Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 18, 2016 | |
Document Information [Line Items] | ||
Entity Registrant Name | Fifth Street Asset Management Inc. | |
Entity Central Index Key | 1,611,988 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Class A Common Stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding (shares) | 6,602,374 | |
Class B Common Stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding (shares) | 42,856,854 |
Consolidated Statements of Fina
Consolidated Statements of Financial Condition - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Assets | ||
Cash and cash equivalents | $ 4,137,833 | $ 17,185,204 |
Insurance recovery receivable | 9,775,905 | 0 |
Prepaid expenses (includes $833,275 and $676,789 related to income taxes at September 30, 2016 and December 31, 2015, respectively) | 3,008,454 | 1,284,759 |
Investments in equity method investees | 59,060,165 | 32,388,943 |
Due from affiliates | 3,828,063 | 3,943,384 |
Fixed assets, net | 5,570,857 | 9,893,521 |
Deferred tax assets | 42,941,089 | 51,217,957 |
Deferred financing costs | 1,551,936 | 1,929,433 |
Other assets | 3,330,570 | 3,976,420 |
Total assets | 176,181,002 | 150,461,653 |
Liabilities | ||
Accounts payable and accrued expenses | 7,411,469 | 5,324,842 |
Accrued compensation and benefits | 8,147,182 | 10,448,260 |
Income taxes payable | 0 | 28,559 |
Loans payable (including $0 and $4,738,026 at September 30, 2016 and December 31, 2015, respectively, of MMKT Notes at fair value) | 14,972,565 | 21,710,640 |
Legal settlement payable | 9,250,000 | 0 |
Credit facility payable | 92,000,000 | 65,000,000 |
Dividends payable | 1,884,686 | 1,748,062 |
Due to related party | 37,960,213 | 45,486,114 |
Deferred rent liability | 2,110,809 | 3,146,210 |
Total liabilities | 173,765,495 | 152,916,944 |
Commitments and contingencies | ||
Equity (deficit) | ||
Preferred stock, $0.01 par value; 5,000,000 shares authorized; none issued and outstanding as of September 30, 2016 and December 31, 2015 | 0 | 0 |
Additional paid-in capital | 2,132,621 | 2,661,253 |
Accumulated deficit | (817,027) | (30,905) |
Total stockholders' equity, Fifth Street Asset Management Inc., excluding treasury stock | 1,810,187 | 3,117,144 |
Less: Treasury stock, at cost: 24,058 shares as of December 31, 2015 | 0 | (180,064) |
Total stockholders' equity, Fifth Street Asset Management Inc. | 1,810,187 | 2,937,080 |
Non-controlling interests | 605,320 | (5,392,371) |
Total equity (deficit) | 2,415,507 | (2,455,291) |
Total liabilities and equity (deficit) | 176,181,002 | 150,461,653 |
Class A Common Stock | ||
Equity (deficit) | ||
Common stock | 66,024 | 58,227 |
Class B Common Stock | ||
Equity (deficit) | ||
Common stock | 428,569 | 428,569 |
Principal | ||
Liabilities | ||
Derivative liabilities at fair value | 0 | 0 |
Affiliates | ||
Liabilities | ||
Due to related party | 28,571 | 24,257 |
Securities Excluding Beneficial Interest in CLOs | ||
Assets | ||
Beneficial interest in CLO | 0 | |
Beneficial Interest in CLO | ||
Assets | ||
Beneficial interest in CLO | 23,360,754 | 23,537,629 |
Management Fees Receivable | ||
Assets | ||
Management fees receivable | 19,490,540 | 4,879,785 |
Performance Fees Receivable | ||
Assets | ||
Management fees receivable | 124,836 | 224,618 |
Fifth Street Asset Management Inc. | ||
Assets | ||
Cash and cash equivalents | $ 4,137,833 | $ 17,185,204 |
Consolidated Statements of Fin3
Consolidated Statements of Financial Condition (Parenthetical) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Prepaid expenses relating to income taxes | $ 833,275 | $ 676,789 |
Preferred stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (shares) | 5,000,000 | 5,000,000 |
Preferred stock, shares issued (shares) | 0 | 0 |
Preferred stock, shares outstanding (shares) | 0 | 0 |
Treasury stock, shares (shares) | 24,058 | |
Class A Common Stock | ||
Common stock par value (USD per share) | $ 0.01 | $ 0.01 |
Common stock authorized (shares) | 500,000,000 | 500,000,000 |
Common stock issued (shares) | 6,602,374 | 5,822,672 |
Common shares outstanding (shares) | 6,602,374 | 5,798,614 |
Class B Common Stock | ||
Common stock par value (USD per share) | $ 0.01 | $ 0.01 |
Common stock authorized (shares) | 50,000,000 | 50,000,000 |
Common stock issued (shares) | 42,856,854 | 42,856,854 |
Common shares outstanding (shares) | 42,856,854 | 42,856,854 |
Fair Value | MMKT | ||
Convertible notes | $ 0 | $ 4,738,026 |
Beneficial Interest in CLO | ||
Available-for-sale securities, cost | 24,271,320 | 24,617,568 |
Management Fees Receivable | ||
Part I fees | $ 7,867,962 | $ (555,663) |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenues | ||||
Management fees (includes Part I Fees of $7,867,962 and $9,166,813 and $21,890,239 and $26,766,547 for the three months and nine months ended September 30, 2016 and 2015, respectively) | $ 19,670,420 | $ 23,310,135 | $ 58,049,388 | $ 69,094,654 |
Performance fees | 38,661 | 2,596 | 124,836 | 79,451 |
Other fees | 2,748,115 | 2,176,510 | 6,482,213 | 5,672,077 |
Total revenues | 22,457,196 | 25,489,241 | 64,656,437 | 74,846,182 |
Expenses | ||||
Compensation and benefits | 9,536,656 | 10,258,766 | 27,183,281 | 28,791,731 |
General, administrative and other expenses | 7,424,927 | 4,179,089 | 24,806,542 | 10,551,314 |
Depreciation and amortization | 349,475 | 434,146 | 3,925,519 | 1,254,544 |
Total expenses | 17,311,058 | 14,872,001 | 55,915,342 | 40,597,589 |
Other income (expense) | ||||
Interest income | 386,626 | 110,525 | 1,082,368 | 293,665 |
Interest expense | (1,149,549) | (507,647) | (3,344,996) | (1,337,827) |
Income from equity method investments | 1,550,487 | 15,295 | 3,554,541 | 5,343 |
Unrealized loss on MMKT Notes | (2,582,405) | 0 | 0 | 0 |
Realized gain on settlement of MMKT Notes | 2,592,751 | 0 | 2,592,751 | 0 |
Unrealized gain (loss) on beneficial interests in CLOs | 537,600 | (23,148) | 169,373 | (590,546) |
Gain on extinguishment of debt | 0 | 0 | 2,000,000 | 0 |
Adjustment of TRA liability for tax rate change | 0 | 0 | 7,525,901 | 0 |
Loss on legal settlement | 0 | 0 | (9,250,000) | 0 |
Insurance recoveries | 50,905 | 0 | 12,297,636 | 0 |
Unrealized gain on derivatives | 8,383,213 | 0 | 0 | 0 |
Realized loss on derivatives | (3,078,357) | 0 | (2,612,932) | 0 |
Loss on investor settlement | 0 | 0 | (10,419,274) | 0 |
Other income (expense), net | (50,000) | 0 | (620,514) | 122,000 |
Total other income (expense), net | 6,641,271 | (404,975) | 2,974,854 | (1,507,365) |
Income before provision for income taxes | 11,787,409 | 10,212,265 | 11,715,949 | 32,741,228 |
Provision for income taxes | 1,607,590 | 982,110 | 8,459,693 | 3,490,115 |
Net income | 10,179,819 | 9,230,155 | 3,256,256 | 29,251,113 |
Net income attributable to non-controlling interests | (10,417,537) | (8,079,583) | (3,878,297) | (25,696,758) |
Net income (loss) attributable to Fifth Street Asset Management Inc. | $ (237,718) | $ 1,150,572 | $ (622,041) | $ 3,554,355 |
Class A Common Stock | ||||
Other income (expense) | ||||
Net income (loss) per share attributable to Fifth Street Asset Management Inc. Class A common stock - Basic (USD per share) | $ (0.04) | $ 0.19 | $ (0.11) | $ 0.60 |
Net income (loss) per share attributable to Fifth Street Asset Management Inc. Class A common stock - diluted (USD per share) | $ (0.04) | $ 0.19 | $ (0.13) | $ 0.60 |
Weighted average shares of Class A common stock outstanding - Basic (shares) | 5,908,407 | 5,901,718 | 5,847,139 | 5,956,389 |
Weighted average shares of Class A common stock outstanding - Diluted (shares) | 5,908,407 | 5,908,463 | 5,847,139 | 5,963,318 |
Consolidated Statements of Inc5
Consolidated Statements of Income (Parenthetical) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Statement [Abstract] | ||||
Part I fees | $ 7,867,962 | $ 9,166,813 | $ 21,890,239 | $ 26,766,547 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Equity - USD ($) | Total | Class A Common Stock | Common StockClass A Common Stock | Common StockClass B Common Stock | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Non-Controlling Interests |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Cumulative effect of ASU 2016-09 adoption | $ 145,127 | $ (164,081) | $ (160,023) | |||||
Beginning balance (shares) at Dec. 31, 2015 | 5,822,672 | 42,856,854 | ||||||
Beginning balance at Dec. 31, 2015 | $ (2,455,291) | $ 58,227 | $ 428,569 | 2,661,253 | (30,905) | $ (180,064) | (5,392,371) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Paid and accrued dividends - $0.30 per Class A common share | (1,824,330) | (1,824,330) | 0 | |||||
Paid and accrued dividends on restricted stock units | (299,490) | (35,131) | (264,359) | |||||
Issuance of shares in connection with vesting of RSUs (in shares) | 43,701 | |||||||
Issuance of shares in connection with vesting of RSUs | 437 | $ 437 | 0 | 0 | ||||
Issuance of shares to settle derivative liability (in shares) | 760,059 | |||||||
Issuance of shares to settle derivative liability | 3,267,160 | $ 7,601 | 3,259,559 | 0 | ||||
Retirement of Class A common stock (in shares) | (217,641) | (24,058) | ||||||
Retirement of Class A common stock | 0 | $ (241) | (179,823) | 180,064 | ||||
Deemed capital contribution | 5,810,794 | 676,617 | 5,134,177 | |||||
Distributions to members | (11,373,105) | (11,373,105) | ||||||
Reallocation of equity for changes in ownership interest | 0 | (3,070,991) | 3,070,991 | |||||
Amortization of equity-based compensation | 6,212,053 | 500,340 | 5,711,713 | |||||
Net loss | 3,256,256 | (622,041) | 3,878,297 | |||||
Ending balance (shares) at Sep. 30, 2016 | 6,602,374 | 42,856,854 | ||||||
Ending balance at Sep. 30, 2016 | $ 2,415,507 | $ 66,024 | $ 428,569 | $ 2,132,621 | $ (817,027) | $ 0 | $ 605,320 |
Consolidated Statement of Chan7
Consolidated Statement of Changes in Equity (Parenthetical) - $ / shares | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
Statement of Stockholders' Equity [Abstract] | ||||||||
Dividend declared (USD per share) | $ 0.1 | $ 0.10 | $ 0.10 | $ 0.17 | $ 0.17 | $ 0.3 | $ 0.3 | $ 0.64 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities | ||
Net income | $ 3,256,256 | $ 29,251,113 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 3,713,200 | 1,042,224 |
Amortization of fractional interests in aircrafts | 212,319 | 212,320 |
Amortization of deferred financing costs | 377,497 | 377,498 |
Amortization of equity-based compensation | 6,216,367 | 4,480,918 |
Write-off of capitalized software costs | 624,512 | 0 |
Unrealized gain on beneficial interests in CLOs | (169,373) | 590,546 |
Distributions received from beneficial interest in CLO | 3,059,289 | 0 |
Interest income accreted on beneficial interest in CLOs | (1,082,342) | (231,231) |
Deferred taxes | 8,276,868 | 3,224,207 |
Deferred rent | (1,035,401) | (73,570) |
Realized gain on settlement of MMKT Notes | (2,592,751) | 0 |
Loss on investor settlement | 10,419,274 | 0 |
Loss on lease abandonment | 1,240,928 | 0 |
Gain on extinguishment of debt | (2,000,000) | 0 |
Adjustment of TRA liability for tax rate change | (7,525,901) | 0 |
Realized loss on derivatives | 3,267,160 | 0 |
Income from equity method investments | (3,554,541) | (5,343) |
Changes in operating assets and liabilities: | ||
Insurance recovery receivable | (9,775,905) | 0 |
Prepaid expenses | (1,723,695) | 221,566 |
Due from affiliates | 115,321 | 1,670,438 |
Other assets | 433,531 | (81,541) |
Accounts payable and accrued expenses | 832,003 | (1,061,858) |
Accrued compensation and benefits | (2,301,078) | (649,123) |
Income taxes payable | (28,559) | (361,052) |
Legal settlement payable | 9,250,000 | 0 |
Due to related parties | 0 | (16,863) |
Net cash provided by operating activities | 5,011,719 | 43,353,227 |
Cash flows from investing activities | ||
Purchases of fixed assets | (15,048) | (874,060) |
Purchases of equity method investments | (37,548,532) | (8,879,679) |
Redemptions of equity method investments | 6,000,000 | 1,200,000 |
Distributions from equity method investments | 842,801 | 0 |
Purchases of beneficial interest in CLO | 0 | |
Net cash used in investing activities | (29,292,189) | (29,851,462) |
Cash flows from financing activities | ||
Proceeds from loan payable | 0 | 21,620,819 |
Proceeds from borrowings under credit facility | 30,000,000 | 48,000,000 |
Repayments under credit facility | (3,000,000) | (25,000,000) |
Repayments of notes payable | (2,237,443) | (9,046,929) |
Repurchases of Class A common stock | 0 | (1,849,140) |
Net cash provided by (used in) financing activities | 11,233,099 | (10,701,850) |
Net increase (decrease) in cash and cash equivalents | (13,047,371) | 2,799,915 |
Cash and cash equivalents, beginning of period | 17,185,204 | 3,238,008 |
Cash and cash equivalents, end of period | 4,137,833 | 6,037,923 |
Supplemental disclosures of cash flow information: | ||
Cash paid during the period for interest | 2,857,564 | 887,425 |
Cash paid during the period for income taxes | 251,236 | 1,064,200 |
Non-cash investing activities: | ||
Non-cash contribution to FSOF | 78,720 | 106,635 |
Non-cash distribution from FSOF | 78,720 | 106,635 |
Non-cash financing activities: | ||
Accrued dividends | 1,126,478 | 1,608,759 |
Deemed capital contribution | 5,810,794 | 0 |
Issuance of shares to settle derivative liability | 3,267,160 | 0 |
Affiliates | ||
Changes in operating assets and liabilities: | ||
Due to related parties | 4,314 | (59,316) |
Non-Controlling Interests | ||
Cash flows from financing activities | ||
Capital contributions from non-controlling interests | 0 | 20,000 |
Members | ||
Cash flows from financing activities | ||
Distributions to members | (11,373,105) | (41,639,038) |
Shareholders | ||
Cash flows from financing activities | ||
Dividends to Class A shareholders | (2,156,353) | (2,807,562) |
Beneficial Interest in CLO | ||
Cash flows from investing activities | ||
Distributions from equity method investments | 1,428,590 | 225,282 |
Purchases of beneficial interest in CLO | 0 | (21,523,005) |
Management Fees Receivable | ||
Changes in operating assets and liabilities: | ||
Management fees receivable | (14,610,755) | 4,795,110 |
Performance Fees Receivable | ||
Changes in operating assets and liabilities: | ||
Management fees receivable | 21,062 | 27,184 |
August 2015 MMKT Notes | Convertible Notes | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Interest expense on MMKT Notes | $ 92,119 | $ 0 |
Organization
Organization | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization Fifth Street Asset Management Inc. ("FSAM"), together with its consolidated subsidiaries (collectively, the "Company"), is an alternative asset management firm headquartered in Greenwich, CT that provides asset management services to its investment funds (referred to as the "Fifth Street Funds" or the "funds"), which, to date, consist primarily of Fifth Street Finance Corp. (formed on January 2, 2008, "FSC") and Fifth Street Senior Floating Rate Corp. (formed on May 22, 2013, "FSFR"), both publicly-traded business development companies regulated under the Investment Company Act of 1940 (together, the "BDCs"). The Company conducts all of its operations through its consolidated subsidiaries, Fifth Street Management LLC ("FSM"), Fifth Street CLO Management LLC ("CLO Management") and FSCO GP LLC ("FSCO GP"). The Company's primary sources of revenues are management fees, primarily from the BDCs, which are driven by the amount of the assets under management and quarterly investment performance of the Fifth Street Funds. The Company conducts substantially all of its operations through one reportable segment that provides asset management services to the Fifth Street Funds. The Company generates all of its revenues in the United States. Reorganization In anticipation of its initial public offering (the "IPO") that closed November 4, 2014, FSAM was incorporated in Delaware on May 8, 2014 as a holding company with its primary asset expected to be a limited partnership interest in Fifth Street Holdings L.P. ("Fifth Street Holdings"). Fifth Street Holdings was formed on June 27, 2014 by Leonard M. Tannenbaum and Bernard D. Berman (the "Principals") as a Delaware limited partnership. Prior to the transactions described below, the Principals were the general partners and limited partners of Fifth Street Holdings. Fifth Street Holdings has a single class of limited partnership interests (the "Holdings LP Interests"). Immediately prior to the IPO: • The Principals contributed their general partnership interests in Fifth Street Holdings to FSAM in exchange for 100% of FSAM's Class B common stock; • The members of FSM contributed 100% of their membership interests in FSM to Fifth Street Holdings in exchange for Holdings LP Interests; and • The members of FSCO GP, a Delaware limited liability company, formed on January 6, 2014 to serve as the general partner of Fifth Street Opportunities Fund, L.P. (''FSOF,'' formerly Fifth Street Credit Opportunities Fund, L.P.) contributed 100% of their membership interests in FSCO GP to Fifth Street Holdings in exchange for Holdings LP Interests. These collective actions are referred to herein as the "Reorganization." Initial Public Offering On November 4, 2014, FSAM issued 6,000,000 shares of Class A common stock in the IPO at a price of $17.00 per common share. The proceeds totaled $95.9 million , net of underwriting commissions of $6.1 million . The proceeds were used to purchase a 12.0% limited partnership interest in Fifth Street Holdings. Immediately following the Reorganization and the closing of the IPO on November 4, 2014: • The Principals held 42,856,854 shares of FSAM Class B common stock and 42,856,854 Holdings LP Interests. • FSAM held 6,000,000 Holdings LP Interests and the former members of FSM and FSCO GP, including the Principals, held 44,000,000 Holdings LP Interests. • The Principals, through their holdings of FSAM Class B common stock in the aggregate, had approximately 97.3% of the voting power of FSAM's common stock. Upon the completion of the Reorganization and the IPO, FSAM became the general partner of Fifth Street Holdings and acquired a 12.0% limited partnership interest in Fifth Street Holdings. Fifth Street Holdings and its wholly-owned subsidiaries (including FSM, CLO Management and FSCO GP) are consolidated by FSAM in the consolidated financial statements. The portion of net income attributable to the limited partners of Fifth Street Holdings, excluding FSAM, is recorded as "Net income attributable to non-controlling interests" on the Consolidated Statements of Income. Exchange Agreement In connection with the Reorganization, FSAM entered into an exchange agreement with the limited partners of Fifth Street Holdings that granted each limited partner of Fifth Street Holdings, and certain permitted transferees, the right, beginning two years after the closing of the IPO and subject to vesting and minimum retained ownership requirements, on a quarterly basis, to exchange such person's Holdings LP Interests for shares of Class A common stock of FSAM, on a one -for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications (collectively referred to as the "Exchange Agreement"). As a result, each limited partner of Fifth Street Holdings, over time, has the ability to convert his or her illiquid ownership interests in Fifth Street Holdings into Class A common stock of FSAM, which can more readily be sold in the public markets. As of September 30, 2016 and December 31, 2015, FSAM held approximately 13.0% and 11.6% of Fifth Street Holdings, respectively. FSAM’s percentage ownership in Fifth Street Holdings will continue to change as Holdings LP Interests are exchanged for Class A common stock of FSAM or when FSAM otherwise issues or repurchases FSAM common stock. FSAM's purchase of Holdings LP Interests concurrent with its IPO, and the subsequent and future exchanges by holders of Holdings LP Interests for shares of FSAM's Class A common stock pursuant to the Exchange Agreement are expected to result in increases in its share of the tax basis of the tangible and intangible assets of Fifth Street Holdings, which will increase the tax depreciation and amortization deductions that otherwise would not have been available to FSAM. These increases in tax basis and tax depreciation and amortization deductions are expected to reduce the amount of cash taxes that FSAM would otherwise be required to pay in the future. FSAM entered into a tax receivable agreement ("TRA") with certain limited partners of Fifth Street Holdings (the "TRA Recipients") that requires FSAM to pay the TRA Recipients 85% of the amount of cash savings, if any, in U.S. federal, state, local and foreign income tax that FSAM actually realizes (or, under certain circumstances, is deemed to realize) as a result of the increases in tax basis in connection with exchanges by the TRA Recipients described above and certain other tax benefits attributable to payments under the tax receivable agreement. RiverNorth Settlement On February 18, 2016, the Company entered into a purchase and settlement agreement ("PSA") with RiverNorth Capital Management, LLC ("RiverNorth") pursuant to which RiverNorth would withdraw its competing FSC proxy solicitation. In connection with the execution and delivery of the PSA, on March 24, 2016, the Company purchased 4,078,304 shares of common stock of FSC for $25.0 million of cash at a purchase price of $6.13 per share, net of certain dividends payable to the Company pursuant to the PSA. Pursuant to a letter agreement with the Company, Leonard M. Tannenbaum purchased 5,142,296 shares of common stock of FSC at a net purchase price of $6.13 per share. During the three months ended March 31, 2016, the Company recorded a loss of $10,419,274 on the purchase which represented the premium paid by the Company and Mr. Tannenbaum in excess of the FSC closing share price on the date of the transaction . The premium paid by Mr. Tannenbaum was included as a loss in the consolidated financial statements since the Company directly benefited from this payment. In addition, the Company issued RiverNorth a warrant to purchase 3,086,420 shares of FSAM's Class A common stock that, upon exercise, the Company was obligated to pay RiverNorth an amount equal to the lesser of: (i) $5 million and (ii) the spread value of the warrant based on a $3.24 strike price. The warrant was exercised by RiverNorth on June 23, 2016. Refer to Note 3 for further information. The Company also entered into a swap agreement with RiverNorth whereas on each settlement date, if the settlement date share price of FSC common stock was less than $6.25 , the Company was obligated to pay RiverNorth an amount equal to the excess of $6.25 over the settlement date share price multiplied by the 3,878,542 notional shares of common stock underlying the swap. Alternatively, if the settlement date share price of FSC common stock was greater than $6.25 , RiverNorth was obligated to pay the Company for the excess of the settlement date share price over $6.25 in cash. The settlement dates ranged from October 2016 to January 2017. The Company was also entitled to a portion of dividends on FSC shares underlying the total return swap which were earned by RiverNorth prior to the settlement date. On September 7, 2016, the Company settled the swap agreement with RiverNorth (see Note 3). Ironsides Settlement On September 30, 2016, the Company entered into a purchase and settlement agreement with Ironsides Partners LLC, Ironsides Partners Special Situations Master Fund II L.P. and Ironsides P Fund L.P. (collectively, "Ironsides"). In connection with the agreement, the Company agreed to purchase 1,942,533 shares of FSFR’s common stock for a per-share purchase price of $9.00 from Ironsides. The transaction is expected to settle on November 30, 2016. As of September 30, 2016, the total consideration of $17,482,797 represents a premium to the FSFR stock price in an amount of $854,715 based on a share price of $8.56 on that date. In connection with the execution and delivery of the purchase and settlement agreement with Ironsides, the Company and Leonard M. Tannenbaum, Chairman and Chief Executive Officer of the Company, have entered into a letter agreement, or the Letter Agreement, that provides that the Company will purchase the maximum number of shares of FSFR’s common stock that the Company determines, in its sole discretion, it can purchase with immediately available funds and that will not violate any of the terms or conditions of any contractual arrangements or regulations to which the Company is a party to or its property or assets are subject to. Any additional shares that the Company is obligated to purchase pursuant to the purchase and sale agreement will be purchased by Mr. Tannenbaum. The Letter Agreement also provides for mutual indemnification of the parties in connection with their obligations under the purchase and sale agreement and the Letter Agreement. The Company did not record this transaction as of September 30, 2016 as it cannot reasonably estimate the allocation between the Company and Mr. Tannenbaum. MMKT Exchange LLC On December 22, 2014, FSM entered into a limited liability company agreement, as majority member, with Leonard Tannenbaum’s brother, as minority member, for the purpose of forming MMKT Exchange LLC (previously IMME LLC), a Delaware limited liability company ("MMKT"). MMKT was a financial technology company that sought to bring increased liquidity and transparency to middle market loans. FSM made a capital contribution of $80,000 for an 80% membership interest in MMKT. In addition, MMKT issued $5,900,000 of MMKT Notes (as defined in note 15), of which $1,300,000 was held by the FSM. MMKT is consolidated in the Company’s consolidated financial statements and any intercompany balances between MMKT and FSM are eliminated. As of March 31, 2016, MMKT reevaluated alternatives for the business and determined it was appropriate to scale back its operations. As a result, during the three months ended March 31, 2016, the MMKT Notes were written down to reflect the estimated net tangible assets of the business at loan expiration, which resulted in a an unrealized gain of $2,582,405 . Additionally, previously capitalized software costs of $624,512 were written off as it was determined it was no longer probable that the software being developed would be placed into service. During the three months ended June 30, 2016, MMKT determined that it would cease further development of its technology and market its intellectual property for sale and distribute all available cash to its convertible noteholders as soon as practicable. On August 8, 2016, MMKT entered into an agreement with its noteholders to settle and cancel the MMKT Notes in exchange for consideration of $2,833,050 , of which $634,460 was paid to FSM. As a result of the cancellation, the Company realized a gain of $2,592,751 during the three months September 30, 2016. In connection with the settlement and cancellation of the MMKT notes, FSM incurred an expense of $100,000 that was paid to third-party noteholders in exchange for a release of claims against FSM and MMKT, which is included in Other income (expense) in the Consolidated Statements of Income. On August 12, 2016, MMKT sold the rights to its platform, including all intellectual property, in exchange for $50,000 and distributed the proceeds to its noteholders, including $11,197 which was distributed to FSM. The Company recognized a gain of $50,000 related to this sale within Other income (expense) in the Consolidated Statements of Income. As of September 30, 2016, MMKT is in the process of winding up its business operations and dissolving MMKT Exchange LLC. Upon the final liquidation, the noteholders are entitled to a distribution equal to cash remaining after the settlement of all liabilities (see Note 8). |
Significant Accounting Policies
Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Revision of Previously Issued Financial Statements for Correction of Immaterial Errors During the three months ended September 30, 2016, the Company identified an error related to the accounting treatment of its investments in common shares of the BDCs. In September 2015, the Company began purchasing common shares in the BDCs and treated such shares as available-for-sale securities under Accounting Standards Codification (“ASC”) 320. In 2016, the Company made substantial additional purchases of the BDC common shares. As a result, the Company revisited its accounting method for the shares held. The Company determined that it does exert significant influence over the BDCs and accordingly, its investments in the BDCs should have been accounted for as equity method investments under ASC 323 since inception. As of June 30, 2016, the cumulative error was an understatement of income from equity method investments of $1.7 million , an overstatement of other income of $2.5 million (resulting in a net decrease to income before provision for income taxes of $0.8 million ), and an understatement of other comprehensive income of $6.5 million . The Company assessed the materiality of these errors on its prior quarterly and annual financial statements, assessing materiality both quantitatively and qualitatively, in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 99 and SAB No. 108 and concluded that the errors were not material to any of its previously issued financial statements. However, in order to correctly present the shares as an equity method investment in the appropriate period, management revised previously issued financial statements (the "Revision"). The Company also corrected immaterial out-of-period adjustments that had been previously reported. These prior period adjustments will be reflected in future quarterly and annual filings for the respective period. Set forth below is a summary of the amounts and financial statement line items impacted by these revisions for the periods presented in this Form 10-Q and previous filings. Three Months Ended June 30, 2016 Consolidated Statement of Income: As previously reported Adjustments As revised Income from equity method investments $ — $ 1,110,217 $ 1,110,217 Other income (expense), net 1,571,903 (1,546,728 ) 25,175 Total other income, net 10,608,494 (436,511 ) 10,171,983 Income before provision for income taxes 11,643,558 (436,511 ) 11,207,047 Provision for income taxes 7,237,303 (122,427 ) 7,114,876 Net income 4,406,255 (314,084 ) 4,092,171 Net income attributable to non-controlling interests (3,629,933 ) 385,308 (3,244,625 ) Net income attributable to Fifth Street Asset $ 776,322 $ 71,224 $ 847,546 Net income per share attributable to Fifth Street Asset Management Inc. - Basic $ 0.13 $ 0.02 $ 0.15 Net income per share attributable to Fifth Street Asset Management Inc. - Diluted $ 0.07 $ — $ 0.07 Six Months Ended June 30, 2016 Consolidated Statement of Income: As previously reported Adjustments As revised Income from equity method investments $ — $ 1,978,326 $ 1,978,326 Other income (expense), net 1,783,490 (2,328,275 ) (544,785 ) Total other expense, net (3,316,468 ) (349,949 ) (3,666,417 ) Income (loss) before provision for income taxes 278,488 (349,949 ) (71,461 ) Provision for income taxes 6,971,891 (119,788 ) 6,852,103 Net loss (6,693,403 ) (230,161 ) (6,923,564 ) Net loss attributable to non-controlling interests 6,230,340 308,826 6,539,166 Net loss attributable to Fifth Street Asset $ (463,063 ) $ 78,665 $ (384,398 ) Net loss per share attributable to Fifth Street Asset Management Inc. - Basic $ (0.08 ) $ 0.01 $ (0.07 ) Net loss per share attributable to Fifth Street Asset Management Inc. - Diluted $ (0.10 ) $ — $ (0.10 ) Three Months Ended June 30, 2016 Consolidated Statement of Comprehensive Income: As previously reported Adjustments As revised Net income $ 4,406,255 $ (314,084 ) $ 4,092,171 Adjustment for change in fair value of available-for-sale securities (1,423,276 ) 1,423,276 — Tax effect of adjustment for change in fair value of available-for-sale securities 20,304 (20,304 ) — Total comprehensive income 3,003,283 1,088,888 4,092,171 Less: Comprehensive income attributable to non-controlling interests (2,374,581 ) (870,044 ) (3,244,625 ) Comprehensive income attributable to Fifth Street Asset Management Inc. $ 628,702 $ 218,844 $ 847,546 Six Months Ended June 30, 2016 Consolidated Statement of Comprehensive Income: As previously reported Adjustments As revised Net loss $ (6,693,403 ) $ (230,161 ) $ (6,923,564 ) Adjustment for change in fair value of available-for-sale securities (7,119,228 ) 7,119,228 — Tax effect of adjustment for change in fair value of available-for-sale securities 284,010 (284,010 ) — Total comprehensive loss (13,528,621 ) 6,605,057 (6,923,564 ) Less: Comprehensive loss attributable to non-controlling interests 12,518,400 (5,979,234 ) 6,539,166 Comprehensive loss attributable to Fifth Street Asset Management Inc. $ (1,010,221 ) $ 625,823 $ (384,398 ) Six Months Ended June 30, 2016 Consolidated Statement of Cash Flows: As previously reported Adjustments As revised Cash flows from operating activities Net loss $ (6,693,403 ) $ (230,161 ) $ (6,923,564 ) Distributions of earnings from equity method investments — 1,700,636 1,700,636 Deferred taxes 6,990,955 (119,788 ) 6,871,167 Income from equity method investments (25,728 ) (1,978,326 ) (2,004,054 ) Net cash used in operating activities (5,487,912 ) (627,639 ) (6,115,551 ) Cash flows from investing activities Purchases of equity method investments — (26,925,757 ) $ (26,925,757 ) Purchases of available-for-sale securities (26,925,757 ) 26,925,757 $ — Distributions from equity method investments — 627,639 627,639 Net cash used in investing activities (19,577,470 ) 627,639 (18,949,831 ) Net decrease in cash and cash equivalents (8,568,646 ) — (8,568,646 ) Cash and cash equivalents, beginning of period 17,185,204 — 17,185,204 Cash and cash equivalents, end of period $ 8,616,558 $ — $ 8,616,558 Three Months Ended March 31, 2016 Consolidated Statement of Income: As previously reported Adjustments As revised Income from equity method investments $ — $ 868,109 $ 868,109 Other income (expense), net 211,587 (781,547 ) (569,960 ) Total other expense, net (13,924,962 ) 86,562 (13,838,400 ) Loss before income tax benefit (11,365,070 ) 86,562 (11,278,508 ) Income tax benefit (265,412 ) 2,639 (262,773 ) Net loss (11,099,658 ) 83,923 (11,015,735 ) Net loss attributable to non-controlling interests 9,860,273 (76,483 ) 9,783,790 Net loss attributable to Fifth Street Asset $ (1,239,385 ) $ 7,440 $ (1,231,945 ) Net loss per share attributable to Fifth Street Asset Management Inc. - Basic $ (0.21 ) $ — $ (0.21 ) Net loss per share attributable to Fifth Street Asset Management Inc. - Diluted $ (0.24 ) $ — $ (0.24 ) Three Months Ended March 31, 2016 Consolidated Statement of Comprehensive Income: As previously reported Adjustments As revised Net loss $ (11,099,658 ) $ 83,923 $ (11,015,735 ) Adjustment for change in fair value of available-for-sale securities (5,695,952 ) 5,695,952 — Tax effect of adjustment for change in fair value of available-for-sale securities 263,706 (263,706 ) — Total comprehensive loss (16,531,904 ) 5,516,169 (11,015,735 ) Less: Comprehensive loss attributable to non-controlling interests 14,892,981 (5,109,191 ) 9,783,790 Comprehensive loss attributable to Fifth Street Asset Management Inc. $ (1,638,923 ) $ 406,978 $ (1,231,945 ) Three Months Ended March 31, 2016 Consolidated Statement of Cash Flows: As previously reported Adjustments As revised Cash flows from operating activities Net loss $ (11,099,658 ) $ 83,923 $ (11,015,735 ) Distributions of earnings from equity method investments — 600,549 600,549 Deferred taxes (246,396 ) 2,639 (243,757 ) Income from equity method investments (552 ) (868,109 ) (868,661 ) Net cash used in operating activities (15,033,201 ) (180,998 ) (15,214,199 ) Purchases of equity method investments — (26,925,757 ) (26,925,757 ) Purchases of available-for-sale securities (26,925,757 ) 26,925,757 — Distributions from equity method investments — 180,998 180,998 Net cash used in investing activities (20,752,835 ) 180,998 (20,571,837 ) Net decrease in cash and cash equivalents (11,775,890 ) — (11,775,890 ) Cash and cash equivalents, beginning of period 17,185,204 — 17,185,204 Cash and cash equivalents, end of period $ 5,409,314 $ — $ 5,409,314 December 31, 2015 Consolidated Statement of Financial Condition: As previously reported Adjustments As revised Investments in equity method investees $ 6,427,272 $ 25,961,671 $ 32,388,943 Investments in available-for-sale securities at fair value 26,771,258 (26,771,258 ) — Deferred tax assets 51,180,237 37,720 51,217,957 Total assets $ 151,233,520 $ (771,867 ) $ 150,461,653 Accumulated other comprehensive income 27,276 (27,276 ) — Retained earnings — (30,905 ) (30,905 ) Total stockholders' equity, Fifth Street Asset Management Inc. 2,995,261 (58,181 ) 2,937,080 Non-controlling interests (4,678,685 ) (713,686 ) (5,392,371 ) Total equity (deficit) (1,683,424 ) (771,867 ) (2,455,291 ) Total liabilities and equity $ 151,233,520 $ (771,867 ) $ 150,461,653 Year Ended December 31, 2015 Consolidated Statement of Income: As previously reported Adjustments As revised Income (loss) from equity method investments $ 20,630 $ (269,940 ) $ (249,310 ) Other income, net 279,405 (157,405 ) 122,000 Total other expense, net (2,519,624 ) (427,345 ) (2,946,969 ) Income before provision for income taxes 39,029,901 (427,345 ) 38,602,556 Provision for income taxes 5,065,420 (19,717 ) 5,045,703 Net income 33,964,481 (407,628 ) 33,556,853 Net income attributable to non-controlling interests (31,556,455 ) 376,723 (31,179,732 ) Net income attributable to Fifth Street Asset Management Inc. $ 2,408,026 $ (30,905 ) $ 2,377,121 Net income per share attributable to Fifth Street Asset Management Inc. - Basic and Diluted $ 0.41 $ (0.01 ) $ 0.40 Year Ended December 31, 2015 Consolidated Statement of Comprehensive Income: As previously reported Adjustments As revised Net income $ 33,964,481 $ (407,628 ) $ 33,556,853 Adjustment for change in fair value of available-for-sale securities 382,242 (382,242 ) — Tax effect of adjustment for change in fair value of available-for-sale securities (18,003 ) 18,003 — Total comprehensive income 34,328,720 (771,867 ) 33,556,853 Less: Comprehensive income attributable to non-controlling interests (31,893,418 ) 713,686 (31,179,732 ) Comprehensive income attributable to Fifth Street Asset Management Inc. $ 2,435,302 $ (58,181 ) $ 2,377,121 Year Ended December 31, 2015 Consolidated Statement of Cash Flows: As previously reported Adjustments As revised Cash flows from operating activities Net income $ 33,964,481 $ (407,628 ) $ 33,556,853 Deferred taxes 5,178,675 (19,717 ) 5,158,958 (Income) loss from equity method investments (83,405 ) 269,940 186,535 Net cash provided by operating activities 67,480,808 (157,405 ) 67,323,403 Cash flows from investing activities Purchases of equity method investments (7,500,000 ) (26,389,016 ) (33,889,016 ) Purchases of available-for-sale securities (26,389,016 ) 26,389,016 — Distributions from equity method investments 225,282 157,405 382,687 Net cash used in investing activities (53,833,253 ) 157,405 (53,675,848 ) Net increase in cash and cash equivalents 13,947,196 — 13,947,196 Cash and cash equivalents, beginning of period 3,238,008 — 3,238,008 Cash and cash equivalents, end of period $ 17,185,204 $ — $ 17,185,204 Three Months Ended September 30, 2015 Consolidated Statement of Income: As previously reported Adjustments (1) As revised Management fees $ 23,609,474 $ (299,339 ) $ 23,310,135 Other fees 1,347,133 829,377 2,176,510 Total revenues 24,959,203 530,038 25,489,241 General, administrative and other expenses 3,349,712 829,377 4,179,089 Total expenses 14,042,624 829,377 14,872,001 Income from equity method investments 12,492 2,803 15,295 Total other expense, net (407,778 ) 2,803 (404,975 ) Income before provision for income taxes 10,508,801 (296,536 ) 10,212,265 Provision for income taxes 995,506 (13,396 ) 982,110 Net income 9,513,295 (283,140 ) 9,230,155 Net income attributable to non-controlling interests (8,341,728 ) 262,145 (8,079,583 ) Net income attributable to Fifth Street Asset Management Inc. $ 1,171,567 $ (20,995 ) $ 1,150,572 Net income per share attributable to Fifth Street Asset Management Inc. - Basic and Diluted $ 0.20 $ (0.01 ) $ 0.19 Nine Months Ended September 30, 2015 Consolidated Statement of Income: As previously reported Adjustments (1) As revised Management fees $ 70,417,077 $ (1,322,423 ) $ 69,094,654 Other fees 3,668,878 2,003,199 5,672,077 Total revenues 74,165,406 680,776 74,846,182 General, administrative and other expenses 8,548,115 2,003,199 10,551,314 Total expenses 38,594,390 2,003,199 40,597,589 Income from equity method investments 2,540 2,803 5,343 Total other expense, net (1,510,168 ) 2,803 (1,507,365 ) Income before provision for income taxes 34,060,848 (1,319,620 ) 32,741,228 Provision for income taxes 3,551,329 (61,214 ) 3,490,115 Net income 30,509,519 (1,258,406 ) 29,251,113 Net income attributable to non-controlling interests (26,859,217 ) 1,162,459 (25,696,758 ) Net income attributable to Fifth Street Asset $ 3,650,302 $ (95,947 ) $ 3,554,355 Net income per share attributable to Fifth Street Asset Management Inc. - Basic and Diluted $ 0.61 $ (0.01 ) $ 0.60 Three Months Ended September 30, 2015 Consolidated Statement of Comprehensive Income: As previously reported Adjustments (1) As revised Net income $ 9,513,295 $ (283,140 ) $ 9,230,155 Adjustment for change in fair value of available-for-sale securities 538,494 (538,494 ) — Tax effect of adjustment for change in fair value of available-for-sale securities (25,410 ) 25,410 — Total comprehensive income 10,026,379 (796,224 ) 9,230,155 Less: Comprehensive income attributable to non-controlling interests (8,549,626 ) 470,043 (8,079,583 ) Comprehensive income attributable to Fifth Street Asset Management Inc. $ 1,476,753 $ (326,181 ) $ 1,150,572 Nine Months Ended September 30, 2015 Consolidated Statement of Comprehensive Income: As previously reported Adjustments (1) As revised Net income $ 30,509,519 $ (1,258,406 ) $ 29,251,113 Adjustment for change in fair value of available-for-sale securities (28,904 ) 28,904 — Tax effect of adjustment for change in fair value of available-for-sale securities 1,370 (1,370 ) — Total comprehensive income 30,481,985 (1,230,872 ) 29,251,113 Less: Comprehensive income attributable to non-controlling interests (26,709,534 ) 1,012,776 (25,696,758 ) Comprehensive income attributable to Fifth Street Asset Management Inc. $ 3,772,451 $ (218,096 ) $ 3,554,355 Nine Months Ended September 30, 2015 Consolidated Statement of Cash Flows: As previously reported Deconsolidation of Fund (2) Adjustment (1) As revised Cash flows from operating activities Net income $ 30,509,519 $ — $ (1,258,406 ) $ 29,251,113 Deferred taxes 3,224,078 — 129 3,224,207 Income from equity method investments (2,540 ) — (2,803 ) (5,343 ) Management fees receivable 3,472,687 — 1,322,423 4,795,110 Prepaid Expenses 282,909 — (61,343 ) 221,566 Purchases of investment of Consolidated Fund (304,435,163 ) 304,435,163 — — Change in other assets of Consolidated Fund (3,277,652 ) 3,277,652 — — Net cash provided by (used in) operating activities (264,359,588 ) 307,712,815 — 43,353,227 Purchases of equity method investments (7,500,000 ) — (1,379,679 ) (8,879,679 ) Purchases of available-for-sale securities (1,379,679 ) — 1,379,679 — Purchases of beneficial interest in CLO (612,889 ) (20,910,116 ) — (21,523,005 ) Net cash used in investing activities (8,941,346 ) (20,910,116 ) — (29,851,462 ) Issuance on notes payable by Consolidated Fund 364,066,775 (364,066,775 ) — — Deferred financing costs (2,744,980 ) 2,744,980 — — Net cash provided by (used in) investing activities 350,619,945 (361,321,795 ) — (10,701,850 ) Net increase in cash and cash equivalents 77,319,011 (74,519,096 ) — 2,799,915 Cash and cash equivalents, beginning of period 3,238,008 — — 3,238,008 Cash and cash equivalents, end of period (including Consolidated Fund) 80,557,019 (74,519,096 ) — 6,037,923 Less: Cash and cash equivalents of the Consolidated Fund 74,519,096 (74,519,096 ) — — Cash and cash equivalents, end of period $ 6,037,923 $ — $ — $ 6,037,923 (1) Amounts include previous revisions in the December 31, 2015 Form 10-K relating to Part I Fees and the gross presentation of certain reimbursements from the BDCs. (2) Amounts represent deconsolidation of a CLO as previously disclosed in the December 31, 2015 Form 10-K. Basis of Presentation The unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and the requirements for reporting on Form 10-Q and Regulation S-X. In the opinion of management, all adjustments of a normal recurring nature considered necessary for the fair presentation of the consolidated financial statements have been made. All significant intercompany transactions and balances have been eliminated in consolidation. Principles of Consolidation The consolidated financial statements include the accounts of the Company and entities in which it, directly or indirectly, is determined to have a controlling financial interest under ASC 810, as amended by ASU No. 2015-02. Under the variable interest model, the Company determines whether, if by design, an entity has equity investors who lack substantive participating or kick-out rights. If equity investors do not have such rights, the entity is considered a variable interest entity ("VIE") and must be consolidated by its primary beneficiary. An enterprise is determined to be the primary beneficiary if it holds a controlling financial interest. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly impact the entity's economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The consolidation guidance requires an analysis to determine (a) whether an entity in which the Company holds a variable interest is a VIE and (b) whether the Company's involvement, through holding interests directly or indirectly in the entity, would give it a controlling financial interest. Performance of that analysis requires the exercise of judgment. Under the consolidation guidance, the Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a variable interest entity and reconsiders that conclusion continually. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly or indirectly by the Company. The consolidation analysis can generally be performed qualitatively; however, if it is not readily apparent that the Company is not the primary beneficiary, a quantitative analysis may also be performed. Investments and redemptions (either by the Company, affiliates of the Company or third parties) or amendments to the governing documents of the respective investment funds could affect an entity's status as a VIE or the determination of the primary beneficiary. At each reporting date, the Company assesses whether it is the primary beneficiary and will consolidate or deconsolidate accordingly. For equity investments where the Company does not control the investee, and where it is not the primary beneficiary of a VIE, but can exert significant influence over the financial and operating policies of the investee, the Company follows the equity method of accounting. The evaluation of whether the Company exerts control or significant influence over the financial and operational policies of its investees requires significant judgment based on the facts and circumstances surrounding each individual investment. Factors considered in these evaluations may include the type of investment, the legal structure of the investee, the terms and structure of the investment agreement, including investor voting or other rights, the terms of the Company's investment advisory agreement or other agreements with the investee, any influence the Company may have on the governing board of the investee, the legal rights of other investors in the entity pursuant to the fund’s operating documents and the relationship between the Company and other investors in the entity. Consolidated Variable Interest Entities Fifth Street Holdings FSAM is the sole general partner of Fifth Street Holdings and, as such, it operates and controls all of the business and affairs of Fifth Street Holdings and its wholly-owned subsidiaries, FSM, CLO Management and FSCO GP. Under ASC 810, Fifth Street Holdings meets the definition of a VIE because the limited partners do not hold substantive kick-out or participating rights. Since FSAM has the obligation to absorb expected losses and the right to receive benefits that could be significant to Fifth Street Holdings and is the sole general partner, FSAM is considered to be the primary beneficiary of Fifth Street Holdings. The assets of Fifth Street Holdings can be used to settle the obligations of FSAM based on the discretion of FSAM in its capacity as the general partner of Fifth Street Holdings. As a result, the Company consolidates the financial results of Fifth Street Holdings and its wholly-owned subsidiaries and records the economic interests in Fifth Street Holdings held by the limited partners other than FSAM as "Non-controlling interests" on the Consolidated Statements of Financial Condition and "Net income attributable to non-controlling interests" on the Consolidated Statements of Income. Voting Interest Entities Entities that are not VIEs are generally evaluated under the voting interest model. The Company consolidates voting interest entities that it controls through a majority voting interest or through other means. Unconsolidated Variable Interest Entities The Company holds interests in certain VIEs that are not consolidated because the Company is not deemed the primary beneficiary. The Company's interest in such entities generally is in the form of direct interests and fixed fee arrangements. The maximum exposure to loss represents the potential loss of assets by the Company relating to these non-consolidated entities. The Company's interests in these non-consolidated VIEs and their respective maximum exposure to loss relating to non-consolidated VIEs as of September 30, 2016 is $24,584,966 , which represents the fair value of beneficial interests as well as management fees receivable at such date. CLOs In February 2015, the Company closed a securitization of the senior secured loans warehoused in Fifth Street Senior Loan Fund I, LLC ("CLO I"). In September 2015, Fifth Street Senior Loan II, LLC merged into Fifth Street SLF II Ltd. ("CLO II"), and the Company closed a securitization of the senior secured loans previously warehoused in Fifth Street Senior Loan Fund II, LLC. Fifth Street CLO Management LLC ("CLO Management"), a wholly owned-consolidated subsidiary of Fifth Street Holdings, is the collateral manager of CLO I and CLO II (collectively referred to as the "CLOs"), and as such, it operates and controls all of the business and affairs of the CLOs. Under ASC 810, the CLOs meet the definition of a VIE because the total equity at risk is not sufficient to finance it activities. The Company determined that it did not have an obligation to absorb expected losses that could be significant to CLO I and CLO II. Therefore, the Company is not considered to be the primary beneficiary of the CLOs, and accordingly, does not consolidate their financial results. As of September 30, 2016 , investments held by the Company in the senior secured and subordinated notes of the CLOs are included within "Beneficial interests in CLOs at fair value" on the Consolidated Statements of Financial Condition. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions affecting amounts reported in the consolidated financial statements and accompanying notes. The most significant of these estimates are related to: (i) the valuation of equity-based compensation, (ii) the estimate of future taxable income, which impacts the carrying amount of the Company’s deferred income tax assets, (iii) the determination of net tax benefits in connection with the Company's tax receivable agreements, (iv) the valuation of the Company's investments, (v) the valuation of derivative liabilities and (vi) the measurement of asset and liabilities associated with exit and disposal activities related to the abandonment of office space. These estimates are based on the information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions and conditions. Concentration of Credit Risk and Other Risks and Uncertainties Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. For the nine months ended September 30, 2016 and 2015 , substantially all revenues and receivables were earned or derived from advisory or administrative services provided to the BDCs and other affiliated entities. The Company is dependent on its chief executive officer, Leonard M. Tannenbaum, who holds over 90% of the combined voting power of the Company through his ownership of shares of common stock. If for any reason the services of the Company's chief executive officer were to become unavailable, there could be a material adverse effect on the Company's operations, liquidity and profitability. Fair Value Measurements The carrying amounts of cash and cash equivalents, management and performance fees receivable from affiliates, prepaid expenses, insurance recovery receivable, due from/to affiliates, accounts payable and accrued expenses, accrued compensation and benefits, income taxes payable, legal settlement payable and dividend payable approximate fair value due to the immediate or short-term maturity of these financial instruments. Cash and Cash Equivalents Cash equivalents include short-term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. The Company places its cash and cash equivalents with U.S. financial institutions and, at times, amounts may exceed federally insured limits. The Company monitors the credit standing of these financial institutions. Equity Method Investments Investments over which the Company exercises significant influence, but which do not meet the requirements for consolidation, are accounted for using the equity method of accounting, whereby the Company records its share of the underlying income or losses of equity method investees. The Company did not elect the fair value option on its equity method investments. Investments in equity method investees consists of the Company's general partner interests in an unconsolidated fund and investments in FSC and FSFR common stock. The Company exercises significant influence with respect to the fund and BDCs as a result of its management contracts with the affiliated fund and BDCs, and specifically with respect to the BDCs, its board of director representation. Beneficial Interest in CLOs Beneficial interests in CLOs meet the definition of a debt security under ASC 325-40, Beneficial Interest in Securitized Financial Assets. Income from the beneficial interest in CLOs is recorded using the effective interest method based upon an estimation of an effective yield to maturity utilizing assumed cash flows. The Company monitors the expected residual payments, and effective yield is determined and updated periodically, as needed. Any distributions received from the beneficial interests in CLOs in excess of the calculated income using the effective yield are treated as a reduction of the cost. The Company earned interest income of $386,617 and $1,082,342 , respectively, from beneficial interests in CLOs, for the three and nine months ended September 30, 2016 and $95,396 and $231,231 , respectively, for the three and nine months ended September 30, 2015 . Fair Value Option The Company has elected the fair value option, upon initial recognition, for all beneficial interests in CLOs, which had a cost of $24,271,320 as of September 30, 2016. There were $537,600 and $169,373 of unrealized gains, respectively, recorded on beneficial interests in CLOs for the three and nine months ended September 30, 2016 . There was $23,148 and $590,546 of unrealized losses, respectively, recorded on beneficial interests in CLOs for the three and nine months ended September 30, 2015 . The Company also elected the fair value option on the MMKT Notes upon initial recognition, which were included in loans payable on the Consolidated Statements of Financial Condition. The MMKT Notes were settled and canceled during the three months ended September 30, 2016. The Company realized a gain of $2,592,751 on the MMKT Notes during the three and nine months ended September 30, 2016 (see Note 8). The fair value option permits the irrevocable election of fair value on an instrument-by-instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. The Company believes that by electing the fair value option for these financial instruments, it provides consistent measurement with its peers in the asset management industry. Changes in the fair value of these assets and liabilities and related interest income/expense are recorded within "Other income (expense)" in the Consolidated Statements of Income. Refer to Note 5 for a description of valuation methodologies for each of the financial instruments mentioned above. Derivative Instruments Derivative instruments include warrant and swap contracts issued in connection with the RiverNorth settlement. The derivative instruments are not designated as hedging instruments. All derivatives are recognized in "Derivative liabilities at fair value" and are presented gross in the Consolidated Statements of Financial Condition with changes in fair value recorded in "Unrealized gain (loss) on derivatives" in the accompanying Consolidated Statements of Income. Upon settlement of the instrument, the Company records "Realized gain (loss) on derivatives" in the Consolidated Statements of Income. The Company’s derivative instruments contain credit risk to the extent that its counterparty may be unable to meet the terms of the agreements. The Company’s derivative instruments also contain market risk in excess of the amounts reflected in the Consolidated Statements of Financial Condition based on future changes to underlying share prices. No collateral has been pledged and/or received with the counterparty, and the Company’s derivatives instruments are not subject to a master netting arrangement. See Note 4 for quantitative disclosures regarding derivative instruments. Fixed Assets Fixed assets consist of furniture, fixtures and equipment (including automobiles, computer hardware and purchased software), software developed for internal use and leasehold improvements, and are recorded at cost, less accumulated depreciation and amortization. Depreciation of furniture, fixtures and equipment is computed using the straight-line method over the estimated useful lives of the respective assets ( three to eight years). Software developed for internal use, which is amortized over three years , consists of costs incurred during the application development stage of software developed for the Company's proprietary use and includes costs of company personnel who are directly associated with the development. Amortization of improvements to leased properties is computed using the straight-line method based upon the initial term of the applicable lease or the estimated useful life of the improvements, whichever is shorter, and ranges from five to 10 years. Routine expenditures for repairs and maintenance are charged to expense when incurred. Major betterments and improvements are capitalized. Upon retiremen |
Derivative Instruments
Derivative Instruments | 9 Months Ended |
Sep. 30, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | Derivative Instruments The table below summarizes the impact to the Consolidated Statements of Income from the Company's derivative instruments for the three and nine months ended September 30, 2016 . For the Three Months Ended September 30, 2016 For the Nine Months Ended September 30, 2016 Unrealized gain (loss) on derivatives Swap $ 5,313,603 $ — Warrant 3,069,610 — Total unrealized gain on derivatives $ 8,383,213 $ — Realized gain (loss) on derivatives Swap (1) $ 188,803 $ 654,228 Warrant (3,267,160 ) (3,267,160 ) Total realized loss on derivatives $ (3,078,357 ) $ (2,612,932 ) __________ __ (1) Amounts represent the Company's portion of dividends received on FSC shares underlying the total return swap, net of a $160,266 payment by the Company to settle the swap agreement during the three months ended September 30, 2016. On June 23, 2016, RiverNorth formally exercised its warrant to purchase 3,086,420 shares of Class A common stock at a price of approximately $4.30 per share. At the exercise date, the cash settlement value of the warrant was $3,267,160 . However, the Company elected to settle the warrants in Class A common stock, which was approved by the Company's Board of Directors on September 15, 2016. On September 22, 2016, the Company issued 760,059 unregistered shares of Class A common stock to RiverNorth to settle the warrant. The Company reclassified the warrant liability to stockholder's equity and realized a cumulative loss of $3,267,160 as a result of the settlement of the warrant. On September 7, 2016, the Company settled the swap agreement with RiverNorth. The Company realized a cumulative gain of $654,228 as a result of the settlement of the swap agreement. |
Investments and Fair Value Meas
Investments and Fair Value Measurements | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Investments and Fair Value Measurements | Investments and Fair Value Measurements ASC 820 – Fair Value Measurements and Disclosures ("ASC 820") – defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A liability's fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available or reliable, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments' complexity. The Company engages an independent third party valuation firm to assist in the fair value measurement for its beneficial interest in CLO. Assets and liabilities recorded at fair value in the Company's consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows: • Level 1 — Unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. • Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities. • Level 3 — Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. When determining the fair value of beneficial interests in CLOs, the Company utilizes a discounted cash flow model that takes into consideration prepayment and loss assumptions, based on projected performance, economic factors, the characteristics and condition of the underlying collateral, comparable yields for similar securities and recent trading activity. The following tables present the financial instruments carried at fair value as of September 30, 2016 , by caption on the Company's Consolidated Statement of Financial Condition for each of the levels of hierarchy established by ASC 820: Assets Level 1 Level 2 Level 3 Total Beneficial interests in CLOs — — 23,360,754 23,360,754 $ — $ — $ 23,360,754 $ 23,360,754 The following tables present the financial instruments carried at fair value as of December 31, 2015 , by caption on the Company's Consolidated Statement of Financial Condition for each of the levels of hierarchy established by ASC 820: Assets Level 1 Level 2 Level 3 Total Beneficial interests in CLOs — — 23,537,629 23,537,629 $ — $ — $ 23,537,629 $ 23,537,629 Liabilities Level 1 Level 2 Level 3 Total MMKT Notes $ — $ — $ 4,738,026 $ 4,738,026 $ — $ — $ 4,738,026 $ 4,738,026 When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the fact that the unobservable factors are the significant to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable or Level 3 components, observable components (that is, components that are actively quoted and can be validated by external sources). Accordingly, the appreciation (depreciation) in the tables below includes changes in fair value due in part to observable factors that are part of the valuation methodology. The following table provides a roll-forward in the changes in fair value for all financial instruments for which the Company determines fair value using unobservable (Level 3) factors for the three and nine months ended September 30, 2016 : Beneficial interests in CLOs MMKT Notes Fair value at June 30, 2016 $ 22,967,217 $ 2,247,740 Distributions (530,680 ) (2,237,394 ) Interest income 386,617 — Unrealized gains or losses 537,600 2,582,405 Realized gains — (2,592,751 ) Fair value at September 30, 2016 $ 23,360,754 $ — Beneficial interests in CLOs MMKT Notes Fair value at December 31, 2015 $ 23,537,629 $ 4,738,026 Distributions (1,428,590 ) (2,237,394 ) Interest income or expense 1,082,342 92,119 Unrealized gains or losses 169,373 — Realized gains — (2,592,751 ) Fair value at September 30, 2016 $ 23,360,754 $ — There were no transfers in or out of level 3 during the three and nine months ended September 30, 2016. All unrealized gains or losses related to investments still held as of September 30, 2016 with the exception of MMKT Notes. The following table provides a roll-forward in the changes in fair value for all financial instruments for which the Company determines fair value using unobservable (Level 3) factors for the three and nine months ended September 30, 2015 : Beneficial interests in CLOs MMKT Notes Fair value at June 30, 2015 $ 4,065,473 $ 150,000 Proceeds from issuance of notes payable — 4,450,000 Purchases of investments 20,910,115 — Distributions (231,643 ) — Interest income or expense 95,396 44,895 Unrealized gains or losses (23,148 ) — Fair value at September 30, 2015 $ 24,816,193 $ 4,644,895 Beneficial interests in CLOs MMKT Notes Fair value at December 31, 2014 $ — $ — Proceeds from issuance of notes payable — 4,600,000 Purchases of investments 25,407,151 — Distributions (231,643 ) — Interest income or expense 231,231 44,895 Unrealized gains or losses (590,546 ) — Fair value at September 30, 2015 $ 24,816,193 $ 4,644,895 Significant Unobservable Inputs for Level 3 Financial Instruments The following table provides quantitative information related to the significant unobservable inputs for Level 3 financial instruments, which are carried at fair value as of September 30, 2016 : Assets Fair Value Valuation Technique Unobservable Input Input Value Beneficial interests in CLOs $ 23,360,754 Discounted cash flow Constant prepayment rate 15% Constant default rate 2% Loss severity rate 30% Total $ 23,360,754 The following table provides quantitative information related to the significant unobservable inputs for Level 3 financial instruments, which are carried at fair value as of December 31, 2015 : Assets Fair Value Valuation Technique Unobservable Input Input Value Beneficial interests in CLOs $ 23,537,629 Discounted cash flow Constant prepayment rate 15% Constant default rate 2% Loss severity rate 30% Total $ 23,537,629 Liabilities Fair Value Valuation Technique Unobservable Input Input Value MMKT Notes $ 4,738,026 Recent market transactions N/A N/A Total $ 4,738,026 Under the discounted cash flow approach, the significant unobservable inputs used in the fair value measurement of the Company's beneficial interests in the CLOs are the constant prepayment rate, constant default rate and loss severity. Significant increases or decreases in any of these inputs in isolation may result in a significantly lower or higher fair value measurement. As of December 31, 2015, the cost of the MMKT Notes approximated fair value as there were recent market transactions. Investments in Equity Method Investees The following table provides information about the Company's equity method investments as of September 30, 2016 and December 31, 2015: Equity Held as of Equity method investments September 30, 2016 % of Ownership December 31, 2015 % of Ownership FSC common stock (1) $ 46,396,530 5.86 % $ 24,665,471 2.65 % FSFR common stock (1) 12,114,886 4.69 1,296,200 0.53 FSOF equity interest 548,749 0.88 6,427,272 8.78 Total $ 59,060,165 $ 32,388,943 __________ __ (1) The total fair value of the Company’s investments in FSC and FSFR was $60,629,008 based on quoted market prices as of September 30, 2016. Based on the market prices at the time the investments in FSC and FSFR were purchased, there was a residual excess of the Company's share of FSC's and FSFR's net assets over the Company's cost basis. The Company allocated the residual excess to the investments held by FSC and FSFR, and will recognize the residual excess of approximately $29.0 million over the average life of investments held in FSC and FSFR, which ranges between three to five years . For the three and nine months ended September 30, 2016, the Company recognized $1,533,458 and $3,511,784 , respectively, related to this residual excess. The Company's investments in FSC common stock met the significance criteria as defined by the SEC for the nine months ended September 30, 2016. In calculating the income recognized under the equity method for its investment in FSC, the Company used estimated financial information for the three months ended September 30, 2016. The following tables (shown in thousands) present summarized financial information of FSC for the three and nine months ended June 30, 2016, which is the latest publicly available financial information as of the date of this report. Statements of Operations For the Three Months Ended June 30, 2016 For the Nine Months Ended June 30, 2016 Investment income $ 64,026 $ 188,712 Net expenses 34,920 107,680 Net investment income 29,106 81,032 Net unrealized gain (loss) on investments and secured borrowings 10,490 (74,042 ) Net realized loss on investments and secured borrowings (44,814 ) (70,113 ) Net decrease in net assets resulting from operations (5,218 ) (63,123 ) Financial Instruments Disclosed, But Not Carried At Fair Value The following table presents the carrying value and fair value of the Company's financial assets and liabilities disclosed, but not carried, at fair value as of September 30, 2016 and the level of each financial asset and liability within the fair value hierarchy: Carrying Value Fair Value Level 1 Level 2 Level 3 Risk Retention Term Loan $ 12,972,565 $ 12,972,565 $ — $ — $ 12,972,565 Loan payable - DECD loan 2,000,000 1,925,423 — — 1,925,423 Credit facility payable 92,000,000 92,000,000 — — 92,000,000 Payables to related parties pursuant to tax receivable agreements 37,960,213 32,975,004 — — 32,975,004 Total $ 144,932,778 $ 139,872,992 $ — $ — $ 139,872,992 The following table presents the carrying value and fair value of the Company's financial assets and liabilities disclosed, but not carried, at fair value as of December 31, 2015 and the level of each financial asset and liability within the fair value hierarchy: Carrying Value Fair Value Level 1 Level 2 Level 3 Risk Retention Term Loan $ 12,972,614 $ 12,972,614 $ — $ — $ 12,972,614 Loan payable - DECD loan 4,000,000 4,040,214 — — 4,040,214 Credit facility payable 65,000,000 65,000,000 — — 65,000,000 Payables to related parties pursuant to tax receivable agreements 45,486,114 40,015,336 — — 40,015,336 Total $ 127,458,728 $ 122,028,164 $ — $ — $ 122,028,164 The Company utilizes a bond yield approach to estimate the fair value of its DECD loan, which is included in Level 3 of the hierarchy. Under the bond yield approach, the Company uses its incremental borrowing rate to determine the present value of the future cash flow streams related to the liability. The carrying values of the Risk Retention Term Loan and the credit facility payable approximate their fair value and are included in Level 3 of the hierarchy. The Company utilizes a discounted cash flow approach to estimate the fair value of its payables to related parties pursuant to TRAs, which is included in Level 3 of the hierarchy. Under the discounted cash flow approach, the Company estimates the present value of estimated future tax benefits pursuant to the TRA discounted using a market interest rate. |
Due from Affiliates
Due from Affiliates | 9 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Due from Affiliates | Due from Affiliates In connection with administration agreements that are in place (see Note 11), the Company provides certain administrative services for the funds, including office facilities and equipment, and clerical, bookkeeping and recordkeeping services at such facilities. For providing these services, facilities and personnel, the Fifth Street Funds reimburse the Company for direct fund expenses and the BDCs reimburse the Company for the allocable portion of overhead and other expenses incurred by the Company in performing its obligations under the administration agreements. Also, in the normal course of business, the Company pays certain expenses on behalf of the BDCs, primarily for travel and other costs associated with particular portfolio company holdings of the BDCs, for which it is reimbursed. |
Fixed Assets
Fixed Assets | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Fixed Assets | Fixed Assets Fixed assets consist of the following: September 30, 2016 December 31, 2015 Furniture, fixtures and equipment $ 1,398,475 $ 1,519,742 Capitalized software costs (1) — 624,512 Leasehold improvements 10,312,968 10,312,968 Fixed assets, cost 11,711,443 12,457,222 Less: accumulated depreciation and amortization (2) (6,140,586 ) (2,563,701 ) Fixed assets, net book value $ 5,570,857 $ 9,893,521 __________ __ (1) During the three months ended June 30, 2016, the Company determined it was no longer probable that the MMKT software being developed would be completed and placed in service. As a result, the Company wrote off the capitalized software costs, and accordingly, a loss in the amount of $624,512 is included in Other income (expense), net in the Consolidated Statement of Income for the nine months ended September 30, 2016 . (2) In April 2016, the Company abandoned a portion of its office space in its corporate headquarters in Greenwich, CT. As a result, the Company accelerated depreciation in the amount of $2,158,012 and $653,719 during the three months ended June 30, 2016 relating to leasehold improvements and furniture and fixtures, respectively, which represents the net book value of identifiable assets on which the Company will no longer derive future economic benefit. Depreciation and amortization expense related to fixed assets for the three and nine months ended September 30, 2016 was $278,702 and $3,713,200 , respectively. Depreciation and amortization expense related to fixed assets for the three and nine months ended September 30, 2015 was $363,373 , and $1,042,224 , respectively. There were $136,315 of fully depreciated assets which were disposed of during the nine months ended September 30, 2016. |
Other Assets
Other Assets | 9 Months Ended |
Sep. 30, 2016 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Assets | Other Assets Other assets consist of the following: September 30, 2016 December 31, 2015 Security deposits (a) $ 81,999 $ 499,835 Fractional interests in aircrafts (b) 3,089,871 3,302,190 Other 158,700 174,395 $ 3,330,570 $ 3,976,420 __________________ (a) In April 2016, the Company received its security deposit in the amount of $417,836 in connection with its former White Plains, NY office lease. (b) In November 2013, the Company entered into an agreement that entitled it to the use of a corporate aircraft for five years. The amount paid, less the estimated trade-in value, is being amortized on a straight-line basis over the expected five-year term of the agreement. In December 2014, the Company sold half of this interest and entered into an agreement for a second corporate aircraft for five years. Amortization expense for the three and nine months ended September 30, 2016 was $70,773 and $212,319 , respectively. Amortization expense for the three and nine months ended September 30, 2015 was $70,773 and $212,320 , respectively. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Debt | Debt Loans Payable Loans payable consist of the following: September 30, 2016 December 31, 2015 DECD loan $ 2,000,000 $ 4,000,000 MMKT Notes — 4,738,026 Risk Retention Term Loan 12,972,565 12,972,614 $ 14,972,565 $ 21,710,640 DECD Loan On October 7, 2013, the Company borrowed $4,000,000 from the Department of Economic and Community Development (the "DECD") of the State of Connecticut. Proceeds from the loan were utilized to partially fund the build-out costs of the Company's new headquarters in Greenwich, CT. The loan bears interest at a fixed rate of 2.5% per annum, matures on November 21, 2023 and requires interest-only payments through November 1, 2017, at which point monthly payments of principal and interest are required until maturity or such time that the loan is repaid in full. As security for the loan, the Company has granted the State of Connecticut a blanket interest in the Company's personal property, subject only to prior security interests permitted by the State of Connecticut. For the three and nine months ended September 30, 2016 , interest expense related to this loan was $12,569 and $58,197 , respectively. For the three and nine months ended September 30, 2015 , interest expense related to this loan was $25,206 and $74,795 , respectively. Under the terms of the agreement, the Company was eligible for forgiveness of up to $3,000,000 of the principal amount of the loan based on certain job creation milestones, as mutually agreed to by the Company and the DECD. As a result of the Company achieving certain job creation milestones, on May 19, 2016, the DECD granted the Company a loan forgiveness credit of $2,000,000 , which was recorded as an extinguishment of debt during the three months ended June 30, 2016. The Company is not entitled to any additional forgiveness. MMKT Notes On February 24, 2015, MMKT issued $800,000 in aggregate principal amount of Convertible Promissory Notes (the "MMKT Original Notes") due August 31, 2016, bearing interest at a rate of 8% per annum due upon maturity, prepayment or conversion to the Company. On each of February 27, 2015, April 1, 2015 and August 5, 2015, MMKT issued additional MMKT Original Notes in the amounts of $50,000 , $100,000 and $2,000,000 , under the same terms as the MMKT Original Notes issued to the Company. On each of August 28, 2015 and September 4, 2015, MMKT issued new Convertible Promissory Notes, due September 4, 2016 and bearing interest at a rate of 8% per annum due upon maturity, prepayment or conversion ("MMKT Notes") to the Company and additional investors. The MMKT Notes also were issued to all existing holders in exchange for their outstanding MMKT Original Notes (the "Exchange"). The Exchange was a non-cash transaction and the principal amounts of the existing MMKT Notes issued to the previous holders were increased to account for the interest accrued over the period prior to the Exchange in the amount of $2,950,000 . Additionally, MMKT issued $2,950,000 in aggregate principal amount of MMKT Notes to new investors. The MMKT Notes did not represent additional claims on FSAM's general assets; rather, they represented claims against the specific assets of MMKT. Further, FSAM has not guaranteed any of the MMKT Notes. For the nine months ended September 30, 2016 , MMKT recorded $92,119 of interest expense recorded related to the MMKT Notes. There was no interest expense recorded related to the MMKT Notes during the three months ended September 30, 2016. As of March 31, 2016, MMKT reevaluated alternatives for the business and determined it was appropriate to scale back its operations. As a result, during the three months ended March 31, 2016, the MMKT Notes were written down to reflect the estimated net tangible assets of the business at loan maturity, which resulted in a an unrealized gain of $2,582,405 . During the three months ended June 30, 2016, MMKT determined that it would cease further development of its technology and market its intellectual property for sale and distribute all available cash to its convertible noteholders as soon as practicable. On August 8, 2016, MMKT entered into an agreement with its noteholders to settle and cancel the MMKT Notes in exchange for consideration of $2,833,050 , of which $634,459 was paid to FSM. As a result of the cancellation, the Company realized a gain of $2,592,751 during the three and nine months September 30, 2016. On August 12, 2016, MMKT sold the rights to its platform in exchange for $50,000 and distributed the proceeds to its noteholders, including $11,197 which was distributed to FSM. Risk Retention Term Loan On September 28, 2015, CLO Management, a wholly-owned consolidated subsidiary of the Company, entered into a Risk Retention Term Loan to provide financing for its purchase of CLO II senior notes up to $17 million at a variable rate based on either LIBOR or a base rate plus an applicable margin. Borrowings under the Risk Retention Term Loan totaled $16,972,565 , of which $4,000,000 was repaid, and accrue interest at a rate based on the interest rate on the financed notes and the weighted current cost basis which was 3.83% as of September 30, 2016 . The Company's beneficial interests in CLO II in the aggregate amount of $20,515,345 at fair value are pledged as collateral for the Risk Retention Term Loan. The facility matures on September 29, 2027 with certain lenders party thereto from time to time and Natixis, New York Branch, as administrative agent and joint lead arranger, and Bleachers Finance 1 Limited as syndication agent and joint lead arranger. The Risk Retention Term Loan contains customary affirmative and negative covenants for agreements of this type, including financial maintenance requirements, delivery of financial and other information, compliance with laws, further assurances and limitations with respect to indebtedness, liens, fundamental changes, restrictive agreements, dispositions of assets, acquisitions and other investments, conduct of business and transactions with affiliates. The Company is in compliance with all covenants as of September 30, 2016 and has $12,972,565 of borrowings outstanding under the Risk Retention Term Loan which approximated fair value. For the three and nine months ended September 30, 2016 , interest expense related to the Risk Retention Term Loan was $127,891 and $375,670 , respectively. Credit Facility On November 4, 2014, Fifth Street Holdings entered into an unsecured revolving credit facility which matures on November 4, 2019 with certain lenders party thereto from time to time and Sumitomo Mitsui Banking Corporation, as administrative agent and joint lead arranger, and Morgan Stanley Senior Funding, Inc., as syndication agent and joint lead arranger. On February 29, 2016, the unsecured revolving credit facility was amended to reduce the aggregate revolver commitments of the lenders from $176 million to $146 million and provide, among other things, that certain risk retention debt incurred by subsidiaries engaged solely in managing collateralized loan obligations shall be permitted and excluded from certain financial covenant calculations, including leverage and interest coverage ratios. As of September 30, 2016 , the revolving credit facility provides for $146 million of borrowing capacity, with a $100 million accordion feature, and bears interest at a variable rate based on either LIBOR or a base rate plus an applicable margin with an unused commitment fee paid quarterly, which is subject to change based on a total leverage ratio. Borrowings under the revolving credit facility accrue interest at an annual rate of LIBOR plus 3.50% per annum and the unused commitment fee under the facility is 0.30% per annum. The revolving credit facility contains customary affirmative and negative covenants for agreements of this type, including financial maintenance requirements, delivery of financial and other information, compliance with laws, further assurances and limitations with respect to indebtedness, liens, fundamental changes, restrictive agreements, dispositions of assets, acquisitions and other investments, conduct of business and transactions with affiliates. The revolving credit facility has a term of five years. As of September 30, 2016 and December 31, 2015 , the Company had $92,000,000 and $65,000,000 , respectively, of borrowings outstanding under the credit facility, at cost and fair value. For the three and nine months ended September 30, 2016 , interest expense related to the credit facility was $1,009,093 and $2,819,012 , respectively. For the three and nine months ended September 30, 2015 , interest expense related to the credit facility was $437,442 and $1,199,940 , respectively. At September 30, 2016 , the Company was in compliance with all debt covenants. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Leases The Company leases office space in various locations throughout the United States and maintains its headquarters in Greenwich, CT. On July 22, 2013, the Company entered into a lease agreement with a related party (see Note 11) for office space in Greenwich, CT that expires on September 30, 2024. Other non-cancelable office leases in other locations expire through 2020. The Company's rental lease agreements are generally subject to escalation provisions on base rental payments, as well as certain costs incurred by the property owner and are recognized on a straight-line basis over the term of the lease agreements. In April 2016, the Company abandoned a portion of its office space in its corporate headquarters in Greenwich, CT. Although the Company is currently marketing the unused space to prospective tenants, until such time the new tenant were to occupy such space and our lease agreement is modified, the Company is still obligated to pay contractual rent payments in accordance with the operating lease. The Company estimated the liability under the operating lease agreement and accrued lease abandonment costs in accordance with ASC 420, Exit or Disposal Cost Obligations and recorded a liability of $1,240,928 at the time of abandonment, which represents the present value of the remaining contractual rent payments on the unused space net of estimated sublease income. In addition, the Company reversed $915,464 of its deferred rent liability which is included as a reduction to "General, administrative and other expenses" in the Consolidated Statements of Income during the three months ended June 30, 2016, which represents the portion of the deferred rent liability attributable to the abandoned space. A summary of the Company’s lease abandonment activity for the nine months ended September 30, 2016 is as follows: Lease abandonment costs incurred $ 1,240,928 Rent payments (317,514 ) Present value adjustment 920 Accrued lease abandonment costs, end of period $ 924,334 In July 2014, the Company terminated the operating lease for its White Plains, NY office. Under the terms of the agreement with the landlord, the Company paid an early termination fee of $616,852 at that time and was obligated to pay rent through November 30, 2015. Accordingly, upon lease termination, the Company had recognized an additional expense in the amount of $460,658 representing the fair value of the remaining lease obligation. During March 2015, the Company reached an agreement with its landlord to cancel a significant portion of its remaining lease obligation which resulted in a reduction of rent expense in the amount of $341,044 . Capital Commitments As of September 30, 2016 , the Company does not have any unfunded capital commitments. Litigation FSC Class-Action Lawsuits The Company has been named as a defendant in three putative securities class-action lawsuits arising from its role as investment adviser to FSC. The first lawsuit was filed on October 1, 2015, in the United States District Court for the Southern District of New York and is captioned Howard Randall, Trustee, Howard & Gale Randall Trust FBO Kimberly Randall Irrevocable Trust UA Feb 15, 2000 v. Fifth Street Finance Corp., et al., Case No. 1:15-cv-07759-LAK. The second lawsuit was filed on October 14, 2015, in the United States District Court for the District of Connecticut and is captioned Lynn Waters-Cottrell v. Fifth Street Finance Corp., et al., Case No. 3:15-cv-01488. The case was later transferred to the United States District Court for the Southern District of New York, where it is pending as Case No. 16-cv-00088-LAK. The third lawsuit was filed on November 12, 2015, in the United States District Court for the Southern District of New York and is captioned Robert J. Hurwitz v. Fifth Street Finance Corp., et al., Case No. 1:15-cv-08908-LAK. The defendants in all three cases are Leonard M. Tannenbaum, Bernard D. Berman, Alexander C. Frank, Todd G. Owens, Ivelin M. Dimitrov, Richard Petrocelli, us and FSC. The lawsuits allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) on behalf of a putative class of investors who purchased FSC common stock between July 7, 2014 and February 6, 2015, inclusive. The lawsuits allege in general terms that defendants engaged in a purportedly fraudulent scheme designed to artificially inflate the true value of FSC’s investment portfolio and investment income in order to increase FSAM’s revenue, which FSAM received as the asset manager and investment adviser (through subsidiaries) of FSC. For example, the lawsuits allege that FSC improperly delayed the write-down of at least three of its investments until the fiscal quarter ended December 31, 2014, after FSAM had conducted its initial public offering, or IPO, in October 2014, even though FSC purportedly should have taken the write-downs before FSAM’s IPO. The plaintiffs seek compensatory damages and attorneys’ fees and costs, among other relief, but have not specified the amount of damages being sought in any of the actions. On February 1, 2016, the court appointed Oklahoma Police Pension and Retirement System as lead plaintiff and the law firm of Labaton Sucharow LLP as lead counsel. Lead plaintiff filed its consolidated complaint on April 1, 2016. The consolidated complaint alleges claims similar to those pled in the original complaints on behalf of the same putative class. Defendants moved to dismiss the consolidated complaint on May 31, 2016. After defendants filed their motion to dismiss, the parties engaged in a mediation to explore the possible settlement of the action. Following the mediation, the parties entered into an agreement to settle the case for $14,050,000 on behalf of a settlement class consisting of persons and entities who purchased our common stock during the period from July 7, 2014 through February 6, 2015. Approximately 99% of which will be covered by FSC's insurance proceeds from its carriers. The proposed settlement is subject to lead plaintiff’s completion of additional discovery and approval by the United States District Court for the Southern District of New York after notice has been sent to the settlement class. Lead plaintiff completed the additional discovery and decided to proceed with the proposed settlement. The parties submitted the proposed settlement to the court on September 23, 2016, and asked the court to enter an order certifying the putative class for settlement purposes, authorizing dissemination of notice of the settlement to potential class members, and scheduling a fairness hearing on the proposed settlement. On November 9, 2016, the court entered the proposed order and scheduled the fairness hearing for February 16, 2017. FSC proxy litigation The Company was also named as a defendant in a putative class-action lawsuit filed by a purported stockholder of FSC on January 29, 2016, in the Court of Chancery of the State of Delaware. The case is captioned James Craig v. Bernard D. Berman, et al., C.A. No. 11947-VCG. The defendants in the case were Bernard D. Berman, James Castro-Blanco, Ivelin M. Dimitrov, Brian S. Dunn, Richard P. Dutkiewicz, Byron J. Haney, Sandeep K. Khorana, Todd G. Owens, Douglas F. Ray, Fifth Street Management LLC, FSC, Fifth Street Holdings L.P., and the Company. The complaint alleged that the defendants breached their fiduciary duties to FSC stockholders by, among other things, issuing an incomplete or inaccurate preliminary proxy statement that purportedly attempted to mislead FSC stockholders into voting against proposals to be presented by another shareholder (RiverNorth Capital Management) in a proxy contest in connection with FSC’s 2016 annual meeting. The competing shareholder proposals had sought to elect three director nominees to FSC’s Board of Directors and to terminate the Investment Advisory Agreement between FSC and the Company. The complaint also charged that the director defendants breached their fiduciary duties by perpetuating and failing to terminate the Investment Advisory Agreement and by seeking to entrench themselves as directors and FSAM affiliates as FSC’s manager. The FSAM entities were charged with breaching their duties as alleged controlling persons of FSC and with aiding and abetting the FSC directors’ breaches of duty. The complaint sought, among other things, an injunction preventing FSC and its Board of Directors from soliciting proxies for the 2016 annual meeting until additional disclosures were issued; a declaration that the defendants breached their fiduciary duties by refusing to terminate the Investment Advisory Agreement and by keeping the FSC Board of Directors and Fifth Street Management LLC in place; a declaration that any shares repurchased by FSC after the record date of the 2016 annual meeting would not be considered outstanding shares for purposes of the FSC stockholder approvals sought at the annual meeting; and awarding plaintiff costs and disbursements. The plaintiff moved for expedited proceedings and for a preliminary injunction. Defendants opposed plaintiff’s motion for expedited proceedings and moved to dismiss the case. FSC also filed another amendment to the preliminary proxy statement, making additional disclosures relating to issues raised by plaintiff and RiverNorth. On February 16, 2016, plaintiff informed the Delaware court that the basis for his injunction motion had become moot and that he was withdrawing his motions for a preliminary injunction and expedited proceedings. On February 18, 2016, FSC announced that it had entered into an agreement with RiverNorth pursuant to which RiverNorth would withdraw its competing proxy solicitation. Plaintiff later informed the court that his case had become moot, and he moved for a “mootness fee.” On September 23, 2016, the court awarded plaintiff fees and expenses of $350,000. Any potential liabilities related to this matter would be borne by FSC, not the Company. The litigation is now concluded. FSC shareholder derivative actions On December 4, 2015, a putative shareholder derivative action captioned Solomon Chau v. Leonard M. Tannenbaum, et al., Case No. 3:15-cv-01795-RNC, was filed on behalf of FSC in the United States District Court for the District of Connecticut. The complaint names Leonard Tannenbaum, Bernard D. Berman, Todd G. Owens, Ivelin M. Dimitrov, Alexander C. Frank, Steven M. Noreika, David H. Harrison, Brian S. Dunn, Douglas F. Ray, Richard P. Dutkiewicz, Byron J. Haney, James Castro-Blanco, Richard A. Petrocelli, Frank C. Meyer, and the Company as defendants and FSC as the nominal defendant. A second putative shareholder derivative action, captioned Scott Avera v. Leonard M. Tannenbaum, et al., Case No. 3:15-cv-01889, was filed in the United States District Court for the District of Connecticut on December 31, 2015, against the same group of defendants. The underlying allegations in both complaints are related, and generally similar, to the allegations in the securities class actions against FSC, the Company, and others described in the preceding paragraphs. The complaints allege that FSC’s Board approved unfair advisory and management agreements with entities related to the Company and that certain defendants engaged in allegedly improper conduct designed to make the Company appear more attractive to potential investors before its IPO. The cases have been consolidated under the caption In re Fifth Street Finance Corp. Shareholder Derivative Litigation, No. 3:15-cv-01795-RNC. FSC and the defendants moved to transfer the case to the United States District Court for the Southern District of New York. That motion has been withdrawn without prejudice in connection with the proposed settlement described below. On January 27, 2016, two putative shareholder derivative actions were filed on behalf of FSC in the Superior Court of Connecticut, Judicial District of Stamford/Norwalk. The cases are captioned John Durgerian v. Leonard M. Tannenbaum, et al., No. FST-CV16-6027659-S, and Kamile Dahne v. Leonard M. Tannenbaum, et al., No. FSTCV16- 6027660-S. The defendants in the cases are Leonard M. Tannenbaum, Bernard D. Berman, Alexander C. Frank, Todd G. Owens, Ivelin M. Dimitrov, Richard A. Petrocelli, James Castro-Blanco, Brian S. Dunn, Richard P. Dutkiewicz, Byron J. Haney, Douglas F. Ray, Sandeep K. Khorana, Steven M. Noreika, David H. Harrison, Frank C. Meyer, and the Company, with FSC as the nominal defendant. The allegations in the two cases are generally similar to those in the federal derivative actions described above. The cases have been consolidated under the caption In re Fifth Street Finance Corp. Shareholder Derivative Litigation, No. FST-CV16-6027659-S, and have been stayed by consent of the parties and order of the court until February 1, 2017. On April 1, 2016 and April 6, 2016, respectively, two additional putative shareholder derivative actions were filed on behalf of FSC in the Delaware Court of Chancery. The cases are captioned Justin A. Tuttelman v. Leonard M. Tannenbaum, et al., No. 12157-VCG, and James C. Cooper v. Leonard M. Tannenbaum, et al., No. 12171-VCG. The defendants in the cases are Leonard M. Tannenbaum, Bernard D. Berman, Todd G. Owens, Ivelin M. Dimitrov, Alexander C. Frank, Steven M. Noreika, David H. Harrison, Brian S. Dunn, Douglas F. Ray, Richard P. Dutkiewicz, Byron J. Haney, James Castro-Blanco, Richard A. Petrocelli, Frank C. Meyer, and the Company, with FSC as the nominal defendant. The allegations in the two cases are generally similar to those in the other derivative actions. The cases were consolidated under the caption In re Fifth Street Finance Corp. Stockholder Litigation, C.A. No. 12157-VCG. The two original plaintiffs and several others later filed a consolidated amended complaint on June 8, 2016. The consolidated complaint repeated and expanded on prior allegations and added Fifth Street Management LLC as a defendant. Pursuant to stipulated orders, the consolidated cases have been stayed until 35 business days after the United States District Court for the District of Connecticut rules on the proposed settlement of the shareholder derivative actions as described below. The parties in all of the derivative actions described above agreed to mediate their disputes and, following that mediation, signed an agreement to settle the cases. The proposed settlement provides for Fifth Street Management’s waiver of fees charged to FSC in the amount of $1,000,000 for each of ten consecutive quarters starting in January 2018 and maintenance of the previously announced decrease in Fifth Street Management’s base management fee from 2% to a maximum of 1.75% of gross assets (excluding cash and cash equivalents) for at least four years. The proposed settlement also calls for us to adopt certain governance and oversight enhancements. Those enhancements include provisions relating to equity ownership by FSC Board members, disclosure of executive compensation, director independence, valuation policies and processes, creation of a Board-level Credit Risk and Conflicts Committee at FSC, and increased consultation with outside advisers and independent third parties. Some of the undertakings and enhancements described above are subject to Fifth Street Management’s continuing as FSC’s investment adviser. FSC and the defendants further agreed that they would not oppose plaintiffs’ request for an award of $5,100,000 in attorneys’ fees and expenses, which will be paid from insurance coverage. The proposed settlement is subject to plaintiffs’ completion of additional discovery and approval by the United States District Court for the District of Connecticut after notice has been disseminated to FSC’s shareholders. As discussed above, FSC and the defendants withdrew the pending transfer motion without prejudice so that the Connecticut federal court can rule on the proposed settlement. The plaintiffs have conducted their confirmatory discovery and have decided to proceed with the proposed settlement. The proposed settlement is an obligation of FSC, not the Company. Therefore, the proposed settlement and related insurance recovery is not recorded in these consolidated financial statements. FSAM class-action lawsuits The Company was named as a defendant in two putative securities class-action lawsuits filed by purchasers of the Company’s shares. The suits are related to the securities class actions brought by shareholders of FSC, for which Fifth Street Management serves as investment adviser. The first lawsuit by the Company’s shareholders was filed on January 7, 2016, in the United States District Court for the District of Connecticut and was captioned Ronald K. Linde, etc. v. Fifth Street Asset Management Inc., et al., Case No. 1:16-cv-00025. The defendants are the Company, Leonard M. Tannenbaum, Bernard D. Berman, Alexander C. Frank, Steven M. Noreika, Wayne Cooper, Mark J. Gordon, Thomas L. Harrison, and Frank C. Meyer. The lawsuit asserts claims under §§ 11, 12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”) on behalf of a putative class of persons and entities who purchased the Company’s common stock pursuant or traceable to the Registration Statement issued in connection with the Company’s IPO. The complaint alleges that the defendants engaged in a fraudulent scheme and course of conduct to artificially inflate FSC’s assets and investment income and, in turn, the Company’s valuation at the time of its IPO, thereby rendering the Company’s IPO Registration Statement and Prospectus materially false and misleading. The plaintiffs have not quantified their claims for relief. On February 25, 2016, the court granted the Company’s unopposed motion to transfer the case to the United States District Court for the Southern District of New York, where the case could be coordinated as appropriate with the securities class actions filed by FSC shareholders. The case is now pending in the Southern District of New York as Case No. 1:16-cv-01941-LAK. On April 22, 2016, the court appointed Kieran and Susan Duffy as lead plaintiffs and the law firm of Glancy Prongay & Murray LLP as lead counsel. Lead plaintiffs filed an amended complaint on June 13, 2016. On March 7, 2016, the other putative class action by the Company’s shareholders was filed in the United States District Court for the Southern District of New York. The case was captioned Joyce L. Trupp Agreement of Trust v. Fifth Street Asset Management Inc., et al., No. 1:16-cv-01711. The defendants were the same as in the Linde case, and the complaint was a virtual clone of the original Linde complaint. The Trupp plaintiff voluntarily dismissed her case before lead plaintiffs and lead counsel were appointed in the Linde case. Following an agreed mediation, and as previously disclosed in the Company’s Form 8-K filed on August 4, 2016, the parties in the Linde case signed an agreement to settle the action for $9,250,000 , which will be covered by insurance proceeds. The proposed settlement is subject to lead plaintiffs’ completion of additional discovery and approval by the court after notice has been sent to the settlement class. Lead plaintiffs completed the additional discovery and decided to proceed with the proposed settlement. The parties submitted the proposed settlement to the court on September 23, 2016, and asked the court to enter an order certifying the putative class for settlement purposes, authorizing dissemination of notice of the settlement to potential class members, and scheduling a fairness hearing on the proposed settlement. On November 9, 2016, the court entered the proposed order and scheduled the fairness hearing for February 16, 2017. A provision for losses of $9,250,000 related to the lawsuits has been recorded, offset by the accrual of expected insurance recoveries of $9,250,000 in the accompanying consolidated financial statements as of September 30, 2016. An adverse judgment for monetary damages could have a material adverse effect on the operations and liquidity of the Company. SEC Examination and Investigation On March 23, 2016, the Division of Enforcement of the SEC sent document subpoenas and document-preservation notices to the Company, FSC, FSCO GP LLC - General Partner of Fifth Street Opportunities Fund, L.P., or FSOF, and FSFR. The subpoenas sought production of documents relating to a variety of issues, including those raised in an ordinary-course examination of Fifth Street Asset Management LLC by the SEC’s Office of Compliance Inspections and Examinations that began in October 2015, and in the FSC and FSAM securities class actions and the FSC derivative actions discussed above. The subpoenas were issued pursuant to a formal order of private investigation captioned In the Matter of the Fifth Street Group of Companies, No. HO-12925, dated March 23, 2016, which addresses (among other things) (i) the valuation of FSC’s portfolio companies and investments, (ii) the expenses allocated or charged to FSC and FSFR, (iii) FSOF’s trading in the securities of publicly traded business development companies, (iv) statements to the board, other representatives of pooled investment vehicles, investors, or prospective investors concerning the fair value of FSC’s portfolio companies or investments as well as expenses allocated or charged to FSC and FSFR, (v) various issues relating to adoption and implementation of policies and procedures under the Investment Advisers Act of 1940 (the “Advisers Act”), (vi) statements and/or potential omissions in the entities’ SEC filings, (vii) the entities’ books, records, and accounts and whether they fairly and accurately reflected the entities’ transactions and dispositions of assets, and (viii) several other issues relating to corporate books and records. The formal order cites various provisions of the Securities Act, the Exchange Act, and the Advisers Act, as well as rules promulgated under those Acts, as the bases of the investigation. The subpoenaed Fifth Street entities are cooperating with the Division of Enforcement investigation, have been producing requested documents, and have been communicating with Division of Enforcement personnel. In connection with the matters described above and other non-recurring matters, the Company has incurred professional fees of $2,888,901 and $11,285,662 , respectively, for the three and nine months ended September 30, 2016 . Certain of the expenses associated with defense of these matters may also be covered by insurance, and the Company may seek reimbursement from the appropriate carriers. During the three and nine months ended September 30, 2016, the Company recorded $50,905 and $3,047,636 , respectively, of insurance recoveries related to previously incurred professional fee expenses which are included in Other income (expense) in the Company's Consolidated Statements of Income. The Company cannot provide assurance, however, that these expenses will ultimately be reimbursed in whole, or at all. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions Payments Pursuant to Tax Receivable Agreements FSAM's purchase of Holdings LP Interests concurrent with its IPO, and the subsequent and future exchanges by holders of Holdings LP Interests for shares of FSAM's Class A common stock pursuant to the Exchange Agreement resulted in increases in its share of the tax basis of the tangible and intangible assets of Fifth Street Holdings, which increased the tax depreciation and amortization deductions that otherwise would not have been available to FSAM. These increases in tax basis and tax depreciation and amortization deductions reduce the amount of cash taxes that FSAM would otherwise be required to pay. FSAM entered into a TRA with certain limited partners of Fifth Street Holdings TRA Recipients that requires it to pay them 85% of the amount of cash savings, if any, in U.S. federal, state, local and foreign income tax that FSAM actually realizes (or, under certain circumstances, is deemed to realize) as a result of the increases in tax basis in connection with exchanges by the TRA Recipients described above and certain other tax benefits attributable to payments under the TRA. As a result of certain changes to Connecticut state tax law that were passed in May 2016 (effective January 1, 2016), which resulted in a lower state income tax rate, the Company reduced its payable to TRA recipients by $7,525,901 which is included in Other income (expense) in the Consolidated Statements of Income. In addition, the Company reduced the tax benefit associated with the TRA by $289,606 as a result of a change in the federal corporate tax rate. As of September 30, 2016 , payments due to the TRA Recipients under the TRA totaled $37,960,213 , after these adjustments. In connection with the finalization of the 2014 tax returns in 2015, FSAM paid $340,713 , representing the initial payment associated with the TRA liability. In connection with the finalization of the 2015 tax returns in October 2016, FSAM paid $1,969,958 to the TRA recipients. Within the next 12 month period, the Company expects to pay approximately $2,000,000 of the total amount of estimated TRA liability. Such amount was determined by estimating the amount of taxable income and specified deductions subject to the TRA which are expected to be realized by FSAM for the related tax year. These calculations are performed pursuant to the terms of the TRAs. Payments are anticipated to be made under the TRAs indefinitely, and are due within 45 calendar days after the date FSAM files its federal income tax return. The payments are to be made in accordance with the terms of the TRAs. The timing of the payments is subject to certain contingencies including the Company having sufficient taxable income to utilize all of the tax benefits defined in the TRAs. Obligations pursuant to the TRAs are obligations of FSAM. They do not impact the non-controlling interests in Fifth Street Holdings. These obligations are not income tax obligations and have no impact on the tax provision or the allocation of taxes. In general, items of income, gain, loss and deduction are allocated on the basis of the limited partners' ownership interests pursuant to the Fifth Street Holdings limited partnership agreement after taking into consideration all relevant sections of the Internal Revenue Code. Other Related Party Transactions Revenues All of the Company's revenue is earned from its affiliates, including management fees, performance fees and other fees. For the three and nine months ended September 30, 2016 , the Company earned $18,939,914 and $55,886,970 , respectively, in management fees relating to services provided to the BDCs. For the three and nine months ended September 30, 2015 , the Company earned $22,628,626 and $67,238,892 , respectively, in management fees relating to services provided to the BDCs. As of September 30, 2016 and December 31, 2015 , management fees receivable in the amounts of $18,939,913 and $4,239,207 , were due from the BDCs. For the three and nine months ended September 30, 2016 , the Company voluntarily waived $86,733 , and $248,921 of management fees from the BDCs, respectively. For the three and nine months ended September 30, 2015 , the Company voluntarily waived $145,399 , and $435,232 of management fees from the BDCs, respectively. On January 19, 2016, the Company amended and restated the FSC Investment Advisory Agreement, which reduced the base management fee payable to the Company on gross assets, excluding cash and cash equivalents, from 2.00% to 1.75% effective as of January 1, 2016. On July 14, 2015, FSC announced that FSM, its investment adviser, voluntarily agreed to a revised base management fee arrangement for the period commencing on July 1, 2015 and remaining in effect until January 1, 2017. The revised management fee is intended to provide for a potential reduction in the base management fee payable by FSC to FSM during such period. The revised management fee will be calculated quarterly and will be equal to FSC’s gross assets, including assets acquired with borrowed funds, but excluding any cash and cash equivalents, multiplied by 0.25 multiplied by the sum of (x) and (y), expressed as a percentage, where (x) is equal to 1.75% multiplied by the Baseline NAV Percentage, and (y) is equal to 1% multiplied by the Incremental NAV Percentage. Performance fees earned for the three months ended September 30, 2016 and September 30, 2015 were $38,661 and $2,596 , respectively. Performance fees earned for the nine months ended September 30, 2016 and September 30, 2015 were $124,836 and $79,451 , respectively. The Company also has entered into administration agreements under which the Company provides administrative services for the BDCs and private funds (collectively, the "Fifth Street Funds"), including office facilities and equipment, and clerical, bookkeeping and recordkeeping services at such facilities. Under the administration agreements, the Company also performs or oversees the performance of the BDCs' required administrative services, which includes being responsible for the financial records which the BDCs are required to maintain and preparing reports to the BDCs' stockholders and reports filed with the SEC. In addition, the Company assists each of the BDCs in determining and publishing its net asset value, overseeing the preparation and filing of its tax returns and the printing and dissemination of reports to the each of the BDC's stockholders, and generally overseeing the payment of each Fifth Street Fund's expenses and the performance of administrative and professional services rendered to the funds. For providing these services, facilities and personnel, the Fifth Street Funds reimburse the Company for direct fund expenses and the BDCs reimburse the Company for the allocable portion of overhead and other expenses incurred by the Company in performing its obligations under the administration agreements, including rent and such BDC's allocable portion of the costs of compensation and related expenses of such BDC's chief financial officer and chief compliance officer and their staffs. Such reimbursement is at cost with no profit to, or markup by, the Company. Included in Revenues — other fees in the Consolidated Statements of Income for the three months ended September 30, 2016 and 2015 was $2,748,115 and $2,176,510 , respectively, was recorded related to amounts charged for the above services provided to the Fifth Street Funds. For the nine months ended September 30, 2016 and 2015 respectively, $6,482,213 and $5,672,077 was recorded related to amounts charged for the above services provided to the Fifth Street Funds.The Company may also provide, on the BDCs' behalf, managerial assistance to such BDC's portfolio companies. Each of the administration agreements may be terminated by either the Company or the BDC without penalty upon 60 days' written notice to the other party. Receivables for reimbursable expenses from the Fifth Street Funds are included within Due from Affiliates and totaled $3,397,049 and $3,755,729 at September 30, 2016 and December 31, 2015 , respectively. Purchases of FSC and FSFR Common Stock During the nine months ended September 30, 2016 , the Company purchased an additional 332,934 shares of FSC common stock in the open market for $1,925,757 , which represented a weighted average price of $5.78 per share. In addition, during the three months ended March 31, 2016, the Company purchased 4,078,304 shares of FSC common stock from RiverNorth as part of the PSA for $25 million , which represented a weighted average price of $6.13 per share, net of certain dividends payable to the Company pursuant to the PSA. The shares acquired from RiverNorth were purchased at a premium to the trading price on the date of settlement. Pursuant to a letter agreement with the Company, Leonard M. Tannenbaum purchased 5,142,296 shares of common stock of FSC at a net purchase price of $6.13 per share. During the three months ended March 31, 2016, the Company recorded a loss of $10,419,274 on the purchase which represented the premium paid by the Company and Mr. Tannenbaum in excess of the FSC closing share price on the date of the transaction . The premium paid by Mr. Tannenbaum was included as a loss in the consolidated financial statements since the Company directly benefited from this payment. As a result of the above transactions, the total shares of FSC common stock held by the Company at September 30, 2016 was 8,399,520 . During the nine months ended September 30, 2016 , the Company purchased an additional 1,227,024 shares of FSFR common stock in the open market for $10,622,775 , which represented a weighted average price of $8.66 per share. As of September 30, 2016 , the Company held 1,381,752 shares of FSFR common stock. The following table provides information about the Company's investments in FSC and FSFR common stock as of September 30, 2016 at fair value. The Company records its investment in FSC and FSFR common stock based on the equity method of accounting, not at fair value. Therefore, the unrealized gains or losses disclosed in the following table are not recorded in the consolidated financial statements. Securities Shares Cost Fair Value Gross Cumulative Unrealized Gains Gross Cumulative Unrealized Losses FSC common stock 8,399,520 $ 47,326,614 $ 48,801,211 $ 1,474,597 $ — FSFR common stock 1,381,752 12,002,454 11,827,797 — (174,657 ) Total 9,781,272 $ 59,329,068 $ 60,629,008 $ 1,474,597 $ (174,657 ) MMKT On December 22, 2014, FSM entered into a limited liability company agreement, as majority member, with Leonard Tannenbaum’s brother, as minority member, for the purpose of forming MMKT. The purpose of MMKT was to develop technology related to the financial services industry. FSM made a total capital contribution of $80,000 for an 80% membership interest in MMKT. In addition, MMKT issued $5,900,000 of MMKT Notes, of which $1,300,000 was held by the FSM. The Company has consolidated MMKT in its consolidated financial statements based on its 80% membership interest. In that regard, the Company's allocable portion of the income attributable to MMKT was $1,056,432 for the nine months ended September 30, 2016 . FSOF As of September 30, 2016 , the Company has made capital contributions (net of redemptions) of $300,000 to FSOF through its investment in FSCO GP, which is recorded in investments in equity method investees in the Consolidated Statements of Financial Condition. During the nine months ended September 30, 2016 , the Company redeemed $6.0 million of its investment in FSOF. CLO I and CLO II As of September 30, 2016 , the Company's investments in senior and subordinated notes in CLO I and CLO II totaled $2,845,409 and $20,515,345 , respectively. As of December 31, 2015 , the Company's investments in senior and subordinated notes in CLO I and CLO II totaled $2,929,476 and $20,608,153 , respectively. Other On July 22, 2013, the Company entered into a lease agreement for office space for its headquarters in Greenwich, CT. The landlord is an entity controlled by Leonard M. Tannenbaum, the Company's chairman and chief executive officer. The lease agreement requires monthly rental payments, expires on September 30, 2024 and can be renewed at the request of the Company for two additional five year periods. Rental payments under this lease of approximately $2,000,000 per year began on October 11, 2014. In April 2016, the Company abandoned a portion of its office space in its corporate headquarters in Greenwich, CT. Although the Company is currently marketing the unused space to prospective tenants, unless the lease agreement is modified, the Company is still obligated to pay contractual rent payments in accordance with the operating lease. The Company's fractional interests in corporate aircrafts are used primarily for business purposes. Occasionally, certain of the members of management have used the aircraft for personal use. The Company charges these members of management for such personal use based on market rates. There were no such charges for the three and nine months ended September 30, 2016 and 2015 . As of September 30, 2016 and December 31, 2015 amounts due to and from affiliates were comprised of the following: As of September 30, 2016 As of December 31, 2015 Management fees receivable: Base management fees receivable - BDCs $ 11,071,951 $ 4,794,870 Part I Fees receivable (payable) - BDCs 7,867,962 (555,663 ) Collateral management fees receivable - CLO I and CLO II 550,627 640,578 $ 19,490,540 $ 4,879,785 Performance fees receivable: Performance fees receivable - FSOF $ 124,836 $ 78,720 Part II fees receivable - BDCs — 145,898 $ 124,836 $ 224,618 Due from affiliates: Reimbursed expenses due from the BDCs $ 2,705,035 $ 3,355,875 Reimbursed expenses due from private funds 692,014 399,854 Due from employees 365,738 51,167 Other amounts due from affiliated entities 65,276 136,488 $ 3,828,063 $ 3,943,384 Due to affiliates: Stock appreciation rights liability $ 28,571 $ 24,257 $ 28,571 $ 24,257 |
Equity and Equity-based Compens
Equity and Equity-based Compensation | 9 Months Ended |
Sep. 30, 2016 | |
Equity [Abstract] | |
Equity and Equity-based Compensation | Equity and Equity-based Compensation FSAM Ownership Structure Subsequent to the Reorganization and IPO as described in Note 1, FSAM has two classes of common stock, Class A common stock and Class B common stock, which are described as follows: Class A common stock Holders of shares of Class A common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Additionally, holders of shares of Class A common stock are entitled to receive dividends when and if declared by the Board of Directors, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock. Upon dissolution, liquidation or the sale of all or substantially all of the Company's assets, after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of shares of Class A common stock would be entitled to receive the Company's remaining assets available for distribution on pro rata basis. Holders of shares of Class A common stock do not have preemptive, subscription, redemption or conversion rights. Class B common stock Holders of Class B common stock are entitled to five votes for each share held of record on all matters submitted to a vote of stockholders. Shares of Class B common stock have voting but no economic rights and were issued in equal proportion to the number of Holdings LP Interests issued in the Reorganization to the Principals. Holders of Class B common stock do not have any right to receive dividends (other than dividends consisting of shares of Class B common stock or in rights, options, warrants or other securities convertible or exercisable into or exchangeable for shares of Class B common stock paid proportionally with respect to each outstanding share of Class B common stock) or to receive a distribution upon the dissolution, liquidation or sale of all or substantially all of the Company's assets with respect to their Class B common stock other than the par value of the Class B common stock held. FSAM's amended and restated certificate of incorporation does not provide for any restrictions on transfer of shares of Class B common stock, however, in the event that an outstanding share of Class B common stock ceases to be held by a holder of a corresponding Holdings LP Interest, such share shall automatically be retired and canceled. In addition, when a Holdings LP Interest is exchanged for a share of Class A common stock by a Principal, the corresponding share of Class B common stock will be retired and canceled. Preferred Stock FSAM's amended and restated certificate of incorporation authorizes its Board of Directors to establish one or more series of preferred stock (including convertible preferred stock). Unless required by law or by any stock exchange, the authorized shares of preferred stock will be available for issuance without further action by holders of Class A common stock. FSAM's Board of Directors is able to determine, with respect to any series of preferred stock, the terms and rights of the series of preferred stock. FSAM could issue a series of preferred stock that could, depending on the terms of the series, impede or discourage an acquisition attempt or other transaction that some, or a majority, of its stockholders may believe is in their best interests or in which they may receive a premium for their Class A common stock over the market price of the Class A common stock. Dividends The following table reflects the dividends per share that the Company has recorded on its common stock for the nine months ended September 30, 2016 and September 30, 2015 : Date Declared Record Date Payment Date Amount Cash January 15, 2015 March 31, 2015 April 15, 2015 $ 0.30 $1.8 million May 11, 2015 June 30, 2015 July 15, 2015 0.17 1.0 million August 10, 2015 September 30, 2015 October 15, 2015 0.17 1.0 million Total for the nine months ended September 30, 2015 $ 0.64 $3.8 million March 14, 2016 March 31, 2016 April 15, 2016 $ 0.10 $0.6 million May 11, 2016 June 30, 2016 July 15, 2016 0.10 0.6 million August 10, 2016 September 30, 2016 October 14, 2016 0.10 0.7 million Total for the nine months ended September 30, 2016 $ 0.30 $1.8 million Share Repurchase Program On May 11, 2015, the Company's Board of Directors authorized a share repurchase program of up to $20.0 million of the Company’s Class A common stock. Under the repurchase program, the Company was authorized to repurchase shares through open market purchases or block trades, as conditions permit and in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The repurchase program expired on May 11, 2016. During the nine months ended September 30, 2015, FSAM repurchased and retired 217,641 shares of its Class A common stock at a weighted average price of $8.47 per share pursuant to this program, resulting in aggregate cash consideration paid for these repurchases of $1.8 million . Upon expiration of the previous share repurchase program, on May 11, 2016, the Company's Board of Directors re-authorized a share repurchase program for the repurchase of up to $20.0 million of the Company's Class A common stock. Under the repurchase program, the Company is authorized to repurchase shares through open market purchases or block trades, as conditions permit and in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The repurchase program will terminate on May 11, 2017, unless earlier terminated or extended by the Company's Board of Directors, and may be suspended for periods or discontinued at any time. During the nine months ended September 30, 2016, there were no repurchases of shares of Class A common stock pursuant to this program. Equity-based Compensation Prior to the Reorganization, the Company historically had fee sharing arrangements whereby certain employees or members were granted interests to a share of Part I Fees. Upon consummation of the Reorganization such interests were exchanged for Holdings LP Interests. In addition, upon consummation of the IPO, the Company granted certain equity instruments to Holdings Limited Partners, employees and directors. Part I Fees Prior to December 1, 2012, interests in the Company's Part I Fees that were granted and/or sold to members (other than the managing member) were accounted for as liabilities using the intrinsic-value method as these interests are subject to repurchase in the event of the member's termination of employment, at a formula-based price (as defined in the then existing operating agreement) determined by the member's pro rata share of Part I Fees. In addition, the redemption amounts were exclusive of any accumulated undistributed earnings associated with the member's interests, which were also required to be paid to a former member. Effective December 1, 2012, the Fifth Street operating agreement was amended to include a retirement eligibility vesting clause for then existing members (“equity members”). Members admitted after December 1, 2012, were considered non-equity members as their interests did include the retirement eligibility clause and were accounted for as liabilities using the intrinsic-value method consistent with the above. Conversion and Vesting of Member Interests in Predecessor and Fifth Street Holdings L.P. On November 4, 2014, in connection with the Reorganization, existing interests held by the members of the Predecessor (Part I fee-sharing arrangements discussed above) were exchanged for Holdings LP Interests. As part of this exchange, one of the members' Holdings LP Interests became immediately vested and expensed in full and the other members' vesting was modified and their Holdings LP Interests vest over a period of eight years from the IPO. There was no change in the fair value of these converted interests as a result of the modification in vesting. The following table summarizes the amortization of unrecognized compensation expense for the nine months ended September 30, 2016 and 2015 with respect to the Company's Holdings LP Interests which are equity classified awards: Balance at December 31, 2015 $ 7,016,286 Amortization of Holdings LP Interests (1) (1,946,632 ) Balance at September 30, 2016 $ 5,069,654 Balance at December 31, 2014 $ 8,043,058 Amortization of Holdings LP Interests (770,079 ) Balance at September 30, 2015 $ 7,272,979 (1) Included in amortization of Holdings LP Interests is an acceleration of $1,193,165 in connection with the separation of two former Holdings limited partners. Included in compensation expense for the nine months ended September 30, 2016 and 2015 was $1,946,632 and $770,079 , respectively, of amortization relating to the above equity-classified awards. All such compensation expense has been allocated to the Predecessor for periods prior to the Reorganization and to the non-controlling interests thereafter in the Statement of Changes in Equity. As of September 30, 2016 , unrecognized compensation cost in the amount of $5,069,654 relating to these equity-based awards is expected to be recognized over a period of approximately 6.1 years . Fifth Street Asset Management Inc. 2014 Omnibus Incentive Plan In connection with the IPO, FSAM's Board of Directors adopted the 2014 Omnibus Incentive Plan pursuant to which the Company granted options to its non-employee directors, executive officers and other employees to acquire 5,658,970 shares of Class A common stock, 1,174,748 restricted stock units to be settled in shares of Class A common stock and 90,500 stock appreciation rights to be settled in cash. During the three and nine months ended September 30, 2016 and 2015 , there were additional grants under the 2014 Omnibus Incentive Plan as discussed below. Equity-based compensation expense related to grants under the 2014 Omnibus Incentive Plan is as follows: Three Months Ended September 30, 2016 Three Months Ended September 30, 2015 Nine Months Ended September 30, 2016 Nine Months Ended September 30, 2015 Restricted stock units to be settled in Class A common stock $ 748,950 $ 666,347 $ 2,406,268 $ 1,969,093 Options to acquire shares of Class A common stock 614,706 575,384 1,859,153 1,726,152 Stock appreciation rights to be settled in cash 1,966 5,198 4,314 15,594 Total $ 1,365,622 $ 1,246,929 $ 4,269,735 $ 3,710,839 Restricted Stock Units Each restricted stock unit represents an unfunded, unsecured right of the holder to receive a Class A common share on the vesting dates. The restricted stock units will not vest for three years and subsequently vest at a rate of one-third per year on the fourth, fifth and sixth anniversary of the grant date. These awards will become saleable at a rate of one-quarter (¼) per year, beginning on the sixth, seventh, eighth and ninth anniversary of the grant date. Upon vesting, shares of Class A common stock will be delivered to the participant. Additionally, when the Company pays dividends on its outstanding shares of Class A common stock, the holder of the restricted stock units will be credited with dividend equivalents. For stock dividends, the dividend equivalents will be in the form of additional restricted stock units. For cash dividends, the dividend equivalents will be in the form of cash (without interest or earnings). Dividend equivalents are subject to the same terms and conditions as the original restricted stock unit award, and are not paid until the vesting and settlement of the underlying shares of Class A common stock to which such dividend equivalents relate. During the nine months ended September 30, 2016, the Company granted 156,740 in restricted stock units to employees under substantially similar terms to the IPO grant. For the nine months ended September 30, 2016 and 2015 , the Company declared cash dividends of $0.30 and $0.64 per share, respectively, and accrued dividends in the amount of $299,490 and $601,207 respectively, related to unvested restricted stock units which are forfeitable. The following table presents unvested restricted stock units' activity for the nine months ended September 30, 2016 : Restricted Units Weighted Average Grant Date Fair Value Per Unit Balance - December 31, 2015 1,201,794 $ 16.64 Granted 156,740 3.19 Vested (43,701 ) 5.56 Forfeited (205,443 ) 7.16 Balance - September 30, 2016 1,109,390 $ 16.93 Compensation expense associated with these restricted stock units is being recognized on a straight-line basis during the service period of the respective grant. During the three months ended June 30, 2016, the Company accelerated the vesting of 43,701 RSUs relating to the separation of a former employee. The total compensation expense expected to be recognized in all future periods associated with the restricted stock units, is $13,529,685 at September 30, 2016 , which is expected to be recognized over the remaining weighted average period of 4.1 years . Options The fair value of each option granted during the nine months ended September 30, 2016 is measured on the date of grant using the Black-Scholes option-pricing model and the following weighted average assumptions: Risk-free interest rate 1.16 % Expected dividend yield 11.87 % Expected volatility factor 47.86 % Expected life in years 5.0 Each option entitles the holders to purchase from the Company, upon exercise thereof, one Class A common share at the stated exercise price. Since all of the options granted either restrict saleability upon vesting or have strike prices in excess of the IPO price, the use of standard option pricing models such as Black-Scholes is precluded by ASC 718. As such, the Company has utilized a Monte Carlo pricing simulation, a statistical pricing technique or similar method to measure the fair value of option awards on the date of grant. A summary of unvested options activity for the nine months ended September 30, 2016 is presented below: Options Weighted Average Exercise Price Weighted Average Remaining Life (in years) Aggregate Intrinsic Value Balance - December 31, 2015 5,562,866 $ 18.64 7.5 Granted 50,000 3.70 5.0 Vested (60,000 ) 17.29 4.0 Forfeited (134,489 ) 18.07 8.3 Balance - September 30, 2016 5,418,377 18.53 6.5 Exercisable at September 30, 2016 — $ — — $ — Aggregate intrinsic value represents the value of the Company's closing share price on the last trading day of the quarter in excess of the weighted average exercise price multiplied by the number of options exercisable or expected to vest. As of September 30, 2016 , the Company's closing share price was lower than the weighted average exercise price of the options exercisable or expected to vest. As a result, the options are out of the money and have no intrinsic value. Compensation expense associated with these options is being recognized on a straight-line basis over the service period of the respective grant. As of September 30, 2016 , there was $5,147,992 of total unrecognized compensation expense, that is expected to be recognized over the remaining weighted average period of 2.8 years . Stock Appreciation Rights (“SARs”) Each SAR represents an unfunded, unsecured right of the holder to receive an amount in cash equal to the excess of the closing price of a Class A common share over the exercise price. The SARs terms and conditions are substantially similar to the provisions of the ten year option grants discussed above and had a grant date fair value of $1.78 per unit. Upon vesting, they will be settled in cash. The fair value of the SARs are re-measured each reporting period until settlement and changes in fair value are charged to compensation expense as the SARs vest over the remaining service period. The amount of the adjustment has been derived based on a grant date fair value using the IPO price of $17.00 per share, multiplied by the number of unvested shares, and expensed over the six year service period. Additionally, the calculation of the expense assumes a forfeiture rate of 5% . The total compensation expense expected to be recognized in all future periods associated with the SARs, is approximately $56,163 . No SARs were issued during the nine months ended September 30, 2016 . A summary of unvested SARs activity for the nine months ended September 30, 2016 is presented below: SARs Weighted Average Grant Date Fair Value Per SAR Balance December 31, 2015 71,000 $ 1.78 Granted — — Vested — — Forfeited (24,500 ) 1.78 Balance September 30, 2016 46,500 $ 1.78 The following table summarizes activity for the nine months ended September 30, 2016 and 2015 with respect to the Company's liability classified awards, which are recorded in Due to affiliates in the Consolidated Statements of Financial Condition, including stock appreciation rights discussed below: Balance at December 31, 2015 $ 24,257 Compensation expense 4,314 Balance at September 30, 2016 $ 28,571 Balance at December 31, 2014 $ 3,465 Compensation expense 15,594 Balance at September 30, 2015 $ 19,059 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Prior to November 4, 2014, the Company had not been subject to U.S. Federal income taxes as the Predecessor was organized as a limited liability company. As a result of the Reorganization and IPO, the portion of Fifth Street Holdings income attributable to FSAM is now subject to U.S. Federal, state and local income taxes and is taxed at the prevailing corporate tax rates. The Company's effective tax rate includes a rate benefit attributable to the fact that certain of the Company's subsidiaries operate as a series of pass-through entities which are not themselves subject to federal income tax. As a result of the Reorganization, certain subsidiaries were converted from pass-through entities to taxable entities. Accordingly, the portion of the Company's subsidiaries' earnings attributable to non-controlling interests are subject to tax when reported as a component of the non-controlling interests' taxable income on their individual tax returns. The Company’s provision for income taxes consists of Federal, state and local taxes in amounts necessary to align the Company’s year-to-date provision for income taxes with the effective tax rate that the Company expects to achieve for the full year. As a result of certain changes to Connecticut state tax law that were passed in May 2016 (effective January 1, 2016), which resulted in a lower state income tax rate, the Company reduced its deferred tax assets by $8,467,072 during the nine months ended September 30, 2016, which includes a discrete adjustment of $6,271,403 recorded during the three months ended June 30, 2016, and is included in the provision for income taxes in the Consolidated Statements of Income. An additional $376,000 provision for income tax related to this item will be recorded prior to December 31, 2016 through the annual effective tax rate. The estimated annualized income tax provision for 2016 reflects an effective tax rate of 13.4% . The difference between the annual effective rate of 13.4% and the statutory Federal rate of 34% primarily relates to state taxes and pass-through entity income not subject to income taxes. The increase in the effective tax rate during the nine months ended September 30, 2016 relates to the adjustment of TRA liability in the amount of $7,525,901 . The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual tax rate could differ from current estimates. Actual provision expense may vary from the annual effective rate for discrete items recorded in the period. Deferred tax assets are primarily the result of an increase in the tax basis of certain intangible assets resulting from FSAM's investment in Fifth Street Holdings. Net deferred tax assets are also recorded related to differences between the financial reporting basis and the tax basis of FSAM's proportionate share of the net assets of Fifth Street Holdings. Based on the Company's historical taxable income and its expected future earnings, management evaluates the uncertainty associated with booking tax benefits and determined that the deferred tax assets are more likely than not to be realized, including evaluation of deferred tax liabilities and the expectation of future taxable income. The Company does not believe it has any significant uncertain tax positions. Accordingly, the Company did not record any adjustments or recognize interest expense for uncertain tax positions for the nine months ended September 30, 2016. In the future, if uncertain tax positions arise, interest and penalties will be accrued and included in the Provision for Income Taxes. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share Basic earnings per share ("EPS") measures the performance of an entity over the reporting period. Diluted earnings per share measures the performance of an entity over the reporting period while giving effect to all potentially dilutive common shares that were outstanding during the period. The treasury stock method is used to determine the dilutive potential of stock options and restricted stock units. The following is a reconciliation of the numerator and denominator used in the basic and diluted EPS calculations (in thousands, except shares and per share information): Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Numerator for basic net income (loss) per share of Class A common stock: Net income (loss) attributable to Fifth Street Asset Management Inc. $ (237,718 ) $ 1,150,572 $ (622,041 ) $ 3,554,355 Numerator for diluted net income (loss) per share of Class A common stock: Net income (loss) attributable to Fifth Street Asset Management Inc. $ (237,718 ) $ 1,150,572 $ (622,041 ) $ 3,554,355 Dilutive effects of MMKT Notes — — (155,242 ) — Net income (loss) available to Class A common stockholders $ (237,718 ) $ 1,150,572 $ (777,283 ) $ 3,554,355 Denominator for basic net income (loss) per share of Class A common stock: Weighted average shares of Class A common stock outstanding 5,908,407 5,901,718 5,847,139 5,956,389 Denominator for diluted net income (loss) per share of Class A common stock: Weighted average shares of Class A common stock outstanding 5,908,407 5,901,718 5,847,139 5,956,389 Dilutive effects of restricted stock units — 6,745 — 6,929 Weighted average shares of Class A common stock outstanding - diluted 5,908,407 5,908,463 5,847,139 5,963,318 Earnings per share of Class A common stock: Net income (loss) attributable to Fifth Street Asset Management Inc. per share of Class A common stock, basic $ (0.04 ) $ 0.19 $ (0.11 ) $ 0.60 Net income (loss) attributable to Fifth Street Asset Management Inc. per share of Class A common stock, diluted $ (0.04 ) $ 0.19 $ (0.13 ) $ 0.60 Shares of Class B common stock have no impact on the calculation of net income per share of Class A common stock as holders of Class B common stock do not participate in net income or dividends, and thus, are not participating securities. The treasury stock method is used to calculate incremental Class A common shares on potentially dilutive Class A common shares resulting from options and unvested restricted units granted in connection with the IPO. Potentially dilutive securities representing an incremental 1,109,390 restricted stock units for the three and nine months ended September 30, 2016 were excluded from the computation of diluted earnings per Class A common share for the period because their impact would have been anti-dilutive. Potentially dilutive securities representing an incremental 5,431,766 and 5,501,766 options to acquire Class A common shares for the three and nine months ended September 30, 2016, respectively, were excluded from the computation of diluted earnings per Class A common share for the period because their impact would have been anti-dilutive. Potentially dilutive securities representing an incremental 1,235,515 restricted stock units and 5,630,376 options to acquire Class A common shares for the three and nine months ended September 30, 2015 were excluded from the computation of diluted earnings per Class A common share for the period because their impact would have been anti-dilutive. For the nine months ended September 30, 2016, the if-converted method was used to calculate the dilutive effect of the MMKT Notes. For the three months ended September 30, 2016 and the three and nine months ended September 30, 2015, the assumed conversion of the MMKT Notes was anti-dilutive. For the three and nine months ended September 30, 2016, diluted earnings per share includes the assumed conversion of Holdings LP interests and the related tax effects. For the three and nine months ended September 30, 2015, the earnings per share excludes the assumed conversion of Holdings LP interests as their impact would have been anti-dilutive. For the three and nine months ended September 30, 2016, diluted earnings per share does not include the assumed conversion of the RiverNorth Warrant as the impact would have been anti-dilutive. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On November 9, 2016, the Company's Board of Directors declared a quarterly dividend of $0.125 per share of Class A common stock. The declared dividend is payable on January 13, 2017 to stockholders of record at the close of business on December 30, 2016. |
Significant Accounting Polici23
Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and the requirements for reporting on Form 10-Q and Regulation S-X. In the opinion of management, all adjustments of a normal recurring nature considered necessary for the fair presentation of the consolidated financial statements have been made. All significant intercompany transactions and balances have been eliminated in consolidation. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and entities in which it, directly or indirectly, is determined to have a controlling financial interest under ASC 810, as amended by ASU No. 2015-02. Under the variable interest model, the Company determines whether, if by design, an entity has equity investors who lack substantive participating or kick-out rights. If equity investors do not have such rights, the entity is considered a variable interest entity ("VIE") and must be consolidated by its primary beneficiary. An enterprise is determined to be the primary beneficiary if it holds a controlling financial interest. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly impact the entity's economic performance and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The consolidation guidance requires an analysis to determine (a) whether an entity in which the Company holds a variable interest is a VIE and (b) whether the Company's involvement, through holding interests directly or indirectly in the entity, would give it a controlling financial interest. Performance of that analysis requires the exercise of judgment. Under the consolidation guidance, the Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a variable interest entity and reconsiders that conclusion continually. In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly or indirectly by the Company. The consolidation analysis can generally be performed qualitatively; however, if it is not readily apparent that the Company is not the primary beneficiary, a quantitative analysis may also be performed. Investments and redemptions (either by the Company, affiliates of the Company or third parties) or amendments to the governing documents of the respective investment funds could affect an entity's status as a VIE or the determination of the primary beneficiary. At each reporting date, the Company assesses whether it is the primary beneficiary and will consolidate or deconsolidate accordingly. For equity investments where the Company does not control the investee, and where it is not the primary beneficiary of a VIE, but can exert significant influence over the financial and operating policies of the investee, the Company follows the equity method of accounting. The evaluation of whether the Company exerts control or significant influence over the financial and operational policies of its investees requires significant judgment based on the facts and circumstances surrounding each individual investment. Factors considered in these evaluations may include the type of investment, the legal structure of the investee, the terms and structure of the investment agreement, including investor voting or other rights, the terms of the Company's investment advisory agreement or other agreements with the investee, any influence the Company may have on the governing board of the investee, the legal rights of other investors in the entity pursuant to the fund’s operating documents and the relationship between the Company and other investors in the entity. Consolidated Variable Interest Entities Fifth Street Holdings FSAM is the sole general partner of Fifth Street Holdings and, as such, it operates and controls all of the business and affairs of Fifth Street Holdings and its wholly-owned subsidiaries, FSM, CLO Management and FSCO GP. Under ASC 810, Fifth Street Holdings meets the definition of a VIE because the limited partners do not hold substantive kick-out or participating rights. Since FSAM has the obligation to absorb expected losses and the right to receive benefits that could be significant to Fifth Street Holdings and is the sole general partner, FSAM is considered to be the primary beneficiary of Fifth Street Holdings. The assets of Fifth Street Holdings can be used to settle the obligations of FSAM based on the discretion of FSAM in its capacity as the general partner of Fifth Street Holdings. As a result, the Company consolidates the financial results of Fifth Street Holdings and its wholly-owned subsidiaries and records the economic interests in Fifth Street Holdings held by the limited partners other than FSAM as "Non-controlling interests" on the Consolidated Statements of Financial Condition and "Net income attributable to non-controlling interests" on the Consolidated Statements of Income. Voting Interest Entities Entities that are not VIEs are generally evaluated under the voting interest model. The Company consolidates voting interest entities that it controls through a majority voting interest or through other means. Unconsolidated Variable Interest Entities The Company holds interests in certain VIEs that are not consolidated because the Company is not deemed the primary beneficiary. The Company's interest in such entities generally is in the form of direct interests and fixed fee arrangements. The maximum exposure to loss represents the potential loss of assets by the Company relating to these non-consolidated entities. The Company's interests in these non-consolidated VIEs and their respective maximum exposure to loss relating to non-consolidated VIEs as of September 30, 2016 is $24,584,966 , which represents the fair value of beneficial interests as well as management fees receivable at such date. CLOs In February 2015, the Company closed a securitization of the senior secured loans warehoused in Fifth Street Senior Loan Fund I, LLC ("CLO I"). In September 2015, Fifth Street Senior Loan II, LLC merged into Fifth Street SLF II Ltd. ("CLO II"), and the Company closed a securitization of the senior secured loans previously warehoused in Fifth Street Senior Loan Fund II, LLC. Fifth Street CLO Management LLC ("CLO Management"), a wholly owned-consolidated subsidiary of Fifth Street Holdings, is the collateral manager of CLO I and CLO II (collectively referred to as the "CLOs"), and as such, it operates and controls all of the business and affairs of the CLOs. Under ASC 810, the CLOs meet the definition of a VIE because the total equity at risk is not sufficient to finance it activities. The Company determined that it did not have an obligation to absorb expected losses that could be significant to CLO I and CLO II. Therefore, the Company is not considered to be the primary beneficiary of the CLOs, and accordingly, does not consolidate their financial results. As of September 30, 2016 , investments held by the Company in the senior secured and subordinated notes of the CLOs are included within "Beneficial interests in CLOs at fair value" on the Consolidated Statements of Financial Condition. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions affecting amounts reported in the consolidated financial statements and accompanying notes. The most significant of these estimates are related to: (i) the valuation of equity-based compensation, (ii) the estimate of future taxable income, which impacts the carrying amount of the Company’s deferred income tax assets, (iii) the determination of net tax benefits in connection with the Company's tax receivable agreements, (iv) the valuation of the Company's investments, (v) the valuation of derivative liabilities and (vi) the measurement of asset and liabilities associated with exit and disposal activities related to the abandonment of office space. These estimates are based on the information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions and conditions. |
Concentration of Credit Risk and Other Risks and Uncertainties | Concentration of Credit Risk and Other Risks and Uncertainties Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. |
Fair Values Measurements | Fair Value Measurements The carrying amounts of cash and cash equivalents, management and performance fees receivable from affiliates, prepaid expenses, insurance recovery receivable, due from/to affiliates, accounts payable and accrued expenses, accrued compensation and benefits, income taxes payable, legal settlement payable and dividend payable approximate fair value due to the immediate or short-term maturity of these financial instruments. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash equivalents include short-term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. The Company places its cash and cash equivalents with U.S. financial institutions and, at times, amounts may exceed federally insured limits. The Company monitors the credit standing of these financial institutions. |
Investments in Equity Method Investees | Equity Method Investments Investments over which the Company exercises significant influence, but which do not meet the requirements for consolidation, are accounted for using the equity method of accounting, whereby the Company records its share of the underlying income or losses of equity method investees. The Company did not elect the fair value option on its equity method investments. Investments in equity method investees consists of the Company's general partner interests in an unconsolidated fund and investments in FSC and FSFR common stock. The Company exercises significant influence with respect to the fund and BDCs as a result of its management contracts with the affiliated fund and BDCs, and specifically with respect to the BDCs, its board of director representation. |
Investment in Available-for-Sale Securities and Beneficial Interests in CLOs | Beneficial Interest in CLOs Beneficial interests in CLOs meet the definition of a debt security under ASC 325-40, Beneficial Interest in Securitized Financial Assets. Income from the beneficial interest in CLOs is recorded using the effective interest method based upon an estimation of an effective yield to maturity utilizing assumed cash flows. The Company monitors the expected residual payments, and effective yield is determined and updated periodically, as needed. Any distributions received from the beneficial interests in CLOs in excess of the calculated income using the effective yield are treated as a reduction of the cost. |
Fair Value Option | Fair Value Option The Company has elected the fair value option, upon initial recognition, for all beneficial interests in CLOs, which had a cost of $24,271,320 as of September 30, 2016. There were $537,600 and $169,373 of unrealized gains, respectively, recorded on beneficial interests in CLOs for the three and nine months ended September 30, 2016 . There was $23,148 and $590,546 of unrealized losses, respectively, recorded on beneficial interests in CLOs for the three and nine months ended September 30, 2015 . The Company also elected the fair value option on the MMKT Notes upon initial recognition, which were included in loans payable on the Consolidated Statements of Financial Condition. The MMKT Notes were settled and canceled during the three months ended September 30, 2016. The Company realized a gain of $2,592,751 on the MMKT Notes during the three and nine months ended September 30, 2016 (see Note 8). The fair value option permits the irrevocable election of fair value on an instrument-by-instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. The Company believes that by electing the fair value option for these financial instruments, it provides consistent measurement with its peers in the asset management industry. Changes in the fair value of these assets and liabilities and related interest income/expense are recorded within "Other income (expense)" in the Consolidated Statements of Income. Refer to Note 5 for a description of valuation methodologies for each of the financial instruments mentioned above. |
Derivative Instruments | Derivative Instruments Derivative instruments include warrant and swap contracts issued in connection with the RiverNorth settlement. The derivative instruments are not designated as hedging instruments. All derivatives are recognized in "Derivative liabilities at fair value" and are presented gross in the Consolidated Statements of Financial Condition with changes in fair value recorded in "Unrealized gain (loss) on derivatives" in the accompanying Consolidated Statements of Income. Upon settlement of the instrument, the Company records "Realized gain (loss) on derivatives" in the Consolidated Statements of Income. The Company’s derivative instruments contain credit risk to the extent that its counterparty may be unable to meet the terms of the agreements. The Company’s derivative instruments also contain market risk in excess of the amounts reflected in the Consolidated Statements of Financial Condition based on future changes to underlying share prices. No collateral has been pledged and/or received with the counterparty, and the Company’s derivatives instruments are not subject to a master netting arrangement. See Note 4 for quantitative disclosures regarding derivative instruments. |
Fixed Assets | Fixed Assets Fixed assets consist of furniture, fixtures and equipment (including automobiles, computer hardware and purchased software), software developed for internal use and leasehold improvements, and are recorded at cost, less accumulated depreciation and amortization. Depreciation of furniture, fixtures and equipment is computed using the straight-line method over the estimated useful lives of the respective assets ( three to eight years). Software developed for internal use, which is amortized over three years , consists of costs incurred during the application development stage of software developed for the Company's proprietary use and includes costs of company personnel who are directly associated with the development. Amortization of improvements to leased properties is computed using the straight-line method based upon the initial term of the applicable lease or the estimated useful life of the improvements, whichever is shorter, and ranges from five to 10 years. Routine expenditures for repairs and maintenance are charged to expense when incurred. Major betterments and improvements are capitalized. Upon retirement or disposition of fixed assets, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the Consolidated Statements of Income. The Company evaluates fixed assets for impairment whenever events or changes in circumstances indicate that an asset's carrying value may not be fully recovered. |
Deferred Financing Costs | Deferred Financing Costs Deferred financing costs consist of fees and expenses paid in connection with the closing of Fifth Street Holdings' credit facility and are capitalized at the time of payment. Deferred financing costs are amortized using the straight line method over the term of the credit facility and are included in interest expense on the Consolidated Statements of Income. |
Deferred Rent | Deferred Rent The Company recognizes rent expense on a straight-line basis over the expected lease term. Within the provisions of certain leases, there are free rent periods and escalations in payments over the base lease term. The effects of these items have been reflected in rent expense on a straight-line basis over the expected lease term. Landlord contributions and tenant allowances are included in the straight-line calculations and are being deferred over the lease term and are reflected as a reduction in rent expense. |
Revenue Recognition | Revenue Recognition The Company has three principal sources of revenues: management fees, performance fees and other fees. These revenues are derived from the Company's agreements with the funds it manages, primarily the BDCs. The investment advisory agreements on which revenues are based are generally renewable on an annual basis by the general partner or the board of directors of the respective funds. Management Fees Management fees are generally based on a defined percentage of fair value of assets, total commitments, invested capital, net asset value, net investment income, total assets or principal amount of the investment portfolios managed by the Company. All management fees are earned from affiliated funds of the Company. The contractual terms of management fees vary by fund structure and investment strategy and range from 0.40% to 1.75% for base management fees, which are asset or capital-based. Management fees from affiliates also include quarterly incentive fees on the net investment income from the BDCs ("Part I Fees"). Part I Fees are generally equal to 20.0% of the BDCs' net investment income (before Part I Fees and performance fees payable based on capital gains), subject to fixed "hurdle rates" as defined in the respective investment advisory agreement. No fees are recognized until the BDCs' net investment income exceeds the respective hurdle rate, with a "catch-up" provision that serves to ensure the Company receives 20.0% of the BDCs' net investment income from the first dollar earned. Such fees are classified as management fees as they are paid quarterly, predictable and recurring in nature, not subject to repayment (or clawback) and cash settled each quarter. Management fees from affiliates are recognized as revenue in the period investment advisory services are rendered, subject to the Company's assessment of collectability. Performance Fees Performance fees are earned from the funds managed by the Company based on the performance of the respective funds. The contractual terms of performance fees vary by fund structure and investment strategy and are generally 15.0% to 20.0% of investment performance. The Company has elected to adopt Method 2 of ASC 605-20, Revenue Recognition for Revenue Based on a Formula. Under this method, the Company recognizes revenue based on the respective fund's performance during the period, subject to certain hurdles or benchmarks. The performance fees for any period are based upon an assumed liquidation of the fund's net assets on the reporting date, and distribution of the net proceeds in accordance with the fund's income allocation provisions. The performance fees may be subject to reversal to the extent that the performance fees recorded exceed the amount due to the general partner or investment manager based on a fund's cumulative investment returns. Performance fees related to the BDCs ("Part II Fees") are calculated and payable in arrears as of the end of each fiscal year of the BDCs and equal 20.0% of the BDCs' realized capital gains, if any, on a cumulative basis since inception, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees. Other Fees The Company also provides administrative services to the Fifth Street Funds. These fees are reported within Revenues - Other fees. These fees generally represent reimbursable compensation, overhead and other expenses incurred by the Company on behalf of the funds. The Company is considered the principal under these arrangements and is required to record the expense and related reimbursement revenue on a gross basis. |
Compensation and Benefits | Compensation and Benefits Compensation generally includes salaries, bonuses, severance and equity-based compensation charges. Bonuses are accrued over the service period to which they relate. All payments made to the Predecessor's managing member since inception and all payments made to the Predecessor's equity members since December 1, 2012 (see Note 11) related to their granted or purchased interests are accounted for as distributions on the equity held by such members. Retention Bonus Agreements During the nine months ended September 30, 2016, the Company entered into retention bonus agreements in the amount of $2,307,000 with certain key employees. The retention bonuses provide for the upfront payment of a cash bonus to each participant, which is generally subject to the participant remaining actively employed by the Company for the one -year period subsequent to the bonus payment. Notwithstanding the foregoing, in the event a participant’s employment is terminated by the Company, the participant is not required to repay the cash retention bonus. The Company recognizes these retention bonuses over the term of the service period as defined in the retention bonus agreements. Included in compensation expense for the three and nine and months ended September 30, 2016 is $479,564 and $862,753 , respectively, of amortization related to these agreements. Severance Agreements The Company has entered into various severance and change in control agreements with certain key employees, which provide for the payment of severance and other benefits to each participant in the event of a termination without cause or for good reason, and in certain cases, the payment of a cash bonus upon the occurrence of a change in control event. The amounts of such payments and benefits vary by employee. The Company records expenses related to such severance and change in control agreements by employee if, and when, a termination or change in control event occurs. Included in compensation expense for the three and nine months ended September 30, 2016 is $1,247,644 and $1,949,198 , respectively, related to these severance arrangements. Equity-Based Compensation The Company accounts for stock-based compensation in accordance with ASC 718, "Compensation – Stock Compensation." Under the fair value recognition provision of this guidance, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period. The Company recognizes expense related to equity-based compensation transactions in which it receives employee services in exchange for: (a) equity instruments of the Company or (b) liabilities that are based on the fair value of the Company's equity instruments. Equity-based compensation expense represents expenses associated with the: (i) granting of Part I Fee-sharing arrangements prior to the Reorganization; (ii) conversion of and acceleration in vesting of interests in the Predecessor in connection with the Reorganization; and (iii) the granting of restricted stock units, options to purchase shares of FSAM Class A common stock and stock appreciation rights granted in connection with the IPO. Effective January 1, 2016, the Company elected to early adopt ASU 2016-09. The primary impact of the Company's adoption was limited to the accounting for forfeitures of certain stock based awards, which is adopted on a modified retrospective basis. Upon adoption, the Company no longer estimates forfeitures. Rather, the Company has elected to account for forfeitures as they occur. The value of the award is amortized on a straight-line basis over the requisite service period and is included within "Compensation and benefits" (except for grants to non-employees which are included in "General, administrative and other expenses") in the Company’s Consolidated Statements of Income. The Company records deferred tax assets or liabilities for equity compensation plan awards based on deductions for income tax purposes of stock-based compensation recognized at the statutory tax rate in the jurisdiction in which the Company is expected to receive a tax deduction. In addition, differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on the Company's income tax returns are recorded as an adjustment to the provision (benefit) for income taxes on the Consolidated Statements of Income. |
Income Taxes | Income Taxes Fifth Street Holdings complies with the requirements of the Internal Revenue Code that are applicable to limited partnerships, which allow for the complete pass-through of taxable income or losses to Fifth Street Holdings limited partners, including FSAM, who are individually responsible for any federal tax consequences. The tax provision includes the income tax obligation related to FSAM's allocated portion of Fifth Street Holdings' income, which is net of any tax incurred at Fifth Street Holdings' subsidiaries that are subject to income tax. Also, as a result of the Reorganization, certain subsidiaries were converted from pass-through entities to taxable entities. Accordingly, the portion of the Company's subsidiaries' earnings attributable to non-controlling interests are subject to tax when reported as a component of the non-controlling interests' taxable income on their individual tax returns. The Company accounts for income taxes under the asset and liability method prescribed by ASC 740, "Income Taxes." As a result of the Company's acquisition of limited partnership interests in Fifth Street Holdings, the Company expects to benefit from amortization and other tax deductions reflecting the step-up in tax basis in the acquired assets. Those deductions will be used by the Company and will be taken into account in determining the Company's taxable income. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Management periodically assesses the recoverability of its deferred tax assets based upon expected future earnings, future deductibility of the asset and changes in applicable tax laws and other factors. If management determines that it is not probable that the deferred tax asset will be fully recoverable in the future, a valuation allowance may be established for the difference between the asset balance and the amount expected to be recoverable in the future. The allowance will result in a charge to the Company’s Consolidated Statements of Income. Further, the Company records its income taxes receivable and payable based upon its estimated income tax liability. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company recognizes interest and penalties associated with tax matters such as franchise tax liabilities, if applicable, as general and administrative and other expenses. |
Class A Earnings per Share | Class A Earnings per Share The Company computes basic earnings per share attributable to FSAM’s Class A common stockholders by dividing income attributable to FSAM by the weighted-average Class A common shares outstanding for the period. Diluted earnings per share reflects the potential dilution beyond shares for basic earnings per share that could occur if securities or other contracts to issue common stock were exercised, converted into common stock, or resulted in the issuance of common stock that would have shared in the Company's earnings. Potentially dilutive securities include outstanding options to acquire Class A common shares, unvested restricted stock units, warrants issued to RiverNorth, MMKT Notes and Fifth Street Holdings limited partnership interests which are exchangeable for shares of Class A common stock. The dilutive effect of stock options and restricted stock units is reflected in diluted earnings per share of Class A common stock by application of the treasury stock method. Under the treasury stock method, if the average market price of a share of Class A common stock increases above the option's exercise price, the proceeds that would be assumed to be realized from the exercise of the option would be used to acquire outstanding shares of Class A common stock. The dilutive effect of awards is directly correlated with the fair value of the shares of Class A common stock. However, the awards may be anti-dilutive when the market price of the underlying shares exceeds the option's exercise price. This result is possible because the compensation expense attributed to future services but not yet recognized is included as a component of the assumed proceeds upon exercise. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606) - Principal versus Agent Considerations. This ASU is intended to clarify revenue recognition accounting when a third party is involved in providing goods or services to a customer. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing. This ASU is intended to clarify two aspects of Topic 606: identifying performance obligations and licensing implementation guidance. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients. This ASU amends certain aspects of ASU 2014-09, addresses certain implementation issues identified and clarifies the new revenue standards’ core revenue recognition principles. The new standards will be effective for the Company on January 1, 2018 and early adoption is permitted on the original effective date of January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that new standards will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of this standard on its consolidated financial statements and its ongoing financial reporting. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern, which requires management to evaluate, at each annual and interim reporting period, a company's ability to continue as a going concern within one year of the date the financial statements are issued and provide related disclosures. This accounting guidance is effective for the Company on a prospective basis beginning for the annual fiscal 2016 period and is not expected to have a material effect on its consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall, which makes limited amendments to the guidance in U.S. GAAP on the classification and measurement of financial instruments. The new standard significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods therein. Early adoption is permitted specifically for the amendments pertaining to the presentation of certain fair value changes for financial liabilities measured at fair value. Early adoption of all other amendments is not permitted. Upon adoption, the Company will be required to make a cumulative-effect adjustment to the Consolidated Statement of Assets and Liabilities as of the beginning of the first reporting period in which the guidance is effective. The Company is evaluating the effect that ASU 2016-01 will have on its consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." The guidance in this ASU supersedes the leasing guidance in Topic 840, "Leases." Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for those leases previously classified as operating leases. The amendments in ASU No. 2016-02 are effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09. The objective of the guidance in ASU 2016-09 is to reduce the cost and complexity of providing stock compensation information while maintaining or improving the usefulness of the information. ASU 2016-09 amends previous guidance around when and how excess tax benefits or deficiencies should be recognized, and now requires excess tax benefits to be recognized in the income statement, regardless of whether it will reduce the Company’s taxes payable in the current period. ASU 2016-09 also allows companies to elect whether to use an estimated forfeiture rate, or to recognize forfeitures as they occur. Another change related to this update, is the movement of excess tax benefits from stock options from financing activities to operating activities within the Company's Consolidated Statements of Cash Flows. ASU 2016-09 is effective for public entities for annual reporting periods beginning after December 15, 2016 and interim periods within those reporting periods, with early adoption permitted. The Company adopted ASU 2016-09 as of January 1, 2016 using a modified retrospective approach to account for the changes related to forfeiture estimates and the cumulative adjustment to reduce FSAM's equity by $178,977 . |
Significant Accounting Polici24
Significant Accounting Policies Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Schedule of Error Corrections and Prior Period Adjustments | Set forth below is a summary of the amounts and financial statement line items impacted by these revisions for the periods presented in this Form 10-Q and previous filings. Three Months Ended June 30, 2016 Consolidated Statement of Income: As previously reported Adjustments As revised Income from equity method investments $ — $ 1,110,217 $ 1,110,217 Other income (expense), net 1,571,903 (1,546,728 ) 25,175 Total other income, net 10,608,494 (436,511 ) 10,171,983 Income before provision for income taxes 11,643,558 (436,511 ) 11,207,047 Provision for income taxes 7,237,303 (122,427 ) 7,114,876 Net income 4,406,255 (314,084 ) 4,092,171 Net income attributable to non-controlling interests (3,629,933 ) 385,308 (3,244,625 ) Net income attributable to Fifth Street Asset $ 776,322 $ 71,224 $ 847,546 Net income per share attributable to Fifth Street Asset Management Inc. - Basic $ 0.13 $ 0.02 $ 0.15 Net income per share attributable to Fifth Street Asset Management Inc. - Diluted $ 0.07 $ — $ 0.07 Six Months Ended June 30, 2016 Consolidated Statement of Income: As previously reported Adjustments As revised Income from equity method investments $ — $ 1,978,326 $ 1,978,326 Other income (expense), net 1,783,490 (2,328,275 ) (544,785 ) Total other expense, net (3,316,468 ) (349,949 ) (3,666,417 ) Income (loss) before provision for income taxes 278,488 (349,949 ) (71,461 ) Provision for income taxes 6,971,891 (119,788 ) 6,852,103 Net loss (6,693,403 ) (230,161 ) (6,923,564 ) Net loss attributable to non-controlling interests 6,230,340 308,826 6,539,166 Net loss attributable to Fifth Street Asset $ (463,063 ) $ 78,665 $ (384,398 ) Net loss per share attributable to Fifth Street Asset Management Inc. - Basic $ (0.08 ) $ 0.01 $ (0.07 ) Net loss per share attributable to Fifth Street Asset Management Inc. - Diluted $ (0.10 ) $ — $ (0.10 ) Three Months Ended June 30, 2016 Consolidated Statement of Comprehensive Income: As previously reported Adjustments As revised Net income $ 4,406,255 $ (314,084 ) $ 4,092,171 Adjustment for change in fair value of available-for-sale securities (1,423,276 ) 1,423,276 — Tax effect of adjustment for change in fair value of available-for-sale securities 20,304 (20,304 ) — Total comprehensive income 3,003,283 1,088,888 4,092,171 Less: Comprehensive income attributable to non-controlling interests (2,374,581 ) (870,044 ) (3,244,625 ) Comprehensive income attributable to Fifth Street Asset Management Inc. $ 628,702 $ 218,844 $ 847,546 Six Months Ended June 30, 2016 Consolidated Statement of Comprehensive Income: As previously reported Adjustments As revised Net loss $ (6,693,403 ) $ (230,161 ) $ (6,923,564 ) Adjustment for change in fair value of available-for-sale securities (7,119,228 ) 7,119,228 — Tax effect of adjustment for change in fair value of available-for-sale securities 284,010 (284,010 ) — Total comprehensive loss (13,528,621 ) 6,605,057 (6,923,564 ) Less: Comprehensive loss attributable to non-controlling interests 12,518,400 (5,979,234 ) 6,539,166 Comprehensive loss attributable to Fifth Street Asset Management Inc. $ (1,010,221 ) $ 625,823 $ (384,398 ) Six Months Ended June 30, 2016 Consolidated Statement of Cash Flows: As previously reported Adjustments As revised Cash flows from operating activities Net loss $ (6,693,403 ) $ (230,161 ) $ (6,923,564 ) Distributions of earnings from equity method investments — 1,700,636 1,700,636 Deferred taxes 6,990,955 (119,788 ) 6,871,167 Income from equity method investments (25,728 ) (1,978,326 ) (2,004,054 ) Net cash used in operating activities (5,487,912 ) (627,639 ) (6,115,551 ) Cash flows from investing activities Purchases of equity method investments — (26,925,757 ) $ (26,925,757 ) Purchases of available-for-sale securities (26,925,757 ) 26,925,757 $ — Distributions from equity method investments — 627,639 627,639 Net cash used in investing activities (19,577,470 ) 627,639 (18,949,831 ) Net decrease in cash and cash equivalents (8,568,646 ) — (8,568,646 ) Cash and cash equivalents, beginning of period 17,185,204 — 17,185,204 Cash and cash equivalents, end of period $ 8,616,558 $ — $ 8,616,558 Three Months Ended March 31, 2016 Consolidated Statement of Income: As previously reported Adjustments As revised Income from equity method investments $ — $ 868,109 $ 868,109 Other income (expense), net 211,587 (781,547 ) (569,960 ) Total other expense, net (13,924,962 ) 86,562 (13,838,400 ) Loss before income tax benefit (11,365,070 ) 86,562 (11,278,508 ) Income tax benefit (265,412 ) 2,639 (262,773 ) Net loss (11,099,658 ) 83,923 (11,015,735 ) Net loss attributable to non-controlling interests 9,860,273 (76,483 ) 9,783,790 Net loss attributable to Fifth Street Asset $ (1,239,385 ) $ 7,440 $ (1,231,945 ) Net loss per share attributable to Fifth Street Asset Management Inc. - Basic $ (0.21 ) $ — $ (0.21 ) Net loss per share attributable to Fifth Street Asset Management Inc. - Diluted $ (0.24 ) $ — $ (0.24 ) Three Months Ended March 31, 2016 Consolidated Statement of Comprehensive Income: As previously reported Adjustments As revised Net loss $ (11,099,658 ) $ 83,923 $ (11,015,735 ) Adjustment for change in fair value of available-for-sale securities (5,695,952 ) 5,695,952 — Tax effect of adjustment for change in fair value of available-for-sale securities 263,706 (263,706 ) — Total comprehensive loss (16,531,904 ) 5,516,169 (11,015,735 ) Less: Comprehensive loss attributable to non-controlling interests 14,892,981 (5,109,191 ) 9,783,790 Comprehensive loss attributable to Fifth Street Asset Management Inc. $ (1,638,923 ) $ 406,978 $ (1,231,945 ) Three Months Ended March 31, 2016 Consolidated Statement of Cash Flows: As previously reported Adjustments As revised Cash flows from operating activities Net loss $ (11,099,658 ) $ 83,923 $ (11,015,735 ) Distributions of earnings from equity method investments — 600,549 600,549 Deferred taxes (246,396 ) 2,639 (243,757 ) Income from equity method investments (552 ) (868,109 ) (868,661 ) Net cash used in operating activities (15,033,201 ) (180,998 ) (15,214,199 ) Purchases of equity method investments — (26,925,757 ) (26,925,757 ) Purchases of available-for-sale securities (26,925,757 ) 26,925,757 — Distributions from equity method investments — 180,998 180,998 Net cash used in investing activities (20,752,835 ) 180,998 (20,571,837 ) Net decrease in cash and cash equivalents (11,775,890 ) — (11,775,890 ) Cash and cash equivalents, beginning of period 17,185,204 — 17,185,204 Cash and cash equivalents, end of period $ 5,409,314 $ — $ 5,409,314 December 31, 2015 Consolidated Statement of Financial Condition: As previously reported Adjustments As revised Investments in equity method investees $ 6,427,272 $ 25,961,671 $ 32,388,943 Investments in available-for-sale securities at fair value 26,771,258 (26,771,258 ) — Deferred tax assets 51,180,237 37,720 51,217,957 Total assets $ 151,233,520 $ (771,867 ) $ 150,461,653 Accumulated other comprehensive income 27,276 (27,276 ) — Retained earnings — (30,905 ) (30,905 ) Total stockholders' equity, Fifth Street Asset Management Inc. 2,995,261 (58,181 ) 2,937,080 Non-controlling interests (4,678,685 ) (713,686 ) (5,392,371 ) Total equity (deficit) (1,683,424 ) (771,867 ) (2,455,291 ) Total liabilities and equity $ 151,233,520 $ (771,867 ) $ 150,461,653 Year Ended December 31, 2015 Consolidated Statement of Income: As previously reported Adjustments As revised Income (loss) from equity method investments $ 20,630 $ (269,940 ) $ (249,310 ) Other income, net 279,405 (157,405 ) 122,000 Total other expense, net (2,519,624 ) (427,345 ) (2,946,969 ) Income before provision for income taxes 39,029,901 (427,345 ) 38,602,556 Provision for income taxes 5,065,420 (19,717 ) 5,045,703 Net income 33,964,481 (407,628 ) 33,556,853 Net income attributable to non-controlling interests (31,556,455 ) 376,723 (31,179,732 ) Net income attributable to Fifth Street Asset Management Inc. $ 2,408,026 $ (30,905 ) $ 2,377,121 Net income per share attributable to Fifth Street Asset Management Inc. - Basic and Diluted $ 0.41 $ (0.01 ) $ 0.40 Year Ended December 31, 2015 Consolidated Statement of Comprehensive Income: As previously reported Adjustments As revised Net income $ 33,964,481 $ (407,628 ) $ 33,556,853 Adjustment for change in fair value of available-for-sale securities 382,242 (382,242 ) — Tax effect of adjustment for change in fair value of available-for-sale securities (18,003 ) 18,003 — Total comprehensive income 34,328,720 (771,867 ) 33,556,853 Less: Comprehensive income attributable to non-controlling interests (31,893,418 ) 713,686 (31,179,732 ) Comprehensive income attributable to Fifth Street Asset Management Inc. $ 2,435,302 $ (58,181 ) $ 2,377,121 Year Ended December 31, 2015 Consolidated Statement of Cash Flows: As previously reported Adjustments As revised Cash flows from operating activities Net income $ 33,964,481 $ (407,628 ) $ 33,556,853 Deferred taxes 5,178,675 (19,717 ) 5,158,958 (Income) loss from equity method investments (83,405 ) 269,940 186,535 Net cash provided by operating activities 67,480,808 (157,405 ) 67,323,403 Cash flows from investing activities Purchases of equity method investments (7,500,000 ) (26,389,016 ) (33,889,016 ) Purchases of available-for-sale securities (26,389,016 ) 26,389,016 — Distributions from equity method investments 225,282 157,405 382,687 Net cash used in investing activities (53,833,253 ) 157,405 (53,675,848 ) Net increase in cash and cash equivalents 13,947,196 — 13,947,196 Cash and cash equivalents, beginning of period 3,238,008 — 3,238,008 Cash and cash equivalents, end of period $ 17,185,204 $ — $ 17,185,204 Three Months Ended September 30, 2015 Consolidated Statement of Income: As previously reported Adjustments (1) As revised Management fees $ 23,609,474 $ (299,339 ) $ 23,310,135 Other fees 1,347,133 829,377 2,176,510 Total revenues 24,959,203 530,038 25,489,241 General, administrative and other expenses 3,349,712 829,377 4,179,089 Total expenses 14,042,624 829,377 14,872,001 Income from equity method investments 12,492 2,803 15,295 Total other expense, net (407,778 ) 2,803 (404,975 ) Income before provision for income taxes 10,508,801 (296,536 ) 10,212,265 Provision for income taxes 995,506 (13,396 ) 982,110 Net income 9,513,295 (283,140 ) 9,230,155 Net income attributable to non-controlling interests (8,341,728 ) 262,145 (8,079,583 ) Net income attributable to Fifth Street Asset Management Inc. $ 1,171,567 $ (20,995 ) $ 1,150,572 Net income per share attributable to Fifth Street Asset Management Inc. - Basic and Diluted $ 0.20 $ (0.01 ) $ 0.19 Nine Months Ended September 30, 2015 Consolidated Statement of Income: As previously reported Adjustments (1) As revised Management fees $ 70,417,077 $ (1,322,423 ) $ 69,094,654 Other fees 3,668,878 2,003,199 5,672,077 Total revenues 74,165,406 680,776 74,846,182 General, administrative and other expenses 8,548,115 2,003,199 10,551,314 Total expenses 38,594,390 2,003,199 40,597,589 Income from equity method investments 2,540 2,803 5,343 Total other expense, net (1,510,168 ) 2,803 (1,507,365 ) Income before provision for income taxes 34,060,848 (1,319,620 ) 32,741,228 Provision for income taxes 3,551,329 (61,214 ) 3,490,115 Net income 30,509,519 (1,258,406 ) 29,251,113 Net income attributable to non-controlling interests (26,859,217 ) 1,162,459 (25,696,758 ) Net income attributable to Fifth Street Asset $ 3,650,302 $ (95,947 ) $ 3,554,355 Net income per share attributable to Fifth Street Asset Management Inc. - Basic and Diluted $ 0.61 $ (0.01 ) $ 0.60 Three Months Ended September 30, 2015 Consolidated Statement of Comprehensive Income: As previously reported Adjustments (1) As revised Net income $ 9,513,295 $ (283,140 ) $ 9,230,155 Adjustment for change in fair value of available-for-sale securities 538,494 (538,494 ) — Tax effect of adjustment for change in fair value of available-for-sale securities (25,410 ) 25,410 — Total comprehensive income 10,026,379 (796,224 ) 9,230,155 Less: Comprehensive income attributable to non-controlling interests (8,549,626 ) 470,043 (8,079,583 ) Comprehensive income attributable to Fifth Street Asset Management Inc. $ 1,476,753 $ (326,181 ) $ 1,150,572 Nine Months Ended September 30, 2015 Consolidated Statement of Comprehensive Income: As previously reported Adjustments (1) As revised Net income $ 30,509,519 $ (1,258,406 ) $ 29,251,113 Adjustment for change in fair value of available-for-sale securities (28,904 ) 28,904 — Tax effect of adjustment for change in fair value of available-for-sale securities 1,370 (1,370 ) — Total comprehensive income 30,481,985 (1,230,872 ) 29,251,113 Less: Comprehensive income attributable to non-controlling interests (26,709,534 ) 1,012,776 (25,696,758 ) Comprehensive income attributable to Fifth Street Asset Management Inc. $ 3,772,451 $ (218,096 ) $ 3,554,355 Nine Months Ended September 30, 2015 Consolidated Statement of Cash Flows: As previously reported Deconsolidation of Fund (2) Adjustment (1) As revised Cash flows from operating activities Net income $ 30,509,519 $ — $ (1,258,406 ) $ 29,251,113 Deferred taxes 3,224,078 — 129 3,224,207 Income from equity method investments (2,540 ) — (2,803 ) (5,343 ) Management fees receivable 3,472,687 — 1,322,423 4,795,110 Prepaid Expenses 282,909 — (61,343 ) 221,566 Purchases of investment of Consolidated Fund (304,435,163 ) 304,435,163 — — Change in other assets of Consolidated Fund (3,277,652 ) 3,277,652 — — Net cash provided by (used in) operating activities (264,359,588 ) 307,712,815 — 43,353,227 Purchases of equity method investments (7,500,000 ) — (1,379,679 ) (8,879,679 ) Purchases of available-for-sale securities (1,379,679 ) — 1,379,679 — Purchases of beneficial interest in CLO (612,889 ) (20,910,116 ) — (21,523,005 ) Net cash used in investing activities (8,941,346 ) (20,910,116 ) — (29,851,462 ) Issuance on notes payable by Consolidated Fund 364,066,775 (364,066,775 ) — — Deferred financing costs (2,744,980 ) 2,744,980 — — Net cash provided by (used in) investing activities 350,619,945 (361,321,795 ) — (10,701,850 ) Net increase in cash and cash equivalents 77,319,011 (74,519,096 ) — 2,799,915 Cash and cash equivalents, beginning of period 3,238,008 — — 3,238,008 Cash and cash equivalents, end of period (including Consolidated Fund) 80,557,019 (74,519,096 ) — 6,037,923 Less: Cash and cash equivalents of the Consolidated Fund 74,519,096 (74,519,096 ) — — Cash and cash equivalents, end of period $ 6,037,923 $ — $ — $ 6,037,923 (1) Amounts include previous revisions in the December 31, 2015 Form 10-K relating to Part I Fees and the gross presentation of certain reimbursements from the BDCs. (2) Amounts represent deconsolidation of a CLO as previously disclosed in the December 31, 2015 Form 10-K. |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Summary of Impact to the Consolidated Statements of Income | The table below summarizes the impact to the Consolidated Statements of Income from the Company's derivative instruments for the three and nine months ended September 30, 2016 . For the Three Months Ended September 30, 2016 For the Nine Months Ended September 30, 2016 Unrealized gain (loss) on derivatives Swap $ 5,313,603 $ — Warrant 3,069,610 — Total unrealized gain on derivatives $ 8,383,213 $ — Realized gain (loss) on derivatives Swap (1) $ 188,803 $ 654,228 Warrant (3,267,160 ) (3,267,160 ) Total realized loss on derivatives $ (3,078,357 ) $ (2,612,932 ) __________ __ (1) Amounts represent the Company's portion of dividends received on FSC shares underlying the total return swap, net of a $160,266 payment by the Company to settle the swap agreement during the three months ended September 30, 2016. |
Investments and Fair Value Me26
Investments and Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Schedule of Financial Instruments Carried at Fair Value | The following tables present the financial instruments carried at fair value as of September 30, 2016 , by caption on the Company's Consolidated Statement of Financial Condition for each of the levels of hierarchy established by ASC 820: Assets Level 1 Level 2 Level 3 Total Beneficial interests in CLOs — — 23,360,754 23,360,754 $ — $ — $ 23,360,754 $ 23,360,754 The following tables present the financial instruments carried at fair value as of December 31, 2015 , by caption on the Company's Consolidated Statement of Financial Condition for each of the levels of hierarchy established by ASC 820: Assets Level 1 Level 2 Level 3 Total Beneficial interests in CLOs — — 23,537,629 23,537,629 $ — $ — $ 23,537,629 $ 23,537,629 Liabilities Level 1 Level 2 Level 3 Total MMKT Notes $ — $ — $ 4,738,026 $ 4,738,026 $ — $ — $ 4,738,026 $ 4,738,026 |
Roll-forward in the Changes in Fair Value of All Financial Instruments With Unobservable Inputs, Assets | The following table provides a roll-forward in the changes in fair value for all financial instruments for which the Company determines fair value using unobservable (Level 3) factors for the three and nine months ended September 30, 2016 : Beneficial interests in CLOs MMKT Notes Fair value at June 30, 2016 $ 22,967,217 $ 2,247,740 Distributions (530,680 ) (2,237,394 ) Interest income 386,617 — Unrealized gains or losses 537,600 2,582,405 Realized gains — (2,592,751 ) Fair value at September 30, 2016 $ 23,360,754 $ — Beneficial interests in CLOs MMKT Notes Fair value at December 31, 2015 $ 23,537,629 $ 4,738,026 Distributions (1,428,590 ) (2,237,394 ) Interest income or expense 1,082,342 92,119 Unrealized gains or losses 169,373 — Realized gains — (2,592,751 ) Fair value at September 30, 2016 $ 23,360,754 $ — There were no transfers in or out of level 3 during the three and nine months ended September 30, 2016. All unrealized gains or losses related to investments still held as of September 30, 2016 with the exception of MMKT Notes. The following table provides a roll-forward in the changes in fair value for all financial instruments for which the Company determines fair value using unobservable (Level 3) factors for the three and nine months ended September 30, 2015 : Beneficial interests in CLOs MMKT Notes Fair value at June 30, 2015 $ 4,065,473 $ 150,000 Proceeds from issuance of notes payable — 4,450,000 Purchases of investments 20,910,115 — Distributions (231,643 ) — Interest income or expense 95,396 44,895 Unrealized gains or losses (23,148 ) — Fair value at September 30, 2015 $ 24,816,193 $ 4,644,895 Beneficial interests in CLOs MMKT Notes Fair value at December 31, 2014 $ — $ — Proceeds from issuance of notes payable — 4,600,000 Purchases of investments 25,407,151 — Distributions (231,643 ) — Interest income or expense 231,231 44,895 Unrealized gains or losses (590,546 ) — Fair value at September 30, 2015 $ 24,816,193 $ 4,644,895 |
Roll-forward in the Changes in Fair Value of All Financial Instruments With Unobservable Inputs, Liabilities | The following table provides a roll-forward in the changes in fair value for all financial instruments for which the Company determines fair value using unobservable (Level 3) factors for the three and nine months ended September 30, 2016 : Beneficial interests in CLOs MMKT Notes Fair value at June 30, 2016 $ 22,967,217 $ 2,247,740 Distributions (530,680 ) (2,237,394 ) Interest income 386,617 — Unrealized gains or losses 537,600 2,582,405 Realized gains — (2,592,751 ) Fair value at September 30, 2016 $ 23,360,754 $ — Beneficial interests in CLOs MMKT Notes Fair value at December 31, 2015 $ 23,537,629 $ 4,738,026 Distributions (1,428,590 ) (2,237,394 ) Interest income or expense 1,082,342 92,119 Unrealized gains or losses 169,373 — Realized gains — (2,592,751 ) Fair value at September 30, 2016 $ 23,360,754 $ — There were no transfers in or out of level 3 during the three and nine months ended September 30, 2016. All unrealized gains or losses related to investments still held as of September 30, 2016 with the exception of MMKT Notes. The following table provides a roll-forward in the changes in fair value for all financial instruments for which the Company determines fair value using unobservable (Level 3) factors for the three and nine months ended September 30, 2015 : Beneficial interests in CLOs MMKT Notes Fair value at June 30, 2015 $ 4,065,473 $ 150,000 Proceeds from issuance of notes payable — 4,450,000 Purchases of investments 20,910,115 — Distributions (231,643 ) — Interest income or expense 95,396 44,895 Unrealized gains or losses (23,148 ) — Fair value at September 30, 2015 $ 24,816,193 $ 4,644,895 Beneficial interests in CLOs MMKT Notes Fair value at December 31, 2014 $ — $ — Proceeds from issuance of notes payable — 4,600,000 Purchases of investments 25,407,151 — Distributions (231,643 ) — Interest income or expense 231,231 44,895 Unrealized gains or losses (590,546 ) — Fair value at September 30, 2015 $ 24,816,193 $ 4,644,895 |
Quantitative Information Related to Significant Unobservable Inputs for Level 3 Financial Instruments, Assets | The following table provides quantitative information related to the significant unobservable inputs for Level 3 financial instruments, which are carried at fair value as of September 30, 2016 : Assets Fair Value Valuation Technique Unobservable Input Input Value Beneficial interests in CLOs $ 23,360,754 Discounted cash flow Constant prepayment rate 15% Constant default rate 2% Loss severity rate 30% Total $ 23,360,754 The following table provides quantitative information related to the significant unobservable inputs for Level 3 financial instruments, which are carried at fair value as of December 31, 2015 : Assets Fair Value Valuation Technique Unobservable Input Input Value Beneficial interests in CLOs $ 23,537,629 Discounted cash flow Constant prepayment rate 15% Constant default rate 2% Loss severity rate 30% Total $ 23,537,629 Liabilities Fair Value Valuation Technique Unobservable Input Input Value MMKT Notes $ 4,738,026 Recent market transactions N/A N/A Total $ 4,738,026 |
Quantitative Information Related to Significant Unobservable Inputs for Level 3 Financial Instruments, Liabilities | The following table provides quantitative information related to the significant unobservable inputs for Level 3 financial instruments, which are carried at fair value as of September 30, 2016 : Assets Fair Value Valuation Technique Unobservable Input Input Value Beneficial interests in CLOs $ 23,360,754 Discounted cash flow Constant prepayment rate 15% Constant default rate 2% Loss severity rate 30% Total $ 23,360,754 The following table provides quantitative information related to the significant unobservable inputs for Level 3 financial instruments, which are carried at fair value as of December 31, 2015 : Assets Fair Value Valuation Technique Unobservable Input Input Value Beneficial interests in CLOs $ 23,537,629 Discounted cash flow Constant prepayment rate 15% Constant default rate 2% Loss severity rate 30% Total $ 23,537,629 Liabilities Fair Value Valuation Technique Unobservable Input Input Value MMKT Notes $ 4,738,026 Recent market transactions N/A N/A Total $ 4,738,026 |
Investments in Equity Method Investees | he following tables (shown in thousands) present summarized financial information of FSC for the three and nine months ended June 30, 2016, which is the latest publicly available financial information as of the date of this report. Statements of Operations For the Three Months Ended June 30, 2016 For the Nine Months Ended June 30, 2016 Investment income $ 64,026 $ 188,712 Net expenses 34,920 107,680 Net investment income 29,106 81,032 Net unrealized gain (loss) on investments and secured borrowings 10,490 (74,042 ) Net realized loss on investments and secured borrowings (44,814 ) (70,113 ) Net decrease in net assets resulting from operations (5,218 ) (63,123 ) The following table provides information about the Company's equity method investments as of September 30, 2016 and December 31, 2015: Equity Held as of Equity method investments September 30, 2016 % of Ownership December 31, 2015 % of Ownership FSC common stock (1) $ 46,396,530 5.86 % $ 24,665,471 2.65 % FSFR common stock (1) 12,114,886 4.69 1,296,200 0.53 FSOF equity interest 548,749 0.88 6,427,272 8.78 Total $ 59,060,165 $ 32,388,943 __________ __ (1) The total fair value of the Company’s investments in FSC and FSFR was $60,629,008 based on quoted market prices as of September 30, 2016. Therefore, the unrealized gains or losses disclosed in the following table are not recorded in the consolidated financial statements. Securities Shares Cost Fair Value Gross Cumulative Unrealized Gains Gross Cumulative Unrealized Losses FSC common stock 8,399,520 $ 47,326,614 $ 48,801,211 $ 1,474,597 $ — FSFR common stock 1,381,752 12,002,454 11,827,797 — (174,657 ) Total 9,781,272 $ 59,329,068 $ 60,629,008 $ 1,474,597 $ (174,657 ) |
Financial Instruments Disclosed, But Not Carried at Fair Value | The following table presents the carrying value and fair value of the Company's financial assets and liabilities disclosed, but not carried, at fair value as of September 30, 2016 and the level of each financial asset and liability within the fair value hierarchy: Carrying Value Fair Value Level 1 Level 2 Level 3 Risk Retention Term Loan $ 12,972,565 $ 12,972,565 $ — $ — $ 12,972,565 Loan payable - DECD loan 2,000,000 1,925,423 — — 1,925,423 Credit facility payable 92,000,000 92,000,000 — — 92,000,000 Payables to related parties pursuant to tax receivable agreements 37,960,213 32,975,004 — — 32,975,004 Total $ 144,932,778 $ 139,872,992 $ — $ — $ 139,872,992 The following table presents the carrying value and fair value of the Company's financial assets and liabilities disclosed, but not carried, at fair value as of December 31, 2015 and the level of each financial asset and liability within the fair value hierarchy: Carrying Value Fair Value Level 1 Level 2 Level 3 Risk Retention Term Loan $ 12,972,614 $ 12,972,614 $ — $ — $ 12,972,614 Loan payable - DECD loan 4,000,000 4,040,214 — — 4,040,214 Credit facility payable 65,000,000 65,000,000 — — 65,000,000 Payables to related parties pursuant to tax receivable agreements 45,486,114 40,015,336 — — 40,015,336 Total $ 127,458,728 $ 122,028,164 $ — $ — $ 122,028,164 |
Fixed Assets (Tables)
Fixed Assets (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Fixed Assets | Fixed assets consist of the following: September 30, 2016 December 31, 2015 Furniture, fixtures and equipment $ 1,398,475 $ 1,519,742 Capitalized software costs (1) — 624,512 Leasehold improvements 10,312,968 10,312,968 Fixed assets, cost 11,711,443 12,457,222 Less: accumulated depreciation and amortization (2) (6,140,586 ) (2,563,701 ) Fixed assets, net book value $ 5,570,857 $ 9,893,521 __________ __ (1) During the three months ended June 30, 2016, the Company determined it was no longer probable that the MMKT software being developed would be completed and placed in service. As a result, the Company wrote off the capitalized software costs, and accordingly, a loss in the amount of $624,512 is included in Other income (expense), net in the Consolidated Statement of Income for the nine months ended September 30, 2016 . (2) In April 2016, the Company abandoned a portion of its office space in its corporate headquarters in Greenwich, CT. As a result, the Company accelerated depreciation in the amount of $2,158,012 and $653,719 during the three months ended June 30, 2016 relating to leasehold improvements and furniture and fixtures, respectively, which represents the net book value of identifiable assets on which the Company will no longer derive future economic benefit. |
Other Assets (Tables)
Other Assets (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Other Assets | Other assets consist of the following: September 30, 2016 December 31, 2015 Security deposits (a) $ 81,999 $ 499,835 Fractional interests in aircrafts (b) 3,089,871 3,302,190 Other 158,700 174,395 $ 3,330,570 $ 3,976,420 __________________ (a) In April 2016, the Company received its security deposit in the amount of $417,836 in connection with its former White Plains, NY office lease. (b) In November 2013, the Company entered into an agreement that entitled it to the use of a corporate aircraft for five years. The amount paid, less the estimated trade-in value, is being amortized on a straight-line basis over the expected five-year term of the agreement. In December 2014, the Company sold half of this interest and entered into an agreement for a second corporate aircraft for five years. Amortization expense for the three and nine months ended September 30, 2016 was $70,773 and $212,319 , respectively. Amortization expense for the three and nine months ended September 30, 2015 was $70,773 and $212,320 , respectively. |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of Debt Instruments | Loans payable consist of the following: September 30, 2016 December 31, 2015 DECD loan $ 2,000,000 $ 4,000,000 MMKT Notes — 4,738,026 Risk Retention Term Loan 12,972,565 12,972,614 $ 14,972,565 $ 21,710,640 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Summary of Lease Abandonment Activity | A summary of the Company’s lease abandonment activity for the nine months ended September 30, 2016 is as follows: Lease abandonment costs incurred $ 1,240,928 Rent payments (317,514 ) Present value adjustment 920 Accrued lease abandonment costs, end of period $ 924,334 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Investments in Equity Method Investees | he following tables (shown in thousands) present summarized financial information of FSC for the three and nine months ended June 30, 2016, which is the latest publicly available financial information as of the date of this report. Statements of Operations For the Three Months Ended June 30, 2016 For the Nine Months Ended June 30, 2016 Investment income $ 64,026 $ 188,712 Net expenses 34,920 107,680 Net investment income 29,106 81,032 Net unrealized gain (loss) on investments and secured borrowings 10,490 (74,042 ) Net realized loss on investments and secured borrowings (44,814 ) (70,113 ) Net decrease in net assets resulting from operations (5,218 ) (63,123 ) The following table provides information about the Company's equity method investments as of September 30, 2016 and December 31, 2015: Equity Held as of Equity method investments September 30, 2016 % of Ownership December 31, 2015 % of Ownership FSC common stock (1) $ 46,396,530 5.86 % $ 24,665,471 2.65 % FSFR common stock (1) 12,114,886 4.69 1,296,200 0.53 FSOF equity interest 548,749 0.88 6,427,272 8.78 Total $ 59,060,165 $ 32,388,943 __________ __ (1) The total fair value of the Company’s investments in FSC and FSFR was $60,629,008 based on quoted market prices as of September 30, 2016. Therefore, the unrealized gains or losses disclosed in the following table are not recorded in the consolidated financial statements. Securities Shares Cost Fair Value Gross Cumulative Unrealized Gains Gross Cumulative Unrealized Losses FSC common stock 8,399,520 $ 47,326,614 $ 48,801,211 $ 1,474,597 $ — FSFR common stock 1,381,752 12,002,454 11,827,797 — (174,657 ) Total 9,781,272 $ 59,329,068 $ 60,629,008 $ 1,474,597 $ (174,657 ) |
Schedule of Amounts Due to and From Affiliates | As of September 30, 2016 and December 31, 2015 amounts due to and from affiliates were comprised of the following: As of September 30, 2016 As of December 31, 2015 Management fees receivable: Base management fees receivable - BDCs $ 11,071,951 $ 4,794,870 Part I Fees receivable (payable) - BDCs 7,867,962 (555,663 ) Collateral management fees receivable - CLO I and CLO II 550,627 640,578 $ 19,490,540 $ 4,879,785 Performance fees receivable: Performance fees receivable - FSOF $ 124,836 $ 78,720 Part II fees receivable - BDCs — 145,898 $ 124,836 $ 224,618 Due from affiliates: Reimbursed expenses due from the BDCs $ 2,705,035 $ 3,355,875 Reimbursed expenses due from private funds 692,014 399,854 Due from employees 365,738 51,167 Other amounts due from affiliated entities 65,276 136,488 $ 3,828,063 $ 3,943,384 Due to affiliates: Stock appreciation rights liability $ 28,571 $ 24,257 $ 28,571 $ 24,257 |
Equity and Equity-based Compe32
Equity and Equity-based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Equity [Abstract] | |
Summary of Dividends Per Share Declared | The following table reflects the dividends per share that the Company has recorded on its common stock for the nine months ended September 30, 2016 and September 30, 2015 : Date Declared Record Date Payment Date Amount Cash January 15, 2015 March 31, 2015 April 15, 2015 $ 0.30 $1.8 million May 11, 2015 June 30, 2015 July 15, 2015 0.17 1.0 million August 10, 2015 September 30, 2015 October 15, 2015 0.17 1.0 million Total for the nine months ended September 30, 2015 $ 0.64 $3.8 million March 14, 2016 March 31, 2016 April 15, 2016 $ 0.10 $0.6 million May 11, 2016 June 30, 2016 July 15, 2016 0.10 0.6 million August 10, 2016 September 30, 2016 October 14, 2016 0.10 0.7 million Total for the nine months ended September 30, 2016 $ 0.30 $1.8 million |
Schedule of Equity Classified Awards | The following table summarizes the amortization of unrecognized compensation expense for the nine months ended September 30, 2016 and 2015 with respect to the Company's Holdings LP Interests which are equity classified awards: Balance at December 31, 2015 $ 7,016,286 Amortization of Holdings LP Interests (1) (1,946,632 ) Balance at September 30, 2016 $ 5,069,654 Balance at December 31, 2014 $ 8,043,058 Amortization of Holdings LP Interests (770,079 ) Balance at September 30, 2015 $ 7,272,979 (1) Included in amortization of Holdings LP Interests is an acceleration of $1,193,165 in connection with the separation of two former Holdings limited partners. |
Schedule of Equity-Based Compensation Expense | Equity-based compensation expense related to grants under the 2014 Omnibus Incentive Plan is as follows: Three Months Ended September 30, 2016 Three Months Ended September 30, 2015 Nine Months Ended September 30, 2016 Nine Months Ended September 30, 2015 Restricted stock units to be settled in Class A common stock $ 748,950 $ 666,347 $ 2,406,268 $ 1,969,093 Options to acquire shares of Class A common stock 614,706 575,384 1,859,153 1,726,152 Stock appreciation rights to be settled in cash 1,966 5,198 4,314 15,594 Total $ 1,365,622 $ 1,246,929 $ 4,269,735 $ 3,710,839 |
Restricted Stock Units Activity | The following table presents unvested restricted stock units' activity for the nine months ended September 30, 2016 : Restricted Units Weighted Average Grant Date Fair Value Per Unit Balance - December 31, 2015 1,201,794 $ 16.64 Granted 156,740 3.19 Vested (43,701 ) 5.56 Forfeited (205,443 ) 7.16 Balance - September 30, 2016 1,109,390 $ 16.93 |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | The fair value of each option granted during the nine months ended September 30, 2016 is measured on the date of grant using the Black-Scholes option-pricing model and the following weighted average assumptions: Risk-free interest rate 1.16 % Expected dividend yield 11.87 % Expected volatility factor 47.86 % Expected life in years 5.0 |
Unvested Option Activity | A summary of unvested options activity for the nine months ended September 30, 2016 is presented below: Options Weighted Average Exercise Price Weighted Average Remaining Life (in years) Aggregate Intrinsic Value Balance - December 31, 2015 5,562,866 $ 18.64 7.5 Granted 50,000 3.70 5.0 Vested (60,000 ) 17.29 4.0 Forfeited (134,489 ) 18.07 8.3 Balance - September 30, 2016 5,418,377 18.53 6.5 Exercisable at September 30, 2016 — $ — — $ — |
Unvested SARs Activity | A summary of unvested SARs activity for the nine months ended September 30, 2016 is presented below: SARs Weighted Average Grant Date Fair Value Per SAR Balance December 31, 2015 71,000 $ 1.78 Granted — — Vested — — Forfeited (24,500 ) 1.78 Balance September 30, 2016 46,500 $ 1.78 |
Schedule of Liability Classified Awards | The following table summarizes activity for the nine months ended September 30, 2016 and 2015 with respect to the Company's liability classified awards, which are recorded in Due to affiliates in the Consolidated Statements of Financial Condition, including stock appreciation rights discussed below: Balance at December 31, 2015 $ 24,257 Compensation expense 4,314 Balance at September 30, 2016 $ 28,571 Balance at December 31, 2014 $ 3,465 Compensation expense 15,594 Balance at September 30, 2015 $ 19,059 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings per Share | The following is a reconciliation of the numerator and denominator used in the basic and diluted EPS calculations (in thousands, except shares and per share information): Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Numerator for basic net income (loss) per share of Class A common stock: Net income (loss) attributable to Fifth Street Asset Management Inc. $ (237,718 ) $ 1,150,572 $ (622,041 ) $ 3,554,355 Numerator for diluted net income (loss) per share of Class A common stock: Net income (loss) attributable to Fifth Street Asset Management Inc. $ (237,718 ) $ 1,150,572 $ (622,041 ) $ 3,554,355 Dilutive effects of MMKT Notes — — (155,242 ) — Net income (loss) available to Class A common stockholders $ (237,718 ) $ 1,150,572 $ (777,283 ) $ 3,554,355 Denominator for basic net income (loss) per share of Class A common stock: Weighted average shares of Class A common stock outstanding 5,908,407 5,901,718 5,847,139 5,956,389 Denominator for diluted net income (loss) per share of Class A common stock: Weighted average shares of Class A common stock outstanding 5,908,407 5,901,718 5,847,139 5,956,389 Dilutive effects of restricted stock units — 6,745 — 6,929 Weighted average shares of Class A common stock outstanding - diluted 5,908,407 5,908,463 5,847,139 5,963,318 Earnings per share of Class A common stock: Net income (loss) attributable to Fifth Street Asset Management Inc. per share of Class A common stock, basic $ (0.04 ) $ 0.19 $ (0.11 ) $ 0.60 Net income (loss) attributable to Fifth Street Asset Management Inc. per share of Class A common stock, diluted $ (0.04 ) $ 0.19 $ (0.13 ) $ 0.60 |
Organization - Additional Discl
Organization - Additional Disclosures (Details) | Sep. 30, 2016USD ($)$ / sharesshares | Aug. 12, 2016USD ($) | Aug. 09, 2016USD ($) | Aug. 08, 2016USD ($) | Jul. 28, 2016USD ($) | Feb. 18, 2016USD ($)$ / sharesshares | Dec. 22, 2014USD ($) | Nov. 04, 2014USD ($)$ / sharesshares | Nov. 03, 2014 | Sep. 30, 2016USD ($)$ / sharesshares | Mar. 31, 2016USD ($)$ / sharesshares | Sep. 30, 2015USD ($) | Sep. 30, 2016USD ($)segment$ / sharesshares | Sep. 30, 2015USD ($) | Jun. 23, 2016$ / sharesshares | Dec. 31, 2015shares |
Related Party Transaction [Line Items] | ||||||||||||||||
Number of reportable segments | segment | 1 | |||||||||||||||
Cash savings payable to TRA Recipients under tax receivable agreement, percent | 85.00% | |||||||||||||||
Realized loss on settlement | $ 0 | $ 10,419,274 | $ 0 | $ 10,419,274 | $ 0 | |||||||||||
Unrealized loss on MMKT Notes | (2,582,405) | $ 2,582,405 | 0 | 0 | 0 | |||||||||||
Realized gain on settlement of MMKT Notes | $ 2,592,751 | $ 0 | 2,592,751 | 0 | ||||||||||||
Write-off of capitalized software costs | 624,512 | $ 0 | ||||||||||||||
Intellectual Property | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Proceeds from sale of intangibles | $ 50,000 | |||||||||||||||
Gain on sale of intangibles | 50,000 | |||||||||||||||
Other Income (Expense) | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Write-off of capitalized software costs | $ 624,512 | |||||||||||||||
RiverNorth | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Share price (USD per share) | $ / shares | $ 6.13 | $ 6.13 | ||||||||||||||
Shares issued (shares) | shares | 4,078,304 | 4,078,304 | ||||||||||||||
Stock issued during period, value | $ 25,000,000 | $ 25,000,000 | ||||||||||||||
RiverNorth | Swap | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Share price (USD per share) | $ / shares | $ 6.25 | |||||||||||||||
RiverNorth | Maximum | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Loss contingency, range of possible loss, maximum | $ 5,000,000 | |||||||||||||||
RiverNorth | Class A Common Stock | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Number of securities which could be called by warrants (shares) | shares | 3,086,420 | |||||||||||||||
Warrant strike price (USD per share) | $ / shares | $ 3.24 | |||||||||||||||
RiverNorth | Leonard M. Tannenbaum | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Share price (USD per share) | $ / shares | $ 6.13 | |||||||||||||||
Shares issued (shares) | shares | 5,142,296 | 5,142,296 | ||||||||||||||
Ironsides | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Share price (USD per share) | $ / shares | $ 9 | $ 9 | $ 9 | |||||||||||||
Shares issued (shares) | shares | 1,942,533 | 1,942,533 | 1,942,533 | |||||||||||||
Stock issued during period, value | $ 17,482,797 | |||||||||||||||
Premium on issuance | $ 854,715 | |||||||||||||||
Share price (in usd per share) | $ / shares | $ 8.56 | $ 8.56 | $ 8.56 | |||||||||||||
Fifth Street Holdings L.P. | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Noncontrolling interest, ownership percentage by parent | 13.00% | 13.00% | 13.00% | 11.60% | ||||||||||||
FSM | Intellectual Property | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Proceeds from sale of intangibles | $ 11,197 | |||||||||||||||
Holdings LP Interests | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Holdings LP Interests (shares) | shares | 6,000,000 | |||||||||||||||
Class A Common Stock | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Shares issued (shares) | shares | 6,000,000 | |||||||||||||||
Share price (USD per share) | $ / shares | $ 17 | |||||||||||||||
Proceeds from sale of Class A common shares | $ 95,900,000 | |||||||||||||||
Underwriting commissions | $ 6,100,000 | |||||||||||||||
Common shares outstanding (shares) | shares | 6,602,374 | 6,602,374 | 6,602,374 | 5,798,614 | ||||||||||||
Number of securities which could be called by warrants (shares) | shares | 3,086,420 | |||||||||||||||
Warrant strike price (USD per share) | $ / shares | $ 4.30 | |||||||||||||||
Class A Common Stock | Swap | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Derivative, nonmonetary notional amount (shares) | shares | 3,878,542 | |||||||||||||||
Class B Common Stock | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Common shares outstanding (shares) | shares | 42,856,854 | 42,856,854 | 42,856,854 | 42,856,854 | ||||||||||||
Principals of Fifth Street Holdings, L.P. | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Ownership interest exchanged, percent | 100.00% | |||||||||||||||
Principals of Fifth Street Holdings, L.P. | Common Stock | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Voting power of FSAM's common stock, percent | 97.30% | |||||||||||||||
Principals of Fifth Street Holdings, L.P. | Holdings LP Interests | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Holdings LP Interests (shares) | shares | 42,856,854 | |||||||||||||||
Principals of Fifth Street Holdings, L.P. | Class B Common Stock | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Common shares outstanding (shares) | shares | 42,856,854 | |||||||||||||||
Members of Fifth Street Management LLC | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Ownership interest exchanged, percent | 100.00% | |||||||||||||||
Members of FSCO GP LLC | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Ownership interest exchanged, percent | 100.00% | |||||||||||||||
Fifth Street Holdings L.P. | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Membership/Partnership interest | 12.00% | |||||||||||||||
Limited Partners of Fifth Street Holdings, L.P. | Holdings LP Interests | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Holdings LP Interests (shares) | shares | 44,000,000 | |||||||||||||||
MMKT | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Issuance amount | $ 5,900,000 | |||||||||||||||
Realized gain on settlement of MMKT Notes | $ 2,592,752 | $ 2,592,751 | ||||||||||||||
Consideration amount | $ 2,833,050 | $ 2,833,050 | ||||||||||||||
MMKT | FSM | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Membership/Partnership interest | 80.00% | |||||||||||||||
Total capital contribution | $ 80,000 | |||||||||||||||
Issuance amount | $ 1,300,000 | |||||||||||||||
Consideration amount | $ 634,459 | $ 634,460 | ||||||||||||||
Repayments of debt | $ 100,000 | |||||||||||||||
Reorganization Conversion | ||||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||||
Conversion term | 2 years | |||||||||||||||
Conversion ratio | 1 |
Significant Accounting Polici35
Significant Accounting Policies - Adjusted Consolidated Statements of Income (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Jun. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Management fees | $ 19,670,420 | $ 23,310,135 | $ 58,049,388 | $ 69,094,654 | ||||
Other fees | 2,748,115 | 2,176,510 | 6,482,213 | 5,672,077 | ||||
Total revenues | 22,457,196 | 25,489,241 | 64,656,437 | 74,846,182 | ||||
General, administrative and other expenses | 7,424,927 | 4,179,089 | 24,806,542 | 10,551,314 | ||||
Total expenses | 17,311,058 | 14,872,001 | 55,915,342 | 40,597,589 | ||||
Income from equity method investments | $ 1,110,217 | $ 868,109 | 15,295 | $ 1,978,326 | 5,343 | $ (249,310) | ||
Other income (expense), net | (50,000) | 25,175 | (569,960) | 0 | (544,785) | (620,514) | 122,000 | 122,000 |
Total other income (expense), net | 6,641,271 | 10,171,983 | (13,838,400) | (404,975) | (3,666,417) | 2,974,854 | (1,507,365) | (2,946,969) |
Income (loss) before provision for income taxes | 11,787,409 | 11,207,047 | (11,278,508) | 10,212,265 | (71,461) | 11,715,949 | 32,741,228 | 38,602,556 |
Provision for income taxes | 1,607,590 | 7,114,876 | (262,773) | 982,110 | 6,852,103 | 8,459,693 | 3,490,115 | 5,045,703 |
Net income (loss) | 10,179,819 | 4,092,171 | (11,015,735) | 9,230,155 | (6,923,564) | 3,256,256 | 29,251,113 | 33,556,853 |
Net income attributable to non-controlling interests | (10,417,537) | (3,244,625) | 9,783,790 | (8,079,583) | 6,539,166 | (3,878,297) | (25,696,758) | (31,179,732) |
Net income (loss) attributable to Fifth Street Asset Management Inc. | $ (237,718) | $ 847,546 | $ (1,231,945) | $ 1,150,572 | $ (384,398) | $ (622,041) | $ 3,554,355 | $ 2,377,121 |
Net income (loss) per share attributable to Fifth Street Asset Management Inc. - Basic (in usd per share) | $ 0.15 | $ (0.21) | $ (0.07) | |||||
Net income (loss) per share attributable to Fifth Street Asset Management Inc. - Diluted (in usd per share) | $ 0.07 | $ (0.24) | $ (0.10) | |||||
Net income (loss) per share attributable to Fifth Street Asset Management Inc. - Basic and Diluted (in usd per share) | $ 0.19 | $ 0.60 | $ 0.40 | |||||
As Previously Reported | ||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Management fees | $ 23,609,474 | $ 70,417,077 | ||||||
Other fees | 1,347,133 | 3,668,878 | ||||||
Total revenues | 24,959,203 | 74,165,406 | ||||||
General, administrative and other expenses | 3,349,712 | 8,548,115 | ||||||
Total expenses | 14,042,624 | 38,594,390 | ||||||
Income from equity method investments | $ 0 | $ 0 | 12,492 | $ 0 | 2,540 | $ 20,630 | ||
Other income (expense), net | 1,571,903 | 211,587 | 1,783,490 | 279,405 | ||||
Total other income (expense), net | 10,608,494 | (13,924,962) | (407,778) | (3,316,468) | (1,510,168) | (2,519,624) | ||
Income (loss) before provision for income taxes | 11,643,558 | (11,365,070) | 10,508,801 | 278,488 | 34,060,848 | 39,029,901 | ||
Provision for income taxes | 7,237,303 | (265,412) | 995,506 | 6,971,891 | 3,551,329 | 5,065,420 | ||
Net income (loss) | 4,406,255 | (11,099,658) | 9,513,295 | (6,693,403) | 30,509,519 | 33,964,481 | ||
Net income attributable to non-controlling interests | (3,629,933) | 9,860,273 | (8,341,728) | 6,230,340 | (26,859,217) | (31,556,455) | ||
Net income (loss) attributable to Fifth Street Asset Management Inc. | $ 776,322 | $ (1,239,385) | $ 1,171,567 | $ (463,063) | $ 3,650,302 | $ 2,408,026 | ||
Net income (loss) per share attributable to Fifth Street Asset Management Inc. - Basic (in usd per share) | $ 0.13 | $ (0.21) | $ (0.08) | |||||
Net income (loss) per share attributable to Fifth Street Asset Management Inc. - Diluted (in usd per share) | $ 0.07 | $ (0.24) | $ (0.10) | |||||
Net income (loss) per share attributable to Fifth Street Asset Management Inc. - Basic and Diluted (in usd per share) | $ 0.20 | $ 0.61 | $ 0.41 | |||||
Adjustments | ||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Management fees | $ (299,339) | $ (1,322,423) | ||||||
Other fees | 829,377 | 2,003,199 | ||||||
Total revenues | 530,038 | 680,776 | ||||||
General, administrative and other expenses | 829,377 | 2,003,199 | ||||||
Total expenses | 829,377 | 2,003,199 | ||||||
Income from equity method investments | $ 1,110,217 | $ 868,109 | 2,803 | $ 1,978,326 | 2,803 | $ (269,940) | ||
Other income (expense), net | (1,546,728) | (781,547) | (2,328,275) | (157,405) | ||||
Total other income (expense), net | (436,511) | 86,562 | 2,803 | (349,949) | 2,803 | (427,345) | ||
Income (loss) before provision for income taxes | (436,511) | 86,562 | (296,536) | (349,949) | (1,319,620) | (427,345) | ||
Provision for income taxes | (122,427) | 2,639 | (13,396) | (119,788) | (61,214) | (19,717) | ||
Net income (loss) | (314,084) | 83,923 | (283,140) | (230,161) | (1,258,406) | (407,628) | ||
Net income attributable to non-controlling interests | 385,308 | (76,483) | 262,145 | 308,826 | 1,162,459 | 376,723 | ||
Net income (loss) attributable to Fifth Street Asset Management Inc. | $ 71,224 | $ 7,440 | $ (20,995) | $ 78,665 | $ (95,947) | $ (30,905) | ||
Net income (loss) per share attributable to Fifth Street Asset Management Inc. - Basic (in usd per share) | $ 0.02 | $ 0 | $ 0.01 | |||||
Net income (loss) per share attributable to Fifth Street Asset Management Inc. - Diluted (in usd per share) | $ 0 | $ 0 | $ 0 | |||||
Net income (loss) per share attributable to Fifth Street Asset Management Inc. - Basic and Diluted (in usd per share) | $ (0.01) | $ (0.01) | $ (0.01) |
Significant Accounting Polici36
Significant Accounting Policies - Adjusted Consolidated Statement of Comprehensive Income (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Jun. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Net income (loss) | $ 10,179,819 | $ 4,092,171 | $ (11,015,735) | $ 9,230,155 | $ (6,923,564) | $ 3,256,256 | $ 29,251,113 | $ 33,556,853 |
Adjustment for change in fair value of available-for-sale securities | 0 | 0 | 0 | 0 | 0 | 0 | ||
Tax effect of adjustment for change in fair value of available-for-sale securities | 0 | 0 | 0 | 0 | 0 | 0 | ||
Total comprehensive income | 4,092,171 | (11,015,735) | 9,230,155 | (6,923,564) | 29,251,113 | 33,556,853 | ||
Less: Comprehensive income attributable to non-controlling interests | (3,244,625) | 9,783,790 | (8,079,583) | 6,539,166 | (25,696,758) | (31,179,732) | ||
Comprehensive income attributable to Fifth Street Asset Management Inc. | 847,546 | (1,231,945) | 1,150,572 | (384,398) | 3,554,355 | 2,377,121 | ||
As Previously Reported | ||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Net income (loss) | 4,406,255 | (11,099,658) | 9,513,295 | (6,693,403) | 30,509,519 | 33,964,481 | ||
Adjustment for change in fair value of available-for-sale securities | (1,423,276) | (5,695,952) | 538,494 | (7,119,228) | (28,904) | 382,242 | ||
Tax effect of adjustment for change in fair value of available-for-sale securities | 20,304 | 263,706 | (25,410) | 284,010 | 1,370 | (18,003) | ||
Total comprehensive income | 3,003,283 | (16,531,904) | 10,026,379 | (13,528,621) | 30,481,985 | 34,328,720 | ||
Less: Comprehensive income attributable to non-controlling interests | (2,374,581) | 14,892,981 | (8,549,626) | 12,518,400 | (26,709,534) | (31,893,418) | ||
Comprehensive income attributable to Fifth Street Asset Management Inc. | 628,702 | (1,638,923) | 1,476,753 | (1,010,221) | 3,772,451 | 2,435,302 | ||
Adjustments | ||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||||||||
Net income (loss) | (314,084) | 83,923 | (283,140) | (230,161) | (1,258,406) | (407,628) | ||
Adjustment for change in fair value of available-for-sale securities | 1,423,276 | 5,695,952 | (538,494) | 7,119,228 | 28,904 | (382,242) | ||
Tax effect of adjustment for change in fair value of available-for-sale securities | (20,304) | (263,706) | 25,410 | (284,010) | (1,370) | 18,003 | ||
Total comprehensive income | 1,088,888 | 5,516,169 | (796,224) | 6,605,057 | (1,230,872) | (771,867) | ||
Less: Comprehensive income attributable to non-controlling interests | (870,044) | (5,109,191) | 470,043 | (5,979,234) | 1,012,776 | 713,686 | ||
Comprehensive income attributable to Fifth Street Asset Management Inc. | $ 218,844 | $ 406,978 | $ (326,181) | $ 625,823 | $ (218,096) | $ (58,181) |
Significant Accounting Polici37
Significant Accounting Policies - Adjusted Consolidated Statements of Cash Flows (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Jun. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Cash flows from operating activities | ||||||||
Net income | $ 10,179,819 | $ 4,092,171 | $ (11,015,735) | $ 9,230,155 | $ (6,923,564) | $ 3,256,256 | $ 29,251,113 | $ 33,556,853 |
Distributions received from beneficial interest in CLO | 600,549 | 1,700,636 | 3,059,289 | 0 | ||||
Deferred taxes | (243,757) | 6,871,167 | 8,276,868 | 3,224,207 | 5,158,958 | |||
Income from equity method investments | (1,550,487) | 868,661 | (15,295) | 2,004,054 | (3,554,541) | (5,343) | (186,535) | |
Prepaid expenses | (1,723,695) | 221,566 | ||||||
Purchases of investment of Consolidated Fund | 0 | |||||||
Change in other assets of Consolidated Fund | 0 | |||||||
Net cash provided by operating activities | (15,214,199) | (6,115,551) | 5,011,719 | 43,353,227 | 67,323,403 | |||
Cash flows from investing activities | ||||||||
Purchases of equity method investments | (26,925,757) | (26,925,757) | (37,548,532) | (8,879,679) | (33,889,016) | |||
Distributions from equity method investments | 180,998 | 627,639 | 842,801 | 0 | 382,687 | |||
Purchases of beneficial interest in CLO | 0 | |||||||
Net cash used in investing activities | (20,571,837) | (18,949,831) | (29,292,189) | (29,851,462) | (53,675,848) | |||
Cash flows from financing activities | ||||||||
Issuance on notes payable by Consolidated Fund | 0 | |||||||
Deferred financing costs | 0 | |||||||
Net cash provided by (used in) investing activities | 11,233,099 | (10,701,850) | ||||||
Net increase in cash and cash equivalents | (11,775,890) | (8,568,646) | (13,047,371) | 2,799,915 | 13,947,196 | |||
Cash and cash equivalents, beginning of period | 8,616,558 | 5,409,314 | 17,185,204 | 6,037,923 | 17,185,204 | 17,185,204 | 3,238,008 | 3,238,008 |
Cash and cash equivalents, end of period | 4,137,833 | 8,616,558 | 5,409,314 | 6,037,923 | 8,616,558 | 4,137,833 | 6,037,923 | 17,185,204 |
As Previously Reported | ||||||||
Cash flows from operating activities | ||||||||
Net income | 4,406,255 | (11,099,658) | 9,513,295 | (6,693,403) | 30,509,519 | 33,964,481 | ||
Distributions received from beneficial interest in CLO | 0 | 0 | ||||||
Deferred taxes | (246,396) | 6,990,955 | 3,224,078 | 5,178,675 | ||||
Income from equity method investments | 552 | 25,728 | (2,540) | 83,405 | ||||
Prepaid expenses | 282,909 | |||||||
Purchases of investment of Consolidated Fund | (304,435,163) | |||||||
Change in other assets of Consolidated Fund | (3,277,652) | |||||||
Net cash provided by operating activities | (15,033,201) | (5,487,912) | (264,359,588) | 67,480,808 | ||||
Cash flows from investing activities | ||||||||
Purchases of equity method investments | 0 | 0 | (7,500,000) | (7,500,000) | ||||
Distributions from equity method investments | 0 | 0 | 225,282 | |||||
Purchases of beneficial interest in CLO | (1,379,679) | |||||||
Net cash used in investing activities | (20,752,835) | (19,577,470) | (8,941,346) | (53,833,253) | ||||
Cash flows from financing activities | ||||||||
Issuance on notes payable by Consolidated Fund | 364,066,775 | |||||||
Deferred financing costs | (2,744,980) | |||||||
Net cash provided by (used in) investing activities | 350,619,945 | |||||||
Net increase in cash and cash equivalents | (11,775,890) | (8,568,646) | 77,319,011 | 13,947,196 | ||||
Cash and cash equivalents, beginning of period | 8,616,558 | 5,409,314 | 17,185,204 | 17,185,204 | 17,185,204 | 3,238,008 | 3,238,008 | |
Cash and cash equivalents, end of period | 8,616,558 | 5,409,314 | 6,037,923 | 8,616,558 | 6,037,923 | 17,185,204 | ||
Deconsolidation of Fund | ||||||||
Cash flows from operating activities | ||||||||
Net income | 0 | |||||||
Deferred taxes | 0 | |||||||
Income from equity method investments | 0 | |||||||
Prepaid expenses | 0 | |||||||
Purchases of investment of Consolidated Fund | 304,435,163 | |||||||
Change in other assets of Consolidated Fund | 3,277,652 | |||||||
Net cash provided by operating activities | 307,712,815 | |||||||
Cash flows from investing activities | ||||||||
Purchases of equity method investments | 0 | |||||||
Purchases of beneficial interest in CLO | 0 | |||||||
Net cash used in investing activities | (20,910,116) | |||||||
Cash flows from financing activities | ||||||||
Issuance on notes payable by Consolidated Fund | (364,066,775) | |||||||
Deferred financing costs | 2,744,980 | |||||||
Net cash provided by (used in) investing activities | (361,321,795) | |||||||
Net increase in cash and cash equivalents | (74,519,096) | |||||||
Cash and cash equivalents, beginning of period | 0 | 0 | ||||||
Cash and cash equivalents, end of period | 0 | 0 | ||||||
Adjustments | ||||||||
Cash flows from operating activities | ||||||||
Net income | (314,084) | 83,923 | (283,140) | (230,161) | (1,258,406) | (407,628) | ||
Distributions received from beneficial interest in CLO | 600,549 | 1,700,636 | ||||||
Deferred taxes | 2,639 | (119,788) | 129 | (19,717) | ||||
Income from equity method investments | 868,109 | 1,978,326 | (2,803) | (269,940) | ||||
Prepaid expenses | (61,343) | |||||||
Purchases of investment of Consolidated Fund | 0 | |||||||
Change in other assets of Consolidated Fund | 0 | |||||||
Net cash provided by operating activities | (180,998) | (627,639) | 0 | (157,405) | ||||
Cash flows from investing activities | ||||||||
Purchases of equity method investments | (26,925,757) | (26,925,757) | (1,379,679) | (26,389,016) | ||||
Distributions from equity method investments | 180,998 | 627,639 | 157,405 | |||||
Purchases of beneficial interest in CLO | 1,379,679 | |||||||
Net cash used in investing activities | 180,998 | 627,639 | 0 | 157,405 | ||||
Cash flows from financing activities | ||||||||
Issuance on notes payable by Consolidated Fund | 0 | |||||||
Deferred financing costs | 0 | |||||||
Net cash provided by (used in) investing activities | 0 | |||||||
Net increase in cash and cash equivalents | 0 | 0 | 0 | 0 | ||||
Cash and cash equivalents, beginning of period | $ 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
Cash and cash equivalents, end of period | $ 0 | 0 | 0 | 0 | 0 | 0 | ||
Management Fees Receivable | ||||||||
Cash flows from operating activities | ||||||||
Management fees receivable | (14,610,755) | 4,795,110 | ||||||
Management Fees Receivable | As Previously Reported | ||||||||
Cash flows from operating activities | ||||||||
Management fees receivable | 3,472,687 | |||||||
Management Fees Receivable | Deconsolidation of Fund | ||||||||
Cash flows from operating activities | ||||||||
Management fees receivable | 0 | |||||||
Management Fees Receivable | Adjustments | ||||||||
Cash flows from operating activities | ||||||||
Management fees receivable | 1,322,423 | |||||||
Beneficial Interest in CLO | ||||||||
Cash flows from investing activities | ||||||||
Distributions from equity method investments | 1,428,590 | 225,282 | ||||||
Purchases of beneficial interest in CLO | 0 | 0 | $ 0 | (21,523,005) | 0 | |||
Beneficial Interest in CLO | As Previously Reported | ||||||||
Cash flows from investing activities | ||||||||
Purchases of beneficial interest in CLO | (26,925,757) | (26,925,757) | (612,889) | (26,389,016) | ||||
Beneficial Interest in CLO | Deconsolidation of Fund | ||||||||
Cash flows from investing activities | ||||||||
Purchases of beneficial interest in CLO | (20,910,116) | |||||||
Beneficial Interest in CLO | Adjustments | ||||||||
Cash flows from investing activities | ||||||||
Purchases of beneficial interest in CLO | $ 26,925,757 | $ 26,925,757 | 0 | $ 26,389,016 | ||||
Parent Company (including Consolidated Entities) | ||||||||
Cash flows from financing activities | ||||||||
Cash and cash equivalents, end of period | 6,037,923 | 6,037,923 | ||||||
Parent Company (including Consolidated Entities) | As Previously Reported | ||||||||
Cash flows from financing activities | ||||||||
Cash and cash equivalents, end of period | 80,557,019 | 80,557,019 | ||||||
Parent Company (including Consolidated Entities) | Deconsolidation of Fund | ||||||||
Cash flows from financing activities | ||||||||
Cash and cash equivalents, end of period | (74,519,096) | (74,519,096) | ||||||
Parent Company (including Consolidated Entities) | Adjustments | ||||||||
Cash flows from financing activities | ||||||||
Cash and cash equivalents, end of period | 0 | 0 | ||||||
Consolidated Fund | ||||||||
Cash flows from financing activities | ||||||||
Cash and cash equivalents, end of period | 0 | 0 | ||||||
Consolidated Fund | As Previously Reported | ||||||||
Cash flows from financing activities | ||||||||
Cash and cash equivalents, end of period | 74,519,096 | 74,519,096 | ||||||
Consolidated Fund | Deconsolidation of Fund | ||||||||
Cash flows from financing activities | ||||||||
Cash and cash equivalents, end of period | (74,519,096) | (74,519,096) | ||||||
Consolidated Fund | Adjustments | ||||||||
Cash flows from financing activities | ||||||||
Cash and cash equivalents, end of period | $ 0 | $ 0 |
Significant Accounting Polici38
Significant Accounting Policies - Adjusted Consolidated Statement of Financial Condition (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Investments in equity method investees | $ 59,060,165 | $ 32,388,943 |
Deferred tax assets | 42,941,089 | 51,217,957 |
Total assets | 176,181,002 | 150,461,653 |
Accumulated other comprehensive income | 0 | |
Accumulated deficit | (817,027) | (30,905) |
Total stockholders' equity, Fifth Street Asset Management Inc. | 1,810,187 | 2,937,080 |
Non-controlling interests | 605,320 | (5,392,371) |
Total equity (deficit) | 2,415,507 | (2,455,291) |
Total liabilities and equity | $ 176,181,002 | 150,461,653 |
Securities Excluding Beneficial Interest in CLOs | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Investments in available-for-sale securities at fair value | 0 | |
Adjustments | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Investments in equity method investees | 25,961,671 | |
Deferred tax assets | 37,720 | |
Total assets | (771,867) | |
Accumulated other comprehensive income | (27,276) | |
Accumulated deficit | (30,905) | |
Total stockholders' equity, Fifth Street Asset Management Inc. | (58,181) | |
Non-controlling interests | (713,686) | |
Total equity (deficit) | (771,867) | |
Total liabilities and equity | (771,867) | |
Adjustments | Securities Excluding Beneficial Interest in CLOs | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Investments in available-for-sale securities at fair value | (26,771,258) | |
As Previously Reported | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Investments in equity method investees | 6,427,272 | |
Deferred tax assets | 51,180,237 | |
Total assets | 151,233,520 | |
Accumulated other comprehensive income | 27,276 | |
Accumulated deficit | 0 | |
Total stockholders' equity, Fifth Street Asset Management Inc. | 2,995,261 | |
Non-controlling interests | (4,678,685) | |
Total equity (deficit) | (1,683,424) | |
Total liabilities and equity | 151,233,520 | |
As Previously Reported | Securities Excluding Beneficial Interest in CLOs | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Investments in available-for-sale securities at fair value | $ 26,771,258 |
Significant Accounting Polici39
Significant Accounting Policies - Additional Disclosures (Details) - USD ($) | Jun. 30, 2016 | Sep. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 |
Schedule of Accounting Policies [Line Items] | |||||||
Interest income | $ 386,626 | $ 110,525 | $ 1,082,368 | $ 293,665 | |||
Unrealized gain (loss) on beneficial interests in CLOs | 537,600 | (23,148) | 169,373 | (590,546) | |||
Realized gain | 0 | $ (10,419,274) | 0 | $ (10,419,274) | 0 | ||
Part I fees percentage | 20.00% | ||||||
Catch-up provision, percentage of BDC revenue | 20.00% | ||||||
BDCC performance fee percentage | 20.00% | ||||||
Retention agreement expense | $ 2,307,000 | ||||||
Requisite term | 1 year | ||||||
Severance costs | 1,247,644 | $ 1,949,198 | |||||
Accumulated Deficit | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Cumulative effect of ASU 2016-09 adoption | $ (164,081) | ||||||
New Accounting Pronouncement, Early Adoption, Effect | Accumulated Deficit | Accounting Standards Update 2016-09, Forfeiture Rate Component | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Cumulative effect of ASU 2016-09 adoption | (178,977) | ||||||
Capitalized software costs | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Useful life, intangible assets | 3 years | ||||||
Minimum | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Management fee percentage charged to funds | 0.40% | ||||||
Fund performance fee percentage | 15.00% | ||||||
Maximum | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Management fee percentage charged to funds | 1.75% | ||||||
Fund performance fee percentage | 20.00% | ||||||
Furniture, fixtures and equipment | Minimum | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Useful life | 3 years | ||||||
Furniture, fixtures and equipment | Maximum | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Useful life | 8 years | ||||||
Leasehold improvements | Minimum | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Useful life | 5 years | ||||||
Leasehold improvements | Maximum | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Useful life | 10 years | ||||||
MMKT | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Realized gain | 2,592,751 | $ 2,592,751 | |||||
Beneficial Interest in CLO | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Interest income | 386,617 | $ 95,396 | 1,082,342 | $ 231,231 | |||
Available-for-sale securities, cost | 24,271,320 | 24,271,320 | $ 24,617,568 | ||||
Other Income | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Overstatement (Understatement) of financial statement line items | $ 2,500,000 | ||||||
Income before Income Tax | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Overstatement (Understatement) of financial statement line items | (800,000) | ||||||
Other Comprehensive Income | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Overstatement (Understatement) of financial statement line items | (6,500,000) | ||||||
Compensation and Benefits Expense | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Retention agreement expense | $ 479,564 | $ 862,753 | |||||
Chief Executive Officer | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Percent of voting interest held | 90.00% | 90.00% | |||||
Variable Interest Entity, Not Primary Beneficiary | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Maximum exposure to loss | $ 24,584,966 | $ 24,584,966 | |||||
Accounting for Equity Method Investments | Income from Equity Method Investments | |||||||
Schedule of Accounting Policies [Line Items] | |||||||
Overstatement (Understatement) of financial statement line items | $ (1,700,000) |
Derivative Instruments - Unreal
Derivative Instruments - Unrealized and Realized Gains (Losses) (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Derivative [Line Items] | ||||
Unrealized gain (loss) on derivatives | $ 8,383,213 | $ 0 | $ 0 | $ 0 |
Realized gain (loss) on derivatives | (3,078,357) | (2,612,932) | ||
Net settlement payment | 160,266 | |||
Swap | ||||
Derivative [Line Items] | ||||
Unrealized gain (loss) on derivatives | 5,313,603 | 0 | ||
Realized gain (loss) on derivatives | 188,803 | 654,228 | ||
Warrant | ||||
Derivative [Line Items] | ||||
Unrealized gain (loss) on derivatives | 3,069,610 | 0 | ||
Realized gain (loss) on derivatives | $ (3,267,160) | $ (3,267,160) |
Derivative Instruments - Additi
Derivative Instruments - Additional Information (Details) - USD ($) | Sep. 22, 2016 | Sep. 07, 2016 | Jun. 23, 2016 | Sep. 30, 2016 | Sep. 30, 2015 |
Class of Warrant or Right [Line Items] | |||||
Cash settlement value | $ 3,267,160 | $ 0 | |||
Class A Common Stock | |||||
Class of Warrant or Right [Line Items] | |||||
Shares purchased (in shares) | 3,086,420 | ||||
Warrant strike price (USD per share) | $ 4.30 | ||||
Cash settlement value | $ 3,267,160 | ||||
Issuance of shares to settle derivative liability (in shares) | 760,059 | ||||
Warrant | |||||
Class of Warrant or Right [Line Items] | |||||
Loss on settlement | $ 3,267,160 | ||||
Swap | |||||
Class of Warrant or Right [Line Items] | |||||
Gain on settlement | $ 654,228 |
Investments and Fair Value Me42
Investments and Fair Value Measurements - Fair Value of Assets and Liabilities (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Assets | ||
Assets | $ 23,360,754 | $ 23,537,629 |
Liabilities | ||
Liabilities | 4,738,026 | |
MMKT | ||
Liabilities | ||
MMKT Notes | 4,738,026 | |
Beneficial Interest in CLO | ||
Assets | ||
Investments, fair value disclosure | 23,360,754 | 23,537,629 |
Level 1 | ||
Assets | ||
Assets | 0 | 0 |
Liabilities | ||
Liabilities | 0 | |
Level 1 | MMKT | ||
Liabilities | ||
MMKT Notes | 0 | |
Level 1 | Beneficial Interest in CLO | ||
Assets | ||
Investments, fair value disclosure | 0 | 0 |
Level 2 | ||
Assets | ||
Assets | 0 | 0 |
Liabilities | ||
Liabilities | 0 | |
Level 2 | MMKT | ||
Liabilities | ||
MMKT Notes | 0 | |
Level 2 | Beneficial Interest in CLO | ||
Assets | ||
Investments, fair value disclosure | 0 | 0 |
Level 3 | ||
Assets | ||
Assets | 23,360,754 | 23,537,629 |
Liabilities | ||
Liabilities | 4,738,026 | |
Level 3 | MMKT | ||
Liabilities | ||
MMKT Notes | 4,738,026 | |
Level 3 | Beneficial Interest in CLO | ||
Assets | ||
Investments, fair value disclosure | $ 23,360,754 | $ 23,537,629 |
Investments and Fair Value Me43
Investments and Fair Value Measurements - Rollforward of Fair Value, Assets (Details) - Level 3 - Beneficial Interest in CLO - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Beginning balance | $ 22,967,217 | $ 4,065,473 | $ 23,537,629 | $ 0 |
Purchases of investments | 20,910,115 | 25,407,151 | ||
Distributions | (530,680) | (231,643) | (1,428,590) | (231,643) |
Interest income | 386,617 | 95,396 | 1,082,342 | 231,231 |
Unrealized gains or losses | 537,600 | (23,148) | 169,373 | (590,546) |
Realized gains | 0 | 0 | ||
Ending balance | $ 23,360,754 | $ 24,816,193 | $ 23,360,754 | $ 24,816,193 |
Investments and Fair Value Me44
Investments and Fair Value Measurements - Rollforward of Fair Value, Liabilities (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Realized gains | $ (2,592,751) | $ 0 | $ (2,592,751) | $ 0 |
MMKT | ||||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Realized gains | (2,592,752) | (2,592,751) | ||
Level 3 | MMKT | Convertible Notes | ||||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
Beginning balance | 2,247,740 | 150,000 | 4,738,026 | 0 |
Proceeds from issuance of notes payable | 4,450,000 | 4,600,000 | ||
Purchases of investments | 0 | |||
Distributions | (2,237,394) | 0 | (2,237,394) | 0 |
Interest income | 0 | 44,895 | 92,119 | 44,895 |
Unrealized gains or losses | 2,582,405 | 0 | 0 | 0 |
Realized gains | (2,592,751) | (2,592,751) | ||
Ending balance | $ 0 | $ 4,644,895 | $ 0 | $ 4,644,895 |
Investments and Fair Value Me45
Investments and Fair Value Measurements - Fair Value, Assets, Quantitative Information (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Fair value of assets | $ 23,360,754 | $ 23,537,629 |
Level 3 | ||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Fair value of assets | 23,360,754 | 23,537,629 |
Level 3 | Beneficial Interest in CLO | Discounted Cash Flow | ||
Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
Fair value of assets | $ 23,360,754 | $ 23,537,629 |
Constant prepayment rate | 15.00% | 15.00% |
Constant default rate | 2.00% | 2.00% |
Loss severity | 30.00% | 30.00% |
Investments and Fair Value Me46
Investments and Fair Value Measurements - Fair Value, Liabilities, Quantitative Information (Details) - Level 3 | Dec. 31, 2015USD ($) |
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | |
Fair value of liabilities | $ 4,738,026 |
MMKT | Convertible Notes | Recent market transactions | |
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] | |
Fair value of liabilities | $ 4,738,026 |
Investments and Fair Value Me47
Investments and Fair Value Measurements - Investments in Equity Method Investees (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Subsidiary or Equity Method Investee [Line Items] | ||
Investments in equity method investees | $ 59,060,165 | $ 32,388,943 |
FSC and FSFR Common Stock | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Investments in equity method investees | 60,629,008 | |
FSC common stock | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Investments in equity method investees | $ 46,396,530 | $ 24,665,471 |
% of Ownership | 5.86% | 2.65% |
FSFR common stock | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Investments in equity method investees | $ 12,114,886 | $ 1,296,200 |
% of Ownership | 4.69% | 0.53% |
FSOF equity interest | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Investments in equity method investees | $ 548,749 | $ 6,427,272 |
% of Ownership | 0.88% | 8.78% |
Investments and Fair Value Me48
Investments and Fair Value Measurements - Summarized Financial Information (Details) - FSC - USD ($) | 3 Months Ended | 6 Months Ended |
Jun. 30, 2016 | Jun. 30, 2016 | |
Subsidiary or Equity Method Investee [Line Items] | ||
Investment income | $ 64,026 | $ 188,712 |
Net expenses | 34,920 | 107,680 |
Net investment income | 29,106 | 81,032 |
Net unrealized gain (loss) on investments and secured borrowings | 10,490 | (74,042) |
Net realized loss on investments and secured borrowings | (44,814) | (70,113) |
Net decrease in net assets resulting from operations | $ (5,218) | $ (63,123) |
Investments and Fair Value Me49
Investments and Fair Value Measurements - Financial Instruments Disclosed but not Carried at Fair Value (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Level 3 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Total | $ 4,738,026 | |
Carrying Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Credit facility payable | $ 92,000,000 | 65,000,000 |
Payables to related parties pursuant to tax receivable agreements | 37,960,213 | 45,486,114 |
Total | 144,932,778 | 127,458,728 |
Carrying Value | Loans Payable | Fixed Rate Secured Loan | Connecticut Department of Economic and Community Development | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Loans payable | 2,000,000 | 4,000,000 |
Carrying Value | Risk Retention Credit Facility | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Loans payable | 12,972,565 | 12,972,614 |
Fair Value | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Credit facility payable | 92,000,000 | 65,000,000 |
Payables to related parties pursuant to tax receivable agreements | 32,975,004 | 40,015,336 |
Total | 139,872,992 | 122,028,164 |
Fair Value | Loans Payable | Fixed Rate Secured Loan | Connecticut Department of Economic and Community Development | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Loans payable | 1,925,423 | 4,040,214 |
Fair Value | Risk Retention Credit Facility | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Loans payable | 12,972,565 | 12,972,614 |
Fair Value | Level 1 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Credit facility payable | 0 | 0 |
Payables to related parties pursuant to tax receivable agreements | 0 | 0 |
Total | 0 | 0 |
Fair Value | Level 1 | Loans Payable | Fixed Rate Secured Loan | Connecticut Department of Economic and Community Development | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Loans payable | 0 | 0 |
Fair Value | Level 1 | Risk Retention Credit Facility | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Loans payable | 0 | 0 |
Fair Value | Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Credit facility payable | 0 | 0 |
Payables to related parties pursuant to tax receivable agreements | 0 | 0 |
Total | 0 | 0 |
Fair Value | Level 2 | Loans Payable | Fixed Rate Secured Loan | Connecticut Department of Economic and Community Development | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Loans payable | 0 | 0 |
Fair Value | Level 2 | Risk Retention Credit Facility | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Loans payable | 0 | 0 |
Fair Value | Level 3 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Credit facility payable | 92,000,000 | 65,000,000 |
Payables to related parties pursuant to tax receivable agreements | 32,975,004 | 40,015,336 |
Total | 139,872,992 | 122,028,164 |
Fair Value | Level 3 | Loans Payable | Fixed Rate Secured Loan | Connecticut Department of Economic and Community Development | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Loans payable | 1,925,423 | 4,040,214 |
Fair Value | Level 3 | Risk Retention Credit Facility | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Loans payable | $ 12,972,565 | $ 12,972,614 |
Investments and Fair Value Me50
Investments and Fair Value Measurements - Additional Information (Details) - FSC and FSFR Common Stock - USD ($) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | |
Subsidiary or Equity Method Investee [Line Items] | |||
Underlying difference | $ 29,000,000 | ||
Realized gain on underlying difference | $ 1,533,458 | $ 3,511,784 | |
Minimum | |||
Subsidiary or Equity Method Investee [Line Items] | |||
Recognition period | 3 years | ||
Maximum | |||
Subsidiary or Equity Method Investee [Line Items] | |||
Recognition period | 5 years |
Fixed Assets (Details)
Fixed Assets (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2016 | Jun. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Property, Plant and Equipment [Line Items] | ||||||
Fixed assets | $ 11,711,443 | $ 11,711,443 | $ 12,457,222 | |||
Less: accumulated depreciation and amortization | (6,140,586) | (6,140,586) | (2,563,701) | |||
Fixed assets, net book value | 5,570,857 | 5,570,857 | 9,893,521 | |||
Write-off of capitalized software costs | 624,512 | $ 0 | ||||
Depreciation and amortization expense | 278,702 | $ 363,373 | 3,713,200 | $ 1,042,224 | ||
Fully depreciated assets disposed | 136,315 | |||||
Other Income (Expense) | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Write-off of capitalized software costs | 624,512 | |||||
Furniture, fixtures and equipment | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Fixed assets | 1,398,475 | 1,398,475 | 1,519,742 | |||
Depreciation | $ 653,719 | |||||
Capitalized software costs | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Fixed assets | 0 | 0 | 624,512 | |||
Leasehold improvements | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Fixed assets | $ 10,312,968 | $ 10,312,968 | $ 10,312,968 | |||
Depreciation | $ 2,158,012 |
Other Assets (Details)
Other Assets (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Apr. 30, 2016 | Dec. 31, 2014 | Nov. 30, 2013 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||||||||
Security deposits | $ 81,999 | $ 81,999 | $ 499,835 | |||||
Fractional interests in aircrafts | 3,089,871 | 3,089,871 | 3,302,190 | |||||
Other | 158,700 | 158,700 | 174,395 | |||||
Other assets | 3,330,570 | 3,330,570 | $ 3,976,420 | |||||
Proceeds from security deposit | $ 417,836 | |||||||
Corporate aircraft agreement, term | 5 years | 5 years | ||||||
Fractional interest in aircraft, percent of interest sold | 50.00% | |||||||
Amortization of fractional interests in aircrafts included in depreciation, depletion and amortization | $ 70,773 | $ 70,773 | $ 212,319 | $ 212,320 |
Debt - Loans Payable (Details)
Debt - Loans Payable (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Debt Instrument [Line Items] | ||
Loans payable | $ 14,972,565 | $ 21,710,640 |
Risk Retention Credit Facility | ||
Debt Instrument [Line Items] | ||
Loans payable | 12,972,565 | 12,972,614 |
Loans Payable | Fixed Rate Secured Loan | Connecticut Department of Economic and Community Development | ||
Debt Instrument [Line Items] | ||
Loans payable | 2,000,000 | 4,000,000 |
Convertible Notes | MMKT | ||
Debt Instrument [Line Items] | ||
Loans payable | $ 0 | $ 4,738,026 |
Debt - DECD (Details)
Debt - DECD (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Oct. 07, 2013 | |
Debt Instrument [Line Items] | |||||
Interest expense | $ 1,149,549 | $ 507,647 | $ 3,344,996 | $ 1,337,827 | |
Gain on extinguishment of debt | 0 | 0 | 2,000,000 | 0 | |
Connecticut Department of Economic and Community Development | Loans Payable | Fixed Rate Secured Loan | |||||
Debt Instrument [Line Items] | |||||
Long-term debt | $ 4,000,000 | ||||
Stated interest rate, percentage | 2.50% | ||||
Interest expense | 12,569 | $ 25,206 | 58,197 | $ 74,795 | |
Maximum amount of conditional forgiveness of debt | 3,000,000 | $ 3,000,000 | |||
Gain on extinguishment of debt | $ 2,000,000 |
Debt - MMKT Notes (Details)
Debt - MMKT Notes (Details) - USD ($) | Aug. 12, 2016 | Aug. 08, 2016 | Jul. 28, 2016 | Sep. 04, 2015 | Aug. 05, 2015 | Apr. 01, 2015 | Feb. 27, 2015 | Feb. 24, 2015 | Sep. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Aug. 25, 2015 |
Debt Instrument [Line Items] | ||||||||||||||
Interest expense | $ 1,149,549 | $ 507,647 | $ 3,344,996 | $ 1,337,827 | ||||||||||
Unrealized loss on MMKT Notes | (2,582,405) | $ 2,582,405 | 0 | 0 | 0 | |||||||||
Realized gain on settlement of MMKT Notes | 2,592,751 | $ 0 | 2,592,751 | $ 0 | ||||||||||
Intellectual Property | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Proceeds from sale of intangibles | $ 50,000 | |||||||||||||
MMKT | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Consideration amount | $ 2,833,050 | $ 2,833,050 | ||||||||||||
Realized gain on settlement of MMKT Notes | $ 2,592,752 | 2,592,751 | ||||||||||||
MMKT | Convertible Notes | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Convertible promissory notes issued | $ 2,950,000 | $ 2,000,000 | $ 100,000 | $ 50,000 | $ 800,000 | |||||||||
Stated interest rate, percentage | 8.00% | 8.00% | ||||||||||||
Interest expense | $ 92,119 | |||||||||||||
FSM | Intellectual Property | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Proceeds from sale of intangibles | $ 11,197 | |||||||||||||
FSM | MMKT | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Consideration amount | $ 634,459 | $ 634,460 |
Debt - Risk Retention Term Loan
Debt - Risk Retention Term Loan (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Sep. 28, 2015 | |
Line of Credit Facility [Line Items] | ||||||
Borrowings outstanding | $ 92,000,000 | $ 92,000,000 | $ 65,000,000 | |||
Interest expense | 1,149,549 | $ 507,647 | 3,344,996 | $ 1,337,827 | ||
CLO Management | Risk Retention Credit Facility | ||||||
Line of Credit Facility [Line Items] | ||||||
Maximum borrowing capacity | $ 17,000,000 | |||||
Borrowings outstanding | 12,972,565 | 12,972,565 | ||||
Amount pledged as collateral | $ 20,515,345 | |||||
Interest expense | 127,891 | 375,670 | ||||
CLO Management | Risk Retention Credit Facility, Term Loan | ||||||
Line of Credit Facility [Line Items] | ||||||
Borrowings outstanding | $ 16,972,565 | 16,972,565 | ||||
Repayments of loans under risk retention credit facility | $ 4,000,000 | |||||
Debt, weighted average interest rate | 3.83% | 3.83% |
Debt - Credit Facility (Details
Debt - Credit Facility (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Feb. 29, 2016 | Dec. 31, 2015 | Nov. 04, 2014 | |
Debt Instrument [Line Items] | |||||||
Borrowings outstanding | $ 92,000,000 | $ 92,000,000 | $ 65,000,000 | ||||
Interest expense | 1,149,549 | $ 507,647 | 3,344,996 | $ 1,337,827 | |||
Fifth Street Holdings L.P. | Revolving Credit Facility | Unsecured Revolving Credit Facility Maturing in 2019 | |||||||
Debt Instrument [Line Items] | |||||||
Revolving credit facility borrowing capacity | 146,000,000 | 146,000,000 | $ 146,000,000 | $ 176,000,000 | |||
Borrowing capacity accordion feature | 100,000,000 | $ 100,000,000 | |||||
Unused commitment fee, percent | 0.30% | ||||||
Revolving credit agreement, term | 5 years | ||||||
Borrowings outstanding | 92,000,000 | $ 92,000,000 | $ 65,000,000 | ||||
Interest expense | $ 1,009,093 | $ 437,442 | $ 2,819,012 | $ 1,199,940 | |||
Fifth Street Holdings L.P. | Revolving Credit Facility | Unsecured Revolving Credit Facility Maturing in 2019 | LIBOR | |||||||
Debt Instrument [Line Items] | |||||||
Basis spread on LIBOR, percent | 3.50% |
Commitments and Contingencies -
Commitments and Contingencies - Additional Disclosure (Details) | Aug. 04, 2016USD ($) | Aug. 03, 2016 | Mar. 31, 2015USD ($) | Jul. 31, 2014USD ($) | Sep. 30, 2016USD ($)investmentlawsuit | Sep. 30, 2015USD ($) | Sep. 30, 2016USD ($)investmentlawsuit | Sep. 30, 2015USD ($) | Jan. 27, 2016lawsuit | Dec. 31, 2015USD ($) |
Loss Contingencies [Line Items] | ||||||||||
Contingency accrual | $ 9,250,000 | $ 9,250,000 | $ 0 | |||||||
Expensed deferred rent liability | 0 | $ 0 | 9,250,000 | $ 0 | ||||||
Insurance recovery receivable | 9,775,905 | 9,775,905 | 0 | |||||||
Professional fees | 2,888,901 | 11,285,662 | ||||||||
Estimated insurance recoveries | $ 50,905 | $ 3,047,636 | ||||||||
Lawsuit Arising from Role as Investment Advisor to FSC | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Number of lawsuits | lawsuit | 3 | 3 | ||||||||
Write-downs improperly delayed, number of investments (investment) | investment | 3 | 3 | ||||||||
Lawsuit Arising from Role as Investment Advisor to FSC | Settled Litigation | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Settlement amount | $ 14,050,000 | |||||||||
Percent covered by insurance | 99.00% | |||||||||
Putative Shareholder Derivative Actions | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Number of lawsuits | lawsuit | 2 | |||||||||
Putative Shareholder Derivative Actions | Pending Litigation | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Settlement amount | $ 5,100,000 | |||||||||
Fees waived | $ 1,000,000 | |||||||||
Management fee percentage charged to funds | 1.75% | 2.00% | ||||||||
Class Action Lawsuits Filed by Purchasers of FSAM Shares | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Number of lawsuits | lawsuit | 2 | 2 | ||||||||
Class Action Lawsuits Filed by Purchasers of FSAM Shares | Settled Litigation | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Contingency accrual | $ 9,250,000 | $ 9,250,000 | ||||||||
Settlement amount | $ 9,250,000 | |||||||||
Insurance recovery receivable | 9,250,000 | 9,250,000 | ||||||||
Lease Abandonment | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Contingency accrual | 924,334 | 924,334 | $ 1,240,928 | |||||||
Expensed deferred rent liability | 915,464 | 920 | ||||||||
Terminated Lease Agreement for White Plains, NY Office | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Early termination fee | $ 616,852 | |||||||||
Additional rent expense representing fair value of remaining lease obligation | $ 460,658 | |||||||||
Reduction in rent expense | $ 341,044 | |||||||||
Fifth Street Asset Management Inc. | ||||||||||
Loss Contingencies [Line Items] | ||||||||||
Unfunded commitments | $ 0 | $ 0 |
Commitments and Contingencies59
Commitments and Contingencies - Summary of Lease Abandonment Activity (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Loss Contingency Accrual [Roll Forward] | ||||
Lease abandonment costs incurred | $ 0 | |||
Present value adjustment | $ 0 | $ 0 | 9,250,000 | $ 0 |
Accrued lease abandonment costs, end of period | 9,250,000 | 9,250,000 | ||
Lease Abandonment | ||||
Loss Contingency Accrual [Roll Forward] | ||||
Lease abandonment costs incurred | 1,240,928 | |||
Rent payments | (317,514) | |||
Present value adjustment | 915,464 | 920 | ||
Accrued lease abandonment costs, end of period | $ 924,334 | $ 924,334 |
Related Party Transactions - Ad
Related Party Transactions - Additional Disclosures (Details) | Feb. 18, 2016USD ($)$ / sharesshares | Jan. 19, 2016 | Jul. 14, 2015 | Dec. 22, 2014USD ($) | Oct. 11, 2014USD ($) | Jul. 22, 2013renewal_term | Oct. 31, 2016USD ($) | Sep. 30, 2016USD ($)shares | Mar. 31, 2016USD ($)$ / sharesshares | Sep. 30, 2015USD ($) | Jun. 30, 2016USD ($) | Sep. 30, 2016USD ($)$ / sharesshares | Sep. 30, 2015USD ($) | Dec. 31, 2015USD ($) |
Related Party Transaction [Line Items] | ||||||||||||||
Cash savings payable to TRA Recipients under tax receivable agreement, percent | 85.00% | |||||||||||||
Adjustment of TRA liability for tax rate change | $ 0 | $ 0 | $ 7,525,901 | $ 0 | ||||||||||
Due to related party | 37,960,213 | 37,960,213 | $ 45,486,114 | |||||||||||
Net asset value | 1,810,187 | 1,810,187 | 2,937,080 | |||||||||||
Other fees | 2,748,115 | 2,176,510 | 6,482,213 | 5,672,077 | ||||||||||
Realized loss on settlement | 0 | $ 10,419,274 | 0 | 10,419,274 | 0 | |||||||||
Total capital contributions (net of redemptions) for equity method investment | 59,329,068 | 59,329,068 | ||||||||||||
Distributions from equity method investments | $ 180,998 | $ 627,639 | 842,801 | 0 | 382,687 | |||||||||
FSOF | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Total capital contributions (net of redemptions) for equity method investment | $ 300,000 | 300,000 | ||||||||||||
Distributions from equity method investments | $ 6,000,000 | |||||||||||||
Fifth Street Management Group | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Property management fee, percent fee | 1.75% | |||||||||||||
RiverNorth | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Shares issued (shares) | shares | 4,078,304 | 4,078,304 | ||||||||||||
Stock issued during period, value | $ 25,000,000 | $ 25,000,000 | ||||||||||||
Share price (USD per share) | $ / shares | $ 6.13 | $ 6.13 | ||||||||||||
RiverNorth | Leonard M. Tannenbaum | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Shares issued (shares) | shares | 5,142,296 | 5,142,296 | ||||||||||||
Share price (USD per share) | $ / shares | $ 6.13 | |||||||||||||
FSC common stock | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Available-for sale equity securities (shares) | shares | 8,399,520 | 8,399,520 | ||||||||||||
Maximum | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Management fee, percent | 1.75% | |||||||||||||
Minimum | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Management fee, percent | 0.40% | |||||||||||||
MMKT | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Operating income | $ 1,056,432 | |||||||||||||
Performance Fees | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Revenue from related parties | $ 38,661 | 124,836 | 79,451 | |||||||||||
Reimbursable Expenses | Due From Affiliates | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Management fees receivable | 3,397,049 | 3,397,049 | 3,755,729 | |||||||||||
Recipients of Tax Receivable Agreements | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Reduction in tax benefit from payment of tax receivable agreement | 289,606 | |||||||||||||
Due to related party | 37,960,213 | 37,960,213 | ||||||||||||
Payments representing the initial payment associated with the TRA liability | 340,713 | |||||||||||||
TRA payable in the next twelve months | 2,000,000 | $ 2,000,000 | ||||||||||||
TRA, number of days due after FSAM files federal income tax return | 45 days | |||||||||||||
Recipients of Tax Receivable Agreements | Subsequent Event | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Payments representing the initial payment associated with the TRA liability | $ 1,969,958 | |||||||||||||
Business Development Companies | Management Fees | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Revenue from related parties | 18,939,914 | 22,628,626 | $ 55,886,970 | 67,238,892 | ||||||||||
Management fees receivable | 18,939,913 | 18,939,913 | 4,239,207 | |||||||||||
Related party transactions, asset management fees waived | 86,733 | 145,399 | $ 248,921 | $ 435,232 | ||||||||||
Business Development Companies | Administration Agreement Fees | Revenues - Other Fees | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Related party transaction, other fees | $ 2,748,115 | $ 2,176,510 | ||||||||||||
FSC | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Number of shares purchased from related party (shares) | shares | 332,934 | |||||||||||||
Value of shares purchased from related party | $ 1,925,757 | |||||||||||||
Weighted average price of shares purchased from related party (USD per share) | $ / shares | $ 5.78 | |||||||||||||
FSFR | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Number of shares purchased from related party (shares) | shares | 1,227,024 | |||||||||||||
Value of shares purchased from related party | $ 10,622,775 | |||||||||||||
Weighted average price of shares purchased from related party (USD per share) | $ / shares | $ 8.66 | |||||||||||||
Available-for sale equity securities (shares) | shares | 1,381,752 | 1,381,752 | ||||||||||||
FSM | Management Fees | FSC | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Management fee multiplier | 0.25 | |||||||||||||
Management fee calculation, percent multiplied by Incremental NAV Percentage | 1.00% | |||||||||||||
FSM | Management Fees | FSC | Maximum | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Management fee, percent | 1.75% | 2.00% | ||||||||||||
MMKT | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Issuance amount | $ 5,900,000 | |||||||||||||
MMKT | FSM | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Total capital contribution | $ 80,000 | |||||||||||||
Membership interest | 80.00% | |||||||||||||
Issuance amount | $ 1,300,000 | |||||||||||||
CLO I | Senior and Subordinated Notes | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Investments at cost | $ 2,845,409 | $ 2,845,409 | 2,929,476 | |||||||||||
Investment owned, fair value | $ 20,515,345 | $ 20,515,345 | $ 20,608,153 | |||||||||||
Entity Controlled by Managing Member | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Number of lease renewal periods | renewal_term | 2 | |||||||||||||
Lease renewal term | 5 years | |||||||||||||
Entity Controlled by Managing Member | Lease Agreements | ||||||||||||||
Related Party Transaction [Line Items] | ||||||||||||||
Rental payments, per year | $ 2,000,000 |
Related Party Transactions - Su
Related Party Transactions - Summary of Equity Method Investments (Details) | Sep. 30, 2016USD ($)shares |
Schedule of Equity Method Investments [Line Items] | |
Shares | shares | 9,781,272 |
Cost | $ 59,329,068 |
Fair Value | 60,629,008 |
Gross Cumulative Unrealized Gains | 1,474,597 |
Gross Cumulative Unrealized Losses | $ (174,657) |
FSC common stock | |
Schedule of Equity Method Investments [Line Items] | |
Shares | shares | 8,399,520 |
Cost | $ 47,326,614 |
Fair Value | 48,801,211 |
Gross Cumulative Unrealized Gains | 1,474,597 |
Gross Cumulative Unrealized Losses | $ 0 |
FSFR common stock | |
Schedule of Equity Method Investments [Line Items] | |
Shares | shares | 1,381,752 |
Cost | $ 12,002,454 |
Fair Value | 11,827,797 |
Gross Cumulative Unrealized Gains | 0 |
Gross Cumulative Unrealized Losses | $ (174,657) |
Related Party Transactions - Am
Related Party Transactions - Amounts Due and From Affiliates (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Related Party Transaction [Line Items] | ||
Due from affiliates | $ 3,828,063 | $ 3,943,384 |
Due to affiliates | 28,571 | 24,257 |
Reimbursed expenses due from the BDCs | ||
Related Party Transaction [Line Items] | ||
Due from affiliates | 2,705,035 | 3,355,875 |
Reimbursed expenses due from private funds | ||
Related Party Transaction [Line Items] | ||
Due from affiliates | 692,014 | 399,854 |
Due from employees | ||
Related Party Transaction [Line Items] | ||
Due from affiliates | 365,738 | 51,167 |
Other amounts due from affiliated entities | ||
Related Party Transaction [Line Items] | ||
Due from affiliates | 65,276 | 136,488 |
Stock appreciation rights liability | ||
Related Party Transaction [Line Items] | ||
Due to affiliates | 28,571 | 24,257 |
Management Fees | ||
Related Party Transaction [Line Items] | ||
Management fees receivable (payable) | 19,490,540 | 4,879,785 |
Performance Fees | ||
Related Party Transaction [Line Items] | ||
Management fees receivable (payable) | 124,836 | 224,618 |
Business Development Companies | Base Management Fees Receivable | ||
Related Party Transaction [Line Items] | ||
Management fees receivable (payable) | 11,071,951 | 4,794,870 |
Business Development Companies | Part I Fees Receivable (Payable) | ||
Related Party Transaction [Line Items] | ||
Management fees receivable (payable) | 7,867,962 | (555,663) |
Business Development Companies | Part II Fees Receivable | ||
Related Party Transaction [Line Items] | ||
Management fees receivable (payable) | 0 | 145,898 |
CLO I and CLO II | Collateral Management Fees Receivable | ||
Related Party Transaction [Line Items] | ||
Management fees receivable (payable) | 550,627 | 640,578 |
FSOF | Performance Fees | ||
Related Party Transaction [Line Items] | ||
Management fees receivable (payable) | $ 124,836 | $ 78,720 |
Equity and Equity-based Compe63
Equity and Equity-based Compensation - FSAM Ownership Structure (Details) | 9 Months Ended |
Sep. 30, 2016classvote | |
Class of Stock [Line Items] | |
Number of classes of common stock | class | 2 |
Class A Common Stock | |
Class of Stock [Line Items] | |
Number of votes | 1 |
Class B Common Stock | |
Class of Stock [Line Items] | |
Number of votes | 5 |
Equity and Equity-based Compe64
Equity and Equity-based Compensation - Dividends (Details) - USD ($) | Oct. 14, 2016 | Sep. 30, 2016 | Jul. 15, 2016 | Jun. 30, 2016 | Apr. 15, 2016 | Mar. 31, 2016 | Oct. 15, 2015 | Sep. 30, 2015 | Jul. 15, 2015 | Jun. 30, 2015 | Apr. 15, 2015 | Mar. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
Class of Stock [Line Items] | ||||||||||||||
Dividend declared (USD per share) | $ 0.1 | $ 0.10 | $ 0.10 | $ 0.17 | $ 0.17 | $ 0.3 | $ 0.3 | $ 0.64 | ||||||
Dividends paid | $ 600,000 | $ 600,000 | $ 1,000,000 | $ 1,000,000 | $ 1,800,000 | $ 1,824,330 | $ 3,800,000 | |||||||
Subsequent Event | ||||||||||||||
Class of Stock [Line Items] | ||||||||||||||
Dividends paid | $ 700,000 |
Equity and Equity-based Compe65
Equity and Equity-based Compensation - Share Repurchase Program (Details) - USD ($) | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | May 11, 2016 | May 11, 2015 | |
Equity, Class of Treasury Stock [Line Items] | ||||
Payments for repurchase of common stock | $ 0 | $ 1,849,140 | ||
Class A Common Stock | ||||
Equity, Class of Treasury Stock [Line Items] | ||||
Stock repurchase program, authorized amount | $ 20,000,000 | $ 20,000,000 | ||
Shares repurchased and retired during period (in shares) | 217,641 | |||
Treasury stock acquired, average cost per share (USD per share) | $ 8.47 | |||
Payments for repurchase of common stock | $ 1,800,000 |
Equity and Equity-based Compe66
Equity and Equity-based Compensation - Equity Classified Awards (Details) - USD ($) | Nov. 04, 2014 | Sep. 30, 2016 | Sep. 30, 2015 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period of award from the IPO date | 8 years | ||
Compensation charge related to the modification of awards | $ 0 | ||
Equity Classified Award [Roll Forward] | |||
Equity classified awards, beginning | $ 7,016,286 | $ 8,043,058 | |
Amortization of interests | (1,946,632) | (770,079) | |
Equity classified awards, ending | 5,069,654 | 7,272,979 | |
Accelerated amortization of interests | 1,193,165 | ||
Total compensation expense expected to be recognized in future periods | $ 5,069,654 | ||
Period for recognition of unrecognized compensation costs | 6 years 1 month | ||
Compensation expense | |||
Equity Classified Award [Roll Forward] | |||
Amortization of interests | $ (1,946,632) | $ (770,079) |
Equity and Equity-based Compe67
Equity and Equity-based Compensation - 2014 Omnibus Incentive Plan (Details) - USD ($) | Nov. 04, 2014 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of options granted | 50,000 | ||||
Restricted Stock Units (RSUs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of awards granted | 156,740 | ||||
Stock Appreciation Rights (SARs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of awards granted | 0 | ||||
Omnibus Incentive Plan 2014 | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of options granted | 5,658,970 | ||||
Equity-based compensation expense (in usd) | $ 1,365,622 | $ 1,246,929 | $ 4,269,735 | $ 3,710,839 | |
Omnibus Incentive Plan 2014 | Restricted Stock Units (RSUs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of awards granted | 1,174,748 | ||||
Equity-based compensation expense (in usd) | 748,950 | 666,347 | 2,406,268 | 1,969,093 | |
Omnibus Incentive Plan 2014 | Options | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Equity-based compensation expense (in usd) | 614,706 | 575,384 | 1,859,153 | 1,726,152 | |
Omnibus Incentive Plan 2014 | Stock Appreciation Rights (SARs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of awards granted | 90,500 | ||||
Equity-based compensation expense (in usd) | $ 1,966 | $ 5,198 | $ 4,314 | $ 15,594 |
Equity and Equity-based Compe68
Equity and Equity-based Compensation - Restricted Stock Units, Narrative (Details) - USD ($) | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Dividend declared (USD per share) | $ 0.1 | $ 0.10 | $ 0.10 | $ 0.17 | $ 0.17 | $ 0.3 | $ 0.3 | $ 0.64 |
Accrued dividends related to unvested restricted stock units | $ 299,490 | |||||||
Total compensation expense expected to be recognized in future periods | $ 5,069,654 | $ 5,069,654 | ||||||
Restricted Stock Units (RSUs) | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Nonvesting period | 3 years | |||||||
Granted (shares) | 156,740 | |||||||
Accrued dividends related to unvested restricted stock units | $ 299,490 | $ 601,207 | ||||||
Vested (shares) | 43,701 | |||||||
Total compensation expense expected to be recognized in future periods | $ 13,529,685 | $ 13,529,685 | ||||||
Weighted average period for recognition of compensation expense | 4 years 1 month | |||||||
Restricted Stock Units (RSUs) | Fourth Anniversary | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Vesting percentage | 33.33% | |||||||
Restricted Stock Units (RSUs) | Fifth Anniversary | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Vesting percentage | 33.33% | |||||||
Restricted Stock Units (RSUs) | Sixth Anniversary | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Vesting percentage | 33.33% | |||||||
Saleable rate | 25.00% | |||||||
Restricted Stock Units (RSUs) | Seventh Anniversary | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Saleable rate | 25.00% | |||||||
Restricted Stock Units (RSUs) | Eighth Anniversary | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Saleable rate | 25.00% | |||||||
Restricted Stock Units (RSUs) | Ninth Anniversary | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Saleable rate | 25.00% |
Equity and Equity-based Compe69
Equity and Equity-based Compensation - Restricted Stock Units (Details) - Restricted Stock Units (RSUs) | 9 Months Ended |
Sep. 30, 2016$ / sharesshares | |
Number of Shares | |
Beginning balance (shares) | shares | 1,201,794 |
Granted (shares) | shares | 156,740 |
Vested (shares) | shares | (43,701) |
Forfeited (shares) | shares | (205,443) |
Ending balance (shares) | shares | 1,109,390 |
Weighted Average Grant Date Fair Value Per Unit | |
Beginning balance (USD per share) | $ / shares | $ 16.64 |
Granted (USD per share) | $ / shares | 3.19 |
Vested (USD per share) | $ / shares | 5.56 |
Forfeited (USD per share) | $ / shares | 7.16 |
Ending balance (USD per share) | $ / shares | $ 16.93 |
Equity and Equity-based Compe70
Equity and Equity-based Compensation - Option Valuation Information (Details) - Options | 9 Months Ended |
Sep. 30, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Risk-free interest rate | 1.16% |
Expected dividend yield | 11.87% |
Expected volatility factor | 47.86% |
Expected life in years | 5 years |
Equity and Equity-based Compe71
Equity and Equity-based Compensation - Option Activity (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Number of Shares | ||
Beginning balance (shares) | 5,562,866 | |
Granted (shares) | 50,000 | |
Vested (shares) | (60,000) | |
Forfeited (shares) | (134,489) | |
Ending balance (shares) | 5,418,377 | 5,562,866 |
Exercisable at end of period (shares) | 0 | |
Weighted Average Exercise Price | ||
Beginning balance (USD per share) | $ 18.64 | |
Granted (USD per share) | 3.70 | |
Vested (USD per share) | 17.29 | |
Forfeited or expired (USD per share) | 18.07 | |
Ending balance (USD per share) | 18.53 | $ 18.64 |
Exercisable at end of period (USD per share) | $ 0 | |
Weighted average remaining life, outstanding | 6 years 6 months 12 days | 7 years 6 months |
Weighted Average Remaining Life (in years), options granted | 5 years | |
Weighted Average Remaining Life (in years), options vested | 4 years | |
Weighted average remaining life, forfeited | 8 years 3 months 18 days | |
Aggregate intrinsic value, exercisable | $ 0 |
Equity and Equity-based Compe72
Equity and Equity-based Compensation - Options, Narrative (Details) - Options | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Total unrecognized compensation expense | $ 5,147,992 |
Weighted average period for recognition of compensation expense | 2 years 9 months 6 days |
Equity and Equity-based Compe73
Equity and Equity-based Compensation - Stock Appreciation Rights (Details) | 9 Months Ended |
Sep. 30, 2016USD ($)$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Total compensation expense expected to be recognized in future periods | $ | $ 5,069,654 |
Options | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Term of options | 10 years |
Stock Appreciation Rights (SARs) | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Service period | 6 years |
Assumed forfeiture rate | 5.00% |
Total compensation expense expected to be recognized in future periods | $ | $ 56,163 |
Number of Shares | |
Beginning balance (shares) | shares | 71,000 |
Granted (shares) | shares | 0 |
Vested (shares) | shares | 0 |
Forfeited (shares) | shares | (24,500) |
Ending balance (shares) | shares | 46,500 |
Weighted Average Grant Date Fair Value Per Unit | |
Beginning balance (USD per share) | $ 1.78 |
Granted (USD per share) | 0 |
Vested (USD per share) | 0 |
Forfeited (USD per share) | 1.78 |
Ending balance (USD per share) | 1.78 |
Stock Appreciation Rights (SARs) | IPO | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
IPO share price (USD per share) | $ 17 |
Equity and Equity-based Compe74
Equity and Equity-based Compensation - Liability Classified Awards (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Liability Classified Awards [Roll Forward] | ||
Liability classified awards, beginning | $ 24,257 | $ 3,465 |
Compensation expense | 4,314 | 15,594 |
Liability classified awards, ending | $ 28,571 | $ 19,059 |
- Additional Information (Detai
- Additional Information (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended |
May 31, 2016 | Jun. 30, 2016 | Sep. 30, 2016 | |
Income Tax Contingency [Line Items] | |||
Reduction in deferred tax assets | $ 8,467,072 | ||
Effective income tax rate reconciliation, percent | 13.40% | ||
Effective income tax rate reconciliation, at federal statutory income tax rate, percent | 34.00% | ||
Tax liability | $ 7,525,901 | ||
Discrete Adjustment [Member] | |||
Income Tax Contingency [Line Items] | |||
Reduction in deferred tax assets | $ 6,271,403 | ||
Additional Provision [Member] | |||
Income Tax Contingency [Line Items] | |||
Reduction in deferred tax assets | $ 376,000 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Jun. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||||
Net income (loss) attributable to Fifth Street Asset Management Inc. | $ (237,718) | $ 847,546 | $ (1,231,945) | $ 1,150,572 | $ (384,398) | $ (622,041) | $ 3,554,355 | $ 2,377,121 |
Dilutive effects of MMKT Notes | 0 | 0 | (155,242) | 0 | ||||
Net income (loss) available to Class A common stockholders | $ (237,718) | $ 1,150,572 | $ (777,283) | $ 3,554,355 | ||||
Net income (loss) per share attributable to Fifth Street Asset Management Inc. Class A common stock - Basic (USD per share) | $ 0.15 | $ (0.21) | $ (0.07) | |||||
Net income (loss) per share attributable to Fifth Street Asset Management Inc. Class A common stock - diluted (USD per share) | $ 0.07 | $ (0.24) | $ (0.10) | |||||
Restricted Stock Units (RSUs) | ||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||||
Dilutive effects of restricted stock units (in shares) | 0 | 6,745 | 0 | 6,929 | ||||
Antidilutive securities (shares) | 1,109,390 | 1,109,390 | 1,235,515 | |||||
Options | ||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||||
Antidilutive securities (shares) | 5,431,766 | 5,501,766 | 5,630,376 | |||||
Class A Common Stock | ||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||||||
Weighted average shares of Class A common stock outstanding (shares) | 5,908,407 | 5,901,718 | 5,847,139 | 5,956,389 | ||||
Weighted average shares of Class A common stock outstanding - Diluted (shares) | 5,908,407 | 5,908,463 | 5,847,139 | 5,963,318 | ||||
Net income (loss) per share attributable to Fifth Street Asset Management Inc. Class A common stock - Basic (USD per share) | $ (0.04) | $ 0.19 | $ (0.11) | $ 0.60 | ||||
Net income (loss) per share attributable to Fifth Street Asset Management Inc. Class A common stock - diluted (USD per share) | $ (0.04) | $ 0.19 | $ (0.13) | $ 0.60 |
Subsequent Events (Details)
Subsequent Events (Details) - $ / shares | Nov. 09, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
Subsequent Event [Line Items] | |||||||||
Dividend declared (USD per share) | $ 0.1 | $ 0.10 | $ 0.10 | $ 0.17 | $ 0.17 | $ 0.3 | $ 0.3 | $ 0.64 | |
Subsequent Event | Class A Common Stock | |||||||||
Subsequent Event [Line Items] | |||||||||
Dividend declared (USD per share) | $ 0.125 |