OM ASSET MANAGEMENT PLC, 10-Q filed on 11/10/2015
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2015
Nov. 6, 2015
Document and Entity Information
 
 
Entity Registrant Name
OM Asset Management plc 
 
Entity Central Index Key
0001611702 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Non-accelerated Filer 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2015 
 
Document Fiscal Year Focus
2015 
 
Entity Current Reporting Status
No 
 
Document Fiscal Period Focus
Q3 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
120,535,398 
Condensed Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
Assets
 
 
Cash and cash equivalents
$ 126.8 
$ 268.6 
Total assets
911.9 
7,772.9 
Liabilities and shareholders' equity
 
 
Total liabilities
787.7 
5,215.5 
Commitments and contingencies
   
   
Equity:
 
 
Other comprehensive income (loss)
(7.3)
(20.4)
Total equity and redeemable non-controlling interests in consolidated Funds
124.2 
2,557.4 
Total liabilities and equity
911.9 
7,772.9 
Consolidated Entity Excluding Consolidated Funds
 
 
Assets
 
 
Cash and cash equivalents
126.8 
175.6 
Investment advisory fees receivable
145.3 
161.1 
Property and equipment, net
28.6 
24.1 
Investments, at fair value
152.2 
149.3 
Acquired intangibles, net
0.9 
1.0 
Goodwill
127.1 
126.5 
Other assets
21.4 
21.3 
Deferred tax assets
309.6 
330.3 
Liabilities and shareholders' equity
 
 
Accounts payable and accrued expenses
47.3 
39.5 
Accrued incentive compensation
112.8 
132.1 
Other amounts due to related parties
239.9 
289.9 
Long-term compensation liabilities
251.4 
228.3 
Accrued income taxes
58.9 
47.0 
Notes payable to related parties
37.0 
Third party borrowings
70.0 
177.0 
Other liabilities
7.4 
5.9 
Equity:
 
 
Ordinary shares (nominal value $0.001; 120,536,829 and 120,000,000 shares, respectively, issued)
0.1 
0.1 
Shareholders' equity
129.6 
31.1 
Other comprehensive income (loss)
(5.5)
5.3 
Consolidated Funds
 
 
Assets
 
 
Cash and cash equivalents
93.0 
Restricted cash in Timber Funds
2,487.7 
Investments, at fair value
60.6 
Timber assets
4,053.2 
Other assets
89.2 
Liabilities and shareholders' equity
 
 
Accounts payable and accrued expenses
66.9 
Notes payable to related parties
318.7 
Other liabilities
79.6 
Long term debt
3,777.2 
Securities sold, not yet purchased, at fair value
16.4 
Redeemable non-controlling interests in consolidated Funds
61.9 
Equity:
 
 
Non-controlling interests in consolidated Funds
$ 0 
$ 2,459.0 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Sep. 30, 2015
Dec. 31, 2014
Consolidated Entity Excluding Consolidated Funds
 
 
Ordinary shares, nominal value (in dollars per share)
$ 0.001 
$ 0.001 
Ordinary shares, issued (shares)
120,536,829 
120,000,000 
Recurring
 
 
Investments, fair value (in dollars)
 
$ 259.3 
Recurring |
Consolidated Entity Excluding Consolidated Funds
 
 
Investments, fair value (in dollars)
$ 99.8 
$ 94.2 
Condensed Consolidated Statements of Operations (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Revenue:
 
 
 
 
Total revenue
$ 161.8 
$ 260.0 
$ 535.9 
$ 789.8 
Operating expenses:
 
 
 
 
Total operating expenses
118.8 
278.2 
385.6 
847.9 
Operating income (loss)
43.0 
(18.2)
150.3 
(58.1)
Non-operating income and (expense):
 
 
 
 
Total non-operating income
3.7 
2.5 
7.3 
6.7 
Income (loss) from continuing operations before taxes
46.7 
(15.7)
157.6 
(51.4)
Income tax expense (benefit)
12.7 
(6.0)
40.9 
10.2 
Income (loss) from continuing operations
34.0 
(9.7)
116.7 
(61.6)
Loss from discontinued operations, net of tax
(2.0)
Gain on disposal of discontinued operations, net of tax
1.0 
1.3 
1.9 
3.7 
Net income (loss)
35.0 
(8.4)
118.6 
(59.9)
Net loss attributable to non-controlling interests in consolidated Funds
 
 
(77.3)
Net income (loss) attributable to controlling interests
35.0 
(1.7)
118.6 
17.4 
Earnings (loss) per share (basic) attributable to controlling interests
$ 0.29 
 
$ 0.98 
 
Earnings (loss) per share (diluted) attributable to controlling interests
$ 0.29 
 
$ 0.98 
 
Continuing operations earnings (loss) per share (basic) attributable to controlling interests
$ 0.28 
 
$ 0.96 
 
Continuing operations earnings (loss) per share (diluted) attributable to controlling interests
$ 0.28 
 
$ 0.96 
 
Weighted Average Number of Shares Outstanding, Basic
120,000,000 
 
120,000,000 
 
Weighted Average Number of Shares Outstanding, Diluted
120,517,072 
 
120,471,767 
 
Consolidated Entity Excluding Consolidated Funds
 
 
 
 
Revenue:
 
 
 
 
Management fees
158.4 
147.4 
480.2 
422.8 
Performance fees
3.3 
2.9 
55.5 
5.3 
Other revenue
0.1 
1.2 
0.2 
1.5 
Operating expenses:
 
 
 
 
Compensation and benefits
93.7 
128.7 
314.5 
310.0 
General and administrative expense
23.3 
21.7 
66.0 
58.8 
Amortization of acquired intangibles
0.1 
0.1 
Depreciation and amortization
1.8 
1.6 
5.0 
4.4 
Non-operating income and (expense):
 
 
 
 
Investment income
4.2 
3.1 
9.3 
8.9 
Interest income
0.1 
0.2 
0.1 
Interest expense
(0.6)
(16.6)
(2.2)
(49.8)
Consolidated Funds
 
 
 
 
Revenue:
 
 
 
 
Revenue from timber
100.9 
340.3 
Other revenue
7.6 
19.9 
Operating expenses:
 
 
 
 
Interest and dividend expense
32.3 
99.5 
Timber expense
56.1 
201.0 
Other expense
37.8 
174.1 
Non-operating income and (expense):
 
 
 
 
Net consolidated Funds' gains
16.0 
47.5 
Net loss attributable to non-controlling interests in consolidated Funds
$ 0 
$ (6.7)
$ 0 
$ (77.3)
Pro forma
 
 
 
 
Non-operating income and (expense):
 
 
 
 
Earnings (loss) per share (basic) attributable to controlling interests
 
$ (0.01)
 
$ 0.15 
Earnings (loss) per share (diluted) attributable to controlling interests
 
$ (0.01)
 
$ 0.15 
Continuing operations earnings (loss) per share (basic) attributable to controlling interests
 
$ (0.03)
 
$ 0.17 
Continuing operations earnings (loss) per share (diluted) attributable to controlling interests
 
$ (0.03)
 
$ 0.17 
Weighted Average Number of Shares Outstanding, Basic
 
120,000,000 
 
120,000,000 
Weighted Average Number of Shares Outstanding, Diluted
 
120,000,000 
 
120,000,000 
Condensed Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Net income (loss)
$ 35.0 
$ (8.4)
$ 118.6 
$ (59.9)
Valuation of derivative securities, net of tax
(9.6)
(9.6)
Foreign currency translation adjustment
(0.8)
(1.7)
(1.2)
1.2 
Total other comprehensive income (loss)
24.6 
(10.1)
107.8 
(58.7)
Total comprehensive income (loss) attributable to controlling interests
24.6 
(3.0)
107.8 
18.9 
Consolidated Funds
 
 
 
 
Comprehensive loss attributable to non-controlling interests in consolidated Funds
$ 0 
$ (7.1)
$ 0 
$ (77.6)
Condensed Consolidated Statements of Changes in Stockholders' Equity (USD $)
In Millions, except Share data, unless otherwise specified
Total
Consolidated Entity Excluding Consolidated Funds
Consolidated Entity Excluding Consolidated Funds
Ordinary shares
Consolidated Entity Excluding Consolidated Funds
Shareholders' equity (deficit)
Consolidated Entity Excluding Consolidated Funds
Accumulated other comprehensive income (loss)
Consolidated Entity Excluding Consolidated Funds
Total shareholders' equity (deficit)
Consolidated Entity Excluding Consolidated Funds
Non-controlling interests
Consolidated Funds
Consolidated Funds
Non-controlling interests
Balance at Dec. 31, 2013
$ 2,132.6 
 
$ 0 
$ (449.8)
$ 3.0 
$ (446.8)
$ 0.1 
 
$ 2,579.3 
Balance (in shares) at Dec. 31, 2013
 
 
 
 
 
 
 
 
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
(14.0)
 
 
(15.6)
1.6 
(14.0)
 
 
 
Tax on gain from transfer of subsidiary to Parent
(3.4)
 
 
(3.4)
 
(3.4)
 
 
 
Issuance of ordinary shares (in shares)
 
 
120,000,000 
 
 
 
 
 
 
Issuance of ordinary shares
0.2 
 
0.1 
0.1 
 
0.2 
 
 
 
Capital contributions (redemptions)
923.2 
 
 
973.1 
 
973.1 
 
 
(49.9)
Equity-based compensation
6.0 
 
 
6.0 
 
6.0 
 
 
 
Transfer of IPO share award
1.8 
 
 
1.8 
 
1.8 
 
 
 
Foreign currency translation adjustment
1.2 
 
 
 
1.5 
1.5 
 
 
(0.3)
Parent company corporate cost allocation
3.4 
3.4 
 
3.4 
 
3.4 
 
 
 
Assignment of deferred tax assets and co-investments to Parent
(332.6)
 
 
(332.6)
 
(332.6)
 
 
 
Repurchase of Affiliate equity
(3.8)
 
 
(3.7)
 
(3.7)
(0.1)
 
 
Net consolidation (de-consolidation) of Funds
60.2 
 
 
 
 
 
 
 
60.2 
Distributions
(212.0)
 
 
(212.0)
 
(212.0)
 
 
 
Valuation of derivative securities, net of tax
 
 
 
 
 
 
 
 
Net income (loss)
(68.1)
 
 
17.4 
 
17.4 
 
 
(85.5)
Increase (Decrease) in redeemable non-controlling interest in consolidated Funds
 
 
 
 
 
 
 
 
 
Transfer of subsidiary to Parent
 
 
 
 
 
 
 
(327.4)
 
Capital contributions (redemptions)
 
 
 
 
 
 
 
5.1 
 
Net de-consolidation of Funds
 
 
 
 
 
 
 
(28.8)
 
Net income (loss)
 
 
 
 
 
 
 
8.2 
 
Increase (Decrease) in total equity and redeemable non-controlling interest in consolidated Funds
 
 
 
 
 
 
 
 
 
Transfer of subsidiary to Parent
(341.4)
 
 
 
 
 
 
 
 
Tax on gain from transfer of subsidiary to Parent
(3.4)
 
 
 
 
 
 
 
 
Tax on gain from transfer of subsidiary to Parent
0.2 
 
 
 
 
 
 
 
 
Capital contributions (redemptions)
928.3 
 
 
 
 
 
 
 
 
Equity-based compensation
6.0 
 
 
 
 
 
 
 
 
Transfer of IPO share award
1.8 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
1.2 
 
 
 
 
 
 
 
 
Parent company corporate cost allocation
(3.4)
 
 
 
 
 
 
 
 
Assignment of deferred tax assets and co-investments to Parent
(332.6)
 
 
 
 
 
 
 
 
Repurchase of Affiliate equity
(3.8)
 
 
 
 
 
 
 
 
De-consolidation of Funds
31.4 
 
 
 
 
 
 
 
 
Dividends to related parties
(212.0)
 
 
 
 
 
 
 
 
Net income (loss)
(59.9)
 
 
 
 
 
 
 
 
Balance at Sep. 30, 2014
2,494.7 
 
0.1 
(15.3)
6.1 
(9.1)
 
2,503.8 
Balance (in shares) at Sep. 30, 2014
 
 
120,000,000 
 
 
 
 
 
 
Balance at Sep. 30, 2014
2,555.1 
 
 
 
 
 
 
 
 
Balance at Sep. 30, 2014
 
 
 
 
 
 
 
60.4 
 
Balance at Dec. 31, 2014
2,495.5 
 
0.1 
31.1 
5.3 
36.5 
 
2,459.0 
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 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
Issuance of ordinary shares (in shares)
 
 
500,000 
 
 
 
 
 
 
Capital contributions (redemptions)
(0.9)
 
 
(0.9)
 
(0.9)
 
 
 
Equity-based compensation
9.9 
 
 
9.9 
 
9.9 
 
 
 
Foreign currency translation adjustment
(1.2)
 
 
 
(1.2)
(1.2)
 
 
 
Parent company corporate cost allocation
 
 
 
 
 
 
 
 
Net consolidation (de-consolidation) of Funds
(2,459.0)
 
 
 
 
 
 
 
(2,459.0)
Valuation of derivative securities, net of tax
(9.6)
 
 
 
(9.6)
(9.6)
 
 
 
Dividends to shareholders
(7.6)
 
 
(7.6)
 
(7.6)
 
 
 
Dividends to related parties
(21.5)
 
 
(21.5)
 
(21.5)
 
 
 
Net income (loss)
118.6 
 
 
118.6 
 
118.6 
 
 
 
Increase (Decrease) in redeemable non-controlling interest in consolidated Funds
 
 
 
 
 
 
 
 
 
Net de-consolidation of Funds
 
 
 
 
 
 
 
(61.9)
 
Increase (Decrease) in total equity and redeemable non-controlling interest in consolidated Funds
 
 
 
 
 
 
 
 
 
Capital contributions (redemptions)
(0.9)
 
 
 
 
 
 
 
 
Equity-based compensation
9.9 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
(1.2)
 
 
 
 
 
 
 
 
De-consolidation of Funds
(2,520.9)
 
 
 
 
 
 
 
 
Valuation of derivative securities, net of tax
(9.6)
 
 
 
 
 
 
 
 
Dividends to shareholders
(7.6)
 
 
 
 
 
 
 
 
Dividends to related parties
(21.5)
 
 
 
 
 
 
 
 
Net income (loss)
118.6 
 
 
 
 
 
 
 
 
Balance at Sep. 30, 2015
124.2 
 
0.1 
129.6 
(5.5)
124.2 
 
Balance (in shares) at Sep. 30, 2015
 
 
120,500,000 
 
 
 
 
 
 
Balance at Sep. 30, 2015
124.2 
 
 
 
 
 
 
 
 
Balance at Sep. 30, 2015
 
 
 
 
 
 
 
$ 0 
 
Condensed Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Cash flows from operating activities:
 
 
Net income (loss)
$ 118.6 
$ (59.9)
Net loss attributable to non-controlling interests in consolidated Funds
77.3 
Adjustments to reconcile net income to net cash provided by (used in) operating activities from continuing operations:
 
 
Parent company corporate cost allocation
 
3.4 
Net earnings from Affiliates accounted for using the equity method
(9.3)
(6.4)
Changes in operating assets and liabilities (excluding discontinued operations):
 
 
Cash flows from operating activities:
186.2 
156.5 
Net cash flows from operating activities of discontinued operations
1.9 
(34.6)
Total net cash flows from operating activities
188.1 
121.9 
Cash flows from investing activities:
 
 
Net cash flows from investing activities of continuing operations
(104.6)
(32.5)
Net cash flows from investing activities of discontinued operations
(7.1)
Total net cash flows from investing activities
(104.6)
(39.6)
Cash flows from financing activities:
 
 
Net cash flows from financing activities of continuing operations
(225.3)
(84.9)
Net cash flows from financing activities of discontinued operations
(1.2)
Total net cash flows from financing activities
(225.3)
(86.1)
Effect of foreign exchange rate changes on cash and cash equivalents
(0.1)
Net decrease in cash and cash equivalents
(141.8)
(3.9)
Cash and cash equivalents at beginning of period
268.6 
282.2 
Cash and cash equivalents at end of period
126.8 
278.3 
Supplemental disclosure of cash flow information:
 
 
Interest paid (excluding consolidated Funds)
2.7 
63.2 
Income taxes paid
8.8 
5.2 
De-consolidation of Funds
(2,520.9)
31.4 
Non-cash capital contribution to Parent
(0.1)
(14.0)
Non-cash contribution from Parent
428.5 
Consolidated Entity Excluding Consolidated Funds
 
 
Adjustments to reconcile net income to net cash provided by (used in) operating activities from continuing operations:
 
 
Net (income) loss from discontinued operations
(1.9)
3.0 
Amortization of acquired intangibles
0.1 
0.1 
Depreciation and other amortization
5.0 
4.4 
(Gain) loss on disposal of property and equipment
0.1 
Amortization and revaluation of non-cash compensation awards
32.4 
68.5 
Parent company corporate cost allocation
3.4 
Net earnings from Affiliates accounted for using the equity method
(9.3)
(6.3)
Distributions received from equity method Affiliates
8.5 
6.9 
Deferred income taxes
19.4 
12.3 
(Gains) losses on other investments
(2.6)
Changes in operating assets and liabilities (excluding discontinued operations):
 
 
(Increase) decrease in investment advisory fees receivable and other amounts due from related parties
19.4 
(Increase) decrease in other receivables, prepayments, deposits and other assets
(1.6)
(22.5)
Increase (decrease) in accrued incentive compensation, other amounts due to related parties and other liabilities
(13.5)
(9.4)
Increase (decrease) in accounts payable and accruals and accrued income taxes
9.0 
(10.1)
Cash flows from operating activities:
186.2 
65.1 
Cash flows from investing activities:
 
 
Purchase of fixed assets, excluding discontinued operations
(8.9)
(4.6)
Payments for Affiliate and joint venture equity
(0.6)
(11.0)
Dispositions of Affiliates
(3.7)
Purchase of investment securities
(13.0)
(7.9)
Sales of investment securities
10.9 
18.6 
Cash flows from financing activities:
 
 
Repayment of third party borrowings
(107.0)
Repayment of related party borrowings
(37.0)
(37.1)
Payment to Parent for deferred tax arrangement
(42.9)
Payment to Parent for co-investment redemptions
(9.5)
Dividends paid to shareholders
(7.4)
Dividends paid to related parties
(21.5)
Cash and cash equivalents at beginning of period
175.6 
 
Cash and cash equivalents at end of period
126.8 
 
Consolidated Funds
 
 
Cash flows from operating activities:
 
 
Net loss attributable to non-controlling interests in consolidated Funds
77.3 
Adjustments to reconcile net income to net cash provided by (used in) operating activities from continuing operations:
 
 
Net (income) loss from discontinued operations
(4.7)
(Gains) losses on other investments
(4.6)
Changes in operating assets and liabilities (excluding discontinued operations):
 
 
Cash flows from operating activities:
91.4 
(Increase) decrease in receivables other assets
155.4 
Increase (decrease) in accounts payable and other liabilities
13.2 
Cash flows from investing activities:
 
 
Purchase of investment securities
(97.1)
Redemption of investments
87.4 
De-consolidation of Funds
(93.0)
(14.2)
Cash flows from financing activities:
 
 
Deposits of restricted cash
31.5 
Proceeds from debt raised
4.1 
Repayment of debt
(4.8)
Non-controlling interest capital redeemed
(25.0)
Redeemable non-controlling interest capital raised
10.7 
Redeemable non-controlling interest capital redeemed
(6.9)
Distributions to non-controlling interests
(55.5)
Distributions to redeemable non-controlling interests
(1.9)
Cash and cash equivalents at beginning of period
93.0 
 
Cash and cash equivalents at end of period
$ 0 
 
Organization and Description of the Business
Organization and Description of the Business
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 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
 
Prior to the initial public offering of the Company’s business (the "Offering"), the Company’s U.S. holding company, Old Mutual (US) Holdings Inc. (“OMUSH”) was a subsidiary of OM Group (UK) Limited (“OMGUK”) which was in turn wholly owned by the Parent. The board of directors of the Parent elected to undertake the Offering which was completed on October 15, 2014.
 
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 prior to 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 was fully repaid by June 30, 2015.
9.
OMAM entered into arrangements with OMGUK for the payment of future realizable benefits (estimated to total $208.0 million at September 30, 2015) associated with certain deferred tax assets existing as of the date of the Offering, as well as co-investments (with both a carrying value and fair value of $31.8 million at September 30, 2015) 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, in the fourth quarter of 2014, the Company recast the components of Shareholders' equity 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
Basis of Presentation and Significant Accounting Policies
 
The Company’s significant accounting policies are as follows:
 
Basis of presentation
 
These unaudited Condensed 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.  On June 22, 2015, the Company completed a secondary public offering by its Parent of 13,300,000 ordinary shares of the Company pursuant to the Securities Act of 1933, as amended.  Additionally, the underwriters in the secondary public offering exercised their full overallotment option and purchased an additional 1,995,000 shares of the Company from the Parent.  Within these Condensed 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 Condensed 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 during 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 Condensed 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 Condensed 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 Condensed Consolidated Financial Statements, however material intercompany balances and transactions among the Company, its consolidated Affiliates and consolidated Funds (as defined below) are eliminated in consolidation.
 
These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2014 included in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March 30, 2015. The Company’s significant accounting policies, which have been consistently applied, are summarized in those Financial Statements.
 
New accounting policies

In February 2015, the FASB issued Accounting Standards Update 2015-02, Consolidation: Amendments to the Consolidation Analysis ("ASU 2015-02"). ASU 2015-02 rescinds the deferral of the consolidation rules under Financial Accounting Standard 167, "Amendments to FASB Interpretation No. 46(R)," ("FAS 167") granted under ASU 2010-10, "Amendments for Certain Investment Funds" 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 consolidated 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 elected to implement ASU 2015-02 using the modified retrospective method, which resulted in an effective date of adoption of January 1, 2015 and did not require the restatement of prior period results.

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 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 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, as amended by ASU 2015-02, relating to the consolidation of VIEs.

Prior to the adoption of ASU 2015-02, substantially all of the Funds managed by the Company qualified for the deferral granted under ASU 2010-10. As such, the Company evaluated these Funds for consolidation pursuant to former guidance in Financial Accounting Standards Board (“FASB”) Interpretation No. 46(R), Consolidation of Variable Interest Entities. These Funds have typically been 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 adopting ASU 2015-02, the Company re-evaluated all of its Affiliates' Funds for consolidation. All Funds consolidated prior to January 1, 2015 pursuant to consolidation guidance superseded by ASU 2015-02 were de-consolidated as of January 1, 2015. As of January 1, 2015, there were no Funds which required consolidation pursuant to ASU 2015-02.
 
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.
 
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. As of September 30, 2015, there were no Funds which were consolidated pursuant to ASU 2015-02.

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. 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.

Prior to the adoption of ASU 2015-02, the Company's Timber Funds did not qualify for the deferral under ASU 2010-10. Following the adoption of ASU 2015-02, Timber Funds and Investment Funds are evaluated pursuant to the same revised consolidation guidance. All of the Company's Timber Funds that were previously consolidated were de-consolidated on January 1, 2015 upon the adoption of ASU 2015-02.

Derivatives and Hedging

The Company may utilize derivative financial instruments to hedge the risk of movement of interest rates and foreign currency on financial assets and liabilities. These derivative financial instruments may or may not qualify as hedges for accounting purposes. The Company records all derivative financial instruments as either assets or liabilities on its Consolidated Balance Sheets and measures these instruments at fair value. For a derivative financial instrument that qualifies as a hedge for accounting purposes and is designated as a hedging instrument, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income (loss) and subsequently reclassified into earnings over the life of the hedge. The ineffective portion of the gain or loss is reported in earnings immediately.

Use of estimates
 
The preparation of these Condensed 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.
Fair Value Measurements
Fair Value Measurements
Fair Value Measurements
 
The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2015 (in millions): 
 
Quoted prices
in active
markets
(Level I)
 
Significant
other
observable
inputs
(Level II)
 
Significant
unobservable
inputs
(Level III)
 
Total value,
September 30, 2015
Assets of OMAM(1)
 

 
 

 
 

 
 

Investment securities(2)
$
64.5

 
$

 
$

 
$
64.5

Investments in unconsolidated Funds(3)

 

 
35.3

 
35.3

Total fair value assets
$
64.5

 
$

 
$
35.3

 
$
99.8

 
 
 
 
 
 
 
 
Liabilities of OMAM(1)
 
 
 
 
 
 
 
Derivative securities
$

 
$
(12.1
)
 
$

 
$
(12.1
)
Total fair value liabilities
$

 
$
(12.1
)
 
$

 
$
(12.1
)


On January 1, 2015, in conjunction with the adoption of ASU 2015-02, the Company de-consolidated all Funds that had been consolidated as of December 31, 2014.

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
)
 
 
(1)
Assets and liabilities measured at fair value are comprised of financial investments managed by the Company’s Affiliates and derivative securities held by the Company. $0.0 million in assets and $0.0 million in liabilities at September 30, 2015 and $60.6 million in assets and $(16.4) million in liabilities at December 31, 2014 are the result of the consolidation of Funds sponsored by the Company’s Affiliates. 

Of these, collective investment funds are multi-strategy products categorized as Level II because they are redeemable monthly and valued at NAV per share of the fund without adjustment which the Company believes represents the fair value of the investments. The fair value of fixed income securities, corporate debt, and other investments is estimated based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs and therefore classified within Level II. The Company obtains prices from independent pricing services that may utilize broker quotes, but generally the independent pricing services will use various other pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data. The Company has not made adjustments to the prices provided. If the pricing services are only able to (a) obtain a single broker quote or (b) utilize a pricing model, such securities are classified as Level III. If the pricing services are unable to provide prices, the Company attempts to obtain one or more broker quotes directly from a dealer or values such securities at the last bid price obtained. In either case, such securities are classified as Level III. The Company performs due diligence procedures over third party pricing vendors to understand their methodology and controls to support their use in the valuation process to ensure compliance with required accounting disclosures. 

Equity, short-term investment funds and derivatives which are traded on a national securities exchange are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level I. These securities that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs obtained by the Company from independent pricing services are classified as Level II.
 
(2)
Investment securities of $64.5 million and $59.7 million at September 30, 2015 and December 31, 2014, respectively, are investments in publicly registered daily redeemable funds (some managed by Affiliates), which the Company has classified as trading securities and valued using the published price as of the measurement dates. Accordingly, the Company has classified these investments as Level I.

(3)
The $35.3 million and $34.5 million at September 30, 2015 and December 31, 2014, respectively, relate to investments in unconsolidated Funds which consist primarily of investments in funds advised by Affiliates and are valued using NAV which the Company relies on to determine their fair value. The NAVs that have been provided by investees have been derived from the fair values of the underlying investments as of the measurement dates. The Company has classified investments in unconsolidated Funds as Level III given the nature of redemption restrictions that are in place. These unconsolidated Funds consist primarily of real estate investments funds. These investments are subject to longer than monthly or quarterly redemption restrictions, and due to their nature, distributions are received only as cash flows are generated from underlying assets over the life of the funds. The range of time over which the underlying assets are expected to be liquidated by the investees is approximately 1-8 years from September 30, 2015. The valuation process for the underlying real estate investments held by the real estate investments funds begins with each property or loan being valued by the investment teams. The valuations are then reviewed and approved by the valuation committee, which consists of senior members of the portfolio management, acquisitions, and research teams. For certain properties and loans, the valuation process may also include a valuation by independent appraisers. In connection with this process, changes in fair-value measurements from period to period are evaluated for reasonableness, considering items such as market rents, capitalization and discount rates, and general economic and market conditions.
 
The following table presents changes in Level III assets and liabilities, comprised of significant unobservable inputs, for the nine months ended September 30, 2015 (in millions): 
 
Investments in unconsolidated Funds,
 
For the three months ended September 30,
 
For the nine months ended September 30,
 
2015
 
2014
 
2015
 
2014
Beginning of period balance
$
34.4

 
$
42.3

 
$
34.5

 
$
43.1

Realized gain (loss)
0.6

 
0.5

 
(0.6
)
 
1.5

Net change in unrealized appreciation (depreciation)
0.4

 
(2.4
)
 
(0.4
)
 
(2.1
)
Purchases, issuances or settlements
0.7

 

 
3.5

 

Dispositions
(0.8
)
 
(1.0
)
 
(1.7
)
 
(3.1
)
Balance, September 30,
$
35.3

 
$
39.4

 
$
35.3

 
$
39.4


 
Gains (losses) recorded on the Company’s Condensed Consolidated Statements of Operations related to the above Level III changes were $1.0 million for the three months ended September 30, 2015 and $(1.9) million for the three months ended September 30, 2014. Gains (losses) recorded on the Company’s Condensed Consolidated Statements of Operations related to the above Level III changes were $(1.0) million for the nine months ended September 30, 2015 and $(0.6) million for the nine months ended September 30, 2014. There were no significant transfers of financial assets or liabilities among Levels I, II or III during the nine months ended September 30, 2015 or 2014.
Variable Interest Entities
Variable Interest Entities
Variable Interest Entities
 
The Company sponsors the formation of various entities considered to be VIEs. The Company consolidates these entities as required pursuant to ASC Topic 810 relating to the consolidation of VIEs. These VIEs are primarily Funds managed by Affiliates and are investment vehicles typically owned entirely by third-party investors. Certain Funds may be capitalized with seed capital investments from the Company and may be owned partially by Affiliate key employees and/or individuals that own minority interests in an Affiliate.
 
The Company’s determination of whether it is the primary beneficiary of a Fund that is a VIE is based in part on an assessment of whether or not the Company and its related parties are exposed to the majority of the risks and rewards of the entity. Typically the Fund’s investors are entitled to substantially all of the economics of these VIEs with the exception of the management fees and performance fees, if any, earned by the Company or any investment the Company has made into the Funds. 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.

The following table presents the assets and liabilities of Funds that are VIEs and consolidated by the Company (in millions): 
 
September 30,
2015
 
December 31,
2014
Assets
 

 
 

Investments, at fair value
$

 
$
5.9

Restricted cash

 
2,487.7

Timber assets

 
4,053.2

Other assets of consolidated Funds

 
165.0

Total Assets
$

 
$
6,711.8

Liabilities
 

 
 

Borrowings
$

 
$
4,095.9

Other liabilities of consolidated Funds

 
150.8

Total Liabilities
$

 
$
4,246.7


 
On January 1, 2015, in conjunction with the adoption of ASU 2015-02, the Company de-consolidated all Funds that had been consolidated as of December 31, 2014.

“Investments, at fair value” consist of investments in securities and investments in related parties.
 
The assets of consolidated VIEs presented in the table above belong to the investors in those Funds, are available for use only by the Fund to which they belong, and are not available for use by the Company. Any debt or liabilities held by consolidated Funds have no recourse to the Company’s general credit. The Company may also consolidate Funds that are not VIEs, and therefore the assets and liabilities of those Funds are not included in the table above.
 
The Company’s involvement with Funds that are VIEs and unconsolidated by the Company is generally limited to that of an investment manager and its investment in the unconsolidated VIE, if any. The Company’s investment in any unconsolidated VIE generally represents an insignificant interest of the Fund’s net assets and assets under management, such that the majority of the VIE’s results are attributable to third parties. The Company’s exposure to risk in these entities is generally limited to any capital contribution it has made or is required to make and any earned but uncollected management fees. The Company has not issued any investment performance guarantees to these VIEs or their investors.
 
The following information pertains to unconsolidated VIEs for which the Company holds a variable interest (in millions): 
 
September 30,
2015
 
December 31,
2014
Unconsolidated VIE assets
$
7,374.4

 
$
9,993.5

Unconsolidated VIE liabilities
$
4,204.2

 
$
1,515.0

Equity interests on the Condensed Consolidated Balance Sheet
$
50.4

 
$
75.3

Maximum risk of loss (1)
$
55.3

 
$
75.5

 
 
(1)
Includes equity investments the Company has made or is required to make and any earned but uncollected management/incentive fees. The Company does not record performance/incentive allocations until the respective measurement period has ended.
 
In addition to the multiple unconsolidated VIE Funds, the Company determined that Heitman LLC, one of the Company’s Affiliates, is a VIE. The Company concluded that it is not the primary beneficiary of Heitman LLC because it does not hold the power to direct its most economically significant activities. The Company aggregated Heitman LLC with the Company’s other unconsolidated VIE Funds due to their similar risk profiles given that the risks and rewards are driven by changes in investment values and the Affiliates’ ability to manage those assets.
Equity-Accounted Investees
Equity-Accounted Investees
Equity-Accounted Investees
 
The following tables present summarized financial information for Affiliates and Funds accounted for under the equity method (in millions): 
 
 
Nine Months Ended
September 30, 2015
 
Nine Months Ended
September 30, 2014
Statements of Income
 
Heitman LLC
 
Other
 
Total
 
Heitman LLC
 
Other
 
Total
Net revenues (1)
 
$
93.8

 
$
176.3

 
$
270.1

 
$
176.1

 
$
64.2

 
$
240.3

Operating income
 
17.6

 
81.8

 
99.4

 
42.0

 
22.4

 
64.4

Other income (expense), net
 

 
50.8

 
50.8

 
41.2

 
(35.4
)
 
5.8

Income before income taxes
 
17.6

 
132.6

 
150.2

 
83.2

 
(13.0
)
 
70.2

Less income tax expense
 
0.6

 
7.1

 
7.7

 
1.5

 
0.1

 
1.6

Exclude: noncontrolling interests income (loss)
 

 
123.6

 
123.6

 
73.3

 
(14.3
)
 
59.0

Net income attributable to controlling interests
 
$
17.0

 
$
1.9

 
$
18.9

 
$
8.4

 
$
1.2

 
$
9.6

OMAM equity in net income of equity method investees
 
$
7.4

 
$
1.9

 
$
9.3

 
$
5.2

 
$
1.2

 
$
6.4

 
 
 
As of September 30, 2015
 
As of December 31, 2014
Balance Sheet
 
Heitman LLC
 
Other
 
Total
 
Heitman LLC
 
Other
 
Total
Total assets
 
$
62.3

 
$
2,620.0

 
$
2,682.3

 
$
1,647.1

 
$
1,319.9

 
$
2,967.0

Total liabilities
 
33.8

 
970.7

 
1,004.5

 
581.1

 
552.8

 
1,133.9

Non-controlling interests in subsidiaries
 

 
1,613.2

 
1,613.2

 
1,014.4

 
756.9

 
1,771.3

Members’ equity
 
$
28.5

 
$
36.1

 
$
64.6

 
$
51.6

 
$
10.2

 
$
61.8

OMAM equity investment and undistributed earnings of affiliated companies, before consolidating and reconciling adjustments
 
$
20.0

 
$
36.1

 
$
56.1

 
$
44.7

 
$
10.2

 
$
54.9

Consolidating and reconciling adjustments:
 
 

 
 

 
 

 
 

 
 

 
 

Goodwill attributable to equity method investment
 
29.8

 

 
29.8

 
30.6

 

 
30.6

OMAM Investment in equity method investees at cost plus equity in undistributable earnings since acquisition
 
$
49.8

 
$
36.1

 
$
85.9

 
$
75.3

 
$
10.2

 
$
85.5

 
 
(1)
Net revenue includes advisory fees for asset management services and investment income, including interest and dividends from consolidated investment partnerships.
 
On January 1, 2015, in conjunction with the adoption of ASU 2015-02, the Company, including its equity-accounted Affiliates, de-consolidated all Funds that had been consolidated as of December 31, 2014. Of the de-consolidated Funds, to the extent the Company had significant influence due to its investment and its role as the investment advisor, the Funds have been treated as equity method investments and included as "Other" in the tables above.
Timber and Timberlands
Timber and Timberlands
Timber and Timberlands
 
Timber and timberlands consisted of the following (in millions): 
USD, in millions
 
9/30/2015
 
12/31/2014
Total timber and timberlands, at cost
 
$

 
$
4,920.1

Accumulated depletion on timber
 

 
(866.0
)
Accumulated amortization
 

 
(0.9
)
Timber and timberlands, net
 
$

 
$
4,053.2


 
On January 1, 2015, in conjunction with the adoption of ASU 2015-02, the Company de-consolidated its Timber Funds.
Related Party Transactions
Related Party Transactions
Related Party Transactions
 
The Company’s Parent provides the Company with various oversight services, including governance, which includes compensation for Old Mutual plc board and executive committees, investor relations, procurement of insurance coverage, human resources, financial reporting, internal audit, treasury, systems, risk and tax services. That portion of the above costs which (i) are directly attributable to the Company, (ii) have been charged to the Company by the Parent and (iii) have been paid to the Parent by the Company, have been recorded in the Company's unaudited Condensed Consolidated Financial Statements. In the three months ended September 30, 2015 and 2014, $1.3 million and $3.4 million, respectively, of these costs incurred have been expensed by the Company. These charges are periodically settled in cash.
 
As part of its profit-interests plan, an Affiliate made tax payments in 2014 on behalf of its employees who became vested in profit interests of the Affiliate. Payments totaling $5.3 million were repaid by the employees of the Affiliate in the nine months ended September 30, 2015.

During 2014, the Company entered into a seed capital management agreement, a co-investment deed, a deferred tax asset deed and a shareholder agreement with the Parent and/or the Parent’s subsidiaries. Additionally, in connection with the Reorganization, on September 29, 2014 the Company entered into loan note two, a non-interest bearing loan in the amount of $37.0 million, with the Parent. Loan note two was paid off in full as of June 30, 2015. Amounts owed to the Parent associated with the deferred tax asset deed were $208.0 million at September 30, 2015. Amounts owed to the Parent associated with the co-investment deed were $28.7 million at September 30, 2015, net of tax. As of September 30, 2015, the Company recorded $2.4 million withheld for estimated taxes due on co-investment redemptions. Amounts withheld in excess of the future tax liability will be payable to the Parent upon settlement.
Borrowings and Debt
Borrowings and Debt
Borrowings and Debt
 
The Company’s long term debt at September 30, 2015 and December 31, 2014, excluding the long term debt of the Company’s consolidated Funds, was comprised of the following (in millions): 
(in millions)
 
9/30/2015
 
12/31/2014
 
Interest rate
 
Maturity
Third party obligations:
 
 

 
 

 
 
 
 
Revolving credit facility
 
$
70.0

 
$
177.0

 
LIBOR + 1.25% plus 0.20% commitment fee
 
October 15, 2019
Related party obligations:
 
 

 
 

 
 
 
 
Loan note two
 

 
37.0

 
 
September 29, 2024
Total long term debt of the Company
 
$
70.0

 
$
214.0

 
 
 
 

 
The fair value of borrowings approximated net cost basis as of September 30, 2015 and December 31, 2014. Fair value was determined based on future cash flows, discounted to present value using current market rates. The inputs are categorized as Level III in the fair value hierarchy. Interest expense incurred amounted to a total of $2.2 million and $49.8 million for the nine months ended September 30, 2015 and 2014, respectively. Interest expense in 2014 was attributable to long-term debt owed to the Company's Parent. On September 29, 2014, the Parent made a capital contribution to the Company in the amount of the outstanding principal on a related party credit facility (see Note 1).
 
On September 29, 2014, the Company entered into loan note one and loan note two with its Parent. Loan note one was issued in the amount of $175.0 million, accrued interest at 3% per annum and was payable in full on its maturity date, September 29, 2015. On October 15, 2014, the Company repaid loan note one upon the closing of its new revolving credit facility. Loan note two was issued in the amount of $37.0 million and did not bear interest. Loan note two had a ten year term and calls for quarterly repayments amounting to the greater of the Company's excess cash, as defined in loan note two, or $1.0 million. On June 1, 2015, the Company repaid the remaining $36.0 million of the outstanding principal balance.
 
On October 15, 2014, the Company entered into a revolving credit facility with Citibank, as administrative agent and issuing bank, Citigroup Global Markets Inc. and Merrill Lynch, Piece, Fenner & Smith Incorporated as joint lead arrangers and joint book runners (the "Credit Facility"). Pursuant to the terms of the Credit Facility, the Company may obtain loans on a revolving credit basis and procure the issuance of letters of credit in an aggregate amount at any time outstanding not in excess of $350 million. The Credit Facility has a maturity date of October 15, 2019. Borrowings under the credit facility will bear interest, at OMAM's option, at either the per annum rate equal to (a) the greatest of (i) the prime rate, (ii) the federal funds effective rate plus 0.5% and (iii) the one month Adjusted LIBO Rate plus 1.0%, plus, in each case an additional amount ranging from 0.25% to 1.00%, with such additional amount being based from time to time on the ratio of the Company's total consolidated indebtedness to Adjusted EBITDA (a "Leverage Ratio") until either Moody's Investor Service, Inc. or Standard & Poor's has assigned an initial rating to the Company's senior, unsecured long-term indebtedness for borrowed money that is not subject to credit enhancement, or its credit rating, at which time such additional amount will be based on its credit rating or (b) the London interbank offered rate for a period, at the Company's election, equal to one, two, three or six months plus an additional amount ranging from 1.25% to 2.00%, with such additional amount being based from time to time on the Company's Leverage Ratio until it has been assigned a credit rating, at which time such additional amount will be based on its credit rating. In addition, the Company will be charged a commitment fee based on the average daily unused portion of the revolving credit facility at a per annum rate ranging from 0.20% to 0.50%, with such amount being based from time to time on its Leverage Ratio until it has been assigned a credit rating, at which time such amount will be based on the Company's credit rating. Under the Credit Facility, the ratio of third-party borrowings to trailing twelve months Adjusted EBITDA cannot exceed 3.0x, and the interest coverage ratio must not be less than 4.0x. At September 30, 2015 the outstanding balance of the facility is $70.0 million. An interest rate of LIBOR plus a margin of 1.25% and commitment fee rate of 0.20% is being charged, and the Company’s ratio of third-party borrowings to trailing twelve months Adjusted EBITDA was 0.3x.

In October 2015, the Company paid an additional $10.0 million against the outstanding balance of the revolving credit facility.
 
The long term debt of the Company’s consolidated Funds was comprised of the following at September 30, 2015 and December 31, 2014 (in millions): 
(in millions)
 
September 30,
2015
 
December 31,
2014
 
Interest rate
 
Maturity
Related party obligations:
 
 

 
 

 
 
 
 
Shareholder loans and note interest
 
$

 
$
318.7

 
BBSW* + 5.5%
 
October 2022
Total related party obligations:
 

 
318.7

 
 
 
 
Third party obligations:
 
 

 
 

 
 
 
 
Term loan A
 

 
163.0

 
6% - 6.26%
 
May 2016
Term loan B
 

 
261.3

 
5.93% - LIBOR + 1.61%
 
October 2016
Senior secured notes
 

 
860.0

 
6.19% - 6.38%
 
December 2019
Secured bank loan
 

 
109.7

 
variable
 
October 2017
Notes payable
 

 
2,383.2

 
LIBOR + margin
 
October 2027
Total third party obligations:
 

 
3,777.2

 
 
 
 
Total long term debt of consolidated Funds
 
$

 
$
4,095.9

 
 
 
 
 
 
 * BBSW refers to the Australian Bank-Bill Reference Rate
 
The fair value of borrowings was approximately $3,794.1 million at December 31, 2014. Fair value was determined based on future cash flows, discounted to present value using current market rates. The inputs are categorized as Level III in the fair value hierarchy.
 
Total interest expense recognized in relation to the above obligations of consolidated Funds during the nine months ended September 30, 2015 and 2014 was $0.0 million and $99.3 million, respectively. On January 1, 2015, in conjunction with the adoption of ASU 2015-02, the Company de-consolidated all Funds that held debt obligations.
 
The Company was in compliance with the required covenants related to borrowings and debt facilities as of September 30, 2015.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
 
Operational commitments
 
The Company had unfunded commitments to invest up to $32.2 million and $30.0 million in co-investments with an Affiliate as of September 30, 2015 and December 31, 2014, respectively. These commitments will be funded as required through the end of the respective investment periods ranging through fiscal 2018.
 
Certain Affiliates operate under regulatory authorities that require that they maintain minimum financial or capital requirements. Management is not aware of any violations of such financial requirements occurring during the period.
 
Litigation
 
The Company and its Affiliates are subject to claims, legal proceedings and other contingencies in the ordinary course of their business activities. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved in a manner unfavorable to the Company or its Affiliates. The Company and its Affiliates establish accruals for matters for which the outcome is probable and can be reasonably estimated. Management believes that any liability in excess of these accruals upon the ultimate resolution of these matters will not have a material adverse effect on the Combined and Consolidated financial condition or results of operations of the Company. As of September 30, 2015, there were no accruals for claims, legal proceedings or other contingencies.
 
Indemnifications
 
In the normal course of business, such as through agreements to enter into business combinations and divestitures of Affiliates, the Company enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred.

Foreign tax contingency

The Company has clients in non-U.S. jurisdictions which require entities that are conducting certain business activities in such jurisdictions to collect and remit tax assessed on certain fees paid for goods and services provided. The Company does not believe this requirement is applicable based on its limited business activities in these jurisdictions. However, given the fact that uncertainty exists around the requirement, the Company has chosen to evaluate its potential exposure related to non-collection and remittance of these taxes. At September 30, 2015, management of the Company has estimated the potential maximum exposure to be approximately $10 million. However, no accrual for the potential exposure has been recorded as the probability of incurring any potential liability relating to this exposure is not probable at September 30, 2015.

Considerations of credit risk
 
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash investments. The Company maintains cash and cash equivalents and short term investments with various financial institutions. These financial institutions are typically located in cities in which the Company and its Affiliates operate. For the Company and certain Affiliates, cash deposits at a financial institution may exceed Federal Deposit Insurance Corporation insurance limits.
Earnings Per Share
Earnings Per Share
Earnings Per Share

Basic earnings per share is calculated by dividing net income attributable to controlling interests by the weighted-average number of shares outstanding. Diluted earnings per share is similar to basic earnings per share, but is adjusted for the effect of potentially issuable ordinary shares, except when inclusion is antidilutive. 

The calculation of basic and diluted earnings per ordinary share is as follows. Amounts shown reflect pro forma shares outstanding in prior periods (dollars in millions, except per share data): 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Numerator:
 

 
 

 
 

 
 

Net income (loss) attributable to controlling interests
$
35.0

 
$
(1.7
)
 
$
118.6

 
$
17.4

Less: Total income available to participating unvested securities (1)
0.2

 

 
0.4

 

Total net income (loss) attributable to ordinary shares
$
34.8

 
$
(1.7
)
 
$
118.2

 
$
17.4

Denominator:
 

 
 

 
 

 
 

Weighted-average ordinary shares outstanding—basic
120,000,000

 
120,000,000

 
120,000,000

 
120,000,000

Potential ordinary shares
 
 
 
 
 
 
 
Restricted stock units
517,072

 

 
471,767

 

Weighted-average ordinary shares outstanding—diluted
120,517,072

 
120,000,000

 
120,471,767

 
120,000,000

Earnings (loss) per ordinary share attributable to controlling interests:
 

 
 

 
 

 
 

Basic
$
0.29

 
$
(0.01
)
 
$
0.98

 
$
0.15

Diluted
$
0.29

 
$
(0.01
)
 
$
0.98

 
$
0.15

 
 
(1)
Income available to participating unvested securities includes dividends paid on unvested restricted shares and their proportionate share of undistributed earnings.
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income
 
The components of accumulated other comprehensive income at September 30, 2015 and December 31, 2014 were as follows (in millions), including proportions attributable to non-controlling interests: 
 
September 30,
2015
 
December 31,
2014
Foreign currency translation
$
2.3

 
$
(20.4
)
Valuation of derivative securities, net of tax
(9.6
)
 

Total
$
(7.3
)
 
$
(20.4
)


In the nine months ended September 30, 2015 the Company recorded $(9.6) million, net of tax, on the derivative contract as further described in Note 12. On January 1, 2015, in conjunction with the adoption of ASU 2015-02, the Company de-consolidated all Funds that had been consolidated as of December 31, 2014, resulting in the reversal of $23.9 million related to accumulated foreign currency translation of previously consolidated Funds.
Derivatives and Hedging
Derivatives and Hedging
Derivatives and Hedging

In late July 2015, the Company entered into a Treasury rate lock contract. The contract was designated and qualified as a cash flow hedge under Accounting Standard Codification 815 (“ASC 815”). The Company documented its hedging strategy and risk management objective for this contract in anticipation of future financing transactions. The Company assesses the effectiveness of the hedging contract at inception and on a quarterly basis thereafter. At September 30, 2015, the hedging contract was evaluated to be highly effective in offsetting changes in cash flows associated with the hedged items. The fair value of the contract included in accounts payable and accrued expenses was $9.6 million, net of tax, at September 30, 2015. Amounts included in other comprehensive income (loss) were $(9.6) million, net of tax, for the three months ended September 30, 2015. The Treasury rate lock contract has not been settled as of September 30, 2015 and has been extended into the third quarter of 2016.
Discontinued Operations and Restructuring
Discontinued Operations and Restructuring
Discontinued Operations and Restructuring
 
Discontinued operations
 
The Company’s gain (loss) from discontinued operations was comprised of the following at September 30 (in millions):
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
Revenues
$

 
$

 
$

 
$
38.0

Compensation expense

 

 

 
31.0

Depreciation

 

 

 
0.2

Other operating expenses

 

 

 
9.8

Operating loss

 

 

 
(3.0
)
Investment gain of consolidated Funds

 

 

 
2.8

Net interest income

 

 

 
0.2

Income before taxes

 

 

 

Income taxes

 

 

 
2.0

Discontinued net loss

 

 

 
(2.0
)
Gain on disposal, net of tax of $0.6, $0.6, $1.2, and $0.6
1.0

 
1.3

 
1.9

 
3.7

Total Discontinued Operations
1.0

 
1.3

 
1.9

 
1.7

Attributable to non-controlling interests

 

 

 
4.7

Attributable to controlling interests
$
1.0

 
$