Exhibit 99.1
ARES MANAGEMENT, L.P. REPORTS THIRD QUARTER 2015 RESULTS
· | Total assets under management (“AUM”)1 increased to $91.5 billion, a 14.9% increase year over year |
· | $6.5 billion in gross capital raised during the three months ended September 30, 2015 and $15.5 billion raised over the twelve months ended September 30, 2015 |
· | Fee related earnings were $43.1 million and $137.2 million for the three and nine months ended September 30, 2015, up 5% and 28% from the three and nine months ended September 30, 2014, respectively |
· | Economic net income was $6.0 million on a pre-tax basis and ($0.00) per unit, 2 net of tax, down from $72.1 million on a pre-tax basis and $0.32 per unit for the three months ended September 30, 2014 |
· | Distributable earnings were $39.6 million on a pre-tax basis and $0.14 per common unit, net of tax, down from $65.3 million on a pre-tax basis and $0.26 per common unit, net of tax, for the three months ended September 30, 2014 |
· | Declared third quarter distribution of $0.13 per common unit compared to $0.24 for the third quarter of 2014 |
· | Third quarter net loss attributable to Ares Management, L.P. was $11.3 million |
LOS ANGELES -- Ares Management, L.P. (“the Company,” “Ares,” “we,” and “our”) (NYSE:ARES) today reported its financial results for the quarter ended September 30, 2015.
“While our earnings were impacted by significant third quarter global market volatility and short-term unrealized changes in valuations for our assets, the fundamental performance of our business and our portfolio continues to be strong,” said Tony Ressler, Chairman and Chief Executive Officer of Ares. “Existing and new clients continue to entrust us with their capital as we have delivered attractive long term returns and as we have expanded our platform capabilities.”
Ares reported growth in AUM and Fee Earning Assets Under Management (“FEAUM”) of 14.9% and 11.4%, year over year, reaching $91.5 billion and $66.7 billion, respectively. Third quarter gross capital raised totaled $6.5 billion primarily driven by fundraising in the Tradable Credit and Direct Lending Groups.
“We continued to deliver strong fundraising results with $6.5 billion in gross new capital raised across three of our four business groups,” said Michael Arougheti, President of Ares. “We believe we are well positioned to grow our management fees and fee related earnings in 2016 from our fundraising efforts involving several of our flagship funds and the expected deployment of a portion of our available capital.”
Economic net income for the three months ended September 30, 2015 was $6.0 million compared to $72.1 million for the three months ended September 30, 2014. Third quarter economic net income, net of income taxes, was ($0.6) million, or ($0.00) per unit, compared to $67.4 million, or $0.32 per unit, for the third quarter of 2014. The decrease in economic net income was primarily driven by a decline in net investment income, largely attributable to portfolio investments in our ACOF Asia fund in the Private Equity Group and certain alternative credit funds in the Tradable Credit Group, and, to a lesser extent, reduced net performance fees in the Private Equity, Direct Lending and Tradable Credit Groups and lower fee related earnings in the Real Estate Group. The decrease was partially offset by an increase in fee related earnings in the Private Equity, Direct Lending and Tradable Credit Groups. Economic net income for the nine months ended September 30, 2015 was $164.9 million compared to $224.5 million for the nine months ended September 30, 2014.
1 | In this press release we refer to certain non-GAAP financial measures, including assets under management, fee earning assets under management, economic net income, fee related earnings, performance related earnings and distributable earnings. The definitions and reconciliations of these measures to the most directly comparable GAAP measures, where applicable, as well as an explanation of why we use these measures, are included in this press release. |
2 | Total units outstanding represents the sum of common units, Ares Operating Group Units that are exchangeable for common units on a one-for-one basis, and the dilutive effects of the Company’s equity-based awards. See Exhibit F for more details. |
Distributable earnings were $39.6 million for the three months ended September 30, 2015 compared to $65.3 million for the three months ended September 30, 2014. The decrease was primarily driven by declines in realized net performance fees and in realized net investment income in the Tradable Credit and Private Equity Groups and in fee related earnings in the Real Estate Group. This decrease was partially offset by an increase in fee related earnings in the Private Equity, Direct Lending and Tradable Credit Groups. Distributable earnings were $179.8 million for the nine months ended September 30, 2015 compared to $168.2 million for the nine months ended September 30, 2014. The increase was primarily driven by an increase in fee related earnings in the Private Equity, Direct Lending and Tradable Credit Groups, partially offset by a decline in realized net performance fees and realized net investment income in the Tradable Credit and Private Equity Groups.
For the third quarter ended September 30, 2015, distributable earnings after income taxes allocated to common unitholders were $11.3 million, or $0.14 per common unit. Ares declared a third quarter distribution of $0.13 per common unit payable on December 8, 2015 to common unitholders of record as of November 24, 2015.
Ares has also provided additional information in its Third Quarter 2015 Earnings Presentation, which can be viewed at www.aresmgmt.com under “Investor Resources – Presentations and Reports.”
ARES MANAGEMENT, L.P.
Key Performance Metrics as of September 30, 2015
($ in thousands, except unit data and as otherwise noted) | | Three months ended
September 30, | | % | | Nine months ended
September 30, | | % | |
| | 2015 | | 2014 | | Change | | 2015 | | 2014(1) | | Change | |
Management Fees (includes ARCC Part I Fees of $31,680 and $31,156 for the three months ended September 30, 2015 and 2014, respectively and $89,972 and $85,140 for the nine months ended September 30, 2015 and 2014, respectively) | | $162,210 | | $153,676 | | 6% | | $485,013 | | $436,940 | | 11% | |
Admin. & Other Fees | | 8,026 | | 6,568 | | 22% | | 22,409 | | 20,009 | | 12% | |
Compensation & Benefits(2) | | (96,465) | | (93,408) | | 3% | | (281,682) | | (272,504) | | 3% | |
General & Administrative Expenses(3) | | (30,691) | | (25,613) | | 20% | | (88,551) | | (77,220) | | 15% | |
Fee Related Earnings | | $43,080 | | $41,223 | | 5% | | $137,189 | | $107,225 | | 28% | |
| | | | | | | | | | | | | |
Net Performance Fees | | ($5,916) | | $9,415 | | NM | | $43,872 | | $50,766 | | (14%) | |
Net Investment Income | | (31,129) | | 21,417 | | NM | | (16,123) | | 66,515 | | NM | |
Performance Related Earnings | | ($37,045) | | $30,832 | | NM | | $27,749 | | $117,281 | | (76%) | |
| | | | | | | | | | | | | |
Economic Net Income | | $6,035 | | $72,055 | | (92%) | | $164,938 | | $224,506 | | (27%) | |
Economic Net Income After Income Taxes(4) | | ($562) | | $67,368 | | NM | | $142,619 | | $209,809 | | (32%) | |
Economic Net Income After Income Taxes per Unit(4) | | ($0.00) | | $0.32 | | NM | | $0.67 | | $0.99 | | (32%) | |
Distributable Earnings | | $39,584 | | $65,324 | | (39%) | | $179,835 | | $168,218 | | 7% | |
Distributable Earnings After Income Taxes per Common Unit(5) | | $0.14 | | $0.26 | | (46%) | | $0.68 | | $0.66 | | 3% | |
| | | | | | | | | | | | | |
Other Data | | | | | | | | | | | | | |
Accrued Incentives (Gross) | | $565,385 | | $526,763 | | 7% | | $565,385 | | $526,763 | | 7% | |
Accrued Incentives (Net) | | 153,116 | | 166,533 | | (8%) | | 153,116 | | 166,533 | | (8%) | |
Total Fee Revenue(6) | | 156,292 | | 163,091 | | (4%) | | 528,886 | | 487,706 | | 8% | |
Management Fees as a Percentage of Total Fee Revenue(6) | | 103.8% | | 94.2% | | - | | 91.7% | | 89.6% | | - | |
(1) | Ares completed its IPO and related reorganization on May 7, 2014, and accordingly the financial results for the nine months ended September 30, 2014 reported herein include the results of our predecessor owners. |
(2) | Includes compensation and benefits expenses attributable to OMG of $31.9 million and $27.1 million for the three months ended September 30, 2015 and 2014, respectively, and $87.9 million and $80.7 million for the nine months ended September 30, 2015 and 2014, respectively, which are not allocated to an operating segment. |
(3) | Includes G&A expenses attributable to OMG of $15.1 million and $14.0 million for the three months ended September 30, 2015 and 2014, respectively, and $46.5 million and $40.5 million for the nine months ended September 30, 2015 and 2014, respectively, which are not allocated to an operating segment. |
(4) | For the nine months ended September 30, 2014, represents pro forma results assuming Ares’ IPO and reorganization had taken place on January 1, 2014. Total units of 214,335,500 for the three months ended September 30, 2015 includes common units, Ares Operating Group Units that are exchangeable for common units on a one-for-one basis, and the dilutive effects of the Company’s equity-based awards. |
(5) | Distributable earnings attributable to common unitholders is presented on a pro forma basis for the nine months ending September 30, 2014 as if Ares’ IPO occurred on January 1, 2014. The per unit calculation uses total common units outstanding. See “Exhibit G. Per Unit Calculations For the Three Months Ended September 30, 2015” for more detail. |
(6) | Total fee revenue is calculated as management fees plus net performance fees. |
2
Management Fee Revenue. Management fee revenue increased by $8.5 million to $162.2 million for the three months ended September 30, 2015 compared to the three months ended September 30, 2014. For the nine months ended September 30, 2015, management fee revenue increased by $48.1 million to $485.0 million over the same period in 2014. The increase for both periods was primarily due to management fee contracts acquired in the Energy Investors Funds (“EIF”) acquisition in the first quarter of 2015, deployment of European Direct Lending funds and new capital raised and related deployment at ARCC. The increase was partially offset by a decrease in management fees in the Real Estate and Tradable Credit Groups due to certain funds that are past their reinvestment periods, as well as fund liquidations and distributions and one-time catch up fees attributable to certain funds in the Real Estate Group recognized in the third quarter of 2014.
Compensation and Benefits. Compensation and benefits expenses increased by $3.1 million to $96.5 million for the three months ended September 30, 2015 compared to the three months ended September 30, 2014. For the nine months ended September 30, 2015, compensation and benefits expenses increased by $9.2 million to $281.7 million over the same period in 2014. Both increases were attributable to merit-based increases and increased headcount, including approximately 100 additional professionals from the Keltic Financial Services and Keltic Financial Partners (“Keltic”), First Capital Holdings (“FCC”) and EIF acquisitions.
General and Administrative Expenses. General and administrative expenses increased by $5.1 million to $30.7 million for the three months ended September 30, 2015 compared to the three months ended September 30, 2014. For the nine months ended September 30, 2015, general and administrative expenses increased by $11.3 million to $88.6 million over the same period in 2014. Both increases were primarily driven by additional occupancy and office expenses, growth in personnel and geographical expansion and expenses relating to the Keltic, FCC and EIF acquisitions.
Fee Related Earnings. FRE increased by $1.9 million, or 4.5%, to $43.1 million for the three months ended September 30, 2015 compared to the three months ended September 30, 2014. FRE increased by $30.0 million, or 27.9%, to $137.2 million for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014. For both periods, the growth in FRE was attributable to an increase in management fees in the Private Equity and Direct Lending Groups and a decrease in compensation and benefits expenses in the Tradable Credit and Real Estate Groups.
Performance Related Earnings. PRE was ($37.0) million for the three months ended September 30, 2015 compared to $30.8 million for the three months ended September 30, 2014. PRE was $27.7 million for the nine months ended September 30, 2015 compared to $117.3 million for the nine months ended September 30, 2014. For both periods, the decrease in PRE was primarily attributable to reduced investment income from unrealized market depreciation of equity investments held by ACOF Asia in the Private Equity Group and lower performance of certain underlying investments in certain funds in the Private Equity and Tradable Credit Groups, which resulted in the reversal of previously recognized unrealized performance fees in those funds. For the nine month period, the decrease was partially offset by an increase in net performance fees in certain European funds in the Direct Lending Group.
Economic Net Income. ENI was $6.0 million for the three months ended September 30, 2015 compared to $72.1 million for the three months ended September 30, 2014. ENI after provision for income taxes was ($0.6) million, or ($0.00) per unit, for the three months ended September 30, 2015 compared to $67.4 million, or $0.32 per unit for the three months ended September 30, 2014. The decrease in ENI was due to unrealized depreciation in net investment income of $52.5 million and lower net performance fees of $15.3 million. The decrease was offset by an increase in FRE of $1.9 million. For the nine months ended September 30, 2015, ENI was $164.9 million, compared to $224.5 million for the nine months ended September 30, 2014. The decrease in ENI was primarily driven by a decline in net investment income of $82.6 million, partially offset by an increase in FRE of $30.0 million. ENI after provision for taxes was $142.6 million, or $0.67 per unit, for the nine months ended September 30, 2015 compared to $209.8 million, or $0.99 per unit for the nine months ended September 30, 2014.
Distributable Earnings. Total distributable earnings decreased by $25.7 million to $39.6 million for the three months ended September 30, 2015 compared to the three months ended September 30, 2014. The decrease was primarily driven by declines in realized net performance fees and in realized net investment income in the Tradable Credit and Private Equity Groups and in fee related earnings in the Real Estate Group. This decrease was partially offset by an increase in fee related earnings in the Private Equity, Direct Lending and Tradable Credit Groups. For the nine months ended September 30, 2015, total distributable earnings increased by $11.6 million to $179.8 million compared to the nine months ended September 30, 2014. The increase was primarily driven by an increase in fee related earnings in the Private Equity, Direct Lending and Tradable Credit Groups, partially offset by a decline in realized net performance fees and realized net investment income in the Tradable Credit and Private Equity Groups.
Accrued Incentives Fees. Net accrued incentive fees as of September 30, 2015 decreased by $13.4 million to $153.1 million compared to $166.5 million as of September 30, 2014. The decrease in net accrued incentive fees was primarily attributable to the realization of accrued fees in the Tradable Credit Group as a result of (i) the liquidation of certain long-only funds and (ii) increased realization on certain alternative credit funds. This decrease was partially offset by (i) an increase in accrued incentive fees from ACOF III and ACOF IV in the Private Equity Group, as a result of market appreciation of their investment portfolios and (ii) an increase in accrued performance fees from ACE II in the Direct Lending Group, as a result of market appreciation of the fund’s investment portfolio.
3
Assets Under Management
($ in millions) | | For the three
months ended
September 30, 2015 | | For the twelve
months ended
September 30, 2015 | |
Beginning of Period AUM | | $87,522 | | $79,616 | |
Acquisitions (1) | | - | | 4,581 | |
Commitments (2) | | 6,453 | | 14,985 | |
Capital Reduction (3) | | (978) | | (2,875) | |
Distribution (4) | | (1,121) | | (5,330) | |
Change in Fund Value (5) | | (359) | | 539 | |
End of Period AUM | | $91,517 | | $91,517 | |
Average AUM | | $89,519 | | $85,566 | |
(1) | Represents AUM acquired via acquisition. |
(2) | Represents net new commitments during the period, including equity and debt commitments, reductions of previous commitments, and gross inflows into our open-ended managed accounts and sub-advised accounts, as well as equity offerings by our publicly traded vehicles. |
(3) | Represents the permanent reduction in leverage during the period. |
(4) | Represents distributions and redemptions net of recallable amounts. |
(5) | Includes fund net income, including interest income, realized and unrealized gains (losses), fees and expenses and the impact of foreign currency. |
Total AUM was $91.5 billion as of September 30, 2015, an increase of $4.0 billion, or 4.6%, compared to total AUM of $87.5 billion as of June 30, 2015. For the three months ended September 30, 2015, the increase in AUM was primarily driven by net new commitments of $6.5 billion, which mainly consisted of (i) $2.0 billion in debt commitments and $224.7 million in equity commitments to the Tradable Credit Group’s long-only credit funds, (ii) $1.3 billion in debt commitments and $2.3 billion in equity commitments to the Direct Lending Group’s funds and (iii) $657.9 million in equity commitments to the Real Estate Group’s funds. The increase in AUM was partially offset by capital reduction of $1.0 billion and distributions of $1.1 billion, of which $290.6 million was attributable to the Tradable Credit Group, $236.4 million was attributable to the Direct Lending Group, $75.5 million was attributable to the Private Equity Group and $518.6 million was attributable to the Real Estate Group.
Fee-Earning Assets Under Management
($ in millions) | | For the three
months ended
September 30, 2015 | | For the twelve
months ended
September 30, 2015 | |
Beginning of Period FEAUM | | $66,008 | | $59,920 | |
Acquisitions (1) | | - | | 4,046 | |
Commitments (2) | | 2,443 | | 5,468 | |
Subscriptions / Deployment / Increase in Leverage (3) | | 840 | | 5,988 | |
Redemptions / Distributions / Decrease in Leverage (4) | | (2,717) | | (8,243) | |
Market Appreciation (5) | | (5) | | 305 | |
Change in Fee Basis | | 152 | | (762) | |
End of Period FEAUM | | $66,722 | | $66,722 | |
Average FEAUM | | $66,365 | | $63,321 | |
(1) | Represents fee earning AUM acquired via acquisition. |
(2) | Represents net new commitments during the period for funds that earn management fees based on committed capital. |
(3) | Represents subscriptions, capital deployment and increase in leverage (for funds that earn fees on a gross asset basis). |
(4) | Represents redemptions, distributions and decrease in leverage (for funds that earn fees on a gross asset basis). |
(5) | Includes fund net income, including interest income, realized and unrealized gains (losses), fees and expenses and the impact of foreign currency for funds that earn management fees based on market value. |
Total Fee Earning Assets Under Management (“FEAUM”) was $66.7 billion as of September 30, 2015, an increase of $0.7 billion, or 1.1%, compared to total FEAUM of $66.0 billion as of June 30, 2015. The increase in FEAUM was primarily driven by net new commitments of $2.4 billion, primarily comprised of $1.4 billion in the Tradable Credit Group, $384.7 million in the Direct Lending Group, and $533.7 million in the Real Estate Group. Subscriptions / deployment / increase in leverage of $840.4 million further added to the increase in FEAUM. Partially offsetting the increase in FEAUM were redemptions / distributions / decreases in leverage of $2.7 billion in the Tradable Credit and Direct Lending Groups.
4
Incentive Generating AUM and Incentive Eligible AUM
($ in millions)
| | As of September 30, 2015 | | As of June 30, 2015 | |
| | Incentive
Generating AUM | | Incentive Eligible
AUM | | Incentive
Generating AUM | | Incentive Eligible
AUM | |
Tradable Credit Group | | $1,003 | | $6,438 | | $1,225 | | $6,933 | |
Direct Lending Group | | 11,569 | | 17,246 | | 11,112 | | 15,428 | |
Private Equity Group | | 7,467 | | 9,685 | | 7,391 | | 9,809 | |
Real Estate Group | | 2,290 | | 6,777 | | 2,094 | | 6,171 | |
Total | | $22,329 | | $40,145 | | $21,821 | | $38,340 | |
Total Incentive Generating AUM (“IGAUM”) was $22.3 billion as of September 30, 2015, an increase of 2.3%, compared to total IGAUM of $21.8 billion as of June 30, 2015. The increase was primarily attributable to additional funds exceeding their hurdle in our Direct Lending and Real Estate Groups as of September 30, 2015.
Total Incentive Eligible AUM (“IEAUM”) was $40.1 billion as of September 30, 2015, compared to IEAUM of $38.3 billion as of June 30, 2015. Significant funds not contributing incentive fees as of September 30, 2015 included Ares European Real Estate Fund III, Ares European Real Estate Fund IV and Ares Commercial Real Estate Corporation.
Available Capital and Assets Under Management Not Yet Earning Fees
($ in millions)
| | As of September 30, 2015 | | As of June 30, 2015 | |
| | Available
Capital | | AUM Not Yet
Earning Fees | | Available
Capital | | AUM Not Yet
Earning Fees | |
Tradable Credit Group | | $5,256 | | $2,803 | | $5,278 | | $2,352 | |
Direct Lending Group | | 9,798 | | 8,691 | | 6,015 | | 5,768 | |
Private Equity Group | | 2,837 | | 922 | | 3,641 | | 923 | |
Real Estate Group | | 3,815 | | 923 | | 3,390 | | 1,058 | |
Total | | $21,707 | | $13,339 | | $18,324 | | $10,101 | |
Total available capital was $21.7 billion as of September 30, 2015, an increase of 18.5%, compared to $18.3 billion as of June 30, 2015. The increase was primarily due to $2.3 billion of new equity commitments and $0.9 billion of new debt commitments in the Direct Lending Group’s funds.
Total AUM Not Yet Earning Fees was $13.3 billion as of September 30, 2015, an increase of 32.1%, compared to $10.1 billion as of June 30, 2015. The increase in AUM Not Yet Earning Fees was primarily due to new commitments to our third commingled European Direct Lending fund, which is currently fundraising, and other new U.S. and European Direct Lending funds that pay fees based on invested capital.
Results Excluding Consolidated Funds
Net loss of the Company excluding the effect of the Consolidated Funds for the three months ended September 30, 2015 was $28.4 million.
Investment Capacity and Liquidity
As of September 30, 2015, our cash and cash equivalents were $387.7 million, investments were $602.0 million, net performance fees receivable were $153.1 million and no amounts were drawn against the revolving credit facility.
($ in thousands) | | As of
September 30, 2015 | | As of
December 31, 2014 | |
| | | | | |
Cash and cash equivalents | | $387,678 | | $148,858 | |
Investments | | 602,015 | | 598,074 | |
Debt obligations | | 595,740 | | 243,491 | |
Net performance fees receivable | | 153,116 | | 166,934 | |
5
Distribution
We declared a quarterly distribution of $0.13 per common unit, payable to common unitholders of record at the close of business on November 24, 2015, payable on December 8, 2015.
Recent Developments
· On October 27, 2015, the Company and Kayne Anderson Capital Advisors, L.P. (“KACALP”) announced a mutual termination of their proposed merger. As part of the termination agreement, the Company or one of its subsidiaries will reimburse KACALP $30.0 million for its estimated out of pocket expenses incurred in connection with the merger. Additionally, the Company and its affiliates and their principals and related parties will invest $150.0 million into three energy funds managed by KACALP, of which approximately 50% will be committed by the Company and its subsidiaries. The termination of the merger agreement constituted a special mandatory redemption event under the indenture governing the Ares Finance Co. II LLC Notes (“AFC II Notes”). On November 5, 2015, we redeemed the AFC II Notes at 101% of the principal amount, plus accrued and unpaid interest.
· During the third quarter of 2015, we held a closing of €1.4 billion on our third commingled European direct lending fund. Following quarter end, we held an additional closing, bringing the total closings to date to €1.8 billion, towards a target fund size of €2.0 billion.
Conference Call and Webcast Information
On November 10, 2015, the Company invites all interested persons to attend its webcast/conference call at 8:30am (Eastern Time) to discuss its third quarter 2015 financial results.
All interested parties are invited to participate via telephone or the live webcast, which will be hosted on a webcast link located on the Home page of the Investor Resources section of our website at http://www.aresmgmt.com. Please visit the website to test your connection before the webcast. Domestic callers can access the conference call by dialing (888) 317-6003. International callers can access the conference call by dialing +1 (412) 317-6061. All callers will need to enter the Participant Elite Entry Number 4037974 followed by the # sign and reference “Ares Management, L.P.” once connected with the operator. All callers are asked to dial in 10-15 minutes prior to the call so that name and company information can be collected. For interested parties, an archived replay of the call will be available through December 9, 2015 to domestic callers by dialing (877) 344-7529 and to international callers by dialing +1 (412) 317-0088. For all replays, please reference conference number 10074377. An archived replay will also be available through December 9, 2015 on a webcast link located on the Home page of the Investor Resources section of our website.
About Ares Management, L.P.
Ares Management, L.P. is a publicly traded, leading global alternative asset manager with approximately $92 billion of assets under management as of September 30, 2015 and more than 15 offices in the United States, Europe and Asia. Since its inception in 1997, Ares has adhered to a disciplined investment philosophy that focuses on delivering strong risk-adjusted investment returns throughout market cycles. Ares believes each of its four distinct but complementary investment groups in Tradable Credit, Direct Lending, Private Equity and Real Estate is a market leader based on assets under management and investment performance. Ares was built upon the fundamental principle that each group benefits from being part of the greater whole.
Forward-Looking Statements
Statements included herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events or our future performance or financial condition. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in our filings with the Securities and Exchange Commission. Ares Management, L.P. undertakes no duty to update any forward-looking statements made herein or on the webcast/conference call.
Nothing in this press release constitutes an offer to sell or solicitation of an offer to buy any securities of Ares or an investment fund managed by Ares or its affiliates.
Available Information
Ares Management, L.P.’s filings with the Securities and Exchange Commission, press releases, earnings releases and other financial information are available on its website at www.aresmgmt.com. The contents of such website are not and should not be deemed to be incorporated by reference herein.
Contact
Ares Management, L.P.
Carl Drake
(800) 340-6597
6
Appendix
Exhibit A. Operating Segments as of September 30, 2015
($ in millions)
| | Available
Capital | | Fair Value of
Capital | | AUM | |
Tradable Credit Group | | $5,256 | | $27,978 | | $33,234 | |
Direct Lending Group | | 9,798 | | 23,768 | | 33,566 | |
Private Equity Group | | 2,837 | | 11,797 | | 14,634 | |
Real Estate Group | | 3,815 | | 6,267 | | 10,082 | |
Total | | $21,707 | | $69,810 | | $91,517 | |
Exhibit B. Segment Results
($ in thousands)
As of and for the three months ended September 30, 2015:
| | Tradable | | Direct | | Private | | Real | | | | | | Total |
| | Credit | | Lending | | Equity | | Estate | | Total | | | | Stand |
| | Group | | Group | | Group | | Group | | Segments | | OMG | | Alone |
Management fees (includes ARCC Part I Fees of $31,680) | | $ | 35,914 | | $ | 74,675 | | $ | 35,931 | | $ | 15,690 | | $ | 162,210 | | $ | — | | $ | 162,210 |
Administrative fees and other income | | 28 | | 75 | | 679 | | 551 | | 1,333 | | 6,693 | | 8,026 |
Compensation and benefits | | (7,725) | | (33,974) | | (12,592) | | (10,262) | | (64,553) | | (31,912) | | (96,465) |
General, administrative and other expenses | | (4,239) | | (3,629) | | (2,808) | | (4,872) | | (15,548) | | (15,143) | | (30,691) |
Fee related earnings (loss) | | 23,978 | | 37,147 | | 21,210 | | 1,107 | | 83,442 | | (40,362) | | 43,080 |
Performance fees—realized | | 4,275 | | 313 | | — | | 3,044 | | 7,632 | | — | | 7,632 |
Performance fees—unrealized | | (15,741) | | 8,494 | | (31,731) | | 5,137 | | (33,841) | | — | | (33,841) |
Performance fee compensation—realized | | (88) | | (188) | | — | | (1,826) | | (2,102) | | — | | (2,102) |
Performance fee compensation—unrealized | | 6,512 | | (5,328) | | 23,393 | | (2,182) | | 22,395 | | — | | 22,395 |
Net performance fees | | (5,042) | | 3,291 | | (8,338) | | 4,173 | | (5,916) | | — | | (5,916) |
Investment income (loss)—realized | | 422 | | 232 | | (2,680) | | 1,063 | | (963) | | — | | (963) |
Investment income (loss)—unrealized | | (14,628) | | 992 | | (15,465) | | (187) | | (29,288) | | — | | (29,288) |
Interest and other investment income | | 4,312 | | 366 | | 199 | | 158 | | 5,035 | | — | | 5,035 |
Interest expense | | (2,293) | | (804) | | (2,404) | | (412) | | (5,913) | | — | | (5,913) |
Net investment income (loss) | | (12,187) | | 786 | | (20,350) | | 622 | | (31,129) | | — | | (31,129) |
Performance related earnings (loss) | | (17,229) | | 4,077 | | (28,688) | | 4,795 | | (37,045) | | — | | (37,045) |
Economic net income (loss) | | $ | 6,749 | | $ | 41,224 | | $ | (7,478) | | $ | 5,902 | | $ | 46,397 | | $ | (40,362) | | $ | 6,035 |
Distributable earnings (loss) | | $ | 29,261 | | $ | 34,208 | | $ | 15,739 | | $ | 2,734 | | $ | 81,942 | | $ | (42,358) | | $ | 39,584 |
Total assets | | $ | 464,418 | | $ | 316,311 | | $ | 990,845 | | $ | 214,502 | | $ | 1,986,076 | | $ | 17,992 | | $ | 2,004,068 |
As of and for the three months ended September 30, 2014:
| | Tradable | | Direct | | Private | | Real | | | | | | Total |
| | Credit | | Lending | | Equity | | Estate | | Total | | | | Stand |
| | Group | | Group | | Group | | Group | | Segments | | OMG | | Alone |
Management fees (includes ARCC Part I Fees of $31,156) | | $ | 37,038 | | $ | 68,953 | | $ | 22,386 | | $ | 25,299 | | $ | 153,676 | | $ | — | | $ | 153,676 |
Administrative fees and other income | | 3 | | 108 | | (137) | | 1,333 | | 1,307 | | 5,261 | | 6,568 |
Compensation and benefits | | (10,813) | | (34,815) | | (8,638) | | (12,092) | | (66,358) | | (27,050) | | (93,408) |
General, administrative and other expenses | | (2,741) | | (3,684) | | (1,872) | | (3,311) | | (11,608) | | (14,005) | | (25,613) |
Fee related earnings (loss) | | 23,487 | | 30,562 | | 11,739 | | 11,229 | | 77,017 | | (35,794) | | 41,223 |
Performance fees—realized | | 31,599 | | — | | 5,075 | | 799 | | 37,473 | | — | | 37,473 |
Performance fees—unrealized | | (44,526) | | 14,148 | | 35,106 | | 477 | | 5,205 | | — | | 5,205 |
Performance fee compensation—realized | | (6,973) | | (10) | | (4,058) | | — | | (11,041) | | — | | (11,041) |
Performance fee compensation—unrealized | | 13,476 | | (8,349) | | (27,307) | | (42) | | (22,222) | | — | | (22,222) |
Net performance fees | | (6,424) | | 5,789 | | 8,816 | | 1,234 | | 9,415 | | — | | 9,415 |
Investment income (loss)—realized | | 6,868 | | 430 | | 1,269 | | 413 | | 8,980 | | — | | 8,980 |
Investment income (loss)—unrealized | | (3,225) | | 3,888 | | 9,081 | | 460 | | 10,204 | | — | | 10,204 |
Interest and other investment income | | 2,222 | | 175 | | 1,312 | | 89 | | 3,798 | | — | | 3,798 |
Interest expense | | (447) | | (221) | | (630) | | (267) | | (1,565) | | — | | (1,565) |
Net investment income (loss) | | 5,418 | | 4,272 | | 11,032 | | 695 | | 21,417 | | — | | 21,417 |
Performance related earnings (loss) | | (1,006) | | 10,061 | | 19,848 | | 1,929 | | 30,832 | | — | | 30,832 |
Economic net income (loss) | | $ | 22,481 | | $ | 40,623 | | $ | 31,587 | | $ | 13,158 | | $ | 107,849 | | $ | (35,794) | | $ | 72,055 |
Distributable earnings (loss) | | $ | 54,185 | | $ | 30,288 | | $ | 14,145 | | $ | 3,773 | | $ | 102,391 | | $ | (37,067) | | $ | 65,324 |
Total assets | | $ | 531,158 | | $ | 260,060 | | $ | 594,350 | | $ | 192,772 | | $ | 1,578,340 | | $ | 9,629 | | $ | 1,587,969 |
7
Exhibit B. Segment Results (continued)
($ in thousands)
As of and for the nine months ended September 30, 2015:
| | Tradable | | Direct | | Private | | Real | | | | | | Total |
| | Credit | | Lending | | Equity | | Estate | | Total | | | | Stand |
| | Group | | Group | | Group | | Group | | Segments | | OMG | | Alone |
Management fees (includes ARCC Part I Fees of $89,972) | | $ | 111,374 | | $ | 215,743 | | $ | 108,893 | | $ | 49,003 | | $ | 485,013 | | $ | — | | $ | 485,013 |
Administrative fees and other income | | 73 | | 227 | | 728 | | 2,136 | | 3,164 | | 19,245 | | 22,409 |
Compensation and benefits | | (27,528) | | (99,772) | | (36,139) | | (30,385) | | (193,824) | | (87,858) | | (281,682) |
General, administrative and other expenses | | (11,641) | | (10,177) | | (9,126) | | (11,125) | | (42,069) | | (46,482) | | (88,551) |
Fee related earnings (loss) | | 72,278 | | 106,021 | | 64,356 | | 9,629 | | 252,284 | | (115,095) | | 137,189 |
Performance fees—realized | | 75,588 | | 4,295 | | 19,303 | | 3,146 | | 102,332 | | — | | 102,332 |
Performance fees—unrealized | | (89,575) | | 36,952 | | 97,463 | | 9,343 | | 54,183 | | — | | 54,183 |
Performance fee compensation—realized | | (41,322) | | (2,575) | | (15,442) | | (1,826) | | (61,165) | | — | | (61,165) |
Performance fee compensation—unrealized | | 53,281 | | (21,414) | | (80,384) | | (2,961) | | (51,478) | | — | | (51,478) |
Net performance fees | | (2,028) | | 17,258 | | 20,940 | | 7,702 | | 43,872 | | — | | 43,872 |
Investment income (loss)—realized | | 13,855 | | 1,320 | | 4,597 | | 1,450 | | 21,222 | | — | | 21,222 |
Investment income (loss)—unrealized | | (25,344) | | 1,806 | | (14,822) | | 962 | | (37,398) | | — | | (37,398) |
Interest and other income | | 6,315 | | 770 | | 6,014 | | 205 | | 13,304 | | — | | 13,304 |
Interest expense | | (4,717) | | (1,849) | | (5,743) | | (942) | | (13,251) | | — | | (13,251) |
Net investment income (loss) | | (9,891) | | 2,047 | | (9,954) | | 1,675 | | (16,123) | | — | | (16,123) |
Performance related earnings (loss) | | (11,919) | | 19,305 | | 10,986 | | 9,377 | | 27,749 | | — | | 27,749 |
Economic net income (loss) | | $ | 60,359 | | $ | 125,326 | | $ | 75,342 | | $ | 19,006 | | $ | 280,033 | | $ | (115,095) | | $ | 164,938 |
Distributable earnings (loss) | | $ | 117,438 | | $ | 103,343 | | $ | 71,067 | | $ | 8,206 | | $ | 300,054 | | $ | (120,219) | | $ | 179,835 |
Total assets | | $ | 464,418 | | $ | 316,311 | | $ | 990,845 | | $ | 214,502 | | $ | 1,986,076 | | $ | 17,992 | | $ | 2,004,068 |
As of and for the nine months ended September 30, 2014:
| | Tradable | | Direct | | Private | | Real | | | | | | Total |
| | Credit | | Lending | | Equity | | Estate | | Total | | | | Stand |
| | Group | | Group | | Group | | Group | | Segments | | OMG | | Alone |
Management fees (includes ARCC Part I Fees of $85,140) | | $ | 106,802 | | $ | 199,963 | | $ | 68,192 | | $ | 61,983 | | $ | 436,940 | | $ | — | | $ | 436,940 |
Administrative fees and other income | | 53 | | 474 | | 33 | | 4,119 | | 4,679 | | 15,326 | | 20,009 |
Compensation and benefits | | (32,071) | | (99,780) | | (24,720) | | (35,265) | | (191,836) | | (80,668) | | (272,504) |
General, administrative and other expenses | | (10,333) | | (7,843) | | (6,609) | | (11,911) | | (36,696) | | (40,524) | | (77,220) |
Fee related earnings (loss) | | 64,451 | | 92,814 | | 36,896 | | 18,926 | | 213,087 | | (105,866) | | 107,225 |
Performance fees—realized | | 66,094 | | 39 | | 22,775 | | 799 | | 89,707 | | — | | 89,707 |
Performance fees—unrealized | | (42,635) | | 20,040 | | 98,450 | | 11,152 | | 87,007 | | — | | 87,007 |
Performance fee compensation—realized | | (28,465) | | (38) | | (18,220) | | — | | (46,723) | | — | | (46,723) |
Performance fee compensation—unrealized | | 10,301 | | (11,874) | | (77,044) | | (608) | | (79,225) | | — | | (79,225) |
Net performance fees | | 5,295 | | 8,167 | | 25,961 | | 11,343 | | 50,766 | | — | | 50,766 |
Investment income (loss)—realized | | 31,453 | | (1,102) | | 5,048 | | 842 | | 36,241 | | — | | 36,241 |
Investment income (loss)—unrealized | | (18,625) | | 5,627 | | 36,096 | | 233 | | 23,331 | | — | | 23,331 |
Interest and other investment income | | 6,801 | | 418 | | 4,679 | | 286 | | 12,184 | | — | | 12,184 |
Interest expense | | (1,377) | | (857) | | (2,037) | | (970) | | (5,241) | | — | | (5,241) |
Net investment income (loss) | | 18,252 | | 4,086 | | 43,786 | | 391 | | 66,515 | | — | | 66,515 |
Performance related earnings | | 23,547 | | 12,253 | | 69,747 | | 11,734 | | 117,281 | | — | | 117,281 |
Economic net income (loss) | | $ | 87,998 | | $ | 105,067 | | $ | 106,643 | | $ | 30,660 | | $ | 330,372 | | $ | (105,866) | | $ | 224,506 |
Distributable earnings (loss) | | $ | 133,741 | | $ | 89,501 | | $ | 47,780 | | $ | 7,615 | | $ | 278,637 | | $ | (110,419) | | $ | 168,218 |
Total assets | | $ | 531,158 | | $ | 260,060 | | $ | 594,350 | | $ | 192,772 | | $ | 1,578,340 | | $ | 9,629 | | $ | 1,587,969 |
8
Exhibit C. Consolidated Statements of Financial Condition and Statements of Operations (GAAP Financials)
($ in thousands, except unit data)
| | As of September 30, | | As of December 31, |
| | 2015 | | 2014 |
| | (unaudited) | | |
Assets | | | | |
Cash and cash equivalents | | $ | 387,678 | | $ | 148,858 |
Restricted cash and cash equivalents | | 554 | | 32,734 |
Investments | | 440,141 | | 174,052 |
Derivative assets, at fair value | | 520 | | 7,623 |
Performance fees receivable | | 561,468 | | 187,059 |
Due from affiliates | | 150,539 | | 146,534 |
Other assets | | 56,932 | | 58,716 |
Intangible assets, net | | 93,616 | | 40,948 |
Goodwill | | 144,123 | | 85,582 |
Assets of Consolidated Funds: | | | | |
Cash and cash equivalents | | 85,943 | | 1,314,397 |
Investments, at fair value | | 2,785,753 | | 19,123,950 |
Loans held for investment, net | | — | | 77,514 |
Due from affiliates | | 8,682 | | 11,342 |
Dividends and interest receivable | | 12,812 | | 81,331 |
Receivable for securities sold | | 25,785 | | 132,753 |
Derivative assets, at fair value | | 832 | | 3,126 |
Other assets | | 592 | | 12,473 |
Total assets | | $ | 4,755,970 | | $ | 21,638,992 |
Liabilities | | | | |
Accounts payable and accrued expenses | | $ | 138,945 | | $ | 101,310 |
Accrued compensation | | 114,807 | | 129,433 |
Derivative liabilities, at fair value | | 1,802 | | 2,850 |
Due to affiliates | | 8,740 | | 19,030 |
Performance fee compensation payable | | 412,269 | | 380,268 |
Debt obligations | | 595,740 | | 243,491 |
Equity compensation put option liability | | 20,000 | | 20,000 |
Deferred tax liability, net | | 18,687 | | 19,861 |
Liabilities of Consolidated Funds: | | | | |
Accounts payable and accrued expenses | | 7,157 | | 68,589 |
Due to affiliates | | — | | 2,441 |
Payable for securities purchased | | 26,934 | | 618,902 |
Derivative liabilities, at fair value | | 9,508 | | 42,332 |
Securities sold short, at fair value | | — | | 3,763 |
Deferred tax liability, net | | — | | 22,214 |
CLO loan obligations | | 2,221,144 | | 12,049,170 |
Fund borrowings | | 161,734 | | 777,600 |
Mezzanine debt | | — | | 378,365 |
Total liabilities | | 3,737,467 | | 14,879,619 |
Commitments and contingencies | | | | |
Redeemable interest in Consolidated Funds | | — | | 1,037,450 |
Redeemable interest in Ares Operating Group entities | | 23,632 | | 23,988 |
Non-controlling interest in Consolidated Funds: | | | | |
Non-controlling interest in Consolidated Funds | | 311,864 | | 4,988,729 |
Equity appropriated for Consolidated Funds | | 10,460 | | (37,926) |
Non-controlling interest in Consolidated Funds | | 322,324 | | 4,950,803 |
Non-controlling interest in Ares Operating Group entities | | 416,499 | | 463,493 |
Controlling interest in Ares Management, L.P. : | | | | |
Partners’ Capital (80,676,995 units and 80,667,664 units, issued and outstanding at September 30, 2015 and December 31, 2014, respectively) | | 258,305 | | 285,025 |
Accumulated other comprehensive income (loss) | | (2,257) | | (1,386) |
Total controlling interest in Ares Management, L.P | | 256,048 | | 283,639 |
Total equity | | 994,871 | | 5,697,935 |
Total liabilities, redeemable interest, non-controlling interests and equity | | $ | 4,755,970 | | $ | 21,638,992 |
9
Exhibit C. Consolidated Statements of Financial Condition and Statements of Operations (GAAP Financials) (continued)
($ in thousands, except unit data)
| | Three Months Ended | | Nine Months Ended | |
| | Ended September 30, | | Ended September 30, | |
| | 2015 | | 2014 | | 2015 | | 2014 | |
Revenues | | | | | | | | | |
Management fees (includes ARCC Part I Fees of $31,680, $89,972, and $31,156, $85,140 for the three and nine months ended September 30, 2015 and 2014, respectively) | | $ | 158,051 | | $ | 127,464 | | $ | 473,341 | | $ | 352,439 | |
Performance fees | | (22,223) | | 41,885 | | 160,351 | | 69,274 | |
Other fees | | 8,026 | | 5,812 | | 21,231 | | 18,694 | |
Total revenues | | 143,854 | | 175,161 | | 654,923 | | 440,407 | |
Expenses | | | | | | | | | |
Compensation and benefits | | 104,872 | | 100,928 | | 305,808 | | 347,591 | |
Performance fee compensation | | (20,293) | | 33,263 | | 112,643 | | 125,948 | |
General, administrative and other expenses | | 50,862 | | 41,737 | | 149,740 | | 119,972 | |
Consolidated Funds’ expenses | | 945 | | 27,409 | | 15,227 | | 53,058 | |
Total expenses | | 136,386 | | 203,337 | | 583,418 | | 646,569 | |
Other income (expense) | | | | | | | | | |
Interest and other investment income | | 1,049 | | 652 | | 12,446 | | 7,673 | |
Interest expense | | (5,913) | | (1,565) | | (13,251) | | (5,241) | |
Other income (expense), net | | 2,769 | | (1,609) | | (799) | | (4,847) | |
Net realized gain (loss) on investments | | (1,078) | | 1,725 | | 12,724 | | 474 | |
Net change in unrealized appreciation (depreciation) on investments | | (6,606) | | 11,113 | | (689) | | 24,962 | |
Interest and other investment income of Consolidated Funds | | 32,306 | | 189,600 | | 89,992 | | 738,283 | |
Interest expense of Consolidated Funds | | (23,848) | | (215,524) | | (59,992) | | (564,307) | |
Net realized gain (loss) on investments of Consolidated Funds | | (1,517) | | (30,972) | | 12,493 | | 71,833 | |
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds | | (36,715) | | (2,129) | | (52,513) | | 326,611 | |
Total other income (expense) | | (39,553) | | (48,709) | | 411 | | 595,441 | |
Income (loss) before taxes | | (32,085) | | (76,885) | | 71,916 | | 389,279 | |
Income tax expense | | 5,579 | | 2,399 | | 15,741 | | 971 | |
Net income (loss) | | (37,664) | | (79,284) | | 56,175 | | 388,308 | |
Less: Net income (loss) attributable to redeemable interests in Consolidated Funds | | — | | (23,694) | | — | | 26,767 | |
Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds | | (9,219) | | (96,675) | | (7,705) | | 261,597 | |
Less: Net income (loss) attributable to redeemable interests in Ares Operating Group entities | | (119) | | 191 | | 310 | | 573 | |
Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group entities | | (16,977) | | 26,923 | | 44,376 | | 67,556 | |
Net income (loss) attributable to Ares Management, L.P. | | $ | (11,349) | | $ | 13,971 | | $ | 19,194 | | $ | 31,815 | |
Net income (loss) attributable to Ares Management, L.P. per common unit | | | | | | | | | |
Basic | | $ | (0.14) | | 0.17 | | 0.23 | | 0.40 | |
Diluted | | $ | (0.14) | | 0.17 | | 0.23 | | 0.39 | |
Weighted-average common units | | | | | | | | | |
Basic | | 80,676,232 | | 80,667,664 | | 80,671,786 | | 80,171,855 | |
Diluted | | 80,676,232 | | 81,363,978 | | 80,671,786 | | 80,818,072 | |
Distribution declared per common unit | | $ | 0.26 | | $ | 0.18 | | $ | 0.75 | | $ | 0.18 | |
10
Exhibit D. Supplemental Financial Information Consolidating Schedules
($ in thousands, except unit data)
| | As of September 30, 2015 | |
| | Consolidated | | Consolidated | | | | | |
| | Company Entities | | Funds | | Eliminations | | Consolidated | |
Assets | | | | | | | | | |
Cash and cash equivalents | | $ | 387,678 | | $ | — | | $ | — | | $ | 387,678 | |
Restricted cash and cash equivalents | | 554 | | — | | — | | 554 | |
Investments, at fair value | | 602,015 | | — | | (161,874) | | 440,141 | |
Derivative assets, at fair value | | 520 | | — | | — | | 520 | |
Performance fees receivable | | 565,385 | | — | | (3,917) | | 561,468 | |
Due from affiliates | | 153,245 | | — | | (2,706) | | 150,539 | |
Other assets | | 56,932 | | — | | — | | 56,932 | |
Intangible assets, net | | 93,616 | | — | | — | | 93,616 | |
Goodwill | | 144,123 | | — | | — | | 144,123 | |
Assets of Consolidated Funds | | | | | | | | | |
Cash and cash equivalents | | — | | 85,943 | | — | | 85,943 | |
Investments | | — | | 2,785,753 | | — | | 2,785,753 | |
Due from affiliates | | — | | 9,169 | | (487) | | 8,682 | |
Dividends and interest receivable | | — | | 12,812 | | — | | 12,812 | |
Receivable for securities sold | | — | | 25,785 | | — | | 25,785 | |
Derivative assets, at fair value | | — | | 832 | | — | | 832 | |
Other assets | | — | | 592 | | — | | 592 | |
Total assets | | $ | 2,004,068 | | $ | 2,920,886 | | $ | (168,984) | | $ | 4,755,970 | |
Liabilities | | | | | | | | | |
Accounts payable and accrued expenses | | $ | 138,945 | | $ | — | | $ | — | | $ | 138,945 | |
Accrued compensation | | 114,807 | | — | | — | | 114,807 | |
Derivative liabilities, at fair value | | 1,802 | | — | | — | | 1,802 | |
Due to affiliates | | 8,874 | | — | | (134) | | 8,740 | |
Performance fee compensation payable | | 412,269 | | — | | — | | 412,269 | |
Debt obligations | | 595,740 | | — | | — | | 595,740 | |
Equity compensation put option liability | | 20,000 | | — | | — | | 20,000 | |
Deferred tax liability, net | | 18,687 | | — | | — | | 18,687 | |
Liabilities of Consolidated Funds | | | | | | | | | |
Accounts payable, accrued expenses and other liabilities | | — | | 7,163 | | (6) | | 7,157 | |
Due to affiliates | | — | | 3,189 | | (3,189) | | — | |
Payable for securities purchased | | — | | 26,934 | | — | | 26,934 | |
Derivative liabilities, at fair value | | — | | 9,508 | | — | | 9,508 | |
CLO loan obligations | | — | | 2,251,993 | | (30,849) | | 2,221,144 | |
Fund borrowings | | — | | 161,734 | | — | | 161,734 | |
Total liabilities | | 1,311,124 | | 2,460,521 | | (34,178) | | 3,737,467 | |
Commitments and contingencies | | | | | | | | | |
Redeemable interest in Ares Operating Group entities | | 23,632 | | — | | — | | 23,632 | |
Non-controlling interest in Consolidated Funds | | | | | | | | | |
Non-controlling interest in Consolidated Funds | | — | | 449,906 | | (138,042) | | 311,864 | |
Equity appropriated for Consolidated Funds | | — | | 10,460 | | — | | 10,460 | |
Non-controlling interest in Consolidated Funds | | — | | 460,366 | | (138,042) | | 322,324 | |
Non-controlling interest in Ares Operating Group entities | | 416,499 | | — | | — | | 416,499 | |
Controlling interest in Ares Management, L.P.: | | | | | | | | | |
Partners’ Capital (80,676,995 units issued and outstanding) | | 258,305 | | — | | — | | 258,305 | |
Accumulated other comprehensive gain (loss) | | (5,493) | | — | | 3,236 | | (2,257) | |
Total controlling interest in Ares Management, L.P | | 252,812 | | — | | 3,236 | | 256,048 | |
Total equity | | 669,311 | | 460,366 | | (134,806) | | 994,871 | |
Total liabilities, redeemable interests, non-controlling interests and equity | | $ | 2,004,068 | | 2,920,886 | | (168,984) | | $ | 4,755,970 | |
11
Exhibit D. Supplemental Financial Information Consolidating Schedules (continued)
($ in thousands)
| | As of December 31, 2014 | |
| | Consolidated | | Consolidated | | | | | |
| | Company Entities | | Funds | | Eliminations | | Consolidated | |
Assets | | | | | | | | | |
Cash and cash equivalents | | $ | 148,858 | | $ | — | | $ | — | | $ | 148,858 | |
Restricted cash and cash equivalents | | 32,734 | | — | | — | | 32,734 | |
Investments | | 598,074 | | — | | (424,022) | | 174,052 | |
Derivative assets, at fair value | | 7,623 | | — | | — | | 7,623 | |
Performance fees receivable | | 548,098 | | — | | (361,039) | | 187,059 | |
Due from affiliates | | 166,225 | | — | | (19,691) | | 146,534 | |
Other assets | | 58,809 | | — | | (93) | | 58,716 | |
Intangible assets, net | | 40,948 | | — | | — | | 40,948 | |
Goodwill | | 85,582 | | — | | — | | 85,582 | |
Assets of Consolidated Funds | | | | | | | | | |
Cash and cash equivalents | | — | | 1,314,397 | | — | | 1,314,397 | |
Investments | | — | | 19,123,950 | | — | | 19,123,950 | |
Loans held for investment, net | | — | | 77,514 | | — | | 77,514 | |
Due from affiliates | | — | | 13,262 | | (1,920) | | 11,342 | |
Dividends and interest receivable | | — | | 81,331 | | — | | 81,331 | |
Receivable for securities sold | | — | | 132,753 | | — | | 132,753 | |
Derivative assets, at fair value | | — | | 3,126 | | — | | 3,126 | |
Other assets | | — | | 12,473 | | — | | 12,473 | |
Total assets | | $ | 1,686,951 | | $ | 20,758,806 | | $ | (806,765) | | $ | 21,638,992 | |
Liabilities | | | | | | | | | |
Accounts payable and accrued expenses | | $ | 101,912 | | $ | — | | $ | (602) | | $ | 101,310 | |
Accrued compensation | | 129,433 | | — | | — | | 129,433 | |
Derivative liabilities, at fair value | | 2,850 | | — | | — | | 2,850 | |
Due to affiliates | | 19,881 | | — | | (851) | | 19,030 | |
Performance fee compensation payable | | 381,164 | | — | | (896) | | 380,268 | |
Debt obligations | | 243,491 | | — | | — | | 243,491 | |
Equity compensation put option liability | | 20,000 | | — | | — | | 20,000 | |
Deferred tax liability, net | | 19,861 | | — | | — | | 19,861 | |
Liabilities of Consolidated Funds | | | | | | | | | |
Accounts payable, accrued expenses and other liabilities | | — | | 68,674 | | (85) | | 68,589 | |
Due to affiliates | | — | | 63,417 | | (60,976) | | 2,441 | |
Payable for securities purchased | | — | | 618,902 | | — | | 618,902 | |
Derivative liabilities, at fair value | | — | | 42,332 | | — | | 42,332 | |
Securities sold short, at fair value | | — | | 3,763 | | — | | 3,763 | |
Deferred tax liability, net | | — | | 22,214 | | — | | 22,214 | |
CLO loan obligations | | — | | 12,120,842 | | (71,672) | | 12,049,170 | |
Fund borrowings | | — | | 777,600 | | — | | 777,600 | |
Mezzanine debt | | — | | 378,365 | | — | | 378,365 | |
Total liabilities | | 918,592 | | 14,096,109 | | (135,082) | | 14,879,619 | |
Commitments and contingencies | | | | | | | | | |
Redeemable interest in Consolidated Funds | | — | | 1,037,450 | | — | | 1,037,450 | |
Redeemable interest in Ares Operating Group entities | | 23,988 | | — | | — | | 23,988 | |
Non-controlling interest in Consolidated Funds: | | | | | | | | | |
Non-controlling interest in Consolidated Funds | | — | | 5,663,172 | | (674,443) | | 4,988,729 | |
Equity appropriated for Consolidated Funds | | — | | (37,926) | | — | | (37,926) | |
Non-controlling interest in Consolidated Funds | | — | | 5,625,246 | | (674,443) | | 4,950,803 | |
Non-controlling interest in Ares Operating Group entities | | 463,493 | | — | | — | | 463,493 | |
Controlling interest in Ares Management, L.P.: | | | | | | | | | |
Partners’ Capital (80,667,664 units issued and outstanding) | | 285,025 | | — | | — | | 285,025 | |
Accumulated other comprehensive gain (loss) | | (4,146) | | — | | 2,760 | | (1,386) | |
Total controlling interest in Ares Management, L.P | | 280,879 | | — | | 2,760 | | 283,639 | |
Total equity | | 744,372 | | 5,625,246 | | (671,683) | | 5,697,935 | |
Total liabilities, redeemable interests, non-controlling interests and equity | | $ | 1,686,951 | | $ | 20,758,806 | | $ | (806,765) | | $ | 21,638,992 | |
12
Exhibit D. Supplemental Financial Information Consolidating Schedules (continued)
($ in thousands)
| | For the Three Months Ended September 30, 2015 | |
| | Consolidated | | Consolidated | | | | | |
| | Company Entities | | Funds | | Eliminations | | Consolidated | |
Revenues | | | | | | | | | |
Management fees (includes ARCC Part I Fees of $31,680) | | $ | 162,210 | | $ | — | | $ | (4,159) | | $ | 158,051 | |
Performance fees | | (27,710) | | — | | 5,487 | | (22,223) | |
Other fees | | 8,026 | | — | | — | | 8,026 | |
Total revenues | | 142,526 | | — | | 1,328 | | 143,854 | |
Expenses | | | | | | | | | |
Compensation and benefits | | 104,872 | | — | | — | | 104,872 | |
Performance fee compensation | | (20,293) | | — | | — | | (20,293) | |
General, administrative and other expense | | 50,862 | | — | | — | | 50,862 | |
Consolidated Fund expenses | | — | | 5,104 | | (4,159) | | 945 | |
Total expenses | | 135,441 | | 5,104 | | (4,159) | | 136,386 | |
Other income (expense) | | | | | | | | | |
Interest and other investment income | | 1,767 | | — | | (718) | | 1,049 | |
Interest expense | | (5,913) | | — | | — | | (5,913) | |
Other income (expense), net | | 3,267 | | — | | (498) | | 2,769 | |
Net realized gain (loss) on investments | | (963) | | — | | (115) | | (1,078) | |
Net change in unrealized appreciation (depreciation) on investments | | (27,788) | | — | | 21,182 | | (6,606) | |
Interest and other investment income of Consolidated Funds | | — | | 32,306 | | — | | 32,306 | |
Interest expense of Consolidated Funds | | — | | (26,344) | | 2,496 | | (23,848) | |
Net realized gain (loss) on investments of Consolidated Funds | | — | | (1,517) | | — | | (1,517) | |
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds | | — | | (30,571) | | (6,144) | | (36,715) | |
Total other income (expense) | | (29,630) | | (26,126) | | 16,203 | | (39,553) | |
Income (loss) before taxes | | (22,545) | | (31,230) | | 21,690 | | (32,085) | |
Income tax expense (benefit) | | 5,901 | | (322) | | — | | 5,579 | |
Net income (loss) | | (28,446) | | (30,908) | | 21,690 | | (37,664) | |
Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds | | — | | (30,908) | | 21,690 | | (9,219) | |
Less: Net income (loss) attributable to redeemable interests in Ares Operating Group entities | | (119) | | — | | — | | (119) | |
Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group entities | | (16,977) | | — | | — | | (16,977) | |
Net income (loss) attributable to Ares Management, L.P. | | $ | (11,349) | | $ | — | | $ | — | | $ | (11,349) | |
13
Exhibit D. Supplemental Financial Information Consolidating Schedules (continued)
($ in thousands)
| | For the Three Months Ended September 30, 2014 | |
| | Consolidated | | Consolidated | | | | | |
| | Company Entities | | Funds | | Eliminations | | Consolidated | |
Revenues | | | | | | | | | |
Management fees (includes ARCC Part I Fees of $31,156) | | $ | 153,676 | | $ | — | | $ | (26,212) | | $ | 127,464 | |
Performance fees | | 41,472 | | — | | 413 | | 41,885 | |
Other fees | | 6,568 | | — | | (756) | | 5,812 | |
Total revenues | | 201,716 | | — | | (26,555) | | 175,161 | |
Expenses | | | | | | | | | |
Compensation and benefits | | 100,928 | | — | | — | | 100,928 | |
Performance fee compensation | | 33,263 | | — | | — | | 33,263 | |
General, administrative and other expense | | 41,737 | | — | | — | | 41,737 | |
Consolidated Fund expenses | | — | | 53,685 | | (26,276) | | 27,409 | |
Total expenses | | 175,928 | | 53,685 | | (26,276) | | 203,337 | |
Other income (expense) | | | | | | | | | |
Interest and other investment income | | 2,365 | | — | | (1,713) | | 652 | |
Interest expense | | (1,565) | | — | | — | | (1,565) | |
Other income (expense), net | | (1,609) | | — | | — | | (1,609) | |
Net realized gain (loss) on investments | | 9,560 | | — | | (7,835) | | 1,725 | |
Net change in unrealized appreciation (depreciation) on investments | | 10,607 | | — | | 506 | | 11,113 | |
Interest and other investment income of Consolidated Funds | | — | | 191,112 | | (1,512) | | 189,600 | |
Interest expense of Consolidated Funds | | — | | (216,904) | | 1,380 | | (215,524) | |
Net realized gain (loss) on investments of Consolidated Funds | | — | | (30,972) | | — | | (30,972) | |
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds | | — | | 1,342 | | (3,471) | | (2,129) | |
Total other income (expense) | | 19,358 | | (55,422) | | (12,645) | | (48,709) | |
Income (loss) before taxes | | 45,146 | | (109,107) | | (12,924) | | (76,885) | |
Income tax expense (benefit) | | 4,061 | | (1,662) | | — | | 2,399 | |
Net income (loss) | | 41,085 | | (107,445) | | (12,924) | | (79,284) | |
Less: Net income (loss) attributable to redeemable interests in Consolidated Funds | | — | | (28,160) | | 4,466 | | (23,694) | |
Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds | | — | | (79,285) | | (17,390) | | (96,675) | |
Less: Net income attributable to redeemable interests in Ares Operating Group entities | | 191 | | — | | — | | 191 | |
Less: Net income attributable to non-controlling interests in Ares Operating Group entities | | 26,923 | | — | | — | | 26,923 | |
Net income attributable to Ares Management, L.P. | | $ | 13,971 | | $ | — | | $ | — | | $ | 13,971 | |
14
Exhibit D. Supplemental Financial Information Consolidating Schedules (continued)
($ in thousands)
| | For the Nine Months Ended September 30, 2015 | |
| | Consolidated | | Consolidated | | | | | |
| | Company Entities | | Funds | | Eliminations | | Consolidated | |
Revenues | | | | | | | | | |
Management fees (includes ARCC Part I Fees of $89,972) | | $ | 485,013 | | $ | — | | $ | (11,672) | | $ | 473,341 | |
Performance fees | | 152,004 | | — | | 8,347 | | 160,351 | |
Other fees | | 22,409 | | — | | (1,178) | | 21,231 | |
Total revenues | | 659,426 | | — | | (4,503) | | 654,923 | |
Expenses | | | | | | | | | |
Compensation and benefits | | 305,808 | | — | | — | | 305,808 | |
Performance fee compensation | | 112,643 | | — | | — | | 112,643 | |
General, administrative and other expense | | 149,740 | | — | | — | | 149,740 | |
Consolidated Fund expenses | | — | | 28,077 | | (12,850) | | 15,227 | |
Total expenses | | 568,191 | | 28,077 | | (12,850) | | 583,418 | |
Other income (expense) | | | | | | | | | |
Interest and other investment income | | 15,069 | | — | | (2,623) | | 12,446 | |
Interest expense | | (13,251) | | — | | — | | (13,251) | |
Other income (expense), net | | (1,776) | | — | | 977 | | (799) | |
Net realized gain (loss) on investments | | 21,324 | | — | | (8,600) | | 12,724 | |
Net change in unrealized appreciation (depreciation) on investments | | (32,990) | | — | | 32,301 | | (689) | |
Interest and other investment income of Consolidated Funds | | — | | 89,992 | | — | | 89,992 | |
Interest expense of Consolidated Funds | | — | | (66,073) | | 6,081 | | (59,992) | |
Net realized gain (loss) on investments of Consolidated Funds | | — | | 12,493 | | — | | 12,493 | |
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds | | — | | (42,456) | | (10,057) | | (52,513) | |
Total other income (expense) | | (11,624) | | (6,044) | | 18,079 | | 411 | |
Income (loss) before taxes | | 79,611 | | (34,121) | | 26,426 | | 71,916 | |
Income tax expense | | 15,732 | | 9 | | — | | 15,741 | |
Net income (loss) | | 63,879 | | (34,130) | | 26,426 | | 56,175 | |
Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds | | — | | (34,130) | | 26,426 | | (7,705) | |
Less: Net income attributable to redeemable interests in Ares Operating Group entities | | 310 | | — | | — | | 310 | |
Less: Net income attributable to non-controlling interests in Ares Operating Group entities | | 44,376 | | — | | — | | 44,376 | |
Net income attributable to Ares Management, L.P. | | $ | 19,194 | | $ | — | | $ | — | | $ | 19,194 | |
15
Exhibit D. Supplemental Financial Information Consolidating Schedules (continued)
($ in thousands)
| | For the Nine Months Ended September 30, 2014 | |
| | Consolidated | | Consolidated | | | | | |
| | Company Entities | | Funds | | Eliminations | | Consolidated | |
Revenues | | | | | | | | | |
Management fees (includes ARCC Part I Fees of $85,140) | | $ | 436,940 | | $ | — | | $ | (84,501) | | $ | 352,439 | |
Performance fees | | 165,777 | | — | | (96,503) | | 69,274 | |
Other fees | | 20,009 | | — | | (1,315) | | 18,694 | |
Total revenues | | 622,726 | | — | | (182,319) | | 440,407 | |
Expenses | | | | | | | | | |
Compensation and benefits | | 347,591 | | — | | — | | 347,591 | |
Performance fee compensation | | 125,948 | | — | | — | | 125,948 | |
General, administrative and other expense | | 119,972 | | — | | — | | 119,972 | |
Consolidated Fund expenses | | — | | 144,014 | | (90,956) | | 53,058 | |
Total expenses | | 593,511 | | 144,014 | | (90,956) | | 646,569 | |
Other income (expense) | | | | | | | | | |
Interest and other investment income | | 13,771 | | — | | (6,098) | | 7,673 | |
Interest expense | | (5,241) | | — | | — | | (5,241) | |
Other income (expense), net | | (4,847) | | — | | — | | (4,847) | |
Net realized gain (loss) on investments | | 37,039 | | — | | (36,565) | | 474 | |
Net change in unrealized appreciation (depreciation) on investments | | 33,469 | | — | | (8,507) | | 24,962 | |
Interest and other investment income of Consolidated Funds | | — | | 740,052 | | (1,769) | | 738,283 | |
Interest expense of Consolidated Funds | | — | | (568,407) | | 4,100 | | (564,307) | |
Net realized gain (loss) on investments of Consolidated Funds | | — | | 71,833 | | — | | 71,833 | |
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds | | — | | 329,012 | | (2,401) | | 326,611 | |
Total other income (expense) | | 74,191 | | 572,490 | | (51,240) | | 595,441 | |
Income (loss) before taxes | | 103,406 | | 428,476 | | (142,603) | | 389,279 | |
Income tax expense (benefit) | | 3,463 | | (2,492) | | — | | 971 | |
Net income | | 99,943 | | 430,968 | | (142,603) | | 388,308 | |
Less: Net income (loss) attributable to redeemable interests in Consolidated Funds | | — | | 28,066 | | (1,299) | | 26,767 | |
Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds | | — | | 402,901 | | (141,304) | | 261,597 | |
Less: Net income attributable to redeemable interests in Ares Operating Group entities | | 573 | | — | | — | | 573 | |
Less: Net income attributable to non-controlling interests in Ares Operating Group entities | | 67,556 | | — | | — | | 67,556 | |
Net income attributable to Ares Management, L.P. | | $ | 31,815 | | $ | — | | $ | — | | $ | 31,815 | |
16
Exhibit E. Reconciliation from Segments to GAAP Financials
($ in thousands)
| | Three Months Ended | | Nine Months Ended | |
| | September 30, | | September 30, | |
| | 2015 | | 2014 | | 2015 | | 2014 | |
| | (Dollars in thousands) | |
Economic net income: | | | | | | | | | |
Income (loss) before taxes | | $ | (32,085) | | $ | (76,885) | | $ | 71,916 | | $ | 389,279 | |
Adjustments | | | | | | | | | |
Amortization of intangibles | | 10,061 | | 6,143 | | 37,600 | | 21,692 | |
Depreciation expense | | 1,841 | | 1,844 | | 5,063 | | 5,651 | |
Equity compensation expenses | | 8,407 | | 7,521 | | 24,126 | | 75,088 | |
Acquisition-related expenses | | 1,489 | | 4,871 | | 4,284 | | 7,584 | |
Merger-related expenses | | 4,824 | | — | | 7,779 | | — | |
Placement fees and underwriting costs | | 1,956 | | 3,267 | | 6,463 | | 7,825 | |
OMG expenses, net | | 40,362 | | 35,794 | | 115,095 | | 105,866 | |
Loss on fixed asset disposal | | — | | 2,937 | | 10 | | 2,937 | |
Other non-cash expense | | — | | 324 | | — | | 324 | |
Income (loss) before taxes of non-controlling interests in Consolidated Funds, net of eliminations | | 9,541 | | 122,031 | | 7,696 | | (285,872) | |
Total consolidation adjustments and reconciling items | | 78,482 | | 184,734 | | 208,117 | | (58,907) | |
Economic net income | | 46,397 | | 107,849 | | 280,033 | | 330,372 | |
Total performance fee income—realized | | (7,632) | | (37,473) | | (102,332) | | (89,707) | |
Total performance fee income—unrealized | | 33,841 | | (5,205) | | (54,183) | | (87,007) | |
Total performance fee compensation expense—realized | | 2,102 | | 11,041 | | 61,165 | | 46,723 | |
Total performance fee compensation expense—unrealized | | (22,395) | | 22,222 | | 51,478 | | 79,225 | |
Net investment income | | 31,129 | | (21,417) | | 16,123 | | (66,515) | |
Fee related earnings | | $ | 83,442 | | $ | 77,017 | | $ | 252,284 | | $ | 213,087 | |
Management fees | | 162,210 | | 153,676 | | 485,013 | | 436,940 | |
Administrative fees and other income | | 1,333 | | 1,307 | | 3,164 | | 4,679 | |
Compensation and benefits | | (64,553) | | (66,358) | | (193,824) | | (191,836) | |
General, administrative and other expenses | | (15,548) | | (11,608) | | (42,069) | | (36,696) | |
Fee related earnings | | $ | 83,442 | | $ | 77,017 | | $ | 252,284 | | $ | 213,087 | |
Distributable earnings: | | | | | | | | | |
Income (loss) before taxes | | $ | (32,085) | | $ | (76,885) | | $ | 71,916 | | $ | 389,279 | |
Adjustments: | | | | | | | | | |
Amortization of intangibles | | 10,061 | | 6,143 | | 37,600 | | 21,692 | |
Equity compensation expenses | | 8,407 | | 7,521 | | 24,126 | | 75,088 | |
OMG distributable loss | | 42,358 | | 37,067 | | 120,219 | | 110,419 | |
Non-cash acquisition-related expenses | | 43 | | — | | 1,630 | | — | |
Merger-related expenses | | 4,824 | | — | | 7,779 | | — | |
Taxes paid | | (905) | | (625) | | (2,290) | | (1,180) | |
Dividend equivalent | | (974) | | — | | (2,844) | | — | |
Other non-cash items | | (63) | | 324 | | (472) | | 324 | |
Income (loss) before taxes of non-controlling interests in Consolidated Funds, net of eliminations | | 9,541 | | 122,031 | | 7,696 | | (285,872) | |
Unrealized performance fees | | 33,841 | | (5,205) | | (54,183) | | (87,007) | |
Unrealized performance fee compensation | | (22,395) | | 22,222 | | 51,478 | | 79,225 | |
Unrealized investment and other income (loss) | | 29,288 | | (10,204) | | 37,398 | | (23,331) | |
Distributable earnings | | $ | 81,942 | | $ | 102,391 | | $ | 300,054 | | $ | 278,637 | |
17
| | Three Months Ended | | Nine Months Ended | |
| | September 30, | | September 30, | |
| | 2015 | | 2014 | | 2015 | | 2014 | |
| | (Dollars in thousands) | |
Fee related earnings | | $ | 83,442 | | $ | 77,017 | | $ | 252,284 | | $ | 213,087 | |
Performance fee—realized | | 7,632 | | 37,473 | | 102,332 | | 89,707 | |
Performance fee compensation expense—realized | | (2,102) | | (11,041) | | (61,165) | | (46,723) | |
Investment and other income realized, net | | (1,842) | | 11,215 | | 21,275 | | 43,184 | |
Net performance related earnings—realized | | $ | 3,688 | | $ | 37,647 | | $ | 62,442 | | $ | 86,168 | |
Less: | | | | | | | | | |
Dividend equivalent | | (727) | | — | | (2,130) | | — | |
One-time acquisition costs | | (988) | | (4,871) | | (1,459) | | (5,507) | |
Income tax expense | | (227) | | (228) | | (1,094) | | (572) | |
Non-cash items | | (63) | | — | | (472) | | — | |
Placement fees and underwriting costs | | (1,957) | | (3,267) | | (6,463) | | (7,825) | |
Non-cash depreciation and amortization | | (1,226) | | (3,904) | | (3,054) | | (6,715) | |
Distributable earnings | | $ | 81,942 | | $ | 102,391 | | $ | 300,054 | | $ | 278,637 | |
18
Exhibit F. Weighted Average Units Outstanding as of September 30, 2015
| | Units Outstanding | | Adjusted Common
Units Outstanding |
Ares Management, L.P. Common Units | | 80,676,232 | | 80,676,232 |
Ares Operating Group Units exchangeable into Common Units | | 132,432,659 | | — |
Dilutive Effect of Unvested Restricted Common Units(1) | | 1,226,609 | | 464,394(2) |
Dilutive Effect of Unvested Options | | — | | — |
Total | | 214,335,500 | | 81,140,626 |
(1) | | For the three months ended September 30, 2015, we apply the treasury stock method to determine the dilutive weighted-average common units represented by our restricted units to be settled in common units and options to acquire common units. Under the treasury stock method, compensation expense attributed to future services and not yet recognized is presumed to be used to acquire outstanding common units, thus reducing the weighted-average number of units and the dilutive effect of these awards. |
(2) | | Represent proportional dilutive impact based upon the percentage of the Ares Operating Group owned by Ares Management, L.P. (37.86%). |
Exhibit G. Per Unit Calculations ($ in thousands, except per unit data)
| | Q3-15 | | Q2-15 | | Q1-15 | | Q4-14 | | Q3-14 |
After Tax Economic Net Income per Unit | | | | | | | | | | |
Economic Net Income Before Taxes | | $6,035 | | $75,977 | | $82,930 | | $64,696 | | $72,055 |
Less: Entity Level Foreign, State and Local Taxes | | 905 | | 906 | | 479 | | 1,155 | | 626 |
Economic Net Income After Entity Level, Foreign, State and Local Taxes | | $5,127 | | $75,071 | | $82,451 | | $63,541 | | $71,429 |
x Tax Rate | | 111.0% | | 8.7% | | 9.4% | | 10.7% | | 5.7% |
Less: Income Tax Provision (1) | | 5,689 | | 6,565 | | 7,776 | | 6,813 | | 4,061 |
After Tax Economic Net Income (Loss) | | ($562) | | $68,506 | | $74,675 | | $56,728 | | $67,368 |
After Tax Economic Net Income (Loss) per Unit Outstanding | | ($0.00) | | $0.32 | | $0.35 | | $0.27 | | $0.32 |
| | | | | | | | | | |
After Tax Economic Net Income per Common Unit | | | | | | | | | | |
Economic Net Income After Entity Level, Foreign, State and Local Taxes | | $5,127 | | $75,071 | | $82,451 | | $63,541 | | $71,429 |
x Common Ownership Percentage | | 37.86% | | 37.86% | | 37.85% | | 38.14% | | 38.12% |
Economic Net Income Attributable to Common Unitholders | | $1,941 | | $28,422 | | $31,211 | | $24,235 | | $27,229 |
x Tax Rate | | 293.1% | | 23.1% | | 24.9% | | 28.1% | | 14.9% |
Less: Income Tax Provision (1) | | 5,689 | | 6,565 | | 7,776 | | 6,813 | | 4,061 |
After Tax Economic Net (Loss) Income Attributable to Common Unitholders | | ($3,748) | | $21,856 | | $23,435 | | $17,422 | | $23,168 |
After Tax Economic Net Income (Loss) per Adjusted Common Unit | | ($0.05) | | $0.27 | | $0.29 | | $0.22 | | $0.29 |
| | | | | | | | | | |
Distributable Earnings per Unit | | | | | | | | | | |
Distributable Earnings | | $40,488 | | $73,862 | | $67,774 | | $65,693 | | $65,950 |
Less: Entity Level Foreign, State and Local Tax | | 905 | | 906 | | 479 | | 1,155 | | 626 |
Distributable Earnings After Entity Level Foreign, State and Local Tax | | $39,584 | | $72,956 | | $67,295 | | $64,538 | | $65,324 |
x Common Ownership Percentage | | 37.86% | | 37.86% | | 37.85% | | 38.14% | | 38.12% |
Distributable Earnings Attributable to Common Unitholders | | $14,987 | | $27,621 | | $25,473 | | $24,615 | | $24,902 |
Less: Current Provision for Income Taxes(2) | | 3,723 | | 4,714 | | 4,513 | | 3,423 | | 3,788 |
Distributable Earnings After Tax Attributable to Common Unitholders | | $11,263 | | $22,907 | | $20,960 | | $21,192 | | $21,113 |
Distributable Earnings per Common Unit Outstanding | | $0.14 | | $0.28 | | $0.26 | | $0.26 | | $0.26 |
Actual Distribution per Common Unit Outstanding | | $0.13 | | $0.26 | | $0.25 | | $0.24 | | $0.24 |
(1) | | The provision for income taxes on ENI was calculated by multiplying (1) Ares Management, L.P.’s share of ENI that is subject to corporate level taxes (reduced by the interest expense attributable to an intercompany loan between Ares Management, L.P. and a corporate subsidiary and its share of other deductible items) by (2) the Company’s assumed corporate tax rate. |
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(2) | | The provision for income taxes on DE represents the current provision for income taxes on pre-tax net income or loss (reduced by the interest expense attributable to an intercompany loan between Ares Management, L.P. and a corporate subsidiary), adjusted to reflect Ares Management, L.P.’s current ownership percentage of the Company’s tax paying corporate subsidiaries. |
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Exhibit H. Glossary of Terms
ARCC Part I Fees | | ARCC Part I Fees refers to fees based on ARCC’s net investment income (before giving effect to ARCC Part I Fees and fees based on ARCC’s net capital gains (“ARCC Part II Fees”)). |
Ares Operating Group Units | | Ares Operating Group Units refer, collectively, to a partnership unit in each of the Ares Operating Group entities, which include Ares Holdings L.P., Ares Domestic Holdings L.P., Ares Offshore Holdings L.P., Ares Investments L.P. and Ares Real Estate Holdings L.P. |
Assets Under Management | | Assets Under Management (or “AUM”) refers to the assets of our funds. For our funds other than CLOs, our AUM represents the sum of the net asset value of such funds, the drawn and undrawn debt (at the fund-level including amounts subject to restrictions) and uncalled committed capital (including commitments to funds that have yet to commence their investment periods). For our funds that are CLOs, our AUM represents subordinated notes (equity) plus all drawn and undrawn debt tranches. A portion of our AUM may be cancelled or otherwise not available. No assurance can be made that all AUM will be invested. |
Consolidated Funds | | Consolidated Funds refers collectively to certain Ares-affiliated funds, related co-investment entities and certain CLOs that are required under GAAP to be consolidated in our combined and consolidated financial statements. |
Economic Net Income | | Economic net income (or “ENI”) represents net income excluding (a) income tax expense, (b) operating results of our Consolidated Funds, (c) depreciation expense, (d) the effects of changes arising from corporate actions, and (e) certain other items that we believe are not indicative of our core performance. Changes arising from corporate actions include equity-based compensation expenses, the amortization of intangible assets, transaction costs associated with acquisitions and capital transactions, placement fees and underwriting costs and expenses incurred in connection with corporate reorganization. |
Distributable Earnings | | Distributable earnings (or “DE”) is a pre-income tax measure that is used to assess amounts potentially available for distributions to stakeholders. Distributable earnings is calculated as the sum of Fee Related Earnings, realized performance fees, realized performance fee compensation expense, realized net investment and other income, and is reduced for expenses arising from transaction costs associated with acquisitions, placement fees and underwriting costs, expenses incurred in connection with corporate reorganization and depreciation. Distributable earnings differs from income before taxes computed in accordance with GAAP as it is presented before giving effect to unrealized performance fee income, unrealized performance fee compensation, unrealized net investment income, amortization of intangibles, equity compensation expense and is further adjusted by certain items described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of Certain Non-GAAP Measures to Consolidated GAAP Financial Measures.” |
Fee Earning Assets Under Management | | Fee earning AUM (or “FEAUM”) refers to the AUM of our funds on which we directly or indirectly earn management fees. Fee earning AUM is equal to the sum of all the individual fee bases of our funds that contribute directly or indirectly to our management fees. |
Fee Related Earnings | | Fee related earnings (or “FRE”) is a component of ENI and is used to assess the ability of our business to cover direct base compensation and operating expenses from management fees. FRE differs from income before taxes computed in accordance with GAAP as it adjusts for the items included in the calculation of ENI and excludes performance fees, performance fee compensation, investment income from our Consolidated Funds and certain other items. |
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Incentive Generating Assets Under Management | | Incentive generating AUM (or “IGAUM”) refers to the AUM of our funds that are currently generating, on a realized or unrealized basis, performance fee revenue. It generally represents the NAV of our funds for which we are entitled to receive a performance fee, excluding capital committed by us and our professionals (which generally is not subject to a performance fee). |
Incentive Eligible Assets Under Management | | Incentive eligible AUM (or “IEAUM”) refers to the AUM of our funds that are eligible to produce performance fee revenue, regardless of whether or not they are currently generating performance fees. It generally represents the NAV plus uncalled equity of our funds for which we are entitled to receive a performance fee, excluding capital committed by us and our professionals (which generally is not subject to a performance fee). |
Operations Management Group | | In addition to our four segments, we have an Operations Management Group (the “OMG”) that consists of five independent, shared resource Groups to support our reportable segments by providing infrastructure and administrative support in the areas of accounting/finance, operations/information technology, business development, legal/compliance and human resources. The OMG’s expenses are not allocated to our four reportable segments but we consider the cost structure of the OMG when evaluating our financial performance. This information constitutes non-GAAP financial information within the meaning of Regulation G, as promulgated by the SEC. Our management uses this information to assess the performance of our reportable segments and our Operations Management Group, and we believe that this information enhances the ability of unitholders to analyze our performance. |
Our Funds | | Our funds refers to the funds, alternative asset companies and other entities and accounts that are managed or co-managed by Ares. It also includes funds managed by Ivy Hill Asset Management, L.P. (“IHAM”), a wholly owned portfolio company of ARCC, and a registered investment adviser. |
Performance Related Earnings | | Performance related earnings (or “PRE”) is a measure used to assess our investment performance. PRE differs from income (loss) before taxes computed in accordance with GAAP as it only includes performance fees, performance fee compensation and investment income earned from our Consolidated Funds and non-consolidated funds. |
Permanent Capital | | Permanent capital refers to capital of our funds that do not have redemption provisions or a requirement to return capital to investors upon exiting the investments made with such capital, except as required by applicable law, which funds currently consist of Ares Capital Corporation (“ARCC”), Ares Commercial Real Estate Corporation (“ACRE”), Ares Dynamic Credit Allocation Fund, Inc. (“ARDC”) and Ares Multi-Strategy Credit Fund, Inc. (“ARMF”); such funds may be required, or elect, to return all or a portion of capital gains and investment income. |
Total Fee Revenue | | Total fee revenue refers to the sum of segment management fees and net performance fees. |
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