OM ASSET MANAGEMENT PLC, 10-K filed on 3/30/2015
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2014
Mar. 27, 2015
Jun. 30, 2014
Document and Entity Information
 
 
 
Entity Registrant Name
OM Asset Management plc 
 
 
Entity Central Index Key
0001611702 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2014 
 
 
Amendment Flag
false 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Non-accelerated Filer 
 
 
Entity Public Float
 
 
$ 0 
Entity Common Stock, Shares Outstanding
 
120,000,000 
 
Document Fiscal Year Focus
2014 
 
 
Document Fiscal Period Focus
FY 
 
 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Assets
 
 
Cash and cash equivalents
$ 268.6 
$ 282.2 
Investments (includes balances reported at fair value of $94.2 and $95.2)
209.9 
554.3 
Investments at fair value
154.8 
501.4 
Goodwill
126.5 
117.8 
Deferred tax assets
330.3 
294.2 
Total assets
7,772.9 
8,551.8 
Liabilities and shareholders' equity
 
 
Long-term compensation liabilities
228.3 
216.6 
Total liabilities
5,215.5 
6,015.9 
Commitments and contingencies
   
   
Redeemable non-controlling interests in consolidated Funds
61.9 
403.3 
Equity:
 
 
Total equity and redeemable non-controlling interests in consolidated Funds
2,557.4 
2,535.9 
Total liabilities and equity
7,772.9 
8,551.8 
Consolidated Entity Excluding Consolidated Funds
 
 
Assets
 
 
Cash and cash equivalents
175.6 
194.2 
Investment advisory fees receivable
161.1 
154.9 
Property and equipment, net
24.1 
24.1 
Investments (includes balances reported at fair value of $94.2 and $95.2)
149.3 
148.1 
Investments at fair value
94.2 
95.2 
Acquired intangibles, net
1.0 
1.2 
Goodwill
126.5 
117.8 
Other assets
21.3 
24.8 
Note receivable due from related party
 
32.2 
Deferred tax assets
330.3 
294.2 
Liabilities and shareholders' equity
 
 
Accounts payable and accrued expenses
39.5 
43.9 
Accrued incentive compensation
132.1 
128.7 
Interest payable to related parties
 
14.6 
Other amounts due to related parties
289.9 
1.0 
Long-term compensation liabilities
228.3 
216.6 
Accrued income taxes
47.0 
6.7 
Notes payable to related parties
37.0 
1,040.7 
Third party borrowings
177.0 
2.5 
Other liabilities
5.9 
6.4 
Equity:
 
 
Ordinary shares (nominal value $0.001; issued and outstanding 120,000,000 shares)
0.1 
 
Shareholders' equity
31.1 
 
Parent equity (deficit)
 
(449.8)
Accumulated other comprehensive income
5.3 
3.0 
Non-controlling interests
0.1 
Consolidated Funds
 
 
Assets
 
 
Cash and cash equivalents
93.0 
88.0 
Restricted cash in Timber Funds
2,487.7 
2,557.0 
Investments at fair value
60.6 
406.2 
Timber assets
4,053.2 
4,422.1 
Other assets
89.2 
87.0 
Liabilities and shareholders' equity
 
 
Accounts payable and accrued expenses
66.9 
33.5 
Notes payable to related parties
318.7 
604.7 
Third party borrowings
3,777.2 
3,783.1 
Securities sold, not yet purchased, at fair value
16.4 
24.6 
Other liabilities
79.6 
108.9 
Redeemable non-controlling interests in consolidated Funds
61.9 
403.3 
Equity:
 
 
Non-controlling interests
$ 2,459.0 
$ 2,579.3 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Dec. 31, 2014
Investments, fair value (in dollars)
$ 154.8 
Consolidated Entity Excluding Consolidated Funds
 
Investments, fair value (in dollars)
$ 94.2 
Ordinary shares, nominal value (in dollars per share)
$ 0.001 
Ordinary shares, issued shares
120,000,000 
Ordinary shares, outstanding shares
120,000,000 
Consolidated Statements of Operations (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Revenue:
 
 
 
Revenue from timber
$ 425.7 
$ 401.1 
$ 257.1 
Total revenue
1,056.3 
928.6 
703.5 
Operating expenses:
 
 
 
Amortization of acquired intangibles
0.1 
0.1 
0.1 
Total operating expenses
1,123.5 
1,028.1 
766.0 
Operating loss
(67.2)
(99.5)
(62.5)
Non-operating income and (expense):
 
 
 
Total non-operating income
35.0 
15.7 
15.8 
Loss from continuing operations before taxes
(32.2)
(83.8)
(46.7)
Income tax expense
12.8 
13.3 
3.3 
Loss from continuing operations
(45.0)
(97.1)
(50.0)
Gain (loss) from discontinued operations, net of tax
(1.1)
2.7 
(27.0)
Gain (loss) on disposal of discontinued operations, net of tax
2.3 
(2.1)
10.8 
Net loss
(43.8)
(96.5)
(66.2)
Net income attributable to controlling interests
51.7 
25.7 
3.0 
Earnings per share (basic) attributable to controlling interests (in dollars per share)
$ 0.43 
$ 0.21 
$ 0.03 
Earnings per share (diluted) attributable to controlling interests (in dollars per share)
$ 0.43 
$ 0.21 
$ 0.03 
Continuing operations earnings per share (basic) attributable to controlling interests (in dollars per share)
$ 0.46 
$ 0.16 
$ 0.20 
Continuing operations earnings per share (diluted) attributable to controlling interests (in dollars per share)
$ 0.46 
$ 0.16 
$ 0.20 
Weighted average ordinary shares outstanding
120,000,000 
120,000,000 
120,000,000 
Weighted average diluted ordinary shares outstanding
120,000,000 
120,000,000 
120,000,000 
Consolidated Entity Excluding Consolidated Funds
 
 
 
Revenue:
 
 
 
Management fees
569.7 
478.2 
399.3 
Performance fees
34.3 
18.1 
14.1 
Other revenue
1.6 
1.8 
0.5 
Operating expenses:
 
 
 
Compensation and benefits
429.4 
352.3 
267.2 
General and administrative expense
83.9 
68.7 
68.6 
Amortization of acquired intangibles
0.1 
0.1 
0.1 
Impairment of goodwill and acquired intangibles
 
 
1.7 
Depreciation and amortization
6.1 
4.9 
5.8 
Non-operating income and (expense):
 
 
 
Investment income
12.2 
10.7 
16.5 
Interest income
0.2 
0.5 
1.4 
Interest expense
(50.6)
(72.2)
(84.1)
Net income attributable to non-controlling interests
 
0.1 
 
Consolidated Funds
 
 
 
Revenue:
 
 
 
Other revenue
25.0 
29.4 
32.5 
Operating expenses:
 
 
 
Interest and dividend expense
135.6 
150.1 
121.1 
Timber expense
257.7 
238.4 
164.6 
Depletion expense
128.4 
142.9 
83.7 
Other expense
82.3 
70.7 
53.2 
Non-operating income and (expense):
 
 
 
Interest expense
(135.5)
(149.3)
(127.2)
Net consolidated Funds gains
73.2 
76.7 
82.0 
Net income attributable to non-controlling interests
$ (95.5)
$ (122.3)
$ (69.2)
Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Net loss
$ (43.8)
$ (96.5)
$ (66.2)
Foreign currency translation adjustment
(2.5)
(19.1)
1.2 
Total other comprehensive loss
(46.3)
(115.6)
(65.0)
Total comprehensive income attributable to controlling interests
52.4 
27.0 
4.6 
Consolidated Entity Excluding Consolidated Funds
 
 
 
Comprehensive income (loss) attributable to non-controlling interests, net of tax
 
0.1 
 
Consolidated Funds
 
 
 
Comprehensive income (loss) attributable to non-controlling interests, net of tax
$ (98.7)
$ (142.7)
$ (69.6)
Consolidated Statements of Changes in Shareholders' Equity (USD $)
In Millions, except Share data, unless otherwise specified
Consolidated Entity Excluding Consolidated Funds
Total shareholders' equity (deficit)
Consolidated Entity Excluding Consolidated Funds
Common stock
Consolidated Entity Excluding Consolidated Funds
Shareholders' equity (deficit)
Consolidated Entity Excluding Consolidated Funds
Accumulated other comprehensive income.
Consolidated Entity Excluding Consolidated Funds
Non-controlling interests
Consolidated Entity Excluding Consolidated Funds
Consolidated Funds
Non-controlling interests
Consolidated Funds
Total
Balance at Dec. 31, 2011
$ (492.5)
 
$ (492.5)
 
$ 4.5 
 
$ 3,055.2 
 
$ 2,567.2 
Balance at Dec. 31, 2011
 
 
 
 
 
 
 
 
2,676.0 
Balance at Dec. 31, 2011
 
 
 
 
 
 
 
108.8 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
Capital contributions (redemptions)
 
 
 
 
 
 
613.0 
 
613.0 
Equity-based compensation
2.9 
 
2.9 
 
(3.6)
 
 
 
(0.7)
Foreign currency translation adjustment
1.6 
 
 
1.6 
 
 
(0.4)
 
1.2 
Parent company corporate cost allocation
 
 
 
 
 
(2.8)
 
 
 
Parent company corporate cost allocation
2.8 
 
2.8 
 
 
 
 
 
2.8 
Net consolidation (deconsolidation) of funds
 
 
 
 
 
 
226.5 
 
226.5 
Distributions
 
 
 
 
 
 
(535.8)
 
(535.8)
Net Loss
3.0 
 
3.0 
 
 
 
(81.1)
 
(78.1)
Increase (Decrease) in redeemable non-controlling interest in consolidated Funds
 
 
 
 
 
 
 
 
 
Capital contributions (redemptions)
 
 
 
 
 
 
 
(26.5)
 
Redemptions
 
 
 
 
 
 
 
(5.3)
 
Net income (loss)
 
 
 
 
 
 
 
11.9 
 
Increase (Decrease) in total equity and redeemable non-controlling interest in consolidated Funds
 
 
 
 
 
 
 
 
 
Capital contributions (redemptions)
 
 
 
 
 
 
 
 
586.5 
Equity-based compensation
 
 
 
 
 
 
 
 
(0.7)
Foreign currency translation adjustment
 
 
 
 
 
 
 
 
1.2 
Parent company corporate cost allocation
 
 
 
 
 
 
 
 
2.8 
Redemptions
 
 
 
 
 
 
 
 
(5.3)
Net consolidation (deconsolidation) of funds
 
 
 
 
 
 
 
 
(226.5)
Distributions
 
 
 
 
 
 
 
 
(535.8)
Net income (loss)
 
 
 
 
 
 
 
 
(66.2)
Balance at Dec. 31, 2012
(482.2)
 
(483.8)
1.6 
0.9 
 
2,824.4 
 
2,343.1 
Balance at Dec. 31, 2012
 
 
 
 
 
 
 
 
2,432.0 
Balance at Dec. 31, 2012
 
 
 
 
 
 
 
88.9 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
Capital contributions (redemptions)
 
 
 
 
 
 
(0.4)
 
(0.4)
Equity-based compensation
5.0 
 
5.0 
 
(0.9)
 
 
 
4.1 
Foreign currency translation adjustment
1.4 
 
 
1.4 
 
 
(20.5)
 
(19.1)
Parent company corporate cost allocation
 
 
 
 
 
(3.3)
 
 
 
Parent company corporate cost allocation
3.3 
 
3.3 
 
 
 
 
 
3.3 
Net consolidation (deconsolidation) of funds
 
 
 
 
 
 
 
109.0 
 
Distributions
 
 
 
 
 
 
(99.3)
 
(99.3)
Net Loss
25.7 
 
25.7 
 
0.1 
 
(124.9)
 
(99.1)
Increase (Decrease) in redeemable non-controlling interest in consolidated Funds
 
 
 
 
 
 
 
 
 
Capital contributions (redemptions)
 
 
 
 
 
 
 
268.1 
 
Distributions
 
 
 
 
 
 
 
(65.3)
 
Net income (loss)
 
 
 
 
 
 
 
2.6 
 
Increase (Decrease) in total equity and redeemable non-controlling interest in consolidated Funds
 
 
 
 
 
 
 
 
 
Capital contributions (redemptions)
 
 
 
 
 
 
 
 
267.7 
Equity-based compensation
 
 
 
 
 
 
 
 
4.1 
Foreign currency translation adjustment
 
 
 
 
 
 
 
 
(19.1)
Parent company corporate cost allocation
 
 
 
 
 
 
 
 
3.3 
Net consolidation (deconsolidation) of funds
 
 
 
 
 
 
 
 
109.0 
Distributions
 
 
 
 
 
 
 
 
(164.6)
Net income (loss)
 
 
 
 
 
 
 
 
(96.5)
Balance at Dec. 31, 2013
(446.8)
 
(449.8)
3.0 
0.1 
 
2,579.3 
 
2,132.6 
Balance at Dec. 31, 2013
 
 
 
 
 
 
 
 
2,535.9 
Balance at Dec. 31, 2013
 
 
 
 
 
 
 
403.3 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
Transfer of subsidiary to Parent
(14.4)
 
(16.0)
1.6 
 
 
 
(327.4)
(14.4)
Tax on gain from transfer of subsidiary to Parent
(3.2)
 
(3.2)
 
 
 
 
 
(3.2)
Issuance of ordinary shares
0.1 
0.1 
 
 
 
 
 
 
0.1 
Issuance of ordinary shares (in shares)
 
120,000,000 
 
 
 
 
 
 
 
Capital contributions (redemptions)
973.1 
 
973.1 
 
 
 
(72.1)
 
901.0 
Equity-based compensation
8.9 
 
8.9 
 
 
 
 
 
8.9 
Deferred tax asset revaluation
4.3 
 
4.3 
 
 
 
 
 
4.3 
Transfer of value incentive plan share award
1.8 
 
1.8 
 
 
 
 
 
1.8 
Foreign currency translation adjustment
0.7 
 
 
0.7 
 
 
(3.2)
 
(2.5)
Parent company corporate cost allocation
 
 
 
 
 
(3.4)
 
 
 
Parent company corporate cost allocation
3.4 
 
3.4 
 
 
 
 
 
3.4 
Assignment of deferred tax assets and coinvestments
(304.3)
 
(304.3)
 
 
 
 
 
(304.3)
IPO costs charged to parent
(23.1)
 
(23.1)
 
 
 
 
 
(23.1)
Repurchase of Affiliate equity
(3.7)
 
(3.7)
 
(0.1)
 
 
 
(3.8)
Net consolidation (deconsolidation) of funds
 
 
 
 
 
 
60.2 
 
60.2 
Dividends to Parent
(212.0)
 
(212.0)
 
 
 
 
 
(212.0)
Net Loss
51.7 
 
51.7 
 
 
 
(105.2)
 
(53.5)
Increase (Decrease) in redeemable non-controlling interest in consolidated Funds
 
 
 
 
 
 
 
 
 
Capital contributions (redemptions)
 
 
 
 
 
 
 
5.1 
 
Net consolidation (deconsolidation) of funds
 
 
 
 
 
 
 
(28.8)
 
Net income (loss)
 
 
 
 
 
 
 
9.7 
 
Increase (Decrease) in total equity and redeemable non-controlling interest in consolidated Funds
 
 
 
 
 
 
 
 
 
Transfer of subsidiary to Parent
 
 
 
 
 
 
 
 
(341.8)
Tax on gain from transfer of subsidiary to Parent
 
 
 
 
 
 
 
 
(3.2)
Issuance of ordinary shares
 
 
 
 
 
 
 
 
0.1 
Capital contributions (redemptions)
 
 
 
 
 
 
 
 
906.1 
Equity-based compensation
 
 
 
 
 
 
 
 
8.9 
Transfer of value incentive plan share award
 
 
 
 
 
 
 
 
1.8 
Foreign currency translation adjustment
 
 
 
 
 
 
 
 
(2.5)
Parent company corporate cost allocation
 
 
 
 
 
 
 
 
3.4 
Assignment of deferred tax assets and coinvestments
 
 
 
 
 
 
 
 
(304.3)
IPO costs charged to Parent
 
 
 
 
 
 
 
 
(23.1)
Repurchase of Affiliate equity
 
 
 
 
 
 
 
 
(3.8)
Net consolidation (deconsolidation) of funds
 
 
 
 
 
 
 
 
31.4 
Dividends
 
 
 
 
 
 
 
 
(212.0)
Net income (loss)
 
 
 
 
 
 
 
 
(43.8)
Balance at Dec. 31, 2014
36.5 
0.1 
31.1 
5.3 
 
 
2,459.0 
 
2,495.5 
Balance (in shares) at Dec. 31, 2014
 
120,000,000 
 
 
 
 
 
 
 
Balance at Dec. 31, 2014
 
 
 
 
 
 
 
 
2,557.4 
Balance at Dec. 31, 2014
 
 
 
 
 
 
 
$ 61.9 
 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Cash flow from operating activities:
 
 
 
Net loss
$ (43.8)
$ (96.5)
$ (66.2)
Adjustments to reconcile net profit (loss) to net cash provided by (used in) operating activities from continuing operations:
 
 
 
Deferred income taxes
(35.2)
8.3 
10.7 
Changes in operating assets and liabilities (excluding discontinued operations):
 
 
 
Net cash flows from operating activities of continuing operations
179.0 
130.8 
38.8 
Net cash flows from operating activities of discontinued operations
(24.9)
13.7 
(32.4)
Total net cash flows from operating activities
154.1 
144.5 
6.4 
Cash flow from investing activities:
 
 
 
Net cash flows from investing activities of continuing operations
(6.0)
83.2 
(576.8)
Net cash flows from investing activities of discontinued operations
(7.1)
(181.0)
30.5 
Total net cash flows from investing activities
(13.1)
(97.8)
(546.3)
Cash flow from financing activities:
 
 
 
Net cash flows from financing activities of continuing operations
(151.3)
(205.6)
507.4 
Net cash flows from financing activities of discontinued operations
(1.2)
174.1 
22.9 
Total net cash flows from financing activities
(152.5)
(31.5)
530.3 
Effect of foreign exchange rate changes on cash and cash equivalents
(2.1)
(1.6)
1.0 
Net increase (decrease) in cash and cash equivalents
(13.6)
13.6 
(8.6)
Cash and cash equivalents at beginning of period
282.2 
268.6 
277.2 
Cash and cash equivalents at end of period
268.6 
282.2 
268.6 
Supplemental disclosure of cash flow information:
 
 
 
Income taxes paid
6.1 
5.5 
0.8 
Non-cash capital contribution to Parent
(14.4)
 
 
Non-cash contribution from Parent
258.6 
 
 
Consolidated Entity Excluding Consolidated Funds
 
 
 
Cash flow from operating activities:
 
 
 
Less: Net loss attributable to non-controlling interests
 
0.1 
 
Adjustments to reconcile net profit (loss) to net cash provided by (used in) operating activities from continuing operations:
 
 
 
Net (income) loss from discontinued operations
3.5 
(6.3)
21.0 
Amortization and impairment of acquired intangibles
0.1 
0.1 
1.8 
Depreciation and other amortization
6.1 
4.9 
5.8 
Loss on disposal of property and equipment
0.4 
 
 
Amortization and revaluation of non-cash compensation awards
103.9 
61.6 
27.2 
Parent company corporate cost allocation
3.4 
3.3 
2.8 
Net earnings from affiliates accounted for using the equity method
(9.6)
(7.7)
(14.8)
Distributions received from equity method affiliates
7.7 
15.3 
10.1 
Deferred income taxes
(35.3)
10.3 
9.1 
(Gains) losses on other investments
(2.6)
(3.0)
(1.8)
Changes in operating assets and liabilities (excluding discontinued operations):
 
 
 
(Increase) decrease in investment advisory fees receivable
(26.9)
(22.9)
(27.6)
(Increase) decrease in other receivables, prepayments, deposits and other assets
(28.5)
(3.6)
0.8 
Increase (decrease) in accrued incentive compensation and other liabilities
(51.7)
25.8 
6.1 
Increase (decrease) in accounts payable and accruals and accrued income taxes
34.7 
9.7 
4.8 
Net cash flows from operating activities of continuing operations
56.9 
113.3 
48.2 
Cash flow from investing activities:
 
 
 
Purchase of fixed assets, excluding discontinued operations
(7.6)
(9.9)
(12.7)
Contingent payments for affiliate equity
(11.0)
 
 
Dispositions of Affiliates
(3.8)
 
 
Purchase of investment securities
(8.8)
(15.2)
(66.9)
Sale of investment securities
25.5 
15.1 
55.6 
Cash flow from financing activities:
 
 
 
Proceeds from third party borrowings
174.5 
 
 
Proceeds from related party borrowings
 
 
30.0 
Repayment of third party borrowings
 
(13.5)
(0.5)
Repayment of related party borrowings
(37.0)
(90.8)
(80.3)
Payment to parent for deferred tax arrangement
(12.3)
 
 
Dividends paid to related parties
(175.0)
 
 
Cash and cash equivalents at beginning of period
194.2 
 
 
Cash and cash equivalents at end of period
175.6 
194.2 
 
Supplemental disclosure of cash flow information:
 
 
 
Interest paid (excluding consolidated Funds)
64.4 
72.5 
83.9 
Consolidated Funds
 
 
 
Cash flow from operating activities:
 
 
 
Less: Net loss attributable to non-controlling interests
(95.5)
(122.3)
(69.2)
Adjustments to reconcile net profit (loss) to net cash provided by (used in) operating activities from continuing operations:
 
 
 
Net (income) loss from discontinued operations
4.7 
 
(4.9)
Depletion
128.4 
142.9 
83.7 
(Gains) losses on other investments
(4.6)
(27.7)
(33.5)
Changes in operating assets and liabilities (excluding discontinued operations):
 
 
 
(Increase) decrease in receivables other assets
24.5 
(52.3)
1.3 
Increase (decrease) in accounts payable and other liabilities
64.6 
76.9 
13.2 
Net cash flows from operating activities of continuing operations
122.1 
17.5 
(9.4)
Cash flow from investing activities:
 
 
 
Purchase of investment securities
(105.1)
(191.7)
(934.1)
Sale of investment securities
87.5 
333.3 
364.9 
Change in restricted cash
31.5 
(48.0)
75.2 
Deconsolidation of funds
(14.2)
(0.4)
(58.8)
Cash flow from financing activities:
 
 
 
Proceeds from third party borrowings
4.1 
 
137.3 
Repayment of debt
(4.7)
(30.3)
(72.1)
Non-controlling interest capital raised
 
29.0 
587.0 
Non-controlling interest capital redeemed
(25.1)
(91.2)
(77.9)
Redeemable non-controlling interest capital raised
10.7 
 
 
Redeemable non-controlling interest capital redeemed
(6.9)
(8.8)
(16.1)
Distributions to non-controlling interests
(77.7)
 
 
Distributions to redeemable non-controlling interests
(1.9)
 
 
Cash and cash equivalents at beginning of period
88.0 
 
 
Cash and cash equivalents at end of period
$ 93.0 
$ 88.0 
 
Organization and Description of the Business
Organization and Description of the Business

1) Organization and Description of the Business

        OM Asset Management plc ("OMAM" or the "Company"), through its subsidiaries, is a global asset management business with interests in a diverse group of boutique investment management firms (the "Affiliates") individually headquartered in the United States. The Company provides investment management services globally to predominantly institutional investors, in asset classes that include U.S. and global equities, fixed income, real estate and timber. Fees for services are largely asset-based and, as a result, the Company's revenue fluctuates based on the performance of financial markets and investors' asset flows in and out of the Company's products.

        The Company's Affiliates are organized as limited liability companies. The Company generally utilizes a profit-sharing model in structuring its compensation and ownership arrangements with Affiliates. The Affiliates' variable compensation is generally based on each firm's profitability. OMAM and Affiliate key employees share in profits after variable compensation according to their respective ownership interests. The profit-sharing model results in the alignment of OMAM and Affiliate key employee economic interests, which is critical to the Company's talent management strategy and long-term growth of the business. The Company operates in one reportable segment.

        The Company is a majority-owned subsidiary of Old Mutual plc (the "Parent"), an international long-term savings, protection and investment group, listed on the London Stock Exchange.

Reorganization

        At January 1, 2014, the Company's U.S. holding company, Old Mutual (US) Holdings Inc. ("OMUSH") was a subsidiary of OM Group (UK) Limited ("OMGUK") which was and is in turn wholly owned by the Parent. The board of directors of the Parent elected to undertake an initial public offering of the Company's ordinary shares (the "Offering") as outlined below.

        The Company and the Parent determined that certain transactions (the "Reorganization") should be undertaken in preparation for the Offering. Specifically, the pre-Offering restructuring steps described below were completed by the Company and the Parent on or before October 15, 2014:

 

 

1.

OMGUK incorporated OMAM in the United Kingdom as a direct, wholly-owned subsidiary of OMGUK.

2.

OMAM incorporated OMAM US, Inc. in the State of Delaware ("U.S. Sub") as a direct, wholly-owned subsidiary of OMAM.

3.

U.S. Sub incorporated OMAM UK Limited in the United Kingdom ("U.K. Sub") as a direct, wholly-owned subsidiary of U.S. Sub.

4.

The Company's existing intercompany debt, which was owed by OMUSH to OMGUK, was refinanced with new intercompany debt.

5.

OMGUK contributed its shares in OMUSH and the new intercompany debt to OMAM in return for an issuance of shares by OMAM resulting in the elimination of existing intercompany debt of $1,003.5 million and the redemption of a $32.2 million intercompany receivable via a capital distribution back to OMGUK, for a net reduction of existing intercompany debt of $971.3 million.

6.

The OMUSH shares were transferred to U.K. Sub via a series of share exchanges, and the new intercompany debt was contributed among OMAM, U.S. Sub and U.K. Sub.

7.

OMAM underwent a reduction of share capital to maximize distributable reserves, re-registered in the United Kingdom as a public limited company, amended its articles of association to reflect the same and organized its share capital for purposes of the Offering.

8.

OMAM declared a $175.0 million pre-Offering dividend to OMGUK. OMAM also issued a non-interest bearing promissory note to OMGUK in the principal amount of $37.0 million which will be paid as funds become available from Affiliate distributions, subject to the maintenance of a minimum level of cash holdings.

9.

OMAM entered into arrangements with OMGUK for the payment of future realizable benefits (estimated to total $252.2 million at December 31, 2014) associated with certain deferred tax assets existing as of the date of the Offering, as well as co-investments (with a carrying value of $35.0 million and a fair value of $43.5 million at December 31, 2014) made by the Company in real-estate and timber strategies of its Affiliates. In accordance with the deferred tax asset arrangement, in December 2014, OMAM began to make quarterly payments to OMGUK. In the fourth quarter of 2014, OMAM adjusted the balance of the liability to reflect the impact of the 2013 income tax return and also reduced the liability as of the Offering date to reflect a revised estimate of the future realizable benefits as of the Offering date. The liability will again be adjusted in the fourth quarter of 2015 to reflect the impact of the 2014 income tax return through October 8, 2014.

10.

The Company made a payment of the $175.0 million pre-Offering dividend to OMGUK, funded by a new third party credit facility entered into at the closing of the Offering; and

11.

OMAM completed the purchase of additional ownership of an Affiliate for $60.0 million in cash, resulting in a reduction of liabilities for the same amount.

 

        Additionally, the Company has recast the components of Shareholders' equity (deficit) to reflect the issuance of 120,000,000 ordinary shares, nominal value $0.001 per share.

Basis of Presentation and Significant Accounting Policies
Basis of Presentation and Significant Accounting Policies

 

2) Basis of Presentation and Significant Accounting Policies

        The Company's significant accounting policies are as follows:

Basis of presentation

        These Consolidated Financial Statements reflect the historical balance sheets; statements of operations and of comprehensive income; statements of changes in shareholders' equity; and statements of cash flows of the Company. On October 15, 2014, the Company completed the Offering by its Parent of 22,000,000 ordinary shares of the Company pursuant to the Securities Act of 1933, as amended. Additionally, the underwriters in the Offering exercised a portion of their overallotment option and purchased an additional 2,231,375 shares of the Company from the Parent. Within these Consolidated Financial Statements, entities that are part of the Parent's consolidated results, but are not part of OMAM, as defined above, are referred to as "related parties." These historical Consolidated Financial Statements prepared prior to the Offering use the Parent's historical basis in determining the assets and liabilities and the results of the Company. The financial information included herein may not reflect the consolidated financial position, operating results, changes in the Parent's equity investment and cash flows of the Company in the future, and does not reflect what they would have been had the Company been a separate, stand-alone entity for the entirety of the periods presented.

        The Company historically has utilized the services of the Parent for certain functions. These services include providing working capital, as well as certain finance, internal audit, insurance, human resources, investor relations, risk, governance and other corporate functions and projects. The cost of these services has been allocated to the Company and included in the Consolidated Financial Statements. The allocations have been determined on the basis which the Parent and the Company considered to be reasonable reflections of the utilization of services provided by the Parent. Subsequent to the Offering, the Company assumed responsibility for the costs of these functions.

        The Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). All dollar amounts, except per share data in the text and tables herein, are stated in millions unless otherwise indicated. Transactions between the Company and the Parent are included in the Consolidated Financial Statements, however material intercompany balances and transactions among the Company, its consolidated Affiliates and consolidated Funds are eliminated in consolidation.

Allocated Costs from the Parent

        The Company's Parent provides the Company with various services, including governance through the board of directors and executive committees, investor relations, procurement of insurance coverage, human resources, financial reporting, internal audit, treasury, systems, risk and tax services. Some of these services are directly attributable to the Company and some are of a more general nature. The costs associated with the services which are (i) directly attributable to the Company, (ii) have been charged directly to the Company by the Company's Parent, and (iii) have been paid to the Company's Parent by the Company have been reflected in the Company's Consolidated Financial Statements. During the years ended December 31, 2014, 2013 and 2012, the amount of expenses charged directly to the Company from the Company's Parent were $2.1 million, $2.0 million and $2.7 million, respectively.

        With respect to the above services and benefits which are not directly attributable to the Company, costs were allocated to the Company and included in the Consolidated Financial Statements, based generally on the Company's proportion of the total Parent's consolidated, normalized revenues. During the years ended December 31, 2014, 2013 and 2012, costs allocated to the Company from Parent were $3.4 million, $3.3 million and $2.8 million, respectively. Subsequent to the Offering, these general costs are no longer allocated and if required are borne directly by the Company.

        These cost allocations were determined using a method that Parent and the Company considered reasonably reflected the costs of such services attributable to the Company provided by Parent. The Company believes the assumptions and allocations underlying the Consolidated Financial Statements are reasonable and the allocated amounts are representative of the amounts that would have been recorded in the Consolidated Financial Statements had the Company operated independent of Parent for the historical periods presented prior to the Offering. A more detailed discussion of the relationship with Parent, including a description of the costs that have been allocated to the Company, as well as the allocation methods, is included in Note 10, "Related Party Transactions".

Consolidation

Affiliates

        The Company evaluates each of its Affiliate and other operating entities to determine the appropriate method of accounting. Generally, majority-owned entities or otherwise controlled investments in which the Company holds a controlling financial interest as the principal shareholder, managing member, or general partner are consolidated.

Funds

        In the normal course of business, the Company's Affiliates sponsor and manage certain investment vehicles (the "Funds"). The Company assesses consolidation requirements with respect to its Funds pursuant to Accounting Standards Codification ("ASC") Topic 810 relating to the consolidation of variable interest entities. Substantially all of the Funds that are managed by the Company qualify for the deferral granted under Accounting Standards Updates ("ASU") 2010-10, "Amendments for Certain Investment Funds" ("ASU 2010-10"). As such, the Company evaluates these Funds for consolidation pursuant to guidance formerly in Financial Accounting Standards Board ("FASB") Interpretation No. 46(R), Consolidation of Variable Interest Entities. These Funds are typically owned entirely by third-party investors, however certain Funds are capitalized with seed capital investments from the Company or its related parties and may be owned partially by Affiliate key employees and/or individuals that own minority interests in an Affiliate.

        In evaluating whether or not a legal entity must be consolidated, the Company determines if such entity is a variable interest entity ("VIE") or a voting interest entity ("VOE"). A VOE is considered an entity in which (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently and (ii) the equity holders at risk have the obligation to absorb losses, the right to receive residual returns, and the right to direct the activities of the entity that most significantly impact the entity's economic performance. A VIE is an entity that lacks one or more of the characteristics of a VOE. Assessing whether an entity is a VIE or VOE involves judgment and analysis. Factors considered in this assessment include the entity's legal organization, the entity's capital structure and equity ownership and any related party or de facto agent implications of the Company's involvement with the entity. Investments that are determined to be VIEs are consolidated if the Company or a consolidated Affiliate is the primary beneficiary of the investment. VOEs are typically consolidated if the Company holds the majority voting interest or otherwise controls the entity.

        In evaluating whether the Company is the primary beneficiary, the Company evaluates its economic interests in the entity held either directly by the Company or indirectly through related parties. For VIEs that are investment companies subject to ASU 2010-10, the primary beneficiary of the VIE is generally the variable interest holder that absorbs a majority of the expected losses of the VIE, receives a majority of the expected residual returns of the VIE, or both. The Company generally is not the primary beneficiary of Fund VIEs created to manage assets for clients unless the Company's ownership interest, including interests of related parties, is substantial.

        For VIEs that do not qualify for the deferral granted under ASU 2010-10, the primary beneficiary of a VIE is defined as the variable interest holder that has a controlling financial interest. A controlling financial interest is defined as (i) the power to direct the activities of the VIE that most significantly impacts its economic performance and (ii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. If no single party satisfies both criteria, but the Company and its related parties satisfy the criteria on a combined basis, then the primary beneficiary is the entity out of the related party group that is most closely associated to the VIE. The consolidation analysis can generally be performed qualitatively, however, if it is not readily apparent that the Company is not the primary beneficiary, a quantitative analysis may also be performed.

        The Company consolidates VOEs when it has control over significant operating, financial and investing decisions of the entity. For VOEs organized as limited partnerships or as an entity with governance structures similar to a limited partnership (e.g., limited liability company with a managing member), the Company consolidates an entity when it holds the controlling general partnership interest and the limited partners do not hold substantive participating rights or rights to remove and replace the general partner or rights that could provide the limited partners with the ability to impact the ongoing governance and operating activities of the entity.

        Other than Funds holding investments in timber assets (the "Timber Funds"), the Company's consolidated Funds are investment companies (the "Investment Funds") and the Company has therefore retained their specialized investment company accounting in consolidation, pursuant to ASC 946, "Financial Services—Investment Companies."

        Upon the occurrence of certain events (such as contributions and redemptions, either by the Company, its Affiliates, or third parties, or amendments to the governing documents of the Company's investees or sponsored Funds) management reviews and reconsiders its previous conclusion regarding the status of an entity as a VIE or a VOE. Additionally, management continually reconsiders whether the Company is deemed to be a VIE's primary beneficiary who consolidates such entity.

Timber Funds

        Timber assets and timber lease rights of consolidated Timber Funds are stated at historical cost less depletion for timber previously harvested and less accumulated amortization and depreciation for lease rights and roads. The Company performs a valuation of acquired timber property to assess the allocation of purchase price for each material asset acquired that is expected to provide a future economic benefit to the Company. Fair value of each asset is determined by using a discounted future cash flow model and applying assumptions commonly used in the industry. The cost of the acquired assets is then allocated pro rata based on the relative fair values. Timber investment values are adjusted for capital additions made to the property subsequent to the valuation date. All initial silviculture costs, including site preparation and planting costs are capitalized as stand establishment costs. Stand establishment costs are transferred to a merchantable timber classification as trees reach a certain size. Generally, costs incurred subsequent to two years after planting, such as fertilization, vegetation, insect control and pre-commercial thinning are considered to be maintenance and are expensed as incurred.

        The Company estimates its timber inventory using statistical information and data obtained from physical measurements, site maps, photo-types and other information gathering techniques. These estimates are updated annually and may result in adjustments of timber volumes, including timber growth rates and depletion rates.

        Depletion consists of costs attributed to harvesting timber and is recorded as an expense as timber is harvested. The depletion rate applied to the volume of timber sold is adjusted annually and is based on the relationship of incurred costs in the merchantable timber classification to estimated current merchantable volume.

        Timber and timberlands are reviewed for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The Company compares the carrying value of a timber asset with the asset's expected future undiscounted cash flows. If the carrying value of the asset exceeds the expected future cash flows, impairment exists, which is measured by the excess of the carrying value over the fair value of the assets. The Company recognized no timber impairment losses for the years ended December 31, 2014, 2013 and 2012.

Use of estimates

        The preparation of these Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ significantly from those estimates.

Operating segment

        The Company operates in one operating segment that provides investment management services and products primarily to institutional clients. Although the Company does make certain disclosures regarding assets under management by product and affiliate, the Company's determination that it operates one business segment is based on the fact that the Chief Operating Decision Maker ("CODM") reviews the Company's financial performance on an aggregate level.

Cash and cash equivalents

        The Company considers all highly liquid investments, including money market mutual funds, with original maturities of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates market value due to the short-term maturity of these investments. Cash held by consolidated Funds is not available to fund general liquidity needs of the Company.

        Restricted cash in Timber Funds consists primarily of deposits in time deposit accounts, earning interest at LIBOR + a margin, which are restricted to payment of certain notes payable of consolidated Funds of the Company (also see Note 13). Restricted cash of the consolidated Timber Funds may only be drawn upon to meet debt service payments (corrective coverage payments) or to pay certain Fund operating expenses through December 31, 2014. During the period thereafter, the restricted reserve balance may only be drawn upon for principal payments.

Fair value measurements

        In accordance with the provisions of FASB ASC 820, "Fair Value Measurement" ("ASC 820"), fair value is the price that the Company expects to be paid upon the sale of an asset or expects to pay upon the transfer of a liability in an orderly transaction between market participants. Pursuant to ASC 820, there is a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources. Unobservable inputs reflect the Company's own conclusions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories:

Level I—Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I include listed equities and listed derivatives. As required by U.S. GAAP, the Company does not adjust the quoted price for these investments.

Level II—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies utilizing observable market inputs other than quoted prices. Investments which are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives.

Level III—Pricing inputs are unobservable for the asset or liability and include assets and liabilities where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. Investments that are included in this category generally include general and limited partner interests in corporate private equity, real estate funds, and funds of hedge funds.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

Investments and Investment Transactions

Valuation of investments held at fair value

        Valuation of Fund investments is evaluated pursuant to the fair value methodology discussed above. The Company's discretionary investments are categorized as trading and held at estimated fair value. Realized and unrealized gains and losses arising from changes in fair value of discretionary investments are reported within investment income in the Consolidated Statements of Operations. See Note 4 for a summary of the fair value inputs utilized to determine the fair value of other discretionary investments held at fair value.

Security transactions

        The Investment Funds generally record securities transactions on a trade-date basis. Realized gains and losses on securities transactions are generally determined on the average-cost method (net of foreign capital gain taxes) and for certain transactions determined based on the specific identification method.

Income and expense recognition

        The Investment Funds record interest income on an accrual basis and include amortization of premiums and accretion of discounts. Dividend income and expense on dividends sold short are recorded on the ex-dividend date, net of applicable withholding taxes. Expenses are recorded on an accrual basis.

Foreign currency translation

        The books and records of the Company and its Affiliates are maintained in U.S. dollars. Except for one Timber Fund in Australia, the books and records of consolidated Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars on the date of valuation. Income and expense transactions denominated in foreign currencies are translated into U.S. dollars using the average exchange rate over the period presented. The portion of realized or unrealized gains and losses resulting from changes in foreign exchange rates and from fluctuations arising from changes in the market prices of the underlying securities are included in the net realized and unrealized gain and loss on investments on the consolidated statement of operations. Net realized and unrealized gains and losses on foreign currency transactions represent net foreign exchange gains or losses from forward foreign currency exchange contracts, disposition of foreign currencies, currency gains or losses between the trade and settlement date on security transactions, and the difference between the amount of the investment income and foreign withholding taxes recorded on the Funds' books and the U.S. dollar equivalent amounts actually received or paid.

Short sales

        Certain of the Funds may sell a security they do not own in anticipation of a decline in the fair value of that security. When a Fund sells a security short, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale. The short sales are secured by the long portfolio and available cash. The Fund records a gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in size, upon the termination of a short sale. The amount of the gain or loss will be equal to the proceeds received in entering into the short sale less the cost of buying back the short security to close the short position. While the transaction is open, the Fund will incur an expense for any accrued dividends or interest which is paid to the lender of the securities. These short sales may involve a level of risk in excess of the liability recognized in the accompanying consolidated balance sheet. The extent of such risk cannot be quantified.

Derivatives

        Certain Funds use derivative instruments. However, there is minimal risk to the Company in relation to the derivative assets and liabilities of the Funds in excess of its investment in the respective Funds holding the investment. The Funds' derivative instruments include foreign currency exchange contracts, credit default swaps, interest rate swaps, financial futures contracts and warrants. The fair values of derivative instruments are recorded as other assets or other liabilities on the Company's Consolidated Balance Sheets. The Company has used foreign exchange forwards to hedge the risk of movement in exchange rates on financial assets on a limited basis.

        The Company's Funds have not designated any financial instruments for hedge accounting, as defined in the accounting literature, during the periods presented. The gains or losses on derivative instruments not designated for hedge accounting are included as investment income in the Company's Consolidated Statements of Operations.

Equity method investments

        The Company uses the equity method of accounting for investments that provide the Company with the ability to exercise significant influence over an entity, but that do not meet the requirements for consolidation. Equity method investments include two Affiliates, Heitman LLC and Investment Counselors of Maryland, LLC as well as all unconsolidated Funds over which the Company exercises significant influence. The Company's share of earnings (losses) from equity method investments is included in investment income in the Consolidated Statements of Operations. The carrying amounts of equity method investments are reflected in Investments in the Consolidated Balance Sheets. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. The difference between the carrying value and its estimated fair value is recognized as impairment when the loss is deemed other than temporary. Other investments, in which OMAM or an Affiliate do not exercise significant influence are accounted for under the cost method. Under the cost method, income is recognized as dividends are declared.

Revenue recognition

        The Company's consolidated revenue primarily represents management fees billed monthly, quarterly and annually by Affiliates for managing the assets of clients. Asset-based management fees are recognized monthly as services are rendered and are primarily based upon a percentage of the market value of client assets managed. Affiliates that manage tangible property may also earn transaction fees at the time the underlying property is bought and sold. Any fees collected in advance are deferred and recognized as income over the period earned. Dividend income received by Investment Funds is recorded on the ex-dividend date. Performance fees are generally assessed as a percentage of the investment performance realized on a client's account. Performance fees, including those that are subject to clawback are recognized when they (i) become billable to customers (based on contractual terms of agreements), (ii) are not subject to contingent repayment and (iii) when collection is reasonably assured. Other income and revenues include interest income on cash and cash equivalents of Investment Funds and the Company's share of earnings from joint venture partners.

        Timber Funds' revenue is recognized from log and fiber sales upon delivery to the customer. The Company is typically responsible for all logging and hauling costs. However, under pay-as-cut timber contracts, title and risk of loss from stumpage sales transfer to the buyer as the trees are cut. Revenue is recognized as timber is harvested. The buyer is typically responsible for all logging and hauling costs.

Investment advisory fees receivable

        The Company earns management and performance fees which are billed monthly, quarterly and annually in arrears, according to the terms of the relevant investment management agreement. Management and performance fees that have been earned, but have not yet been collected are presented as Investment advisory fees receivable on the Consolidated Balance Sheets. Due to the short-term nature and liquidity of these receivables, the carrying amounts approximate their fair values. The Company's accounts receivable balances do not include any allowance for doubtful accounts, nor has any bad debt expense attributable to accounts receivable been recorded for the years ended December 31, 2014, 2013, and 2012. The Company believes all accounts receivable balances are fully collectible.

Property and equipment

        Property and equipment are recorded at historical cost and depreciated using the straight-line method over its estimated useful lives. The estimated useful lives of office equipment and furniture and fixtures range from three to five years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the remaining term of the lease. Computer software developed or obtained for internal use is amortized using the straight-line method over the estimated useful life of the software, which is generally three years or less. The costs of improvements that extend the life of a fixed asset are capitalized, while the cost of repairs and maintenance is expensed as incurred.

Intangible assets

        Acquired Affiliates have identifiable intangible assets arising from contractual or other legal rights with their clients. In determining the value of acquired intangibles, the Company analyzes the net present value of each acquired Affiliate's existing client relationships based on a number of factors. The Company analyzes the Affiliate's historical and potential future operating performance, the Affiliate's historical and potential future rates of attrition among existing clients, the stability and longevity of existing client relationships, the Affiliate's recent and long-term investment performance, the characteristics of the firm's products and investment styles, the stability and depth of the Affiliate's management team and the Affiliate's history and perceived franchise or brand value. The Company's acquired intangible assets are predominately definite-life intangible assets and are generally amortized on a straight line basis over their estimated useful lives, ranging from five to sixteen years, reflecting the expected duration of such relationships. The Company does not hold any indefinite-lived intangible assets other than goodwill.

        The Company tests for the possible impairment of acquired intangibles whenever events or changes in circumstances indicate that the carrying amount of the asset is not recoverable. If such indicators exist, the Company compares the undiscounted cash flows related to the asset to the carrying value of the asset. If the carrying value is greater than the undiscounted cash flow amount, an impairment charge is recorded in the Consolidated Statements of Operations for amounts necessary to reduce the carrying value of the asset to fair value. Intangible assets to be disposed of are reported at the lower of carrying value or fair value less cost to sell.

Goodwill

        The Company records goodwill when the consideration paid in a business acquisition exceeds the fair value of the net total of tangible assets acquired, identifiable intangible assets acquired and liabilities assumed. Goodwill is not amortized, but rather is tested for impairment annually or more frequently if events or circumstances occur that indicate impairment may exist. Factors that could trigger an impairment review include significant underperformance relative to historical or projected future operating results, significant changes in the Company's use of the acquired assets in a business combination or the strategy for the Company's overall business, and significant negative industry or economic trends.

        The Company performs its assessment for impairment of goodwill during the fourth quarter annually as of September 30, or as necessary, and the Company has determined that it has five reporting units, consisting of the five consolidated Affiliates. The Company first considers various qualitative factors to determine if it is more likely than not that the fair value of each of the reporting units is greater than its respective carrying amount, including goodwill. If the fair value of any reporting unit declines below its respective carrying amount, therefore indicating that impairment may exist, the impact would be determined at that point. For purposes of assessing potential impairment, the fair value of the reporting unit is estimated and compared to the carrying value of the reporting unit. The fair value of a reporting unit is based on discounted estimated future cash flows. The assumptions used to estimate fair value include management's estimates of future growth rates, operating cash flows, discount rates and terminal value. These assumptions and estimates can change in future periods based on market movement and factors impacting the expected business performance. Changes in assumptions or estimates could materially affect the determination of the fair value of a reporting unit. If it is determined that the carrying value of the reporting unit exceeds its fair value, the Company determines the implied fair value of the goodwill in the same manner used to determine the amount of goodwill in a business combination. If the carrying value of goodwill exceeds the implied fair value of the goodwill, an impairment charge is recognized in the amount equal to that excess. Based on the Company's most recent annual goodwill impairment test, the fair value of all its reporting units were in excess of their carrying value.

Leases

        The Company and its Affiliates currently lease office space and equipment under various leasing arrangements, classified as operating leases. As these leases expire, it can be expected that in the normal course of business they will be renewed or replaced. Some lease agreements contain renewal options, rent escalation clauses or other inducements provided by the landlord. Rent expense is accrued to recognize lease escalation provisions and inducements provided by the landlord, if any, on a straight-line basis over the lease term.

Earnings per share

        The Company calculates basic and diluted earnings per share ("EPS") by dividing net income for the year ended December 31, 2014 by its shares outstanding as outlined below. For periods prior to the Offering (described in Note 1), the Company is calculating pro forma basic and fully diluted EPS based upon 120 million pro forma shares, the number of shares outstanding following the Reorganization described in Note 1.

        Basic EPS attributable to the Company's common shareholders is calculated by dividing "Net income attributable to controlling interests" by the weighted-average number of shares outstanding. Diluted EPS is similar to basic EPS, but adjusts for the effect of potential common shares unless they are antidilutive. For periods with a net loss, potential common shares are considered antidilutive.

        The Company considers two ways to measure dilution to earnings per share: (a) calculate the net number of shares that would be issued assuming any related proceeds are used to buy back outstanding shares (the treasury stock method), or (b) assume the gross number of shares are issued and calculate any related effects on net income available for shareholders (the if-converted or two-class method). As appropriate, the Company's policy is to apply the more dilutive methodology upon issuance of such instruments.

Compensation arrangements

        The Company operates short term variable compensation arrangements where generally, a percentage of each Affiliate's annual pre-variable compensation earnings, as defined in each arrangement, is allocated to a "pool" of each respective Affiliate's key employees, and subsequently distributed to individuals subject to recommendation and approval of a Remuneration Committee comprised of both the Company's and each respective Affiliate's management. Variable compensation expense is accrued and recognized in the Consolidated Statements of Operations as services are provided by individual employees. Variable compensation allocated to the "pools" of Affiliate key employees under the terms of the plans, where distribution has not yet been approved by the Remuneration Committee, is not recognized until the required service has been performed and the award is communicated to the individual.

        The Company operates longer term profit-interest plans whereby certain Affiliate key employees are granted (or have a right to purchase) awards representing a profits interest in their respective Affiliate, as distinct from an equity interest due to the lack of pari passu voting rights. Under these plans, the Company may award a portion of the aforementioned variable compensation arrangement through issuance of a profits interest in the Affiliate. The awards generally have a three to five year vesting period from the grant date, and the service period begins at the commencement of the financial period to which the variable compensation relates. Under these plans, Affiliate key employees are eligible to share in the profits of their respective affiliates based on their respective percentage interest held.

        In addition, under certain circumstances Affiliate key employees are eligible to receive a series of repurchase payments upon exiting the plans based on a multiple of the last twelve months profits of their respective Affiliate, as defined. Profits allocated and movements in the potential repurchase value, determined based on a fixed multiple times trailing twelve month profits, as defined, are recognized as compensation expense. Profits interests compensation liabilities are re-measured at each reporting date at the current trailing twelve month earnings multiple, with movements treated as compensation expense in the Company's Consolidated Statements of Operations.

Share-based compensation plans

        The Company recognizes the cost of all share-based payments to directors, senior management and employees, including grants of restricted stock and stock options of its Parent and its Affiliates, as compensation expense in the Consolidated Statements of Operations over the respective vesting periods.

        Awards made previously under the Parent's restricted stock and stock options plans are accounted for as equity settled, and the grant date fair value is recognized as compensation expense over the requisite service period, with a corresponding contribution to capital recorded. Options granted are measured at fair value using a standard option pricing valuation model. The valuation is consistent with generally accepted valuation methodologies for pricing financial instruments and incorporates all factors and assumptions that knowledgeable, willing market participants would consider in setting the price of the options.

        In connection with the Offering, certain unvested restricted shares of the Parent were exchanged for unvested restricted shares of the Company. Awards made under the Company's equity plan are accounted for as equity settled, and the grant date fair value is recognized as compensation expense over the requisite service period, with a corresponding contribution to capital recorded.

        Awards of equity made to Affiliate key employees are accounted for as cash settled, with the fair value recognized as compensation expense over the requisite service period, with a corresponding liability carried within other long term liabilities on the Consolidated Balance Sheet until the award is settled by the Company. The fair value of the liability is based on the expected cash to be paid, as determined according to trailing twelve months earnings multiples prescribed by each arrangement. The liability is revalued at each reporting period, with any movements recorded within compensation expense.

Deferred financing costs

        The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with in-process equity financings as other assets until such financings are consummated. After consummation of the equity financing, these costs are recorded in total equity as a reduction of Shareholders' equity generated as a result of the offering. At the time in which the equity financing is no longer considered probable of being consummated, the deferred financing costs are expensed immediately as a charge to operating expenses in the Consolidated Statement of Operations. Costs associated with an unconsummated transaction amounted to $0.0 million, $0.0 million, and $0.4 million expensed in the years ended December 31, 2014, 2013 and 2012, respectively.

Income taxes

        The Company uses the asset and liability method of accounting for income taxes on a "separate return" basis. Under this method, a subsidiary is assumed to file a separate return with the taxing authority, thereby reporting its taxable income or loss and paying the applicable tax to or receiving the appropriate refund from the parent. The rules followed by the subsidiary in computing its tax or refund should be the same as those followed by a taxpayer filing directly with the taxing authority.

        The Company files tax returns directly with the U.S. and state tax authorities and therefore, the computations under the separate return method follow the Company's filings.

        Deferred income taxes are recognized for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the Consolidated Financial Statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company's deferred tax assets have been attributable to federal and state loss carry forwards, interest deductions, and accrued liabilities. Deferred tax liabilities have been attributable to undistributed earnings of subsidiaries.

        Deferred income tax assets are subject to a valuation allowance if, in management's opinion, it is not more-likely-than-not that these benefits will be realized. In evaluating the Company's ability to recover its deferred tax assets, the Company considers all available positive and negative evidence including its past operating results, the existence of cumulative earnings or losses in the most recent years and its forecast of future taxable income. In estimating future taxable income, the Company develops assumptions including the amount of future pre-tax operating income and the reversal of temporary differences. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates the Company is using to manage the underlying businesses.

        A tax benefit should only be recognized if it is more likely than not that the position will be sustained based on its technical merits. The Company recognizes the financial statement benefit of a tax position only after considering the probability that a tax authority would uphold the position in an examination. For tax positions meeting a "more-likely-than-not" threshold, the amount recognized in the financial statements is the largest amount of benefit greater than 50% likely of being sustained. The more-likely-than-not threshold must continue to be met in each reporting period to support continued recognition of the benefit. Unrecognized tax benefits and related interest and penalties, are adjusted periodically to reflect changing facts and circumstances. The Company's accounting policy is to classify interest and related charges as a component of income tax expense.

Non-controlling interests

        Non-controlling interests in Consolidated Funds on the Consolidated Balance Sheets include undistributed income owned by the investors in the respective Funds. At December 31, 2013, the Company had non-controlling interests on the Consolidated Balance Sheets of $0.1 million representing equity arrangements for entities that are consolidated, but less than 100% owned. All non-controlling interests in these entities were acquired by the Company in 2014. The Company's consolidated net income on the Consolidated Statements of Operations includes the income (loss) attributable to non-controlling interest holders of these consolidated entities. Ownership interests held by Affiliate key employees are categorized as liabilities on the Consolidated Balance Sheets and are revalued each reporting date, with movements treated as compensation expense in the Consolidated Statements of Operations.

Redeemable non-controlling interests

        The Company includes redeemable non-controlling interests related to certain consolidated Funds as temporary equity on the Consolidated Balance Sheets. Non-controlling interests in certain consolidated Funds are subject to monthly or quarterly redemption by the investors. When redeemable amounts become legally payable to investors, they are classified as a liability and included in other liabilities of consolidated Funds on the Consolidated Balance Sheets.

Other comprehensive income (loss)

        Other comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners. For the Company's purposes, comprehensive income (loss) represents net income/loss, as presented in the accompanying Consolidated Statements of Operations, adjusted for net foreign currency translation adjustments.

Restructuring costs

        A liability for restructuring is recognized only after management has developed a formal plan, approved by the Board of Directors, to which it has committed. The costs included in a restructuring liability are those costs that are either incremental or incurred as a direct result of the plan, or are the result of a continuing contractual obligation with no continuing economic benefit to the Company, or a penalty incurred to cancel the contractual obligation. Refer to Note 22 for details of the Company's restructuring activities.

Recent accounting developments

        In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements and Property Plant and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 amends the criteria for reporting a component of an entity as discontinued operations. The new guidance only allows disposals of components of an entity that represent a strategic shift or will have a major effect on operations to be classified as discontinued operations. Additionally, the guidance allows for an entity to have significant continuing involvement in the operations of a component after the disposal transaction. The new guidance is effective for interim and fiscal periods beginning on or after December 15, 2014. The Company has elected not to early adopt ASU 2014-08. The Company is evaluating the impact of ASU 2014-08, however it does not expect it to have a significant impact on its Consolidated Financial Statements.

        In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 modifies existing U.S. GAAP revenue recognition standards to more closely align with international accounting standards. Additionally, the guidance requires improved disclosures around the nature, amount, timing and uncertainty of revenue recognized. This new guidance will be effective for annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. The Company is evaluating the impact of ASU 2014-09, however it does not expect it to have a significant impact on its Consolidated Financial Statements.

        In June 2014, the FASB issued ASU 2014-12, Compensation—Stock Compensation: Accounting for Share-Based Payments when the Terms of an Award Provide That a Performance Target Could Be Achieved after the Required Service Period. ASU 2014-12 requires that if an entity were to make a share-based payment award which includes terms that provide for a performance target that affects vesting, the entity must be treated as a performance condition. The new guidance is effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted and entities may elect to apply this ASU either prospectively for all awards or retrospectively for all awards with outstanding performance targets. The Company has not elected to early adopt ASU 2014-12. The Company is evaluating the impact of ASU 2014-12, however it does not expect it to have a significant impact on its Consolidated Financial Statements.

        In November 2014, the FASB issued ASU 2014-16, Derivatives and Hedging: Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or Equity. Entities may raise capital by issuing different classes of shares with certain preferences and voting rights, some of which may meet the definition of a derivative. For such instruments, ASU 2014-16 clarifies how an issuer or an investor should be interpreted in determining the nature of all stated and implied terms, while considering all the relevant facts and circumstances. ASU 2014-16 is effective for fiscal years beginning after December 15, 2016 and early adoption is permitted. The Company is evaluating the impact of ASU 2014-16, however it does not expect it to have a significant impact on its Consolidated Financial Statements.

        In November 2014, the FASB issued ASU 2014-17, Business Combinations: Pushdown Accounting. ASU 2014-17 expands existing guidance for determining whether and at what threshold an acquired entity can reflect the acquirer's accounting and reporting basis, known as pushdown accounting. Under ASU 2014-17, an acquired entity may apply pushdown accounting upon occurrence of an event in which the acquirer obtains control. ASU 2014-17 is effective for an acquired entity's financial statements as of November 18, 2014.

        In February 2015, the FASB issued ASU 2015-02, Consolidation: Amendments to the Consolidation Analysis. ASU 2015-02 rescinds the deferral of the consolidation rules under FAS 167, "Amendments to FASB Interpretation No. 46(R)", ("FAS 167") granted under ASU 2010-10, and will require all legal entities to be reevaluated under the revised consolidation model. The revised consolidation model provides updates when evaluating i) limited partnerships and similar entities currently under the voting interest model, ii) decision maker or service provider fees as a variable interest, iii) fee arrangements in the primary beneficiary determination, iv) related parties in the primary beneficiary determination, and v) certain investment funds. The amendments are intended to simplify the current consolidation model and reduce the number of consolidation entities by placing more emphasis on the risk of loss when determining a controlling financial interest. The amended guidance is effective for public entities for interim and annual periods beginning after December 15, 2015. Early adoption, including adoption in an interim period, is permitted. The Company is currently assessing the financial statement impact of the revised consolidation model and intends to early adopt ASU 2015-02 once the evaluation of the impact has been completed.

Investments
Investments

 

3) Investments

        Investments are comprised of the following at December 31 (in millions):

                                                                                                                                                                                    

 

 

2014

 

2013

 

Investments by consolidated Funds in related, unconsolidated master Funds

 

$

23.6 

 

$

19.8 

 

Other investments of consolidated Funds attributable to non-controlling interests

 

 

37.0 

 

 

386.4 

 

​  

​  

​  

​  

Investments of consolidated Funds attributable to non-controlling interests held at fair value

 

 

60.6 

 

 

406.2 

 

​  

​  

​  

​  

Equity-accounted investments in unconsolidated Funds (Note 6)

 

 

34.5 

 

 

43.1 

 

Other discretionary investments held at fair value

 

 

 

 

0.7 

 

​  

​  

​  

​  

Total investments in products held at fair value attributable to controlling interests

 

 

34.5 

 

 

43.8 

 

Investments related to voluntary deferred compensation plans held at fair value

 

 

59.7 

 

 

51.4 

 

​  

​  

​  

​  

Total investments held at fair value

 

 

154.8 

 

 

501.4 

 

Equity-accounted investments in Affiliates (Note 6)

 

 

50.5 

 

 

48.5 

 

Equity-accounted investments in unconsolidated Funds, at cost (Note 6)

 

 

0.5 

 

 

 

Investments in joint ventures

 

 

2.4 

 

 

2.9 

 

Other investments

 

 

1.7 

 

 

1.5 

 

​  

​  

​  

​  

Total investments per Consolidated Balance Sheet

 

$

209.9 

 

$

554.3 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

        Investment income is comprised of the following for the years ended December 31 (in millions):

                                                                                                                                                                                    

 

 

2014

 

2013

 

2012

 

Investment return of equity-accounted investments in unconsolidated Funds (Note 6)

 

$

1.9 

 

$

2.9 

 

$

1.7 

 

Realized and unrealized gains/losses on other discretionary investments held at fair value

 

 

0.7 

 

 

0.1 

 

 

—  

 

​  

​  

​  

​  

​  

​  

Total investment return on OMAM products

 

 

2.6 

 

 

3.0 

 

 

1.7 

 

Investment return of equity-accounted investments in Affiliates (Note 6)

 

 

9.6 

 

 

7.7 

 

 

14.8 

 

​  

​  

​  

​  

​  

​  

Total investment income per Consolidated Statement of Operations (Note 6)

 

$

12.2 

 

$

10.7 

 

$

16.5 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

 

Fair Value Measurements
Fair Value Measurements

 

4) Fair Value Measurements

        The following table summarizes the Company's assets and liabilities that are measured at fair value on a recurring basis at December 31, 2014 (in millions):

                                                                                                                                                                                    

 

 

Quoted prices
in active
markets
(Level I)

 

Significant
other
observable
inputs
(Level II)

 

Significant
unobservable
inputs
(Level III)

 

Total value,
December 31,
2014

 

Assets of OMAM and consolidated Funds(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments owned, at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

Common and preferred stock

 

$

24.8

 

$

 

$

 

$

24.8

 

Short-term investment funds

 

 

0.1

 

 

 

 

 

 

0.1

 

Fixed income securities

 

 

1.1

 

 

 

 

 

 

1.1

 

Collective investment funds

 

 

 

 

32.5

 

 

 

 

32.5

 

Other investments

 

 

0.3

 

 

1.8

 

 

 

 

2.1

 

​  

​  

​  

​  

​  

​  

​  

​  

Total investments at fair value

 

 

26.3

 

 

34.3

 

 

 

 

60.6

 

Restricted cash held at fair value

 

 

104.5

 

 

 

 

 

 

104.5

 

​  

​  

​  

​  

​  

​  

​  

​  

Consolidated Funds Total

 

 

130.8

 

 

34.3

 

 

 

 

165.1

 

​  

​  

​  

​  

​  

​  

​  

​  

Investment securities(2)

 

 

59.7

 

 

 

 

 

 

59.7

 

Investments in unconsolidated Funds(3)          

 

 

 

 

 

 

34.5

 

 

34.5

 

​  

​  

​  

​  

​  

​  

​  

​  

OMAM Total

 

 

59.7

 

 

 

 

34.5

 

 

94.2

 

​  

​  

​  

​  

​  

​  

​  

​  

Total fair value assets

 

$

190.5

 

$

34.3

 

$

34.5

 

$

259.3

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

Liabilities of consolidated Funds(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

$

(16.4

)

$

 

$

 

$

(16.4

)

​  

​  

​  

​  

​  

​  

​  

​  

Total fair value liabilities

 

$

(16.4

)

$

 

$

 

$

(16.4

)

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

        The following table summarizes the Company's assets and liabilities that are measured at fair value on a recurring basis at December 31, 2013 (in millions):

                                                                                                                                                                                    

 

 

Quoted prices
in active
markets
(Level I)

 

Significant
other
observable
inputs
(Level II)

 

Significant
unobservable
inputs
(Level III)

 

Total value,
December 31,
2013

 

Assets of OMAM and consolidated Funds(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments owned, at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

Common and preferred stock

 

$

52.0

 

$

 

$

 

$

52.0

 

Short-term investment funds

 

 

8.8

 

 

 

 

 

 

8.8

 

Fixed income securities

 

 

 

 

207.0

 

 

 

 

207.0

 

Collective investment funds

 

 

 

 

9.1

 

 

 

 

9.1

 

Corporate debt

 

 

 

 

54.1

 

 

 

 

54.1

 

Other investments

 

 

0.9

 

 

70.2

 

 

 

 

71.1

 

Derivatives

 

 

2.8

 

 

1.3

 

 

 

 

4.1

 

​  

​  

​  

​  

​  

​  

​  

​  

Total investments at fair value

 

 

64.5

 

 

341.7

 

 

 

 

406.2

 

Restricted cash held at fair value

 

 

80.5

 

 

93.6

 

 

 

 

174.1

 

​  

​  

​  

​  

​  

​  

​  

​  

Consolidated Funds Total

 

 

145.0

 

 

435.3

 

 

 

 

580.3

 

​  

​  

​  

​  

​  

​  

​  

​  

Investment securities(2)

 

 

52.1

 

 

 

 

 

 

52.1

 

Investments in unconsolidated Funds(3)          

 

 

 

 

 

 

43.1

 

 

43.1

 

​  

​  

​  

​  

​  

​  

​  

​  

OMAM Total

 

 

52.1

 

 

 

 

43.1

 

 

95.2

 

​  

​  

​  

​  

​  

​  

​  

​  

Total fair value assets

 

$

197.1

 

$

435.3

 

$

43.1

 

$

675.5

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​  

​