- Adjusted net income per Class A
unit was $0.61 and $3.24 for the fourth quarter and full-year 2014,
respectively, down from $1.62 and $6.38 for the corresponding
prior-year periods, on lower incentive and investment income.
- Distributable earnings per Class
A unit were $0.65 and $3.43 for the fourth quarter and full-year
2014, respectively, down from $1.33 and $5.82 for the corresponding
prior-year periods, primarily on lower incentive income.
- GAAP net income attributable to
Oaktree Capital Group, LLC was $24.4 million and $126.3 million for
the fourth quarter and full-year 2014, respectively, as compared
with $64.9 million and $222.0 million for the corresponding
prior-year periods.
- Gross capital raised was $2.3
billion and $14.7 billion for the fourth quarter and full-year
2014, respectively, with newer investment strategies contributing
$1.0 billion and $7.6 billion of the respective totals. The annual
total of $14.7 billion represented a record for a year without a
new Distressed Debt fund and drove a 9% year-over-year gain in
assets under management, to $90.8 billion.
- Oaktree declares a distribution
of $0.56 per Class A unit with respect to the fourth quarter
of 2014, bringing aggregate distributions relating to full-year
2014 to $2.71.
Oaktree Capital Group, LLC (NYSE: OAK) today reported its
unaudited financial results for the fourth quarter and year ended
December 31, 2014.
Howard Marks, Co-Chairman, said, “The investing environment in
2014 defied easy labeling, with a big spread in performance among
the major equity and fixed income indices, as well as our
strategies. Against this backdrop, we continued to find some
attractive opportunities to deploy capital, particularly in real
estate and Europe. As we begin 2015 with our largest-ever fund
marketing pipeline, we believe we are well positioned to take
advantage of growing investment opportunities.”
Jay Wintrob, who joined Oaktree as CEO in November 2014, said,
“Oaktree is an outstanding firm with tremendous talent and a superb
reputation. I look forward to making Oaktree even better by driving
our focus on achieving excellence in investing, increasing
efficiency and profitability, and pursuing appropriate growth
opportunities.”
Adjusted net income (“ANI”) declined to $98.4 million in the
fourth quarter of 2014 from $268.4 million in the fourth quarter of
2013. For full-year 2014, ANI decreased to $575.1 million from $1.1
billion in 2013. The declines primarily reflected lower incentive
income attributable to the prior year's comparatively large
incentive distributions by OCM Opportunities Fund VIIb, L.P. (“Opps
VIIb”), and reduced investment income.
Distributable earnings declined to $121.7 million in the fourth
quarter of 2014 from $221.3 million in the fourth quarter of 2013.
For full-year 2014, distributable earnings decreased to $608.1
million from $984.3 million in 2013. The declines primarily
reflected lower incentive income following the comparatively large
incentive distributions by Opps VIIb in 2013.
As previously announced, assets under management (“AUM”) and
management fee-generating assets under management (“management
fee-generating AUM”) as of December 31, 2014 were $90.8 billion and
$78.1 billion, respectively, in each case up 9% from the respective
December 31, 2013 balances, on capital inflows, the Highstar
Capital team (“Highstar”) acquisition and, in the case of
management fee-generating AUM, deployment of capital by applicable
funds. AUM and management fee-generating AUM declined by $2.4
billion and $1.0 billion, respectively, from September 30, 2014,
primarily as a result of distributions by closed-end funds.
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 of the funds’ holdings. ENI declined to $18.7 million in the
fourth quarter of 2014 from $303.2 million in the fourth quarter of
2013, reflecting negative incentives created (fund level) in the
current-year period. Per Class A unit, ENI was a loss of $0.02 and
income of $1.46 for the fourth quarter and full-year 2014,
respectively. Excluding the cumulative impact of a true-up in the
full-year income tax rate, ENI per Class A unit would have been
income of $0.08 for the fourth quarter of 2014.
GAAP-basis results for the fourth quarter and full-year 2014
included net income attributable to Oaktree Capital Group, LLC of
$24.4 million and $126.3 million, respectively, as compared to
$64.9 million and $222.0 million for the comparable prior-year
periods.
Closed-end funds that Oaktree is currently marketing include
Oaktree Mezzanine Fund IV, L.P. (“Mezz IV”), Oaktree Principal Fund
VI, L.P. (“PF VI”), Oaktree Real Estate Opportunities Fund VII,
L.P., Oaktree Power Opportunities Fund IV, L.P. and Oaktree
Opportunities Funds X and Xb, 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 As of or for the Year Ended December 31,
Ended December 31, 2014
2013 2014 2013 (in
thousands, except per unit data or as otherwise indicated)
Segment Results: Segment revenues $ 264,812 $ 528,620 $
1,373,556 $ 2,038,750 Adjusted net income 98,375 268,373 575,130
1,080,707 Distributable earnings revenues 280,507 482,213 1,386,878
1,944,656 Distributable earnings 121,650 221,255 608,139 984,266
Fee-related earnings revenues 192,464 197,620 764,492 749,901
Fee-related earnings 68,369 73,333 253,133 260,115 Economic net
income revenues 133,163 701,526 1,046,524 2,177,391 Economic net
income 18,722 303,200 339,827 1,033,739
Per Class A
unit: Adjusted net income $ 0.61 $ 1.62 $ 3.24 $ 6.38
Distributable earnings 0.65 1.33 3.43 5.82 Fee-related earnings
0.41 0.40 1.44 1.43 Economic net income (loss) (0.02 ) 1.92 1.46
6.07
Operating Metrics: Assets under management (in
millions): Assets under management $ 90,831 $ 83,605 $ 90,831 $
83,605 Management fee-generating assets under management 78,079
71,950 78,079 71,950 Incentive-creating assets under management
33,861 32,379 33,861 32,379 Uncalled capital commitments 10,333
13,169 10,333 13,169 Accrued incentives (fund level): Incentives
created (fund level) (78,645 ) 415,436 164,370 1,168,836 Incentives
created (fund level), net of associated incentive income
compensation expense (50,731 ) 152,121 24,228 549,545 Accrued
incentives (fund level) 1,949,407 2,276,439 1,949,407 2,276,439
Accrued incentives (fund level), net of associated incentive income
compensation expense 999,923 1,235,226 999,923 1,235,226
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 a basis other than generally accepted
accounting principles in the United States (“non-GAAP”).
Reconciliations of those non-GAAP financial measures to the most
directly comparable GAAP financial measures are presented at
Exhibit A. All non-GAAP measures and all interim results presented
in this release are unaudited. GAAP-basis results, including
adjusted net income, for the year ended December 31, 2014 are
subject to the completion of Oaktree's annual audit.
Operating Metrics
Assets Under Management
AUM was $90.8 billion as of December 31, 2014, $93.2 billion as
of September 30, 2014 and $83.6 billion as of December 31, 2013.
The $2.4 billion decrease since September 30, 2014 reflected $2.6
billion of distributions to closed-end fund investors, a $0.5
billion negative net impact from foreign currency translation and
$0.4 billion of market-value declines, partially offset by $1.3
billion in aggregate capital inflows and fee-generating leverage
for closed-end and evergreen funds. Capital inflows and
fee-generating leverage for closed-end and evergreen funds included
$0.5 billion for collateralized loan obligation vehicles (“CLOs”),
$0.4 billion for Oaktree Enhanced Income Fund II, L.P. (“EIF II”)
and $0.2 billion for Mezz IV. The $2.6 billion of distributions to
closed-end fund investors included $1.3 billion by Distressed Debt
funds.
The $7.2 billion increase in AUM since December 31, 2013
reflected $6.5 billion of capital inflows and fee-generating
leverage for closed-end and evergreen funds, $4.7 billion of net
inflows to open-end funds, $2.6 billion of market-value gains and
$2.3 billion from the Highstar acquisition, partially offset by
$7.0 billion of distributions to closed-end fund investors and a
$1.4 billion negative net impact from foreign currency translation.
The $6.5 billion of capital inflows and fee-generating leverage for
closed-end and evergreen funds included $1.9 billion for CLOs, $1.5
billion for EIF II, $1.0 billion for Real Estate Debt, $0.7 billion
for Strategic Credit, $0.5 billion for Mezz IV, $0.3 billion for PF
VI and $0.3 billion for Value Equities. Of the $7.0 billion of
distributions to closed-end fund investors, $3.2 billion and $2.0
billion were attributable to Distressed Debt and Principal
Investing funds, respectively. Net inflows to open-end funds
included gross capital raised of $3.8 billion for High Yield Bonds,
$3.1 billion for Emerging Markets Equities, $1.2 billion for Senior
Loans and $1.0 billion for Convertible Securities.
Management Fee-generating Assets Under
Management
Management fee-generating AUM was $78.1 billion as of December
31, 2014, $79.1 billion as of September 30, 2014 and $72.0 billion
as of December 31, 2013. The $1.0 billion decrease since September
30, 2014 reflected declines of $1.4 billion attributable to
closed-end funds in liquidation, $0.6 billion from market-value
changes in funds for which management fees are based on NAV and a
$0.4 billion negative net impact from foreign currency translation,
partially offset by $0.9 billion in fee-generating leverage and
drawdowns or contributions by closed-end and evergreen funds for
which management fees are based on drawn capital or NAV and $0.5
billion in new capital commitments for CLOs.
The $6.1 billion increase in management fee-generating AUM since
December 31, 2013 reflected $4.7 billion from net inflows to
open-end funds, $2.9 billion from fee-generating leverage and
drawdowns or contributions by closed-end and evergreen funds for
which management fees are based on drawn capital or NAV, $1.9
billion from the Highstar acquisition and $1.7 billion in new
capital commitments, partially offset by $3.3 billion attributable
to closed-end funds in liquidation, a $1.2 billion negative net
impact from foreign currency translation and $0.5 billion of
distributions by funds that pay fees based on NAV.
Incentive-creating Assets Under
Management
Incentive-creating assets under management (“incentive-creating
AUM”) were $33.9 billion as of December 31, 2014, $34.7 billion as
of September 30, 2014 and $32.4 billion as of December 31, 2013.
The $0.8 billion decrease since September 30, 2014 reflected the
net effect of $1.3 billion in drawdowns by closed-end funds, $2.0
billion in distributions by closed-end funds, $0.1 billion in
market-value gains and a $0.2 billion negative net impact from
foreign currency translation. The $1.5 billion increase since
December 31, 2013 reflected the net effect of $5.8 billion in
drawdowns by closed-end funds, $2.3 billion in market-value gains,
$1.0 billion from the Highstar acquisition, $6.8 billion in
distributions by closed-end funds and a $0.7 billion negative net
impact from foreign currency translation.
Of the $33.9 billion in incentive-creating AUM as of December
31, 2014, $24.3 billion, or 71.7%, was generating incentives at the
fund level.
Accrued Incentives (Fund Level) and
Incentives Created (Fund Level)
Accrued incentives (fund level) were $1.9 billion as of December
31, 2014, $2.1 billion as of September 30, 2014 and $2.3 billion as
of December 31, 2013. The fourth quarter of 2014 reflected $78.6
million of negative incentives created (fund level) and $53.0
million of segment incentive income recognized. The $78.6 million
of negative incentives created (fund level) was the net result of
$119.7 million from funds that generated positive incentives and
$198.3 million from funds that created negative incentives, with a
significant portion of the latter being in excess of our typical
20% share due to catch-up allocations for certain closed-end funds.
Generally speaking, while in the catch-up layer, approximately 80%
of any increase or decrease, respectively, in the fund’s NAV
results in a commensurate amount of positive or negative incentives
created (fund level).
Full-year 2014 reflected $164.4 million of incentives created
(fund level) and $491.4 million of segment incentive income
recognized. The $164.4 million of incentives created (fund level)
was the net result of $494.9 million from funds that generated
positive incentives and $330.5 million from funds that created
negative incentives, with a significant portion of the latter being
in the catch-up layer for certain closed-end funds.
Net of incentive income compensation expense, accrued incentives
(fund level) were $1.0 billion as of December 31, 2014, $1.1
billion as of September 30, 2014 and $1.2 billion as of December
31, 2013. As of December 31, 2014 and 2013, the portion of net
accrued incentives (fund level) represented by funds that were
currently paying incentives was $420.7 million and $494.0 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 possibly tax-related distributions.
Uncalled Capital Commitments
Uncalled capital commitments were $10.3 billion as of December
31, 2014, $12.4 billion as of September 30, 2014, and $13.2 billion
as of December 31, 2013. Capital drawn by closed-end funds during
the fourth quarter and full-year 2014 aggregated $2.6 billion and
$8.8 billion, respectively, as compared with $1.5 billion and $6.1
billion for the corresponding prior-year periods.
Segment Results
Revenues
Segment revenues declined $263.8 million, or 49.9%, to $264.8
million in the fourth quarter of 2014, from $528.6 million in the
fourth quarter of 2013, reflecting decreases of $5.1 million in
management fees, $189.5 million in incentive income and $69.2
million in investment income.
For full-year 2014, segment revenues declined $665.2 million, or
32.6%, to $1.4 billion from $2.0 billion in 2013, reflecting an
increase of $14.6 million in management fees and decreases of
$538.8 million in incentive income and $141.0 million in investment
income.
Management Fees
Management fees decreased $5.1 million, or 2.6%, to $192.5
million in the fourth quarter of 2014, from $197.6 million in the
fourth quarter of 2013, as a result of the prior-year period’s
extra $12.5 million in deferred fees from Oaktree Mezzanine Fund
III, L.P. (“Mezz III”) that were contingent on the fund achieving
certain cash-flow levels and $5.3 million in retroactive management
fees upon a closing by Oaktree Real Estate Opportunities Fund VI,
L.P. (“ROF VI”). Excluding the extra management fees from Mezz III
and ROF VI, quarterly management fees increased $12.7 million, or
7.1%, from the prior-year period, reflecting the start of Oaktree
Opportunities Fund IX, L.P.’s (“Opps IX”) investment period on
January 1, 2014, net inflows and market-value gains in open-end
funds, and the Highstar acquisition, less the impact of closed-end
fund distributions.
For full-year 2014, management fees grew $14.6 million, or 1.9%,
to $764.5 million from $749.9 million in 2013, despite an aggregate
$114.3 million decline primarily attributable to closed-end funds
in liquidation and the inclusion in the prior-year period of $15.6
million in deferred fees from Mezz III and $9.5 million in
retroactive management fees from ROF VI. Excluding the prior year's
extra management fees from Mezz III and ROF VI, annual management
fees increased $39.7 million, or 5.5%, from the prior-year period,
generally for the same reasons as described above for the fourth
quarter.
Incentive Income
Incentive income decreased $189.5 million, or 78.1%, to $53.0
million in the fourth quarter of 2014, from $242.5 million in the
fourth quarter of 2013. The decline was primarily attributable to a
smaller incentive distribution by Opps VIIb, which accounted for
$27.2 million and $97.3 million in the fourth quarters of 2014 and
2013, respectively.
For full-year 2014, incentive income decreased $538.8 million,
or 52.3%, to $491.4 million, from $1.0 billion in 2013. The decline
was primarily attributable to lower incentive distributions,
partially offset by higher tax-related incentive distributions with
respect to taxable income generated by closed-end funds. Full-year
2014 included incentive distributions of $201.8 million from Opps
VIIb and $219.7 million of tax-related incentive distributions.
Full-year 2013 included incentive distributions of $662.3 million
from Opps VIIb and $122.7 million of tax-related incentive
distributions.
Investment Income
Investment income decreased to $19.3 million in the fourth
quarter of 2014, from $88.5 million in the fourth quarter of 2013,
primarily as a result of market-value changes in Oaktree funds amid
the generally weaker global financial markets in the current-year
period. The average invested balance in Oaktree funds increased
33.2% between the fourth quarters of 2013 and 2014. Investments in
companies accounted for $9.4 million of the overall decline,
principally reflecting a sizable market-value gain in the fourth
quarter of 2013 on our minority equity investment in China Cinda
Asset Management Co., Ltd. (“Cinda”). Our one-fifth ownership stake
in DoubleLine Capital LP and its affiliates (collectively,
“DoubleLine”) accounted for investment income of $16.2 million and
$11.9 million in the fourth quarters of 2014 and 2013,
respectively, of which performance fees accounted for $4.8 million
and $0.4 million, respectively.
For full-year 2014, investment income decreased $141.0 million,
or 54.5%, to $117.7 million from $258.7 million in 2013, primarily
as a result of market-value changes in Oaktree funds. Investments
in companies accounted for $15.3 million of the overall decline,
principally reflecting a sizable market-value gain in 2013 on our
investment in Cinda, as compared to a market-value loss in 2014.
Our one-fifth ownership stake in DoubleLine accounted for
investment income of $46.9 million and $31.4 million in 2014 and
2013, respectively, of which performance fees accounted for $10.1
million and $3.4 million, respectively.
Expenses
Compensation and Benefits
Compensation and benefits increased $5.3 million, or 6.2%, to
$91.3 million for the fourth quarter of 2014, from $86.0 million
for the fourth quarter of 2013. For full-year 2014, compensation
and benefits increased $16.2 million, or 4.4%, to $381.5 million
from $365.3 million in 2013. Both increases primarily reflected
growth in headcount, and secondarily the Highstar acquisition. The
fourth quarters of 2014 and 2013 included an expense of $0.7
million and $2.1 million, respectively, and full-years 2014 and
2013 included a $0.2 million benefit and a $6.5 million expense,
respectively, associated with our phantom equity awards, stemming
from each period's equity distributions and change in the Class A
unit trading price. Accruals towards the year-end bonus pool over
the first three quarters proved to be higher than necessary in both
2013 and 2014, resulting in a lower-than-representative bonus
charge in each year’s fourth quarter. In the fourth quarter of
2014, bonus expense was approximately $10 million lower than the
average of the year’s first three quarters.
Equity-based Compensation
Equity-based compensation increased to $5.4 million for the
fourth quarter of 2014 from $1.2 million for the fourth quarter of
2013. For full-year 2014, equity-based compensation increased to
$19.7 million from $3.8 million in 2013. Both increases primarily
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 decreased $103.7 million,
or 81.1%, to $24.1 million for the fourth quarter of 2014, from
$127.8 million for the fourth quarter of 2013, primarily reflecting
the 78.1% decline in incentive income. For full-year 2014,
incentive income compensation expense decreased $204.3 million, or
46.8%, to $231.9 million from $436.2 million in 2013. The
percentage decrease for the annual period was slightly smaller than
the corresponding decline of 52.3% in incentive income, primarily
due to the 2011 acquisition of a small portion of certain
investment professionals’ carried interest in Opps VIIb, which
caused incentive income compensation expense in 2013 to be $50.1
million lower than it otherwise would have been. There was no such
benefit in 2014.
General and Administrative
General and administrative expense decreased $5.3 million, or
14.5%, to $31.2 million for the fourth quarter of 2014, from $36.5
million for the fourth quarter of 2013. Excluding the impact of
foreign currency-related items, general and administrative expense
decreased $4.7 million, or 12.8%, to $32.0 million from $36.7
million, primarily reflecting lower legal and other professional
fees, as well as the fact that the fourth quarter of 2013 included
$1.8 million in placement fees for ROF VI, as compared with a
negligible amount of such expenses in the fourth quarter of 2014.
For full-year 2014, general and administrative expense increased
$5.2 million, or 4.4%, to $122.6 million from $117.4 million in
2013. Excluding the impact of foreign currency-related items,
general and administrative expense increased $10.5 million, or
8.9%, to $128.8 million from $118.3 million, primarily reflecting
higher legal and other professional fees, as well as costs
associated with corporate growth and the Highstar acquisition,
partially offset by lower placement fees.
Other Income (Expense), Net
The fourth quarter of 2014 included a $2.1 million loss related
to the sale of the portfolio of properties received as part of a
2010 arbitration award related to a former senior executive and
portfolio manager of the Company’s real estate group who left the
Company in 2005 and a $1.5 million loss associated with certain
non-operating activities. Full-year 2014 included those two items,
as well as the write-off of $3.0 million in unamortized debt
issuance costs stemming from the refinancing of our five-year
corporate credit facility and $1.5 million of income related to
proceeds received as part of the 2010 arbitration award.
Adjusted Net Income
ANI decreased $170.0 million, or 63.3%, to $98.4 million for the
fourth quarter of 2014, from $268.4 million for the fourth quarter
of 2013, reflecting decreases of $85.8 million in incentive income,
net of incentive income compensation expense (“net incentive
income”), $69.2 million in investment income and $4.9 million in
fee-related earnings. The portion of ANI attributable to our
Class A units was $26.6 million and $61.9 million for the
fourth quarters of 2014 and 2013, respectively. Per Class A unit,
adjusted net income-OCG was $0.61 and $1.62 for the fourth quarters
of 2014 and 2013, respectively.
For full-year 2014, ANI decreased $505.6 million, or 46.8%, to
$575.1 million from $1.1 billion in 2013, reflecting decreases of
$334.4 million in net incentive income, $141.0 million in
investment income and $7.0 million in fee-related earnings. The
portion of ANI attributable to our Class A units was $137.8
million and $223.1 million for 2014 and 2013, respectively. Per
Class A unit, adjusted net income-OCG was $3.24 and $6.38 for 2014
and 2013, respectively.
The effective tax rate applied to ANI for the fourth quarters of
2014 and 2013 was 4% and 9%, respectively, resulting from full-year
effective rates of 12% and 9%, respectively.
Distributable Earnings
Distributable earnings declined $99.6 million, or 45.0%, to
$121.7 million for the fourth quarter of 2014, from $221.3 million
for the fourth quarter of 2013, reflecting decreases of $85.8
million in net incentive income, $7.0 million in investment income
proceeds and $4.9 million in fee-related earnings. For the fourth
quarter of 2014, investment income proceeds totaled $35.0 million,
including $14.7 million from fund distributions and $19.3 million
from DoubleLine, as compared with total investment income proceeds
in the prior-year quarter of $42.1 million, of which $26.6 million
and $15.4 million was attributable to fund distributions and
DoubleLine, respectively.
For full-year 2014, distributable earnings declined $376.2
million, or 38.2%, to $608.1 million from $984.3 million in 2013,
reflecting decreases of $334.4 million in net incentive income,
$33.6 million in investment income proceeds and $7.0 million in
fee-related earnings. For full-year 2014, investment income
proceeds totaled $131.0 million, including $81.4 million from fund
distributions and $46.7 million from DoubleLine, as compared with
total investment income proceeds in 2013 of $164.6 million, of
which $128.9 million and $35.7 million was attributable to fund
distributions and DoubleLine, respectively.
The portion of distributable earnings attributable to our
Class A units was $0.65 and $1.33 per unit for the fourth
quarters of 2014 and 2013, respectively, reflecting distributable
earnings per Operating Group unit of $0.80 and $1.46, 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 declined $4.9 million, or 6.7%, to $68.4
million for the fourth quarter of 2014, from $73.3 million for the
fourth quarter of 2013. The decrease reflected $5.1 million of
lower management fees, an increase of $5.3 million in compensation
and benefits, and a decrease of $5.3 million in general and
administrative expense. The portion of fee-related earnings
attributable to our Class A units was $0.41 and $0.40 per unit
for the fourth quarters of 2014 and 2013, respectively.
For full-year 2014, fee-related earnings declined $7.0 million,
or 2.7%, to $253.1 million from $260.1 million in 2013. The
decrease reflected increases of $16.2 million in compensation and
benefits and $5.2 million in general and administrative expense,
partially offset by $14.6 million of higher management fees. The
portion of fee-related earnings attributable to our Class A
units was $1.44 and $1.43 per unit for 2014 and 2013,
respectively.
The effective tax rate applicable to fee-related earnings for
the fourth quarters of 2014 and 2013 was 6% and 17%, respectively,
resulting from full-year effective rates of 11% and 15%,
respectively.
GAAP-basis Results
Net income attributable to Oaktree Capital Group, LLC was $24.4
million for the fourth quarter of 2014, as compared to $64.9
million for the fourth quarter of 2013. For full-year 2014, net
income attributable to Oaktree Capital Group, LLC was $126.3
million, as compared to $222.0 million for full-year 2013.
Capital and Liquidity
As of December 31, 2014, Oaktree had $1.1 billion of cash and
investments in U.S. Treasury securities and $850 million of
outstanding debt. Oaktree had then, and currently has, no
borrowings outstanding against its $500 million revolving credit
facility. As of December 31, 2014, Oaktree’s investments in funds
and companies had a carrying value of $1.5 billion, with its 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 $1.0
billion as of that date.
Distribution
Oaktree Capital Group, LLC has declared a distribution
attributable to the fourth quarter of 2014 of $0.56 per
Class A unit. This distribution will be paid on February 25,
2015 to Class A unitholders of record at the close of business
on February 19, 2015.
Conference Call
Oaktree will host a conference call to discuss its fourth
quarter and full-year 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 (800) 568-3942 (U.S. callers) or
+1 (203) 369-3812 (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 $90.8 billion in
assets under management as of December 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 925 employees and
offices in 17 cities worldwide. For additional information, please
visit Oaktree’s website at www.oaktreecapital.com.
Investor Relations Website
Investors and others should note that Oaktree uses the Investors
section of its corporate website to announce material information
to investors and the marketplace. While not all of the information
that Oaktree posts on its corporate website is of a material
nature, some information could be deemed to be material.
Accordingly, Oaktree encourages investors, the media, and others
interested in Oaktree to review the information that it shares on
its corporate website at the Unitholders – Investor Relations
section of the Oaktree website, http://ir.oaktreecapital.com/.
Information contained on, or available through, our website is not
incorporated by reference into this document.
Forward-Looking Statements
This release contains forward-looking statements within the
meaning of Section 27A of the U.S. Securities Act of 1933, as
amended, and Section 21E of the U.S. Securities Exchange Act
of 1934, as amended, which reflect the current views of Oaktree
Capital Group, LLC (“OCG”), with respect to, among other things,
our 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 our beliefs, assumptions and expectations
of our future performance, taking into account all information
currently available to us. Such forward-looking statements are
subject to risks and uncertainties and assumptions relating to our
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; the amount and timing of distributions on our Class
A units; 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, 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
December 31, Year Ended December 31, 2014
2013 2014
2013 (in thousands, except per unit data) Revenues:
Management fees $ 45,821 $ 43,183 $ 192,055 $ 192,605 Incentive
income 1,839 — 1,839 2,317 Total
revenues 47,660 43,183 193,894 194,922
Expenses: Compensation and benefits (96,003 ) (86,058 ) (388,512 )
(365,696 ) Equity-based compensation (11,169 ) (7,564 ) (41,395 )
(28,441 ) Incentive income compensation (50,393 ) (174,105 )
(221,194 ) (482,551 )
Total compensation and benefits
expense
(157,565 ) (267,727 ) (651,101 ) (876,688 ) General and
administrative (20,638 ) (34,177 ) (99,835 ) (114,404 )
Depreciation and amortization (1,865 ) (1,853 ) (8,003 ) (7,119 )
Consolidated fund expenses (41,304 ) (28,102 ) (188,538 ) (108,851
) Total expenses (221,372 ) (331,859 ) (947,477 ) (1,107,062 )
Other income (loss): Interest expense (45,679 ) (18,229 ) (129,942
) (61,160 ) Interest and dividend income 395,270 430,438 1,902,576
1,806,361 Net realized gain on consolidated funds’ investments
534,988 707,550 2,131,584 3,503,998 Net change in unrealized
appreciation (depreciation) on consolidated funds’ investments
(824,892 ) 835,974 (993,260 ) 1,843,469 Investment income 18,546
33,427 33,695 56,027 Other income (expense), net 2,012 (3 )
3,018 409 Total other income 80,245 1,989,157
2,947,671 7,149,104 Income (loss) before
income taxes (93,467 ) 1,700,481 2,194,088 6,236,964 Income taxes
552 (7,358 ) (18,536 ) (26,232 ) Net income (loss) (92,915 )
1,693,123 2,175,552 6,210,732 Less: Net (income) loss attributable
to non-controlling interests in consolidated funds 193,762
(1,420,612 ) (1,649,890 ) (5,163,939 ) Net income attributable to
non-controlling interests in consolidated subsidiaries (76,457 )
(207,604 ) (399,379 ) (824,795 ) Net income attributable to Oaktree
Capital Group, LLC $ 24,390 $ 64,907 $ 126,283
$ 221,998 Distributions declared per Class A unit $ 0.62
$ 0.74 $ 3.15 $ 4.71 Net income per
unit (basic and diluted): Net income per Class A unit $ 0.56
$ 1.69 $ 2.97 $ 6.35 Weighted average number
of Class A units outstanding 43,616 38,343 42,582
34,979
Segment Financial Data
As of or for the Three Months
As of or for the Year Ended December
31, Ended December 31, 2014
2013 2014 2013 (in
thousands, except per unit data or as otherwise indicated)
Segment Statements of Operations Data: (1) Revenues:
Management fees $ 192,464 $ 197,620 $ 764,492 $ 749,901 Incentive
income 53,004 242,530 491,402 1,030,195 Investment income 19,344
88,470 117,662 258,654 Total revenues
264,812 528,620 1,373,556 2,038,750
Expenses: Compensation and benefits (91,310 ) (85,962 ) (381,544 )
(365,306 ) Equity-based compensation (5,426 ) (1,182 ) (19,705 )
(3,828 ) Incentive income compensation (24,082 ) (127,771 )
(231,871 ) (436,217 ) General and administrative (31,186 ) (36,472
) (122,566 ) (117,361 ) Depreciation and amortization (1,599 )
(1,853 ) (7,249 ) (7,119 ) Total expenses (153,603 ) (253,240 )
(762,935 ) (929,831 ) Adjusted net income before interest and other
income (expense) 111,209 275,380 610,621 1,108,919
Interest expense, net of interest income
(2)
(9,212 ) (7,004 ) (30,190 ) (28,621 ) Other income (expense), net
(3,622 ) (3 ) (5,301 ) 409 Adjusted net income $ 98,375
$ 268,373 $ 575,130 $ 1,080,707
Adjusted net income-OCG $ 26,587 $ 61,928 $ 137,762 $ 223,113
Adjusted net income per Class A unit
0.61 1.62 3.24 6.38 Distributable earnings 121,650 221,255 608,139
984,266 Distributable earnings-OCG 28,306 50,914 145,973 203,595
Distributable earnings per Class A unit 0.65 1.33 3.43 5.82
Fee-related earnings 68,369 73,333 253,133 260,115 Fee-related
earnings-OCG 17,825 15,166 61,318 50,122 Fee-related earnings per
Class A unit 0.41 0.40 1.44 1.43 Economic net income 18,722 303,200
339,827 1,033,739 Economic net income (loss)-OCG (970 ) 73,513
62,059 212,283 Economic net income (loss) per Class A unit (0.02 )
1.92 1.46 6.07 Weighted average number of Operating Group
units outstanding 152,853 151,061 152,660 150,971 Weighted average
number of Class A units outstanding 43,616 38,343 42,582 34,979
Operating Metrics: Assets under management (in
millions): Assets under management $ 90,831 $ 83,605 $ 90,831 $
83,605 Management fee-generating assets under management 78,079
71,950 78,079 71,950 Incentive-creating assets under management
33,861 32,379 33,861 32,379
Uncalled capital commitments (3)
10,333 13,169 10,333 13,169 Accrued incentives (fund level): (4)
Incentives created (fund level) (78,645 ) 415,436 164,370 1,168,836
Incentives created (fund level), net of associated incentive income
compensation expense (50,731 ) 152,121 24,228 549,545 Accrued
incentives (fund level) 1,949,407 2,276,439 1,949,407 2,276,439
Accrued incentives (fund level), net of associated incentive income
compensation expense 999,923 1,235,226 999,923 1,235,226
(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.
Segment revenues include investment income (loss) that is
classified in other income (loss) in the GAAP-basis statements of
operations. Segment revenues and expenses also reflect Oaktree's
proportionate economic interest in Highstar, whereby amounts
received for contractually reimbursable costs are included with
segment expenses, as compared to being recorded as other income
under GAAP. 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)
acquisition-related items including amortization of intangibles and
changes in the contingent consideration liability, (c) differences
arising from equity value units (“EVUs”) that are classified as
liability awards under GAAP, but classified as equity awards for
segment reporting purposes, (d) income taxes, (e) other income or
expenses applicable to OCG or its Intermediate Holding Companies
and (f) 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 $0.9 million and $0.8
million for the three months ended December 31, 2014 and 2013,
respectively, and $3.6 million and $3.2 million for the years ended
December 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 are no longer 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 December 31,
September 30, December
31, 2014 2014 2013 (in
millions) Assets Under Management: Closed-end funds $
48,203 $ 49,869 $ 46,685 Open-end funds 37,452 37,970 32,868
Evergreen funds 5,176 5,385 4,052 Total $
90,831 $ 93,224 $ 83,605
Three
Months Ended
December 31,
Year Ended December 31, 2014 2013 2014
2013 (in millions) Change in Assets Under
Management: Beginning balance $ 93,224 $ 79,818 $ 83,605 $
77,051 Closed-end funds:
New capital commitments/other (1)
876 1,834 4,172 5,496 Acquisition (Highstar) — — 2,349 —
Distributions for a realization
event/other (2)
(2,615 ) (2,240 ) (6,956 ) (12,029 ) Uncalled capital commitments
at end of investment period (169 ) — (315 ) — Foreign currency
translation (284 ) 111 (868 ) 269
Change in market value (3)
171 1,535 2,279 5,837 Change in applicable leverage 355 88 857
1,412 Open-end funds: Contributions 1,287 2,021 9,123 5,276
Redemptions (1,232 ) (992 ) (4,415 ) (4,292 ) Foreign currency
translation (186 ) 52 (522 ) 108
Change in market value (3)
(387 ) 1,118 398 2,684 Evergreen funds: Contributions or new
capital commitments 87 231 1,447 1,739 Redemptions or distributions
(89 ) (92 ) (218 ) (272 ) Distributions from restructured funds (20
) (1 ) (55 ) (49 ) Foreign currency translation 5 4 6 4
Change in market value (3)
(192 ) 118 (56 ) 371 Ending balance $ 90,831 $
83,605 $ 90,831 $ 83,605
(1) These amounts represent new capital commitments and the
aggregate par value of collateral assets and principal cash
associated with our CLOs. (2) These amounts represent distributions
for a realization event, tax-related distributions, reductions in
the par value of collateral assets and principal cash resulting
from the repayment of debt by our CLOs and recallable distributions
at the end of the investment period. (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 CLOs resulting from other activities.
Management Fee-generating AUM As of
December 31, September 30,
December 31, 2014 2014
2013 Management Fee-generating Assets Under
Management: (in millions) Closed-end funds: Senior Loans
$ 5,255 $ 4,340 $ 2,425 Other 32,017 33,455 33,997 Open-end funds
37,383 37,925 32,830 Evergreen funds 3,424 3,426
2,698 Total $ 78,079 $ 79,146 $ 71,950
Three Months EndedDecember
31,
Year Ended December 31,
2014 2013 2014 2013 Change in
Management Fee-generating Assets Under Management: (in
millions) Beginning balance $ 79,146 $ 66,947 $ 71,950 $
66,784 Closed-end funds:
New capital commitments to funds that pay
fees based on committed capital/other (1)
533 4,562 1,667 6,597 Acquisition (Highstar) — — 1,882 — Capital
drawn by funds that pay fees based on drawn capital or NAV 277 142
959 1,835
Change attributable to funds in
liquidation (2)
(1,387 ) (1,527 ) (3,303 ) (8,222 ) Uncalled capital commitments at
end of investment period for funds that pay fees based on committed
capital — (664 ) (169 ) (664 )
Distributions by funds that pay fees based
on NAV/other (3)
(35 ) (106 ) (511 ) (325 ) Foreign currency translation (201 ) 63
(662 ) 196
Change in market value (4)
(52 ) 84 29 (1 ) Change in applicable leverage 342 35 958 1,256
Open-end funds: Contributions 1,261 2,022 9,095 5,276 Redemptions
(1,232 ) (992 ) (4,418 ) (4,292 ) Foreign currency translation (185
) 52 (521 ) 108 Change in market value (386 ) 1,116 397 2,682
Evergreen funds: Contributions or capital drawn by funds that pay
fees based on drawn capital or NAV 252 192 998 660 Redemptions or
distributions (83 ) (92 ) (214 ) (272 ) Change in market value (171
) 116 (58 ) 332 Ending balance $ 78,079 $
71,950 $ 78,079 $ 71,950
(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 CLOs.
(2) These amounts represent the change for funds that pay fees
based on the lesser of funded capital or cost basis during the
liquidation period and recallable distributions at the end of the
investment period. For most closed-end funds, management fees are
charged during the liquidation period on the lesser of (a) total
funded capital or (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 CLOs.
(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 CLOs resulting from other activities.
As of December 31,
September 30, December
31, 2014 2014 2013
Reconciliation of Assets Under Management to Management
Fee-generating Assets Under Management: (in millions)
Assets under management $ 90,831 $ 93,224 $ 83,605
Difference between assets under management
and committed capital or cost basis for applicable closed-end funds
(1)
(5,521 ) (6,622 ) (6,311 ) Undrawn capital commitments to funds
that have not yet commenced their investment periods (320 ) (757 )
(693 ) Undrawn capital commitments to funds for which management
fees are based on drawn capital or NAV (4,528 ) (4,003 ) (2,625 )
Oaktree’s general partner investments in
management fee-generating funds
(1,231 ) (1,483 ) (1,371 ) Closed-end funds that are no longer
paying management fees and co-investments that pay no management
fees (924 ) (949 ) (461 ) Funds for which management fees were
permanently waived (228 ) (264 ) (194 ) Management fee-generating
assets under management $ 78,079 $ 79,146 $ 71,950
(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 December 31,
September 30, December
31, Weighted Average Annual Management Fee Rates:
2014 2014 2013 Closed-end funds: Senior
Loans 0.50 % 0.50 % 0.50 % Other 1.54 1.54 1.55 Open-end funds 0.47
0.47 0.47 Evergreen funds 1.53 1.55 1.63 Overall 0.96 0.97 1.02
Incentive-creating AUM
As of December 31,
September 30, December
31, 2014 2014 2013 Incentive-creating
Assets Under Management: (in millions) Closed-end funds
$ 31,743 $ 32,465 $ 30,362 Evergreen funds 2,118 2,250 2,017
Total $ 33,861 $ 34,715 $ 32,379
Accrued Incentives (Fund Level) and
Incentives Created (Fund Level)
As of or for the Three Months
As of or for the Year Ended December
31, Ended December 31, 2014
2013 2014 2013 Accrued
Incentives (Fund Level): (in thousands) Beginning
balance $ 2,081,056 $ 2,103,533 $ 2,276,439 $
2,137,798 Incentives created (fund level): Closed-end funds
(69,115 ) 399,189 163,194 1,114,088 Evergreen funds (9,530 ) 16,247
1,176 54,748 Total incentives created (fund
level) (78,645 ) 415,436 164,370 1,168,836
Less: segment incentive income recognized by us (53,004 ) (242,530
) (491,402 ) (1,030,195 ) Ending balance $ 1,949,407 $
2,276,439 $ 1,949,407 $ 2,276,439 Accrued
incentives (fund level), net of associated incentive income
compensation expense $ 999,923 $ 1,235,226 $ 999,923
$ 1,235,226
Uncalled Capital Commitments
Uncalled capital commitments were $10.3 billion as of December
31, 2014, as compared with $12.4 billion as of September 30, 2014
and $13.2 billion as of December 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
December 31, Year Ended December 31, 2014
2013 2014
2013 (in thousands, except per unit data) Revenues:
Management fees $ 192,464 $ 197,620 $ 764,492 $ 749,901 Incentive
income 53,004 242,530 491,402 1,030,195 Investment income 19,344
88,470 117,662 258,654 Total revenues
264,812 528,620 1,373,556 2,038,750
Expenses: Compensation and benefits (91,310 ) (85,962 ) (381,544 )
(365,306 ) Equity-based compensation (5,426 ) (1,182 ) (19,705 )
(3,828 ) Incentive income compensation (24,082 ) (127,771 )
(231,871 ) (436,217 ) General and administrative (31,186 ) (36,472
) (122,566 ) (117,361 ) Depreciation and amortization (1,599 )
(1,853 ) (7,249 ) (7,119 ) Total expenses (153,603 ) (253,240 )
(762,935 ) (929,831 ) Adjusted net income before interest and other
income (expense) 111,209 275,380 610,621 1,108,919 Interest
expense, net of interest income (9,212 ) (7,004 ) (30,190 ) (28,621
) Other income (expense), net (3,622 ) (3 ) (5,301 ) 409
Adjusted net income 98,375 268,373 575,130 1,080,707 Adjusted net
income attributable to OCGH non-controlling interest (70,305 )
(200,252 ) (417,259 ) (834,966 ) Non-Operating Group expenses (496
) (248 ) (1,645 ) (1,195 ) Adjusted net income-OCG before income
taxes 27,574 67,873 156,226 244,546 Income taxes-OCG (987 ) (5,945
) (18,464 ) (21,433 ) Adjusted net income-OCG $ 26,587 $
61,928 $ 137,762 $ 223,113 Adjusted net income
per Class A unit $ 0.61 $ 1.62 $ 3.24 $ 6.38
Weighted average number of Class A units outstanding 43,616
38,343 42,582 34,979
Investment Income
Three Months Ended
December 31, Year Ended December 31,
2014 2013 2014
2013 (in thousands) Income (loss) from
investments in funds: Oaktree funds: Corporate Debt $ 78 $ 10,154 $
15,767 $ 19,928 Convertible Securities (84 ) 43 143 163 Distressed
Debt (18,313 ) 21,255 (894 ) 91,793 Control Investing 3,936 16,801
26,369 48,003 Real Estate 11,620 (486 ) 32,347 14,199 Listed
Equities 2,086 13,245 8,466 36,615 Non-Oaktree funds 278 (1,609 )
2,479 (369 ) Income from investments in companies 19,743
29,067 32,985 48,322 Total investment income $
19,344 $ 88,470 $ 117,662 $ 258,654
Distributable Earnings and Distribution Calculation
Distributable earnings and the calculation of distributions are
set forth below:
Three Months Ended
December 31, Year Ended December 31, 2014
2013 2014
2013 Distributable Earnings: (in thousands, except
per unit data) Revenues: Management fees $ 192,464 $ 197,620 $
764,492 $ 749,901 Incentive income 53,004 242,530 491,402 1,030,195
Receipts of investment income from funds
(1)
14,749 26,615 81,438 128,896 Receipts of investment income from
companies 20,290 15,448 49,546 35,664
Total distributable earnings revenues 280,507 482,213
1,386,878 1,944,656 Expenses: Compensation and
benefits (91,310 ) (85,962 ) (381,544 ) (365,306 ) Incentive income
compensation (24,082 ) (127,771 ) (231,871 ) (436,217 ) General and
administrative (31,186 ) (36,472 ) (122,566 ) (117,361 )
Depreciation and amortization (1,599 ) (1,853 ) (7,249 ) (7,119 )
Total expenses (148,177 ) (252,058 ) (743,230 ) (926,003 ) Other
income (expense): Interest expense, net of interest income (9,212 )
(7,004 ) (30,190 ) (28,621 ) Operating Group income tax (expense)
benefit 2,154 (1,893 ) (18 ) (6,175 ) Other income (expense), net
(3,622 ) (3 ) (5,301 ) 409 Distributable earnings $ 121,650
$ 221,255 $ 608,139 $ 984,266
Distribution Calculation: Operating Group distribution with
respect to the period $ 103,940 $ 178,247 $ 507,186 $ 791,314
Distribution per Operating Group unit $ 0.68 $ 1.18 $ 3.32 $ 5.24
Adjustments per Class A unit: Distributable earnings-OCG income tax
expense (0.02 ) (0.09 ) (0.21 ) (0.26 ) Tax receivable agreement
(0.09 ) (0.08 ) (0.36 ) (0.28 ) Non-Operating Group expenses (0.01
) (0.01 ) (0.04 ) (0.04 )
Distribution per Class A unit (2)
$ 0.56 $ 1.00 $ 2.71 $ 4.66
(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 December 31,
2014, the distribution was announced on February 9, 2015 and is
payable on February 25, 2015.
Units Outstanding
Three Months Ended
December 31, Year Ended December 31,
2014 2013 2014
2013 (in thousands) Weighted Average
Units: OCGH 109,237 112,718 110,078 115,992 Class A 43,616
38,343 42,582 34,979 Total 152,853 151,061
152,660 150,971
Units Eligible for Fiscal Period
Distribution: OCGH 109,089 112,584 Class A 43,764 38,473
Total 152,853 151,057
Fee-related Earnings
Fee-related earnings and fee-related earnings-OCG, as well as
per unit data, are set forth below:
Three Months Ended
December 31, Year Ended December 31, 2014
2013 2014
2013 (in thousands, except per unit data) Management
fees: Closed-end funds $ 133,538 $ 144,897 $ 538,463 $ 559,426
Open-end funds 44,745 38,088 173,018 146,557 Evergreen funds 14,181
14,635 53,011 43,918 Total management
fees 192,464 197,620 764,492 749,901
Expenses: Compensation and benefits (91,310 ) (85,962 ) (381,544 )
(365,306 ) General and administrative (31,186 ) (36,472 ) (122,566
) (117,361 ) Depreciation and amortization (1,599 ) (1,853 ) (7,249
) (7,119 ) Total expenses (124,095 ) (124,287 ) (511,359 ) (489,786
) Fee-related earnings 68,369 73,333 253,133 260,115 Fee-related
earnings attributable to OCGH non-controlling interest (48,860 )
(54,720 ) (182,414 ) (199,758 ) Non-Operating Group expenses (496 )
(247 ) (1,647 ) (1,196 ) Fee-related earnings-OCG before income
taxes 19,013 18,366 69,072 59,161 Fee-related earnings-OCG income
taxes (1,188 ) (3,200 ) (7,754 ) (9,039 ) Fee-related earnings-OCG
$ 17,825 $ 15,166 $ 61,318 $ 50,122
Fee-related earnings per Class A unit $ 0.41 $ 0.40 $
1.44 $ 1.43 Weighted average number of Class A units
outstanding 43,616 38,343 42,582 34,979
Segment Statements of Financial
Condition
As of December 31, 2014
2013 (in thousands)
Assets: Cash and cash-equivalents $ 405,290 $ 390,721 U.S.
Treasury securities 655,529 676,600 Corporate investments 1,515,443
1,197,173 Deferred tax assets 357,364 278,885 Receivables and other
assets 334,173 273,748 Total assets $ 3,267,799 $ 2,817,127
Liabilities and Capital: Liabilities: Accounts payable and
accrued expenses $ 390,196 $ 304,427 Due to affiliates 309,214
242,986 Debt obligations 850,000 579,464 Total liabilities
1,549,410 1,126,877 Capital: OCGH non-controlling interest in
consolidated subsidiaries 1,161,407 1,220,647 Unitholders’ capital
attributable to Oaktree Capital Group, LLC 556,982 469,603 Total
capital 1,718,389 1,690,250 Total liabilities and capital $
3,267,799 $ 2,817,127
Corporate Investments
As of December 31, 2014
2013 Investments in funds:
(in
thousands) Oaktree funds: Corporate Debt $ 426,677 $ 125,560
Convertible Securities 18,698 1,554 Distressed Debt 433,715 438,144
Control Investing 249,840 246,058 Real Estate 134,631 112,981
Listed Equities 149,901 129,697 Non-Oaktree funds 49,441 51,580
Investments in companies 52,540 91,599 Total corporate investments
$ 1,515,443 $ 1,197,173
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 December 31, 2014 Investment
Period
TotalCommittedCapital
DrawnCapital (1)
Fund
NetIncomeSinceInception
Distri-butionsSinceInception
NetAssetValue
Manage-
ment Fee-gener-
ating AUM
OaktreeSegmentIncentiveIncomeRecog-nized
AccruedIncentives(Fund
Level)(2)
UnreturnedDrawn
CapitalPlus AccruedPreferred Return
(3)
IRR SinceInception
(4)
Multiple of
DrawnCapital (5)
Start Date End Date
Gross
Net (in millions) Distressed Debt
Oaktree Opportunities Fund IX, L.P. Jan. 2014 Jan. 2017 $ 5,066 $
4,053 $ 135 $ 2 $ 4,186 $ 4,966 $ — $ — $ 4,349 8.1 % 3.7 % 1.1x
Oaktree Opportunities Fund VIIIb, L.P. Aug. 2011 Aug. 2014 2,692
2,692 708 273 3,127 2,547 17 117 2,980 13.4 8.5 1.3 Special Account
B Nov. 2009 Nov. 2012 1,031 1,087 588 854 821 816 15 19 611 17.0
14.3 1.6 Oaktree Opportunities Fund VIII, L.P. Oct. 2009 Oct. 2012
4,507 4,507 2,384 3,506 3,385 2,433 106 359 2,431 15.7 11.1 1.6
Special Account A Nov. 2008 Oct. 2012 253 253 304 462 95 75 41 19 —
29.9 24.4 2.2 OCM Opportunities Fund VIIb, L.P. May 2008 May 2011
10,940 9,844 9,159 17,027 1,976 1,510 1,394 386 — 22.8 17.4 2.0 OCM
Opportunities Fund VII, L.P. Mar. 2007 Mar. 2010 3,598 3,598 1,477
4,381 694 888 81 — 729 10.6 8.0 1.5 OCM Opportunities Fund VI, L.P.
Jul. 2005 Jul. 2008 1,773 1,773 1,304 2,818 259 380 123 132 — 12.1
8.9 1.8 OCM Opportunities Fund V, L.P. Jun. 2004 Jun. 2007 1,179
1,179 975 2,032 122 128 166 24 — 18.6 14.3 1.9
Legacy funds (6)
Various Various 9,543 9,543 8,182 17,695 30 — 1,113 6 — 24.2
19.3 1.9 22.6 % 17.1 %
Emerging Markets Opportunities
Oaktree Emerging Market Opportunities Fund, L.P. (7) (8) Sep. 2013
Sep. 2016 $ 384 $ 162 $ (29 ) $ — $ 133 $ 126 $ — $ — $ 169 nm nm
0.8x
Special Account F (7)
Jan. 2014 Jan. 2017 253 106 (20 ) — 86 85 — — 111 nm nm 0.8
Global Principal Investments Oaktree Principal Fund VI, L.P.
(7)
— (9)
— $ 592 $ 24 $ (1
)
$ — $ 23 $ 23 $ — $ — $ 24 nm nm 1.1x
Oaktree Principal Fund V, L.P. (10)
Feb. 2009 Feb. 2015 2,827 2,586 858 994 2,450 1,839 18 148 2,252
15.0 % 8.6 % 1.4 Special Account C Dec. 2008 Feb. 2014 505 455 313
268 500 395 13 49 334 18.3 13.5 1.8 OCM Principal Opportunities
Fund IV, L.P. Oct. 2006 Oct. 2011 3,328 3,328 1,756 3,416 1,668
1,246 22 10 1,660 10.5 8.0 1.7 OCM Principal Opportunities Fund
III, L.P. Nov. 2003 Nov. 2008 1,400 1,400 901 2,115 186 — 139 35 —
14.1 9.7 1.8
Legacy funds (6)
Various Various 2,301 2,301 1,840 4,137 4 — 236 1 — 14.5
11.6 1.8 13.5 % 10.0 %
Asia Principal Investments OCM
Asia Principal Opportunities Fund, L.P. May 2006 May 2011 $ 578 $
503 $ 47 $ 177 $ 373 $ 332 $ — $ — $ 601 5.3 % 1.6 % 1.3x
European Principal Investments (11) Oaktree European
Principal Fund III, L.P. Nov. 2011 Nov. 2016 € 3,164 € 1,974 € 608
€ 224 € 2,358 € 3,133 € — € 118 € 2,066 20.7 % 12.1 % 1.4x OCM
European Principal Opportunities Fund II, L.P. Dec. 2007 Dec. 2012
€ 1,759 € 1,685 € 727 € 1,300 € 1,112 € 1,042 € 19 € 59 € 1,032
12.6 8.2 1.6 OCM European Principal Opportunities Fund, L.P. Mar.
2006 Mar. 2009 $ 495 $ 473 $ 430 $ 822 $ 81 $ 91 $ 30 $ 52 $ — 11.5
8.6 2.0 14.0 % 9.2 %
Power Opportunities
Oaktree Power Opportunities Fund III, L.P. Apr. 2010 Apr. 2015 $
1,062 $ 574 $ 127 $ 134 $ 567 $ 1,036 $ — $ 22 $ 538 18.1 % 8.5 %
1.4x OCM/GFI Power Opportunities Fund II, L.P. Nov. 2004 Nov. 2009
1,021 541 1,451 1,921 71 39 95 5 — 76.1 58.8 3.9 OCM/GFI Power
Opportunities Fund, L.P. Nov. 1999 Nov. 2004 449 383 251 634 — — 23
— — 20.1 13.1 1.8 34.8 % 26.7 %
As of December 31, 2014 Investment Period
TotalCommittedCapital
DrawnCapital (1)
Fund
NetIncomeSinceInception
Distri-butionsSinceInception
NetAssetValue
Manage-ment
Fee-gener-ating AUM
OaktreeSegmentIncentiveIncomeRecog-nized
AccruedIncentives(Fund
Level)(2)
UnreturnedDrawn
CapitalPlus AccruedPreferredReturn
(3)
IRR Since Inception (4)
Multipleof
DrawnCapital (5)
Start Date End Date
Gross
Net (in millions) Infrastructure
Investing Highstar Capital IV, L.P. (12). Nov. 2010 Nov. 2016 $
2,346 $ 1,756 $ 221 $ 268 $ 1,709 $ 1,882 $ — $ — $ 1,335 19.1 %
8.9 % 1.3x
Real Estate Opportunities Oaktree Real
Estate Opportunities Fund VI, L.P. Aug. 2012 Aug. 2016 $ 2,677 $
2,035 $ 491 $ 40 $ 2,486 $ 2,610 $ — $ 95 $ 2,199 24.9 % 15.8 %
1.3x Oaktree Real Estate Opportunities Fund V, L.P. Mar. 2011 Mar.
2015 1,283 1,283 746 701 1,328 1,209 12 130 913 19.9 14.5 1.7
Special Account D Nov. 2009 Nov. 2012 256 263 161 224 200 112 2 14
138 16.1 13.8 1.6 Oaktree Real Estate Opportunities Fund IV, L.P.
Dec. 2007 Dec. 2011 450 450 391 430 411 277 13 61 220 17.7 12.2 2.0
OCM Real Estate Opportunities Fund III, L.P. Sep. 2002 Sep. 2005
707 707 652 1,283 76 — 114 15 — 15.6 11.7 2.0 Legacy funds (6).
Various Various 1,634 1,610 1,399 3,009 — — 112 — — 15.2
12.0 1.9 15.8 % 12.3 %
Real Estate Debt Oaktree Real
Estate Debt Fund, L.P. (7) (13). Sep. 2013 Sep. 2016 $ 1,012 $ 57 $
15 $ 3 $ 69 $ 75 $ — $ 2 $ 55 nm nm 1.4x Oaktree PPIP Fund, L.P.
(14). Dec. 2009 Dec. 2012 2,322 1,113 457 1,570 — — 47 — — 28.2 %
N/A 1.4
Mezzanine Finance Oaktree Mezzanine Fund IV,
L.P. (7) (13) Oct. 2014 Oct. 2019 $ 463 $ 39 $ — $ — $ 39 $ 38 $ —
$ — $ 40 nm nm 1.0x Oaktree Mezzanine Fund III, L.P. (15). Dec.
2009 Dec. 2014 1,592 1,423 253 911 765 732 — — 775 14.9 % 10.4% /
7.2% 1.3 OCM Mezzanine Fund II, L.P. Jun. 2005 Jun. 2010 1,251
1,107 503 1,388 222 307 — — 239 11.3 7.8 1.6 OCM Mezzanine Fund,
L.P. (16). Oct. 2001 Oct. 2006 808 773 303 1,073 3 — 38 1 — 15.4
10.8 / 10.5 1.5 13.1 % 8.8 %
European Private Debt
Oaktree European Dislocation Fund, L.P. (7) (13). Oct. 2013 Oct.
2016 € 294 € 66 € 8 € 39 € 35 € 64 € — € 1 € 29 nm nm 1.2x Special
Account E (7) (13). Oct. 2013 Apr. 2015 € 379 € 166 € 13 €
16 € 163 € 156 € — € 2 € 158 nm nm 1.1 $ 68,690
(17) (18) 31,515 (18) 1,919
(18)
Other (19) 5,478 25 Total (20) $ 36,993 $
1,944 (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) exclude 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 December 31, 2014 was less than 18
months. (8) As of December 31, 2014, Oaktree had temporarily
elected to assess management fees on NAV, instead of committed
capital, during the investment period. As a result, as of December
31, 2014, management fee-generating AUM represented only that
portion of NAV on which management fees were assessed. (9) As of
December 31, 2014, Oaktree Principal Fund VI, L.P. had made an
aggregate $24 million drawdown against its $592 million of
committed capital. Oaktree has not yet commenced the fund's
investment period and, as a result, as of December 31, 2014
management fees were assessed only on the drawn capital, and
management fee-generating AUM included only that portion of
committed capital. (10) 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. (11) 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
December 31, 2014 spot rate of $1.21. (12) The fund includes
co-investments of $385 million in AUM for which we earn no
management fees or incentive allocation. Those co-investments have
been excluded from the calculation of gross and net IRR, as well as
the unreturned drawn capital plus accrued preferred return amount
and multiple of drawn capital. The fund follows the American-style
waterfall, whereby the general partner may receive carry as soon as
it has returned the drawn capital and paid a preferred return on
the fund’s realized investments (i.e., on a deal-by-deal basis).
However, such cash distributions of carried interest may be subject
to repayment, or clawback. As of December 31, 2014, Oaktree had not
recognized any carry from this fund. Additionally, under the terms
of the Highstar acquisition, Oaktree is effectively entitled to
approximately 8% of the carry generated by this fund. (13)
Management fees during the investment period are calculated on
drawn, rather than committed, capital. As a result, as of December
31, 2014 management fee-generating AUM included only that portion
of committed capital that had been drawn. (14) 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. (15) 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 7.2%. The combined
net IRR for Class A and Class B interests was 9.3%. (16) 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
10.5%. The combined net IRR for the Class A and Class B interests
was 10.7%. (17) The aggregate change in drawn capital for the three
and twelve months ended December 31, 2014 was $2.6 billion and $8.8
billion, respectively. (18) Totals are based on the conversion of
Euro amounts to USD using the December 31, 2014 spot rate of $1.21.
(19) This includes Oaktree Enhanced Income Fund, L.P., Oaktree
Enhanced Income Fund II, L.P., Oaktree Loan Fund 2x, L.P., Oaktree
Asia Special Situations Fund, L.P., CLOs, a closed-end separate
account, a non-Oaktree fund and two evergreen separate accounts in
our Real Estate Debt strategy. (20) This excludes one separate
account with management fee-generating AUM of $425 million as of
December 31, 2014, which has been included as part of the Strategic
Credit strategy within the evergreen funds table, and includes two
evergreen separate accounts in our Real Estate Debt strategy with
an aggregate $146 million of management fee-generating AUM.
Open-end
Funds
Manage-
ment Fee-gener-
ating AUM
as of
Dec. 31, 2014
Year Ended December 31, 2014
Since Inception through December 31, 2014
Strategy Inception
Rates of Return (1) Annualized Rates of Return
(1) Sharpe Ratio Oaktree
Rele-
vant Bench-
mark
Oaktree
Rele-
vant Bench-
mark
Oaktree Gross Rele-
vant Bench-
mark
Gross Net Gross
Net (in millions) U.S. High
Yield Bonds Jan. 1986 $ 13,772 1.7 % 1.2 % 1.9 % 9.7 % 9.1 % 8.6 %
0.81 0.55 Global High Yield Bonds Nov. 2010 6,652 2.5 2.0 2.8 8.4
7.8 7.4 1.22 1.15 European High Yield Bonds May 1999 634 6.0 5.5
4.6 8.3 7.8 6.3 0.67 0.39 U.S. Convertibles Apr. 1987 4,844 3.0 2.5
9.4 9.9 9.4 8.4 0.50 0.36 Non-U.S. Convertibles Oct. 1994 2,466 3.4
2.8 3.1 8.7 8.2 5.9 0.78 0.40 High Income Convertibles Aug. 1989
907 3.7 3.2 1.8 11.7 11.2 8.4 1.04 0.59 U.S. Senior Loans Sep. 2008
2,860 1.9 1.4 2.1 7.0 6.5 5.6 1.17 0.60 European Senior Loans May
2009 1,638 1.4 0.9 2.0 9.6 9.1 10.7 1.72 1.79 Emerging Markets
Equities Jul. 2011 3,610 (5.3 ) (6.1 ) (2.2 ) (0.6 ) (1.4 ) (2.6 )
(0.04 ) (0.15 ) Total $ 37,383 (1) Returns
represent 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 December 31,
2014 Year Ended
December 31, 2014
Since Inception through
December 31, 2014
AUM Manage-
ment
Fee-gener-
ating AUM
Accrued Incen-
tives (Fund Level)
Strategy Inception Rates of Return (1)
Annualized Rates
of Return (1)
Gross Net Gross
Net (in millions)
Strategic Credit (2)
Jul. 2012 $ 2,687 $ 1,567 $ n/a 0.8 % (0.7 )% 10.6 % 9.0 % Value
Opportunities Sep. 2007 1,834 1,769 —
(3)
(0.2 ) (2.4 ) 12.2 7.6
Value Equities (4)
Apr. 2014 351 112 — nm nm nm nm
Emerging Markets Opportunities (4)
Sep. 2013 286 79 —
(3)
nm nm nm nm Emerging Markets Absolute Return Apr. 1997 199 176
—
(3)
(0.3 ) (1.2 ) 14.3 9.7 3,703 —
Restructured funds (5)
— 5
Total (2)(6)
$ 3,703 $ 5 (1) Returns
represent time-weighted rates of return. (2) Includes a separate
account in a closed-end fund structure with $579 million and $425
million of AUM and management fee-generating AUM, respectively. (3)
As of December 31, 2014, the aggregate depreciation below
high-water marks previously established for individual investors in
the fund totaled approximately $47.2 million for Value
Opportunities, $15.7 million for Emerging Markets Opportunities and
$4.1 million for Emerging Markets Absolute Return. (4) Rates of
return are not considered meaningful (“nm”) because the
since-inception period as of December 31, 2014 was less than 18
months. (5) 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 December 31, 2014,
these funds had gross and net IRRs since inception of (2.0)% and
(4.4)%, 7.7% and 5.3%, and (5.4)% and (6.4)%, respectively, and in
the aggregate had AUM of $131.0 million. Additionally, Oaktree High
Yield Plus Fund, L.P. had accrued incentives (fund level) of $5.3
million as of December 31, 2014. (6) Total excludes two evergreen
separate accounts in our Real Estate Debt strategy with an
aggregate $146 million of management fee-generating AUM.
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 are no longer 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. Segment revenues and expenses also reflect Oaktree's
proportionate economic interest in Highstar, whereby amounts
received for contractually reimbursable costs are included with
segment expenses, as compared to being recorded as other income
under GAAP. 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)
acquisition-related items including amortization of intangibles and
changes in the contingent consideration liability, (c) differences
arising from EVUs that are classified as liability awards under
GAAP, but classified as equity awards for segment reporting
purposes, (d) income taxes, (e) other income or expenses
applicable to OCG or its Intermediate Holding Companies and
(f) 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 held by our CLOs.
- 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 or (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 typically 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
held by them, 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 co-investments that
pay no 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 CLOs and 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.
Consolidated funds refers to the funds and CLOs 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.
Equity value units (“EVUs”) represent special limited
partnership units in Oaktree Capital Group Holdings, L.P. (“OCGH”)
that entitle the holder the right to receive a one-time special
distribution that will be settled in OCGH units, based on value
created during the service period (“Term”) in excess of a fixed
“Base Value.” The value created will be measured on a per unit
basis, based on Class A unit trading prices and certain components
of quarterly distributions with respect to the period during the
Term. EVUs also give the holder the right, subject to service
vesting and Oaktree performance relative to the accreting Base
Value, to receive certain quarterly distributions from OCGH. EVUs
do not entitle the holder to any voting rights.
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 non-GAAP financial measures 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
December 31, Year Ended December 31, 2014
2013 2014
2013 (in thousands)
Fee-related earnings (1)
$ 68,369 $ 73,333 $ 253,133 $ 260,115 Incentive income 53,004
242,530 491,402 1,030,195 Incentive income compensation (24,082 )
(127,771 ) (231,871 ) (436,217 ) Investment income 19,344 88,470
117,662 258,654
Equity-based compensation (2)
(5,426 ) (1,182 ) (19,705 ) (3,828 ) Interest expense, net of
interest income (9,212 ) (7,004 ) (30,190 ) (28,621 ) Other income
(expense), net (3,622 ) (3 ) (5,301 ) 409 Adjusted net
income 98,375 268,373 575,130 1,080,707
Incentive income (3)
26,311 64,460 (28,813 ) 64,460
Incentive income compensation (3)
(26,311 ) (46,334 ) 10,677 (46,334 )
Equity-based compensation (4)
(5,743 ) (6,382 ) (21,690 ) (24,613 )
Acquisition-related items (5)
(1,954 ) — (2,442 ) —
Income taxes (6)
552 (7,358 ) (18,536 ) (26,232 )
Non-Operating Group expenses (7)
(496 ) (248 ) (1,645 ) (1,195 )
OCGH non-controlling interest (7)
(66,344 ) (207,604 ) (386,398 ) (824,795 ) Net income attributable
to Oaktree Capital Group, LLC $ 24,390 $ 64,907 $
126,283 $ 221,998 (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. (4) This adjustment
adds back the effect of (a) 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, and (b) differences arising from EVUs that are classified
as liability awards under GAAP, but classified as equity awards for
segment reporting purposes. (5) This adjustment adds back the
effect of acquisition-related items associated with the
amortization of intangibles and changes in the contingent
consideration liability. (6) Because adjusted net income and
fee-related earnings are pre-tax measures, this adjustment adds
back the effect of income tax expense. (7) 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
December 31, Year Ended December 31, 2014
2013 2014
2013 (in thousands)
Fee-related earnings-OCG (1)
$ 17,825 $ 15,166 $ 61,318 $ 50,122 Incentive income attributable
to OCG 15,124 61,560 132,901 231,971 Incentive income compensation
attributable to OCG (6,872 ) (32,431 ) (62,719 ) (99,168 )
Investment income attributable to OCG 5,520 22,456 32,399 60,000
Equity-based compensation attributable to
OCG (2)
(1,548 ) (301 ) (5,517 ) (904 ) Interest expense, net of interest
income attributable to OCG (2,629 ) (1,778 ) (8,439 ) (6,610 )
Other income (expense) attributable to OCG (1,034 ) 1 (1,471 ) 96
Non-fee-related earnings income taxes
attributable to OCG (3)
201 (2,745 ) (10,710 ) (12,394 )
Adjusted net income-OCG (1)
26,587 61,928 137,762 223,113
Incentive income attributable to OCG
(4)
7,507 16,361 (6,641 ) 16,361
Incentive income compensation attributable
to OCG (4)
(7,507 ) (11,761 ) 1,913 (11,761 )
Equity-based compensation attributable to
OCG (5)
(1,638 ) (1,621 ) (6,053 ) (5,715 )
Acquisition-related items attributable to
OCG (6)
(559 ) — (698 ) — Net income attributable to Oaktree
Capital Group, LLC $ 24,390 $ 64,907 $ 126,283
$ 221,998 (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 or 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. (5) This adjustment
adds back the effect of (a) 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, and (b) differences arising from
EVUs that are classified as liability awards under GAAP, but
classified as equity awards for segment reporting purposes. (6)
This adjustment adds back the effect of acquisition-related items
associated with the amortization of intangibles and changes in the
contingent consideration liability attributable to OCG.
The following table reconciles fee-related earnings revenues and
segment revenues to GAAP revenues.
Three Months Ended
December 31, Year Ended December 31, 2014
2013 2014
2013 (in thousands) Fee-related earnings revenues $
192,464 $ 197,620 $ 764,492 $ 749,901 Incentive income 53,004
242,530 491,402 1,030,195 Investment income 19,344 88,470
117,662 258,654 Segment revenues 264,812
528,620 1,373,556 2,038,750
Consolidated funds (1)
(198,606 ) (452,010 ) (1,145,967 ) (1,787,801 )
Investment income (2)
(18,546 ) (33,427 ) (33,695 ) (56,027 ) GAAP revenues $ 47,660
$ 43,183 $ 193,894 $ 194,922 (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
December 31, Year Ended December 31, 2014
2013 2014
2013 (in thousands) Distributable earnings $ 121,650
$ 221,255 $ 608,139 $ 984,266
Investment income (1)
19,344 88,470 117,662 258,654
Receipts of investment income from funds
(2)
(14,749 ) (26,615 ) (81,438 ) (128,896 ) Receipts of investment
income from companies (20,290 ) (15,448 ) (49,546 ) (35,664 )
Equity-based compensation (3)
(5,426 ) (1,182 ) (19,705 ) (3,828 ) Operating Group income taxes
(2,154 ) 1,893 18 6,175 Adjusted net income
98,375 268,373 575,130 1,080,707
Incentive income (4)
26,311 64,460 (28,813 ) 64,460
Incentive income compensation (4)
(26,311 ) (46,334 ) 10,677 (46,334 )
Equity-based compensation (5)
(5,743 ) (6,382 ) (21,690 ) (24,613 )
Acquisition-related items (6)
(1,954 ) — (2,442 ) —
Income taxes (7)
552 (7,358 ) (18,536 ) (26,232 )
Non-Operating Group expenses (8)
(496 ) (248 ) (1,645 ) (1,195 )
OCGH non-controlling interest (8)
(66,344 ) (207,604 ) (386,398 ) (824,795 ) Net income attributable
to Oaktree Capital Group, LLC $ 24,390 $ 64,907 $
126,283 $ 221,998 (1) This
adjustment adds back segment investment income, which with respect
to investments 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 eliminates the portion of
distributions received from funds characterized 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. (5) This adjustment
adds back the effect of (a) 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, and (b) differences
arising from EVUs that are classified as liability awards under
GAAP, but classified as equity awards for segment reporting
purposes. (6) This adjustment adds back the effect of
acquisition-related items associated with the amortization of
intangibles and changes in the contingent consideration liability.
(7) Because adjusted net income and distributable earnings are
pre-tax measures, this adjustment adds back the effect of income
tax expense. (8) 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
December 31, Year Ended December 31, 2014
2013 2014
2013 (in thousands)
Distributable earnings-OCG (1)
$ 28,306 $ 50,914 $ 145,973 $ 203,595 Investment income
attributable to OCG 5,520 22,456 32,399 60,000 Receipts of
investment income from funds attributable to OCG (4,209 ) (6,756 )
(22,674 ) (29,141 ) Receipts of investment income from companies
attributable to OCG (5,790 ) (3,921 ) (13,892 ) (8,486 )
Equity-based compensation attributable to
OCG (2)
(1,548 ) (301 ) (5,517 ) (904 ) Distributable earnings-OCG income
taxes 1,920 2,118 4,138 7,684 Tax receivable agreement 3,991 2,881
15,853 10,422 Income taxes of Intermediate Holding Companies (1,603
) (5,463 ) (18,518 ) (20,057 )
Adjusted net income-OCG (1)
26,587 61,928 137,762 223,113
Incentive income attributable to OCG
(3)
7,507 16,361 (6,641 ) 16,361
Incentive income compensation attributable
to OCG (3)
(7,507 ) (11,761 ) 1,913 (11,761 )
Equity-based compensation attributable to
OCG (4)
(1,638 ) (1,621 ) (6,053 ) (5,715 )
Acquisition-related items attributable to
OCG (5)
(559 ) — (698 ) — Net income attributable to Oaktree
Capital Group, LLC $ 24,390 $ 64,907 $ 126,283
$ 221,998 (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 December 31, Year Ended December 31,
2014 2013 2014
2013 (in thousands, except per unit
data) Distributable earnings $ 121,650 $ 221,255 $ 608,139 $
984,266 Distributable earnings attributable to OCGH non-controlling
interest (86,937 ) (165,094 ) (440,530 ) (761,370 ) Non-Operating
Group expenses (496 ) (248 ) (1,645 ) (1,195 ) Distributable
earnings-OCG income taxes (1,920 ) (2,118 ) (4,138 ) (7,684 ) Tax
receivable agreement (3,991 ) (2,881 ) (15,853 ) (10,422 )
Distributable earnings-OCG $ 28,306 $ 50,914 $
145,973 $ 203,595 Distributable earnings-OCG per
Class A unit $ 0.65 $ 1.33 $ 3.43 $ 5.82
(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. (4) This adjustment adds back the
effect of (a) 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, and (b)
differences arising from EVUs that are classified as liability
awards under GAAP, but classified as equity awards for segment
reporting purposes. (5) This adjustment adds back the effect of
acquisition-related items associated with the amortization of
intangibles and changes in the contingent consideration liability
attributable to OCG.
The following table reconciles distributable earnings revenues
and segment revenues to GAAP revenues.
Three Months Ended
December 31, Year Ended December 31, 2014
2013 2014
2013 (in thousands) Distributable earnings revenues $
280,507 $ 482,213 $ 1,386,878 $ 1,944,656 Investment income 19,344
88,470 117,662 258,654 Receipts of investment income from funds
(14,749 ) (26,615 ) (81,438 ) (128,896 ) Receipts of investment
income from companies (20,290 ) (15,448 ) (49,546 ) (35,664 )
Segment revenues 264,812 528,620 1,373,556 2,038,750
Consolidated funds (1)
(198,606 ) (452,010 ) (1,145,967 ) (1,787,801 )
Investment income (2)
(18,546 ) (33,427 ) (33,695 ) (56,027 ) GAAP revenues $ 47,660
$ 43,183 $ 193,894 $ 194,922
(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
December 31, Year Ended December 31, 2014
2013 2014
2013 (in thousands)
Economic net income (1)
$ 18,722 $ 303,200 $ 339,827 $ 1,033,739
Change in accrued incentives (fund level),
net of associated incentive income compensation (2)
79,653 (34,827 ) 235,303 46,968 Adjusted net
income 98,375 268,373 575,130 1,080,707
Incentive income (3)
26,311 64,460 (28,813 ) 64,460
Incentive income compensation (3)
(26,311 ) (46,334 ) 10,677 (46,334 )
Equity-based compensation (4)
(5,743 ) (6,382 ) (21,690 ) (24,613 )
Acquisition-related items (5)
(1,954 ) — (2,442 ) —
Income taxes (6)
552 (7,358 ) (18,536 ) (26,232 )
Non-Operating Group expenses (7)
(496 ) (248 ) (1,645 ) (1,195 )
OCGH non-controlling interest (7)
(66,344 ) (207,604 ) (386,398 ) (824,795 ) Net income attributable
to Oaktree Capital Group, LLC $ 24,390 $ 64,907 $
126,283 $ 221,998 (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. (4) This adjustment adds back the
effect of (a) equity-based compensation charges 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, and
(b) differences arising from EVUs that are classified as liability
awards under GAAP, but classified as equity awards for segment
reporting purposes. (5) This adjustment adds back the effect of
acquisition-related items associated with the amortization of
intangibles and changes in the contingent consideration liability.
(6) Because adjusted net income and economic net income are pre-tax
measures, this adjustment adds back the effect of income tax
expense. (7) 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 (loss)-OCG
and adjusted net income-OCG to net income attributable to Oaktree
Capital Group, LLC.
Three Months Ended
December 31, Year Ended December 31, 2014
2013 2014
2013 (in thousands)
Economic net income (loss)-OCG (1)
$ (970 ) $ 73,513 $ 62,059 $ 212,283 Change in accrued incentives
(fund level), net of associated incentive income compensation
attributable to OCG 22,727 (8,840 ) 66,531 11,016 Economic net
income (loss)-OCG income taxes 5,817 3,200 27,636 21,247 Income
taxes-OCG (987 ) (5,945 ) (18,464 ) (21,433 )
Adjusted net income-OCG (1)
26,587 61,928 137,762 223,113
Incentive income attributable to OCG
(2)
7,507 16,361 (6,641 ) 16,361
Incentive income compensation attributable
to OCG (2)
(7,507 ) (11,761 ) 1,913 (11,761 ) Equity-based compensation
attributable to OCG (3) (1,638 ) (1,621 ) (6,053 ) (5,715 )
Acquisition-related items attributable to
OCG (4)
(559 ) — (698 ) — Net income attributable to Oaktree
Capital Group, LLC $ 24,390 $ 64,907 $ 126,283
$ 221,998 (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
December 31, Year Ended December 31,
2014 2013
2014 2013 (in thousands,
except per unit data) Economic net income $ 18,722
$ 303,200 $ 339,827 $ 1,033,739
Economic net income attributable to OCGH non-controlling interest
(13,379 ) (226,239 ) (248,487 ) (799,014 ) Non-Operating Group
expenses (496 ) (248 ) (1,645 ) (1,195 ) Economic net income
(loss)-OCG income taxes (5,817 ) (3,200 ) (27,636 ) (21,247 )
Economic net income (loss)-OCG $ (970 ) $ 73,513 $ 62,059
$ 212,283 Economic net income (loss) per Class A unit
$ (0.02 ) $ 1.92 $ 1.46 $ 6.07
(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. (3) This
adjustment adds back the effect of (a) 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, and (b) differences arising from EVUs that are
classified as liability awards under GAAP, but classified as equity
awards for segment reporting purposes. (4) This adjustment adds
back the effect of acquisition-related items associated with the
amortization of intangibles and changes in the contingent
consideration liability attributable to OCG.
The following table reconciles economic net income revenues and
segment revenues to GAAP revenues.
Three Months Ended
December 31, Year Ended December 31, 2014
2013 2014
2013 (in thousands) Economic net income revenues $
133,163 $ 701,526 $ 1,046,524 $ 2,177,391 Incentives created 78,645
(415,436 ) (164,370 ) (1,168,836 ) Incentive income 53,004
242,530 491,402 1,030,195 Segment revenues
264,812 528,620 1,373,556 2,038,750
Consolidated funds (1)
(198,606 ) (452,010 ) (1,145,967 ) (1,787,801 )
Investment income (2)
(18,546 ) (33,427 ) (33,695 ) (56,027 ) GAAP revenues $ 47,660
$ 43,183 $ 193,894 $ 194,922 (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 December 31,
2014 Segment Adjustments
Consolidated (in thousands)
Management fees (1)
$ 192,464 $ (146,643 ) $ 45,821
Incentive income (1)
53,004 (51,165 ) 1,839
Investment income (1)
19,344 (798 ) 18,546
Total expenses (2)
(153,603 ) (67,769 ) (221,372 )
Interest expense, net (3)
(9,212 ) (36,467 ) (45,679 )
Other income (expense), net (4)
(3,622 ) 5,634 2,012
Other income of consolidated funds (5)
— 105,366 105,366 Income taxes — 552 552 Net loss attributable to
non-controlling interests in consolidated funds — 193,762 193,762
Net income attributable to non-controlling interests in
consolidated subsidiaries — (76,457 ) (76,457 ) Adjusted net
income/net income attributable to Oaktree Capital Group, LLC $
98,375 $ (73,985 ) $ 24,390
Corporate investments (6)
$ 1,515,443 $ (1,327,480 ) $ 187,963
Total assets (7)
$ 3,267,799 $ 50,076,263 $ 53,344,062
(1) The adjustment represents the elimination of
amounts earned from the consolidated funds. (2) The expense
adjustment consists of (a) equity-based compensation charges of
$5,710 related to unit grants made before our initial public
offering, (b) consolidated fund expenses of $27,563, (c) expenses
incurred by the Intermediate Holding Companies of $496, (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 $26,311, (e) acquisition-related items of
$1,954, (f) adjustments related to amounts received for
contractually reimbursable costs that are included with segment
expenses, as compared to being recorded as other income under GAAP
of $5,634, (g) differences arising from EVUs that are classified as
liability awards under GAAP, but classified as equity awards for
segment reporting purposes of $33 and (h) other expenses of $68.
(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 (expense), net represents
adjustments related to amounts received for contractually
reimbursable costs that are included with segment expenses, as
compared to being recorded as other income under GAAP. (5) The
adjustment to other income of consolidated funds primarily
represents the inclusion of interest, dividend and other investment
income (loss) attributable to non-controlling interests of the
consolidated funds. (6) 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. Of the
$1.5 billion, equity-method investments accounted for $1.3 billion.
(7) 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
December 31, 2013 Segment
Adjustments Consolidated (in
thousands)
Management fees (1)
$ 197,620 $ (154,437 ) $ 43,183
Incentive income (1)
242,530 (242,530 ) —
Investment income (1)
88,470 (55,043 ) 33,427
Total expenses (2)
(253,240 ) (78,619 ) (331,859 )
Interest expense, net (3)
(7,004 ) (11,225 ) (18,229 ) Other income, net (3 ) — (3 )
Other income of consolidated funds (4)
— 1,973,962 1,973,962 Income taxes — (7,358 ) (7,358 ) Net income
attributable to non-controlling interests in consolidated funds —
(1,420,612 ) (1,420,612 ) Net income attributable to
non-controlling interests in consolidated subsidiaries —
(207,604 ) (207,604 ) Adjusted net income/net income attributable
to Oaktree Capital Group, LLC $ 268,373 $ (203,466 ) $
64,907
Corporate investments (5)
$ 1,197,173 $ (1,027,246 ) $ 169,927
Total assets (6)
$ 2,817,127 $ 42,446,127 $ 45,263,254
(1) The adjustment represents the elimination of
amounts earned from the consolidated funds. (2) The expense
adjustment consists of (a) equity-based compensation charges of
$6,382 related to unit grants made before our initial public
offering, (b) consolidated fund expenses of $25,655, (c) expenses
incurred by the Intermediate Holding Companies of $248 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 that are treated
as equity-method investments for segment reporting. (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 Year Ended December 31, 2014 Segment
Adjustments
Consolidated (in thousands)
Management fees (1)
$ 764,492 $ (572,437 ) $ 192,055
Incentive income (1)
491,402 (489,563 ) 1,839
Investment income (1)
117,662 (83,967 ) 33,695
Total expenses (2)
(762,935 ) (184,542 ) (947,477 )
Interest expense, net (3)
(30,190 ) (99,752 ) (129,942 )
Other income (expense), net (4)
(5,301 ) 8,319 3,018
Other income of consolidated funds (5)
— 3,040,900 3,040,900 Income taxes — (18,536 ) (18,536 ) Net income
attributable to non-controlling interests in consolidated funds —
(1,649,890 ) (1,649,890 ) Net income attributable to
non-controlling interests in consolidated subsidiaries —
(399,379 ) (399,379 ) Adjusted net income/net income attributable
to Oaktree Capital Group, LLC $ 575,130 $ (448,847 ) $
126,283
Corporate investments (6)
$ 1,515,443 $ (1,327,480 ) $ 187,963
Total assets (7)
$ 3,267,799 $ 50,076,263 $ 53,344,062
(1) The adjustment represents the elimination of
amounts earned from the consolidated funds. (2) The expense
adjustment consists of (a) equity-based compensation charges of
$21,657 related to unit grants made before our initial public
offering, (b) consolidated fund expenses of $161,055, (c) expenses
incurred by the Intermediate Holding Companies of $1,645, (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 $10,677, (e) acquisition-related items of
$2,442, (f) adjustments related to amounts received for
contractually reimbursable costs that are included with segment
expenses, as compared to being recorded as other income under GAAP
of $8,319, (g) differences arising from EVUs that are classified as
liability awards under GAAP, but classified as equity awards for
segment reporting purposes of $33 and (h) other expenses of $68.
(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 (expense), net represents
adjustments related to amounts received for contractually
reimbursable costs that are included with segment expenses, as
compared to being recorded as other income under GAAP. (5) 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. (6) 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. Of the
$1.5 billion, equity-method investments accounted for $1.3 billion.
(7) 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 Year Ended
December 31, 2013 Segment
Adjustments Consolidated (in
thousands)
Management fees (1)
$ 749,901 $ (557,296 ) $ 192,605
Incentive income (1)
1,030,195 (1,027,878 ) 2,317
Investment income (1)
258,654 (202,627 ) 56,027
Total expenses (2)
(929,831 ) (177,231 ) (1,107,062 )
Interest expense, net (3)
(28,621 ) (32,539 ) (61,160 ) Other income, net 409 — 409
Other income of consolidated funds (4)
— 7,153,828 7,153,828 Income taxes — (26,232 ) (26,232 ) Net income
attributable to non-controlling interests in consolidated funds —
(5,163,939 ) (5,163,939 ) Net income attributable to
non-controlling interests in consolidated subsidiaries —
(824,795 ) (824,795 ) Adjusted net income/net income attributable
to Oaktree Capital Group, LLC $ 1,080,707 $ (858,709 ) $
221,998
Corporate investments (5)
$ 1,197,173 $ (1,027,246 ) $ 169,927
Total assets (6)
$ 2,817,127 $ 42,446,127 $ 45,263,254
(1) The adjustment represents the elimination
of amounts earned from the consolidated funds. (2) The expense
adjustment consists of (a) equity-based compensation charges of
$24,613 related to unit grants made before our initial public
offering, (b) consolidated fund expenses of $105,089, (c) expenses
incurred by the Intermediate Holding Companies of $1,195 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 that
are treated as equity-method investments for segment reporting. (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. Williams,
213-830-6483investorrelations@oaktreecapital.comorPress
Relations:Sard Verbinnen & CoJohn Christiansen,
415-618-8750jchristiansen@sardverb.comorCarissa
Felger, 312-895-4701cfelger@sardverb.com
Oaktree Capital (NYSE:OAK)
過去 株価チャート
から 6 2024 まで 7 2024
Oaktree Capital (NYSE:OAK)
過去 株価チャート
から 7 2023 まで 7 2024
