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SEGMENT REPORTING
 12 Months Ended
Dec. 31, 2013
Segment Reporting [Abstract]  
SEGMENT REPORTING
SEGMENT REPORTING
The Company’s business is comprised of one segment, the investment management segment. As a global investment manager, the Company provides investment management services through funds and separate accounts. Management makes operating decisions and assesses business performance based on financial and operating metrics and data that are presented without the consolidation of any funds.
The Company conducts its investment management business primarily in the United States, where substantially all of its revenues are generated.
Adjusted Net Income
The Company’s chief operating decision maker uses adjusted net income (“ANI”) to help evaluate the financial performance of, and make resource allocations and other operating decisions for, the investment management segment. The components of revenues and expenses used in the determination of ANI do not give effect to the consolidation of the funds that the Company manages. In addition, ANI excludes the effect of (a) non-cash equity-based compensation charges related to unit grants made before the Company’s initial public offering, (b) income taxes, (c) expenses that Oaktree Capital Group, LLC or its Intermediate Holding Companies bear directly and (d) the adjustment for the OCGH non-controlling interest. Incentive income and incentive income compensation expense are included in ANI when the underlying fund distributions are known or knowable as of the respective quarter end, which may be later than the time at which the same revenue or expense is included in the GAAP-basis statements of operations, for which the revenue standard is fixed or determinable and the expense standard is probable and reasonably estimable. ANI is calculated at the Operating Group level.
ANI was as follows:
 
Year Ended December 31,
 
2013
 
2012
 
2011
Revenues:
 

 
 

 
 

Management fees
$
749,901

 
$
747,440

 
$
724,321

Incentive income
1,030,195

 
461,116

 
303,963

Investment income
258,654

 
202,392

 
23,763

Total revenues
2,038,750

 
1,410,948

 
1,052,047

Expenses:
 
 
 
 
 

Compensation and benefits
(365,306
)
 
(329,741
)
 
(308,115
)
Equity-based compensation
(3,828
)
 
(318
)
 
—

Incentive income compensation
(436,217
)
 
(222,594
)
 
(179,234
)
General and administrative
(117,361
)
 
(102,685
)
 
(94,655
)
Depreciation and amortization
(7,119
)
 
(7,397
)
 
(6,583
)
Total expenses
(929,831
)
 
(662,735
)
 
(588,587
)
Adjusted net income before interest and other income (expense)
1,108,919

 
748,213

 
463,460

Interest expense, net of interest income (1)
(28,621
)
 
(31,730
)
 
(33,867
)
Other income (expense), net
409

 
767

 
(1,209
)
Adjusted net income
$
1,080,707

 
$
717,250

 
$
428,384

 
 
 
 
 
(1)
Interest income was $3.2 million, $2.6 million and $2.3 million for the years ended December 31, 2013, 2011 and 2010, respectively.

A reconciliation of net income (loss) attributable to Oaktree Capital Group, LLC to adjusted net income of the investment management segment is presented below.  
 
Year Ended December 31,
 
2013
 
2012
 
2011
Net income (loss) attributable to Oaktree Capital Group, LLC
$
221,998

 
$
107,810

 
$
(95,972
)
Incentive income (1) 
(64,460
)
 
—

 
—

Incentive income compensation (1) 
46,334

 
—

 
—

Equity-based compensation (2) 
24,613

 
36,024

 
948,746

Income taxes (3)
26,232

 
30,858

 
21,088

Non-Operating Group other income (4)
—

 
(6,260
)
 
—

Non-Operating Group expenses (4)
1,195

 
553

 
768

OCGH non-controlling interest (4) 
824,795

 
548,265

 
(446,246
)
Adjusted net income
$
1,080,707

 
$
717,250

 
$
428,384

 
 
 
 
 
(1)
This adjustment adds back the effect of timing differences associated with the recognition of incentive income and incentive income compensation expense between adjusted net income and net income attributable to OCG. There were no adjustments attributable to timing differences for 2012 and 2011.
(2)
This adjustment adds back the effect of equity-based compensation charges related to unit grants made before the Company’s initial public offering, which is excluded from adjusted net income because it is a non-cash charge that does not affect the Company's financial position.
(3)
Because adjusted net income is a pre-tax measure, this adjustment eliminates the effect of income tax expense from adjusted net income.
(4)
Because adjusted net income is calculated at the Operating Group level, this adjustment adds back the effect of items applicable to OCG, its Intermediate Holding Companies or the OCGH non-controlling interest.



The following tables reconcile the Company’s segment information to the consolidated financial statements:

 
As of or for the Year Ended December 31, 2013
 
Segment
 
Adjustments
 
Consolidated
Management fees (1)
$
749,901

 
$
(557,296
)
 
$
192,605

Incentive income (1)
1,030,195

 
(1,027,878
)
 
2,317

Investment income (1)
258,654

 
(202,627
)
 
56,027

Total expenses (2) 
(929,831
)
 
(177,231
)
 
(1,107,062
)
Interest expense, net (3)
(28,621
)
 
(32,539
)
 
(61,160
)
Other income, net
409

 
—

 
409

Other income of consolidated funds (4)
—

 
7,153,828

 
7,153,828

Income taxes
—

 
(26,232
)
 
(26,232
)
Net income attributable to non-controlling redeemable interests in consolidated funds
—

 
(5,163,939
)
 
(5,163,939
)
Net income attributable to OCGH non-controlling interest in consolidated subsidiaries
—

 
(824,795
)
 
(824,795
)
Adjusted net income/net income attributable to Oaktree Capital Group, LLC
$
1,080,707

 
$
(858,709
)
 
$
221,998

Corporate investments (5)
$
1,197,173

 
$
(1,027,246
)
 
$
169,927

Total assets(6) 
$
2,817,127

 
$
42,446,127

 
$
45,263,254

 
 
 
 
 
(1)
The adjustment represents the elimination of amounts attributable to the consolidated funds.
(2)
The expense adjustment consists of (a) equity-based compensation charges of $24,613 related to unit grants made before the Company’s initial public offering, (b) consolidated fund expenses of $105,089, (c) expenses incurred by the Intermediate Holding Companies of $1,195 and (d) the effect of timing differences in the recognition of incentive income compensation expense between adjusted net income and net income attributable to OCG of $46,334.
(3)
The interest expense adjustment represents the inclusion of interest expense attributable to non-controlling interests of the consolidated funds and the exclusion of segment interest income.
(4)
The adjustment to other income of consolidated funds primarily represents the inclusion of interest, dividend and other investment income attributable to non-controlling interests of the consolidated funds.
(5)
The adjustment to corporate investments is to remove from segment assets the consolidated funds that are treated as equity method investments for segment reporting purposes.
(6)
The total assets adjustment represents the inclusion of investments and other assets of the consolidated funds, net of segment assets eliminated in consolidation, which are primarily corporate investments in funds and incentive income receivable.
 
 
As of or for the Year Ended December 31, 2012
 
Segment
 
Adjustments
 
Consolidated
Management fees (1) 
$
747,440

 
$
(612,872
)
 
$
134,568

Incentive income (1)
461,116

 
(450,701
)
 
10,415

Investment income (1)
202,392

 
(177,010
)
 
25,382

Total expenses (2) 
(662,735
)
 
(127,868
)
 
(790,603
)
Interest expense, net (3) 
(31,730
)
 
(14,043
)
 
(45,773
)
Other income, net (4) 
767

 
6,260

 
7,027

Other income of consolidated funds (5) 
—

 
7,362,259

 
7,362,259

Income taxes
—

 
(30,858
)
 
(30,858
)
Net income attributable to non-controlling redeemable interests in consolidated funds
—

 
(6,016,342
)
 
(6,016,342
)
Net loss attributable to OCGH non-controlling interest in consolidated subsidiaries
—

 
(548,265
)
 
(548,265
)
Adjusted net income/net income attributable to Oaktree Capital Group, LLC
$
717,250

 
$
(609,440
)
 
$
107,810

Corporate investments (6)
$
1,115,952

 
$
(1,017,002
)
 
$
98,950

Total assets (7)
$
2,359,548

 
$
41,510,450

 
$
43,869,998

 
 
 
 
 
(1)
The adjustment represents the elimination of amounts attributable to the consolidated funds.
(2)
The expense adjustment consists of (a) equity-based compensation charges of $36,024 related to unit grants made before the Company’s initial public offering, (b) consolidated fund expenses of $91,291 and (c) expenses incurred by the Intermediate Holding Companies of $553.
(3)
The interest expense adjustment represents the inclusion of interest expense attributable to non-controlling interests of the consolidated funds and the exclusion of segment interest income.
(4)
The other income, net adjustment represents other income or expenses of OCG or its Intermediate Holding Companies. This amount is attributable to a reduction in the amount of the deferred tax asset associated with the Company's tax receivable agreement, which reduced the tax receivable agreement liability payable to OCGH unitholders.
(5)
The adjustment to other income of consolidated funds primarily represents the inclusion of interest, dividend and other investment income attributable to non-controlling interests of the consolidated funds.
(6)
The adjustment to corporate investments is to remove from segment assets the consolidated funds that are treated as equity method investments for segment reporting purposes.
(7)
The total assets adjustment represents the inclusion of investments and other assets of the consolidated funds, net of segment assets eliminated in consolidation, which are primarily corporate investments in funds and incentive income receivable.

 
As of or for the Year Ended December 31, 2011
 
Segment
 
Adjustments
 
Consolidated
Management fees (1) 
$
724,321

 
$
(583,606
)
 
$
140,715

Incentive income (1)
303,963

 
(288,908
)
 
15,055

Investment income (1)
23,763

 
(15,163
)
 
8,600

Total expenses (2) 
(588,587
)
 
(1,056,277
)
 
(1,644,864
)
Interest expense, net (3) 
(33,867
)
 
(17,076
)
 
(50,943
)
Other income, net
(1,209
)
 
—

 
(1,209
)
Other income of consolidated funds (4) 
—

 
1,245,089

 
1,245,089

Income taxes
—

 
(21,088
)
 
(21,088
)
Net income attributable to non-controlling redeemable interests in consolidated funds
—

 
(233,573
)
 
(233,573
)
Net loss attributable to OCGH non-controlling interest in consolidated subsidiaries
—

 
446,246

 
446,246

Adjusted net income/net loss attributable to Oaktree Capital Group, LLC
$
428,384

 
$
(524,356
)
 
$
(95,972
)
Corporate investments (5)
$
1,159,287

 
$
(1,037,462
)
 
$
121,825

Total assets (6)
$
2,083,908

 
$
42,210,248

 
$
44,294,156

 
 
 
 
 
(1)
The adjustment represents the elimination of amounts attributable to the consolidated funds.
(2)
The expense adjustment consists of (a) equity-based compensation charges of $948,746 related to unit grants made before the Company’s initial public offering, (b) consolidated fund expenses of $106,763 and (c) expenses incurred by the Intermediate Holding Companies of $768.
(3)
The interest expense adjustment represents the inclusion of interest expense attributable to non-controlling interests of the consolidated funds and the exclusion of segment interest income.
(4)
The adjustment to other income of consolidated funds primarily represents the inclusion of interest, dividend and other investment income attributable to non-controlling interests of the consolidated funds.
(5)
The adjustment to corporate investments is to remove from segment assets the consolidated funds that are treated as equity method investments for segment reporting purposes.
(6)
The total assets adjustment represents the inclusion of investments and other assets of the consolidated funds, net of segment assets eliminated in consolidation, which are primarily corporate investments in funds and incentive income receivable.