| Distributable Earnings Information (Unaudited) |
Beginning with the first quarter of 2019, the Company has determined that distributable earnings is the primary financial measure used by management to make operating decisions and assess the performance of our business. In connection with this determination, the definition of distributable earnings was modified to include the deduction for preferred unit distributions and exclude costs related to the Brookfield transaction. For comparability, prior periods have been recast for this change, as applicable. The following tables set forth historical information for distributable earnings.
| Three Months Ended | Year Ended | Three Months Ended | Year Ended | Three Months Ended | Year Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributable Earnings Revenues | Mar 31, 2016 | Jun 30, 2016 | Sep 30, 2016 | Dec 31, 2016 | Dec 31, 2016 | Mar 31, 2017 | Jun 30, 2017 | Sep 30, 2017 | Dec 31, 2017 | Dec 31, 2017 | Mar 31, 2018 | Jun 30, 2018 | Sep 30, 2018 | Dec 31, 2018 | Dec 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Management fees | $ | 215,765 | $ | 212,567 | $ | 210,153 | $ | 208,593 | $ | 847,078 | $ | 201,207 | $ | 202,714 | $ | 203,440 | $ | 207,214 | $ | 814,575 | $ | 202,947 | $ | 195,935 | $ | 197,056 | $ | 194,417 | $ | 790,355 | |||||||||||||||||||||||||||||
| Incentive income | 97,146 | 89,116 | 101,623 | 71,993 | 359,878 | 147,442 | 459,896 | 54,508 | 73,557 | 735,403 | 235,557 | 51,352 | 74,488 | 134,138 | 495,535 | ||||||||||||||||||||||||||||||||||||||||||||
| Realized investment income proceeds | 12,923 | 10,694 | 18,020 | 24,753 | 66,390 | 29,095 | 37,250 | 24,919 | 37,204 | 128,468 | 38,760 | 39,768 | 48,278 | 23,680 | 150,486 | ||||||||||||||||||||||||||||||||||||||||||||
| Total distributable earnings revenues | $ | 325,834 | $ | 312,377 | $ | 329,796 | $ | 305,339 | $ | 1,273,346 | $ | 377,744 | $ | 699,860 | $ | 282,867 | $ | 317,975 | $ | 1,678,446 | $ | 477,264 | $ | 287,055 | $ | 319,822 | $ | 352,235 | $ | 1,436,376 | |||||||||||||||||||||||||||||
| Adjusted Expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation and benefits | $ | (104,270 | ) | $ | (99,173 | ) | $ | (94,624 | ) | $ | (83,870 | ) | $ | (381,937 | ) | $ | (102,136 | ) | $ | (99,270 | ) | $ | (95,691 | ) | $ | (84,817 | ) | $ | (381,914 | ) | $ | (104,770 | ) | $ | (103,642 | ) | $ | (100,589 | ) | $ | (90,667 | ) | $ | (399,668 | ) | ||||||||||||||
| Incentive income compensation | (49,749 | ) | (35,407 | ) | (47,378 | ) | (37,149 | ) | (169,683 | ) | (73,144 | ) | (269,974 | ) | (26,362 | ) | (33,348 | ) | (402,828 | ) | (130,442 | ) | (20,984 | ) | (31,508 | ) | (55,183 | ) | (238,117 | ) | |||||||||||||||||||||||||||||
| General and administrative | (38,185 | ) | (31,810 | ) | (30,151 | ) | (35,508 | ) | (135,654 | ) | (32,469 | ) | (32,439 | ) | (29,134 | ) | (38,298 | ) | (132,340 | ) | (37,437 | ) | (39,108 | ) | (37,963 | ) | (38,590 | ) | (153,098 | ) | |||||||||||||||||||||||||||||
| Depreciation and amortization | (3,160 | ) | (3,048 | ) | (2,866 | ) | (3,145 | ) | (12,219 | ) | (2,823 | ) | (2,004 | ) | (2,036 | ) | (2,287 | ) | (9,150 | ) | (2,253 | ) | (2,310 | ) | (2,218 | ) | (2,209 | ) | (8,990 | ) | |||||||||||||||||||||||||||||
| Total adjusted expenses | $ | (195,364 | ) | $ | (169,438 | ) | $ | (175,019 | ) | $ | (159,672 | ) | $ | (699,493 | ) | $ | (210,572 | ) | $ | (403,687 | ) | $ | (153,223 | ) | $ | (158,750 | ) | $ | (926,232 | ) | $ | (274,902 | ) | $ | (166,044 | ) | $ | (172,278 | ) | $ | (186,649 | ) | $ | (799,873 | ) | ||||||||||||||
| Distributable Earnings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net of interest income | $ | (8,682 | ) | $ | (7,977 | ) | $ | (7,799 | ) | $ | (7,387 | ) | $ | (31,845 | ) | $ | (6,971 | ) | $ | (6,544 | ) | $ | (6,280 | ) | $ | (6,580 | ) | $ | (26,375 | ) | $ | (3,410 | ) | $ | (2,399 | ) | $ | (2,197 | ) | $ | (1,181 | ) | $ | (9,187 | ) | ||||||||||||||
| Preferred unit distributions | — | — | — | — | — | — | — | — | — | — | — | — | (3,909 | ) | (8,368 | ) | (12,277 | ) | |||||||||||||||||||||||||||||||||||||||||
| Operating Group income taxes | (1,407 | ) | (1,422 | ) | (1,662 | ) | (144 | ) | (4,635 | ) | (1,021 | ) | (1,621 | ) | (5,208 | ) | 218 | (7,632 | ) | (2,746 | ) | (2,140 | ) | (222 | ) | (2,652 | ) | (7,760 | ) | ||||||||||||||||||||||||||||||
| Other income (expense), net | 135 | (1,527 | ) | (4,902 | ) | (2,098 | ) | (8,392 | ) | 41 | 1,282 | 874 | (599 | ) | 1,598 | (2,233 | ) | (2,186 | ) | 2,724 | (3,779 | ) | (5,474 | ) | |||||||||||||||||||||||||||||||||||
Distributable earnings (1) | $ | 120,516 | $ | 132,013 | $ | 140,414 | $ | 136,038 | $ | 528,981 | $ | 159,221 | $ | 289,290 | $ | 119,030 | $ | 152,264 | $ | 719,805 | $ | 193,973 | $ | 114,286 | $ | 143,940 | $ | 149,606 | $ | 601,805 | |||||||||||||||||||||||||||||
(1) Reflects the sum of total distributable earnings revenues, adjusted expenses, net interest expense, preferred unit distributions, Operating Group income taxes and other income (expense). | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Information (Unaudited) |
The following tables reconcile net income attributable to Oaktree Capital Group, LLC Class A unitholders to distributable earnings.
| Three Months Ended | Year Ended | Three Months Ended | Year Ended | Three Months Ended | Year Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mar 31, 2016 | Jun 30, 2016 | Sep 30, 2016 | Dec 31, 2016 | Dec 31, 2016 | Mar 31, 2017 | Jun 30, 2017 | Sep 30, 2017 | Dec 31, 2017 | Dec 31, 2017 | Mar 31, 2018 | Jun 30, 2018 | Sep 30, 2018 | Dec 31, 2018 | Dec 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to OCG Class A unitholders | $ | 28,078 | $ | 49,047 | $ | 58,297 | $ | 59,283 | $ | 194,705 | $ | 54,915 | $ | 117,324 | $ | 45,841 | $ | 13,414 | $ | 231,494 | $ | 52,732 | $ | 31,121 | $ | 52,750 | $ | 74,538 | $ | 211,141 | |||||||||||||||||||||||||||||
Incentive income (1) | 39,942 | (54 | ) | (7 | ) | (38,474 | ) | 1,407 | 38,536 | 3,418 | — | (55,607 | ) | (13,653 | ) | 83,581 | 16,065 | 7,935 | (288,176 | ) | (180,595 | ) | |||||||||||||||||||||||||||||||||||||
Incentive income compensation (1) | (39,942 | ) | 54 | 7 | 38,474 | (1,407 | ) | (38,536 | ) | (3,418 | ) | — | 55,607 | 13,653 | (45,627 | ) | (5,766 | ) | (4,214 | ) | 156,165 | 100,558 | |||||||||||||||||||||||||||||||||||||
| Investment income | (10,453 | ) | (34,288 | ) | (59,387 | ) | (72,932 | ) | (177,060 | ) | (46,910 | ) | (60,027 | ) | (48,791 | ) | (52,617 | ) | (208,345 | ) | (23,139 | ) | (19,632 | ) | (51,796 | ) | 63,687 | (30,880 | ) | ||||||||||||||||||||||||||||||
Realized investment income proceeds (2) | 12,923 | 10,694 | 18,020 | 24,753 | 66,390 | 29,095 | 37,250 | 24,919 | 37,204 | 128,468 | 38,760 | 39,768 | 48,278 | 23,680 | 150,486 | ||||||||||||||||||||||||||||||||||||||||||||
Equity-based compensation (3) | 13,896 | 14,726 | 19,838 | 15,264 | 63,724 | 14,953 | 14,748 | 15,828 | 13,808 | 59,337 | 14,621 | 15,246 | 14,747 | 18,375 | 62,989 | ||||||||||||||||||||||||||||||||||||||||||||
Foreign-currency hedging (4) | 5,866 | 3,665 | 1,306 | (9,341 | ) | 1,496 | (1,996 | ) | 1,869 | (833 | ) | 2,413 | 1,453 | (2,122 | ) | (741 | ) | (247 | ) | 604 | (2,506 | ) | |||||||||||||||||||||||||||||||||||||
Acquisition-related items (5) | 391 | (1,889 | ) | (253 | ) | 827 | (924 | ) | 1,602 | 861 | (3,919 | ) | 3,294 | 1,838 | 1,574 | (2,834 | ) | 1,703 | 5,531 | 5,974 | |||||||||||||||||||||||||||||||||||||||
Other (income) expense, net (6) | — | — | — | — | — | — | — | — | 21,962 | 21,962 | (2,745 | ) | (2,745 | ) | (2,745 | ) | (2,745 | ) | (10,980 | ) | |||||||||||||||||||||||||||||||||||||||
| Income taxes | 11,272 | 7,149 | 6,906 | 12,557 | 37,884 | 11,281 | 3,920 | 8,649 | 183,960 | 207,810 | 3,651 | 2,727 | 6,346 | 4,295 | 17,019 | ||||||||||||||||||||||||||||||||||||||||||||
Non-Operating Group (income) expense (7) | 264 | 201 | 182 | 529 | 1,176 | 232 | 255 | 62 | (144,692 | ) | (144,143 | ) | (20 | ) | 328 | 321 | 3 | 632 | |||||||||||||||||||||||||||||||||||||||||
Non-controlling interests (7) | 58,279 | 82,708 | 95,505 | 105,098 | 341,590 | 96,049 | 173,090 | 77,274 | 73,518 | 419,931 | 72,707 | 40,749 | 70,862 | 93,649 | 277,967 | ||||||||||||||||||||||||||||||||||||||||||||
Distributable earnings (8) | $ | 120,516 | $ | 132,013 | $ | 140,414 | $ | 136,038 | $ | 528,981 | $ | 159,221 | $ | 289,290 | $ | 119,030 | $ | 152,264 | $ | 719,805 | $ | 193,973 | $ | 114,286 | $ | 143,940 | $ | 149,606 | $ | 601,805 | |||||||||||||||||||||||||||||
| (1) | This adjustment relates to unrealized incentive income which is excluded from distributable earnings revenues and incentive income compensation expense. |
| (2) | This adjustment reflects the portion of distributions received from funds characterized as realized 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, which is excluded from distributable earnings because it is a non-cash charge that does not affect our financial position. |
| (4) | This adjustment removes the effect of unrealized gains and losses related to foreign-currency hedging activities. |
| (5) | This adjustment adds back the effect of acquisition-related items associated with the amortization of intangibles, changes in the contingent consideration liability and costs related to the Brookfield transaction, which are excluded from distributable earnings. |
| (6) | For distributable earnings, the make-whole premium charge that was included in net income attributable to OCG Class A unitholders in the fourth quarter of 2017 in connection with the early repayment of our 2019 Notes is amortized through the original maturity date of December 2019. |
| (7) | Because distributable earnings is 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. |
| (8) | Per Class A unit amounts are calculated to evaluate the portion of distributable earnings attributable to Class A unitholders. Reconciliations of distributable earnings to distributable earnings per Class A unit are presented below. |
| Three Months Ended | Year Ended | Three Months Ended | Year Ended | Three Months Ended | Year Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mar 31, 2016 | Jun 30, 2016 | Sep 30, 2016 | Dec 31, 2016 | Dec 31, 2016 | Mar 31, 2017 | Jun 30, 2017 | Sep 30, 2017 | Dec 31, 2017 | Dec 31, 2017 | Mar 31, 2018 | Jun 30, 2018 | Sep 30, 2018 | Dec 31, 2018 | Dec 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands, except per unit data) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributable earnings | $ | 120,516 | $ | 132,013 | $ | 140,414 | $ | 136,038 | $ | 528,981 | $ | 159,221 | $ | 289,290 | $ | 119,030 | $ | 152,264 | $ | 719,805 | $ | 193,973 | $ | 114,286 | $ | 143,940 | $ | 149,606 | $ | 601,805 | |||||||||||||||||||||||||||||
| OCGH non-controlling interest | (72,019 | ) | (78,702 | ) | (83,545 | ) | (80,734 | ) | (315,000 | ) | (94,341 | ) | (170,199 | ) | (69,977 | ) | (88,978 | ) | (423,495 | ) | (109,624 | ) | (62,534 | ) | (78,568 | ) | (81,446 | ) | (332,172 | ) | |||||||||||||||||||||||||||||
| Non-Operating Group income (expense) | (264 | ) | (201 | ) | (182 | ) | (529 | ) | (1,176 | ) | (232 | ) | (255 | ) | (62 | ) | (372 | ) | (921 | ) | 20 | (328 | ) | (321 | ) | 397 | (232 | ) | |||||||||||||||||||||||||||||||
| Distributable earnings-Class A income taxes | (3,380 | ) | (1,303 | ) | (789 | ) | (6,467 | ) | (11,939 | ) | (4,112 | ) | (7,223 | ) | 4,323 | 1,618 | (5,394 | ) | (333 | ) | 1,973 | 1,687 | (1,991 | ) | 1,336 | ||||||||||||||||||||||||||||||||||
| Tax receivable agreement | (5,106 | ) | (5,106 | ) | (5,106 | ) | (5,151 | ) | (20,469 | ) | (5,363 | ) | (5,415 | ) | (5,415 | ) | (5,415 | ) | (21,608 | ) | (3,858 | ) | (4,008 | ) | (4,008 | ) | (3,704 | ) | (15,578 | ) | |||||||||||||||||||||||||||||
| Distributable earnings-Class A | $ | 39,747 | $ | 46,701 | $ | 50,792 | $ | 43,157 | $ | 180,397 | $ | 55,173 | $ | 106,198 | $ | 47,899 | $ | 59,117 | $ | 268,387 | $ | 80,178 | $ | 49,389 | $ | 62,730 | $ | 62,862 | $ | 255,159 | |||||||||||||||||||||||||||||
| Distributable earnings per Class A unit | $ | 0.64 | $ | 0.75 | $ | 0.81 | $ | 0.69 | $ | 2.88 | $ | 0.88 | $ | 1.65 | $ | 0.74 | $ | 0.91 | $ | 4.18 | $ | 1.18 | $ | 0.69 | $ | 0.88 | $ | 0.88 | $ | 3.62 | |||||||||||||||||||||||||||||
| Weighted average number of Class A units outstanding | 61,894 | 62,617 | 62,755 | 62,986 | 62,565 | 63,022 | 64,193 | 64,394 | 64,961 | 64,148 | 67,918 | 71,177 | 71,369 | 71,591 | 70,526 | ||||||||||||||||||||||||||||||||||||||||||||