Ares About Ares News Ares Management, L.P. Reports Fourth Quarter And Full Year 2014 Results

Ares Management, L.P. Reports Fourth Quarter And Full Year 2014 Results

Mar302015

Ares Management, L.P. Reports Fourth Quarter And Full Year 2014 Results

 

• Total assets under management1 increased to $81.8 billion, a 10.5% increase year over year

 

• Pro forma for the acquisition of Energy Investors Funds (“EIF”) as of December 31, 20142, AUM increased 15.8% to $85.7 billion

 

• $3.3 billion in gross capital raised in Q4 2014 with approximately $16.5 billion raised during the last year

 

• Management fees reached 88.7% of total fee revenue for the three months ended December 31, 2014 and 89.3% of total fee revenue for the year ended December 31, 2014

 

• Fee related earnings were $40.0 million for the three months ended December 31, 2014 and $147.3 million for the year ended December 31, 2014

 

• Economic net income was $64.7 million for the three months ended December 31, 2014; economic net income after tax was $56.7 million, or $0.27 per unit for the three months ended December 31, 20143

 

• Distributable earnings were $64.5 million for the three months ended December 31, 2014; distributable earnings after tax were $0.26 per common unit for the three months ended December 31, 2014

 

• Declared fourth quarter distribution of $0.24 per common unit

 

• Fourth quarter GAAP net income4 was $25.4 million

 

 --------------

 

LOS ANGELES -- Ares Management, L.P.  (“the Company,” “Ares,” “we,” and “our”) (NYSE:ARES) today reported its financial results for its fourth quarter and year ended December 31, 2014.  As Ares was not a public company prior to its initial public offering (“IPO”), which closed on May 7, 2014, and the related reorganization, the financial results for the three months ended December 31, 2013 and for the years ended December 31, 2013 and 2014 reported herein include the results of our predecessor owners.

 

“In 2014, we continued our strong rate of growth in both assets under management and management fees as we continued to expand our investor base across our existing and new investment strategies,” said Tony Ressler, Chief Executive Officer of Ares.  “We believe our 2015 outlook is bright as we see material fundraising opportunities in each of our investment groups and as we focus on operating margin efficiencies through the deployment of our capital with our existing investment teams.”

 

Ares reported growth in assets under management and fee earning assets under management of 10.5% and 3.7%, year over year, reaching $81.8 billion and $61.4 billion, respectively. Including the acquisition of EIF,2 AUM increased 15.8% to $85.7 billion and fee earning AUM increased 10.5% to $65.4 billion.

 

“Throughout 2014, we continued to leverage our platform strengths and flexible capital to invest broadly across asset classes and markets to find attractive value,” said Michael Arougheti, President of Ares.  “With over $18 billion of available capital and the addition of new complementary investment strategies, we believe we are well positioned to take advantage of pockets of volatility and secular changes in the banking industry in certain markets to find compelling investment opportunities in our growing footprint.”

 

Economic net income for the three months ended December 31, 2014 was $64.7 million compared to $100.0 million for the three months ended December 31, 2013. The decline was primarily attributable to lower performance related earnings within the Tradable Credit Group, as fourth quarter fund performance was impacted by a decrease in fair values for certain funds in December 2014, which drove unrealized investment losses and reversals of unrealized performance fees, and within the Private Equity Group primarily as a result of losses recognized from publicly traded equity investments from the Company’s investments in ACOF Asia in the fourth quarter of 2014.  Performance related earnings for the three months ended December 31, 2014 decreased by $40.3 million compared to the three months ended December 31, 2013. Fourth quarter economic net income, net of income taxes, was $56.7 million, or $0.27 per unit. Economic net income for the year ended December 31, 2014 was $289.2 million, 12.0% lower compared to $328.7 million for the year ended December 31, 2013.

 

 


1       In this press release we refer to certain non-GAAP financial measures, including assets under management, fee earning assets under management, economic net income, fee related earnings, performance related earnings and distributable earnings.  The definitions and reconciliations of these measures to the most directly comparable GAAP measures, as well as an explanation of why we use these measures, are included in this press release.

2       Ares closed the acquisition of Energy Investors Fund on January 1, 2015.

3       Total units outstanding represents the sum of common units and Ares Operating Group Units, which are exchangeable for common units. See Exhibit F for more details.

4       GAAP net income is presented before giving effect to income (loss) attributable to non-controlling and redeemable interests in Consolidated Funds and non-controlling and redeemable interests in Ares Operating Group Units.

 

Distributable earnings were $64.5 million for the three months ended December 31, 2014 compared to $88.5 million for the three months ended December 31, 2013, primarily driven by a decline in net realized performance fees and investment income within the Tradable Credit Group and Private Equity Groups. Distributable earnings were $232.8 million for the year ended December 31, 2014 compared to $305.7 million for the year ended December 31, 2013.

 

For the fourth quarter, distributable earnings after income taxes allocated to common unitholders were $21.2 million, or $0.26 per common unit, which was consistent with the third quarter of 2014. Ares declared a fourth quarter distribution of $0.24 per common unit payable on March 24, 2015 to common unitholders of record as of March 16, 2015.

 

Ares has also provided additional information in its Fourth Quarter 2014 Earnings Presentation, which can be viewed at www.aresmgmt.com under “Investor Resources – Presentations and Reports.”

 

ARES MANAGEMENT, L.P.

Key Performance Metrics as of December 31, 2014

 

$ in thousands unless otherwise noted

 

Three months ended
December 31,

 

 

Year ended
December 31,

 

 

 

2014

 

2013

 

 

2014

 

2013 (6)

 

Management Fees (includes ARCC Part I Fees of $33,396 and $29,001 for the three months ended December 31, 2014 and 2013, respectively and $118,537 and $110,511 for the years ended December 31, 2014 and 2013, respectively)

 

$161,106

 

$140,188

 

 

$598,046

 

$516,657

 

Admin. & Other Fees.............................................................................................

 

8,438

 

8,725

 

 

28,447

 

23,955

 

Compensation & Benefits (1)........................................................................................................................

 

(100,638)

 

(87,852)

 

 

(373,142)

 

(305,066)

 

General & Administrative Expenses (2)..............................................................................................

 

(28,867)

 

(26,075)

 

 

(106,087)

 

(82,884)

 

Fee Related Earnings...........................................................................................

 

$40,039

 

$34,986

 

 

$147,264

 

$152,662

 

 

 

 

 

 

 

 

 

 

 

 

Net Performance Fees...........................................................................................

 

$20,580

 

$31,011

 

 

$71,349

 

$101,872

 

Net Investment Income........................................................................................

 

4,077

 

33,990

 

 

70,593

 

74,171

 

Performance Related Earnings........................................................................

 

$24,657

 

$65,001

 

 

$141,942

 

$176,043

 

 

 

 

 

 

 

 

 

 

 

 

Economic Net Income..........................................................................................

 

$64,696

 

$99,987

 

 

$289,206

 

$328,705

 

Economic Net Income After Income Taxes (3).......................................................................

 

$56,728

 

--

 

 

$266,537

 

--

 

Economic Net Income After Income Taxes per Unit (3)...............................................

 

$0.27

 

--

 

 

$1.26

 

--

 

Distributable Earnings........................................................................................

 

$64,538

 

$88,475

 

 

$232,756

 

$305,719

 

Distributable Earnings After Income Taxes per Common Unit (4).................

 

$0.26

 

--

 

 

$0.92

 

--

 

 

 

 

 

 

 

 

 

 

 

 

Other Data

 

 

 

 

 

 

 

 

 

 

Accrued Incentives (Gross)...................................................................................

 

$548,098

 

$481,751

 

 

$548,098

 

$481,751

 

Accrued Incentives (Net)......................................................................................

 

166,934

 

185,773

 

 

166,934

 

185,773

 

Total Fee Revenue(5).............................................................................................................................................

 

181,686

 

171,199

 

 

669,395

 

618,529

 

Management Fees as a Percentage of Total Fee Revenue (5).....................................

 

88.7%

 

81.9%

 

 

89.3%

 

83.5%

 

 

(1)

Includes compensation and benefits attributable to OMG of $28.4 million and $21.8 million for the three months ended December 31, 2014 and 2013, respectively, and $109.0 million and $83.3 million for the years ended December 31, 2014 and 2013, respectively, which is not allocated to an operating segment.

(2)

Includes G&A attributable to OMG of $15.7 million and $11.9 million for the three months ended December 31, 2014 and 2013, respectively, and $56.2 million and $37.4 million for the years ended December 31, 2014 and 2013, respectively, which is not allocated to an operating segment.

(3)

Represents pro forma results assuming Ares IPO and reorganization had taken place on January 1, 2014. Total units of 211,608,309 include both common units and Ares Operating Group Units that are exchangeable for common units on a one-for-one basis and the dilutive effects of the Company’s equity-based awards.

(4)

Distributable earnings attributable to common unitholders is presented on a pro forma basis for the year ending December 31, 2014 as if Ares’ IPO occurred on January 1, 2014. The per unit calculation uses total common units outstanding. See “Exhibit G. Per Unit Calculations For the Three and Twelve Months Ended December 31, 2014” for more detail.

(5)

Total fee revenue is calculated as management fees plus net performance fees.

(6)

Management fees include $15.0 million in one-time deferred fees for the year ended December 31, 2013, which were contractually deferred until certain requirements were met. $1.1 million related to a European fund within the Tradable Credit Group and $13.9 million related to a fund within the Tradable Credit Group that earned such fees over a five year period.

 

Management Fee Revenue. Management fee revenue increased 14.9% to $161.1 million for the three months ended December 31, 2014 compared to the three months ended December 31, 2013. For the year ended December 31, 2014, management fee revenue increased 15.8% to $598.0 million compared to the year ended December 31, 2013. Excluding the recognition of $15.0 million in previously deferred management fees during the year ended December 31, 2013, management fees increased 19.2% for the year ended December 31, 2014.  For both periods, the comparative growth in management fees was primarily attributable to additional capital raises by ARCC, new funds launched in the Tradable Credit Group and Direct Lending Group, and the expansion of the Real Estate Group.

 

Compensation and Benefits. Compensation and benefits increased by $12.8 million to $100.6 million for the three months ended December 31, 2014 compared to the three months ended December 31, 2013. The increase was primarily attributable to merit-based increases and increased headcount. For the year ended December 31, 2014, compensation and benefits increased by $68.1 million to $373.1 million compared to the year ended December 31, 2013. The increase was attributable to a full year impact of professionals from the AREA acquisition, the externalization of management activities of one of our European funds in the Direct Lending Group, which costs were previously borne by the fund, and merit-based increases and increased headcount, including additional professionals from the Keltic acquisition.

 

General and Administrative Expenses. General and administrative expenses increased by $2.8 million to $28.9 million for the three months ended December 31, 2014 compared to the three months ended December 31, 2013. For the year ended December 31, 2014, general and administrative expenses increased by $23.2 million to $106.1 million compared to the year ended December 31, 2013. Both increases were attributable to higher overhead costs related to an increase in headcount during the year ended December 31, 2014, and a full period’s impact from the AREA and Keltic acquisitions.

 

Fee Related Earnings. FRE increased by $5.1 million, or 14.4%, to $40.0 million for the three months ended December 31, 2014 compared to the three months ended December 31, 2013. The growth in FRE was partially attributable to an increase in FRE in the Real Estate Group of $10.3 million and was partially offset by higher compensation and benefits expenses. For the year ended December 31, 2014, FRE decreased $5.4 million, or 3.5%, to $147.3 million compared to the year ended December 31, 2013. The decline in FRE was attributable to an increase in compensation and benefits and general and administrative expenses as a result of costs incurred to support the increase in headcount. This was partially offset by an increase in management fees from the Real Estate Group from the AREA acquisition in the third quarter of 2013. Excluding the recognition of $15.0 million in previously deferred management fees during the year ended December 31, 2013, FRE increased 7.0% for the year ended December 31, 2014.

 

Performance Related Earnings. PRE was $24.7 million for the three months ended December 31, 2014 compared to $65.0 million for the three months ended December 31, 2013. For the year ended December 31, 2014, PRE was $141.9 million compared to $176.0 million for the year ended December 31, 2013. For both periods, the decrease in PRE was primarily attributable to decreases in net performance fees and net investment income, due to the impact of a decline in market values for certain credit funds in the Tradable Credit Group. For the three months ended December 31, 2014, the decrease was also attributable to a decrease in net investment income in the Private Equity Group primarily as a result of unrealized losses recognized from the Company’s investments in ACOF Asia in the fourth quarter of 2014. For the year ended December 31, 2014, the decrease was offset by an increase in net investment income recognized from the Private Equity Group and net performance fees recognized from the Real Estate Group.

 

 Economic Net Income. ENI was $64.7 million for the three months ended December 31, 2014 compared to $100.0 million for the three months ended December 31, 2013. The decrease in ENI for the three months ended December 31, 2014 was driven by declines in net performance fees of $10.4 million and net investment income of $29.9 million primarily within the Tradable Credit Group and Private Equity Group. The decline was offset by an increase in FRE of $5.1 million. ENI after provision for taxes was $56.7 million, or $0.27 per unit, for the fourth quarter of 2014. The blended effective tax rate on total ENI was 37.62% for the three months ended December 31, 2014. For the year ended December 31, 2014, ENI was $289.2 million compared to $328.7 million for the year ended December 31, 2013. The decrease in ENI for the year ended December 31, 2014 was driven by declines in FRE of $5.4 million, net performance fees of $30.5 million and net investment income of $3.6 million.

 

Distributable Earnings. Total distributable earnings decreased by $23.9 million to $64.5 million for the three months ended December 31, 2014 compared to the three months ended December 31, 2013. For the year ended December 31, 2014, total distributable earnings decreased by $73.0 million to $232.8 million compared to the year ended December 31, 2013. Both decreases were primarily driven by declines in net realized performance fees and investment income within the Tradable Credit and Private Equity Groups.

 

Accrued Incentives Fees. Net accrued incentive fees as of December 31, 2014 decreased by $18.8 million to $166.9 million compared to $185.8 million as of December 31, 2013. The decrease in net accrued incentive fees was primarily attributable to the Tradable Credit Group, which had higher realizations of previously accrued incentive fees and a reversal of unrealized incentive fees for certain Tradable Credit funds due to a decline in market values of the fund’s investments in 2014. This decrease was offset by an increase in accrued incentive fees from ACOF III as a result of market appreciation of its investment portfolio.

 

Assets Under Management

 

 

 

AUM

 

($ in millions)

 

For the three
months ended
December 31, 2014

 

For the
year ended
December 31, 2014

 

Beginning of Period AUM....................................................................................................

 

$79,616

 

$74,005

 

Acquisitions (1)........................................................................................................................................................................................

 

 

(179)

 

Commitments (2)..................................................................................................................................................................................

 

2,912

 

15,757

 

Capital Reduction (3).......................................................................................................................................................................

 

58

 

(3,991)

 

Distribution (4).........................................................................................................................................................................................

 

(810)

 

(4,841)

 

Change in Fund Value (5)............................................................................................................................................................

 

(16)

 

1,009

 

End of Period AUM...............................................................................................................

 

$81,761

 

$81,761

 

Average AUM..........................................................................................................................

 

$80,688

 

$77,883

 

 

(1)          Represents AUM acquired via acquisition. Negative amounts are related to the termination of previously acquired asset management agreements.

(2)          Represents net new commitments during the period, including equity and debt commitments, reductions of previous commitments, and gross inflows into our open-ended managed accounts and sub-advised accounts, as well as equity offerings by our publicly traded vehicles.

(3)          Primarily represents permanent reductions in leverage, which may be offset by drawdowns from existing debt facilities.

(4)          Represents distributions and redemptions net of recallable amounts.

(5)          Includes fund net income, including interest income, realized and unrealized gains (losses), fees and expenses and the impact of foreign currency.

 

Total AUM was $81.8 billion as of December 31, 2014, an increase of $2.1 billion, or 2.7%, compared to total AUM of $79.6 billion as of September 30, 2014.  The increase in AUM was primarily due to $2.9 billion in net new commitments raised, which primarily consisted of (i) $511.2 million in debt commitments to the Tradable Credit Group’s leveraged loan funds, (ii) $352.4 million in equity commitments to other Tradable Credit Group long-only credit funds (iii) $652.3 million in commitments to the Direct Lending Group’s funds ($379.5 million of equity commitments and $272.8 million of debt commitments) and (iv) $1.4 billion in equity commitments to the Real Estate Group’s funds.  The increase in AUM was partially offset by total distributions of $809.8 million, of which $272.1 million was attributable to the Tradable Credit Group, $367.8 million was attributable to the Direct Lending Group, $17.7 million was attributable to the Private Equity Group and $152.1 million was attributable to the Real Estate Group. Change in Fund Value for the three months ended December 31, 2014 decreased $16.0 million, of which $442.6 million was attributable to the Tradable Credit Group, including $264.1 million to the Tradable Credit Group’s European long-only loan funds due to foreign currency fluctuations. The decline was partially offset by an increase in fund value of (i) $203.1 million primarily attributable to the underlying investments held by ACOF II and ACOF III within the Private Equity Group, and (ii) $172.2 million attributable to the Real Estate Group.

 

For the year ended December 31, 2014, AUM increased $7.8 billion to $81.8 billion, an increase of 10.5% compared to total AUM of $74.0 billion as of December 31, 2013.  The increase in AUM was primarily due to $15.8 billion of new commitments, which primarily consisted of (i) $7.8 billion to the Tradable Credit Group’s leveraged loan funds ($1.2 billion in equity commitments and $6.6 billion in debt commitments), (ii) $1.2 billion in equity commitments to the Tradable Credit Group’s high yield funds, (iii) $1.0 billion in equity commitments to the Tradable Credit Group’s alternative credit funds, (iv) $1.9 billion to the Direct Lending Group’s funds ($1.3 billion in equity commitments and $656.6 million in debt commitments) and (v) $3.7 billion to the Real Estate  Group’s funds ($2.5 billion in equity commitments and $1.2 billion in debt commitments). The increase in AUM was partially offset by capital reductions of $4.0 billion, of which $3.1 billion was attributable to the Tradable Credit Group. Distributions for the year ended December 31, 2014 totaled $4.8 billion, of which $1.8 billion was attributable to the Tradable Credit Group, $584.0 million was attributable to the Private Equity Group, $1.1 billion was attributable to the Direct Lending Group and $1.4 billion was attributable to the Real Estate Group. Change in Fund Value for the year ended December 31, 2014 increased $1.0 billion, of which $560.9 million was attributable to the Real Estate Group, $866.0 million to the Private Equity Group and $362.2 million to the Direct Lending Group, partially offset by a decrease of $780.1 million in the Tradable Credit Group.

 

Fee-Earning Assets Under Management

 

 

 

FEAUM

 

($ in millions)

 

For the three
months ended
December 31, 2014

 

For the
year ended
December 31, 2014

 

Beginning of Period FEAUM..............................................................................................

 

$59,920

 

$59,162

 

Acquisitions (1)........................................................................................................................................................................................

 

 

(165)

 

Commitments (2)..................................................................................................................................................................................

 

1,416

 

5,595

 

Subscriptions / Deployment / Increase in Leverage (3).................................................................................

 

1,747

 

7,788

 

Redemptions / Distributions / Decrease in Leverage (4)...............................................................................

 

(1,684)

 

(11,188)

 

Market Appreciation (Depreciation) (5)........................................................................................................................

 

62

 

767

 

Change in Fee Basis (6)..................................................................................................................................................................

 

(102)

 

(602)

 

End of Period FEAUM..........................................................................................................

 

$61,359

 

$61,359

 

Average FEAUM....................................................................................................................

 

$60,639

 

$60,261

 

 

(1)

Represents fee earning AUM acquired via acquisition. Negative amounts are related to the termination of previously acquired asset management agreements.

(2)

Represents net new commitments during the period for funds that earn management fees based on committed capital.

(3)

Represents subscriptions, capital deployment and increase in leverage (for funds that earn fees on a gross asset basis).

(4)

Represents redemptions, distributions and decrease in leverage (for funds that earn fees on a gross asset basis).

(5)

Includes fund net income, including interest income, realized and unrealized gains (losses), fees and expenses and the impact of foreign currency for funds that earn management fees based on market value.

(6)

Represents the change of fee basis from committed capital to invested capital.

 

Total Fee Earning Assets Under Management (“FEAUM”) was $61.4 billion as of December 31, 2014, an increase of $1.4 billion, or 2.4%, compared to total FEAUM of $59.9 billion as of September 30, 2014.  The increase in FEAUM was primarily due to subscriptions / deployment / increase in leverage, which was mainly comprised of $386.2 million and $1.2 billion in the Tradable Credit Group and the Direct Lending Group, respectively.  Net new commitments of $1.4 billion, primarily comprised of $500.0 million in the Tradable Credit Group, $581.8 million in the Real Estate Group and $334.4 million in Direct Lending Group further added to the increase in FEAUM. Partially offsetting the increase in FEAUM were redemptions / distributions / decreases in leverage of $1.7 billion, primarily driven by decreases of $645.0 million and $702.4 million in the Tradable Credit Group and Direct Lending Group, respectively.

 

For the year ended December 31, 2014, FEAUM increased $2.2 billion, or 3.7%, to $61.4 billion compared to total FEAUM of $59.2 billion as of December 31, 2013.  The increase in FEAUM was primarily due to: (i) subscriptions / deployment / increase in leverage of $7.8 billion, which was mainly comprised of $3.4 billion in the Tradable Credit Group and $3.9 billion in the Direct Lending Group; and (ii) commitments of $5.6 billion, which was mainly comprised of $3.0 billion in the Tradable Credit Group, $2.0 billion in the Real Estate Group and $602.9 million in the Direct Lending Group. The increase in FEAUM was partially offset by redemptions / distributions / decrease in leverage of $11.2 billion, of which $7.0 billion was attributable to the Tradable Credit Group, $362.0 million was attributable to the Private Equity Group, $2.1 billion was attributable to the Direct Lending Group and $1.7 billion was attributable to the Real Estate Group.

 

Incentive Generating AUM and Incentive Eligible AUM

 

($ in millions)

 

 

 

As of December 31, 2014

 

As of December 31, 2013

 

 

Incentive
Generating AUM

 

Incentive Eligible
AUM

 

Incentive
Generating AUM

 

Incentive Eligible
AUM

Tradable Credit Group...............................

 

$2,891

 

$7,065

 

$5,351

 

$7,779

Direct Lending Group................................

 

11,037

 

14,466

 

8,763

 

13,122

Private Equity Group.................................

 

6,541

 

9,457

 

4,184

 

9,595

Real Estate Group......................................

 

2,079

 

6,365

 

1,572

 

5,645

Total..........................................................

 

$22,547

 

$37,354

 

$19,870

 

$36,141

 

 

Total Incentive Generating AUM (“IGAUM”) was $22.5 billion as of December 31, 2014, an increase of $2.7 billion, or 13.5%, compared to total IGAUM of $19.9 billion as of December 31, 2013. The increase was primarily due to growth in the Direct Lending Group’s ARCC portfolio and the Private Equity Group’s ACOF IV fund which first contributed to Incentive Generating AUM during 2014.

 

Total Incentive Eligible AUM (“IEAUM”) was $37.4 billion as of December 31, 2014, an increase of $1.2 billion, or 3.4%, compared to IEAUM of $36.1 billion as of December 31, 2013.  The increase was primarily due to growth in the Direct Lending Group’s ARCC portfolio and new incentive eligible capital in the Real Estate Group. Funds not yet contributing incentive fees as of December 31, 2014 primarily included Ares European Real Estate Fund III, Ares European Real Estate Fund IV, Ares Commercial Real Estate Corporation, Ares Special Situations Fund IV and Ares European Loan Opportunities Fund.

 

Available Capital and Assets Under Management Not Yet Earning Fees

 

($ in millions)

 

 

 

As of December 31, 2014

 

As of December 31, 2013

 

 

Available
Capital

 

AUM Not Yet
Earning Fees

 

Available
Capital

 

AUM Not Yet
Earning Fees

Tradable Credit Group...................

 

$5,716

 

$1,884

 

$1,733

 

$1,698

Direct Lending Group...................

 

5,432

 

5,177

 

7,215

 

6,684

Private Equity Group.....................

 

3,050

 

674

 

4,462

 

720

Real Estate Group..........................

 

4,022

 

1,490

 

1,866

 

881

Total.............................................

 

$18,221

 

$9,225

 

$15,276

 

$9,983

 

Total available capital was $18.2 billion as of December 31, 2014, an increase of $2.9 billion, or 19.3%, compared to $15.3 billion as of December 31, 2013.  The increase was primarily due to new debt commitments to the Tradable Credit Group’s long only credit funds.

 

Total AUM Not Yet Earnings Fees was $9.2 billion, a decrease of $758.0 million, or 7.6%, compared to $10.0 billion as of December 31, 2013. The decline in AUM Not Yet Earning Fees was due to two factors: deployment of available capital and a portion of new capital raised became fee-earning.

 

Results Excluding Consolidated Funds

 

Net income of the Company excluding the effect of the Consolidated Funds for the three months ended December 31, 2014 was $25.4 million.

 

Investment Capacity and Liquidity

 

As of December 31, 2014, our cash and cash equivalents were $148.9 million, investments at fair value were $594.3 million, and net performance fees receivable were $166.9 million.  As of December 31, 2014, the Company had a $1.03 billion revolving credit facility, which remained undrawn.

 

 

($ in thousands)

 

December 31, 2014

 

December 31, 2013

 

 

 

 

 

Cash and cash equivalents.............................

 

$148,858

 

$89,802

Investments, at fair value...............................

 

594,346

 

525,596

Debt obligations............................................

 

245,752

 

153,119

Net performance fees receivable....................

 

166,934

 

185,773

 

 

Distribution

 

On March 5, 2015, the board of directors of our general partner declared a quarterly distribution of $0.24 per common unit to common unitholders of record at the close of business on March 16, 2015, payable on March 24, 2015.

 

Recent Developments

 

  • On January 1, 2015, we completed the acquisition of EIF, a leading asset manager in the energy infrastructure industry with approximately $4 billion of fee earning assets under management across four comingled funds and related co-investment vehicles.  The acquisition expands our Private Equity Group’s capabilities into power generation, midstream energy infrastructure and transmission, a complementary and strategically important asset class.  EIF’s team is comprised of approximately 40 professionals.

 

Conference Call and Webcast Information

 

On Thursday, March 5, 2015, the Company invites all interested persons to attend its webcast/conference call at 12:00 p.m. (Eastern Time) to discuss its fourth quarter 2014 financial results.

 

All interested parties are invited to participate via telephone or the live webcast, which will be hosted on a webcast link located on the Home page of the Investor Resources section of our website at . Please visit the website to test your connection before the webcast. Domestic callers can access the conference call by dialing (888)-317-6003. International callers can access the conference call by dialing +1 (412)-317-6061. All callers will need to enter the Participant Elite Entry Number 2385704 followed by the # sign and reference “Ares Management, L.P.” once connected with the operator. All callers are asked to dial in 10-15 minutes prior to the call so that name and company information can be collected. For interested parties, an archived replay of the call will be available through March 18, 2015 at 5:00 p.m. (Eastern Time) to domestic callers by dialing (877)-344-7529 and to international callers by dialing +1(412)-317-0088. For all replays, please reference conference number 10058708. An archived replay will also be available through March 18, 2015 on a webcast link located on the Home page of the Investor Resources section of our website.

 

About Ares Management, L.P.

 

Ares is a leading global alternative asset manager with approximately $86 billion of assets under management and more than 15 offices in the United States, Europe and Asia as of December 31, 2014, pro forma for the acquisition of EIF, which closed on January 1, 2015. Since its inception in 1997, Ares has adhered to a disciplined investment philosophy that focuses on delivering strong risk-adjusted investment returns throughout market cycles. Ares believes each of its four distinct but complementary investment groups in Tradable Credit, Direct Lending, Private Equity and Real Estate is a market leader based on assets under management and investment performance. Ares was built upon the fundamental principle that each group benefits from being part of the greater whole.

 

Forward-Looking Statements

 

Statements included herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events or our future performance or financial condition. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in our filings with the Securities and Exchange Commission. Ares Management, L.P. undertakes no duty to update any forward-looking statements made herein or on the webcast/conference call.

 

Nothing in this press release constitutes an offer to sell or solicitation of an offer to buy any securities of Ares.

 

Available Information

 

Ares Management, L.P.’s filings with the Securities and Exchange Commission, press releases, earnings releases and other financial information are available on its website at www.aresmgmt.com.  The contents of such website are not and should not be deemed to be incorporated by reference herein.

 

Contact

 

Ares Management, L.P.

Carl Drake
(800) 340-6597

 

Appendix

 

Exhibit A.  Operating Segments as of December 31, 2014

($ in millions)

 

 

 

Available Capital

 

Fair Value of Capital

 

AUM

 

Tradable Credit Group.....................................

 

$5,716

 

 

$26,684

 

 

$32,400

 

 

Direct Lending Group.....................................

 

5,432

 

 

23,218

 

 

28,651

 

 

Private Equity Group.......................................

 

3,050

 

 

7,085

 

 

10,135

 

 

Real Estate Group............................................

 

4,022

 

 

6,553

 

 

10,575

 

 

Total...............................................................

 

$18,221

 

 

$63,540

 

 

$81,761

 

 

 

Exhibit B.  Segment Results

 

($ in thousands)

 

As of and for the three months ended December 31, 2014:

 

 

 

Tradable
Credit
Group

 

Direct
Lending
Group

 

Private
Equity
Group

 

Real
Estate
Group

 

Total
Segments

 

OMG

 

Total
Stand
Alone

Management fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring fees (includes ARCC Part I Fees at $33,396).........................................................

 

$37,300

 

$75,608

 

$22,498

 

$25,700

 

$161,106

 

$—

 

$161,106

Previously deferred fees......................................

 

 

 

 

 

 

 

Total management fees........................................

 

37,300

 

75,608

 

22,498

 

25,700

 

161,106

 

 

161,106

Administrative fees and other income.................

 

583

 

82

 

186

 

766

 

1,617

 

6,821

 

8,438

Compensation and benefits.................................

 

(11,536)

 

(39,165)

 

(9,666)

 

(11,909)

 

(72,276)

 

(28,362)

 

(100,638)

General, administrative and other expenses.........

 

(3,576)

 

(3,353)

 

(2,557)

 

(3,721)

 

(13,207)

 

(15,660)

 

(28,867)

Fee related earnings (loss)..................................

 

22,771

 

33,172

 

10,461

 

10,836

 

77,240

 

(37,201)

 

40,039

Performance fees—realized.................................

 

30,891

 

24,839

 

 

1,057

 

56,787

 

 

56,787

Performance fees—unrealized.............................

 

(29,190)

 

(8,593)

 

39,403

 

6,256

 

7,876

 

 

7,876

Performance fee compensation — realized..........

 

(18,976)

 

(14,900)

 

 

 

(33,876)

 

 

(33,876)

Performance fee compensation — unrealized......

 

18,716

 

5,134

 

(31,835)

 

(2,222)

 

(10,207)

 

 

(10,207)

Net performance fees..........................................

 

1,441

 

6,480

 

7,568

 

5,091

 

20,580

 

 

20,580

Investment income (loss) — realized..................

 

13,163

 

2,020

 

(347)

 

1,502

 

16,338

 

 

16,338

Investment income (loss) — unrealized..............

 

(10,004)

 

(322)

 

(1,778)

 

(294)

 

(12,398)

 

 

(12,398)

Interest, dividend and other investment income..

 

3,285

 

188

 

62

 

(21)

 

3,514

 

 

3,514

Interest expense..................................................

 

(640)

 

(681)

 

(1,889)

 

(167)

 

(3,377)

 

 

(3,377)

Net investment income (loss)..............................

 

5,804

 

1,205

 

(3,952)

 

1,020

 

4,077

 

 

4,077

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performance related earnings (loss)..................

 

7,245

 

7,685

 

3,616

 

6,111

 

24,657

 

 

24,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Economic net income (loss)................................

 

$30,016

 

$40,857

 

$14,077

 

$16,947

 

$101,897

 

$(37,201)

 

$64,696

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributable earnings (loss)...............................

 

$49,738

 

$44,009

 

$6,376

 

$2,845

 

$102,968

 

$(38,430)

 

$64,538

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets.........................................................

 

$501,883

 

$290,252

 

$657,185

 

$224,686

 

$1,674,006

 

$15,206

 

$1,689,212

 

Exhibit B.  Segment Results (continued)

 

($ in thousands)

 

As of and for the three months ended December 31, 2013:

 

 

 

Tradable
Credit
Group

 

Direct
Lending
Group

 

Private
Equity
Group

 

Real
Estate
Group

 

Total
Segments

 

OMG

 

Total
Stand
Alone

Management fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring fees (includes ARCC Part I Fees at $29,001).........................................................

 

$34,858

 

$65,092

 

$22,721

 

$17,517

 

$140,188

 

$—

 

$140,188

Previously deferred fees......................................

 

 

 

 

 

 

 

Total management fees........................................

 

34,858

 

65,092

 

22,721

 

17,517

 

140,188

 

 

140,188

Administrative fees and other income.................

 

207

 

152

 

161

 

2,602

 

3,122

 

5,603

 

8,725

Compensation and benefits.................................

 

(11,460)

 

(31,514)

 

(9,504)

 

(13,561)

 

(66,039)

 

(21,813)

 

(87,852)

General, administrative and other expenses.........

 

(3,104)

 

(2,065)

 

(3,069)

 

(5,984)

 

(14,222)

 

(11,853)

 

(26,075)

Fee related earnings (loss)..................................

 

20,501

 

31,665

 

10,309

 

574

 

63,049

 

(28,063)

 

34,986

Performance fees — realized...............................

 

67,598

 

17,385

 

18,940

 

317

 

104,240

 

 

104,240

Performance fees — unrealized...........................

 

(28,934)

 

(8,331)

 

32,202

 

3,040

 

(2,023)

 

 

(2,023)

Performance fee compensation — realized..........

 

(42,256)

 

(10,295)

 

(15,244)

 

(26)

 

(67,821)

 

 

(67,821)

Performance fee compensation — unrealized......

 

16,874

 

4,880

 

(25,139)

 

 

(3,385)

 

 

(3,385)

Net performance fees..........................................

 

13,282

 

3,639

 

10,759

 

3,331

 

31,011

 

 

31,011

Investment income (loss) — realized..................

 

26,136

 

7,058

 

1,925

 

(13,108)

 

22,011

 

 

22,011

Investment income (loss) — unrealized..............

 

(14,630)

 

(5,587)

 

12,260

 

17,654

 

9,697

 

 

9,697

Interest, dividend and other investment income..

 

792

 

1,092

 

4,404

 

(35)

 

6,253

 

 

6,253

Interest expense..................................................

 

(552)

 

(1,027)

 

(1,709)

 

(683)

 

(3,971)

 

 

(3,971)

Net investment income (loss)..............................

 

11,746

 

1,536

 

16,880

 

3,828

 

33,990

 

 

33,990

Performance related earnings (loss)..................

 

25,028

 

5,175

 

27,639

 

7,159

 

65,001

 

 

65,001

Economic net income (loss)................................

 

$45,529

 

$36,840

 

$37,948

 

$7,733

 

$128,050

 

$(28,063)

 

$99,987

Distributable earnings (loss)...............................

 

$66,172

 

$45,278

 

$19,319

 

$(13,775

)

$116,994

 

$(28,519)

 

$88,475

Total assets.........................................................

 

$583,426

 

$209,064

 

$464,469

 

$178,107

 

$1,435,066

 

$9,716

 

$1,444,782

 

Exhibit B.  Segment Results (continued)

 

($ in thousands)

 

As of and for the year ended December 31, 2014:

 

 

 

Tradable
Credit
Group

 

Direct
Lending
Group

 

Private
Equity
Group

 

Real
Estate
Group

 

Total
Segments

 

OMG

 

Total
Stand
Alone

Management fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring fees (includes ARCC Part I Fees at $118,537).......................................................

 

$144,102

 

$275,571

 

$90,690

 

$87,683

 

$598,046

 

$—

 

$598,046

Previously deferred fees......................................

 

 

 

 

 

 

 

Total management fees........................................

 

144,102

 

275,571

 

90,690

 

87,683

 

598,046

 

 

598,046

Administrative fees and other income.................

 

636

 

556

 

219

 

4,889

 

6,300

 

22,147

 

28,447

Compensation and benefits.................................

 

(43,607)

 

(138,945)

 

(34,386)

 

(47,174)

 

(264,112)

 

(109,030)

 

(373,142)

General, administrative and other expenses.........

 

(13,909)

 

(11,196)

 

(9,166)

 

(15,632)

 

(49,903)

 

(56,184)

 

(106,087)

Fee related earnings (loss)..................................

 

87,222

 

125,986

 

47,357

 

29,766

 

290,331

 

(143,067)

 

147,264

Performance fees—realized.................................

 

96,985

 

24,878

 

22,775

 

1,856

 

146,494

 

 

146,494

Performance fees—unrealized.............................

 

(71,825)

 

11,447

 

137,853

 

17,408

 

94,883

 

 

94,883

Performance fee compensation—realized............

 

(47,441)

 

(14,938)

 

(18,220)

 

 

(80,599)

 

 

(80,599)

Performance fee compensation—unrealized........

 

29,017

 

(6,740)

 

(108,876)

 

(2,830)

 

(89,429)

 

 

(89,429)

Net performance fees..........................................

 

6,736

 

14,647

 

33,532

 

16,434

 

71,349

 

 

71,349

Investment income (loss)—realized....................

 

44,616

 

918

 

4,701

 

2,344

 

52,579

 

 

52,579

Investment income (loss)—unrealized................

 

(28,629)

 

5,305

 

34,318

 

(61)

 

10,933

 

 

10,933

Interest, dividend and other investment income..

 

10,086

 

606

 

4,741

 

265

 

15,698

 

 

15,698

Interest expense..................................................

 

(2,017)

 

(1,538)

 

(3,925)

 

(1,137)

 

(8,617)

 

 

(8,617)

Net investment income (loss)..............................

 

24,056

 

5,291

 

39,835

 

1,411

 

70,593

 

 

70,593

Performance related earnings (loss)..................

 

30,792

 

19,938

 

73,367

 

17,845

 

141,942

 

 

141,942

Economic net income (loss)................................

 

$118,014

 

$145,924

 

$120,724

 

$47,611

 

$432,273

 

$(143,067)

 

$289,206

Distributable earnings (loss)...............................

 

$183,479

 

$133,510

 

$54,156

 

$10,460

 

$381,605

 

$(148,849)

 

$232,756

Total assets.........................................................

 

$501,883

 

$290,252

 

$657,185

 

$224,686

 

$1,674,006

 

$15,206

 

$1,689,212

 

Exhibit B.  Segment Results (continued)

 

($ in thousands)

 

As of and for the year ended December 31, 2013:

 

 

 

Tradable
Credit
Group

 

Direct
Lending
Group

 

Private
Equity
Group

 

Real
Estate
Group

 

Total
Segments

 

OMG

 

Total Stand
Alone

Management fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recurring fees (includes ARCC Part I Fees at $110,511)....................................................

 

$129,745

 

$238,389

 

$93,440

 

$40,051

 

$501,625

 

$—

 

$501,625

Previously deferred fees...................................

 

15,032

 

 

 

 

15,032

 

 

15,032

Total management fees.....................................

 

144,777

 

238,389

 

93,440

 

40,051

 

516,657

 

 

516,657

Administrative fees and other income...............

 

286

 

400

 

663

 

4,138

 

5,487

 

18,468

 

23,955

Compensation and benefits...............................

 

(38,289)

 

(122,082)

 

(30,595)

 

(30,812)

 

(221,778)

 

(83,288)

 

(305,066)

General, administrative and other expenses......

 

(12,296)

 

(8,836)

 

(11,536)

 

(12,844)

 

(45,512)

 

(37,372)

 

(82,884)

Fee related earnings (loss)...............................

 

94,478

 

107,871

 

51,972

 

533

 

254,854

 

(102,192)

 

152,662

Performance fees—realized..............................

 

121,414

 

17,385

 

85,067

 

317

 

224,183

 

 

224,183

Performance fees—unrealized..........................

 

15,431

 

2,326

 

48,402

 

5,824

 

71,983

 

 

71,983

Performance fee compensation expense—realized..................................................

 

(55,758)

 

(10,258)

 

(68,145)

 

(26)

 

(134,187)

 

 

(134,187)

Performance fee compensation expense—unrealized.....................................................

 

(21,428)

 

(1,488)

 

(37,191)

 

 

(60,107)

 

 

(60,107)

Net performance fees........................................

 

59,659

 

7,965

 

28,133

 

6,115

 

101,872

 

 

101,872

Investment income (loss)—realized..................

 

75,467

 

8,180

 

6,590

 

(13,215)

 

77,022

 

 

77,022

Investment income (loss)—unrealized..............

 

(32,976)

 

(3,793)

 

14,306

 

12,134

 

(10,329)

 

 

(10,329)

Interest and other income.................................

 

3,706

 

4,539

 

8,974

 

1,596

 

18,815

 

 

18,815

Interest expense................................................

 

(2,349)

 

(2,974)

 

(4,395)

 

(1,619)

 

(11,337)

 

 

(11,337)

Net investment income (loss)...........................

 

43,848

 

5,952

 

25,475

 

(1,104)

 

74,171

 

 

74,171

Performance related earnings.........................

 

103,507

 

13,917

 

53,608

 

5,011

 

176,043

 

 

176,043

Economic net income (loss)..............................

 

$197,985

 

$121,788

 

$105,580

 

$5,544

 

$430,897

 

$(102,192)

 

$328,705

Distributable earnings (loss)............................

 

$228,572

 

$122,059

 

$79,151

 

$(20,338)

 

$409,444

 

$(103,725)

 

$305,719

Total assets......................................................

 

$583,426

 

$209,064

 

$464,469

 

$178,107

 

$1,435,066

 

$9,716

 

$1,444,782

 

Exhibit C.  Consolidated Statements of Financial Condition and Statements of Operations (GAAP Financials)

($ in thousands, except unit data)

 

 

 

As of December 31,

 

 

2014

 

2013

Assets

 

 

 

(Predecessor)

Cash and cash equivalents..............................................................................................................................

$

148,858

$

89,802

Restricted cash and cash equivalents..............................................................................................................

 

32,734

 

13,344

Investments, at fair value................................................................................................................................

 

170,324

 

89,438

Derivative assets, at fair value........................................................................................................................

 

7,623

 

1,164

Performance fees receivable...........................................................................................................................

 

187,059

 

137,682

Due from affiliates..........................................................................................................................................

 

146,534

 

108,920

Other assets....................................................................................................................................................

 

64,705

 

73,600

Intangible assets, net.......................................................................................................................................

 

40,948

 

68,742

Goodwill.........................................................................................................................................................

 

85,582

 

58,159

Assets of Consolidated Funds:

 

 

 

 

Cash and cash equivalents..............................................................................................................................

 

1,314,397

 

1,638,003

Investments, at fair value................................................................................................................................

 

19,123,950

 

20,823,338

Loans held for investment, net.......................................................................................................................

 

77,514

 

Due from affiliates..........................................................................................................................................

 

11,342

 

2,010

Dividends and interest receivable...................................................................................................................

 

81,331

 

133,158

Receivable for securities sold.........................................................................................................................

 

132,753

 

427,871

Derivative assets, at fair value........................................................................................................................

 

3,126

 

14,625

Other assets....................................................................................................................................................

 

12,473

 

25,528

Total assets................................................................................................................................................

$

21,641,253

$

23,705,384

Liabilities

 

 

 

 

Accounts payable and accrued expenses........................................................................................................

$

101,310

$

67,486

Accrued compensation...................................................................................................................................

 

129,433

 

132,917

Derivative liabilities, at fair value....................................................................................................................

 

2,850

 

2,907

Due to affiliates..............................................................................................................................................

 

19,030

 

32,690

Performance fee compensation payable..........................................................................................................

 

380,268

 

295,978

Debt obligations..............................................................................................................................................

 

245,752

 

153,119

Equity compensation put option liability........................................................................................................

 

20,000

 

Deferred tax liability, net................................................................................................................................

 

19,861

 

21,002

Liabilities of Consolidated Funds:

 

 

 

 

Accounts payable and accrued expenses........................................................................................................

 

68,589

 

95,839

Due to affiliates..............................................................................................................................................

 

2,441

 

2,695

Payable for securities purchased.....................................................................................................................

 

618,902

 

945,115

Derivative liabilities, at fair value....................................................................................................................

 

42,332

 

75,115

Securities sold short, at fair value...................................................................................................................

 

3,763

 

1,633

Deferred tax liability, net................................................................................................................................

 

22,214

 

35,904

CLO loan obligations......................................................................................................................................

 

12,049,170

 

11,774,157

Fund borrowings............................................................................................................................................

 

777,600

 

2,070,598

Mezzanine debt...............................................................................................................................................

 

378,365

 

323,164

Total liabilities..........................................................................................................................................

 

14,881,880

 

16,030,319

Commitments and contingencies........................................................................................................................

 

 

 

 

Redeemable interest in Consolidated Funds......................................................................................................

 

1,037,450

 

1,093,770

Redeemable interest in Ares Operating Group entities.....................................................................................

 

23,988

 

40,751

Non-controlling interest in Consolidated Funds:

 

 

 

 

Non-controlling interest in Consolidated Funds..............................................................................................

 

4,988,729

 

5,691,874

Equity appropriated for Consolidated Funds..................................................................................................

 

(37,926)

 

155,261

Non-controlling interest in Consolidated Funds............................................................................................

 

4,950,803

 

5,847,135

Non-controlling interest in Ares Operating Group Entities..............................................................................

 

463,493

 

167,731

Members’ equity and common stock of Predecessor.........................................................................................

 

 

525,678

Controlling interest in Ares Management, L.P.:

 

 

 

 

Partners’ Capital (80,667,664 and 0 units, issued and outstanding at December 31, 2014, and 2013, respectively)..................................................................................................................................................................

 

285,025

 

Accumulated other comprehensive income (loss)...........................................................................................

 

(1,386)

 

Total controlling interest in Ares Management, L.P................................................................................

 

283,639

 

525,678

Total equity...............................................................................................................................................

 

5,697,935

 

6,540,544

Total liabilities, redeemable interest, non-controlling interests and equity..............................................

$

21,641,253

$

23,705,384

 

Exhibit C.  Consolidated Statements of Financial Condition and Statements of Operations (GAAP Financials) (continued)

($ in thousands, except unit data)

 

 

 

For the Years Ended December 31,

 

 

2014

 

2013

 

2012

Revenues

 

 

 

(Predecessor)

 

(Predecessor)

Management fees (includes ARCC Part I Fees of $118,537, $110,511 and $95,182 for the years ended December 2014, 2013 and 2012, respectively).....................................................................................................................................

$

486,477

$

375,572

$

249,584

Performance fees..........................................................................................................

 

91,412

 

79,800

 

69,491

Other fees.......................................................................................................................

 

26,000

 

23,283

 

14,971

Total revenues.........................................................................................................

 

603,889

 

478,655

 

334,046

Expenses............................................................................................................................

 

 

 

 

 

 

Compensation and benefits.......................................................................................

 

456,372

 

333,902

 

288,719

Performance fee compensation.................................................................................

 

170,028

 

194,294

 

267,725

General, administrative and other expenses............................................................

 

166,839

 

138,464

 

85,582

Consolidated Funds’ expenses...................................................................................

 

66,800

 

135,237

 

116,505

Total expenses.........................................................................................................

 

860,039

 

801,897

 

758,531

Other income (expense)..................................................................................................

 

 

 

 

 

 

Interest and other investment income......................................................................

 

7,244

 

5,996

 

8,424

Interest expense............................................................................................................

 

(8,617)

 

(9,475)

 

(8,679)

Debt extinguishment expense....................................................................................

 

 

(1,862)

 

(3,032)

Other income (expense), net.......................................................................................

 

(2,422)

 

(200)

 

7

Net realized gain (loss) on investments.....................................................................

 

7,812

 

(6,373)

 

6,662

Net change in unrealized appreciation (depreciation) on investments...............

 

24,316

 

15,295

 

(1,670)

Interest and other investment income of Consolidated Funds............................

 

937,835

 

1,236,037

 

1,406,593

Interest expense of Consolidated Funds..................................................................

 

(666,373)

 

(534,431)

 

(449,377)

Debt extinguishment gain of Consolidated Funds.................................................

 

 

11,800

 

Net realized gain (loss) on investments of Consolidated Funds...........................

 

44,781

 

64,382

 

1,794,412

Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds.................................................................................................

 

468,489

 

414,714

 

(1,067,013)

Total other income (expense)..............................................................................

 

813,065

 

1,195,883

 

1,686,327

Income before taxes....................................................................................................

 

556,915

 

872,641

 

1,261,842

Income tax expense.....................................................................................................

 

11,253

 

59,263

 

26,154

Net income................................................................................................................

 

545,662

 

813,378

 

1,235,688

Less: Net income attributable to redeemable interests in Consolidated Funds.........................................................................................................................

 

2,565

 

137,924

 

199,075

Less: Net income attributable to non-controlling interests in Consolidated Funds................................................................................................

 

417,793

 

448,847

 

734,517

Less: Net income attributable to redeemable interests in Ares Operating Group Entities......................................................................................................................

 

731

 

2,451

 

3,293

Less: Net income attributable to non-controlling interests in Ares Operating Group Entities.....................................................................................

 

89,585

 

43,674

 

78,157

Less: Net income attributable to controlling interests in Predecessor...........

 

 

180,482

 

220,646

Net income attributable to Ares Management, L.P. per common unit...............

$

34,988

$

$

Basic....................................................................................................................

$

0.43

 

 

 

 

Diluted.................................................................................................................

$

0.43

 

 

 

 

Weighted-average common units..............................................................................

 

 

 

 

 

 

Basic....................................................................................................................

 

80,358,036

 

 

 

 

Diluted.................................................................................................................

 

80,358,036

 

 

 

 

 

Exhibit D.  Supplemental Financial Information Consolidating Schedules

($ in thousands, except unit data)

 

 

 

As of December 31, 2014

 

 

Consolidated
Company
Entities

 

Consolidated
Funds

 

Eliminations

 

Consolidated

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents..........................................................................

 

$148,858

 

$—

 

$—

 

$148,858

Restricted cash and cash equivalents...........................................................

 

32,734

 

 

 

32,734

Investments, at fair value............................................................................

 

594,346

 

 

(424,022)

 

170,324

Derivative assets, at fair value.....................................................................

 

7,623

 

 

 

7,623

Performance fees receivable........................................................................

 

548,098

 

 

(361,039)

 

187,059

Due from affiliates......................................................................................

 

166,225

 

 

(19,691)

 

146,534

Other assets................................................................................................

 

64,798

 

 

(93)

 

64,705

Intangible assets, net...................................................................................

 

40,948

 

 

 

40,948

Goodwill.....................................................................................................

 

85,582

 

 

 

85,582

Assets of Consolidated Funds.....................................................................

 

 

 

 

 

 

 

 

Cash and cash equivalents..........................................................................

 

 

1,314,397

 

 

1,314,397

Investments, at fair value............................................................................

 

 

19,123,950

 

 

19,123,950

Loans held for investment, net....................................................................

 

 

77,514

 

 

77,514

Due from affiliates......................................................................................

 

 

13,262

 

(1,920)

 

11,342

Dividends and interest receivable................................................................

 

 

81,331

 

 

81,331

Receivable for securities sold......................................................................

 

 

132,753

 

 

132,753

Derivative assets, at fair value.....................................................................

 

 

3,126

 

 

3,126

Other assets................................................................................................

 

 

12,473

 

 

12,473

Total assets...........................................................................................

 

$1,689,212

 

$20,758,806

 

$(806,765)

 

$21,641,253

Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses.....................................................

 

101,912

 

 

(602)

 

101,310

Accrued compensation................................................................................

 

129,433

 

 

 

129,433

Derivative liabilities, at fair value................................................................

 

2,850

 

 

 

2,850

Due to affiliates...........................................................................................

 

19,881

 

 

(851)

 

19,030

Performance fee compensation payable......................................................

 

381,164

 

 

(896)

 

380,268

Debt obligations..........................................................................................

 

245,752

 

 

 

245,752

Equity compensation put option liability.....................................................

 

20,000

 

 

 

20,000

Deferred tax liability, net.............................................................................

 

19,861

 

 

 

19,861

Liabilities of Consolidated Funds...............................................................

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities............................

 

 

68,674

 

(85)

 

68,589

Due to affiliates...........................................................................................

 

 

63,417

 

(60,976)

 

2,441

Payable for securities purchased.................................................................

 

 

618,902

 

 

618,902

Derivative liabilities, at fair value................................................................

 

 

42,332

 

 

42,332

Securities sold short, at fair value...............................................................

 

 

3,763

 

 

3,763

Deferred tax liability, net.............................................................................

 

 

22,214

 

 

22,214

CLO loan obligations..................................................................................

 

 

12,120,842

 

(71,672)

 

12,049,170

Fund borrowings........................................................................................

 

 

777,600

 

 

777,600

Mezzanine debt...........................................................................................

 

 

378,365

 

 

378,365

Total liabilities......................................................................................

 

920,853

 

14,096,109

 

(135,082)

 

14,881,880

Commitments and contingencies................................................................

 

 

 

 

 

 

 

 

Redeemable interest in Consolidated Funds..............................................

 

 

1,037,450

 

 

1,037,450

Redeemable interest in Ares Operating Group entities.............................

 

23,988

 

 

 

23,988

Non-controlling interest in Consolidated Funds:

 

 

 

 

Non-controlling interest in Consolidated Funds.........................................

 

 

5,663,172

 

(674,443)

 

4,988,729

Equity appropriated for Consolidated Funds..............................................

 

 

(37,926)

 

 

(37,926)

Non-controlling interest in Consolidated Funds..............................

 

 

5,625,246

 

(674,443)

 

4,950,803

Non-controlling interest in Ares Operating Group Entities.....................

 

463,493

 

 

 

463,493

Controlling interest in Ares Management, L.P.:

 

 

 

 

 

 

 

 

Partners’ Capital (80,667,664 units issued and outstanding).................

 

285,025

 

 

 

285,025

Accumulated other comprehensive gain (loss).......................................

 

(4,146)

 

 

2,760

 

(1,386)

Total controlling interest in Ares Management, L.P........................

 

280,879

 

 

2,760

 

283,639

Total equity..........................................................................................

 

744,372

 

5,625,246

 

(671,683)

 

5,697,935

Total liabilities, redeemable interests, non-controlling interests and equity.........................................................................

 

$1,689,212

 

20,758,806

 

(806,765)

 

$21,641,253

 

Exhibit D.  Supplemental Financial Information Consolidating Schedules (continued)

($ in thousands)

 

 

 

As of December 31, 2013

 

 

Consolidated
Company
Entities

 

Consolidated
Funds

 

Eliminations

 

Consolidated

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents............................................................................

 

$89,802

 

$—

 

$—

 

$89,802

Restricted cash and cash equivalents..........................................................

 

13,344

 

 

 

13,344

Investments, at fair value..............................................................................

 

525,596

 

 

(436,158)

 

89,438

Derivative assets, at fair value......................................................................

 

1,164

 

 

 

1,164

Performance fees receivable.........................................................................

 

481,751

 

 

(344,069)

 

137,682

Due from affiliates..........................................................................................

 

130,625

 

 

(21,705)

 

108,920

Other assets......................................................................................................

 

75,599

 

 

(1,999)

 

73,600

Intangible assets, net......................................................................................

 

68,742

 

 

 

68,742

Goodwill............................................................................................................

 

58,159

 

 

 

58,159

Assets of Consolidated Funds..........................................................................

 

 

 

 

 

 

 

 

Cash and cash equivalents............................................................................

 

 

1,638,003

 

 

1,638,003

Investments, at fair value..............................................................................

 

 

20,823,338

 

 

20,823,338

Due from affiliates..........................................................................................

 

 

2,010

 

 

2,010

Dividends and interest receivable.................................................................

 

 

133,158

 

 

133,158

Receivable for securities sold........................................................................

 

 

427,871

 

 

427,871

Derivative assets, at fair value......................................................................

 

 

14,625

 

 

14,625

Other assets......................................................................................................

 

 

27,505

 

(1,977)

 

25,528

Total assets.................................................................................................

 

$1,444,782

 

$23,066,510

 

$(805,908)

 

$23,705,384

Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses...................................................

 

$69,550

 

$—

 

$(2,064)

 

$67,486

Accrued compensation..................................................................................

 

132,917

 

 

 

132,917

Derivative liabilities, at fair value.................................................................

 

2,907

 

 

 

2,907

Due to affiliates...............................................................................................

 

35,149

 

 

(2,459)

 

32,690

Performance fee compensation payable....................................................

 

295,978

 

 

 

295,978

Debt obligations...............................................................................................

 

153,119

 

 

 

153,119

Deferred tax liability, net...............................................................................

 

21,002

 

 

 

21,002

Liabilities of Consolidated Funds..................................................................

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities.......................

 

 

95,839

 

 

95,839

Due to affiliates...............................................................................................

 

 

92,211

 

(89,516)

 

2,695

Payable for securities purchased..................................................................

 

 

945,115

 

 

945,115

Derivative liabilities, at fair value.................................................................

 

 

75,115

 

 

75,115

Securities sold short, at fair value.................................................................

 

 

1,633

 

 

1,633

Deferred tax liability, net...............................................................................

 

 

35,904

 

 

35,904

CLO loan obligations......................................................................................

 

 

11,838,396

 

(64,239)

 

11,774,157

Fund borrowings..............................................................................................

 

 

2,070,598

 

 

2,070,598

Mezzanine debt...............................................................................................

 

 

323,164

 

 

323,164

Total liabilities..........................................................................................

 

710,622

 

15,477,975

 

(158,278)

 

16,030,319

Commitments and contingencies....................................................................

 

 

 

 

 

 

 

 

Redeemable interest in Consolidated Funds................................................

 

 

1,093,770

 

 

1,093,770

Redeemable interest in Ares Operating Group entities............................

 

40,751

 

 

 

40,751

Non-controlling interest in Consolidated Funds:

 

 

 

 

 

 

 

 

Non-controlling interest in Consolidated Funds.........................................

 

 

6,339,504

 

(647,630)

 

5,691,874

Equity appropriated for Consolidated Funds............................................

 

 

155,261

 

 

155,261

Non-controlling interest in Consolidated Funds................................

 

 

6,494,765

 

(647,630)

 

5,847,135

Non-controlling interest in Ares Operating Group Entities....................

 

167,731

 

 

 

167,731

Members’ equity and common stock of Predecessor................................

 

525,678

 

 

 

525,678

Total equity................................................................................................

 

693,409

 

6,494,765

 

(647,630)

 

6,540,544

Total liabilities, redeemable interests, non-controlling interests and equity...............................................................................................

 

$1,444,782

 

$23,066,510

 

$(805,908)

 

$23,705,384

 

Exhibit D.  Supplemental Financial Information Consolidating Schedules (continued)

($ in thousands)

 

 

 

 

For the Three Months Ended December 31, 2014

 

 

Consolidated
Company
Entities

 

Consolidated
Funds

 

Eliminations

 

Consolidated

Revenues

 

 

 

 

 

 

 

 

Management fees (includes ARCC Part I Fees of $33,396).....................

 

$161,106

 

$—

 

$(27,068)

 

$134,038

Performance fees....................................................................................

 

61,013

 

 

(38,875)

 

22,138

Other fees...............................................................................................

 

8,438

 

 

(1,132)

 

7,306

Total revenues..................................................................................

 

230,557

 

 

(67,075)

 

163,482

Expenses.....................................................................................................

 

 

 

 

 

 

 

 

Compensation and benefits....................................................................

 

108,781

 

 

 

108,781

Performance fee compensation...............................................................

 

44,080

 

 

 

44,080

General, administrative and other expense.............................................

 

46,867

 

 

 

46,867

Consolidated Fund expenses..................................................................

 

 

43,480

 

(29,738)

 

13,742

Total expenses...................................................................................

 

199,728

 

43,480

 

(29,738)

 

213,470

Other income (expense).............................................................................

 

 

 

 

 

 

 

 

Interest, dividend and other investment income.....................................

 

2,185

 

 

(2,614)

 

(429)

Interest expense.....................................................................................

 

(3,376)

 

 

 

(3,376)

Other income (expense), net...................................................................

 

1,203

 

 

1,222

 

2,425

Net realized gain (loss) on investments..................................................

 

17,395

 

 

(10,057)

 

7,338

Net change in unrealized appreciation (depreciation) on investments.....

 

(9,802)

 

 

9,160

 

(642)

Interest, dividend and other investment income of Consolidated Funds.

 

 

199,683

 

(131)

 

199,552

Interest expense of Consolidated Funds.................................................

 

 

(105,966)

 

3,900

 

(102,066)

Net realized gain (loss) on investments of Consolidated Funds..............

 

 

(27,052)

 

 

(27,052)

Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds...........................................................................

 

 

145,998

 

(4,122)

 

141,876

Total other income (expense)...........................................................

 

7,605

 

212,663

 

(2,642)

 

217,626

Income (loss) before taxes.....................................................................

 

38,434

 

169,183

 

(39,980)

 

167,638

Income tax expense (benefit).................................................................

 

13,073

 

(2,791)

 

 

10,282

Net income (loss)...............................................................................

 

25,361

 

171,974

 

(39,980)

 

157,356

Less: Net income (loss) attributable to redeemable interests in Consolidated Funds........................................................

 

 

(24,995)

 

793

 

(24,202)

Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds..........................................................................

 

 

196,969

 

(40,773)

 

156,196

Less: Net income (loss) attributable to redeemable interests in Ares Operating Group Entities.................................................................

 

158

 

 

 

158

Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group Entities........................................................

 

22,029

 

 

 

22,029

Net income (loss) attributable to Ares Management, L.P.....................

 

$3,173

 

$—

 

$—

 

$3,173

 

Exhibit D.  Supplemental Financial Information Consolidating Schedules (continued)

($ in thousands)

 

 

 

 

For the Three Months Ended December 31, 2013

 

 

Consolidated
Company
Entities

 

Consolidated
Funds

 

Eliminations

 

Consolidated

Revenues

 

 

 

 

 

 

 

 

Management fees (includes ARCC Part I Fees of $29,001)....................

 

$140,188

 

$—

 

$(33,673)

 

$106,515

Performance fees...................................................................................

 

98,861

 

 

(67,928)

 

30,933

Other fees..............................................................................................

 

8,727

 

 

(236)

 

8,491

Total revenues.................................................................................

 

247,776

 

 

(101,837)

 

145,939

Expenses....................................................................................................

 

 

 

 

 

 

 

 

Compensation and benefits...................................................................

 

93,061

 

 

 

93,061

Performance fee compensation..............................................................

 

71,207

 

 

 

71,207

General, administrative and other expense............................................

 

39,584

 

 

(258)

 

39,326

Consolidated Fund expenses.................................................................

 

 

74,622

 

(36,216)

 

38,406

Total expenses..................................................................................

 

203,852

 

74,622

 

(36,474)

 

242,000

Other income (expense)............................................................................

 

 

 

 

 

 

 

 

Interest, dividend and other investment income....................................

 

6,201

 

 

(5,668)

 

533

Interest expense....................................................................................

 

(2,110)

 

 

 

(2,110)

Debt extinguishment expense................................................................

 

(1,862)

 

 

 

(1,862)

Other income (expense), net..................................................................

 

(145)

 

 

 

(145)

Net realized gain (loss) on investments.................................................

 

22,004

 

 

(28,609)

 

(6,605)

Net change in unrealized appreciation (depreciation) on investments....

 

13,260

 

 

3,031

 

16,291

Interest, dividend and other investment income of Consolidated Funds

 

 

291,160

 

(141)

 

291,019

Interest expense of Consolidated Funds................................................

 

 

(198,851)

 

1,206

 

(197,645)

Debt extinguishment gain of Consolidated Funds..................................

 

 

11,800

 

 

11,800

Net realized gain (loss) on investments of Consolidated Funds.............

 

 

(24,614)

 

 

(24,614)

Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds..........................................................................

 

 

350,088

 

3,803

 

353,891

Total other income (expense)..........................................................

 

37,348

 

429,583

 

(26,378)

 

440,553

Income (loss) before taxes....................................................................

 

81,272

 

354,961

 

(91,741)

 

344,492

Income tax expense (benefit)................................................................

 

647

 

23,064

 

 

23,711

Net income (loss)..............................................................................

 

80,625

 

331,897

 

(91,741)

 

320,781

Less: Net income (loss) attributable to redeemable interests in Consolidated Funds.......................................................

 

 

31,896

 

(926)

 

30,970

Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds.........................................................................

 

 

300,001

 

(90,815)

 

209,186

Less: Net income (loss) attributable to redeemable interests in Ares Operating Group Entities................................................................

 

1,629

 

 

 

1,629

Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group Entities.......................................................

 

15,663

 

 

 

15,663

Less: Net income (loss) attributable to controlling interests in Predecessor......................................................................................

 

63,333

 

 

 

63,333

Net income (loss) attributable to Ares Management, L.P....................

 

$—

 

$—

 

$—

 

$—

 

Exhibit D.  Supplemental Financial Information Consolidating Schedules (continued)

 

($ in thousands)

 

 

 

For the Year Ended December 31, 2014

 

 

Consolidated
Company
Entities

 

Consolidated
Funds

 

Eliminations

 

Consolidated

Revenues

 

 

 

 

 

 

 

 

Management fees (includes ARCC Part I Fees of $118,537).................

 

$ 598,046

 

$—

 

$(111,569)

 

$486,477

Performance fees....................................................................................

 

226,790

 

 

(135,378)

 

91,412

Other fees...............................................................................................

 

28,447

 

 

(2,447)

 

26,000

Total revenues..................................................................................

 

853,283

 

 

(249,394)

 

603,889

Expenses....................................................................................................

 

 

 

 

 

 

 

 

Compensation and benefits.....................................................................

 

456,372

 

 

 

456,372

Performance fee compensation...............................................................

 

170,028

 

 

 

170,028

General, administrative and other expense..............................................

 

166,839

 

 

 

166,839

Consolidated Fund expenses..................................................................

 

 

187,494

 

(120,694)

 

66,800

Total expenses..................................................................................

 

793,239

 

187,494

 

(120,694)

 

860,039

Other income (expense)............................................................................

 

 

 

 

 

 

 

 

Interest and other investment income......................................................

 

15,956

 

 

(8,712)

 

7,244

Interest expense......................................................................................

 

(8,617)

 

 

 

(8,617)

Other income (expense), net...................................................................

 

(3,644)

 

 

1,222

 

(2,422)

Net realized gain (loss) on investments..................................................

 

54,434

 

 

(46,622)

 

7,812

Net change in unrealized appreciation (depreciation) on investments................................................................................

 

23,667

 

 

649

 

24,316

Interest and other investment income of Consolidated Funds.................

 

 

939,735

 

(1,900)

 

937,835

Interest expense of Consolidated Funds.................................................

 

 

(674,373)

 

8,000

 

(666,373)

Net realized gain (loss) on investments of Consolidated Funds.............

 

 

44,781

 

 

44,781

Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds...................................................

 

 

475,009

 

(6,520)

 

468,489

Total other income (expense)..........................................................

 

81,796

 

785,152

 

(53,883)

 

813,065

 

 

 

 

 

 

 

 

 

Income before taxes................................................................................

 

141,840

 

597,658

 

(182,583)

 

556,915

Income tax expense (benefit)..................................................................

 

16,536

 

(5,283)

 

 

11,253

 

 

 

 

 

 

 

 

 

Net income........................................................................................

 

125,304

 

602,941

 

(182,583)

 

545,662

Less: Net income attributable to redeemable interests in Consolidated Funds................................................................................................

 

 

3,071

 

(506)

 

2,565

Less: Net income attributable to non-controlling interests in Consolidated Funds........................................................................

 

 

599,870

 

(182,077)

 

417,793

Less: Net income attributable to redeemable interests in Ares Operating Group Entities...............................................................

 

731

 

 

 

731

Less: Net income attributable to non-controlling interests in Ares Operating Group Entities......................................................

 

89,585

 

 

 

89,585

Net income attributable to Ares Management, L.P..........................

 

$34,988

 

$—

 

$—

 

$34,988

 

Exhibit D.  Supplemental Financial Information Consolidating Schedules (continued)

($ in thousands)

 

 

 

For the Year Ended December 31, 2013

 

 

Consolidated
Company Entities

 

Consolidated
Funds

 

Eliminations

 

Consolidated

Revenues

 

 

 

 

 

 

 

 

Management fees (includes ARCC Part I Fees of $110,511)....................................

 

$516,657

 

$—

 

$(141,085)

 

$375,572

Performance fees........................................................................................................

 

290,026

 

 

(210,226)

 

79,800

Other fees...................................................................................................................

 

23,955

 

 

(672)

 

23,283

Total revenues.....................................................................................................

 

830,638

 

 

(351,983)

 

478,655

Expenses.......................................................................................................................

 

 

 

 

 

 

 

 

Compensation and benefits........................................................................................

 

333,902

 

 

 

333,902

Performance fee compensation...................................................................................

 

194,294

 

 

 

194,294

General, administrative and other expense.................................................................

 

138,722

 

 

(258)

 

138,464

Consolidated Fund expenses......................................................................................

 

 

317,083

 

(181,846)

 

135,237

Total expenses.....................................................................................................

 

666,918

 

317,083

 

(182,104)

 

801,897

Other income (expense)...............................................................................................

 

 

 

 

 

 

 

 

Interest and other investment income.........................................................................

 

18,815

 

 

(12,819)

 

5,996

Interest expense..........................................................................................................

 

(9,475)

 

 

 

(9,475)

Debt extinguishment expense.....................................................................................

 

(1,862)

 

 

 

(1,862)

Other income (expense), net.......................................................................................

 

(200)

 

 

 

 

 

(200)

Net realized gain (loss) on investments......................................................................

 

77,015

 

 

(83,388)

 

(6,373)

Net change in unrealized appreciation (depreciation) on investments.........................

 

(3,983)

 

 

19,278

 

15,295

Interest and other investment income of Consolidated Funds....................................

 

 

1,236,720

 

(683)

 

1,236,037

Interest expense of Consolidated Funds.....................................................................

 

 

(542,587)

 

8,156

 

(534,431)

Debt extinguishment gain of Consolidated Funds......................................................

 

 

11,800

 

 

11,800

Net realized gain (loss) on investments of Consolidated Funds.................................

 

 

64,382

 

 

64,382

Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds...............................................................................................

 

 

405,549

 

9,165

 

414,714

Total other income (expense).............................................................................

 

80,310

 

1,175,864

 

(60,291)

 

1,195,883

Income before taxes...................................................................................................

 

244,030

 

858,781

 

(230,170)

 

872,641

Income tax expense....................................................................................................

 

17,423

 

41,840

 

 

59,263

Net income...........................................................................................................

 

226,607

 

816,941

 

(230,170)

 

813,378

Less: Net income attributable to redeemable interests in Consolidated Funds.

 

 

141,040

 

(3,116)

 

137,924

Less: Net income attributable to non-controlling interests in Consolidated Funds 

 

 

675,901

 

(227,054)

 

448,847

Less: Net income attributable to redeemable interests in Ares Operating Group Entities.....................................................................................................

 

2,451

 

 

 

2,451

Less: Net income attributable to non-controlling interests in Ares Operating Group Entities.................................................................................................................

 

43,674

 

 

 

43,674

Less: Net income attributable to controlling interest in Predecessor..................

 

180,482

 

 

 

180,482

Net income attributable to Ares Management, L.P..............................................

 

$—

 

$—

 

$—

 

$—

 

Exhibit E.  Reconciliation from Segments to GAAP Financials

($ in thousands)

 

 

 

For the Three
Months Ended
December 31, 2014

 

For the Three
Months Ended
December 31, 2013

 

For the Year Ended
December 31, 2014

 

For the Year Ended
December 31, 2013

 

Economic Net Income and Fee Related Earnings

 

 

 

 

 

 

 

 

 

Income (loss) before taxes..................................................

 

$167,638

 

$344,492

 

$556,915

 

$872,641

 

Adjustments:

 

 

 

 

 

 

 

 

 

Amortization of intangibles.............................................

 

5,918

 

6,286

 

27,610

 

34,399

 

Depreciation expense......................................................

 

1,696

 

1,686

 

7,347

 

6,255

 

Equity compensation expenses.......................................

 

8,142

 

7,460

 

83,230

 

28,837

 

Income tax expense........................................................

 

 

85

 

 

546

 

Acquisition related expenses..........................................

 

3,459

 

(2,601)

 

11,043

 

6,235

 

Placement fees and underwriting costs............................

 

6,928

 

5,803

 

14,753

 

8,403

 

Operating Management Group expenses, net..................

 

37,201

 

28,063

 

143,067

 

102,192

 

Loss on fixed asset disposal...........................................

 

125

 

 

3,062

 

 

Non-cash other expense.................................................

 

 

 

324

 

 

Income of non-controlling interests in Consolidated Funds...................................................................................

 

(131,994)

 

(240,156)

 

(420,358)

 

(586,771)

 

Income tax expense (benefit) of non-controlling interests in Consolidated Funds................................................

 

2,791

 

(23,064)

 

5,283

 

(41,840)

 

Total consolidation adjustments and reconciling items...

 

(65,734)

 

(216,438)

 

(124,640)

 

(441,744)

 

Economic net income.................................................

 

$101, 897

 

$128,050

 

$432,273

 

$430,897

 

Total performance fees income—realized............................

 

(56,787)

 

(104,240)

 

(146,494)

 

(224,183)

 

Total performance fees income—unrealized........................

 

(7,876)

 

2,023

 

(94,883)

 

(71,983)

 

Total performance fee compensation—realized...................

 

33,876

 

67,821

 

80,599

 

134,187

 

Total performance fee compensation—unrealized...............

 

10,207

 

3,385

 

89,429

 

60,107

 

Net investment income........................................................

 

(4,077)

 

(33,990)

 

(70,593)

 

(74,171)

 

Fee related earnings..................................................

 

$77,240

 

$63,049

 

$290,331

 

$254,854

 

Management fees.................................................................

 

$161,106

 

$140,188

 

$598,046

 

$516,657

 

Administrative fees and other income.................................

 

1,617

 

3,122

 

6,300

 

5,487

 

Compensation and benefits.................................................

 

(72,276)

 

(66,039)

 

(264,112)

 

(221,778)

 

General, administrative and other expenses.........................

 

(13,207)

 

(14,222)

 

(49,903)

 

(45,512)

 

Fee related earnings..................................................

 

$77,240

 

$63,049

 

$290,331

 

$254,854

 

 

 

 

 

 

 

 

 

 

 

Distributable Earnings

 

 

 

 

 

 

 

 

 

Income before taxes............................................................

 

$167,638

 

$344,492

 

$556,915

 

$872,641

 

Adjustments:

 

 

 

 

 

 

 

 

 

Amortization of intangibles.............................................

 

5,918

 

6,286

 

27,610

 

34,399

 

Equity compensation expenses.......................................

 

8,142

 

7,460

 

83,230

 

28,837

 

Operating Management distributable loss(1)...................

 

38,430

 

28,519

 

148,849

 

103,725

 

Non-cash acquisition-related expenses...........................

 

 

(2,254)

 

 

 

Taxes paid(2).................................................................

 

(1,115)

 

 

(2,335)

 

 

Other non-cash items......................................................

 

(1,525)

 

 

(1,201)

 

 

Income (loss) of non-controlling interests in Consolidated Funds....................................................

 

(131,994)

 

(240,156)

 

(420,358)

 

(586,771)

 

Income tax (expense) benefit of non-controlling interests in Consolidated Funds................................................

 

2,791

 

(23,064)

 

5,283

 

(41,840)

 

Unrealized performance fees..........................................

 

(7,876)

 

2,023

 

(94,883)

 

(71,983)

 

Unrealized performance fee compensation.....................

 

10,207

 

3,385

 

89,429

 

60,107

 

Unrealized investment and other income (loss)..............

 

12,398

 

(9,697)

 

(10,933)

 

10,329

 

Distributable Earnings..............................................

 

$102,968

 

$116,994

 

$381,605

 

$409,444

 

Fee related earnings.............................................................

 

$77,240

 

$63,049

 

$290,331

 

$254,854

 

Performance fees—realized.................................................

 

56,787

 

104,240

 

146,494

 

224,183

 

Performance fee compensation—realized............................

 

(33,876)

 

(67,821)

 

(80,599)

 

(134,187)

 

Investment and other income realized, net...........................

 

14,950

 

24,293

 

59,659

 

84,500

 

Net performance related earnings—realized....................

 

37,861

 

60,712

 

125,554

 

174,496

 

Less:

 

 

 

 

 

 

 

 

 

One-time acquisition costs(3).........................................

 

(2,939)

 

351

 

(8,446)

 

(6,235)

 

Income tax expense(4)...................................................

 

(1,150)

 

(85)

 

(1,722)

 

(546)

 

Non-cash income items..................................................

 

 

 

(1,525)

 

 

Placement fees and underwriting costs............................

 

(6,928)

 

(5,803)

 

(14,753)

 

(8,403)

 

Non-cash depreciation and amortization(5)....................

 

(1,117)

 

(1,230)

 

(7,832)

 

(4,722)

 

Distributable earnings...............................................

 

$102,968

 

$116,994

 

$381,605

 

$409,444

 

 


(1)                                  Represents OMG distributable earnings which includes depreciation expense.

(2)                                  Represents current tax expense of subsidiary operating entities.

(3)                                  One-time acquisition costs are reduced by the amounts attributable to OMG, equal to $2,597 for the year ended December 31, 2014.

(4)                                  Represents current tax expense of subsidiary operating entities. Taxes attributable to OMG equal to $5 and $613 for the three months and year ended December 31, 2014, respectively.

(5)                                  Depreciation and amortization includes loss on disposal of assets, and is reduced by the amounts attributed to OMG equal to $705 and $456 for the three months ended December 31, 2014 and 2013, respectively and $2,577 and $1,533 for the years ended December 31, 2014 and 2013, respectively.

 

Exhibit F.  Units Outstanding As of December 31, 2014

 

 

 

Units Outstanding

 

Adjusted Common
Units Outstanding

Ares Management, L.P. Common Units Outstanding ...........................................

 

80,667,664

 

80,667,664

Ares Operating Group Units exchangeable into Common Units ..........................

 

130,858,662

 

-

Dilutive Effect of Unvested Restricted Common Units(1) .........................................................

 

81,983

 

31,268(2)

Dilutive Effect of Unvested Options .....................................................................

 

-

 

-

Total......................................................................................................................

 

211,608,309

 

80,698,932

 

(1)               We apply the treasury stock method to determine the dilutive weighted-average common units represented by our restricted units to be settled in common units and options to acquire common units. Under the treasury stock method, compensation expense attributed to future services and not yet recognized is presumed to be used to acquire outstanding common units, thus reducing the weighted-average number of units and the dilutive effect of these awards.

(2)               Represent proportional dilutive impact based upon the percentage of the Ares Operating Group owned by Ares Management, L.P. (38.14%).

 

Exhibit G.  Per Unit Calculations ($ in thousands, except per unit data)

 

 

 

 

 

 

 

 

 

 

 

 

 

Q4-14

 

Q3-14

 

Pro Forma
Q2-14(1)

 

Pro Forma
Q1-14(1)

 

After Tax Economic Net Income per Unit

 

 

 

 

 

 

 

 

 

Economic Net Income Before Taxes..........................................................................

 

$64,696

 

$72,055

 

$75,051

 

$77,405

 

Less: Entity Level Foreign, State and Local Taxes............................................

 

1,155

 

626

 

348

 

206

 

Economic Net Income After Entity Level, Foreign, State and Local Taxes........

 

$63,541

 

$71,429

 

$74,699

 

$77,199

 

x Tax Rate.........................................................................................................

 

10.7%

 

5.7%

 

6.3%

 

6.1%

 

Less: Income Tax Provision (2).............................................................................................................................

 

6,813

 

4,061

 

4,733

 

4,724

 

After Tax Economic Net Income............................................................................

 

$56,728

 

$67,368

 

$69,966

 

$72,475

 

After Tax Economic Net Income per Unit Outstanding......................................

 

$0.27

 

$0.32

 

$0.33

 

$0.34

 

 

 

 

 

 

 

 

 

 

 

After Tax Economic Net Income per Common Unit

 

 

 

 

 

 

 

 

 

Economic Net Income After Entity Level, Foreign, State and Local Taxes................

 

$63,541

 

$71,429

 

$74,699

 

$77,199

 

x Common Ownership Percentage....................................................................

 

38.14%

 

38.12%

 

38.12%

 

38.12%

 

Economic Net Income Attributable to Common Unitholders.....................................

 

$24,235

 

$27,229

 

$28,475

 

$29,428

 

x Tax Rate.........................................................................................................

 

28.1%

 

14.9%

 

16.6%

 

16.1%

 

Less: Income Tax Provision (2).............................................................................................................................

 

6,813

 

4,061

 

4,733

 

4,724

 

After Tax Economic Net Income Attributable to Common Unitholders...........

 

$17,422

 

$23,168

 

$23,742

 

$24,704

 

After Tax Economic Net Income per Adjusted Common Unit...........................

 

$0.22

 

$0.29

 

$0.29

 

$0.30

 

 

 

 

 

 

 

 

 

 

 

Distributable Earnings per Unit

 

 

 

 

 

 

 

 

 

Distributable Earnings................................................................................................

 

$65,693

 

$65,950

 

$48,900

 

$53,624

 

Less: Entity Level Foreign, State and Local Tax................................................

 

1,155

 

626

 

348

 

206

 

Distributable Earnings After Entity Level Foreign, State and Local Tax..........

 

$64,538

 

$65,324

 

$48,553

 

$53,418

 

x Common Ownership Percentage....................................................................

 

38.14%

 

38.12%

 

38.12%

 

38.12%

 

Distributable Earnings Attributable to Common Unitholders.....................................

 

$24,615

 

$24,902

 

$18,508

 

$20,363

 

Less: Current Provision for Income Taxes(3)................................................................................

 

3,423

 

3,788

 

4,115

 

2,865

 

Distributable Earnings After Tax Attributable to Common Unitholders.........

 

$21,192

 

$21,113

 

$14,393

 

$17,498

 

Distributable Earnings per Common Unit Outstanding.....................................

 

$0.26

 

$0.26

 

$0.18

 

$0.22

 

Actual Distribution per Common Unit Outstanding...........................................

 

$0.24

 

$0.24

 

$0.18

 

N/A

 

 

(1)          For financial reporting prior to the IPO, certain numbers have been adjusted to assume the IPO effective date was January 1, 2014 to provide comparative analysis.

 

(2)          The provision for income taxes on ENI was calculated by multiplying (1) Ares Management, L.P.’s share of ENI that is subject to corporate level taxes (reduced by the interest expense attributable to an intercompany loan between Ares Management, L.P. and a corporate subsidiary and its share of other deductible items) by (2) the Company’s assumed corporate tax rate.

 

(3)          The provision for income taxes on DE represents the current provision for income taxes on pre-tax net income or loss (reduced by the interest expense attributable to an intercompany loan between Ares Management, L.P. and a corporate subsidiary), adjusted to reflect Ares Management, L.P.’s current ownership percentage of the Company’s tax paying corporate subsidiaries.

 

Exhibit H. Glossary of Terms

 

ARCC Part I Fees...............................................

 

ARCC Part I Fees refers to fees based on ARCC’s net investment income (before ARCC Part I Fees and fees based on ARCC’s net capital gains, which are paid annually (“ARCC Part II Fees”)), which are paid quarterly.

 

Ares Operating Group Units............................

 

Ares Operating Group Units refer, collectively, to a partnership unit in each of the Ares Operating Group entities, which include Ares Holdings L.P., Ares Domestic Holdings L.P., Ares Offshore Holdings L.P., Ares Investments L.P. and Ares Real Estate Holdings L.P.

 

Assets Under Management...............................

 

Assets Under Management (or “AUM”) refers to the assets of our funds. For our funds other than CLOs, our AUM represents the sum of the net asset value of such funds, the drawn and undrawn debt (at the fund-level including amounts subject to restrictions) and uncalled committed capital (including commitments to funds that have yet to commence their investment periods). For our funds that are CLOs, our AUM represents subordinated notes (equity) plus all drawn and undrawn debt tranches.

 

Consolidated Funds............................................

 

Consolidated Funds refers collectively to certain Ares-affiliated funds, related co-investment entities and certain CLOs that are required under GAAP to be consolidated in our combined and consolidated financial statements.

 

Economic Net Income.......................................

 

Economic net income (or “ENI”) represents net income excluding (a) income tax expense, (b) operating results of our Consolidated Funds, (c) depreciation expense, (d) the effects of changes arising from corporate actions, and (e) certain other items that we believe are not indicative of our core performance. Changes arising from corporate actions include equity-based compensation expenses, the amortization of intangible assets, transaction costs associated with acquisitions and capital transactions, placement fees and underwriting costs and expenses incurred in connection with corporate reorganization.

 

Distributable Earnings......................................

 

Distributable earnings (or “DE”) is a pre-income tax measure that is used to assess amounts potentially available for distributions to stakeholders. Distributable earnings is calculated as the sum of Fee Related Earnings, realized performance fees, realized performance fee compensation expense, realized net investment and other income, and is reduced for expenses arising from transaction costs associated with acquisitions, placement fees and underwriting costs, expenses incurred in connection with corporate reorganization and depreciation. Distributable earnings differs from income before taxes computed in accordance with GAAP as it is presented before giving effect to unrealized performance fee income, unrealized performance fee compensation, unrealized net investment income, amortization of intangibles, equity compensation expense and is further adjusted by certain items described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of Certain Non-GAAP Measures to Consolidated GAAP Financial Measures.”

 

Fee Earning Assets Under Management.......

 

Fee earning AUM (or “FEAUM”) refers to the AUM of our funds on which we directly or indirectly earn management fees. Fee earning AUM is equal to the sum of all the individual fee bases of our funds that contribute directly or indirectly to our management fees.

 

Fee Related Earnings........................................

 

Fee related earnings (or “FRE”) is a component of ENI and is used to assess the ability of our business to cover direct base compensation and operating expenses from management fees. FRE differs from income before taxes computed in accordance with GAAP as it adjusts for the items included in the calculation of ENI and excludes performance fees, performance fee compensation, investment income from our Consolidated Funds and certain other items.

 

Incentive Generating Assets Under Management........................................................

 

Incentive generating AUM (or “IGAUM”) refers to the AUM of our funds that are currently generating, on a realized or unrealized basis, performance fee revenue. It generally represents the NAV of our funds for which we are entitled to receive a performance fee, excluding capital committed by us and our professionals (which generally is not subject to a performance fee).

 

Incentive Eligible Assets Under Management.................................................................................

 

Incentive eligible AUM (or “IEAUM”) refers to the AUM of our funds that are eligible to produce performance fee revenue, regardless of whether or not they are currently generating performance fees. It generally represents the NAV plus uncalled equity of our funds for which we are entitled to receive a performance fee, excluding capital committed by us and our professionals (which generally is not subject to a performance fee).

 

Operations Management Group.....................

 

In addition to our four segments, we have an Operations Management Group (the “OMG”) that consists of five independent, shared resource groups to support our reportable segments by providing infrastructure and administrative support in the areas of accounting/finance, operations/information technology, business development, legal/compliance and human resources. The OMG’s expenses are not allocated to our four reportable segments but we consider the cost structure of the OMG when evaluating our financial performance. This information constitutes non-GAAP financial information within the meaning of Regulation G, as promulgated by the SEC. Our management uses this information to assess the performance of our reportable segments and our Operations Management Group, and we believe that this information enhances the ability of unitholders to analyze our performance.

 

Our Funds.............................................................

 

Our funds refers to the funds, alternative asset companies and other entities and accounts that are managed or co-managed by Ares. It also includes funds managed by Ivy Hill Asset Management, L.P. (“IHAM”), a wholly owned portfolio company of ARCC, and a registered investment adviser.

 

Performance Related Earnings......................

 

Performance related earnings (or “PRE”) is a measure used to assess our investment performance. PRE differs from income (loss) before taxes computed in accordance with GAAP as it only includes performance fees, performance fee compensation and investment income earned from our Consolidated Funds and non-consolidated Funds.

 

Permanent Capital.............................................

 

Permanent capital refers to capital of funds that do not have redemption provisions or a requirement to return capital to investors upon exiting the investments made with such capital, except as required by applicable law, which funds currently consist of Ares Capital Corporation (“ARCC”), Ares Commercial Real Estate Corporation (“ACRE”), Ares Dynamic Credit Allocation Fund, Inc. (“ARDC”) and Ares Multi-Strategy Credit Fund, Inc. (“ARMF”); such funds may be required, or elect, to return all or a portion of capital gains and investment income.

 

Total Fee Revenue..............................................

 

Total fee revenue refers to the sum of segment management fees and net performance fees.

 

         

 

*****