As of September 30, 2016 or for the quarter then ended, and,
where applicable, per Class A unit:
- GAAP net income attributable to
Oaktree Capital Group, LLC (“OCG”) was $58.3 million ($0.93 per
unit), up from $1.9 million ($0.04 per unit) for the third quarter
of 2015.
- Adjusted net income was $162.1
million ($0.92 per unit), up from $27.0 million ($0.15 per unit)
for the third quarter of 2015, driven by higher investment income,
incentive income and fee-related earnings.
- Distributable earnings were
$141.5 million ($0.82 per unit), up 46% from $97.0 million ($0.53
per unit) for the third quarter of 2015, primarily on higher
incentive income.
- Assets under management were
$99.8 billion, including uncalled capital commitments of $22.7
billion. Total AUM was up 2% for the quarter and down slightly over
the last 12 months.
- A distribution was declared of
$0.65 per unit, bringing aggregate distributions relating to the
last 12 months to $2.25.
Oaktree Capital Group, LLC (NYSE: OAK) today reported its
unaudited financial results for the third quarter ended September
30, 2016.
Jay Wintrob, Chief Executive Officer, said, “We delivered good
results in the third quarter, primarily driven by strong investment
returns and incentive income from realizations. Fee-related
earnings grew 23 percent year-over-year, reflecting additional
closed-end fund management fees and prudent cost containment.
Distributable earnings rose 46 percent over last year’s third
quarter, mainly due to a substantial increase
in incentive income. It’s natural that a strong realization
environment will not simultaneously offer plentiful bargains, and
thus we’re maintaining our ‘move forward, but with caution’
investing posture. That said, our investment teams continue to be
resourceful in identifying attractive investments and we remain
well positioned, with record levels of dry powder to deploy at a
faster pace if market conditions change and the opportunity set
widens.”
GAAP-basis results for the third quarter and first nine months
of 2016 included net income attributable to Oaktree Capital Group,
LLC of $58.3 million and $135.4 million, respectively, up from $1.9
million and $60.0 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 $99.8 billion as of
September 30, 2016, up 2% from $98.1 billion as of June 30, 2016,
and down slightly from $100.2 billion as of September 30, 2015.
Management fee-generating assets under management (“management
fee-generating AUM”) were $78.7 billion as of September 30, 2016,
down slightly from $79.5 billion as of June 30, 2016, and up 3%
from $76.5 billion as of September 30, 2015.
As of September 30, 2016, uncalled capital commitments
(so-called “dry powder”) stood near a record high at $22.7 billion.
Of these commitments, $13.3 billion were not yet generating
management fees (so-called “shadow AUM”). Gross capital raised was
$2.2 billion and $9.6 billion for the third quarter of 2016 and the
12 months ended September 30, 2016, respectively.
Adjusted net income (“ANI”) grew to $162.1 million and $409.8
million for the third quarter and first nine months of 2016,
respectively, from $27.0 million and $262.3 million for the
comparable 2015 periods. Distributable earnings grew to $141.5
million and $394.7 million for the third quarter and first nine
months of 2016, respectively, from $97.0 million and $343.3 million
for the comparable 2015 periods. All four increases reflected
higher incentive income and fee-related earnings and, for ANI,
higher investment income.
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, including what we call
“incentives created (fund level).” ENI was $263.6 million and
$471.0 million for the third quarter and first nine months of 2016,
respectively, as compared to a loss of $88.6 million and income of
$152.6 million for the comparable 2015 periods. Per Class A unit,
ENI was $1.52 for the third quarter of 2016, as compared to a loss
of $0.65 for the third quarter of 2015.
Closed-end funds that Oaktree is currently marketing include
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
Months As of or for the Nine Months Ended September
30, Ended September 30, 2016
2015 2016 2015
GAAP-basis Results: (in thousands, except per unit data
or as otherwise indicated) Revenues $ 290,230 $ 50,491 $
827,436 $ 152,797 Net income attributable to Oaktree Capital Group,
LLC 58,297 1,887 135,422 59,954 Net income per Class A unit 0.93
0.04 2.17 1.27
Segment Results: (1) Segment
revenues $ 365,008 $ 182,741 $ 1,010,765 $ 853,883 Adjusted net
income 162,140 26,980 409,810 262,285 Distributable earnings
revenues 329,966 245,454 960,965 910,902 Distributable earnings
141,477 96,979 394,708 343,315 Fee-related earnings revenues
194,349 185,766 593,069 566,058 Fee-related earnings 67,601 55,108
194,589 157,854 Economic net income revenues 687,962 (21,826 )
1,274,356 636,696 Economic net income (loss) 263,603 (88,586 )
470,986 152,581
Per Class A Unit: (1) Adjusted net
income $ 0.92 $ 0.15 $ 2.21 $ 1.38 Distributable earnings 0.82 0.53
2.21 1.88 Fee-related earnings 0.38 0.36 1.13 0.98 Economic net
income (loss) 1.52 (0.65 ) 2.62 0.50
Operating Metrics:
Assets under management (in millions): Assets under management $
99,834 $ 100,237 $ 99,834 $ 100,237 Management fee-generating
assets under management 78,700 76,489 78,700 76,489
Incentive-creating assets under management 32,440 33,245 32,440
33,245 Uncalled capital commitments 22,663 20,115 22,663 20,115
Accrued incentives (fund level): Incentives created (fund level)
422,685 (187,642 ) 547,557 13,765 Incentives created (fund level),
net of associated incentive income compensation expense 153,817
(106,237 ) 212,609 (6,004 ) Accrued incentives (fund level)
1,848,808 1,732,220 1,848,808 1,732,220 Accrued incentives (fund
level), net of associated incentive income compensation expense
872,716 890,219 872,716 890,219 (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. Additionally, for ANI, 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 $0.7 million and $4.4 million for the third quarter and first
nine 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 $239.7 million, to $290.2 million in
the third quarter of 2016, from $50.5 million in the third quarter
of 2015. Total expenses increased $11.8 million, or 6.2%, to $202.3
million in the third quarter of 2016, from $190.5 million in the
third quarter of 2015. Other income (loss) increased to income of
$89.5 million in the third quarter of 2016, from a loss of $1,624.7
million in the third quarter of 2015. In the case of revenues and
other income (loss), 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. The increase in total expenses was
primarily attributable to higher incentive income compensation
expense resulting from the increase in segment incentive income,
partially offset by the impact of deconsolidation.
Net income attributable to OCG was $58.3 million for the third
quarter of 2016, as compared to $1.9 million for the third 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 $99.8 billion as of September 30, 2016, $98.1 billion as
of June 30, 2016 and $100.2 billion as of September 30, 2015. The
$1.7 billion increase since June 30, 2016 primarily reflected $3.5
billion in aggregate market-value gains and $1.2 billion of
aggregate capital inflows for closed-end funds, partially offset by
$2.0 billion of aggregate distributions to closed-end fund
investors and $1.2 billion of net outflows from open-end funds.
The $0.4 billion decrease in AUM since September 30, 2015
primarily reflected $6.6 billion of distributions to closed-end
fund investors and $4.8 billion of net outflows from open-end
funds, largely offset by $5.9 billion of aggregate capital inflows
for closed-end funds and $5.3 billion in aggregate market-value
gains. Inflows for closed-end funds included $1.4 billion for
Oaktree Opportunities Funds X and Xb (“Opps X and Xb”), $1.0
billion for Oaktree European Principal Fund IV and $0.8 billion for
Oaktree Real Estate Opportunities Fund VII (“ROF VII”).
Distributions to closed-end fund investors included $2.2 billion
from Real Estate funds, $1.6 billion from Control Investing funds
and $1.5 billion from Distressed Debt funds.
Management Fee-generating Assets Under
Management
Management fee-generating AUM, a forward-looking metric, was
$78.7 billion as of September 30, 2016, $79.5 billion as of June
30, 2016 and $76.5 billion as of September 30, 2015. The $0.8
billion decrease since June 30, 2016 primarily reflected a $2.0
billion aggregate decline attributable to closed-end funds in
liquidation and uncalled capital commitments for closed-end funds
entering or in liquidation and $1.2 billion of net outflows from
open-end funds. These declines were largely offset by $2.0 billion
of aggregate market-value gains.
The $2.2 billion increase in management fee-generating AUM since
September 30, 2015 primarily reflected an aggregate $7.3 billion
principally from the investment-period commencement between
November 2015 and January 2016 of Oaktree Power Opportunities Fund
IV (“Power Fund IV”), Oaktree Principal Fund VI (“PF VI”), Opps X
and ROF VII, $3.6 billion in aggregate market-value gains, and $1.2
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 $4.8 billion of net outflows from open-end
funds and $4.2 billion attributable to closed-end funds in
liquidation.
Incentive-creating Assets Under
Management
Incentive-creating assets under management (“incentive-creating
AUM”) were $32.4 billion as of September 30, 2016, $30.4 billion as
of June 30, 2016 and $33.2 billion as of September 30, 2015. The
$2.0 billion increase since June 30, 2016 reflected the net effect
of drawdowns by closed-end funds, market-value gains, distributions
from closed-end funds and other adjustments. The $0.8 billion
decrease since September 30, 2015 was primarily attributable to
distributions from closed-end funds, partially offset by drawdowns
by closed-end funds and market-value gains.
Of the $32.4 billion in incentive-creating AUM as of September
30, 2016, $20.0 billion, or 62%, was generating incentives at the
fund level, as compared with $19.2 billion, or 58%, of the $33.2
billion of incentive-creating AUM as of September 30, 2015.
Accrued Incentives (Fund Level) and
Incentives Created (Fund Level)
Accrued incentives (fund level) were $1.8 billion as of
September 30, 2016, $1.5 billion as of June 30, 2016, and $1.7
billion as of September 30, 2015. The third quarter of 2016
reflected $422.7 million of incentives created (fund level) and
$99.7 million of segment incentive income recognized.
Net of incentive income compensation expense, accrued incentives
(fund level) were $872.7 million as of September 30, 2016, $771.3
million as of June 30, 2016, and $890.2 million as of September 30,
2015. As of September 30, 2016, June 30, 2016 and September 30,
2015, the portion of net accrued incentives (fund level)
represented by funds that were currently paying incentives was
$224.9 million, $274.5 million and $317.0 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 $22.7 billion as of September
30, 2016, $22.8 billion as of June 30, 2016, and $20.1 billion as
of September 30, 2015. Invested capital during the quarter and 12
months ended September 30, 2016 aggregated $2.2 billion and $8.1
billion, respectively, as compared with $1.8 billion and $9.0
billion for the comparable 2015 periods.
Segment Results
Revenues
Segment revenues grew $182.3 million, or 99.8%, to $365.0
million in the third quarter of 2016, from $182.7 million in the
third quarter of 2015, reflecting increases of $8.5 million in
management fees, $82.8 million in incentive income and $90.9
million in investment income.
Management Fees
Management fees increased $8.5 million, or 4.6%, to $194.3
million in the third quarter of 2016, from $185.8 million in the
third quarter of 2015. The growth reflected an aggregate increase
of $30.0 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 $21.5 million primarily
attributable to closed-end funds in liquidation and net outflows in
open-end funds.
Incentive Income
Incentive income increased $82.8 million, to $99.7 million in
the third quarter of 2016, from $16.9 million in the third quarter
of 2015. The third quarter of 2016 reflected incentive
distributions from six funds across five investment strategies.
Investment Income (Loss)
Investment income (loss) increased $90.9 million, to income of
$70.9 million in the third quarter of 2016, from a loss of $20.0
million in the third 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 $17.7 million and $13.2 million in the third quarters of
2016 and 2015, respectively, of which performance fees accounted
for $1.9 million and $1.3 million.
Expenses
Compensation and Benefits
Compensation and benefits decreased $2.7 million, or 2.8%, to
$94.6 million for the third quarter of 2016, from $97.3 million for
the third quarter of 2015, reflecting an overall shift in
compensation mix from cash to equity.
Equity-based Compensation
Equity-based compensation increased $7.2 million, or 81.8%, to
$16.0 million for the third quarter of 2016, from $8.8 million for
the third 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. Additionally, the third quarter of 2016
included $3.5 million of expense resulting from the accelerated
vesting of Class A and OCGH units related to employee
departures.
Incentive Income Compensation
Incentive income compensation expense increased $39.8 million,
to $47.4 million for the third quarter of 2016, from $7.6 million
for the third quarter of 2015, primarily reflecting growth in
incentive income.
General and Administrative
General and administrative expense decreased $1.0 million, or
3.3%, to $29.3 million for the third quarter of 2016, from $30.3
million for the third quarter of 2015, reflecting various
items.
Other Income (Expense), Net
Other income (expense), net was an expense of $4.9 million and
$0.3 million for the third quarters of 2016 and 2015, respectively.
The third quarter of 2016 included a $4.4 million impairment charge
on our corporate plane.
Adjusted Net Income
ANI increased $135.1 million, to $162.1 million for the third
quarter of 2016, from $27.0 million for the third quarter of 2015,
reflecting increases of $90.9 million in investment income, $43.0
million in incentive income, net of incentive income compensation
expense (“net incentive income”), and $12.5 million in fee-related
earnings. The portion of ANI attributable to our Class A units
was $57.9 million, or $0.92 per unit, and $7.2 million, or $0.15
per unit, for the third quarters of 2016 and 2015,
respectively.
The effective tax rate applied to ANI for the third quarters of
2016 and 2015 was 12% and 10%, respectively, resulting from
estimated full-year effective rates of 17% and 16%, respectively.
The rate used for interim fiscal quarters is 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 $44.5 million, or 45.9%, to $141.5
million for the third quarter of 2016, from $97.0 million for the
third quarter of 2015, reflecting increases of $43.0 million in net
incentive income and $12.5 million in fee-related earnings,
partially offset by a $6.9 million decline in investment income
proceeds. For the third quarter of 2016, investment income proceeds
totaled $35.9 million, including $18.0 million from fund
distributions and $17.9 million from DoubleLine, as compared with
total investment income proceeds in the prior-year quarter of $42.8
million, of which $29.5 million and $13.3 million was attributable
to fund distributions and DoubleLine, respectively. The portion of
distributable earnings attributable to our Class A units was
$0.82 and $0.53 per unit for the third quarters of 2016 and 2015,
respectively, reflecting distributable earnings per Operating Group
unit of $0.91 and $0.63, 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 $12.5 million, or 22.7%, to $67.6
million for the third quarter of 2016, from $55.1 million for the
third quarter of 2015. The increase reflected $8.5 million of
higher management fees, $2.7 million of lower compensation and
benefits, and $1.0 million of lower general and administrative
expense. The portion of fee-related earnings attributable to our
Class A units was $0.38 and $0.36 per unit for the third
quarters of 2016 and 2015, respectively.
The effective tax rate applicable to fee-related earnings for
the third quarters of 2016 and 2015 was 12% and -3%, respectively,
resulting from estimated full-year effective rates of 8% and 1%,
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 September 30, 2016, Oaktree had $1.1 billion of cash and
U.S. Treasury and time deposit securities, and $796 million of
outstanding debt, net of debt issuance costs. Oaktree neither had
as of September 30, 2016, nor currently has, any borrowings
outstanding against its $500 million revolving credit facility. As
of September 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
$873 million as of that date.
Distribution
Oaktree Capital Group, LLC has declared a distribution
attributable to the third quarter of 2016 of $0.65 per Class A
unit. This distribution will be paid on November 14, 2016 to
Class A unitholders of record at the close of business on
November 7, 2016.
Conference Call
Oaktree will host a conference call to discuss its third 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 10093550,
beginning approximately one hour after the broadcast.
About Oaktree
Oaktree is a leader among global investment managers
specializing in alternative investments, with $100 billion in
assets under management as of September 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 and our Quarterly Report on Form 10-Q for the quarter ended
June 30, 2016, filed with the SEC on February 26, 2016 and on
August 4, 2016, respectively, which are 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
Nine Months Ended September 30, September
30, 2016 2015 2016
2015 (in thousands, except per unit
data) Revenues: Management fees $ 190,974 $ 47,106 $ 584,542 $
148,848 Incentive income 99,256 3,385 242,894
3,949 Total revenues 290,230 50,491 827,436
152,797 Expenses: Compensation and benefits (97,552 )
(101,240 ) (308,959 ) (319,133 ) Equity-based compensation (19,838
) (12,494 ) (48,460 ) (40,283 ) Incentive income compensation
(47,385 ) (4,907 ) (92,653 ) (107,010 ) Total compensation and
benefits expense (164,775 ) (118,641 ) (450,072 ) (466,426 )
General and administrative (32,252 ) (37,627 ) (113,032 ) (77,695 )
Depreciation and amortization (3,867 ) (4,032 ) (12,076 ) (10,031 )
Consolidated fund expenses (1,445 ) (30,218 ) (3,991 ) (118,269 )
Total expenses (202,339 ) (190,518 ) (579,171 ) (672,421 ) Other
income (loss): Interest expense (32,414 ) (56,023 ) (86,849 )
(155,334 ) Interest and dividend income 46,817 454,384 120,225
1,455,624 Net realized gain (loss) on consolidated funds’
investments (1,436 ) 318,267 8,647 1,650,645 Net change in
unrealized appreciation (depreciation) on consolidated funds’
investments 10,231 (2,357,989 ) (15,742 ) (3,268,891 ) Investment
income 65,758 10,342 136,205 38,718 Other income (expense), net 543
6,368 11,892 13,925 Total other income
(loss) 89,499 (1,624,651 ) 174,378 (265,313 ) Income
(loss) before income taxes 177,390 (1,764,678 ) 422,643 (784,937 )
Income taxes (8,567 ) (1,893 ) (29,818 ) (15,253 ) Net income
(loss) 168,823 (1,766,571 ) 392,825 (800,190 ) Less: Net (income)
loss attributable to non-controlling interests in consolidated
funds (13,243 ) 1,779,225 (15,618 ) 1,034,521 Net income
attributable to non-controlling interests in consolidated
subsidiaries (97,283 ) (10,767 ) (241,785 ) (174,377 ) Net income
attributable to Oaktree Capital Group, LLC $ 58,297 $ 1,887
$ 135,422 $ 59,954 Distributions declared per
Class A unit $ 0.58 $ 0.50 $ 1.60 $ 1.70
Net income per unit (basic and diluted): Net income per
Class A unit $ 0.93 $ 0.04 $ 2.17 $ 1.27
Weighted average number of Class A units outstanding 62,755
48,440 62,424 47,304 (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
As of or for the Nine Months Ended
September 30, Ended September 30, 2016
2015 2016
2015 Segment Statements of Operations Data: (1)
(in thousands, except per unit data or as otherwise
indicated) Revenues: Management fees $ 194,349 $ 185,766 $
593,069 $ 566,058 Incentive income 99,731 16,925 283,966 230,952
Investment income 70,928 (19,950 ) 133,730 56,873
Total revenues 365,008 182,741 1,010,765
853,883 Expenses: Compensation and benefits (94,624 )
(97,348 ) (298,067 ) (310,996 ) Equity-based compensation (16,041 )
(8,836 ) (39,189 ) (27,760 ) Incentive income compensation (47,378
) (7,596 ) (132,534 ) (127,252 ) General and administrative (29,258
) (30,279 ) (91,339 ) (90,181 ) Depreciation and amortization
(2,866 ) (3,031 ) (9,074 ) (7,027 ) Total expenses (190,167 )
(147,090 ) (570,203 ) (563,216 ) Adjusted net income before
interest and other income (expense) 174,841 35,651 440,562 290,667
Interest expense, net of interest income (2) (7,799 ) (8,388 )
(24,458 ) (26,103 ) Other income (expense), net (4,902 ) (283 )
(6,294 ) (2,279 ) Adjusted net income $ 162,140 $ 26,980
$ 409,810 $ 262,285 Adjusted net
income-OCG $ 57,908 $ 7,194 $ 137,750 $ 65,339 Adjusted net income
per Class A unit 0.92 0.15 2.21 1.38 Distributable earnings 141,477
96,979 394,708 343,315 Distributable earnings-OCG 51,223 25,678
137,948 89,046 Distributable earnings per Class A unit 0.82 0.53
2.21 1.88 Fee-related earnings 67,601 55,108 194,589 157,854
Fee-related earnings-OCG 23,869 17,407 70,745 46,361 Fee-related
earnings per Class A unit 0.38 0.36 1.13 0.98 Economic net income
(loss) 263,603 (88,586 ) 470,986 152,581 Economic net income
(loss)-OCG 95,683 (31,498 ) 163,366 23,441 Economic net income
(loss) per Class A unit 1.52 (0.65 ) 2.62 0.50 Weighted
average number of Operating Group units outstanding 154,945 153,945
154,605 153,676 Weighted average number of Class A units
outstanding 62,755 48,440 62,424 47,304
Operating
Metrics: Assets under management (in millions): Assets under
management $ 99,834 $ 100,237 $ 99,834 $ 100,237 Management
fee-generating assets under management 78,700 76,489 78,700 76,489
Incentive-creating assets under management 32,440 33,245 32,440
33,245 Uncalled capital commitments (3) 22,663 20,115 22,663 20,115
Accrued incentives (fund level): (4) Incentives created (fund
level) 422,685 (187,642 ) 547,557 13,765 Incentives created (fund
level), net of associated incentive income compensation expense
153,817 (106,237 ) 212,609 (6,004 ) Accrued incentives (fund level)
1,848,808 1,732,220 1,848,808 1,732,220 Accrued incentives (fund
level), net of associated incentive income compensation expense
872,716 890,219 872,716 890,219 (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 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 OCGH 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. Additionally, for
ANI, 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. For additional information regarding the
reconciling adjustments discussed above, please see Exhibit A. (2)
Interest income was $1.7 million for both the three months ended
September 30, 2016 and 2015, and $4.6 million and $3.9 million for
the nine months ended September 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
September 30, June 30,
September 30, 2016 2016
2015 (in millions) Assets Under Management:
Closed-end funds $ 60,488 $ 59,576 $ 59,318 Open-end funds 34,197
33,667 35,914 Evergreen funds 5,149 4,881 5,005 Total
$ 99,834 $ 98,124 $ 100,237
Three Months Ended Twelve
Months Ended September 30, September 30,
2016 2015 2016
2015 (in millions) Change in Assets
Under Management: Beginning balance $ 98,124 $ 103,060 $
100,237 $ 93,224 Closed-end funds: Capital commitments/other (1)
1,182 1,705 5,919 16,762 Distributions for a realization
event/other (2) (2,028 ) (560 ) (6,585 ) (6,517 ) Change in
uncalled capital commitments for funds entering or in liquidation
(3) (22 ) 20 76 (1,021 ) Foreign-currency translation 91 15 50 (796
) Change in market value (4) 1,616 (1,105 ) 1,926 54 Change in
applicable leverage 73 229 (216 ) 967 Open-end funds: Contributions
914 979 3,380 5,477 Redemptions (2,105 ) (1,515 ) (8,228 ) (5,365 )
Foreign-currency translation 65 (31 ) 80 (527 ) Change in market
value (4) 1,656 (2,332 ) 3,051 (1,641 ) Evergreen funds:
Contributions or new capital commitments 91 57 300 375 Redemptions
or distributions/other (55 ) (41 ) (511 ) (326 ) Foreign-currency
translation (1 ) (1 ) (9 ) 5 Change in market value (4) 233
(243 ) 364 (434 ) Ending balance $ 99,834 $ 100,237
$ 99,834 $ 100,237 (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 September 30, June
30, September 30, 2016
2016 2015 Management Fee-generating Assets Under
Management: (in millions) Closed-end funds: Senior Loans
$ 6,887 $ 6,909 $ 6,799 Other closed-end funds 33,575 35,096 30,228
Open-end funds 34,148 33,597 35,840 Evergreen funds 4,090
3,914 3,622 Total $ 78,700 $ 79,516 $ 76,489
Three Months EndedSeptember
30,
Twelve Months EndedSeptember
30,
2016 2015 2016
2015 Change in Management Fee-generating
Assets Under Management: (in millions) Beginning
balance $ 79,516 $ 78,596 $ 76,489 $ 79,146 Closed-end funds:
Capital commitments to funds that pay fees based on committed
capital/other (1) 111 503 7,253 1,757 Capital drawn by funds that
pay fees based on drawn capital, NAV or cost basis 345 387 1,247
1,131 Change attributable to funds in liquidation (2) (1,462 ) (272
) (4,230 ) (3,274 ) Change in uncalled capital commitments for
funds entering or in liquidation that pay fees based on committed
capital (3) (512 ) — (437 ) (471 ) Distributions by funds that pay
fees based on NAV/other (4) (283 ) (44 ) (589 ) (324 )
Foreign-currency translation 75 8 1 (522 ) Change in market value
(5) 131 (118 ) 167 (175 ) Change in applicable leverage 52 347 23
1,110 Open-end funds: Contributions 914 978 3,382 5,436 Redemptions
(2,074 ) (1,515 ) (8,203 ) (5,349 ) Foreign-currency translation 65
(31 ) 80 (525 ) Change in market value 1,646 (2,323 ) 3,049 (1,647
) Evergreen funds: Contributions or capital drawn by funds that pay
fees based on drawn capital or NAV 39 213 612 866 Redemptions or
distributions (97 ) (10 ) (491 ) (248 ) Change in market value 234
(230 ) 347 (422 ) Ending balance $ 78,700 $
76,489 $ 78,700 $ 76,489 (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 September 30,
June 30, September
30, 2016 2016 2015 Reconciliation of
Assets Under Management to Management Fee-generating Assets Under
Management: (in millions) Assets under management $
99,834 $ 98,124 $ 100,237 Difference between assets under
management and committed capital or cost basis for applicable
closed-end funds (1) (4,449 ) (2,392 ) (3,381 ) Undrawn capital
commitments to closed-end funds that have not yet commenced their
investment periods (9,552 ) (9,278 ) (14,544 ) Undrawn capital
commitments to funds for which management fees are based on drawn
capital, NAV or cost basis (3,720 ) (3,828 ) (3,279 )
Oaktree’s general partner investments in
management fee-generating funds
(1,987 ) (1,745 ) (1,240 ) Funds that are no longer paying
management fees and co-investments that pay no management fees
(1,426 ) (1,365 ) (1,304 ) Management fee-generating assets under
management $ 78,700 $ 79,516 $ 76,489
(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 September 30,
June 30, September
30, Weighted Average Annual Management Fee Rates:
2016 2016 2015 Closed-end funds: Senior Loans
0.50 % 0.50 % 0.50 % Other closed-end funds 1.51 1.51 1.53 Open-end
funds 0.46 0.46 0.47 Evergreen funds 1.22 1.22 1.46 Overall 0.95
0.97 0.94
Incentive-creating AUM
As of September 30,
June 30,
September 30, 2016 2016 2015
Incentive-creating Assets Under Management: (in
millions) Closed-end funds $ 29,241 $ 28,462 $ 31,290 Evergreen
funds 3,199 1,910 1,955 Total $ 32,440 $
30,372 $ 33,245
Accrued Incentives (Fund Level) and
Incentives Created (Fund Level)
As of or for the Three Months
As of or for the Nine Months Ended
September 30, Ended September 30, 2016
2015 2016
2015 Accrued Incentives (Fund Level): (in
thousands) Beginning balance $ 1,525,854 $ 1,936,787
$ 1,585,217 $ 1,949,407 Incentives created
(fund level): Closed-end funds 402,842 (187,358 ) 522,847 13,414
Evergreen funds 19,843 (284 ) 24,710
351 Total incentives created (fund level)
422,685 (187,642 ) 547,557
13,765 Less: segment incentive income recognized by
us (99,731 ) (16,925 ) (283,966 )
(230,952 ) Ending balance $ 1,848,808 $ 1,732,220 $
1,848,808 $ 1,732,220 Accrued incentives (fund
level), net of associated incentive income compensation expense $
872,716 $ 890,219 $ 872,716 $ 890,219
Uncalled Capital Commitments
Uncalled capital commitments were $22.7 billion as of September
30, 2016, $22.8 billion as of June 30, 2016 and $20.1 billion as of
September 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
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 (in thousands, except per unit
data) Revenues: Management fees $ 194,349 $ 185,766 $ 593,069 $
566,058 Incentive income 99,731 16,925 283,966 230,952 Investment
income (loss) 70,928 (19,950 ) 133,730
56,873 Total revenues 365,008
182,741 1,010,765 853,883
Expenses: Compensation and benefits (94,624 ) (97,348 ) (298,067 )
(310,996 ) Equity-based compensation (16,041 ) (8,836 ) (39,189 )
(27,760 ) Incentive income compensation (47,378 ) (7,596 ) (132,534
) (127,252 ) General and administrative (29,258 ) (30,279 ) (91,339
) (90,181 ) Depreciation and amortization (2,866 )
(3,031 ) (9,074 ) (7,027 ) Total expenses
(190,167 ) (147,090 ) (570,203 ) (563,216 )
Adjusted net income before interest and other income (expense)
174,841 35,651 440,562 290,667 Interest expense, net of interest
income (7,799 ) (8,388 ) (24,458 ) (26,103 ) Other income
(expense), net (4,902 ) (283 ) (6,294 )
(2,279 ) Adjusted net income 162,140 26,980 409,810 262,285
Adjusted net income attributable to OCGH non-controlling interest
(96,471 ) (18,491 ) (244,272 ) (182,862 ) Non-Operating Group
expenses (182 ) (464 ) (647 ) (1,424 )
Adjusted net income-OCG before income taxes 65,487 8,025 164,891
77,999 Income taxes-OCG (7,579 ) (831 )
(27,141 ) (12,660 ) Adjusted net income-OCG $ 57,908
$ 7,194 $ 137,750 $ 65,339 Adjusted net income
per Class A unit $ 0.92 $ 0.15 $ 2.21 $ 1.38
Weighted average number of Class A units outstanding
62,755 48,440 62,424
47,304 (1) 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, 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. Additionally, for
ANI, 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 $0.7 million and $4.4 million,
respectively, for the third quarter and first nine months of 2015,
and remain expensed as incurred in those periods for both GAAP and
ANI purposes.
Investment Income (Loss)
Three Months Ended
Nine Months Ended September 30, September
30, 2016 2015 2016
2015 Income (loss) from investments in
funds:
(in thousands) Oaktree funds: Corporate Debt $ 15,932
$ (2,763 ) $ 15,026 $ 13,250 Convertible Securities 77 (1,257 )
(819 ) (246 ) Distressed Debt 15,295 (30,177 ) 34,462 (34,889 )
Control Investing 19,702 (1,156 ) 19,535 18,127 Real Estate 3,791
3,339 8,353 12,362 Listed Equities (2,802 ) (4,413 ) 2,956 4,737
Non-Oaktree funds 1,166 3,316 4,661 8,049 Income from investments
in companies 17,767 13,161
49,556 35,483 Total investment income (loss) $
70,928 $ (19,950 ) $ 133,730 $ 56,873
Distributable Earnings and Distribution Calculation
Distributable earnings and the calculation of distributions are
set forth below:
Three Months Ended
Nine Months Ended September 30, September
30, 2016 2015 2016
2015 Distributable Earnings:
(in thousands, except per unit data) Revenues: Management
fees $ 194,349 $ 185,766 $ 593,069 $ 566,058 Incentive income
99,731 16,925 283,966 230,952 Receipts of investment income from
funds (1) 18,020 29,459 41,637 83,617 Receipts of investment income
from companies 17,866 13,304
42,293 30,275 Total distributable earnings
revenues 329,966 245,454 960,965
910,902 Expenses: Compensation and benefits
(94,624 ) (97,348 ) (298,067 ) (310,996 ) Incentive income
compensation (47,378 ) (7,596 ) (132,534 ) (127,252 ) General and
administrative (29,258 ) (30,279 ) (91,339 ) (90,181 ) Depreciation
and amortization (2,866 ) (3,031 ) (9,074 )
(7,027 ) Total expenses (174,126 ) (138,254 )
(531,014 ) (535,456 ) Other income (expense):
Interest expense, net of interest income (7,799 ) (8,388 ) (24,458
) (26,103 ) Operating Group income taxes (1,662 ) (1,550 ) (4,491 )
(3,749 ) Other income (expense), net (4,902 ) (283 )
(6,294 ) (2,279 ) Distributable earnings $ 141,477
$ 96,979 $ 394,708 $ 343,315
Distribution Calculation: Operating Group distribution with
respect to the period $ 119,314 $ 78,535 $ 336,319 $ 290,933
Distribution per Operating Group unit $ 0.77 $ 0.51 $ 2.17 $ 1.89
Adjustments per Class A unit: Distributable earnings-OCG income tax
expense (0.03 ) — (0.12 ) (0.02 ) Tax receivable agreement (0.08 )
(0.10 ) (0.24 ) (0.30 ) Non-Operating Group expenses (0.01 )
(0.01 ) (0.03 ) (0.03 )
Distribution per Class A unit (2)
$ 0.65 $ 0.40 $ 1.78 $ 1.54 (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 ANI are, for distributable earnings purposes, amortized
over the remaining investment period of the respective CLO to align
with the timing of expected cash flows. (2) With respect to the
quarter ended September 30, 2016, the distribution was announced on
October 28, 2016 and is payable on November 14, 2016.
Units Outstanding
Three Months Ended
Nine Months Ended September 30, September
30, 2016 2015 2016
2015 (in thousands) Weighted
Average Units: OCGH 92,190 105,505 92,181 106,372 Class A
62,755 48,440 62,424 47,304 Total 154,945 153,945 154,605 153,676
Units Eligible for Fiscal Period Distribution: OCGH 92,039
105,318 Class A 62,914 48,672 Total 154,953 153,990
Segment Statements of Financial
Condition
As of September 30,
June 30,
September 30, 2016 2016 2015 (in
thousands) Assets: Cash and cash-equivalents $
461,389
$ 403,417 $ 417,168 U.S. Treasury and time deposit securities
676,226
684,224 656,120 Corporate investments 1,383,612 1,371,978 1,465,195
Deferred tax assets 426,138 426,119 430,797 Receivables and other
assets
355,546
274,635 259,841 Total assets $
3,302,911
$ 3,160,373 $ 3,229,121
Liabilities and Capital:
Liabilities: Accounts payable and accrued expenses $ 337,594 $
262,392 $ 314,757 Due to affiliates 360,193 358,716 370,949 Debt
obligations (1)
795,678
795,958 846,161 Total liabilities
1,493,465
1,417,066 1,531,867 Capital: OCGH non-controlling
interest in consolidated subsidiaries 1,017,711 982,684 1,097,164
Unitholders’ capital attributable to Oaktree Capital Group, LLC
791,735 760,623 600,090 Total capital
1,809,446 1,743,307 1,697,254 Total liabilities and
capital $
3,302,911
$ 3,160,373 $ 3,229,121 (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 September 30,
June 30,
September 30, 2016 2016 2015
Investments in funds:
(in thousands) Oaktree funds:
Corporate Debt $ 421,466 $ 417,883 $ 446,151 Convertible Securities
1,704 1,627 18,452 Distressed Debt 396,173 380,324 388,459 Control
Investing 263,882 251,612 255,798 Real Estate 117,822 113,406
148,853 Listed Equities 92,962 116,954 123,152 Non-Oaktree funds
69,651 70,551 69,146 Investments in companies 19,952
19,621 15,184 Total corporate investments $ 1,383,612 $
1,371,978 $ 1,465,195
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 September 30,
2016 Investment Period Total Committed Capital
% Invested (1) %
Drawn (2)
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) (3)
Unreturned Drawn Capital Plus Accrued Preferred
Return (4) IRR Since Inception
(5) Multiple of Drawn Capital
(6) 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 (7) Jan.
2016 Jan. 2019 3,243 48 15 192 41 637 3,161 — 37 489 nm nm 1.5x
Oaktree Opportunities Fund IX Jan. 2014 Jan. 2017 5,066 100 100
(45) 5 5,016 4,966 — — 6,104 2.5% (0.4)% 1.1 Oaktree Opportunities
Fund VIIIb Aug. 2011 Aug. 2014 2,692 nm 100 403 1,133 1,962 2,098
52 — 2,517 6.5 3.3 1.2 Special Account B Nov. 2009 Nov. 2012 1,031
nm 100 471 1,124 448 434 15 — 443 12.5 10.0 1.5 Oaktree
Opportunities Fund VIII Oct. 2009 Oct. 2012 4,507 nm 100 1,954
4,545 1,916 1,823 144 152 1,700 11.9 8.3 1.5 Special Account A Nov.
2008 Oct. 2012 253 nm 100 289 463 79 75 42 16 — 28.0 22.6 2.2 OCM
Opportunities Fund VIIb May 2008 May 2011 10,940 nm 90 8,758 17,329
1,273 1,270 1,453 249 — 21.9 16.6 2.0 OCM Opportunities Fund VII
Mar. 2007 Mar. 2010 3,598 nm 100 1,458 4,647 409 644 81 — 543 10.3
7.5 1.5 OCM Opportunities Fund VI Jul. 2005 Jul. 2008 1,773 nm 100
1,298 3,051 20 — 249 4 — 11.9 8.8 1.8 OCM Opportunities Fund V Jun.
2004 Jun. 2007 1,179 nm 100 961 2,097 43 — 179 9 — 18.5 14.1 1.9
Legacy funds (8) Various Various 9,543 nm 100 8,205 17,695 53 —
1,113 11 — 24.2 19.3 1.9 22.0% 16.2
%
Real Estate Opportunities Oaktree Real Estate Opportunities
Fund VII (9) Jan. 2016 Jan. 2020 $2,456 41% —% $22 $8 $14 $1,989 $
— $— $— n/a n/a n/a Oaktree Real Estate Opportunities Fund VI Aug.
2012 Aug. 2016 2,677 nm 100 1,062 990 2,749 2,135 10 195 2,261
17.9% 12.0% 1.5x Oaktree Real Estate Opportunities Fund V Mar. 2011
Mar. 2015 1,283 nm 100 910 1,489 704 383 56 117 266 17.6 13.0 1.8
Special Account D Nov. 2009 Nov. 2012 256 nm 100 179 306 137 73 3
14 79 14.7 12.6 1.7 Oaktree Real Estate Opportunities Fund IV Dec.
2007 Dec. 2011 450 nm 100 394 709 135 99 45 29 — 16.2 11.1 2.0 OCM
Real Estate Opportunities Fund III Sep. 2002 Sep. 2005 707 nm 100
618 1,300 25 — 117 5 — 15.3 11.3 2.0 Legacy funds (8) Various
Various 1,634 nm 99 1,399 3,009 — — 112 — — 15.2 12.0 1.9 15.5%
12.0%
Real Estate Debt Oaktree Real Estate Debt Fund (10)
Sep. 2013 Oct. 2016 $1,112 96% 55% $81 $411 $281 $594 $ — $12 $220
26.5% 19.4% 1.2x Oaktree PPIP Fund (11) Dec. 2009 Dec. 2012 2,322
nm 48 457 1,570 — — 47 — — 28.2 n/a 1.4
Real Estate Value
Add Oaktree Pinnacle Investment Fund (7) (10) Oct. 2016 Oct.
2020 $615 2% 2% $— $— $10 $10 $ — $— $11 nm nm 1.0x
European Principal Investments (12) Oaktree European
Principal Fund IV (13) TBD — €893 2% —% €(4) €— €(4) €17 € — €— €—
n/a n/a n/a Oaktree European Principal Fund III Nov. 2011 Nov. 2016
€3,164 100 85 €1,420 €417 €3,752 €2,921 € — €276 €3,016 19.4% 12.6%
1.6x OCM European Principal Opportunities Fund II Dec. 2007 Dec.
2012 €1,759 nm 100 €498 €1,544 €685 €849 € 29 €— €980 9.4 5.4 1.4
OCM European Principal Opportunities Fund Mar. 2006 Mar. 2009 $495
nm 96 $454 $927 $— $— $ 87 $— $— 11.7 8.9 2.1 13.3% 8.8%
As of September 30,
2016 Investment Period Total Committed Capital
% Invested (1) %
Drawn (2)
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) (3)
Unreturned Drawn Capital Plus Accrued Preferred
Return (4) IRR Since Inception
(5) Multiple of Drawn Capital
(6) Start Date End Date Gross
Net (in millions) European Private Debt
Oaktree European Capital Solutions Fund (7) (10) Dec. 2015 Dec.
2018 €286 54% 34% €1 €— €100 €142 €— €— €101 nm nm 1.0x Oaktree
European Dislocation Fund (10) Oct. 2013 Oct. 2016 €294 85 56 €33
€140 €75 €125 €— €4 €55 23.6% 16.9% 1.2 Special Account E Oct. 2013
Apr. 2015 €379 nm 69 €54 €200 €115 €131 €— €7 €93 14.6 11.2 1.2
16.7% 12.4%
Global Principal Investments Oaktree Principal
Fund VI Nov. 2015 Nov. 2018 $1,223 44% 17% $45 $67 $186 $1,167 $—
$9 $155 47.1% 20.6% 1.4x Oaktree Principal Fund V Feb. 2009 Feb.
2015 2,827 nm 91 453 1,451 1,588 1,773 50 — 2,133 8.2 3.7 1.3
Special Account C Dec. 2008 Feb. 2014 505 nm 91 204 377 287 299 21
3 278 11.6 8.2 1.5 OCM Principal Opportunities Fund IV Oct. 2006
Oct. 2011 3,328 nm 100 2,806 4,061 2,073 691 22 525 1,230 12.4 8.9
2.0 OCM Principal Opportunities Fund III Nov. 2003 Nov. 2008 1,400
nm 100 886 2,206 80 — 157 15 — 13.8 9.5 1.8 Legacy funds (8)
Various Various 2,301 nm 100 1,839 4,138 2 — 236 — — 14.5 11.6 1.8
13.2% 9.5%
Power Opportunities Oaktree Power Opportunities
Fund IV (7) Nov. 2015 Nov. 2020 $1,106 22% 22% $(7) $— $240 $1,078
$— $— $254 nm nm 1.0x Oaktree Power Opportunities Fund III Apr.
2010 Apr. 2015 1,062 nm 66 329 575 452 407 14 48 299 21.1% 12.5%
1.6 OCM/GFI Power Opportunities Fund II Nov. 2004 Nov. 2009 1,021
nm 53 1,450 1,982 9 — 100 1 — 76.1 58.8 3.9 OCM/GFI Power
Opportunities Fund Nov. 1999 Nov. 2004 449 nm 85 251 634 — — 23 — —
20.1 13.1 1.8 34.7% 26.5%
Infrastructure Investing Oaktree
Infrastructure Fund (14) TBD — $409 —% —% $— $— $— $— $— $— $— n/a
n/a n/a Highstar Capital IV (15) Nov. 2010 Nov. 2016 2,610 99 99
544 552 2,573 1,730 — 5 1,947 15.2% 8.7% 1.4x
Mezzanine
Finance Oaktree Mezzanine Fund IV (10) Oct. 2014 Oct. 2019 $852
40% 37% $26 $20 $319 $306 $— $4 $314 12.5% 8.5% 1.1x Oaktree
Mezzanine Fund III (16) Dec. 2009 Dec. 2014 1,592 nm 89 385 1,428
380 377 10 23 350 15.1 10.4 / 8.4 1.4 OCM Mezzanine Fund II Jun.
2005 Jun. 2010 1,251 nm 88 527 1,489 145 — — — 166 11.3 7.8 1.6 OCM
Mezzanine Fund (17) Oct. 2001 Oct. 2006 808 nm 96 302 1,073 2 — 38
— — 15.4
10.8 / 10.5
1.5 13.2% 8.9%
Emerging Markets Opportunities Oaktree
Emerging Market Opportunities Fund (18) Sep. 2013 Sep. 2017 $384
65% 65% $29 $1 $278 $228 $— $— $286 10.1% 6.4% 1.2x Special Account
F Jan. 2014 Jan. 2017 253 66 66 20 — 187 186 — — 191 9.1 7.0 1.2
32,699 (12) 1,805 (12) 9.7% 6.7% Other (19) 7,864 22 Total (20)
$40,563 $1,827 (1) For our incentive-creating
closed-end funds in their investment periods, this percentage
equals invested capital divided by committed capital. Invested
capital for this purpose is the sum of capital drawn from fund
investors plus net borrowings, if any, outstanding, under a
fund-level credit facility where such borrowings were made in lieu
of drawing capital from fund investors. (2) Represents capital
drawn from fund investors divided by committed capital. The
aggregate change in drawn capital for the three months ended
September 30, 2016 was $624 million. (3) Accrued incentives (fund
level) exclude Oaktree segment incentive income previously
recognized. (4) 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. (5) 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. (6) 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. (7) The IRR is
not considered meaningful (“nm”) as the period from the initial
capital contribution through September 30, 2016 was less than 18
months. (8) 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. (9) A portion of this fund pays management fees based on
drawn, rather than committed, capital. (10) Management fees during
the investment period are calculated on drawn capital or cost
basis, rather than committed capital. As a result, as of September
30, 2016 management fee-generating AUM included only that portion
of committed capital that had been drawn. (11) 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. (12) Aggregate IRRs or totals are based on the
conversion of cash flows or amounts, respectively, from euros to
USD using the September 30, 2016 spot rate of $1.12. (13)
Management fees are based on aggregate contributed capital for the
period from the initial investment date until the investment period
start date, which includes indebtedness incurred in lieu of drawn
capital. (14) A portion of the $409 million of commitments to
Oaktree Infrastructure Fund as of September 30, 2016 was subject to
certain contingencies. (15) The fund includes co-investments of
$626 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 September 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. (16) The fund’s partnership interests are divided into
Class A and Class B interests, with the Class A interests having
priority with respect to the distribution of current income and
disposition proceeds. The net IRR for Class A interests was 10.4%
and Class B interests was 8.4%. The combined net IRR for Class A
and Class B interests was 9.5%. (17) 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%. (18) In
the third quarter of 2016, the investment period for Oaktree
Emerging Market Opportunities Fund was extended for a one year
period until September 2017. However, management fees stepped down
to the post-investment period basis effective October 1, 2016. (19)
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. (20) This excludes two closed-end funds with management
fee-generating AUM aggregating $522 million as of September 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 $623 million of management fee-generating AUM.
Open-end
Funds
Manage-
ment Fee-gener-
ating AUM
as of
Sept. 30, 2016
Twelve Months EndedSeptember 30,
2016 Since Inception through September
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 $ 15,938 10.8 % 10.2 % 12.4
% 9.4 % 8.8 % 8.4 % 0.80 0.56 Global High Yield Bonds Nov. 2010
4,424 11.8 11.2 12.8 7.4 6.9 6.9 1.10 1.05 European High Yield
Bonds May 1999 1,444 11.8 11.3 11.7 8.1 7.6 6.3 0.70 0.43 U.S.
Convertibles Apr. 1987 3,559 6.9 6.4 9.1 9.4 8.9 8.1 0.48 0.35
Non-U.S. Convertibles Oct. 1994 1,502 4.9 4.4 1.6 8.4 7.9 5.6 0.77
0.40 High Income Convertibles Aug. 1989 828 11.2 10.3 12.7 11.5
10.6 8.2 1.05 0.59 U.S. Senior Loans Sept. 2008 1,565 4.9 4.4 5.3
6.0 5.5 5.2 1.06 0.63 European Senior Loans May 2009 1,491 6.0 5.5
4.9 8.5 8.0 9.3 1.71 1.72 Emerging Markets Equities Jul. 2011 3,166
18.9 18.0 16.8 (1.5 ) (2.3 ) (2.0 ) (0.08 ) (0.11 ) Other
231 Total $ 34,148 (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 September
30, 2016 Twelve Months
EndedSeptember 30, 2016 Since
Inception throughSeptember 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 $ 3,248 $ 2,438 $ 16 9.4 %
6.3 % 8.3 % 5.9 % Value Opportunities Sept. 2007 1,220 1,158 —
(3)
5.7 3.7 9.1 5.0 Value Equities (4) May 2012 342 275 1 12.4 7.9 17.7
11.9 Emerging Markets Absolute Return Apr. 1997 138 118
—
(3)
7.2 5.7 13.0 8.7 3,989 17 Restructured funds — 5
Total (2) (5) $ 3,989 $ 22 (1) Returns represent
time-weighted rates of return. (2) Includes two closed-end funds
with an aggregate $794 million and $522 million of AUM and
management fee-generating AUM, respectively. Beginning with the
third quarter of 2016, annual performance-based fees have been
reflected as incentive income (as opposed to management fees). Such
amounts were not material in prior periods. (3) As of September 30,
2016, the aggregate depreciation below high-water marks previously
established for individual investors in the fund totaled
approximately $129 million for Value Opportunities and $5 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 $623
million of management fee-generating AUM as of September 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 accrued incentives 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. Additionally, for
ANI, 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 performance 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
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
generally 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 performance 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 performance
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 performance 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 performance
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. 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 performance 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 deployed capital, whether
involving drawn or recycled equity capital, or borrowings from
fund-level credit facilities. This metric is used in connection
with incentive-creating closed-end funds and certain evergreen
funds.
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
Nine Months Ended September 30, September
30, 2016 2015 2016
2015 (in thousands) Fee-related
earnings (1) $ 67,601 $ 55,108 $ 194,589 $ 157,854 Incentive income
99,731 16,925 283,966 230,952 Incentive income compensation (47,378
) (7,596 ) (132,534 ) (127,252 ) Investment income (loss) 70,928
(19,950 ) 133,730 56,873 Equity-based compensation (2) (16,041 )
(8,836 ) (39,189 ) (27,760 ) Interest expense, net of interest
income (7,799 ) (8,388 ) (24,458 ) (26,103 ) Other income
(expense), net (4,902 ) (283 ) (6,294 )
(2,279 ) Adjusted net income 162,140 26,980 409,810 262,285
Incentive income (3) 7 (8,676 ) (39,881 ) (20,249 ) Incentive
income compensation (3) (7 ) 2,689 39,881 20,242 Investment income
(4) 6,155 — 19,733 — Equity-based compensation (5) (3,798 ) (3,658
) (9,271 ) (12,523 ) Placement costs (6) (893 ) — (8,807 ) —
Foreign-currency hedging (7) (1,306 ) (6,338 ) (10,837 ) (959 )
Acquisition-related items (8) 253 (1,433 ) 1,751 (4,935 ) Income
taxes (9) (8,567 ) (1,893 ) (29,818 ) (15,253 ) Non-Operating Group
expenses (10) (182 ) (464 ) (647 ) (1,424 ) Non-controlling
interests (10) (95,505 ) (5,320 ) (236,492 )
(167,230 ) Net income attributable to Oaktree Capital Group,
LLC $ 58,297 $ 1,887 $ 135,422 $ 59,954
(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
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 (in thousands) Fee-related
earnings-OCG (1) $ 23,869 $ 17,407 $ 70,745 $ 46,361 Incentive
income attributable to OCG 40,393 5,325 114,656 69,510 Incentive
income compensation attributable to OCG (19,189 ) (2,391 ) (53,507
) (38,180 ) Investment income (loss) attributable to OCG 28,726
(6,277 ) 54,067 16,790 Equity-based compensation attributable to
OCG (2) (6,497 ) (2,781 ) (15,830 ) (8,588 ) Interest expense, net
of interest income attributable to OCG (3,112 ) (2,611 ) (9,756 )
(7,972 ) Other income (expense) attributable to OCG (1,985 ) (89 )
(2,547 ) (716 ) Non-fee-related earnings income taxes attributable
to OCG (3) (4,297 ) (1,389 ) (20,078 )
(11,866 ) Adjusted net income-OCG (1) 57,908 7,194 137,750 65,339
Incentive income attributable to OCG (4) 3 (2,730 ) (16,048 )
(6,015 ) Incentive income compensation attributable to OCG (4) (3 )
846 16,048 5,893 Investment income attributable to OCG (5) 2,493 —
7,961 — Equity-based compensation attributable to OCG (6) (1,538 )
(1,151 ) (3,744 ) (3,843 ) Placement costs attributable to OCG (7)
(362 ) — (3,548 ) — Foreign-currency hedging attributable to OCG
(8) (529 ) (1,994 ) (4,369 ) (411 ) Acquisition-related items
attributable to OCG (9) 103 (451 ) 708 (1,515 ) Non-controlling
interests attributable to OCG (9) 222 173
664 506 Net income attributable
to Oaktree Capital Group, LLC $ 58,297 $ 1,887 $
135,422 $ 59,954 (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. A reconciliation of fee-related
earnings to fee-related earnings-OCG is presented below.
Three Months Ended Nine Months Ended September
30, September 30, 2016
2015 2016 2015 (in
thousands, except per unit data) Fee-related earnings $ 67,601
$ 55,108 $ 194,589 $ 157,854 Fee-related earnings attributable to
OCGH non-controlling interest (40,221 ) (37,768 ) (116,016 )
(109,221 ) Non-Operating Group expenses (229 ) (491 ) (765 ) (1,478
) Fee-related earnings-OCG income taxes (3,282 ) 558
(7,063 ) (794 ) Fee-related earnings-OCG $
23,869 $ 17,407 $ 70,745 $ 46,361
Fee-related earnings-OCG per Class A unit $ 0.38 $ 0.36
$ 1.13 $ 0.98
(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
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 (in thousands) Management fees:
Closed-end funds $ 141,513 $ 127,129 $ 435,717 $ 387,923 Open-end
funds 39,828 44,241 117,017 135,259 Evergreen funds 13,008
14,396 40,335 42,876
Total management fees / fee-related earnings revenues
194,349 185,766 593,069 566,058 Incentive income 99,731 16,925
283,966 230,952 Investment income (loss) 70,928
(19,950 ) 133,730 56,873 Segment
revenues 365,008 182,741 1,010,765 853,883 Consolidated funds (1)
(9,020 ) (121,908 ) (47,124 ) (662,368 ) Investment income (2)
(65,758 ) (10,342 ) (136,205 ) (38,718
) GAAP revenues $ 290,230 $ 50,491 $ 827,436 $
152,797 (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
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 (in thousands) Distributable
earnings $ 141,477 $ 96,979 $ 394,708 $ 343,315 Investment income
(loss) (1) 70,928 (19,950 ) 133,730 56,873 Receipts of investment
income from funds (2) (18,020 ) (29,459 ) (41,637 ) (83,617 )
Receipts of investment income from companies (17,866 ) (13,304 )
(42,293 ) (30,275 ) Equity-based compensation (3) (16,041 ) (8,836
) (39,189 ) (27,760 ) Operating Group income taxes 1,662
1,550 4,491 3,749
Adjusted net income 162,140 26,980 409,810 262,285 Reconciling
adjustments (4) (103,843 ) (25,093 ) (274,388
) (202,331 ) Net income attributable to Oaktree Capital
Group, LLC $ 58,297 $ 1,887 $ 135,422 $ 59,954
(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
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 (in thousands) Distributable
earnings-OCG (1) $ 51,223 $ 25,678 $ 137,948 $ 89,046 Investment
income (loss) attributable to OCG 28,726 (6,277 ) 54,067 16,790
Receipts of investment income from funds attributable to OCG (7,298
) (9,270 ) (16,817 ) (25,811 ) Receipts of investment income from
companies attributable to OCG (7,236 ) (4,186 ) (17,081 ) (9,343 )
Equity-based compensation attributable to OCG (2) (6,497 ) (2,781 )
(15,830 ) (8,588 ) Distributable earnings-OCG income taxes 789 (507
) 5,472 579 Tax receivable agreement 5,106 4,880 15,318 14,170
Income taxes of Intermediate Holding Companies (6,905 )
(343 ) (25,327 ) (11,504 ) Adjusted net
income-OCG (1) 57,908 7,194 137,750 65,339 Reconciling adjustments
(3) 389 (5,307 ) (2,328 ) (5,385
) Net income attributable to Oaktree Capital Group, LLC $ 58,297
$ 1,887 $ 135,422 $ 59,954 (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 Nine Months Ended
September 30, September 30, 2016
2015 2016 2015
(in thousands, except per unit data) Distributable earnings
$ 141,477 $ 96,979 $ 394,708 $ 343,315 Distributable earnings
attributable to OCGH non-controlling interest (84,177 ) (66,464 )
(235,323 ) (238,096 ) Non-Operating Group expenses (182 ) (464 )
(647 ) (1,424 ) Distributable earnings-OCG income taxes (789 ) 507
(5,472 ) (579 ) Tax receivable agreement (5,106 )
(4,880 ) (15,318 ) (14,170 ) Distributable
earnings-OCG $ 51,223 $ 25,678 $ 137,948 $
89,046 Distributable earnings-OCG per Class A unit $ 0.82
$ 0.53 $ 2.21 $ 1.88 (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
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 (in thousands) Distributable
earnings revenues $ 329,966 $ 245,454 $ 960,965 $ 910,902
Investment income (loss) 70,928 (19,950 ) 133,730 56,873 Receipts
of investment income from funds (18,020 ) (29,459 ) (41,637 )
(83,617 ) Receipts of investment income from companies
(17,866 ) (13,304 ) (42,293 ) (30,275 )
Segment revenues 365,008 182,741 1,010,765 853,883 Consolidated
funds (1) (9,020 ) (121,908 ) (47,124 ) (662,368 ) Investment
income (2) (65,758 ) (10,342 ) (136,205 )
(38,718 ) GAAP revenues $ 290,230 $ 50,491 $
827,436 $ 152,797 (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
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 (in thousands) Economic net income
(loss) (1) $ 263,603 $ (88,586 ) $ 470,986 $ 152,581
Change in accrued incentives (fund level),
net of associated incentive income compensation (2)
(101,463 ) 115,566 (61,176 )
109,704 Adjusted net income 162,140 26,980 409,810 262,285
Reconciling adjustments (3) (103,843 ) (25,093 )
(274,388 ) (202,331 ) Net income attributable to
Oaktree Capital Group, LLC $ 58,297 $ 1,887 $ 135,422
$ 59,954 (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
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 (in thousands) Economic net income
(loss)-OCG (1) $ 95,683 $ (31,498 ) $ 163,366 $ 23,441 Change in
accrued incentives (fund level), net of associated incentive income
compensation attributable to OCG (41,094 ) 36,364 (24,915 ) 36,016
Economic net income-OCG income taxes 10,898 3,159 26,440 18,542
Income taxes-OCG (7,579 ) (831 ) (27,141 )
(12,660 ) Adjusted net income-OCG (1) 57,908 7,194 137,750
65,339 Reconciling adjustments (2) 389 (5,307
) (2,328 ) (5,385 ) Net income attributable to
Oaktree Capital Group, LLC $ 58,297 $ 1,887 $ 135,422
$ 59,954 (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 Nine Months Ended September 30,
September 30, 2016 2015
2016 2015 (in thousands,
except per unit data) Economic net income (loss) $ 263,603 $
(88,586 ) $ 470,986 $ 152,581 Economic net (income) loss
attributable to OCGH non-controlling interest (156,840 ) 60,711
(280,533 ) (109,174 ) Non-Operating Group expenses (182 ) (464 )
(647 ) (1,424 ) Economic net income-OCG income taxes (10,898
) (3,159 ) (26,440 ) (18,542 ) Economic net
income (loss)-OCG $ 95,683 $ (31,498 ) $ 163,366 $
23,441 Economic net income (loss) per Class A unit $ 1.52
$ (0.65 ) $ 2.62 $ 0.50 (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
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 (in thousands) Economic net income
revenues $ 687,962 $ (21,826 ) $ 1,274,356 $ 636,696 Incentives
created (422,685 ) 187,642 (547,557 ) (13,765 ) Incentive income
99,731 16,925 283,966
230,952 Segment revenues 365,008 182,741 1,010,765
853,883 Consolidated funds (1) (9,020 ) (121,908 ) (47,124 )
(662,368 ) Investment income (2) (65,758 ) (10,342 )
(136,205 ) (38,718 ) GAAP revenues $ 290,230 $
50,491 $ 827,436 $ 152,797 (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
September 30, 2016 Segment
Adjustments Consolidated (in
thousands) Management fees (1) $ 194,349 $ (3,375 ) $ 190,974
Incentive income (1) 99,731 (475 ) 99,256 Investment income (1)
70,928 (5,170 ) 65,758 Total expenses (2) (190,167 ) (12,172 )
(202,339 ) Interest expense, net (3) (7,799 ) (24,615 ) (32,414 )
Other income (expense), net (4) (4,902 ) 5,445 543 Other income of
consolidated funds (5) — 55,612 55,612 Income taxes — (8,567 )
(8,567 ) Net loss attributable to non-controlling interests in
consolidated funds — (13,243 ) (13,243 ) Net income attributable to
non-controlling interests in consolidated subsidiaries —
(97,283 ) (97,283 ) Adjusted net income/net
income attributable to Oaktree Capital Group, LLC $ 162,140
$ (103,843 ) $ 58,297 Corporate investments (6) $ 1,383,612
$ (342,618 ) $ 1,040,994 Total assets (7) $
3,302,911
$
3,792,181
$
7,095,092
(1) The adjustment represents (a) the
elimination of amounts earned from the consolidated funds, (b) for
management fees, the reclassification of $397 of net gains related
to foreign-currency hedging activities to general and
administrative expense, and (c) for investment income, differences
of $6,155 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 $4,203 related
to unit grants made before our initial public offering, (b)
consolidated fund expenses of $1,143, (c) expenses incurred by the
Intermediate Holding Companies of $229, (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 $7, (e) acquisition-related items of $253, (f) adjustments
of $4,941 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 $404
arising from EVUs that are classified as liability awards under
GAAP but as equity awards for segment reporting, (h) $893 related
to third-party placement costs, and (i) $1,413 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 $4,941 that are classified as
expenses for segment reporting and as other income under GAAP, and
(b) the reclassification of $504 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 September 30,
2015 Segment Adjustments
Consolidated (in thousands)
Management fees (1) $ 185,766 $ (138,660 ) $ 47,106 Incentive
income (1) 16,925 (13,540 ) 3,385 Investment income (loss) (1)
(19,950 ) 30,292 10,342 Total expenses (2) (147,090 ) (43,428 )
(190,518 ) Interest expense, net (3) (8,388 ) (47,635 ) (56,023 )
Other income (expense), net (4) (283 ) 6,651 6,368 Other income
(loss) of consolidated funds (5) — (1,585,338 ) (1,585,338 ) Income
taxes — (1,893 ) (1,893 ) Net loss attributable to non-controlling
interests in consolidated funds — 1,779,225 1,779,225 Net income
attributable to non-controlling interests in consolidated
subsidiaries — (10,767 ) (10,767 )
Adjusted net income/net income attributable to Oaktree Capital
Group, LLC $ 26,980 $ (25,093 ) $ 1,887 Corporate
investments (6) $ 1,465,195 $ (1,291,621 ) $ 173,574
Total assets (7) $ 3,229,121 $ 51,585,676 $
54,814,797 (1) The adjustment represents (a)
the elimination of amounts earned from the consolidated funds and
(b) for management fees, the reclassification of $3,869 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 $3,874 related to unit grants
made before our initial public offering, (b) consolidated fund
expenses of $31,400, (c) expenses incurred by the Intermediate
Holding Companies of $491, (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 $2,689,
(e) acquisition-related items of $1,433, (f) adjustments of $6,368
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 $217 arising from EVUs that
are classified as liability awards under GAAP but as equity awards
for segment reporting, (h) $2,752 of net losses 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 $6,368 that are classified as expenses for
segment reporting and as other income under GAAP, and (b) the
reclassification of $283 of 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 (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 $1.5 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
Nine Months Ended September 30, 2016 Segment
Adjustments
Consolidated (in thousands) Management fees (1) $
593,069 $ (8,527 ) $ 584,542 Incentive income (1) 283,966 (41,072 )
242,894 Investment income (1) 133,730 2,475 136,205 Total expenses
(2) (570,203 ) (8,968 ) (579,171 ) Interest expense, net (3)
(24,458 ) (62,391 ) (86,849 ) Other income (expense), net (4)
(6,294 ) 18,186 11,892 Other income of consolidated funds (5) —
113,130 113,130 Income taxes — (29,818 ) (29,818 ) Net income
attributable to non-controlling interests in consolidated funds —
(15,618 ) (15,618 ) Net income attributable to non-controlling
interests in consolidated subsidiaries —
(241,785 ) (241,785 ) Adjusted net income/net income
attributable to Oaktree Capital Group, LLC $ 409,810 $
(274,388 ) $ 135,422 Corporate investments (6) $ 1,383,612
$ (342,618 ) $ 1,040,994 Total assets (7) $
3,302,911
$
3,792,181
$
7,095,092
(1) The adjustment represents (a) the
elimination of amounts earned from the consolidated funds, (b) for
management fees, the reclassification of $1,086 of net gains
related to foreign-currency hedging activities to general and
administrative expense, and (c) for investment income, differences
of $19,733 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
$10,269 related to unit grants made before our initial public
offering, (b) consolidated fund expenses of $3,819, (c) expenses
incurred by the Intermediate Holding Companies of $765, (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 $39,881, (e) acquisition-related items of
$1,751, (f) adjustments of $16,287 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 $997 arising from EVUs that are classified as
liability awards under GAAP but as equity awards for segment
reporting, (h) $8,807 related to third-party placement costs, and
(i) $11,650 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 $16,287
that are classified as expenses for segment reporting and as other
income under GAAP, and (b) the reclassification of $1,899 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
Nine Months Ended September 30, 2015 Segment
Adjustments
Consolidated (in thousands) Management fees (1) $
566,058 $ (417,210 ) $ 148,848 Incentive income (1) 230,952
(227,003 ) 3,949 Investment income (1) 56,873 (18,155 ) 38,718
Total expenses (2) (563,216 ) (109,205 ) (672,421 ) Interest
expense, net (3) (26,103 ) (129,231 ) (155,334 ) Other income
(expense), net (4) (2,279 ) 16,204 13,925 Other income (loss) of
consolidated funds (5) — (162,622 ) (162,622 ) Income taxes —
(15,253 ) (15,253 ) Net loss attributable to non-controlling
interests in consolidated funds — 1,034,521 1,034,521 Net income
attributable to non-controlling interests in consolidated
subsidiaries — (174,377 ) (174,377 )
Adjusted net income/net income attributable to Oaktree Capital
Group, LLC $ 262,285 $ (202,331 ) $ 59,954 Corporate
investments (6) $ 1,465,195 $ (1,291,621 ) $ 173,574
Total assets (7) $ 3,229,121 $ 51,585,676 $
54,814,797 (1) The adjustment represents (a)
the elimination of amounts earned from the consolidated funds and
(b) for management fees, the reclassification of $10,553 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 $12,479 related to unit grants
made before our initial public offering, (b) consolidated fund
expenses of $103,831, (c) expenses incurred by the Intermediate
Holding Companies of $1,477, (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 $20,242,
(e) acquisition-related items of $4,935, (f) adjustments of $17,471
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 $44 arising from EVUs that
are classified as liability awards under GAAP but as equity awards
for segment reporting, (h) $10,861 of net gains related to
foreign-currency hedging activities, and (i) other expenses of $71.
(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 $17,471 that are classified as expenses for
segment reporting and as other income under GAAP, and (b) the
reclassification of $1,267 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 $1.5 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/20161028005184/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)
過去 株価チャート
から 6 2024 まで 7 2024
Oaktree Capital (NYSE:OAK)
過去 株価チャート
から 7 2023 まで 7 2024