936
Economic Income (Loss)		$	829,242			$	638,274			$	88,344			$	78,412			$	(2,489	)		$	1,631,783
Segment Assets		$	6,754,805			$	7,916,836			$	1,533,776			$	2,563,449			$	869,846			$	19,638,712

		Three Months Ended March 31, 2014
		Private Equity				Real Estate				Hedge Fund Solutions				Credit				Financial Advisory				Total Segments
Segment Revenues
Management and Advisory Fees, Net
Base Management Fees		$	98,584			$	159,336			$	113,384			$	105,574			$	—			$	476,878
Advisory Fees			—				—				—				—				69,963				69,963
Transaction and Other Fees, Net			42,847				13,564				93				3,344				62				59,910
Management Fee Offsets			(1,713	)			(9,224	)			(1,455	)			(4,252	)			—				(16,644	)
Total Management and Advisory Fees, Net			139,718				163,676				112,022				104,666				70,025				590,107
Performance Fees
Realized
Carried Interest			119,805				194,658				—				19,160				—				333,623
Incentive Fees			—				(26	)			39,845				14,018				—				53,837
Unrealized
Carried Interest			167,065				140,237				—				22,986				—				330,288
Incentive Fees			—				2,737				18,085				40,444				—				61,266
Total Performance Fees			286,870				337,606				57,930				96,608				—				779,014
Investment Income (Loss)
Realized			60,535				31,357				16,820				3,071				134				111,917
Unrealized			(9,033	)			5,379				4,431				3,079				694				4,550
Total Investment Income			51,502				36,736				21,251				6,150				828				116,467
Interest and Dividend Revenue			5,228				6,110				2,661				5,861				2,502				22,362
Other			864				317				122				(259	)			(175	)			869
Total Revenues			484,182				544,445				193,986				213,026				73,180				1,508,819
Expenses
Compensation and Benefits Compensation			73,307				80,233				40,571				50,752				61,682				306,545
Performance Fee Compensation Realized
Carried Interest			85,771				51,833				—				11,794				—				149,398
Incentive Fees			—				(16	)			13,271				10,380				—				23,635
Unrealized
Carried Interest			(27,148	)			56,985				—				10,853				—				40,690
Incentive Fees			—				1,382				6,761				15,388				—				23,531
Total Compensation and Benefits			131,930				190,417				60,603				99,167				61,682				543,799
Other Operating Expenses			33,006				33,107				19,480				32,839				21,342				139,774
Total Expenses			164,936				223,524				80,083				132,006				83,024				683,573
Economic Income (Loss)		$	319,246			$	320,921			$	113,903			$	81,020			$	(9,844	)		$	825,246

The following table reconciles the Total Segments to Blackstone’s Income Before Provision for Taxes and Total Assets as of and for the three months ended March 31, 2015 and 2014:

		Three Months Ended March 31, 2015												Three Months Ended March 31, 2014
		Total Segments				Consolidation Adjustments and Reconciling Items				Blackstone Consolidated				Total Segments				Consolidation Adjustments and Reconciling Items				Blackstone Consolidated
Revenues		$	2,508,719			$	(15,139)(a)			$	2,493,580			$	1,508,819			$	17,849(a)			$	1,526,668
Expenses		$	876,936			$	272,014(b)			$	1,148,950			$	683,573			$	204,278(b)			$	887,851
Other Income		$	—			$	238,972(c)			$	238,972			$	—			$	70,155(c)			$	70,155
Economic Income		$	1,631,783			$	(48,181)(d)			$	1,583,602			$	825,246			$	(116,274)(d)			$	708,972
Total Assets		$	19,638,712			$	12,767,889(e)			$	32,406,601			$	16,458,341			$	13,570,204(e)			$	30,028,545

(a) The Revenues adjustment represents management and performance fees earned from Blackstone Funds which were eliminated in consolidation to arrive at Blackstone consolidated revenues and non-segment related Investment Income, which is included in Blackstone consolidated revenues.

(b) The Expenses adjustment represents the addition of expenses of the consolidated Blackstone Funds to the Blackstone unconsolidated expenses, amortization of intangibles and expenses related to transaction-related equity-based compensation to arrive at Blackstone consolidated expenses.

(c) The Other Income adjustment results from the following:

		Three Months Ended March 31,
		2015				2014
Fund Management Fees and Performance Fees Eliminated in Consolidation and Transactional Investment Loss		$	15,067			$	(17,878	)
Fund Expenses Added in Consolidation			15,748				(746	)
Non-Controlling Interests in Income of Consolidated Entities			209,580				89,753
Transaction-Related Other Loss			(1,423	)			(974	)
Total Consolidation Adjustments and Reconciling Items		$	238,972			$	70,155

(d) The reconciliation of Economic Income to Income Before Provision for Taxes as reported in the Condensed Consolidated Statements of Operations consists of the following:

		Three Months Ended March 31,
		2015				2014
Economic Income		$	1,631,783			$	825,246
Adjustments
Amortization of Intangibles			(25,899	)			(29,003	)
IPO and Acquisition-Related Charges			(231,862	)			(177,024	)
Non-Controlling Interests in Income of Consolidated Entities			209,580				89,753
Total Consolidation Adjustments and Reconciling Items			(48,181	)			(116,274	)
Income Before Provision for Taxes		$	1,583,602			$	708,972

(e) The Total Assets adjustment represents the addition of assets of the consolidated Blackstone Funds to the Blackstone unconsolidated assets to arrive at Blackstone consolidated assets.

X

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

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