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Oaktree Capital Group, LLC Announces Second Quarter 2012 Financial Results

Segment Results (Unaudited)

Our business is comprised of one segment, our investment management segment, which consists of the investment management services that we provide to our clients.

Adjusted Net Income

Adjusted net income and adjusted net income-OCG, as well as per unit data, for the three and six months ended June 30, 2012 and 2011, are set forth below:

          Three Months Ended         Six Months Ended
June 30, June 30,
  2012           2011     2012           2011  
(in thousands, except per unit data)
Revenues:
Management fees $ 188,843 $ 179,412 $ 380,105 $ 364,671
Incentive income 129,018 107,320 191,687 238,209
Investment income   23,241     13,546     87,581     66,563  
Total revenues   341,102     300,278     659,373     669,443  
Expenses:
Compensation and benefits (80,303 ) (83,907 ) (164,707 ) (162,219 )
Incentive income compensation expense (60,965 ) (41,229 ) (88,722 ) (94,995 )
General, administrative and other expenses   (26,327 )   (26,380 )   (52,908 )   (46,630 )
Total expenses   (167,595 )   (151,516 )   (306,337 )   (303,844 )
Adjusted net income before interest and other income (expense) 173,507 148,762 353,036 365,599
Interest expense, net of interest income (8,063 ) (8,584 ) (16,227 ) (17,304 )
Other income (expense), net   66     844     2,333     81  
Adjusted net income 165,510 141,022 339,142 348,376
Adjusted net income attributable to OCGH non-controlling interest (133,037 ) (119,489 ) (280,483 ) (295,274 )
Non-Operating Group other income 6,260

(1)

- 6,260

(1)

-
Non-Operating Group expenses   (100 )   (257 )   (278 )   (441 )
Adjusted net income-OCG before income taxes 38,633 21,276 64,641 52,661
Income taxes-OCG   (12,386 )

(1)

  (5,694 )   (17,947 )

(1)

  (11,098 )
Adjusted net income-OCG $ 26,247   $ 15,582   $ 46,694   $ 41,563  
Adjusted net income-OCG per Class A unit $ 0.89   $ 0.69   $ 1.79   $ 1.83  
Weighted average number of Class A units outstanding   29,586     22,677     26,137     22,677  
 
(1)  

A one-time adjustment in the second quarter of 2012 had the effect of increasing income taxes-OCG by $(7,134) and increasing non-Operating Group other income by $6,260, for a net effect of additional after-tax OCG expense of $(874). This adjustment stemmed from reductions in deferred tax assets and the liability for amounts due to affiliates. The effective income tax rate applicable to adjusted net income-OCG before income taxes for the three months ended June 30, 2012 was 18% without the $(7,134) one-time expense and 24% with it.

 

Fee-Related Earnings

Fee-related earnings and fee-related earnings-OCG, as well as per unit data, for the three and six months ended June 30, 2012 and 2011, are set forth below:

          Three Months Ended         Six Months Ended
June 30, June 30,
  2012           2011     2012           2011  
(in thousands, except per unit data)
 
Management fees:
Closed-end funds $ 148,232 $ 134,591 $ 299,780 $ 276,067
Open-end funds 30,983 33,158 61,448 65,918
Evergreen funds   9,628     11,663     18,877     22,686  
Total management fees   188,843     179,412     380,105     364,671  
Expenses:
Compensation and benefits (80,303 ) (83,907 ) (164,707 ) (162,219 )
General, administrative and other expenses   (26,327 )   (26,380 )   (52,908 )   (46,630 )
Total expenses   (106,630 )   (110,287 )   (217,615 )   (208,849 )
Fee-related earnings 82,213 69,125 162,490 155,822
Fee-related earnings attributable to OCGH non-controlling interest (66,082 ) (58,571 ) (134,252 ) (132,068 )
Non-Operating Group other income 6,260

(1)

- 6,260

(1)

-
Non-Operating Group expenses   (97 )   (256 )   (276 )   (441 )
Fee-related earnings-OCG before income taxes 22,294 10,298 34,222 23,313
Fee-related earnings - OCG income taxes   (10,174 )

(1)

  (3,593 )   (12,834 )

(1)

  (7,541 )
Fee-related earnings-OCG $ 12,120   $ 6,705   $ 21,388   $ 15,772  
Fee-related earnings-OCG per Class A unit $ 0.41   $ 0.30   $ 0.82   $ 0.70  
Weighted average number of Class A units outstanding   29,586     22,677     26,137     22,677  
 
(1)  

A one-time adjustment in the second quarter of 2012 had the effect of increasing income taxes-OCG by $(7,134) and increasing non-Operating Group other income by $6,260, for a net effect of additional after-tax OCG expense of $(874). This adjustment stemmed from reductions in deferred tax assets and the liability for amounts due to affiliates. The effective income tax rate applicable to fee-related earnings-OCG before income taxes for the three months ended June 30, 2012 was 20% without the $(7,134) one-time expense and 29% with it.

 

Distributable Earnings and Distribution Calculation

Distributable earnings and the calculations of the distributions attributable to the three and six months ended June 30, 2012 and 2011, are set forth below:

            Three Months Ended         Six Months Ended
June 30, June 30,
  2012             2011     2012             2011  
(in thousands, except per unit data)
Distributable Earnings:
Fee-related earnings $ 82,213 $ 69,125 $ 162,490 $ 155,822
Incentive income, net of incentive income compensation expense 68,053 66,091 102,965 143,214
Receipts of investment income (loss) (1) 36,001 45,032 66,636 52,036
Interest expense, net of interest income (8,063 ) (8,584 ) (16,227 ) (17,304 )
Operating Group income taxes (1,915 ) (2,228 ) (4,513 ) (4,122 )
Other income (expense), net   66     844     2,333     81  
Distributable earnings $ 176,355   $ 170,280   $ 313,684   $ 329,727  
 
Distribution Calculation:
Operating Group distribution with respect to the period $ 141,433 $ 69,813 $ 251,539 $ 197,524
 
Distribution per Operating Group unit $ 0.94 $ 0.47 $ 1.67 $ 1.33
Adjustments per Class A unit:
Distributable earnings-OCG income taxes (0.09 ) (0.19 ) (0.20 ) (0.41 )
Tax receivable agreements (0.05 ) (0.04 ) (0.11 ) (0.08 )
Non-Operating Group expenses (0.01 ) (0.01 ) (0.02 ) (0.02 )

Other adjustments (2)

  -     0.28     -     0.33  
Distribution per Class A unit (3) $ 0.79   $ 0.51   $ 1.34   $ 1.15  
(1)  

This adjustment characterizes a portion of the distributions received from Oaktree and non-Oaktree funds as receipts of investment income or loss. In general, the income or loss component of a distribution from a fund is calculated by multiplying the amount of the distribution by the ratio of our investment’s undistributed income or loss to our remaining investment balance in the fund. If the distribution is made during the investment period, it is generally not reflected in distributable earnings until after the investment period ends.

(2) This adjustment reflects inter-quarter timing differences surrounding tax-related incentive distributions.
(3) With respect to the quarter ended June 30, 2012, announced on August 7, 2012 and payable on August 21, 2012.
 

Units Outstanding

                                       
Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
Weighted Average Units:
OCGH 121,204,352 125,847,346 124,478,455 126,057,139
Class A 29,586,382 22,677,100 26,137,174 22,677,100
Total 150,790,734 148,524,446 150,615,629 148,734,239
 
Units Eligible for Fiscal Period Distribution:
OCGH 120,280,753 125,862,115
Class A 30,179,510 22,677,100
Total 150,460,263 148,539,215
 

Segment Statements of Financial Condition (Unaudited)

                             
As of

June 30, 2012

 

December 31, 2011

 

June 30, 2011

(in thousands)
Assets:
Cash and cash-equivalents $ 279,311 $ 297,230 $ 343,389
U.S. Treasury and government agency securities 376,224 381,697 402,630
Management fees receivable 22,782 23,207 24,031
Incentive income receivable 12,849 28,892 11,994
Investments in limited partnerships, at equity 1,195,084 1,159,287 1,123,888
Deferred tax assets 168,110 72,986 76,619
Other assets   140,349   120,609   130,976
Total assets $ 2,194,709 $ 2,083,908 $ 2,113,527
Liabilities and Capital:
Liabilities:
Accounts payable and accrued expenses $

173,363

$ 250,191 $ 181,239
Due to affiliates

140,239

57,574 60,828
Debt obligations   626,429   652,143   667,143
Total liabilities   940,031   959,908   909,210
 
Capital:
OCGH non-controlling interests in consolidated subsidiaries 975,908 935,858 1,004,004
Unitholders’ capital attributable to Oaktree Capital Group, LLC   278,770   188,142   200,313
Total capital   1,254,678   1,124,000   1,204,317
Total liabilities and capital $ 2,194,709 $ 2,083,908 $ 2,113,527
 

Investments in Limited Partnerships, at Equity

                                                     
As of

June 30, 2012

December 31, 2011

 

June 30, 2011

(in thousands)
Oaktree funds:
Distressed debt $ 515,354 $ 542,539 $ 596,255
Corporate & high yield debt 148,472 141,972 113,237
Control investing 262,846 239,706 224,887
Convertible securities 1,315 1,251 1,354
Real estate 93,500 81,502 74,094
Listed equities 53,951 39,262 42,617
Non-Oaktree   119,646   113,055   71,444
Total $ 1,195,084 $ 1,159,287 $ 1,123,888
 

Fund Data

Certain information regarding our closed-end, open-end and evergreen funds is set forth below.

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