As of June 30, 2016 or for the quarter then ended:
- GAAP net income attributable to
Oaktree Capital Group, LLC (“OCG”) was $49.0 million (or $0.78 per
Class A unit), up from $19.8 million ($0.41 per unit) for the
second quarter of 2015.
- Adjusted net income was $142.6
million ($0.79 per unit), up 67% from $85.3 million ($0.44 per
unit) for the second quarter of 2015, on higher incentive income,
investment income and fee-related earnings.
- Distributable earnings were
$127.5 million ($0.72 per unit), up 15% from $111.1 million ($0.59
per unit) for the second quarter of 2015, on higher incentive
income and fee-related earnings.
- Assets under management were
$98.1 billion, up 1% for the quarter and down 5% over the last 12
months. Uncalled capital commitments stood at a record high of
$22.8 billion.
- A distribution was declared of
$0.58 per Class A unit, bringing aggregate distributions
relating to the last 12 months to $2.00.
Oaktree Capital Group, LLC (NYSE: OAK) today reported its
unaudited financial results for the second quarter ended June 30,
2016.
Jay Wintrob, Chief Executive Officer, said, “We generated solid
second quarter results with growth versus a year ago in all revenue
categories and in FRE and ANI. Despite some significant market
volatility at quarter-end following the Brexit vote, we delivered
positive performance across virtually all of our investment
strategies. Low interest rates, ample liquidity and a search for
yield continue to sustain the credit markets and buoy equity
markets, creating a somewhat challenging investment environment for
our counter-cyclical investment strategies. However, with our
record level of dry powder, experience in navigating market cycles
and patient, opportunistic approach to deployment, we are well
positioned to continue to serve our clients’ needs.”
GAAP-basis results for the second quarter and first six months
of 2016 included net income attributable to Oaktree Capital Group,
LLC of $49.0 million and $77.1 million, respectively, as compared
to $19.8 million and $58.1 million for the comparable 2015 periods.
Both periods’ increases reflected higher segment profits, as well
as a larger allocation of income to OCG based on the average number
of Class A units outstanding.
Assets under management (“AUM”) were $98.1 billion as of June
30, 2016, up 1% from $96.9 billion as of March 31, 2016, and down
5% from $103.1 billion as of June 30, 2015. Management
fee-generating assets under management (“management fee-generating
AUM”) were $79.5 billion as of June 30, 2016, down 1% from $79.9
billion as of March 31, 2016, and up 1% from $78.6 billion as of
June 30, 2015.
As of June 30, 2016, uncalled capital commitments (so-called
“dry powder”) stood at a record high of $22.8 billion. Of these
commitments, $13.1 billion were not yet generating management fees
(so-called “shadow AUM”). Gross capital raised was $3.0 billion for
the second quarter of 2016 and $10.2 billion for the last 12
months.
Adjusted net income (“ANI”) grew to $142.6 million and $247.7
million for the second quarter and first six months of 2016,
respectively, from $85.3 million and $235.3 million for the
comparable 2015 periods. Distributable earnings grew to $127.5
million and $253.2 million for the second quarter and first six
months of 2016, respectively, from $111.1 million and $246.3
million for the comparable 2015 periods. The second-quarter
increases reflected higher incentive income and fee-related
earnings and, for ANI, higher investment income. The increases in
ANI and distributable earnings for the six-month period were
primarily attributable to fee-related earnings.
In addition to ANI, Oaktree calculates economic net income
(“ENI”) to facilitate comparisons with other alternative asset
managers that report a measure similar to ENI as a performance
metric. Unlike ANI, ENI measures incentive income based on the
market values of the funds’ holdings. ENI was $166.2 million and
$207.4 million for the second quarter and first six months of 2016,
respectively, as compared to $17.6 million and $241.2 million for
the comparable 2015 periods. Per Class A unit, ENI was $0.96 and a
loss of $0.02 for the second quarters of 2016 and 2015,
respectively.
Closed-end funds that Oaktree is currently marketing include
Oaktree Real Estate Opportunities Fund VII, Oaktree Opportunities
Fund Xb, Oaktree Infrastructure Fund, Oaktree European Capital
Solutions Fund, Oaktree European Principal Fund IV and Oaktree Real
Estate Debt Fund II.
The table below presents (a) GAAP-basis results, (b) segment
results 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 MonthsEnded
June 30, As of or for the Six
MonthsEnded June 30, 2016
2015 2016 2015
GAAP-basis Results: (in thousands, except per unit data
or as otherwise indicated) Revenues $ 282,716 $ 51,487 $
537,206 $ 102,306 Net income attributable to Oaktree Capital Group,
LLC 49,047 19,814 77,125 58,067 Net income per Class A unit 0.78
0.41 1.24 1.24
Segment Results: (1) Segment
revenues $ 332,822 $ 274,710 $ 645,757 $ 671,142 Adjusted net
income 142,645 85,279 247,670 235,305 Distributable earnings
revenues 306,660 289,717 630,999 665,448 Distributable earnings
127,506 111,140 253,231 246,336 Fee-related earnings revenues
197,450 190,197 398,720 380,292 Fee-related earnings 64,629 52,990
126,988 102,746 Economic net income revenues 416,317 149,507
586,394 658,522 Economic net income 166,187 17,619 207,383 241,167
Per Class A Unit: (1) Adjusted net income $ 0.79 $
0.44 $ 1.28 $ 1.24 Distributable earnings 0.72 0.59 1.39 1.36
Fee-related earnings 0.38 0.34 0.75 0.62 Economic net income (loss)
0.96 (0.02 ) 1.09 1.18
Operating Metrics: Assets under
management (in millions): Assets under management $ 98,124 $
103,060 $ 98,124 $ 103,060 Management fee-generating assets under
management 79,516 78,596 79,516 78,596 Incentive-creating assets
under management 30,372 33,860 30,372 33,860 Uncalled capital
commitments 22,817 20,141 22,817 20,141 Accrued incentives (fund
level): Incentives created (fund level) 171,142 (64,055 ) 124,872
201,407 Incentives created (fund level), net of associated
incentive income compensation expense 75,783 (36,066 ) 58,792
100,233 Accrued incentives (fund level) 1,525,854 1,936,787
1,525,854 1,936,787 Accrued incentives (fund level), net of
associated incentive income compensation expense 771,253 1,005,785
771,253 1,005,785 (1) In the fourth quarter of
2015, the definition of adjusted net income was modified to reflect
differences with respect to (a) third-party placement costs
associated with closed-end funds, which under GAAP are expensed as
incurred, but for ANI are capitalized and amortized as general and
administrative expense in proportion to the associated management
fee stream, and (b) gains and losses resulting from
foreign-currency transactions and hedging activities, which under
GAAP are recognized as general and administrative expense whether
realized or unrealized in the current period, whereas for ANI
unrealized gains and losses from foreign-currency hedging
activities are deferred until realized, at which time they are
included in the same revenue or expense line item as the underlying
exposure that was hedged. Foreign-currency transaction gains and
losses are included in other income (expense), net. Prior periods
have not been recast for the change related to third-party
placement costs, but have been recast to retroactively reflect the
change related to foreign-currency hedging. Placement costs
associated with closed-end funds amounted to $2.8 million and $3.7
million for the second quarter and first six months of 2015,
respectively, and remain expensed as incurred in those periods for
both GAAP and ANI purposes. Please refer to the Glossary for more
information.
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
Oaktree adopted the new consolidation guidance as of January 1,
2016 under the modified retrospective approach, which did not
require prior periods to be recast. The adoption resulted in the
deconsolidation of substantially all of our previously consolidated
investment funds. Investment vehicles in which we have a
significant investment, such as CLOs and certain Oaktree funds,
remain consolidated under GAAP. When a CLO or fund is consolidated,
the assets, liabilities, revenues, expenses and cash flows of the
consolidated funds are reflected on a gross basis, and the majority
of the economic interests in those consolidated funds, which are
held by third-party investors, are reflected as non-controlling
interests. All of the revenues earned by us as investment manager
of the consolidated funds are eliminated in consolidation. However,
because the eliminated amounts are earned from and funded by
third-party investors, the consolidation of a fund does not impact
net income or loss attributable to OCG.
Total revenues increased $231.2 million, or 448.9%, to $282.7
million in the second quarter of 2016, from $51.5 million in the
second quarter of 2015. Total expenses decreased $54.3 million, or
22.1%, to $191.6 million in the second quarter of 2016, from $245.9
million in the second quarter of 2015. Other income (loss)
increased to income of $58.3 million in the second quarter of 2016,
from a loss of $116.7 million in the second quarter of 2015. In all
three cases, the changes primarily reflected the deconsolidation of
substantially all of Oaktree’s investment funds caused by the
adoption of the new consolidation guidance, effective the first
quarter of 2016.
Net income attributable to OCG was $49.0 million for the second
quarter of 2016, as compared to $19.8 million for the second
quarter of 2015. The increase reflected higher segment profits, as
well as a larger allocation of income to OCG resulting from an
increase in the average number of Class A units outstanding.
Operating Metrics
Assets Under Management
AUM was $98.1 billion as of June 30, 2016, $96.9 billion as of
March 31, 2016 and $103.1 billion as of June 30, 2015. The $1.2
billion increase since March 31, 2016 primarily reflected $1.9
billion of aggregate capital inflows for closed-end funds and $1.6
billion in aggregate market-value gains, partially offset by $1.6
billion of aggregate distributions to closed-end fund investors and
change in fee-generating leverage.
The $5.0 billion decrease in AUM since June 30, 2015 primarily
reflected $5.1 billion of distributions to closed-end fund
investors, $4.2 billion of net outflows from open-end funds and
$1.8 billion in aggregate market-value declines, partially offset
by $6.4 billion of aggregate capital inflows for closed-end funds.
Capital inflows for closed-end funds included $1.8 billion for
Oaktree Opportunities Funds X and Xb (“Opps X and Xb”), $1.1
billion for Oaktree Real Estate Opportunities Fund VII (“ROF VII”)
and $0.9 billion for Oaktree European Principal Fund IV.
Distributions to closed-end fund investors included $1.6 billion
from Distressed Debt funds, $1.5 billion from Control Investing
funds and $1.3 billion from Real Estate funds.
Management Fee-generating Assets Under
Management
Management fee-generating AUM, a forward-looking metric, was
$79.5 billion as of June 30, 2016, $79.9 billion as of March 31,
2016 and $78.6 billion as of June 30, 2015. The $0.4 billion
decrease since March 31, 2016 primarily reflected a $1.7 billion
aggregate decline attributable to closed-end funds in liquidation
and fee-generating leverage, largely offset by $1.3 billion of
aggregate market-value gains.
The $0.9 billion increase in management fee-generating AUM since
June 30, 2015 primarily reflected an aggregate $7.6 billion
principally from the investment-period commencement of Oaktree
Power Opportunities Fund IV (“Power Fund IV”) and Oaktree Principal
Fund VI (“PF VI”) in November 2015, and of Opps X and ROF VII as of
January 1, 2016, and $1.3 billion of drawdowns by closed-end funds
for which management fees are based on drawn capital, NAV or cost
basis. These increases were partially offset by $4.2 billion of net
outflows from open-end funds, $3.0 billion attributable to
closed-end funds in liquidation and $1.1 billion in aggregate
market-value declines.
Incentive-creating Assets Under
Management
Incentive-creating assets under management (“incentive-creating
AUM”) were $30.4 billion as of June 30, 2016, $31.2 billion as of
March 31, 2016 and $33.9 billion as of June 30, 2015. The $0.8
billion decrease since March 31, 2016 reflected the net effect of
$0.7 billion in drawdowns by closed-end funds, $1.6 billion in
distributions from closed-end funds, $0.3 billion in aggregate
market-value gains and $0.2 billion of unfavorable foreign-currency
translation. The $3.5 billion decrease since June 30, 2015
reflected the net effect of $3.4 billion in drawdowns by closed-end
funds, $5.9 billion in distributions from closed-end funds and $0.8
billion in aggregate market-value declines.
Of the $30.4 billion in incentive-creating AUM as of June 30,
2016, $17.9 billion, or 59%, was generating incentives at the fund
level, as compared with $20.1 billion, or 59%, of the $33.9 billion
of incentive-creating AUM as of June 30, 2015.
Accrued Incentives (Fund Level) and
Incentives Created (Fund Level)
Accrued incentives (fund level) were $1.5 billion as of June 30,
2016, $1.4 billion as of March 31, 2016 and $1.9 billion as of June
30, 2015. The second quarter of 2016 reflected $171.1 million of
incentives created (fund level) and $87.6 million of segment
incentive income recognized.
Net of incentive income compensation expense, accrued incentives
(fund level) were $771.3 million as of June 30, 2016, $747.7
million as of March 31, 2016 and $1.0 billion as of June 30, 2015.
As of June 30, 2016, March 31, 2016 and June 30, 2015, the portion
of net accrued incentives (fund level) represented by funds that
was currently paying incentives was $274.5 million, $294.1 million
and $371.1 million, respectively, with the remainder arising from
funds that as of that date were not at 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 $22.8 billion as of June 30,
2016, $21.4 billion as of March 31, 2016 and $20.1 billion as of
June 30, 2015. Invested capital by incentive-creating closed-end
and similar funds during the quarter and 12 months ended June 30,
2016 aggregated $2.4 billion and $7.7 billion, respectively, as
compared with $2.2 billion and $9.3 billion for the comparable 2015
periods.
Segment Results
Revenues
Segment revenues grew $58.1 million, or 21.2%, to $332.8 million
in the second quarter of 2016, from $274.7 million in the second
quarter of 2015, reflecting increases of $7.3 million in management
fees, $26.5 million in incentive income and $24.3 million in
investment income.
Management Fees
Management fees increased $7.3 million, or 3.8%, to $197.5
million in the second quarter of 2016, from $190.2 million in the
second quarter of 2015. The growth reflected an aggregate increase
of $31.3 million principally from the start of investment periods
for Power Fund IV, PF VI, Opps X and ROF VII. This increase was
partially offset by an aggregate decline of $24.0 million primarily
attributable to closed-end funds in liquidation and net outflows
and market-value declines in open-end funds.
Incentive Income
Incentive income increased $26.5 million, or 43.4%, to $87.6
million in the second quarter of 2016, from $61.1 million in the
second quarter of 2015. The second quarter of 2016 reflected
incentive distributions from five funds across four investment
strategies.
Investment Income
Investment income grew $24.3 million, or 103.8%, to $47.7
million in the second quarter of 2016, from $23.4 million in the
second quarter of 2015. The increase largely reflected higher
overall returns on our fund investments. Our one-fifth ownership
stake in DoubleLine Capital LP and its affiliates (collectively,
“DoubleLine”) accounted for investment income of $16.6 million and
$12.5 million in the second quarters of 2016 and 2015,
respectively, of which performance fees accounted for $1.5 million
and $0.6 million.
Expenses
Compensation and Benefits
Compensation and benefits decreased $5.6 million, or 5.3%, to
$99.2 million for the second quarter of 2016, from $104.8 million
for the second quarter of 2015, reflecting variations in annual
bonus accruals, as well as a favorable fluctuation of $2.4 million
in phantom equity expense stemming largely from each period’s
change in the Class A unit trading price.
Equity-based Compensation
Equity-based compensation increased $0.5 million, or 4.2%, to
$12.4 million for the second quarter of 2016, from $11.9 million
for the second quarter of 2015. The increase reflected non-cash
amortization expense associated with vesting of Class A and OCGH
unit grants made to employees and directors subsequent to our 2012
initial public offering.
Incentive Income Compensation
Incentive income compensation expense increased $5.8 million, or
19.6%, to $35.4 million for the second quarter of 2016, from $29.6
million for the second quarter of 2015. The percentage increase was
smaller than the corresponding increase of 43.4% in incentive
income, primarily due to differences in the applicable funds’
compensation percentages.
General and Administrative
General and administrative expense increased $0.3 million, or
1.0%, to $30.6 million for the second quarter of 2016, from $30.3
million for the second quarter of 2015, primarily reflecting higher
professional fees and other general operating items, partially
offset by lower expense for placement costs associated with
closed-end funds.
Depreciation and Amortization
Depreciation and amortization expense increased $0.9 million, or
42.9%, to $3.0 million for the second quarter of 2016, from $2.1
million for the second quarter of 2015, primarily reflecting
amortization of leasehold improvements associated with office space
expansion.
Adjusted Net Income
ANI increased $57.3 million, or 67.2%, to $142.6 million for the
second quarter of 2016, from $85.3 million for the second quarter
of 2015, reflecting increases of $24.3 million in investment
income, $20.6 million in incentive income, net of incentive income
compensation expense (“net incentive income”), and $11.6 million in
fee-related earnings. The portion of ANI attributable to our
Class A units was $49.7 million, or $0.79 per unit, and $21.4
million, or $0.44 per unit, for the second quarters of 2016 and
2015, respectively.
The effective tax rate applied to ANI for the second quarters of
2016 and 2015 was 13% and 18%, respectively, resulting from
estimated full-year effective rates of 19% and 17%, respectively.
The effective tax rate applied to ANI for the second quarter of
2016 was based on an estimated full-year effective tax rate on
income that can be reliably forecasted, combined with tax expense
in the current period on incentive income and any other income that
cannot be reliably estimated. We expect variability in tax rates
between quarters and full years, because the effective tax rate is
a function of the mix of income and other factors, each of which
can have a material impact on the particular period’s income tax
expense and often vary significantly within or between years. In
general, the annual effective tax rate increases as the proportion
of ANI arising from fee-related earnings, DoubleLine-related
investment income, and certain incentive and investment income
rises, and vice versa.
Distributable Earnings
Distributable earnings grew $16.4 million, or 14.8%, to $127.5
million for the second quarter of 2016, from $111.1 million for the
second quarter of 2015, reflecting increases of $20.6 million in
net incentive income and $11.6 million in fee-related earnings,
partially offset by a $16.8 million decline in investment income
proceeds. For the second quarter of 2016, investment income
proceeds totaled $21.6 million, including $10.7 million from fund
distributions and $10.9 million from DoubleLine, as compared with
total investment income proceeds in the prior-year quarter of $38.4
million, of which $30.2 million and $8.2 million was attributable
to fund distributions and DoubleLine, respectively. The portion of
distributable earnings attributable to our Class A units was
$0.72 and $0.59 per unit for the second quarters of 2016 and 2015,
respectively, reflecting distributable earnings per Operating Group
unit of $0.82 and $0.72, 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 grew $11.6 million, or 21.9%, to $64.6
million for the second quarter of 2016, from $53.0 million for the
second quarter of 2015. The increase reflected $7.3 million of
higher management fees and $5.6 million of lower compensation and
benefits. The portion of fee-related earnings attributable to our
Class A units was $0.38 and $0.34 per unit for the second
quarters of 2016 and 2015, respectively.
The effective tax rate applicable to fee-related earnings for
the second quarters of 2016 and 2015 was 8% and -1%, respectively,
resulting from estimated full-year effective rates of 8% and 4%,
respectively. The rate used for interim fiscal periods is based on
the estimated full-year effective tax rate, which is subject to
change as the year progresses. In general, the annual effective tax
rate increases as annual fee-related earnings increase, and vice
versa.
Capital and Liquidity
As of June 30, 2016, Oaktree had $1.1 billion of cash and U.S.
Treasury securities and $796 million of outstanding debt, net of
debt issuance costs. As previously announced, on July 12, 2016,
Oaktree issued and sold to certain accredited investors $100
million in aggregate principal amount of 3.69% senior notes due
July 12, 2031. Oaktree used the proceeds from the sale of the notes
to repay $100 million of its $250 million term loan due March 31,
2021. Oaktree neither had as of June 30, 2016, nor currently has
any borrowings outstanding against its $500 million revolving
credit facility. As of June 30, 2016, Oaktree’s investments in
funds and companies had a carrying value of $1.4 billion, with the
20% investment in DoubleLine carried at $16 million based on cost,
as adjusted under the equity method of accounting. Accrued
incentives (fund level), net of associated compensation expense,
represented an additional $771 million as of that date.
Distribution
Oaktree Capital Group, LLC has declared a distribution
attributable to the second quarter of 2016 of $0.58 per
Class A unit. This distribution will be paid on August 12,
2016 to Class A unitholders of record at the close of business
on August 8, 2016.
Conference Call
Oaktree will host a conference call to discuss its second
quarter 2016 results today at 11:00 a.m. Eastern Time / 8:00 a.m.
Pacific Time. The conference call may be accessed by dialing
(844) 824-3833 (U.S. callers) or +1 (412) 317-5102
(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 (877) 344-7529 (U.S. callers) or
+1 (412) 317-0088 (non-U.S. callers), access code 10089075,
beginning approximately one hour after the broadcast.
About Oaktree
Oaktree is a leader among global investment managers
specializing in alternative investments, with $98 billion in assets
under management as of June 30, 2016. 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 900 employees and offices in 18 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
Unitholders – Investor Relations 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,
2015 filed with the SEC on February 26, 2016, 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) (1)
Three Months Ended June 30, Six Months Ended June
30, 2016 2015 2016
2015 (in thousands, except per unit
data) Revenues: Management fees $ 195,015 $ 50,923 $ 393,568 $
101,742 Incentive income 87,701 564 143,638
564 Total revenues 282,716 51,487 537,206
102,306 Expenses: Compensation and benefits (103,002
) (107,750 ) (211,407 ) (217,893 ) Equity-based compensation
(14,726 ) (16,083 ) (28,622 ) (27,789 ) Incentive income
compensation (35,461 ) (35,211 ) (45,268 ) (102,103 ) Total
compensation and benefits expense (153,189 ) (159,044 ) (285,297 )
(347,785 ) General and administrative (32,949 ) (33,488 ) (80,780 )
(40,068 ) Depreciation and amortization (4,048 ) (3,107 ) (8,209 )
(5,999 ) Consolidated fund expenses (1,462 ) (50,290 ) (2,546 )
(88,051 ) Total expenses (191,648 ) (245,929 ) (376,832 ) (481,903
) Other income (loss): Interest expense (26,730 ) (52,742 ) (54,435
) (99,311 ) Interest and dividend income 37,138 478,311 73,408
1,001,240 Net realized gain on consolidated funds’ investments
6,682 857,548 10,083 1,332,378 Net change in unrealized
appreciation (depreciation) on consolidated funds’ investments
(5,301 ) (1,418,385 ) (25,973 ) (910,902 ) Investment income 41,000
15,694 70,447 28,376 Other income (expense), net 5,548 2,863
11,349 7,557 Total other income (loss) 58,337
(116,711 ) 84,879 1,359,338 Income (loss)
before income taxes 149,405 (311,153 ) 245,253 979,741 Income taxes
(8,571 ) (5,485 ) (21,251 ) (13,360 ) Net income (loss) 140,834
(316,638 ) 224,002 966,381 Less: Net (income) loss attributable to
non-controlling interests in consolidated funds (7,319 ) 391,961
(2,375 ) (744,704 ) Net income attributable to non-controlling
interests in consolidated subsidiaries (84,468 ) (55,509 ) (144,502
) (163,610 ) Net income attributable to Oaktree Capital Group, LLC
$ 49,047 $ 19,814 $ 77,125 $ 58,067
Distributions declared per Class A unit $ 0.55 $ 0.64
$ 1.02 $ 1.20 Net income per unit (basic and
diluted): Net income per Class A unit $ 0.78 $ 0.41 $
1.24 $ 1.24 Weighted average number of Class A units
outstanding 62,617 48,372 62,256 46,727
(1) In the first quarter of 2016, Oaktree
adopted the new consolidation and collateralized financing entity
guidance under the modified retrospective approach. The modified
retrospective approach did not require prior periods to be recast.
The adoption resulted in the deconsolidation of substantially all
of Oaktree’s investment funds.
Segment Financial Data
As of or for the Three Months
Ended June 30,
As of or for the Six MonthsEnded June 30, 2016
2015 2016
2015 Segment Statements of Operations Data: (1)
(in thousands, except per unit data or as otherwise
indicated) Revenues: Management fees $ 197,450 $ 190,197 $
398,720 $ 380,292 Incentive income 87,647 61,148 184,235 214,027
Investment income 47,725 23,365 62,802 76,823
Total revenues 332,822 274,710 645,757
671,142 Expenses: Compensation and benefits (99,173 )
(104,767 ) (203,443 ) (213,648 ) Equity-based compensation (12,445
) (11,901 ) (23,148 ) (18,924 ) Incentive income compensation
(35,407 ) (29,554 ) (85,156 ) (119,656 ) General and administrative
(30,600 ) (30,335 ) (62,081 ) (59,902 ) Depreciation and
amortization (3,048 ) (2,105 ) (6,208 ) (3,996 ) Total expenses
(180,673 ) (178,662 ) (380,036 ) (416,126 ) Adjusted net income
before interest and other income (expense) 152,149 96,048 265,721
255,016 Interest expense, net of interest income (2). (7,977 )
(8,782 ) (16,659 ) (17,715 ) Other income (expense), net (1,527 )
(1,987 ) (1,392 ) (1,996 ) Adjusted net income $ 142,645 $
85,279 $ 247,670 $ 235,305 Adjusted net
income-OCG $ 49,682 $ 21,422 $ 79,842 $ 58,145 Adjusted net income
per Class A unit 0.79 0.44 1.28 1.24 Distributable earnings 127,506
111,140 253,231 246,336 Distributable earnings-OCG 44,882 28,635
86,725 63,368 Distributable earnings per Class A unit 0.72 0.59
1.39 1.36 Fee-related earnings 64,629 52,990 126,988 102,746
Fee-related earnings-OCG 23,817 16,221 46,876 28,954 Fee-related
earnings per Class A unit 0.38 0.34 0.75 0.62 Economic net income
166,187 17,619 207,383 241,167 Economic net income (loss)-OCG
59,880 (978 ) 67,683 54,939 Economic net income (loss) per Class A
unit 0.96 (0.02 ) 1.09 1.18 Weighted average number of
Operating Group units outstanding 155,057 153,839 154,433 153,540
Weighted average number of Class A units outstanding 62,617 48,372
62,256 46,727
Operating Metrics: Assets under
management (in millions): Assets under management $ 98,124 $
103,060 $ 98,124 $ 103,060 Management fee-generating assets under
management 79,516 78,596 79,516 78,596 Incentive-creating assets
under management 30,372 33,860 30,372 33,860
Uncalled capital commitments (3)
22,817 20,141 22,817 20,141 Accrued incentives (fund level): (4)
Incentives created (fund level) 171,142 (64,055 ) 124,872 201,407
Incentives created (fund level), net of associated incentive income
compensation expense 75,783 (36,066 ) 58,792 100,233 Accrued
incentives (fund level) 1,525,854 1,936,787 1,525,854 1,936,787
Accrued incentives (fund level), net of associated incentive income
compensation expense 771,253 1,005,785 771,253 1,005,785 (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 classified for
segment reporting as expenses and under GAAP as other income. In
addition, adjusted net income excludes the effect of (a) non-cash
equity-based compensation expense 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 as equity awards for segment reporting, (d) income taxes, (e)
other income or expenses applicable to OCG or its Intermediate
Holding Companies, and (f) the adjustment for non-controlling
interests. In the fourth quarter of 2015, the definition of
adjusted net income was modified to reflect differences with
respect to (a) third-party placement costs associated with
closed-end funds, which under GAAP are expensed as incurred, but
for adjusted net income are capitalized and amortized as general
and administrative expense in proportion to the associated
management fee stream, and (b) gains and losses resulting from
foreign-currency transactions and hedging activities, which under
GAAP are recognized as general and administrative expense whether
realized or unrealized in the current period, but for adjusted net
income unrealized gains and losses from foreign-currency hedging
activities are deferred until realized, at which time they are
included in the same revenue or expense line item as the underlying
exposure that was hedged. Foreign-currency transaction gains and
losses are included in other income (expense), net. Prior periods
have not been recast for the change related to third-party
placement costs, but have been recast to retroactively reflect the
change related to foreign-currency hedging. 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. CLO investments are carried at fair value for GAAP
reporting, whereas for segment reporting they are carried at
amortized cost, subject to any impairment charges. Investment
income on CLO investments is recognized in adjusted net income when
cash distributions are received. Cash distributions are allocated
between income and return of capital based on the effective yield
method. Adjusted net income is calculated at the Operating Group
level. For additional information regarding the reconciling
adjustments discussed above, please see Exhibit A. (2) Interest
income was $1.6 million and $1.2 million for the three months ended
June 30, 2016 and 2015, respectively, and $2.9 million and $2.2
million for the six months ended June 30, 2016 and 2015,
respectively. (3) Uncalled capital commitments represent undrawn
capital commitments by partners (including Oaktree as general
partner) of our closed-end funds through 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 many 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 June 30,2016
March 31,2016 June
30,2015 (in millions) Assets Under
Management: Closed-end funds $ 59,576 $ 59,081 $ 59,014
Open-end funds 33,667 33,008 38,813 Evergreen funds 4,881
4,785 5,233 Total $ 98,124 $ 96,874 $
103,060
Three Months Ended June 30, Twelve
Months Ended June 30, 2016 2015 2016
2015 (in millions) Change in Assets Under
Management: Beginning balance $ 96,874 $ 99,903 $ 103,060 $
91,089 Closed-end funds:
Capital commitments/other (1)
1,889 4,741 6,442 16,110 Acquisition (Highstar) — — — 2,349
Distributions for a realization
event/other (2)
(1,220 ) (1,405 ) (5,117 ) (7,101 ) Change in uncalled capital
commitments for funds entering or in liquidation (3) 13 (632 ) 118
(1,041 ) Foreign-currency translation (188 ) 249 (26 ) (1,350 )
Change in market value (4)
350 (209 ) (795 ) 760 Change in applicable leverage (349 ) 11 (60 )
1,125 Open-end funds: Contributions 1,002 1,501 3,445 7,021
Redemptions (1,225 ) (1,189 ) (7,638 ) (5,163 ) Foreign-currency
translation (126 ) 134 (16 ) (825 )
Change in market value (4)
1,008 27 (937 ) (200 ) Evergreen funds: Contributions or new
capital commitments 82 27 266 866 Redemptions or
distributions/other (204 ) (115 ) (442 ) (281 ) Distributions from
restructured funds (4 ) — (55 ) (44 ) Foreign-currency translation
(5 ) 2 (9 ) 9
Change in market value (4)
227 15 (112 ) (264 ) Ending balance $ 98,124 $
103,060 $ 98,124 $ 103,060 (1)
These amounts represent capital commitments, as well as the
aggregate par value of collateral assets and principal cash related
to new CLO formations. (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 as return of principal by CLOs, and
recallable distributions at the end of the investment period. (3)
The change in uncalled capital commitments reflects declines
attributable to funds entering their liquidation periods, as well
as capital contributions to funds in their liquidation periods for
deferred purchase obligations or other reasons. (4) The change in
market value reflects the change in NAV of our funds, less
management fees and other fund expenses, as well as changes in the
aggregate par value of collateral assets and principal cash held by
CLOs.
Management Fee-generating AUM As of June
30,2016 March 31,2016
June 30,2015 Management
Fee-generating Assets Under Management: (in millions)
Closed-end funds: Senior Loans $ 6,909 $ 7,184 $ 6,108 Other
closed-end funds 35,096 35,956 30,108 Open-end funds 33,597 32,939
38,731 Evergreen funds 3,914 3,829 3,649 Total
$ 79,516 $ 79,908 $ 78,596
Three
Months Ended June 30, Twelve Months Ended June 30,
2016 2015 2016 2015 Change in
Management Fee-generating Assets Under Management: (in
millions) Beginning balance $ 79,908 $ 78,497 $ 78,596 $
77,781 Closed-end funds:
Capital commitments to funds that pay fees
based on committed capital/other (1)
326 114 7,645 1,287 Acquisition (Highstar) — — — 1,882 Capital
drawn by funds that pay fees based on drawn capital, NAV or cost
basis 380 203 1,289 1,002
Change attributable to funds in
liquidation (2)
(1,462 ) (754 ) (3,040 ) (3,417 ) Change in uncalled capital
commitments for funds entering or in liquidation that pay fees
based on committed capital (3) 13 (36 ) 75 (640 )
Distributions by funds that pay fees based
on NAV/other (4)
(101 ) (136 ) (350 ) (440 ) Foreign-currency translation (181 ) 138
(66 ) (964 )
Change in market value (5)
122 (22 ) (82 ) (142 ) Change in applicable leverage (232 ) 63 318
1,135 Open-end funds: Contributions 1,005 1,501 3,446 6,976
Redemptions (1,231 ) (1,189 ) (7,644 ) (5,147 ) Foreign-currency
translation (126 ) 135 (16 ) (823 ) Change in market value 1,010 27
(920 ) (215 ) Evergreen funds: Contributions or capital drawn by
funds that pay fees based on drawn capital or NAV 90 168 786 833
Redemptions or distributions (209 ) (114 ) (404 ) (261 ) Change in
market value 204 1 (117 ) (251 ) Ending balance $
79,516 $ 78,596 $ 79,516 $ 78,596
(1) These amounts represent capital
commitments to funds that pay fees based on committed capital, as
well as the aggregate par value of collateral assets and principal
cash related to new CLO formations. (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, as well as
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 typically
declines as the fund sells assets. (3) The change in uncalled
capital commitments reflects declines attributable to funds
entering their liquidation periods, as well as capital
contributions to funds in their liquidation periods for deferred
purchase obligations or other reasons. (4) These amounts represent
distributions by funds that pay fees based on NAV, as well as
reductions in the par value of collateral assets and principal cash
resulting from the repayment of debt as return of principal by
CLOs. (5) The change in market value reflects certain funds that
pay management fees based on NAV and leverage, as applicable, as
well as changes in the aggregate par value of collateral assets and
principal cash held by CLOs.
As of June 30,2016
March 31,2016
June 30,2015 Reconciliation of Assets Under
Management to Management Fee-generating Assets Under
Management: (in millions) Assets under management $
98,124 $ 96,874 $ 103,060
Difference between assets under management
and committed capital or cost basis for applicable closed-end funds
(1)
(2,392 ) (1,829 ) (4,595 ) Undrawn capital commitments to funds
that have not yet commenced their investment periods (9,278 )
(8,143 ) (13,184 ) Undrawn capital commitments to funds for which
management fees are based on drawn capital, NAV or cost basis
(3,828 ) (4,095 ) (4,237 )
Oaktree’s general partner investments in
management fee-generating funds
(1,745 ) (1,727 ) (1,200 ) Funds that are no longer paying
management fees and co-investments that pay no management fees
(1,365 ) (1,172 ) (1,248 ) Management fee-generating assets under
management $ 79,516 $ 79,908 $ 78,596
(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.
As of Weighted Average Annual
Management Fee Rates: June 30,2016
March 31,2016
June 30,2015 Closed-end funds:
Senior Loans 0.50 % 0.50 % 0.50 % Other closed-end funds 1.51 1.52
1.54 Open-end funds 0.46 0.47 0.48 Evergreen funds 1.22 1.33 1.49
Overall 0.97 0.98 0.93
Incentive-creating AUM
As of June 30,2016
March 31,2016
June 30,2015 Incentive-creating
Assets Under Management: (in millions) Closed-end funds
$ 28,462 $ 29,251 $ 31,811 Evergreen funds 1,910 1,954 2,049 Total
$ 30,372 $ 31,205 $ 33,860
Accrued Incentives (Fund Level) and
Incentives Created (Fund Level)
As of or for the Three MonthsEnded June 30,
As of or for the Six MonthsEnded June 30, 2016
2015 2016
2015 Accrued Incentives (Fund Level): (in
thousands) Beginning balance $ 1,442,359 $ 2,061,990
$ 1,585,217 $ 1,949,407 Incentives created
(fund level): Closed-end funds 166,850 (64,685 ) 120,005 200,772
Evergreen funds 4,292 630 4,867 635
Total incentives created (fund level) 171,142 (64,055 )
124,872 201,407 Less: segment incentive income
recognized by us (87,647 ) (61,148 ) (184,235 ) (214,027 ) Ending
balance $ 1,525,854 $ 1,936,787 $ 1,525,854 $
1,936,787 Accrued incentives (fund level), net of associated
incentive income compensation expense $ 771,253 $ 1,005,785
$ 771,253 $ 1,005,785
Uncalled Capital Commitments
Uncalled capital commitments were $22.8 billion as of June 30,
2016, $21.4 billion as of March 31, 2016 and $20.1 billion as of
June 30, 2015.
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 (1)
Adjusted net income and adjusted net income-OCG, as well as per
unit data, are set forth below:
Three Months Ended June 30,
Six Months Ended June 30, 2016
2015 2016
2015 (in thousands, except per unit data) Revenues:
Management fees $ 197,450 $ 190,197 $ 398,720 $ 380,292 Incentive
income 87,647 61,148 184,235 214,027 Investment income 47,725
23,365 62,802 76,823 Total revenues
332,822 274,710 645,757 671,142
Expenses: Compensation and benefits (99,173 ) (104,767 ) (203,443 )
(213,648 ) Equity-based compensation (12,445 ) (11,901 ) (23,148 )
(18,924 ) Incentive income compensation (35,407 ) (29,554 ) (85,156
) (119,656 ) General and administrative (30,600 ) (30,335 ) (62,081
) (59,902 ) Depreciation and amortization (3,048 ) (2,105 ) (6,208
) (3,996 ) Total expenses (180,673 ) (178,662 ) (380,036 ) (416,126
) Adjusted net income before interest and other income (expense)
152,149 96,048 265,721 255,016 Interest expense, net of interest
income (7,977 ) (8,782 ) (16,659 ) (17,715 ) Other income
(expense), net (1,527 ) (1,987 ) (1,392 ) (1,996 ) Adjusted net
income 142,645 85,279 247,670 235,305 Adjusted net income
attributable to OCGH non-controlling interest (85,039 ) (58,464 )
(147,801 ) (164,371 ) Non-Operating Group expenses (201 ) (626 )
(465 ) (960 ) Adjusted net income-OCG before income taxes 57,405
26,189 99,404 69,974 Income taxes-OCG (7,723 ) (4,767 ) (19,562 )
(11,829 ) Adjusted net income-OCG $ 49,682 $ 21,422 $
79,842 $ 58,145 Adjusted net income per Class A unit
$ 0.79 $ 0.44 $ 1.28 $ 1.24 Weighted
average number of Class A units outstanding 62,617 48,372
62,256 46,727 (1) In the
fourth quarter of 2015, the definition of adjusted net income was
modified to reflect differences with respect to (a) third-party
placement costs associated with closed-end funds, which under GAAP
are expensed as incurred, but for adjusted net income are
capitalized and amortized as general and administrative expense in
proportion to the associated management fee stream, and (b) gains
and losses resulting from foreign-currency transactions and hedging
activities, which under GAAP are recognized as general and
administrative expense whether realized or unrealized in the
current period, whereas for adjusted net income unrealized gains
and losses from foreign-currency hedging activities are deferred
until realized, at which time they are included in the same revenue
or expense line item as the underlying exposure that was hedged.
Foreign-currency transaction gains and losses are included in other
income (expense), net. Prior periods have not been recast for the
change related to third-party placement costs, but have been recast
to retroactively reflect the change related to foreign-currency
hedging. Placement costs associated with closed-end funds amounted
to $2.8 million and $3.7 million, respectively, for the second
quarter and first six months of 2015, and remain expensed as
incurred in those periods for both GAAP and ANI purposes.
Investment Income
Three Months Ended June 30, Six Months Ended June
30, 2016 2015 2016
2015 Income (loss) from investments in
funds:
(in thousands) Oaktree funds: Corporate Debt $ 12,637
$ 4,662 $ (906 ) $ 16,013 Convertible Securities 48 63 (896 ) 1,011
Distressed Debt 10,276 (6,648 ) 19,167 (4,712 ) Control Investing
1,280 1,526 (167 ) 19,283 Real Estate 1,457 3,254 4,562 9,023
Listed Equities 2,270 6,010 5,758 9,150 Non-Oaktree funds 3,075
2,140 3,495 4,733 Income from investments in companies 16,682
12,358 31,789 22,322 Total investment
income $ 47,725 $ 23,365 $ 62,802 $ 76,823
Distributable Earnings and Distribution Calculation
Distributable earnings and the calculation of distributions are
set forth below:
Three Months Ended June 30,
Six Months Ended June 30, 2016
2015 2016
2015 Distributable Earnings: (in thousands, except
per unit data) Revenues: Management fees $ 197,450 $ 190,197 $
398,720 $ 380,292 Incentive income 87,647 61,148 184,235 214,027
Receipts of investment income from funds
(1)
10,694 30,197 23,617 54,158 Receipts of investment income from
companies 10,869 8,175 24,427 16,971
Total distributable earnings revenues 306,660 289,717
630,999 665,448 Expenses: Compensation and benefits
(99,173 ) (104,767 ) (203,443 ) (213,648 ) Incentive income
compensation (35,407 ) (29,554 ) (85,156 ) (119,656 ) General and
administrative (30,600 ) (30,335 ) (62,081 ) (59,902 ) Depreciation
and amortization (3,048 ) (2,105 ) (6,208 ) (3,996 ) Total expenses
(168,228 ) (166,761 ) (356,888 ) (397,202 ) Other income (expense):
Interest expense, net of interest income (7,977 ) (8,782 ) (16,659
) (17,715 ) Operating Group income taxes (1,422 ) (1,047 ) (2,829 )
(2,199 ) Other income (expense), net (1,527 ) (1,987 ) (1,392 )
(1,996 ) Distributable earnings $ 127,506 $ 111,140 $
253,231 $ 246,336
Distribution
Calculation: Operating Group distribution with respect to the
period $ 108,460 $ 93,940 $ 217,005 $ 212,398 Distribution per
Operating Group unit $ 0.70 $ 0.61 $ 1.40 $ 1.38 Adjustments per
Class A unit: Distributable earnings-OCG income tax expense (0.03 )
— (0.09 ) (0.02 ) Tax receivable agreement (0.08 ) (0.10 ) (0.16 )
(0.20 ) Non-Operating Group expenses (0.01 ) (0.01 ) (0.02 ) (0.02
)
Distribution per Class A unit (2)
$ 0.58 $ 0.50 $ 1.13 $ 1.14 (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. Additionally, any impairment charges on our CLO
investments included in adjusted net income are, for distributable
earnings purposes, amortized over the remaining investment period
of the respective CLO, in order to align with the timing of
expected cash flows. (2) With respect to the quarter ended June 30,
2016, the distribution was announced on July 28, 2016 and is
payable on August 12, 2016.
Units Outstanding
Three Months Ended June 30, Six Months Ended June
30, 2016 2015 2016
2015 (in thousands) Weighted
Average Units: OCGH 92,440 105,467 92,177 106,813 Class A
62,617 48,372 62,256 46,727 Total 155,057 153,839 154,433 153,540
Units Eligible for Fiscal Period Distribution: OCGH 92,340
105,628 Class A 62,603 48,372 Total 154,943 154,000
Fee-related Earnings
Fee-related earnings and fee-related earnings-OCG, as well as
per unit data, are set forth below:
Three Months Ended June 30,
Six Months Ended June 30, 2016
2015 2016
2015 (in thousands, except per unit data) Management
fees: Closed-end funds $ 145,953 $ 129,147 $ 294,204 $ 260,794
Open-end funds 38,776 46,577 77,189 91,018 Evergreen funds 12,721
14,473 27,327 28,480
Total management fees
197,450 190,197 398,720 380,292
Expenses: Compensation and benefits (99,173 ) (104,767 ) (203,443 )
(213,648 ) General and administrative (30,600 ) (30,335 ) (62,081 )
(59,902 ) Depreciation and amortization (3,048 ) (2,105 ) (6,208 )
(3,996 ) Total expenses (132,821 ) (137,207 ) (271,732 ) (277,546 )
Fee-related earnings 64,629 52,990 126,988 102,746 Fee-related
earnings attributable to OCGH non-controlling interest (38,531 )
(36,329 ) (75,795 ) (71,453 ) Non-Operating Group expenses (241 )
(652 ) (536 ) (987 ) Fee-related earnings-OCG before income taxes
25,857 16,009 50,657 30,306 Fee-related earnings-OCG income taxes
(2,040 ) 212 (3,781 ) (1,352 ) Fee-related earnings-OCG $
23,817 $ 16,221 $ 46,876 $ 28,954
Fee-related earnings per Class A unit $ 0.38 $ 0.34 $
0.75 $ 0.62 Weighted average number of Class A units
outstanding 62,617 48,372 62,256 46,727
Segment Statements of Financial
Condition
As of June 30,
2016
March 31,2016
June 30,2015
(in thousands) Assets: Cash and cash-equivalents $
403,417 $ 342,079 $ 308,192 U.S. Treasury securities 684,224
618,899 681,197 Corporate investments 1,371,978 1,352,362 1,560,235
Deferred tax assets 426,119 425,904 430,756 Receivables and other
assets 274,635 397,416 265,080 Total assets $
3,160,373 $ 3,136,660 $ 3,245,460
Liabilities and
Capital: Liabilities: Accounts payable and accrued expenses $
262,392 $ 253,305 $ 267,925 Due to affiliates 358,716 356,851
371,276 Debt obligations (1) 795,958 845,736 845,968
Total liabilities 1,417,066 1,455,892 1,485,169
Capital: OCGH non-controlling interest in consolidated subsidiaries
982,684 945,519 1,146,303 Unitholders’ capital attributable to
Oaktree Capital Group, LLC 760,623 735,249 613,988
Total capital 1,743,307 1,680,768 1,760,291 Total
liabilities and capital $ 3,160,373 $ 3,136,660 $
3,245,460 (1) In the first quarter of 2016,
Oaktree adopted accounting guidance that requires debt issuance
costs, which were previously included in receivables and other
assets, to be netted with the associated outstanding borrowings.
Prior periods have been recast for this change.
Corporate Investments
As of June 30,2016
March 31,2016
June 30,2015 Investments in funds:
(in thousands) Oaktree funds: Corporate Debt $ 417,883 $
381,456 $ 491,685 Convertible Securities 1,627 1,579 19,709
Distressed Debt 380,324 379,507 416,532 Control Investing 251,612
258,753 256,963 Real Estate 113,406 127,731 142,513 Listed Equities
116,954 111,185 152,914 Non-Oaktree funds 70,551 66,321 65,351
Investments in companies 19,621 25,830 14,568 Total
corporate investments $ 1,371,978 $ 1,352,362 $
1,560,235
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 June 30,
2016 Investment Period
Total
Committed
Capital
Drawn
Capital(1)
Fund Net
Income
Since
Inception
Distri-
butions
Since
Inception
Net
Asset
Value
Manage-
ment Fee-
gener-
ating
AUM
Oaktree
Segment
Incentive
Income
Recog-
nized
Accrued
Incentives
(Fund
Level)(2)
Unreturned
Drawn
Capital Plus
Accrued
Preferred
Return(3)
IRR Since
Inception(4)
Multiple
of Drawn
Capital(5)
Start Date End Date
Gross
Net
(in millions) Distressed Debt Oaktree Opportunities
Fund Xb TBD — $ 7,985 $ — $ — $ — $ — $ — $ — $ — $ — n/a n/a n/a
Oaktree Opportunities Fund X (6) Jan. 2016 Jan. 2019 3,241 486 119
1 604 3,160 — 23 516 nm nm 1.3x Oaktree Opportunities Fund IX Jan.
2014 Jan. 2017 5,066 5,066 (215 ) 4 4,847 4,966 — — 5,988 1.1%
(2.1)% 1.0 Oaktree Opportunities Fund VIIIb Aug. 2011 Aug. 2014
2,692 2,692 374 1,133 1,933 2,140 52 — 2,469 6.4 3.1 1.2 Special
Account B Nov. 2009 Nov. 2012 1,031 1,100 454 1,120 434 423 15 —
433 12.5 9.9 1.5 Oaktree Opportunities Fund VIII Oct. 2009 Oct.
2012 4,507 4,507 1,871 4,544 1,834 1,867 144 112 1,668 11.7 8.3 1.5
Special Account A Nov. 2008 Oct. 2012 253 253 280 463 70 75 42 14 —
27.8 22.5 2.1 OCM Opportunities Fund VIIb May 2008 May 2011 10,940
9,844 8,781 17,329 1,296 1,266 1,453 253 — 22.0 16.7 2.0 OCM
Opportunities Fund VII Mar. 2007 Mar. 2010 3,598 3,598 1,461 4,647
412 689 81 — 532 10.3 7.5 1.5 OCM Opportunities Fund VI Jul. 2005
Jul. 2008 1,773 1,773 1,295 2,913 155 64 197 56 — 11.9 8.8 1.8 OCM
Opportunities Fund V Jun. 2004 Jun. 2007 1,179 1,179 964 2,097 46 —
179 10 — 18.5 14.2 1.9
Legacy funds (7)
Various Various 9,543 9,543 8,205 17,695 53 — 1,113 11 — 24.2 19.3
1.9 22.1% 16.2%
Real Estate Opportunities Oaktree Real
Estate Opportunities Fund VII (8) Jan. 2016 Jan. 2020 $ 2,395 $ — $
(9 ) $ 6 $ (15 ) $ 1,936 $ — $ — $ — n/a n/a n/a Oaktree Real
Estate Opportunities Fund VI Aug. 2012 Aug. 2016 2,677 2,677 1,039
678 3,038 2,454 10 191 2,522 19.1% 12.8% 1.5x Oaktree Real Estate
Opportunities Fund V Mar. 2011 Mar. 2015 1,283 1,283 885 1,410 758
446 56 113 335 17.7 13.0 1.8 Special Account D Nov. 2009 Nov. 2012
256 264 165 305 124 73 3 13 78 14.2 12.1 1.7 Oaktree Real Estate
Opportunities Fund IV Dec. 2007 Dec. 2011 450 450 388 696 142 110
36 38 — 16.2 11.1 2.0 OCM Real Estate Opportunities Fund III Sep.
2002 Sep. 2005 707 707 622 1,300 29 — 117 6 — 15.3 11.4 1.9
Legacy funds (7)
Various Various 1,634 1,610 1,399 3,009 — — 112 — — 15.2 12.0 1.9
15.6% 12.0%
Real Estate Debt
Oaktree Real Estate Debt Fund (9)
Sep. 2013 Oct. 2016 $ 1,112 $ 506 $ 66 $ 405 $ 167 $ 492 $ — $ 10 $
118 25.1% 18.1% 1.2x
Oaktree PPIP Fund (10)
Dec. 2009 Dec. 2012 2,322 1,113 457 1,570 — — 47 — — 28.2 n/a 1.4
European Principal Investments (11) Oaktree
European Principal Fund IV TBD — € 840 € — € — € — € — € 8 € — € —
€ — n/a n/a n/a Oaktree European Principal Fund III Nov. 2011 Nov.
2016 € 3,164 € 2,750 € 1,270 € 417 € 3,603 € 3,227 € — € 246 €
2,957 19.5% 12.4% 1.6x OCM European Principal Opportunities Fund II
Dec. 2007 Dec. 2012 € 1,759 € 1,731 € 435 € 1,476 € 690 € 1,045 €
29 € — € 1,028 8.9 4.9 1.4 OCM European Principal Opportunities
Fund Mar. 2006 Mar. 2009 $ 495 $ 473 $ 454 $ 857 $ 70 $ — $ 57 $ 30
$ — 11.7 8.9 2.1 13.0% 8.4%
European Private Debt
Oaktree European Capital Solutions Fund
(6)(9)
Dec. 2015 Dec. 2018 € 287 € 74 € — € — € 74 € 87 € — € — € 75 nm nm
1.0x
Oaktree European Dislocation Fund (9)
Oct. 2013 Oct. 2016 € 294 € 182 € 29 € 140 € 71 € 178 € — € 4 € 54
23.1% 16.5% 1.2 Special Account E Oct. 2013 Apr. 2015 € 379 € 261 €
50 € 167 € 144 € 161 € — € 7 € 124 14.4 11.1 1.2 16.6% 12.3%
As of June 30,
2016 Investment Period
Total
Committed
Capital
Drawn
Capital(1)
Fund Net
Income
Since
Inception
Distri-
butions
Since
Inception
Net
Asset
Value
Manage-
ment Fee-
gener-
ating
AUM
Oaktree
Segment
Incentive
Income
Recog-
nized
Accrued
Incentives
(Fund
Level)(2)
Unreturned
Drawn
Capital Plus
Accrued
Preferred
Return(3)
IRR Since
Inception(4)
Multiple
of Drawn
Capital(5)
Start Date End Date Gross
Net (in millions) Global Principal Investments
Oaktree Principal Fund VI Nov. 2015 Nov. 2018 $ 1,223 $ 208 $ 24 $
32 $ 200 $ 1,167 $ — $ 5 $ 187 40.3% 14.8% 1.2x Oaktree Principal
Fund V Feb. 2009 Feb. 2015 2,827 2,586 381 1,367 1,600 1,839 50 —
2,175 7.8 3.2 1.3 Special Account C Dec. 2008 Feb. 2014 505 460 190
362 288 354 21 — 288 11.3 8.0 1.5 OCM Principal Opportunities Fund
IV Oct. 2006 Oct. 2011 3,328 3,328 2,233 3,811 1,750 854 22 234
1,455 11.1 8.2 1.8 OCM Principal Opportunities Fund III Nov. 2003
Nov. 2008 1,400 1,400 890 2,174 116 — 151 22 — 13.9 9.6 1.8
Legacy funds (7)
Various Various 2,301 2,301 1,839 4,138 2 — 236 — — 14.5 11.6 1.8
12.8% 9.2%
Power Opportunities Oaktree Power Opportunities
Fund IV (6) Nov. 2015 Nov. 2020 $ 1,106 $ 107 $ (12 ) $ — $ 95 $
1,078 $ — $ — $ 109 nm nm 1.0x Oaktree Power Opportunities Fund III
Apr. 2010 Apr. 2015 1,062 698 347 575 470 407 14 52 293 22.6% 13.5%
1.6 OCM/GFI Power Opportunities Fund II Nov. 2004 Nov. 2009 1,021
541 1,450 1,982 9 — 100 1 — 76.1 58.8 3.9 OCM/GFI Power
Opportunities Fund Nov. 1999 Nov. 2004 449 383 251 634 — — 23 — —
20.1 13.1 1.8 34.7% 26.6%
Infrastructure Investing
Highstar Capital IV (12)
Nov. 2010 Nov. 2016 $ 2,585 $ 2,453 $ 490 $ 411 $ 2,532 $ 1,882 $ —
$ 6 $ 1,948 16.7% 9.1% 1.4x
Mezzanine Finance Oaktree
Mezzanine Fund IV (9) Oct. 2014 Oct. 2019 $ 852 $ 248 $ 17 $ 13 $
252 $ 243 $ — $ 1 $ 251 11.5% 8.3% 1.1x Oaktree Mezzanine Fund III
(13). Dec. 2009 Dec. 2014 1,592 1,423 371 1,330 464 431 10 20 439
15.1
10.4/8.2
1.4 OCM Mezzanine Fund II Jun. 2005 Jun. 2010 1,251 1,107 528 1,489
146 — — — 162 11.3 7.8 1.6
OCM Mezzanine Fund (14)
Oct. 2001 Oct. 2006 808 773 302 1,073 2 — 38 — — 15.4
10.8/10.5
1.5 13.2% 8.9%
Emerging Markets Opportunities Oaktree
Emerging Market Opportunities Fund Sep. 2013 Sep. 2016 $ 384 $ 220
$ 13 $ 1 $ 232 $ 364 $ — $ — $ 250 7.1% 3.4% 1.1x Special Account F
Jan. 2014 Jan. 2017 253 157 10 — 167 165 — —
177 6.1 3.9 1.1 73,069 (11) 34,174 (11) 1,506 (11) 6.7% 3.6% Other
(15) 12,328 7,887 16 Total (16) $ 85,397
(17) $ 42,061 $ 1,522 (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) The IRR is
not considered meaningful (“nm”) as the period from the initial
capital contribution through June 30, 2016 was less than 18 months.
(7) 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. (8)
A portion of this fund pays management fees based on drawn, rather
than committed, capital. (9) Management fees during the investment
period are calculated on drawn capital or cost basis, rather than
committed capital. As a result, as of June 30, 2016 management
fee-generating AUM included only that portion of committed capital
that had been drawn. (10) Due to differences in the allocation of
income and expenses to this fund’s two primary limited partners,
the U.S. Treasury and Oaktree PPIP Private Fund, a combined net IRR
is not presented. Of the $2,322 million in capital commitments,
$1,161 million related to the Oaktree PPIP Private Fund, whose
gross and net IRR were 24.7% and 18.6%, respectively. (11)
Aggregate IRRs or totals are based on the conversion of cash flows
or amounts, respectively, from euros to USD using the June 30, 2016
spot rate of $1.11. (12) The fund includes co-investments of $555
million in AUM, most of which do not pay management fees or an
incentive allocation. These 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 distribution
waterfall, whereby the general partner may receive an incentive
allocation 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 incentives
may be subject to repayment, or clawback. As of June 30, 2016,
Oaktree had not recognized any incentive income from this fund. The
accrued incentives (fund level) amount shown for this fund
represents Oaktree’s effective 8% of the potential incentives
generated by this fund in accordance with the terms of the Highstar
acquisition. (13) 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 8.2%. The combined net IRR for Class A
and Class B interests was 9.4%. (14) 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 10.6%. (15) This
includes our closed-end Senior Loan funds, Oaktree Asia Special
Situations Fund, OCM Asia Principal Opportunities Fund, CLOs, a
non-Oaktree fund, certain separate accounts, co-investments and
certain evergreen separate accounts in our Real Estate Debt,
Emerging Markets Opportunities and Emerging Markets Total Return
strategies. (16) This excludes two closed-end funds with management
fee-generating AUM aggregating $550 million as of June 30, 2016,
which has been included as part of the Strategic Credit strategy
within the evergreen funds table, and includes certain evergreen
separate accounts in our Real Estate Debt, Emerging Markets
Opportunities and Emerging Markets Total Return strategies with an
aggregate $606 million of management fee-generating AUM. (17) The
aggregate change in drawn capital for the three months ended June
30, 2016 was $1.0 billion.
Open-end
Funds
Manage-
ment Fee-
gener-
ating AUM
as of
June 30,
2016
Twelve Months Ended
June 30, 2016
Since Inception through June 30, 2016
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 $ 15,871 1.0 % 0.5 % 0.9 % 9.3 % 8.8 % 8.3 % 0.78 0.54 Global
High Yield Bonds Nov. 2010 4,349 1.9 1.4 2.2 6.9 6.3 6.2 1.01 0.94
European High Yield Bonds May 1999 1,370 5.4 4.8 4.5 8.0 7.5 6.1
0.68 0.41 U.S. Convertibles Apr. 1987 3,554 (8.0 ) (8.5 ) (4.5 )
9.3 8.7 7.9 0.47 0.34 Non-U.S. Convertibles Oct. 1994 1,566 (2.0 )
(2.5 ) (3.4 ) 8.3 7.8 5.6 0.75 0.38 High Income Convertibles Aug.
1989 798 3.9 3.1 0.9 11.4 10.5 8.1 1.04 0.57 U.S. Senior Loans
Sept. 2008 1,588 (0.6 ) (1.1 ) 0.9 5.8 5.3 5.0 1.00 0.59 European
Senior Loans May 2009 1,550 3.5 3.0 2.0 8.5 8.0 9.2 1.67 1.67
Emerging Markets Equities Jul. 2011 2,951 (15.2 ) (15.8 )
(12.1 ) (3.7 ) (4.4 ) (3.8 ) (0.19) (0.21) Total $ 33,597
(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 June 30, 2016
Twelve Months EndedJune 30,
2016
Since Inception throughJune 30, 2016 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 $ 3,105 $ 2,386
n/a
(1.8
)%
(3.4 )% 7.3 % 5.0 % Value Opportunities Sept. 2007 1,170 1,112 —
(3) (6.4 ) (8.4 ) 8.8 4.7 Value Equities (4) May 2012 307 242 — (3)
(10.0 ) (11.5 ) 15.1 9.9 Emerging Markets Absolute Return Apr. 1997
138 118 — (3) (4.6 ) (5.8 ) 13.0 8.7 3,858 —
Restructured funds — 4
Total (2)(5)
$ 3,858 $ 4 (1) Returns
represent time-weighted rates of return. (2) Includes two
closed-end funds with an aggregate $765 million and $550 million of
AUM and management fee-generating AUM, respectively. (3) As of June
30, 2016, the aggregate depreciation below high-water marks
previously established for individual investors in the fund totaled
approximately $254 million for Value Opportunities, $22 million for
Value Equities and $9 million for Emerging Markets Absolute Return.
(4) Includes performance results of a proprietary fund with an
initial capital commitment of $25 million since its inception on
May 1, 2012. (5) Total excludes certain evergreen separate accounts
in our Real Estate Debt, Emerging Markets Opportunities and
Emerging Markets Total Return strategies with an aggregate $606
million of management fee-generating AUM as of June 30, 2016.
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 classified for
segment reporting as expenses and under GAAP as other income. In
addition, ANI excludes the effect of (a) non-cash equity-based
compensation expense 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 as equity awards for segment reporting, (d) income taxes,
(e) other income or expenses applicable to OCG or its
Intermediate Holding Companies, and (f) the adjustment for
non-controlling interests. In the fourth quarter of 2015, the
definition of ANI was modified to reflect differences with respect
to (a) third-party placement costs associated with closed-end
funds, which under GAAP are expensed as incurred, but for ANI are
capitalized and amortized as general and administrative expense in
proportion to the associated management fee stream, and (b) gains
and losses resulting from foreign-currency transactions and hedging
activities, which under GAAP are recognized as general and
administrative expense whether realized or unrealized in the
current period, but for ANI unrealized gains and losses from
foreign-currency hedging activities are deferred until realized, at
which time they are included in the same revenue or expense line
item as the underlying exposure that was hedged. Foreign-currency
transaction gains and losses are included in other income
(expense), net. Prior periods have not been recast for the change
related to third-party placement costs, but have been recast to
retroactively reflect the change related to foreign-currency
hedging. 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. CLO investments are carried
at fair value for GAAP reporting, whereas for segment reporting
they are carried at amortized cost, subject to any impairment
charges. Investment income on CLO investments is recognized in ANI
when cash distributions are received. Cash distributions are
allocated between income and return of capital based on the
effective yield method. 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 and investment income arising
from our one-fifth ownership stake in DoubleLine generally have
been subject to corporate-level taxation, and most of our incentive
income and other 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 and DoubleLine-related investment income
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. Our
AUM includes amounts for which we charge no management fees.
- Management fee-generating assets
under management (“management fee-generating AUM”) is a
forward-looking metric and reflects the beginning AUM on which we
will earn management fees in the following quarter. Our closed-end
funds typically pay management fees based on committed capital,
drawn capital or cost basis 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 is required to consolidate as of the respective reporting
date.
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.
Additionally, any impairment charges on our CLO investments
included in ANI are, for distributable earnings purposes, amortized
over the remaining investment period of the respective CLO, in
order to align with the timing of expected cash flows. In addition,
distributable earnings differs from ANI in that it is net of
Operating Group income taxes and excludes non-cash equity-based
compensation expense.
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,” revenue
recognition 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.
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 a specified 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 (“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 non-cash equity-based compensation
expense related to unit grants made after our initial public
offering. FRE is considered baseline because it applies all cash
compensation and benefits other than incentive income compensation
expense, as well as all general and administrative expenses, to
management fees, even though a significant portion of those
expenses is attributable to incentive and investment income. FRE is
presented before income taxes.
Fee-related earnings–OCG, or fee-related earnings per Class A
unit, is a non-GAAP measure calculated to provide Class A
unitholders with a measure that shows the portion of FRE
attributable to their ownership. Fee-related earnings–OCG
represents FRE including the effect of (a) the OCGH
non-controlling interest, (b) other income or expenses, such
as income tax expense, applicable to OCG or its Intermediate
Holding Companies and (c) any Operating Group income taxes
attributable to OCG. Fee-related earnings–OCG income taxes is
calculated excluding any segment incentive income or investment
income (loss).
Intermediate Holding Companies collectively refers to the
subsidiaries wholly owned by us.
Invested capital reflects the aggregate gross capital
invested by our incentive-creating closed-end and similar funds,
including investments made using drawn capital, recycled capital
and fund-level credit facilities.
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 in which we have a minority economic
interest and indirect control that either (i) act as or control the
general partners and investment advisers of our funds or (ii) hold
interests in other entities or investments generating income for
us.
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 an Oaktree custom non-U.S. convertible index that
represents the JACI Global ex-U.S. (Local) Index from inception
through December 31, 2014 and the Thomson Reuters Global Focus
ex-U.S. (USD hedged) Index thereafter;
- our High Income Convertible Securities
strategy, to the Citigroup U.S. High Yield Market Index; and
- our Emerging Markets Equities 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 June 30,
Six Months Ended June 30, 2016
2015 2016
2015 (in thousands) Fee-related earnings (1) $ 64,629
$ 52,990 $ 126,988 $ 102,746 Incentive income 87,647 61,148 184,235
214,027 Incentive income compensation (35,407 ) (29,554 ) (85,156 )
(119,656 ) Investment income 47,725 23,365 62,802 76,823
Equity-based compensation (2) (12,445 ) (11,901 ) (23,148 ) (18,924
) Interest expense, net of interest income (7,977 ) (8,782 )
(16,659 ) (17,715 ) Other income (expense), net (1,527 ) (1,987 )
(1,392 ) (1,996 ) Adjusted net income 142,645 85,279 247,670
235,305 Incentive income (3) 54 5,805 (39,888 ) (11,573 ) Incentive
income compensation (3) (54 ) (5,657 ) 39,888 17,553 Investment
income (4) 3,149 — 13,578 — Equity-based compensation (5) (2,281 )
(4,182 ) (5,473 ) (8,865 ) Placement costs (6) (1,210 ) — (7,914 )
— Foreign-currency hedging (7) (3,665 ) 67 (9,531 ) 5,379
Acquisition-related items (8) 1,889 (1,695 ) 1,498 (3,502 ) Income
taxes (9) (8,571 ) (5,485 ) (21,251 ) (13,360 ) Non-Operating Group
expenses (10) (201 ) (626 ) (465 ) (960 ) Non-controlling interests
(10) (82,708 ) (53,692 ) (140,987 ) (161,910 ) Net income
attributable to Oaktree Capital Group, LLC $ 49,047 $ 19,814
$ 77,125 $ 58,067 (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 expense related to unit grants
made after our initial public offering. (2) This adjustment adds
back the effect of equity-based compensation expense 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 differences in the recognition of
investment income related to corporate investments in CLOs which
under GAAP are marked-to-market but for segment reporting are
accounted for at amortized cost, subject to impairment between
adjusted net income and net income attributable to OCG. (5) This
adjustment adds back the effect of (a) equity-based compensation
expense 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 as
equity awards for segment reporting. (6) This adjustment adds back
the effect of timing differences with respect to the recognition of
third-party placement costs associated with closed-end funds
between adjusted net income and net income attributable to OCG. (7)
This adjustment adds back the effect of timing differences
associated with the recognition of unrealized gains and losses
related to foreign-currency hedging between adjusted net income and
net income attributable to OCG. (8) This adjustment adds back the
effect of acquisition-related items associated with the
amortization of intangibles and changes in the contingent
consideration liability. (9) Because adjusted net income and
fee-related earnings are pre-tax measures, this adjustment adds
back the effect of income tax expense. (10) 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
non-controlling interests.
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 June 30,
Six Months Ended June 30, 2016
2015 2016
2015 (in thousands) Fee-related earnings-OCG (1) $
23,817 $ 16,221 $ 46,876 $ 28,954 Incentive income attributable to
OCG 35,395 19,227 74,263 64,185 Incentive income compensation
attributable to OCG (14,298 ) (9,292 ) (34,318 ) (35,789 )
Investment income attributable to OCG 19,274 7,346 25,341 23,067
Equity-based compensation attributable to OCG (2) (5,026 ) (3,742 )
(9,333 ) (5,807 ) Interest expense, net of interest income
attributable to OCG (3,181 ) (2,735 ) (6,644 ) (5,361 ) Other
income (expense) attributable to OCG (616 ) (624 ) (562 ) (627 )
Non-fee-related earnings income taxes attributable to OCG (3)
(5,683 ) (4,979 ) (15,781 ) (10,477 ) Adjusted net income-OCG (1)
49,682 21,422 79,842 58,145 Incentive income attributable to OCG
(4) 22 1,825 (16,051 ) (3,285 ) Incentive income compensation
attributable to OCG (4) (22 ) (1,778 ) 16,051 5,047 Investment
income attributable to OCG (5) 1,271 — 5,468 — Equity-based
compensation attributable to OCG (6) (921 ) (1,315 ) (2,206 )
(2,692 ) Placement costs attributable to OCG (7) (488 ) — (3,186 )
— Foreign-currency hedging attributable to OCG (8) (1,481 ) 21
(3,840 ) 1,583 Acquisition-related items attributable to OCG (9)
763 (533 ) 605 (1,064 ) Non-controlling interests attributable to
OCG (9) 221 172 442 333 Net income
attributable to Oaktree Capital Group, LLC $ 49,047 $ 19,814
$ 77,125 $ 58,067 (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 expense 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 between adjusted net
income-OCG and net income attributable to OCG. (5) This adjustment
adds back the effect of differences in the recognition of
investment income related to corporate investments in CLOs which
under GAAP are marked-to-market but for segment reporting are
accounted for at amortized cost, subject to impairment between
adjusted net income-OCG and net income attributable to OCG. (6)
This adjustment adds back the effect of (a) equity-based
compensation expense 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 as equity awards for segment reporting. (7)
This adjustment adds back the effect of timing differences with
respect to the recognition of third-party placement costs
associated with closed-end funds between adjusted net income-OCG
and net income attributable to OCG. (8) This adjustment adds back
the effect of timing differences associated with the recognition of
unrealized gains and losses related to foreign-currency hedging
between adjusted net income-OCG and net income attributable to OCG.
(9) This adjustment adds back the effect of (a) acquisition-related
items associated with the amortization of intangibles and changes
in the contingent consideration liability and (b) non-controlling
interests.
The following table reconciles fee-related earnings revenues and
segment revenues to GAAP revenues.
Three Months Ended June 30,
Six Months Ended June 30, 2016
2015 2016
2015 (in thousands) Fee-related earnings revenues $
197,450 $ 190,197 $ 398,720 $ 380,292 Incentive income 87,647
61,148 184,235 214,027 Investment income 47,725 23,365
62,802 76,823 Segment revenues 332,822 274,710
645,757 671,142 Consolidated funds (1) (9,106 ) (207,529 ) (38,104
) (540,460 ) Investment income (2) (41,000 ) (15,694 ) (70,447 )
(28,376 ) GAAP revenues $ 282,716 $ 51,487 $ 537,206
$ 102,306 (1) This adjustment
reflects the elimination of amounts attributable to the
consolidated funds, as well as the reclassification of gains and
losses related to foreign-currency hedging activities to general
and administrative expense. (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 June 30,
Six Months Ended June 30, 2016
2015 2016
2015 (in thousands) Distributable earnings $ 127,506
$ 111,140 $ 253,231 $ 246,336 Investment income (1) 47,725 23,365
62,802 76,823 Receipts of investment income from funds (2) (10,694
) (30,197 ) (23,617 ) (54,158 ) Receipts of investment income from
companies (10,869 ) (8,175 ) (24,427 ) (16,971 ) Equity-based
compensation (3) (12,445 ) (11,901 ) (23,148 ) (18,924 ) Operating
Group income taxes 1,422 1,047 2,829 2,199
Adjusted net income 142,645 85,279 247,670 235,305
Reconciling adjustments (4) (93,598 ) (65,465 ) (170,545 ) (177,238
) Net income attributable to Oaktree Capital Group, LLC $ 49,047
$ 19,814 $ 77,125 $ 58,067 (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
expense 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) Please refer to the
table on page 30 for a detailed reconciliation of adjusted net
income to net income attributable to Oaktree Capital Group, LLC.
The following table reconciles distributable earnings-OCG and
adjusted net income-OCG to net income attributable to Oaktree
Capital Group, LLC.
Three Months Ended June 30,
Six Months Ended June 30, 2016
2015 2016
2015 (in thousands) Distributable earnings-OCG (1) $
44,882 $ 28,635 $ 86,725 $ 63,368 Investment income attributable to
OCG 19,274 7,346 25,341 23,067 Receipts of investment income from
funds attributable to OCG (4,319 ) (9,495 ) (9,519 ) (16,541 )
Receipts of investment income from companies attributable to OCG
(4,389 ) (2,570 ) (9,845 ) (5,157 ) Equity-based compensation
attributable to OCG (2) (5,026 ) (3,742 ) (9,333 ) (5,807 )
Distributable earnings-OCG income taxes 1,303 806 4,683 1,086 Tax
receivable agreement 5,106 4,880 10,212 9,290 Income taxes of
Intermediate Holding Companies (7,149 ) (4,438 ) (18,422 ) (11,161
) Adjusted net income-OCG (1) 49,682 21,422 79,842 58,145
Reconciling adjustments (3) (635 ) (1,608 ) (2,717 ) (78 ) Net
income attributable to Oaktree Capital Group, LLC $ 49,047 $
19,814 $ 77,125 $ 58,067 (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 June 30,
Six Months Ended June 30, 2016
2015 2016 2015 (in
thousands, except per unit data) Distributable earnings $
127,506 $ 111,140 $ 253,231 $ 246,336 Distributable earnings
attributable to OCGH non-controlling interest (76,014 ) (76,193 )
(151,146 ) (171,632 ) Non-Operating Group expenses (201 ) (626 )
(465 ) (960 ) Distributable earnings-OCG income taxes (1,303 ) (806
) (4,683 ) (1,086 ) Tax receivable agreement (5,106 ) (4,880 )
(10,212 ) (9,290 ) Distributable earnings-OCG $ 44,882 $
28,635 $ 86,725 $ 63,368 Distributable
earnings-OCG per Class A unit $ 0.72 $ 0.59 $ 1.39
$ 1.36 (2) This adjustment adds
back the effect of equity-based compensation expense 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) Please refer to the
table on page 31 for a detailed reconciliation of adjusted net
income-OCG to net income attributable to Oaktree Capital Group,
LLC.
The following table reconciles distributable earnings revenues
and segment revenues to GAAP revenues.
Three Months Ended June 30,
Six Months Ended June 30, 2016
2015 2016
2015 (in thousands) Distributable earnings revenues $
306,660 $ 289,717 $ 630,999 $ 665,448 Investment income 47,725
23,365 62,802 76,823 Receipts of investment income from funds
(10,694 ) (30,197 ) (23,617 ) (54,158 ) Receipts of investment
income from companies (10,869 ) (8,175 ) (24,427 ) (16,971 )
Segment revenues 332,822 274,710 645,757 671,142 Consolidated funds
(1) (9,106 ) (207,529 ) (38,104 ) (540,460 ) Investment income (2)
(41,000 ) (15,694 ) (70,447 ) (28,376 ) GAAP revenues $ 282,716
$ 51,487 $ 537,206 $ 102,306 (1)
This adjustment reflects the elimination of amounts
attributable to the consolidated funds, as well as the
reclassification of gains and losses related to foreign-currency
hedging activities to general and administrative expense. (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 June 30,
Six Months Ended June 30, 2016
2015 2016
2015 (in thousands) Economic net income (1) $ 166,187
$ 17,619 $ 207,383 $ 241,167
Change in accrued incentives (fund level),
net of associated incentive income compensation (2)
(23,542 ) 67,660 40,287 (5,862 ) Adjusted net income
142,645 85,279 247,670 235,305 Reconciling adjustments (3) (93,598
) (65,465 ) (170,545 ) (177,238 ) Net income attributable to
Oaktree Capital Group, LLC $ 49,047 $ 19,814 $ 77,125
$ 58,067 (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) Please
refer to the table on page 30 for a detailed reconciliation of
adjusted net income to net income attributable to Oaktree Capital
Group, LLC.
The following table reconciles economic net income-OCG and
adjusted net income-OCG to net income attributable to Oaktree
Capital Group, LLC.
Three Months Ended June 30,
Six Months Ended June 30, 2016
2015 2016
2015 (in thousands) Economic net income (loss)-OCG
(1) $ 59,880 $ (978 ) $ 67,683 $ 54,939 Change in accrued
incentives (fund level), net of associated incentive income
compensation attributable to OCG (9,507 ) 21,274 16,179 (348 )
Economic net income-OCG income taxes 7,032 5,893 15,542 15,383
Income taxes-OCG (7,723 ) (4,767 ) (19,562 ) (11,829 ) Adjusted net
income-OCG (1) 49,682 21,422 79,842 58,145 Reconciling adjustments
(2) (635 ) (1,608 ) (2,717 ) (78 ) Net income attributable to
Oaktree Capital Group, LLC $ 49,047 $ 19,814 $ 77,125
$ 58,067 (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 June 30, Six Months Ended June
30, 2016 2015 2016
2015 (in thousands, except per unit
data) Economic net income $ 166,187 $ 17,619 $ 207,383 $
241,167 Economic net income attributable to OCGH non-controlling
interest (99,074 ) (12,078 ) (123,693 ) (169,885 ) Non-Operating
Group expenses (201 ) (626 ) (465 ) (960 ) Economic net income-OCG
income taxes (7,032 ) (5,893 ) (15,542 ) (15,383 ) Economic net
income (loss)-OCG $ 59,880 $ (978 ) $ 67,683 $ 54,939
Economic net income (loss) per Class A unit $ 0.96 $
(0.02 ) $ 1.09 $ 1.18 (2) Please
refer to the table on page 31 for a detailed reconciliation of
adjusted net income-OCG to net income attributable to Oaktree
Capital Group, LLC.
The following table reconciles economic net income revenues and
segment revenues to GAAP revenues.
Three Months Ended June 30,
Six Months Ended June 30, 2016
2015 2016
2015 (in thousands) Economic net income revenues $
416,317 $ 149,507 $ 586,394 $ 658,522 Incentives created (171,142 )
64,055 (124,872 ) (201,407 ) Incentive income 87,647 61,148
184,235 214,027 Segment revenues 332,822
274,710 645,757 671,142 Consolidated funds (1) (9,106 ) (207,529 )
(38,104 ) (540,460 ) Investment income (2) (41,000 ) (15,694 )
(70,447 ) (28,376 ) GAAP revenues $ 282,716 $ 51,487
$ 537,206 $ 102,306 (1) This
adjustment reflects the elimination of amounts attributable to the
consolidated funds, as well as the reclassification of gains and
losses related to foreign-currency hedging activities to general
and administrative expense. (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 June
30, 2016 Segment
Adjustments
Consolidated (in thousands) Management fees (1) $
197,450 $ (2,435 ) $ 195,015 Incentive income (1) 87,647 54 87,701
Investment income (1) 47,725 (6,725 ) 41,000 Total expenses (2)
(180,673 ) (10,975 ) (191,648 ) Interest expense, net (3) (7,977 )
(18,753 ) (26,730 ) Other income (expense), net (4) (1,527 ) 7,075
5,548 Other income of consolidated funds (5) — 38,519 38,519 Income
taxes — (8,571 ) (8,571 ) Net loss attributable to non-controlling
interests in consolidated funds — (7,319 ) (7,319 ) Net income
attributable to non-controlling interests in consolidated
subsidiaries — (84,468 ) (84,468 ) Adjusted net income/net
income attributable to Oaktree Capital Group, LLC $ 142,645
$ (93,598 ) $ 49,047 Corporate investments (6) $ 1,371,978
$ (335,740 ) $ 1,036,238 Total assets (7) $ 3,160,373
$ 3,464,502 $ 6,624,875 (1)
The adjustment represents (a) the elimination of amounts
earned from the consolidated funds, (b) for management fees, the
reclassification of $27 of net gains related to foreign-currency
hedging activities to general and administrative expense, and (c)
for investment income, differences of $3,149 related to corporate
investments in CLOs which under GAAP are marked-to-market but for
segment reporting accounted for at amortized cost, subject to
impairment. (2) The expense adjustment consists of (a) equity-based
compensation expense of $2,821 related to unit grants made before
our initial public offering, (b) consolidated fund expenses of
$1,635, (c) expenses incurred by the Intermediate Holding Companies
of $241, (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 $54, (e) acquisition-related
items of $1,889, (f) adjustments of $5,545 related to amounts
received for contractually reimbursable costs that are classified
as expenses for segment reporting and as other income under GAAP,
(g) differences of $540 arising from EVUs that are classified as
liability awards under GAAP but as equity awards for segment
reporting, (h) $1,210 related to third-party placement costs, and
(i) $5,168 of net losses related to foreign-currency hedging
activities. (3) The interest expense adjustment represents the
inclusion of interest expense attributable to third-party investors
in our CLOs, 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 (a)
amounts received for contractually reimbursable costs of $5,545
that are classified as expenses for segment reporting and as other
income under GAAP, and (b) the reclassification of $1,530 in net
losses related to foreign-currency hedging activities to general
and administrative expense. (5) The adjustment to other income of
consolidated funds primarily represents the inclusion of interest,
dividend and other investment income attributable to third-party
investors in our CLOs and 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 that are treated as equity- or
cost-method investments for segment reporting. The $1.4 billion of
corporate investments included $1.1 billion of equity-method
investments. (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 June 30, 2015 Segment
Adjustments
Consolidated (in thousands) Management fees
(1) $ 190,197 $ (139,274 ) $ 50,923 Incentive income (1) 61,148
(60,584 ) 564 Investment income (1) 23,365 (7,671 ) 15,694 Total
expenses (2) (178,662 ) (67,267 ) (245,929 ) Interest expense, net
(3) (8,782 ) (43,960 ) (52,742 ) Other income (expense), net (4)
(1,987 ) 4,850 2,863 Other income (loss) of consolidated funds (5)
— (82,526 ) (82,526 ) Income taxes — (5,485 ) (5,485 ) Net loss
attributable to non-controlling interests in consolidated funds —
391,961 391,961 Net income attributable to non-controlling
interests in consolidated subsidiaries — (55,509 ) (55,509 )
Adjusted net income/net income attributable to Oaktree Capital
Group, LLC $ 85,279 $ (65,465 ) $ 19,814 Corporate
investments (6) $ 1,560,235 $ (1,383,557 ) $ 176,678
Total assets (7) $ 3,245,460 $ 51,941,170 $
55,186,630 (1) The adjustment
represents (a) the elimination of amounts earned from the
consolidated funds and (b) for management fees, the
reclassification of $4,639 of net gains related to foreign-currency
hedging activities to general and administrative expense. (2) The
expense adjustment consists of (a) equity-based compensation
expense of $4,010 related to unit grants made before our initial
public offering, (b) consolidated fund expenses of $54,920, (c)
expenses incurred by the Intermediate Holding Companies of $652,
(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 $5,657, (e)
acquisition-related items of $1,695, (f) adjustments of $5,513
related to amounts received for contractually reimbursable costs
that are classified as expenses for segment reporting and as other
income under GAAP, (g) differences of $173 arising from EVUs that
are classified as liability awards under GAAP but as equity awards
for segment reporting, (h) $5,369 of net gains related to
foreign-currency hedging activities, and (i) other expenses of $16.
(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 (a) amounts received for contractually
reimbursable costs of $5,513 that are classified as expenses for
segment reporting and as other income under GAAP, and (b) the
reclassification of $663 of net gains related to foreign-currency
hedging activities to general and administrative expense. (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 that are treated as equity- or
cost-method investments for segment reporting. The $1.6 billion of
corporate investments included $1.3 billion of equity-method
investments. (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
Six Months Ended June 30, 2016 Segment
Adjustments
Consolidated (in thousands) Management fees
(1) $ 398,720 $ (5,152 ) $ 393,568 Incentive income (1) 184,235
(40,597 ) 143,638 Investment income (1) 62,802 7,645 70,447 Total
expenses (2) (380,036 ) 3,204 (376,832 ) Interest expense, net (3)
(16,659 ) (37,776 ) (54,435 ) Other income (expense), net (4)
(1,392 ) 12,741 11,349 Other income of consolidated funds (5) —
57,518 57,518 Income taxes — (21,251 ) (21,251 ) Net loss
attributable to non-controlling interests in consolidated funds —
(2,375 ) (2,375 ) Net income attributable to non-controlling
interests in consolidated subsidiaries — (144,502 ) (144,502
) Adjusted net income/net income attributable to Oaktree Capital
Group, LLC $ 247,670 $ (170,545 ) $ 77,125 Corporate
investments (6) $ 1,371,978 $ (335,740 ) $ 1,036,238
Total assets (7) $ 3,160,373 $ 3,464,502 $ 6,624,875
(1) The adjustment represents (a) the
elimination of amounts earned from the consolidated funds, (b) for
management fees, the reclassification of $689 of net gains related
to foreign-currency hedging activities to general and
administrative expense, and (c) for investment income, differences
of $13,578 related to corporate investments in CLOs which under
GAAP are marked-to-market but for segment reporting accounted for
at amortized cost, subject to impairment. (2) The expense
adjustment consists of (a) equity-based compensation expense of
$6,066 related to unit grants made before our initial public
offering, (b) consolidated fund expenses of $2,676, (c) expenses
incurred by the Intermediate Holding Companies of $536, (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 $39,888, (e) acquisition-related items of
$1,498, (f) adjustments of $11,346 related to amounts received for
contractually reimbursable costs that are classified as expenses
for segment reporting and as other income under GAAP, (g)
differences of $593 arising from EVUs that are classified as
liability awards under GAAP but as equity awards for segment
reporting, (h) $7,914 related to third-party placement costs, and
(i) $10,237 of net losses related to foreign-currency hedging
activities. (3) The interest expense adjustment represents the
inclusion of interest expense attributable to third-party investors
in our CLOs, 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 (a)
amounts received for contractually reimbursable costs of $11,346
that are classified as expenses for segment reporting and as other
income under GAAP, and (b) the reclassification of $1,395 in net
losses related to foreign-currency hedging activities to general
and administrative expense. (5) The adjustment to other income of
consolidated funds primarily represents the inclusion of interest,
dividend and other investment income attributable to third-party
investors in our CLOs and 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 that are treated as equity- or
cost-method investments for segment reporting. The $1.4 billion of
corporate investments included $1.1 billion of equity-method
investments. (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
Six Months Ended June 30, 2015 Segment
Adjustments
Consolidated (in thousands) Management fees
(1) $ 380,292 $ (278,550 ) $ 101,742 Incentive income (1) 214,027
(213,463 ) 564 Investment income (1) 76,823 (48,447 ) 28,376 Total
expenses (2) (416,126 ) (65,777 ) (481,903 ) Interest expense, net
(3) (17,715 ) (81,596 ) (99,311 ) Other income (expense), net (4)
(1,996 ) 9,553 7,557 Other income of consolidated funds (5) —
1,422,716 1,422,716 Income taxes — (13,360 ) (13,360 ) Net income
attributable to non-controlling interests in consolidated funds —
(744,704 ) (744,704 ) Net income attributable to non-controlling
interests in consolidated subsidiaries — (163,610 ) (163,610
) Adjusted net income/net income attributable to Oaktree Capital
Group, LLC $ 235,305 $ (177,238 ) $ 58,067 Corporate
investments (6) $ 1,560,235 $ (1,383,557 ) $ 176,678
Total assets (7) $ 3,245,460 $ 51,941,170 $
55,186,630 (1) The adjustment
represents (a) the elimination of amounts earned from the
consolidated funds and (b) for management fees, the
reclassification of $6,684 of net gains related to foreign-currency
hedging activities to general and administrative expense. (2) The
expense adjustment consists of (a) equity-based compensation
expense of $8,605 related to unit grants made before our initial
public offering, (b) consolidated fund expenses of $72,430, (c)
expenses incurred by the Intermediate Holding Companies of $987,
(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 $17,553, (e)
acquisition-related items of $3,502, (f) adjustments of $11,103
related to amounts received for contractually reimbursable costs
that are classified as expenses for segment reporting and as other
income under GAAP, (g) differences of $261 arising from EVUs that
are classified as liability awards under GAAP but as equity awards
for segment reporting, (h) $13,613 of net gains related to
foreign-currency hedging activities, and (i) other expenses of $55.
(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 (a) amounts received for contractually
reimbursable costs of $11,103 that are classified as expenses for
segment reporting and as other income under GAAP, and (b) the
reclassification of $1,550 of net gains related to foreign-currency
hedging activities to general and administrative expense. (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 that are treated as equity- or
cost-method investments for segment reporting. The $1.6 billion of
corporate investments included $1.3 billion of equity-method
investments. (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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160728005497/en/
Investor Relations:Oaktree Capital Group, LLCAndrea D. Williams,
(213)
830-6483investorrelations@oaktreecapital.comorPress
Relations:Sard Verbinnen & CoJohn Christiansen, (415)
618-8750jchristiansen@sardverb.comorAlyssa Linn, (310)
201-2040alinn@sardverb.com
Oaktree Capital (NYSE:OAK)
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Oaktree Capital (NYSE:OAK)
過去 株価チャート
から 7 2023 まで 7 2024