- Adjusted net income and
distributable earnings per Class A unit were $1.46 and $1.41,
respectively, for the first quarter of 2014, down from $1.95 and
$1.79, respectively, for the first quarter of 2013, on lower
incentive and investment income.
- GAAP net income attributable to
Oaktree Capital Group, LLC was $51.8 million for the first quarter
of 2014, as compared with $57.6 million for the first quarter of
2013.
- Gross capital raised was $3.0
billion for the first quarter of 2014 and $13.0 billion for the
trailing twelve months, with $5.9 billion of the latter amount
representing recently launched investment strategies.
- AUM and management fee-generating
AUM reached all-time highs of $86.2 billion and $74.0 billion,
respectively, as of March 31, 2014, on market-value gains and net
capital inflows.
- Incentives created (fund level),
an indicator of value creation, was $352 million for the first
quarter and $1.1 billion for the last twelve months. As of March
31, 2014, $30 billion of incentive-creating AUM was generating
incentives at the fund level, the highest since June 30, 2011.
- Oaktree declares a distribution
of $0.98 per Class A unit for the first quarter of 2014,
bringing aggregate distributions for the last four quarters to
$4.23.
Oaktree Capital Group, LLC (NYSE: OAK) today reported its
unaudited financial results for the quarter ended March 31,
2014.
Howard Marks, Chairman, said, “Strong investment returns and
continued inflows for our newest investment strategies brought
assets under management and management fee-generating assets under
management to record highs in the first quarter. Importantly, over
the last year we further demonstrated the long-term power of
our business model by continuing to build substantial asset value,
while also investing in a broad range of growth opportunities
across the platform.”
For the first quarter of 2014, adjusted net income (“ANI”) was
$246.9 million on $527.8 million of total segment revenues, down
from $335.8 million of ANI on $593.4 million of segment revenues in
the first quarter of 2013, a period marked by particularly strong
financial markets and incentive income from OCM Opportunities Fund
VIIb, L.P. (“Opps VIIb”).
Distributable earnings were $233.1 million on $512.3 million of
distributable earnings revenues in the first quarter of 2014, down
from distributable earnings of $295.0 million on $554.4 million of
distributable earnings revenues in the first quarter of 2013,
primarily as a result of lower incentive income. Distributable
earnings generated a distribution per Class A unit of $0.98 with
respect to the first quarter of 2014.
As previously announced, assets under management (“AUM”) and
management fee-generating assets under management (“management
fee-generating AUM”) reached record highs in the first quarter of
2014, lifted by market-value gains and net inflows to open-end and
evergreen funds. AUM grew to $86.2 billion as of March 31, 2014,
from $83.6 billion as of December 31, 2013 and $78.8 billion as of
March 31, 2013. Management fee-generating AUM grew to $74.0 billion
as of March 31, 2014, from $72.0 billion as of December 31, 2013
and $66.4 billion as of March 31, 2013.
In addition to ANI, Oaktree calculates economic net income
(“ENI”) to facilitate comparability with other alternative asset
managers that report a measure similar to ENI as a performance
metric. Unlike ANI, ENI measures incentive income based on market
values. ENI was $227.2 million on economic net income revenues of
$587.3 million in the first quarter of 2014, down from quarterly
record highs of $400.6 million in ENI and $726.0 million in
economic net income revenues in the first quarter of 2013, when
particularly strong financial markets boosted our funds' portfolio
market values. Per Class A unit, ENI was $1.34 for the first
quarter of 2014.
GAAP-basis results for the first quarter of 2014 included net
income attributable to Oaktree Capital Group, LLC of $51.8 million,
as compared to $57.6 million for the first quarter of 2013.
Gross capital raised was $3.0 billion in the first quarter,
driven by product innovation and strong inflows across our open-end
funds. Strategies developed within the past three years accounted
for $1.6 billion of the $3.0 billion. AUM in our Emerging Markets
Equity strategy reached $1.2 billion as of March 31, 2014, and the
strategy had additional net inflows of $1.3 billion in April.
Oaktree Enhanced Income Fund II, L.P., which will invest in senior
loans, held its only close in April and is expected to reach $2.2
billion, including leverage. Capital commitments to our Real Estate
Debt strategy reached $794 million as of March 31, 2014.
Additionally in the first quarter, we closed a $517 million
collateralized loan obligation (“CLO”).
Oaktree is currently marketing Oaktree Mezzanine Fund IV, L.P.,
Oaktree Value Equity Fund, L.P. and Oaktree Principal Fund VI,
L.P.
The table below presents (a) segment revenues, distributable
earnings revenues, fee-related earnings revenues and economic net
income revenues, in each case for the Operating Group;
(b) adjusted net income, distributable earnings, fee-related
earnings and economic net income, in each case for both the
Operating Group and per Class A unit; and (c) assets
under management and accrued incentives (fund level) data. Please
refer to the Glossary for definitions.
As of or for the Three Months
Ended March 31,
2014 2013
(in thousands, except per unit
dataor as otherwise indicated)
Segment Results: Segment revenues $ 527,756 $ 593,448
Adjusted net income 246,945 335,750 Distributable earnings revenues
512,349 554,437 Distributable earnings 233,141 295,027 Fee-related
earnings revenues 188,400 184,214 Fee-related earnings (1) 57,723
64,866 Economic net income revenues 587,254 725,964 Economic net
income 227,242 400,574
Per Class A unit: Adjusted net
income $ 1.46 $ 1.95 Distributable earnings 1.41 1.79 Fee-related
earnings (1) 0.33 0.35 Economic net income 1.34 2.07
Operating Metrics: Assets under management (in millions):
Assets under management $ 86,226 $ 78,801 Management fee-generating
assets under management 74,027 66,350 Incentive-creating assets
under management 33,258 33,950 Uncalled capital commitments 12,002
11,198 Accrued incentives (fund level): Incentives created (fund
level) 352,374 459,700 Incentives created (fund level), net of
associated incentive income compensation expense 137,332 261,737
Accrued incentives (fund level) 2,335,937 2,270,314 Accrued
incentives (fund level), net of associated incentive income
compensation expense 1,215,523 1,347,018 (1)
Beginning with the fourth quarter of 2013, the definition of
fee-related earnings was modified to exclude non-cash equity-based
compensation charges related to unit grants made after our initial
public offering in April 2012. Prior periods have been recast to
retroactively reflect this change. Those non-cash compensation
charges amounted to $0.7 million, or less than $0.01 per Class A
unit, for the first quarter of 2013.
Note: Oaktree discloses in this earnings release certain
revenues and financial measures, including segment revenues,
adjusted net income, adjusted net income per Class A unit,
distributable earnings revenues, distributable earnings,
distributable earnings per Class A unit, fee-related earnings
revenues, fee-related earnings, fee-related earnings per
Class A unit, economic net income revenues, economic net
income and economic net income per Class A unit, that are
calculated and presented on the basis of methodologies other than
in accordance with generally accepted accounting principles in the
United States (“non-GAAP”). Reconciliations of these non-GAAP
financial measures to the most directly comparable financial
measures calculated and presented in accordance with GAAP are
presented at Exhibit A.
Operating Metrics
Assets Under Management
AUM grew to $86.2 billion as of March 31, 2014, from $83.6
billion as of December 31, 2013 and $78.8 billion as of March 31,
2013. The $2.6 billion increase since December 31, 2013 reflected
$2.4 billion of aggregate market-value gains, $1.3 billion of new
capital commitments and $1.1 billion of net inflows to open-end
funds, partially offset by $2.0 billion of distributions to
closed-end fund investors. The $2.0 billion of distributions to
closed-end fund investors included $1.2 billion by Distressed Debt
funds, including $0.3 billion by Opps VIIb, and $0.6 billion by
Principal Investing funds.
The $7.4 billion increase in AUM since March 31, 2013 reflected
$8.0 billion of market-value gains, $7.7 billion of new capital
commitments and fee-generating leverage, and $2.2 billion of net
inflows to open-end funds, partially offset by $10.8 billion of
distributions to closed-end fund investors. The $7.7 billion of new
capital commitments and fee-generating leverage included $2.0
billion for Oaktree Real Estate Opportunities Fund VI, L.P. (“ROF
VI”), $1.3 billion for Strategic Credit, $0.9 billion for European
Private Debt, $0.9 billion for Emerging Market Opportunities, $0.8
billion for our CLOs, $0.7 billion for Oaktree Enhanced Income
Fund, L.P. and $0.7 billion for Real Estate Debt. Of the $10.8
billion of distributions to closed-end fund investors, $2.7 billion
was attributable to Opps VIIb, $3.4 billion to other Distressed
Debt funds, $3.2 billion to Principal Investing funds and $0.9
billion to Oaktree PPIP Fund, L.P.
Management Fee-generating Assets Under
Management
Management fee-generating AUM grew to $74.0 billion as of March
31, 2014, from $72.0 billion and $66.4 billion as of December 31,
2013 and March 31, 2013, respectively. The $2.0 billion increase in
the first quarter of 2014 reflected $1.1 billion of net inflows to
open-end funds, $1.1 billion of market-value gains in funds for
which management fees are based on NAV, and $0.6 billion in new
capital commitments, partially offset by a $0.9 billion decline
attributable to asset sales by closed-end funds in liquidation.
The $7.6 billion increase in management fee-generating AUM since
March 31, 2013 reflected an aggregate increase of $6.7 billion from
the commencement on January 1, 2014 of the investment period of
Oaktree Opportunities Fund IX, L.P. (“Opps IX”) and final capital
commitments to ROF VI, $3.1 billion from market-value gains in
funds for which management fees are based on NAV, $2.0 billion from
fee-generating leverage and drawdowns by closed-end funds for which
management fees are based on drawn capital or NAV, and $2.2 billion
from net inflows to open-end funds. Partially offsetting those
increases was a $6.4 billion decline from asset sales by closed-end
funds in liquidation, of which Opps VIIb accounted for $1.4
billion.
Incentive-creating Assets Under
Management
Incentive-creating assets under management (“incentive-creating
AUM”) was $33.3 billion as of March 31, 2014, up from $32.4 billion
as of December 31, 2013 and down from $34.0 billion as of March 31,
2013. The $0.9 billion increase since December 31, 2013 resulted
from the net effect of $1.6 billion in drawdowns by closed-end
funds, $1.4 billion in market-value gains in closed-end and
evergreen funds, and $2.1 billion in distributions by closed-end
funds. The $0.7 billion decrease since March 31, 2013 reflected the
net effect of $11.1 billion in distributions by closed-end funds,
$5.5 billion in drawdowns by closed-end funds and $4.9 billion in
market-value gains in closed-end and evergreen funds. Of the $33.3
billion in incentive-creating AUM as of March 31, 2014, $30.0
billion, or 90.3%, was generating incentives at the fund level.
Accrued Incentives (Fund Level) and
Incentives Created (Fund Level)
Accrued incentives (fund level) were $2.3 billion as of each of
March 31, 2014, December 31, 2013 and March 31, 2013. The first
quarter of 2014 reflected $352.4 million of incentives created
(fund level), less $292.9 million of segment incentive income
recognized.
Net of incentive income compensation expense, accrued incentives
(fund level) were $1.2 billion as of both March 31, 2014
and December 31, 2013, and $1.3 billion as of March 31, 2013.
As of March 31, 2014 and 2013, the portion of net accrued
incentives (fund level) represented by funds that were currently
paying incentives was $444.9 million and $777.5 million,
respectively, with the remainder arising from funds that as of that
date had not yet reached the stage of their cash distribution
waterfall where Oaktree was entitled to receive incentives, other
than tax-related distributions.
Uncalled Capital Commitments
Uncalled capital commitments were $12.0 billion as of March 31,
2014, $13.2 billion as of December 31, 2013, and $11.2 billion as
of March 31, 2013. Capital drawn by closed-end funds during the
first quarter of 2014 was $2.2 billion, as compared with $1.6
billion for the first quarter of 2013.
Segment Results
Revenues
Segment revenues declined $65.6 million, or 11.1%, to $527.8
million for the first quarter of 2014, from $593.4 million for the
first quarter of 2013, reflecting decreases of $34.3 million in
incentive income and $35.6 million in investment income, partially
offset by $4.2 million of higher management fees.
Management Fees
Management fees grew $4.2 million, or 2.3%, to $188.4 million
for the first quarter of 2014, from $184.2 million for the first
quarter of 2013. The increase reflected $19.7 million from the
start of Opps IX's investment period on January 1, 2014, $5.5
million from new capital commitments to ROF VI, $3.6 million from
open-end funds resulting from market-value gains and net inflows,
$2.7 million from closed-end funds for which management fees are
based on drawn capital or NAV, and $2.4 million from drawdowns by
Strategic Credit. Partially offsetting those increases was a $30.4
million decline in fees from closed-end funds in liquidation, of
which Opps VIIb accounted for $11.0 million. For the first quarter
of 2014, closed-end funds represented $137.0 million, or 72.7%, of
total management fees.
Incentive Income
Incentive income decreased $34.3 million, or 10.5%, to $292.9
million for the first quarter of 2014, from $327.2 million for the
first quarter of 2013. The first quarter of 2014 included $219.7
million of tax-related incentive distributions with respect to 2013
taxable income generated by closed-end funds not yet paying
incentives, and $73.2 million of other incentive distributions,
including $57.8 million from Opps VIIb. The first quarter of 2013
included an incentive distribution of $195.2 million from Opps VIIb
and $113.4 million of tax-related incentive distributions with
respect to 2012 taxable income generated by closed-end funds not
yet paying incentives.
Investment Income
Investment income decreased $35.6 million, or 43.4%, to $46.5
million for the first quarter of 2014, from $82.1 million for the
first quarter of 2013, a quarter marked by particularly strong
financial markets. Investments in companies accounted for $7.2
million of the decrease, primarily as a result of a market-value
decline on our minority equity investment in China Cinda Asset
Management Co., Ltd. Our one-fifth ownership stake in DoubleLine
Capital LP and its affiliates (collectively, “DoubleLine”)
accounted for investment income of $9.6 million and $11.0 million
for the first quarters of 2014 and 2013, respectively, of which the
portion attributable to performance fees was $1.4 million and $2.0
million, respectively.
Expenses
Compensation and Benefits
Compensation and benefits increased $4.6 million, or 4.9%, to
$98.2 million for the first quarter of 2014, from $93.6 million for
the first quarter of 2013, primarily reflecting growth in
headcount.
Equity-based Compensation
Equity-based compensation increased to $4.0 million for the
first quarter of 2014, from $0.7 million for the first quarter of
2013. The increase reflected non-cash amortization expense
associated with vesting of restricted unit grants made to employees
and directors subsequent to our initial public offering in April
2012.
Incentive Income Compensation
Incentive income compensation expense increased $7.5 million, or
5.8%, to $137.8 million for the first quarter of 2014, from $130.3
million for the first quarter of 2013. After adjusting the 2013
quarter's expense for its benefit from the 2011 acquisition of a
small portion of certain investment professionals' carried interest
in Opps VIIb, the year-over-year change would have been a decrease
of 5.3%, which is more in line with the 10.5% decline in incentive
income over the same period. The remainder of the adjusted
percentage difference was attributable to the fact that funds that
generated incentive income in the current-year's first quarter had
a higher average percentage of incentive income compensation
expense than those that generated incentive income in the
prior-year period.
General and Administrative
General and administrative expenses increased $6.6 million, or
27.5%, to $30.6 million for the first quarter of 2014, from $24.0
million for the first quarter of 2013. Excluding the impact of
foreign currency-related items, general and administrative expenses
increased $6.9 million, or 27.8%, to $31.7 million from $24.8
million. The increase reflected higher professional fees, our 2014
bi-annual client conferences and costs associated with corporate
growth and continued investment in our operational
infrastructure.
Adjusted Net Income
ANI decreased $88.9 million, or 26.5%, to $246.9 million for the
first quarter of 2014, from $335.8 million for the first quarter of
2013, reflecting decreases of $41.9 million in incentive income,
net of incentive income compensation expense, $35.6 million in
investment income, and $7.2 million in fee-related earnings. The
portion of ANI attributable to our Class A units was $57.9
million and $58.7 million for the first quarters of 2014 and 2013,
respectively. Per Class A unit, adjusted net income-OCG was $1.46
and $1.95 for the first quarters of 2014 and 2013,
respectively.
The effective tax rate applied to ANI for the first quarters of
2014 and 2013 was 10% and 12%, respectively. The effective tax rate
is a function of the mix of income and other factors that often
vary significantly within or between years, each of which can have
a material impact on the particular year’s income tax expense. The
rate used for interim fiscal periods is based on the estimated
full-year effective tax rate, which is subject to change as the
year progresses.
Distributable Earnings
Distributable earnings declined $61.9 million, or 21.0%, to
$233.1 million for the first quarter of 2014, from $295.0 million
for the first quarter of 2013, reflecting decreases of $41.9
million in incentive income, net of incentive income compensation
expense, $12.0 million in investment income proceeds, and $7.2
million in fee-related earnings. For the first quarter of 2014,
receipts of investment income totaled $31.1 million, including
$21.7 million from fund distributions and $9.4 million from
DoubleLine, as compared with total receipts in the prior-year
quarter of $43.0 million, of which $34.0 million and $9.0 million
was attributable to fund distributions and DoubleLine,
respectively.
The portion of distributable earnings attributable to our
Class A units was $1.41 and $1.79 per unit for the first
quarters of 2014 and 2013, respectively, reflecting distributable
earnings per Operating Group unit of $1.53 and $1.96, respectively,
less costs borne by Class A unitholders for professional fees
and other expenses, cash taxes attributable to the Intermediate
Holding Companies and amounts payable pursuant to the tax
receivable agreement.
Fee-related Earnings
Fee-related earnings decreased $7.2 million, or 11.1%, to $57.7
million for the first quarter of 2014, from $64.9 million for the
first quarter of 2013. The decrease reflected increases of $4.6
million in compensation and benefits and $6.6 million in general
and administrative expenses, partially offset by $4.2 million of
higher management fees. The portion of fee-related earnings
attributable to our Class A units was $0.33 and $0.35 per unit
for the first quarters of 2014 and 2013, respectively.
The effective tax rate applied to fee-related earnings was 12%
and 18% for the first quarters of 2014 and 2013, respectively. The
rate used for interim fiscal periods is based on the estimated
full-year effective tax rate, which is subject to change as the
year progresses.
GAAP-basis Results
Net income attributable to Oaktree Capital Group, LLC was $51.8
million for the first quarter of 2014, as compared to $57.6 million
for the first quarter of 2013.
Capital and Liquidity
As of March 31, 2014, Oaktree had $923.9 million of cash and
investments in U.S. Treasury and government-agency securities and
$610.7 million of outstanding debt. Oaktree had then, and currently
has, no borrowings outstanding against its $500 million revolving
credit facility. As of March 31, 2014, Oaktree’s investments in
funds and companies had a carrying value of $1.4 billion, with our
20% investment in DoubleLine carried at cost, as adjusted under the
equity method of accounting. Accrued incentives (fund level), net
of associated compensation expense, represented an additional $1.2
billion as of that date.
Distribution
Oaktree Capital Group, LLC has declared a distribution
attributable to the first quarter of 2014 of $0.98 per Class A
unit. This distribution will be paid on May 15, 2014 to
Class A unitholders of record at the close of business on May
12, 2014.
Conference Call
Oaktree will host a conference call to discuss first quarter
2014 results today at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific
Time. The conference call may be accessed by dialing
(888) 769-9724 (U.S. callers) or +1 (415) 228-4639
(non-U.S. callers), participant password OAKTREE. Alternatively, a
live webcast of the conference call can be accessed through the
Unitholders – Investor Relations section of the Oaktree website,
http://ir.oaktreecapital.com/.
For those individuals unable to listen to the live broadcast of
the conference call, a replay will be available for 30 days on
Oaktree’s website, or by dialing (866) 443-6901 (U.S. callers)
or +1 (203) 369-1120 (non-U.S. callers), beginning
approximately one hour after the broadcast.
About Oaktree
Oaktree is a leader among global investment managers
specializing in alternative investments, with $86.2 billion in
assets under management as of March 31, 2014. The firm emphasizes
an opportunistic, value-oriented and risk-controlled approach to
investments in distressed debt, corporate debt (including high
yield debt and senior loans), control investing, convertible
securities, real estate and listed equities. Headquartered in Los
Angeles, the firm has over 800 employees and offices in 16 cities
worldwide. For additional information, please visit Oaktree’s
website at www.oaktreecapital.com.
Forward-Looking Statements
This release contains forward-looking statements within the
meaning of Section 27A of the U.S. Securities Act of 1933 (the
“Securities Act”) and Section 21E of the U.S. Securities
Exchange Act of 1934, each as amended, which reflect the current
views of Oaktree Capital Group, LLC (“OCG”), with respect to, among
other things, its future results of operations and financial
performance. In some cases, you can identify forward-looking
statements by words such as “anticipate,” “approximately,”
“believe,” “continue,” “could,” “estimate,” “expect,” “intend,”
“may,” “outlook,” “plan,” “potential,” “predict,” “seek,” “should,”
“will” and “would” or the negative version of these words or other
comparable or similar words. These statements identify prospective
information. Important factors could cause actual results to
differ, possibly materially, from those indicated in these
statements. Forward-looking statements are based on OCG’s beliefs,
assumptions and expectations of its future performance, taking into
account all information currently available to OCG. Such
forward-looking statements are subject to risks and uncertainties
and assumptions relating to OCG’s operations, financial results,
financial condition, business prospects, growth strategy and
liquidity, including, but not limited to, changes in our
anticipated revenue and income, which are inherently volatile;
changes in the value of our investments; the pace of our raising of
new funds; changes in assets under management; the timing and
receipt of, and impact of taxes on, carried interest; distributions
from and liquidation of our existing funds; changes in our
operating or other expenses; the degree to which we encounter
competition; and general economic and market conditions. The
factors listed in the item captioned “Risk Factors” in our Annual
Report on Form 10-K for the year ended December 31, 2013 filed with
the SEC on February 28, 2014 (“Annual Report”), which is accessible
on the SEC’s website at www.sec.gov, provide examples of risks,
uncertainties and events that may cause our actual results to
differ materially from the expectations described in our
forward-looking statements.
Forward-looking statements speak only as of the date the
statements are made. Except as required by law, we do not undertake
any obligation to publicly update or review any forward-looking
statement, whether as a result of new information, future
developments or otherwise.
This release and its contents do not constitute and should not
be construed as (a) a recommendation to buy, (b) an offer
to buy or solicitation of an offer to buy, (c) an offer to
sell or (d) advice in relation to, any securities of OCG or
securities of any Oaktree investment fund.
Consolidated Statements of Operations Data (GAAP
basis)
Three Months Ended March 31,
2014 2013 (in
thousands, except per unit data) Revenues: Management fees $
40,431 $ 42,539 Total revenues 40,431 42,539
Expenses: Compensation and benefits (98,292 ) (93,715 )
Equity-based compensation (9,182 ) (6,452 ) Incentive income
compensation (91,494 ) (130,271 ) Total compensation and benefits
expense (198,968 ) (230,438 ) General and administrative (32,238 )
(19,741 ) Depreciation and amortization (1,921 ) (1,743 )
Consolidated fund expenses (25,192 ) (23,583 ) Total expenses
(258,319 ) (275,505 ) Other income (loss): Interest expense (24,000
) (11,581 ) Interest and dividend income 362,136 406,252 Net
realized gain on consolidated funds' investments 654,151 1,198,260
Net change in unrealized appreciation on consolidated funds'
investments 770,478 1,021,517 Investment income 4,991 12,243 Other
income (expense), net (1,698 ) (20 ) Total other income 1,766,058
2,626,671 Income before income taxes 1,548,170
2,393,705 Income taxes (7,986 ) (10,157 ) Net income 1,540,184
2,383,548 Less: Net income attributable to non-controlling
redeemable interests in consolidated funds (1,324,832 ) (2,063,965
) Net income attributable to OCGH non-controlling interest (163,558
) (262,017 ) Net income attributable to Oaktree Capital Group, LLC
$ 51,794 $ 57,566 Net income per unit (basic and
diluted): Net income per Class A unit $ 1.30 $ 1.91
Weighted average number of Class A units outstanding 39,700
30,186
Segment Financial Data
As of or for the Three
Months
Ended March 31,
2014 2013
(in thousands, except per unit
dataor as otherwise indicated)
Segment Statements of Operations Data: (1) Revenues:
Management fees $ 188,400 $ 184,214 Incentive income 292,876
327,184 Investment income 46,480 82,050 Total
revenues 527,756 593,448 Expenses: Compensation and
benefits (98,194 ) (93,617 ) Equity-based compensation (3,983 )
(652 ) Incentive income compensation (137,828 ) (130,271 ) General
and administrative (30,562 ) (23,988 ) Depreciation and
amortization (1,921 ) (1,743 ) Total expenses (272,488 ) (250,271 )
Adjusted net income before interest and other income (expense)
255,268 343,177 Interest expense, net of interest income (2) (6,625
) (7,407 ) Other income (expense), net (1,698 ) (20 ) Adjusted net
income $ 246,945 $ 335,750 Adjusted net
income-OCG $ 57,875 $ 58,727 Adjusted net income per Class A unit
1.46 1.95 Distributable earnings 233,141 295,027 Distributable
earnings-OCG 55,812 54,076 Distributable earnings per Class A unit
1.41 1.79 Fee-related earnings 57,723 64,866 Fee-related
earnings-OCG 12,923 10,538 Fee-related earnings per Class A unit
0.33 0.35 Economic net income 227,242 400,574 Economic net
income-OCG 53,222 62,579 Economic net income per Class A unit 1.34
2.07 Weighted average number of Operating Group units
outstanding 152,271 150,814 Weighted average number of Class A
units outstanding 39,700 30,186
Operating Metrics:
Assets under management (in millions): Assets under management $
86,226 $ 78,801 Management fee-generating assets under management
74,027 66,350 Incentive-creating assets under management 33,258
33,950 Uncalled capital commitments (3) 12,002 11,198 Accrued
incentives (fund level): (4) Incentives created (fund level)
352,374 459,700 Incentives created (fund level), net of associated
incentive income compensation expense 137,332 261,737 Accrued
incentives (fund level) 2,335,937 2,270,314 Accrued incentives
(fund level), net of associated incentive income compensation
expense 1,215,523 1,347,018 (1) Our business is
comprised of one segment, our investment management segment, which
consists of the investment management services that we provide to
our clients. The components of revenues and expenses used in
determining adjusted net income do not give effect to the
consolidation of the funds that we manage. In addition, adjusted
net income excludes the effect of (a) non-cash equity-based
compensation charges related to unit grants made before our initial
public offering, (b) income taxes, (c) other income or expenses
applicable to OCG or its Intermediate Holding Companies and (d) the
adjustment for the OCGH non-controlling interest. Incentive income
and incentive income compensation expense are included in adjusted
net income when the underlying fund distributions are known or
knowable as of the respective quarter end, which may be later than
the time at which the same revenue or expense is included in the
GAAP-basis statements of operations, for which the revenue standard
is fixed or determinable and the expense standard is probable and
reasonably estimable. Adjusted net income is calculated at the
Operating Group level. For additional information regarding the
reconciling adjustments discussed above, please see Exhibit A. (2)
Interest income was $1.1 million and $0.6 million for the three
months ended March 31, 2014 and 2013, respectively. (3) Uncalled
capital commitments represent undrawn capital commitments by
partners (including Oaktree as general partner) of our closed-end
funds in their investment periods and certain evergreen funds. If a
fund distributes capital during its investment period, that capital
is typically subject to possible recall, in which case it is
included in uncalled capital commitments. (4) Our funds record as
accrued incentives the incentive income that would be paid to us if
the funds were liquidated at their reported values as of the date
of the financial statements. Incentives created (fund level) refers
to the gross amount of potential incentives generated by the funds
during the period. We refer to the amount of incentive income
recognized as revenue by us as segment incentive income. Amounts
recognized by us as incentive income no longer are included in
accrued incentives (fund level), the term we use for remaining
fund-level accruals. Incentives created (fund level), incentive
income and accrued incentives (fund level) are presented gross,
without deduction for direct compensation expense that is owed to
our investment professionals associated with the particular fund
when we earn the incentive income. We call that charge “incentive
income compensation expense.” Incentive income compensation expense
varies by the investment strategy and vintage of the particular
fund, among other factors.
Operating Metrics
We monitor certain operating metrics that are either common to
the alternative asset management industry or that we believe
provide important data regarding our business. As described below,
these operating metrics include AUM, management fee-generating AUM,
incentive-creating AUM, incentives created (fund level), accrued
incentives (fund level) and uncalled capital commitments.
Assets Under Management
As of March 31,
2014
December 31,
2013
March 31,
2013
(in millions) Assets Under Management:
Closed-end funds $ 46,902 $ 46,685 $ 46,381 Open-end funds 34,911
32,868 29,837 Evergreen funds 4,413 4,052 2,583
Total $ 86,226 $ 83,605 $ 78,801
Three Months Ended March 31, Twelve Months Ended March
31, 2014 2013 2014
2013 (in millions) Change in Assets Under
Management: Beginning balance $ 83,605 $ 77,051 $ 78,801 $
77,850 Closed-end funds: New capital commitments/other (1) 1,083
1,215 5,364 5,937 Distributions for a realization event/other (2)
(1,952 ) (3,180 ) (10,801 ) (13,265 ) Uncalled capital commitments
at end of investment period (146 ) — (146 ) (1,634 ) Foreign
currency translation 1 (133 ) 403 (173 ) Change in market value (3)
1,369 2,235 4,971 6,151 Change in applicable leverage (138 ) 544
730 787 Open-end funds: Contributions 1,695 1,127 5,844 4,347
Redemptions (579 ) (1,229 ) (3,642 ) (4,212 ) Foreign currency
translation 14 (94 ) 216 (105 ) Change in market value (3) 913 941
2,656 2,974 Evergreen funds: Contributions or new capital
commitments 268 237 1,769 377 Redemptions (14 ) (17 ) (268 ) (500 )
Distributions from restructured funds (16 ) (15 ) (50 ) (38 )
Foreign currency translation (1 ) (1 ) 4 (1 ) Change in market
value (3) 124 120 375 306 Ending
balance $ 86,226 $ 78,801 $ 86,226 $ 78,801
(1) These amounts represent new capital
commitments and the aggregate par value of collateral assets and
principal cash associated with our collateralized loan obligation
vehicles. (2) These amounts represent distributions for a
realization event, tax-related distributions and reductions in the
par value of collateral assets and principal cash resulting from
the repayment of debt by our collateralized loan obligation
vehicles. (3) The change in market value reflects the change in NAV
of our funds resulting from current income and realized and
unrealized gains/losses on investments, less management fees and
other fund expenses, and changes in the aggregate par value of
collateral assets and principal cash held by our collateralized
loan obligation vehicles resulting from other activities.
Management Fee-generating AUM
As of March 31,
2014
December 31,
2013
March 31,
2013
(in millions) Management Fee-generating Assets
Under Management: Closed-end funds $ 36,176 $ 36,422 $ 34,412
Open-end funds 34,855 32,830 29,799 Evergreen funds 2,996
2,698 2,139 Total $ 74,027 $ 71,950 $
66,350
Three Months Ended March 31, Twelve
Months Ended March 31, 2014 2013
2014 2013 (in millions)
Change in Management Fee-generating Assets Under Management:
Beginning balance $ 71,950 $ 66,784 $ 66,350 $ 67,973 Closed-end
funds: New capital commitments to funds that pay fees based on
committed capital and other increases (1) 560 381 6,776 616 Capital
drawn by funds that pay fees based on drawn capital or NAV 107 702
1,240 1,582 Change for funds that pay fees based on the lesser of
funded capital or cost basis during liquidation (2) (898 ) (2,747 )
(6,373 ) (7,102 ) Uncalled capital commitments at end of investment
period for funds that pay fees based on committed capital — — (664
) (57 ) Distributions by funds that pay fees based on NAV and other
decreases (3) (108 ) (61 ) (372 ) (419 ) Foreign currency
translation (16 ) (145 ) 325 (7 ) Change in market value (4) 109 (8
) 116 23 Change in applicable leverage — 540 716 757 Open-end
funds: Contributions 1,680 1,127 5,829 4,333 Redemptions (581 )
(1,229 ) (3,644 ) (4,212 ) Foreign currency translation 14 (94 )
216 (105 ) Change in market value 912 939 2,655 2,968 Evergreen
funds: Contributions or capital drawn by funds that pay fees based
on drawn capital or NAV 197 71 786 211 Redemptions (14 ) (17 ) (269
) (499 ) Change in market value 115 107 340
288 Ending balance $ 74,027 $ 66,350 $ 74,027
$ 66,350 (1) These amounts represent
new capital commitments to funds that pay fees based on committed
capital and the aggregate par value of collateral assets and
principal cash associated with our collateralized loan obligation
vehicles. (2) For most closed-end funds, management fees are
charged during the liquidation period on the lesser of (a) total
funded capital and (b) the cost basis of assets remaining in the
fund, with the cost basis of assets generally calculated by
excluding cash balances. Thus, changes in fee basis during the
liquidation period are not dependent on distributions made from the
fund; rather, they are tied to the cost basis of the fund’s
investments, which generally declines as the fund sells assets. (3)
These amounts represent distributions by funds that pay fees based
on NAV and reductions in the par value of collateral assets and
principal cash resulting from the repayment of debt by our
collateralized loan obligation vehicles. (4) The change in market
value reflects certain funds that pay management fees based on NAV
and leverage, as applicable, and changes in the aggregate par value
of collateral assets and principal cash held by our collateralized
loan obligation vehicles resulting from other activities.
As of March 31,
2014
December 31,
2013
March 31,
2013
(in millions) Reconciliation of Assets Under
Management to Management Fee-generating Assets Under
Management: Assets under management $ 86,226 $ 83,605 $ 78,801
Difference between assets under management and committed capital or
cost basis for most closed-end funds (1) (6,616 ) (6,311 ) (5,160 )
Undrawn capital commitments to funds that have not yet commenced
their investment periods (696 ) (693 ) (4,994 ) Undrawn capital
commitments to funds for which management fees are based on drawn
capital or NAV (3,013 ) (2,625 ) (846 )
Oaktree’s general partner investments in
management fee-generating funds
(1,247 ) (1,371 ) (1,003 ) Closed-end funds that are no longer
paying management fees (444 ) (461 ) (218 ) Funds for which
management fees were permanently waived (183 ) (194 ) (230 )
Management fee-generating assets under management $ 74,027 $
71,950 $ 66,350 (1) This difference is
not applicable to closed-end funds that pay management fees based
on NAV or leverage.
The period-end weighted average annual management fee rates
applicable to the respective management fee-generating AUM balances
above are set forth below, and reflect the applicable contractual
fee rates, exclusive of the impact of special items such as
retroactive management fees and the collection of deferred
contingent management fees.
As of March 31,
2014
December 31,
2013
March 31,
2013
Weighted Average Annual Management Fee Rates: Closed-end
funds 1.46 % 1.48 % 1.49 % Open-end funds 0.47 0.47 0.49 Evergreen
funds 1.61 1.63 1.80 Overall 1.00 1.02 1.05
Incentive-creating AUM
As of March 31,
2014
December 31,
2013
March 31,
2013
(in millions) Incentive-creating Assets Under
Management: Closed-end funds $ 31,172 $ 30,362 $
31,862 Evergreen funds 2,086 2,017 2,088 Total $
33,258 $ 32,379 $ 33,950
Accrued Incentives (Fund Level) and Incentives Created (Fund
Level)
As of or for the Three Months
Ended March 31,
2014 2013
(in thousands) Accrued Incentives (Fund Level):
Beginning balance $ 2,276,439 $ 2,137,798 Incentives
created (fund level): Closed-end funds 337,583 439,586 Evergreen
funds 14,791 20,114 Total incentives created (fund
level) 352,374 459,700 Less: segment incentive income
recognized by us (292,876 ) (327,184 ) Ending balance $ 2,335,937
$ 2,270,314 Accrued incentives (fund level), net of
associated incentive income compensation expense $ 1,215,523
$ 1,347,018
Uncalled Capital Commitments
Uncalled capital commitments were $12.0 billion as of March 31,
2014, as compared with $13.2 billion as of December 31, 2013 and
$11.2 billion as of March 31, 2013.
Segment Results
Our business is comprised of one segment, our investment
management segment, which consists of the investment management
services that we provide to our clients.
Adjusted Net Income
Adjusted net income and adjusted net income-OCG, as well as per
unit data, are set forth below:
Three Months Ended March 31,
2014 2013
(in thousands, except per
unit data)
Revenues: Management fees $ 188,400 $ 184,214 Incentive income
292,876 327,184 Investment income 46,480 82,050 Total
revenues 527,756 593,448 Expenses: Compensation and
benefits (98,194 ) (93,617 ) Equity-based compensation (3,983 )
(652 ) Incentive income compensation (137,828 ) (130,271 ) General
and administrative (30,562 ) (23,988 ) Depreciation and
amortization (1,921 ) (1,743 ) Total expenses (272,488 ) (250,271 )
Adjusted net income before interest and other income (expense)
255,268 343,177 Interest expense, net of interest income (6,625 )
(7,407 ) Other income (expense), net (1,698 ) (20 ) Adjusted net
income 246,945 335,750 Adjusted net income attributable to OCGH
non-controlling interest (182,561 ) (268,547 ) Non-Operating Group
expenses (282 ) (210 ) Adjusted net income-OCG before income taxes
64,102 66,993 Income taxes-OCG (6,227 ) (8,266 ) Adjusted net
income-OCG $ 57,875 $ 58,727 Adjusted net income per
Class A unit $ 1.46 $ 1.95 Weighted average number of
Class A units outstanding 39,700 30,186
Investment Income
Three Months Ended March
31, 2014 2013
(in thousands) Income (loss) from investments in funds:
Oaktree funds: Corporate Debt $ 8,835 $ 3,772 Convertible
Securities 408 50 Distressed Debt 20,474 41,362 Control Investing
11,042 9,856 Real Estate 5,466 9,211 Listed Equities (3,960 ) 5,224
Non-Oaktree funds 923 2,076 Income from investments in companies
3,292 10,499 Total investment income $ 46,480 $
82,050
Distributable Earnings and Distribution Calculation
Distributable earnings and the calculation of distributions are
set forth below:
Three Months Ended March 31,
2014 2013
Distributable Earnings:
(in thousands, except perunit
data)
Revenues: Management fees $ 188,400 $ 184,214 Incentive income
292,876 327,184 Receipts of investment income from funds (1) 21,658
34,026 Receipts of investment income from companies 9,415
9,013 Total distributable earnings revenues 512,349
554,437 Expenses: Compensation and benefits (98,194 )
(93,617 ) Incentive income compensation (137,828 ) (130,271 )
General and administrative (30,562 ) (23,988 ) Depreciation and
amortization (1,921 ) (1,743 ) Total expenses (268,505 ) (249,619 )
Other income (expense): Interest expense, net of interest income
(6,625 ) (7,407 ) Operating Group income taxes (2,380 ) (2,364 )
Other income (expense), net (1,698 ) (20 ) Distributable earnings $
233,141 $ 295,027
Distribution
Calculation: Operating Group distribution with respect to the
period $
184,771
$ 234,055 Distribution per Operating Group unit $ 1.21 $ 1.55
Adjustments per Class A unit: Distributable earnings-OCG income
taxes (0.13 ) (0.07 ) Tax receivable agreement (0.09 ) (0.06 )
Non-Operating Group expenses (0.01 ) (0.01 ) Distribution per Class
A unit (2) $ 0.98 $ 1.41 (1) This
adjustment characterizes a portion of the distributions received
from funds as receipts of investment income or loss. In general,
the income or loss component of a fund distribution is calculated
by multiplying the amount of the distribution by the ratio of our
investment’s undistributed income or loss to our remaining
investment balance. In addition, if the distribution is made during
the investment period, it is generally not reflected in
distributable earnings until after the investment period ends. (2)
With respect to the quarter ended March 31, 2014, the distribution
was announced on May 1, 2014 and is payable on May 15, 2014.
Units Outstanding
Three Months Ended March 31,
2014 2013 (in
thousands) Weighted Average Units: OCGH 112,571
120,628 Class A 39,700 30,186 Total 152,271 150,814
Units Eligible for Fiscal Period Distribution: OCGH
109,223
120,814 Class A 43,480 30,189 Total
152,703
151,003
Fee-related Earnings (1)
Fee-related earnings and fee-related earnings-OCG, as well as
per unit data, are set forth below:
Three Months Ended March 31,
2014 2013 (in
thousands, except per
unit data)
Management fees: Closed-end funds $ 137,038 $ 139,048 Open-end
funds 39,654 36,055 Evergreen funds 11,708 9,111
Total management fees 188,400 184,214 Expenses:
Compensation and benefits (98,194 ) (93,617 ) General and
administrative (30,562 ) (23,988 ) Depreciation and amortization
(1,921 ) (1,743 ) Total expenses (130,677 ) (119,348 ) Fee-related
earnings 57,723 64,866 Fee-related earnings attributable to OCGH
non-controlling interest (42,673 ) (51,883 ) Non-Operating Group
expenses (282 ) (210 ) Fee-related earnings-OCG before income taxes
14,768 12,773 Fee-related earnings-OCG income taxes (1,845 ) (2,235
) Fee-related earnings-OCG $ 12,923 $ 10,538
Fee-related earnings per Class A unit $ 0.33 $ 0.35
Weighted average number of Class A units outstanding 39,700
30,186 (1) Beginning with the fourth quarter
of 2013, the definition of fee-related earnings was modified to
exclude non-cash equity-based compensation charges related to unit
grants made after our initial public offering in April 2012. Prior
periods have been recast to retroactively reflect this change.
Those non-cash compensation charges amounted to $0.7 million, or
less than $0.01 per Class A unit, for the first quarter of 2013.
Segment Statements of Financial Condition
As of March 31, 2014
December 31, 2013
March 31, 2013 (in thousands) Assets: Cash and
cash-equivalents $ 563,292 $ 390,721 $ 687,412 U.S. Treasury and
government-agency securities 360,559 676,600 350,760 Corporate
investments 1,393,692 1,197,173 1,117,848 Deferred tax assets
373,037 278,885 159,171 Other assets 243,747 273,748
185,176 Total assets $ 2,934,327 $ 2,817,127 $
2,500,367
Liabilities and Capital: Liabilities: Accounts
payable and accrued expenses $ 235,596 $ 304,427 $ 223,118 Due to
affiliates 321,830 242,986 136,454 Debt obligations 610,714
579,464 608,929 Total liabilities 1,168,140 1,126,877
968,501 Capital: OCGH non-controlling interest in
consolidated subsidiaries 1,212,862 1,220,647 1,199,745
Unitholders’ capital attributable to Oaktree Capital Group, LLC
553,325 469,603 332,121 Total capital 1,766,187
1,690,250 1,531,866 Total liabilities and capital $
2,934,327 $ 2,817,127 $ 2,500,367
Corporate Investments
As of March 31, 2014
December 31, 2013
March 31, 2013 Investments in funds:
(in
thousands) Oaktree funds: Corporate Debt $ 279,022 $ 125,560 $
106,255 Convertible Securities 18,963 1,554 1,441 Distressed Debt
461,400 438,144 468,308 Control Investing 244,661 246,058 256,034
Real Estate 124,741 112,981 125,116 Listed Equities 130,960 129,697
81,393 Non-Oaktree funds 50,020 51,580 56,237 Investments in
companies 83,925 91,599 23,064 Total corporate
investments $ 1,393,692 $ 1,197,173 $ 1,117,848
Fund Data
Information regarding our closed-end, open-end and evergreen
funds, together with benchmark data where applicable, is set forth
below. For our closed-end and evergreen funds, no benchmarks are
presented in the tables as there are no known comparable benchmarks
for these funds' investment philosophy, strategy and
implementation.
Closed-end Funds
As of March 31, 2014 Investment Period
Total Committed Capital
Drawn Capital (1)
Fund Net Income Since Inception
Distributions Since Inception
Net Asset Value
Management Fee-generating AUM
Oaktree Segment Incentive Income
Recognized
Accrued Incentives (Fund Level) (2)
Unreturned Drawn Capital Plus Accrued Preferred Return
(3) IRR Since Inception (4)
Multiple of Drawn Capital (5) Start
Date End Date
Gross
Net
(in millions) Distressed Debt Oaktree Opportunities
Fund IX, L.P. Jan. 2014 Jan. 2017
$
5,066
$
2,382
$
255
$
1
$
2,636
$
4,966
$
—
$
50
$
2,470
29.8 % 19.2 % 1.1x Oaktree Opportunities Fund VIIIb, L.P. Aug. 2011
Aug. 2014 2,692 2,692 732 22 3,402 2,625 17 125 3,047 19.4 13.0 1.3
Special Account B Nov. 2009 Nov. 2012 1,031 1,077 609 717 969 957
15 75 694 19.6 15.5 1.6 Oaktree Opportunities Fund VIII, L.P. Oct.
2009 Oct. 2012 4,507 4,507 2,498 2,843 4,162 2,895 106 381 2,919
18.2 13.2 1.6 Special Account A Nov. 2008 Oct. 2012 253 253 324 460
117 75 41 23
—
31.9 26.1 2.3 OCM Opportunities Fund VIIb, L.P. May 2008 May 2011
10,940 9,844 9,451 16,287 3,008 1,973 1,250 587
—
23.6 18.1 2.0 OCM Opportunities Fund VII, L.P. Mar. 2007 Mar. 2010
3,598 3,598 1,629 4,310 917 941 81 113 747 11.3 8.2 1.6 OCM
Opportunities Fund VI, L.P. Jul. 2005 Jul. 2008 1,773 1,773 1,317
2,666 424 549 102 155 93 12.3 9.0 1.8 OCM Opportunities Fund V,
L.P. Jun. 2004 Jun. 2007 1,179 1,179 965 2,010 134 146 162 27
—
18.7 14.3 1.9 Legacy funds (6) Various Various 9,543 9,543 8,179
17,689 33
—
1,112 7
—
24.2 19.3 1.9 22.9 % 17.6 %
Emerging Markets
Opportunities Oaktree Emerging Market Opportunities Fund, L.P.
(7) Sep. 2013 Sep. 2017
$
383
$
22
$
4
$
1
$
25
$
23
$
—
$
1
$
22
nm nm 1.2x Special Account F (7) Jan. 2014 Jan. 2017 253 20 1
—
21 21
—
—
20 nm nm 1.1
Global Principal Investments Oaktree
Principal Fund V, L.P. (8) Feb. 2009 Feb. 2015
$
2,827
$
2,233
$
678
$
591
$
2,320
$
1,839
$
18
$
113
$
2,156
15.6 % 8.5 % 1.4x Special Account C Dec. 2008 Feb. 2014 505 455 292
225 522 395 13 45 354 20.0 14.8 1.7 OCM Principal Opportunities
Fund IV, L.P. Oct. 2006 Oct. 2011 3,328 3,328 1,810 3,100 2,038
1,350 22 127 1,858 11.1 8.2 1.7 OCM Principal Opportunities Fund
III, L.P. Nov. 2003 Nov. 2008 1,400 1,400 964 2,098 266
—
136 52
—
14.6 10.2 1.8 Legacy funds (6) Various Various 2,301 2,301 1,839
4,136 4
—
236 1
—
14.5 11.6 1.8 13.8 % 10.2 %
Asia Principal
Investments OCM Asia Principal Opportunities Fund, L.P. May
2006 May 2011
$
578
$
503
$
19
$
124
$
398
$
331
$
—
$
—
$
618
4.6 % 0.7 % 1.2x
European Principal Investments
(9) Oaktree European Principal Fund III, L.P. Nov. 2011 Nov.
2016
€
3,164
€
1,328
€
229
€
98
€
1,459
€
3,030
€
—
€
16
€
1,438
16.0 % 8.2 % 1.3x OCM European Principal Opportunities Fund II,
L.P. Dec. 2007 Dec. 2012
€
1,759
€
1,685
€
704
€
975
€
1,414
€
1,192
€
19
€
92
€
1,285
13.3 8.4 1.5 OCM European Principal Opportunities Fund, L.P. Mar.
2006 Mar. 2009
$
495
$
473
$
450
$
665
$
258
$
113
$
23
$
64
$
128
11.9 9.0 2.1 13.4 % 8.5 %
Power Opportunities
Oaktree Power Opportunities Fund III, L.P. Apr. 2010 Apr. 2015
$
1,062
$
470
$
187
$
5
$
652
$
1,036
$
—
$
36
$
531
31.4 % 17.4 % 1.5x OCM/GFI Power Opportunities Fund II, L.P. Nov.
2004 Nov. 2009 1,021 541 1,456 1,899 98 39 94 6
—
76.2 58.9 3.9 OCM/GFI Power Opportunities Fund, L.P. Nov. 1999 Nov.
2004 449 383 251 634
—
—
23
—
—
20.1
13.1
1.8 35.2 % 27.2 %
As of March 31,
2014 Investment Period Total Committed Capital
Drawn Capital (1) Fund Net Income
Since Inception
Distributions Since Inception
Net Asset Value
Management Fee-generating AUM
Oaktree Segment Incentive Income
Recognized
Accrued Incentives (Fund Level) (2)
Unreturned Drawn Capital Plus Accrued Preferred
Return (3) IRR Since Inception (4)
Multiple of Drawn Capital (5) Start
Date End Date Gross Net
(in millions) Real Estate Opportunities
Oaktree Real Estate Opportunities Fund VI, L.P. Aug.
2012 Aug. 2016
$
2,677
$
1,606
$
50
$
37
$
1,619
$
2,610
$
—
$
—
$
1,656
12.5% 4.8% 1.1x Oaktree Real Estate Opportunities Fund V, L.P. Mar.
2011 Mar. 2015 1,283 1,283 509 201 1,591 1,251 12 85 1,341 18.4
13.0 1.5 Special Account D Nov. 2009 Nov. 2012 256 263 164 198 229
130 2 14 153 18.3 15.7 1.7 Oaktree Real Estate Opportunities Fund
IV, L.P. Dec. 2007 Dec. 2011 450 450 300 282 468 312 13 44 345 16.6
11.0 1.8 OCM Real Estate Opportunities Fund III, L.P. Sep. 2002
Sep. 2005 707 707 638 1,243 102
—
106 20
—
15.6 11.6 2.0 Legacy funds (6) Various Various 1,634 1,610 1,399
3,004 5
—
111 1 57 15.2 12.0 1.9 15.4% 11.9%
Real Estate Debt Oaktree
Real Estate Debt Fund, L.P. (7) Sep. 2013 Sep. 2016
$
518
$
40
$
—
$
1
$
39
$
38
$
—
$
—
$
41
nm nm 1.0x Oaktree PPIP Fund, L.P. (10) Dec. 2009 Dec. 2012 2,322
1,113 457 1,570
—
—
47
—
—
28.2%
N/A 1.4
Mezzanine Finance Oaktree Mezzanine Fund III,
L.P. (11) Dec. 2009 Dec. 2014
$
1,592
$
1,327
$
195
$
794
$
728
$
1,552
$
—
$
—
$
749
14.7%
10.4% / 5.3%
1.2x OCM Mezzanine Fund II, L.P. Jun. 2005 Jun. 2010 1,251 1,107
476 1,232 351 396
—
—
377 11.2 7.7 1.5 OCM Mezzanine Fund, L.P. (12) Oct. 2001 Oct. 2006
808 773 303 1,041 35
—
32 6
—
15.4 10.8 /10.6 1.5 13.1% 8.7%
European Private Debt Oaktree
European Dislocation Fund, L.P. (7) Oct. 2013 Oct. 2016
€
293
€
54
€
2
€
27
€
29
€
52
€
—
€
—
€
28
nm nm 1.0x Special Account E (7) Oct. 2013 Apr. 2015
€
379
€
69
€
3
€
—
€
72
€
69
€
—
€
—
€
71
nm nm 1.0
$
63,577
(13) (14)
32,549 (14) 2,307 (14) Other (15) 3,202 6 Total (16)
$ 35,751
$
2,313
(1) Drawn capital reflects the capital
contributions of investors in the fund, net of any distributions to
such investors of uninvested capital. (2) Accrued incentives (fund
level) excludes Oaktree segment incentive income previously
recognized. (3) Unreturned drawn capital plus accrued preferred
return reflects the amount the fund needs to distribute to its
investors as a return of capital and a preferred return (as
applicable) before Oaktree is entitled to receive incentive income
(other than tax distributions) from the fund. (4) The internal rate
of return (“IRR”) is the annualized implied discount rate
calculated from a series of cash flows. It is the return that
equates the present value of all capital invested in an investment
to the present value of all returns of capital, or the discount
rate that will provide a net present value of all cash flows equal
to zero. Fund-level IRRs are calculated based upon the actual
timing of cash contributions/distributions to investors and the
residual value of such investor's capital accounts at the end of
the applicable period being measured. Gross IRRs reflect returns
before allocation of management fees, expenses and any incentive
allocation to the fund's general partner. To the extent material,
gross returns include certain transaction, advisory, directors or
other ancillary fees (“fee income”) paid directly to us in
connection with our funds' activities (we credit all such fee
income back to the respective fund(s) so that our funds' investors
share pro rata in the fee income's economic benefit). Net IRRs
reflect returns to non-affiliated investors after allocation of
management fees, expenses and any incentive allocation to the
fund's general partner. (5) Multiple of drawn capital is calculated
as drawn capital plus gross income and, if applicable, fee income
before fees and expenses divided by drawn capital. (6) Legacy funds
represent certain predecessor funds within the relevant strategy
that have substantially or completely liquidated their assets,
including funds managed by certain Oaktree investment professionals
while employed at the Trust Company of the West prior to Oaktree's
founding in 1995. When these employees joined Oaktree upon, or
shortly after, its founding, they continued to manage the fund
through the end of its term pursuant to a sub-advisory relationship
between the Trust Company of the West and Oaktree. (7) The IRR is
not considered meaningful (“nm”) as the period from the initial
capital contribution through March 31, 2014 was less than one year.
(8) In the fourth quarter of 2013, the investment period for
Oaktree Principal Fund V, L.P. was extended for a one-year period
until February 2015. However, management fees stepped down to the
post-investment period basis effective February 2014. (9) Aggregate
IRRs are based on the conversion of OCM European Principal
Opportunities Fund II, L.P. and Oaktree European Principal Fund
III, L.P. cash flows from Euros to USD using the March 31, 2014
spot rate of $1.38. (10) Due to the differences in allocations of
income and expenses to this fund's two primary limited partners,
the U.S. Treasury and Oaktree PPIP Private Fund, L.P., a combined
net IRR is not presented. Oaktree PPIP Fund, L.P. had liquidated
all of its investments and made its final liquidating distribution
as of December 31, 2013. Oaktree PPIP Fund, L.P., Oaktree PPIP
Private Fund, L.P. and its related feeder fund were dissolved as of
December 31, 2013. Of the $2,322 million in capital commitments,
$1,161 million related to the Oaktree PPIP Private Fund, L.P. The
gross and net IRR for the Oaktree PPIP Private Fund, L.P. were
24.7% and 18.6%, respectively, as of December 31, 2013. (11) The
fund's partnership interests are divided into Class A and Class B
interests, with the Class A interests having priority with respect
to the distribution of current income and disposition proceeds. The
net IRR for Class A interests was 10.4% and Class B interests was
5.3%. The combined net IRR for Class A and Class B interests was
8.8%. (12) The fund's partnership interests are divided into Class
A and Class B interests, with the Class A interests having priority
with respect to the distribution of current income and disposition
proceeds. The net IRR for Class A interests was 10.8% and Class B
interests was 10.6%. The combined net IRR for the Class A and Class
B interests was 10.7%. (13) The aggregate change in drawn capital
for the three months ended March 31, 2014 was $2.2 billion. (14)
Totals are based on the conversion of Euro amounts to USD using the
March 31, 2014 spot rate of $1.38. (15) This includes Oaktree
Enhanced Income Fund, L.P., Oaktree Loan Fund 2x, L.P., Oaktree
Asia Special Situations Fund, L.P., CLOs, certain separate accounts
and a non-Oaktree fund. (16) This excludes one separate account
with management fee-generating AUM of $425 million as of March 31,
2014, which has been included as part of the Strategic Credit
strategy within the evergreen funds table.
Open-end Funds
ManagementFee-generatingAUM
as ofMar. 31, 2014
Twelve Months Ended
March 31, 2014
Since Inception through March 31, 2014
Strategy Inception Rates of Return (1)
Annualized Rates of Return (1)
Sharpe Ratio Oaktree
Relevant Benchmark
Oaktree
Relevant Benchmark
Oaktree Gross
Relevant Benchmark
Gross Net Gross
Net (in millions) U.S. High Yield Bonds Jan.
1986 $ 12,430 7.1 % 6.6 % 7.2 % 10.0 % 9.4 % 8.9 % 0.83 0.57 Global
High Yield Bonds Nov. 2010 6,784 8.8 8.2 8.0 10.5 9.9 9.1 1.45 1.35
European High Yield Bonds May 1999 1,155 11.6 11.0 9.6 8.5 8.0 6.5
0.67 0.39 U.S. Convertibles Apr. 1987 5,105 18.5 17.9 21.2 10.3 9.7
8.5 0.52 0.35 Non-U.S. Convertibles Oct. 1994 2,920 10.8 10.3 11.5
9.1 8.5 6.1 0.80 0.41 High Income Convertibles Aug. 1989 1,074 13.8
13.2 7.4 12.1 11.5 8.7 1.06 0.61 U.S. Senior Loans Sep. 2008 2,613
5.1 4.5 5.0 7.9 7.4 6.2 1.25 0.63 European Senior Loans May 2009
1,555 5.7 5.1 6.6 11.0 10.5 12.2 1.87 1.92 Emerging Markets
Equities Jul. 2011 1,219 0.0 (0.8 ) (1.4 ) 0.8 0.0 (2.7 )
0.04 (0.14 ) Total $ 34,855 (1) Returns
represent Oaktree’s time-weighted rates of return, including
reinvestment of income, net of commissions and transaction costs.
The returns for Relevant Benchmarks are presented on a gross basis.
Evergreen Funds
As of March 31, 2014 Twelve
Months Ended
March 31, 2014
Since Inception through
March 31, 2014
AUM
ManagementFee-generatingAUM
AccruedIncentives(Fund
Level)
Strategy Inception Rates of Return Annualized
Rates
of Return
Gross Net Gross
Net (in millions) Strategic Credit (1)
Jul. 2012
$
2,167
$
$1,188
$
N/A
14.2 % 12.5 % 17.3 % 15.6 % Value Opportunities Sep. 2007 2,045
1,954 15 18.2 12.6 14.6 9.5 Emerging Markets Opportunities (2) Sep.
2013 235 23 1 nm nm nm nm Emerging Markets Absolute Return Apr.
1997 280 256 1 2.9 0.8 15.1 10.3 3,421 17
Restructured funds (3) — 6 Total (1)
$
$3,421
$
23
(1) This strategy includes a separate account
with a closed-end fund structure with $599 million and $425 million
of AUM and management fee-generating AUM, respectively. The returns
presented are time-weighted rates of return. (2) Rates of return
are not considered meaningful (“nm”) because the since-inception
period as of March 31, 2014 was less than twelve months. (3)
Oaktree manages three restructured evergreen funds that are in
liquidation: Oaktree European Credit Opportunities Fund, L.P.,
Oaktree High Yield Plus Fund, L.P. and Oaktree Japan Opportunities
Fund, L.P. (Yen class). As of March 31, 2014, these funds had gross
and net IRRs since inception of (2.1)% and (4.6)%, 7.8% and 5.4%,
and (6.3)% and (7.3)%, respectively, and in the aggregate had AUM
of $160.5 million. Additionally, Oaktree High Yield Plus Fund, L.P.
had accrued incentives (fund level) of $5.9 million as of March 31,
2014.
GLOSSARY
Accrued incentives (fund level) represents the incentive
income that would be paid to us if the funds were liquidated at
their reported values as of the date of the financial statements.
Incentives created (fund level) refers to the gross amount of
potential incentives generated by the funds during the period. We
refer to the amount of incentive income recognized as revenue by us
as segment incentive income. Amounts recognized by us as incentive
income no longer are included in accrued incentives (fund level),
the term we use for remaining fund-level accruals.
Adjusted net income (“ANI”) is a measure of profitability
for our investment management segment. The components of revenues
(“segment revenues”) and expenses used in the determination of ANI
do not give effect to the consolidation of the funds that we
manage. Segment revenues include investment income (loss) that is
classified in other income (loss) in the GAAP-basis statements of
operations. In addition, ANI excludes the effect of
(a) non-cash equity-based compensation charges related to unit
grants made before our initial public offering, (b) income
taxes, (c) other income or expenses applicable to OCG or its
Intermediate Holding Companies and (d) the adjustment for the
OCGH non-controlling interest. Incentive income and incentive
income compensation expense are included in ANI when the underlying
fund distributions are known or knowable as of the respective
quarter end, which may be later than the time at which the same
revenue or expense is included in the GAAP-basis statements of
operations, for which the revenue standard is fixed or determinable
and the expense standard is probable and reasonably estimable. ANI
is calculated at the Operating Group level.
Adjusted net income–OCG, or adjusted net income per Class A
unit, a non-GAAP measure, is calculated to provide Class A
unitholders with a measure that shows the portion of ANI
attributable to their ownership. Adjusted net income-OCG represents
ANI including the effect of (a) the OCGH non-controlling
interest, (b) other income or expenses, such as income tax
expense, applicable to OCG or its Intermediate Holding Companies
and (c) any Operating Group income taxes attributable to OCG.
Two of our Intermediate Holding Companies incur federal and state
income taxes for their shares of Operating Group income. Generally,
those two corporate entities hold an interest in the Operating
Group’s management fee-generating assets and a small portion of its
incentive and investment income-generating assets. As a result,
historically our fee-related earnings generally have been subject
to corporate-level taxation, and most of our incentive income and
investment income generally has not been subject to corporate-level
taxation. Thus, the blended effective income tax rate has generally
tended to be higher to the extent that fee-related earnings
represented a larger proportion of our ANI. Myriad other factors
affect income tax expense and the effective income tax rate, and
there can be no assurance that this historical relationship will
continue going forward.
Assets under management (“AUM”) generally refers to the
assets we manage and equals the NAV of the assets we manage, the
fund-level leverage on which management fees are charged, the
undrawn capital that we are entitled to call from investors in our
funds pursuant to their capital commitments and the aggregate par
value of collateral assets and principal cash of our CLO
vehicles.
- Management fee-generating assets
under management (“management fee-generating AUM”) is a
forward-looking metric and reflects the AUM on which we will earn
management fees in the following quarter. Our closed-end funds
typically pay management fees based on committed capital or drawn
capital during the investment period, without regard to changes in
NAV, and during the liquidation period on the lesser of
(a) total funded capital and (b) the cost basis of assets
remaining in the fund. The annual management fee rate remains
unchanged from the investment period through the liquidation
period. Our open-end and evergreen funds pay management fees based
on their NAV, and our CLOs pay management fees based on the
aggregate par value of collateral assets and principal cash, as
defined in the applicable CLO indentures. As compared with AUM,
management fee-generating AUM generally excludes the following:
- Differences between AUM and either
committed capital or cost basis for most closed-end funds, other
than for closed-end funds that pay management fees based on NAV and
leverage, as applicable;
- Undrawn capital commitments to
closed-end funds that have not yet commenced their investment
periods;
- Undrawn capital commitments to funds
for which management fees are based on drawn capital or NAV;
- The investments we make in our funds as
general partner;
- Closed-end funds that are beyond the
term during which they pay management fees; and
- AUM in restructured and liquidating
evergreen funds for which management fees were waived.
- Incentive-creating assets under
management (“incentive-creating AUM”) refers to the AUM that
may eventually produce incentive income. It represents the NAV of
our funds for which we are entitled to receive an incentive
allocation, excluding investments made by us and our employees and
directors (which are not subject to an incentive allocation). All
funds for which we are entitled to receive an incentive allocation
are included in incentive-creating AUM, regardless of whether or
not they are currently generating incentives. Incentive-creating
AUM does not include undrawn capital commitments because they are
not part of the NAV.
Consolidated funds refers to the funds and CLO vehicles
that Oaktree consolidates through a majority voting interest or
otherwise, including those funds in which Oaktree as the general
partner is presumed to have control.
Distributable earnings is a non-GAAP performance measure
derived from our segment results that we use to measure our
earnings at the Operating Group level without the effects of the
consolidated funds for the purpose of, among other things,
assisting in the determination of equity distributions from the
Operating Group. However, the declaration, payment and
determination of the amount of equity distributions, if any, is at
the sole discretion of our board of directors, which may change our
distribution policy at any time.
Distributable earnings and distributable earnings revenues
differ from ANI in that they exclude segment investment income or
loss and include the receipt of investment income or loss from
distributions by our investments in funds and companies. In
addition, distributable earnings differs from ANI in that it is net
of Operating Group income taxes and excludes non-cash equity-based
compensation charges related to unit grants made after our initial
public offering in April 2012. In contrast to the GAAP measure of
net income or loss attributable to OCG, distributable earnings also
excludes the effect of (a) non-cash equity-based compensation
charges related to unit grants made before our initial public
offering, (b) income taxes and expenses that OCG or its
Intermediate Holding Companies bear directly and (c) the
adjustment for the OCGH non-controlling interest.
Distributable earnings–OCG, or distributable earnings per
Class A unit, a non-GAAP measure, is calculated to provide
Class A unitholders with a measure that shows the portion of
distributable earnings attributable to their ownership.
Distributable earnings-OCG represents distributable earnings
including the effect of (a) the OCGH non-controlling interest,
(b) expenses, such as current income tax expense, applicable
to OCG or its Intermediate Holding Companies and (c) amounts
payable under a tax receivable agreement. The income tax expense
included in distributable earnings-OCG represents the implied
current provision for income taxes calculated using an approach
similar to that which is used in calculating the income tax
provision for adjusted net income-OCG.
Economic net income (“ENI”) is a non-GAAP measure that we
use to evaluate the financial performance of our segment by
applying the “method 2,” instead of the “method 1,” approach to
accounting for incentive income. ANI follows method 1, except
incentive income is recognized when the underlying fund
distributions are known or knowable as of the respective quarter
end, as opposed to the fixed or determinable standard of method 1.
The method 2 approach followed by ENI recognizes incentive income
as if the funds were liquidated at their reported values as of the
date of the financial statements. ENI is computed by adjusting ANI
for the change in accrued incentives (fund level), net of
associated incentive income compensation expense, during the
period.
Economic net income revenues is a non-GAAP measure applying the
“method 2,” instead of the “method 1,” approach to accounting for
segment incentive income, and reflects the adjustments described
above and under the definition of ANI.
Economic net income–OCG, or economic net income per Class A
unit, a non-GAAP measure, is calculated to provide Class A
unitholders with a measure that shows the portion of ENI
attributable to their ownership. Economic net income-OCG represents
ENI, including the effect of (a) the OCGH non-controlling
interest, (b) other income or expenses, such as income tax
expense, applicable to OCG or its Intermediate Holding Companies
and (c) any Operating Group income taxes attributable to OCG.
The income tax expense included in economic net income-OCG
represents the implied provision for income taxes calculated using
an approach similar to that which is used in calculating the income
tax provision for adjusted net income-OCG.
Fee-related earnings (“FRE”) is a non-GAAP measure that
we use to monitor the baseline earnings of our business. FRE is
comprised of segment management fees (“fee-related earnings
revenues”) less segment operating expenses other than incentive
income compensation expense and, beginning with the fourth quarter
of 2013 (with retrospective application), non-cash equity-based
compensation charges related to unit grants made after our initial
public offering. FRE is considered baseline because it applies all
cash compensation and benefits other than incentive income
compensation expense, as well as all general and administrative
expenses, to management fees, even though a significant portion of
those expenses is attributable to incentive and investment income.
FRE is presented before income taxes.
Fee-related earnings–OCG, or fee-related earnings per Class A
unit, is a non-GAAP measure calculated to provide Class A
unitholders with a measure that shows the portion of FRE
attributable to their ownership. Fee-related earnings–OCG
represents FRE including the effect of (a) the OCGH
non-controlling interest, (b) other income or expenses, such
as income tax expense, applicable to OCG or its Intermediate
Holding Companies and (c) any Operating Group income taxes
attributable to OCG. Fee-related earnings–OCG income taxes is
calculated excluding any segment incentive income or investment
income (loss).
Intermediate Holding Companies collectively refers to the
subsidiaries wholly owned by us.
Net asset value (“NAV”) refers to the value of all the
assets of a fund (including cash and accrued interest and
dividends) less all liabilities of the fund (including accrued
expenses and any reserves established by us, in our discretion, for
contingent liabilities) without reduction for accrued incentives
(fund level) because they are reflected in the partners’ capital of
the fund.
Oaktree, OCG, we, us, our or the Company refers to
Oaktree Capital Group, LLC and, where applicable, its subsidiaries
and affiliates.
Oaktree Operating Group (“Operating Group”) refers
collectively to the entities that control the general partners and
investment advisors of our funds in which we have a minority
economic interest and indirect control.
Relevant Benchmark refers, with respect to:
- our U.S. High Yield Bond strategy, to
the Citigroup U.S. High Yield Cash-Pay Capped Index;
- our Global High Yield Bond strategy, to
an Oaktree custom global high yield index that represents 60% BofA
Merrill Lynch High Yield Master II Constrained Index and 40% BofA
Merrill Lynch Global Non-Financial High Yield European Issuers 3%
Constrained, ex-Russia Index – USD Hedged from inception through
December 31, 2012, and the BofA Merrill Lynch Non-Financial
Developed Markets High Yield Constrained Index – USD Hedged
thereafter;
- our European High Yield Bond strategy,
to the BofA Merrill Lynch Global Non-Financial High Yield European
Issuers excluding Russia 3% Constrained Index (USD Hedged);
- our U.S. Senior Loan strategy (with the
exception of the closed-end funds), to the Credit Suisse Leveraged
Loan Index;
- our European Senior Loan strategy, to
the Credit Suisse Western European Leveraged Loan Index (EUR
Hedged);
- our U.S. Convertible Securities
strategy, to an Oaktree custom convertible index that represents
the Credit Suisse Convertible Securities Index from inception
through December 31, 1999, the Goldman Sachs/Bloomberg
Convertible 100 Index from January 1, 2000 through
June 30, 2004 and the BofA Merrill Lynch All U.S. Convertibles
Index thereafter;
- our non-U.S. Convertible Securities
strategy, to the JACI Global ex-U.S. (Local) Index;
- our High Income Convertible Securities
strategy, to the Citigroup U.S. High Yield Market Index; and
- our Emerging Markets Equity strategy,
to the Morgan Stanley Capital International Emerging Markets Index
(Net).
Sharpe Ratio refers to a metric used to calculate
risk-adjusted return. The Sharpe Ratio is the ratio of excess
return to volatility, with excess return defined as the return
above that of a riskless asset (based on the three-month U.S.
Treasury bill, or for our European senior loan strategy, the Euro
Overnight Index Average) divided by the standard deviation of such
return. A higher Sharpe Ratio indicates a return that is higher
than would be expected for the level of risk compared to the
risk-free rate.
EXHIBIT
A
Use of Non-GAAP Financial Information
Oaktree discloses certain financial measures that are calculated
and presented on the basis of methodologies other than in
accordance with generally accepted accounting principles in the
United States (“non-GAAP”) in this earnings release.
Reconciliations of these non-GAAP financial measures to the most
directly comparable financial measures calculated and presented in
accordance with GAAP are presented below. Management makes
operating decisions and assesses the performance of Oaktree’s
business based on these non-GAAP financial measures. These non-GAAP
financial measures should be considered in addition to and not as a
substitute for, or superior to, financial measures presented in
accordance with GAAP.
Reconciliation of Segment Results to GAAP Net Income
The following table reconciles fee-related earnings and adjusted
net income to net income attributable to Oaktree Capital Group,
LLC.
Three Months Ended March 31,
2014 2013 (in
thousands) Fee-related earnings (1) $ 57,723 $ 64,866 Incentive
income 292,876 327,184 Incentive income compensation (137,828 )
(130,271 ) Investment income 46,480 82,050 Equity-based
compensation (2) (3,983 ) (652 ) Interest expense, net of interest
income (6,625 ) (7,407 ) Other income (expense), net (1,698 ) (20 )
Adjusted net income 246,945 335,750 Incentive income (3) (64,460 )
— Incentive income compensation (3) 46,334 — Equity-based
compensation (4) (5,199 ) (5,800 ) Income taxes (5) (7,986 )
(10,157 ) Non-Operating Group expenses (6) (282 ) (210 ) OCGH
non-controlling interest (6) (163,558 ) (262,017 ) Net income
attributable to Oaktree Capital Group, LLC $ 51,794 $ 57,566
(1) Fee-related earnings is a component of
adjusted net income and is comprised of segment management fees
less segment operating expenses other than incentive income
compensation expense and non-cash equity-based compensation charges
related to unit grants made after our initial public offering. (2)
This adjustment adds back the effect of equity-based compensation
charges related to unit grants made after our initial public
offering, which is excluded from fee-related earnings because it is
non-cash in nature and does not impact our ability to fund our
operations or make equity distributions. (3) This adjustment adds
back the effect of timing differences associated with the
recognition of incentive income and incentive income compensation
expense between adjusted net income and net income attributable to
OCG. There were no adjustments attributable to timing differences
for the three months ended March 31, 2013. (4) This adjustment adds
back the effect of equity-based compensation charges related to
unit grants made before our initial public offering, which is
excluded from adjusted net income and fee-related earnings because
it is a non-cash charge that does not affect our financial
position. (5) Because adjusted net income and fee-related earnings
are pre-tax measures, this adjustment adds back the effect of
income tax expense. (6) Because adjusted net income and fee-related
earnings are calculated at the Operating Group level, this
adjustment adds back the effect of items applicable to OCG, its
Intermediate Holding Companies or the OCGH non-controlling
interest.
The following table reconciles fee-related earnings-OCG and
adjusted net income-OCG to net income attributable to Oaktree
Capital Group, LLC.
Three Months Ended March 31,
2014 2013 (in
thousands) Fee-related earnings-OCG (1) $ 12,923 $ 10,538
Incentive income attributable to OCG 76,359 65,487 Incentive income
compensation attributable to OCG (35,935 ) (26,074 ) Investment
income attributable to OCG 12,118 16,424 Equity-based compensation
attributable to OCG (2) (1,039 ) (131 ) Interest expense, net of
interest income attributable to OCG (1,726 ) (1,482 ) Other income
(expense) attributable to OCG (443 ) (4 ) Non-fee-related earnings
income taxes attributable to OCG (3) (4,382 ) (6,031 ) Adjusted net
income-OCG (1) 57,875 58,727 Incentive income attributable to OCG
(4) (16,806 ) — Incentive income compensation attributable to OCG
(4) 12,080 — Equity-based compensation attributable to OCG (5)
(1,355 ) (1,161 ) Net income attributable to Oaktree Capital Group,
LLC $ 51,794 $ 57,566 (1) Fee-related
earnings-OCG and adjusted net income-OCG are calculated to evaluate
the portion of adjusted net income and fee-related earnings
attributable to Class A unitholders. These measures are net of
income taxes and other income or expenses applicable to OCG or its
Intermediate Holding Companies. (2) This adjustment adds back the
effect of equity-based compensation charges attributable to OCG
related to unit grants made after our initial public offering,
which is excluded from fee-related earnings-OCG because it is
non-cash in nature and does not impact our ability to fund our
operations or make equity distributions. (3) This adjustment adds
back income taxes associated with segment incentive income,
incentive income compensation expense or investment income (loss),
which are not included in the calculation of fee-related
earnings-OCG. (4) This adjustment adds back the effect of timing
differences associated with the recognition of incentive income and
incentive income compensation expense attributable to OCG between
adjusted net income-OCG and net income attributable to OCG. There
were no adjustments attributable to timing differences for the
three months ended March 31, 2013. (5) This adjustment adds back
the effect of equity-based compensation charges attributable to OCG
related to unit grants made before our initial public offering,
which is excluded from adjusted net income-OCG and fee-related
earnings-OCG because it is a non-cash charge that does not affect
our financial position.
The following table reconciles fee-related earnings revenues and
segment revenues to GAAP revenues.
Three Months Ended March 31,
2014 2013 (in
thousands) Fee-related earnings revenues $ 188,400 $ 184,214
Incentive income 292,876 327,184 Investment income 46,480
82,050 Segment revenues 527,756 593,448 Consolidated funds
(1) (482,334 ) (538,666 ) Investment income (2) (4,991 ) (12,243 )
GAAP revenues $ 40,431 $ 42,539 (1)
This adjustment reflects the elimination of amounts attributable to
the consolidated funds. (2) This adjustment reclassifies
consolidated investment income from revenues to other income
(loss).
The following table reconciles distributable earnings and
adjusted net income to net income attributable to Oaktree Capital
Group, LLC.
Three Months Ended March 31,
2014 2013 (in
thousands) Distributable earnings $ 233,141 $ 295,027
Investment income (1) 46,480 82,050 Receipts of investment income
from funds (2) (21,658 ) (34,026 ) Receipts of investment income
from companies (9,415 ) (9,013 ) Equity-based compensation (3)
(3,983 ) (652 ) Operating Group income taxes 2,380 2,364
Adjusted net income 246,945 335,750 Incentive income (4)
(64,460 ) — Incentive income compensation (4) 46,334 — Equity-based
compensation (5) (5,199 ) (5,800 ) Income taxes (6) (7,986 )
(10,157 ) Non-Operating Group expenses (7) (282 ) (210 ) OCGH
non-controlling interest (7) (163,558 ) (262,017 ) Net income
attributable to Oaktree Capital Group, LLC $ 51,794 $ 57,566
(1) This adjustment eliminates our segment
investment income, which with respect to investment in funds is
initially largely non-cash in nature and is thus not available to
fund our operations or make equity distributions. (2) This
adjustment characterizes a portion of the distributions received
from funds as receipts of investment income or loss. In general,
the income or loss component of a distribution from a fund is
calculated by multiplying the amount of the distribution by the
ratio of our investment’s undistributed income or loss to our
remaining investment balance. In addition, if the distribution is
made during the investment period, it is generally not reflected in
distributable earnings until after the investment period ends. (3)
This adjustment adds back the effect of equity-based compensation
charges related to unit grants made after our initial public
offering, which is excluded from distributable earnings because it
is non-cash in nature and does not impact our ability to fund our
operations or make equity distributions. (4) This adjustment adds
back the effect of timing differences associated with the
recognition of incentive income and incentive income compensation
expense between adjusted net income and net income attributable to
OCG. There were no adjustments attributable to timing differences
for the three months ended March 31, 2013. (5) This adjustment adds
back the effect of equity-based compensation charges related to
unit grants made before our initial public offering, which is
excluded from adjusted net income because it does not affect our
financial position and from distributable earnings because it is
non-cash in nature and does not impact our ability to fund
operations or make equity distributions. (6) Because adjusted net
income and distributable earnings are pre-tax measures, this
adjustment adds back the effect of income tax expense. (7) Because
adjusted net income and distributable earnings are calculated at
the Operating Group level, this adjustment adds back the effect of
items applicable to OCG, its Intermediate Holding Companies or the
OCGH non-controlling interest.
The following table reconciles distributable earnings-OCG and
adjusted net income-OCG to net income attributable to Oaktree
Capital Group, LLC.
Three Months Ended March 31,
2014 2013 (in
thousands) Distributable earnings-OCG (1) $ 55,812 $ 54,076
Investment income attributable to OCG 12,118 16,424 Receipts of
investment income from funds attributable to OCG (5,647 ) (6,810 )
Receipts of investment income from companies attributable to OCG
(2,455 ) (1,804 ) Equity-based compensation attributable to OCG (2)
(1,039 ) (131 ) Distributable earnings-OCG income taxes 739 2,920
Tax receivable agreement 3,953 1,845 Income taxes of Intermediate
Holding Companies (5,606 ) (7,793 ) Adjusted net income-OCG (1)
57,875 58,727 Incentive income attributable to OCG (3) (16,806 ) —
Incentive income compensation attributable to OCG (3) 12,080 —
Equity-based compensation attributable to OCG (4) (1,355 ) (1,161 )
Net income attributable to Oaktree Capital Group, LLC $ 51,794
$ 57,566 (1) Distributable earnings-OCG
and adjusted net income-OCG are calculated to evaluate the portion
of adjusted net income and distributable earnings attributable to
Class A unitholders. These measures are net of income taxes and
expenses applicable to OCG or its Intermediate Holding Companies. A
reconciliation of distributable earnings to distributable
earnings-OCG is presented below.
Three Months Ended March 31, 2014
2013
(in thousands, except perunit
data)
Distributable earnings $ 233,141 $ 295,027 Distributable earnings
attributable to OCGH non-controlling interest (172,355 ) (235,976 )
Non-Operating Group expenses (282 ) (210 ) Distributable
earnings-OCG income taxes (739 ) (2,920 ) Tax receivable agreement
(3,953 ) (1,845 ) Distributable earnings-OCG $ 55,812 $
54,076 Distributable earnings-OCG per Class A unit $ 1.41
$ 1.79 (2) This adjustment adds back
the effect of equity-based compensation charges attributable to OCG
related to unit grants made after our initial public offering,
which is excluded from distributable earnings because it is
non-cash in nature and does not impact our ability to fund our
operations or make equity distributions. (3) This adjustment adds
back the effect of timing differences associated with the
recognition of incentive income and incentive income compensation
expense attributable to OCG between adjusted net income-OCG and net
income attributable to OCG. There were no adjustments attributable
to timing differences for the three months ended March 31, 2013.
(4) This adjustment adds back the effect of equity-based
compensation charges attributable to OCG related to unit grants
made before our initial public offering, which is excluded from
adjusted net income because it does not affect our financial
position and from distributable earnings because it is non-cash in
nature and does not impact our ability to fund our operations or
make equity distributions.
The following table reconciles distributable earnings revenues
and segment revenues to GAAP revenues.
Three Months Ended March 31,
2014 2013 (in
thousands) Distributable earnings revenues $ 512,349 $ 554,437
Investment income 46,480 82,050 Receipts of investment income from
funds (21,658 ) (34,026 ) Receipts of investment income from
companies (9,415 ) (9,013 ) Segment revenues 527,756 593,448
Consolidated funds (1) (482,334 ) (538,666 ) Investment income (2)
(4,991 ) (12,243 ) GAAP revenues $ 40,431 $ 42,539
(1) This adjustment reflects the elimination of
amounts attributable to the consolidated funds. (2) This adjustment
reclassifies consolidated investment income from revenues to other
income (loss).
The following table reconciles economic net income and adjusted
net income to net income attributable to Oaktree Capital Group,
LLC.
Three Months Ended March 31,
2014 2013 (in
thousands) Economic net income (1) $ 227,242 $ 400,574 Change
in accrued incentives (fund level), net of associated incentive
income compensation (2) 19,703 (64,824 ) Adjusted net income
246,945 335,750 Incentive income (3) (64,460 ) — Incentive income
compensation (3) 46,334 — Equity-based compensation (4) (5,199 )
(5,800 ) Income taxes (5) (7,986 ) (10,157 ) Non-Operating Group
expenses (6) (282 ) (210 ) OCGH non-controlling interest (6)
(163,558 ) (262,017 ) Net income attributable to Oaktree Capital
Group, LLC $ 51,794 $ 57,566 (1) Please
see Glossary for the definition of economic net income. (2) The
change in accrued incentives (fund level), net of associated
incentive income compensation expense, represents the difference
between (a) our recognition of net incentive income and (b) the
incentive income generated by the funds during the period that
would be due to us if the funds were liquidated at their reported
values as of that date, net of associated incentive income
compensation expense. (3) This adjustment adds back the effect of
timing differences associated with the recognition of incentive
income and incentive income compensation expense between adjusted
net income and net income attributable to OCG. There were no
adjustments attributable to timing differences for the three months
ended March 31, 2013. (4) This adjustment adds back the effect of
equity-based compensation charges attributable to OCG related to
unit grants made before our initial public offering, which is
excluded from adjusted net income and economic net income because
it is a non-cash charge that does not affect our financial
position. (5) Because adjusted net income and economic net income
are pre-tax measures, this adjustment adds back the effect of
income tax expense. (6) Because adjusted net income and economic
net income are calculated at the Operating Group level, this
adjustment adds back the effect of items applicable to OCG, its
Intermediate Holding Companies or the OCGH non-controlling
interest.
The following table reconciles economic net income-OCG and
adjusted net income-OCG to net income attributable to Oaktree
Capital Group, LLC.
Three Months Ended March 31,
2014 2013 (in
thousands) Economic net income-OCG (1) $ 53,222 $ 62,579 Change
in accrued incentives (fund level), net of associated incentive
income compensation attributable to OCG 5,137 (12,974 ) Economic
net income-OCG income taxes 5,743 17,388 Income taxes-OCG (6,227 )
(8,266 ) Adjusted net income-OCG (1) 57,875 58,727 Incentive income
attributable to OCG (2) (16,806 ) — Incentive income compensation
attributable to OCG (2) 12,080 — Equity-based compensation
attributable to OCG (1,355 ) (1,161 ) Net income attributable to
Oaktree Capital Group, LLC $ 51,794 $ 57,566
(1) Economic net income-OCG and adjusted net income-OCG are
calculated to evaluate the portion of adjusted net income and
economic net income attributable to Class A unitholders. These
measures are net of income taxes and other income or expenses
applicable to OCG or its Intermediate Holding Companies. A
reconciliation of economic net income to economic net income-OCG is
presented below.
Three Months Ended
March 31, 2014 2013
(in thousands, exceptper unit
data)
Economic net income $ 227,242 $ 400,574 Economic net income
attributable to OCGH non-controlling interest (167,995 ) (320,397 )
Non-Operating Group expenses (282 ) (210 ) Economic net income-OCG
income taxes (5,743 ) (17,388 ) Economic net income-OCG $ 53,222
$ 62,579 Economic net income-OCG per Class A unit $
1.34 $ 2.07 (2) This adjustment adds
back the effect of timing differences associated with the
recognition of incentive income and incentive income compensation
expense attributable to OCG between adjusted net income-OCG and net
income attributable to OCG. There were no adjustments attributable
to timing differences for the three months ended March 31, 2013.
The following table reconciles economic net income revenues and
segment revenues to GAAP revenues.
Three Months Ended March 31,
2014 2013 (in
thousands) Economic net income revenues $ 587,254 $ 725,964
Incentives created (352,374 ) (459,700 ) Incentive income 292,876
327,184 Segment revenues 527,756 593,448 Consolidated
funds (1) (482,334 ) (538,666 ) Investment income (2) (4,991 )
(12,243 ) GAAP revenues $ 40,431 $ 42,539 (1)
This adjustment reflects the elimination of amounts attributable to
the consolidated funds. (2) This adjustment reclassifies
consolidated investment income from revenues to other income
(loss).
The following tables reconcile segment information to
consolidated financial data:
As of or for the Three Months Ended
March 31, 2014 Segment
Adjustments Consolidated
(in thousands) Management fees (1) $ 188,400 $ (147,969 ) $
40,431 Incentive income (1) 292,876 (292,876 ) — Investment income
(1) 46,480 (41,489 ) 4,991 Total expenses (2) (272,488 ) 14,169
(258,319 ) Interest expense, net (3) (6,625 ) (17,375 ) (24,000 )
Other income, net (1,698 ) — (1,698 ) Other income of consolidated
funds (4) — 1,786,765 1,786,765 Income taxes — (7,986 ) (7,986 )
Net income attributable to non-controlling redeemable interests in
consolidated funds — (1,324,832 ) (1,324,832 ) Net income
attributable to OCGH non-controlling interest in consolidated
subsidiaries — (163,558 ) (163,558 ) Adjusted net income/net
income attributable to Oaktree Capital Group, LLC $ 246,945
$ (195,151 ) $ 51,794 Corporate investments (5) $ 1,393,692
$ (1,214,960 ) $ 178,732 Total assets (6) $ 2,934,327
$ 45,494,881 $ 48,429,208 (1)
The adjustment represents the elimination of amounts attributable
to the consolidated funds. (2) The expense adjustment consists of
(a) equity-based compensation charges of $5,199 related to unit
grants made before our initial public offering, (b) consolidated
fund expenses of $26,684, (c) expenses incurred by the Intermediate
Holding Companies of $282 and (d) the effect of timing differences
in the recognition of incentive income compensation expense between
adjusted net income and net income attributable to OCG of $46,334.
(3) The interest expense adjustment represents the inclusion of
interest expense attributable to non-controlling interests of the
consolidated funds and the exclusion of segment interest income.
(4) The adjustment to other income of consolidated funds primarily
represents the inclusion of interest, dividend and other investment
income attributable to non-controlling interests of the
consolidated funds. (5) The adjustment to corporate investments is
to remove from segment assets our investments in the consolidated
funds, including investments in our CLOs, that are treated as
equity- or cost-method investments for segment reporting purposes.
Of the $1.4 billion, equity-method investments accounted for $1.2
billion. (6) The total assets adjustment represents the inclusion
of investments and other assets of the consolidated funds, net of
segment assets eliminated in consolidation, which are primarily
corporate investments in funds and incentive income receivable.
As of or for the Three Months Ended
March 31, 2013 Segment
Adjustments Consolidated
(in thousands) Management fees (1) $ 184,214 $ (141,675 ) $
42,539 Incentive income (1) 327,184 (327,184 ) — Investment income
(1) 82,050 (69,807 ) 12,243 Total expenses (2) (250,271 ) (25,234 )
(275,505 ) Interest expense, net (3) (7,407 ) (4,174 ) (11,581 )
Other income, net (20 ) — (20 ) Other income of consolidated funds
(4) — 2,626,029 2,626,029 Income taxes — (10,157 ) (10,157 ) Net
income attributable to non-controlling redeemable interests in
consolidated funds — (2,063,965 ) (2,063,965 ) Net income
attributable to OCGH non-controlling interest in consolidated
subsidiaries — (262,017 ) (262,017 ) Adjusted net income/net
income attributable to Oaktree Capital Group, LLC $ 335,750
$ (278,184 ) $ 57,566 Corporate investments (5) $ 1,117,848
$ (1,022,196 ) $ 95,652 Total assets (6) $ 2,500,367
$ 42,416,711 $ 44,917,078 (1)
The adjustment represents the elimination of amounts attributable
to the consolidated funds. (2) The expense adjustment consists of
(a) equity-based compensation charges of $5,800 related to unit
grants made before our initial public offering, (b) consolidated
fund expenses of $19,224 and (c) expenses incurred by the
Intermediate Holding Companies of $210. (3) The interest expense
adjustment represents the inclusion of interest expense
attributable to non-controlling interests of the consolidated funds
and the exclusion of segment interest income. (4) The adjustment to
other income of consolidated funds primarily represents the
inclusion of interest, dividend and other investment income
attributable to non-controlling interests of the consolidated
funds. (5) The adjustment to corporate investments is to remove
from segment assets our investments in the consolidated funds that
are treated as equity-method investments for segment reporting
purposes. (6) The total assets adjustment represents the inclusion
of investments and other assets of the consolidated funds, net of
segment assets eliminated in consolidation, which are primarily
corporate investments in funds and incentive income receivable.
Investor Relations:Oaktree Capital Group, LLCAndrea D.
Williams213-830-6483investorrelations@oaktreecapital.comorPress
Relations:Sard Verbinnen & CoJohn
Christiansen415-618-8750jchristiansen@sardverb.comorCarissa
Felger312-895-4701cfelger@sardverb.com
Oaktree Capital (NYSE:OAK)
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Oaktree Capital (NYSE:OAK)
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から 7 2023 まで 7 2024