Form 8-K MEDLEY MANAGEMENT INC. For: Nov 13

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November 13, 2014 5:17 PM EST

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�

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

�

FORM 8-K

�

CURRENT REPORT

�

Pursuant to Section�13 or 15(d) of the

Securities Exchange Act of 1934

�

Date of Report (Date of Earliest Event Reported): November 13, 2014

�

Medley Management Inc.

(Exact name of registrant as specified in its charter)

�

Delaware	�	001-36638	�	47-1130638
(State or other jurisdiction of	�	(Commission File Number)	�	(IRS Employer
incorporation)	�	�	�	Identification No.)

�

375 Park Avenue, 33^rd Floor, New York, NY 10152

(Address of principal executive offices) (Zip Code)

�

(212) 759-0777

(Registrant’s telephone number, including area code)

�

Not Applicable

(Former name or former address, if changed since last report)

�

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

�

�	�	Written communications pursuant to Rule�425 under the Securities Act (17 CFR 230.425)
�	�	�
�	�	Soliciting material pursuant to Rule�14a-12 under the Exchange Act (17 CFR 240.14a-12)
�	�	�
�	�	Pre-commencement communications pursuant to Rule�14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
�	�	�
�	�	Pre-commencement communications pursuant to Rule�13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

�

Item 2.02

Results of Operations and Financial Condition.

�

On November 13, 2014, Medley Management Inc. (the “Company”) issued a press release announcing its financial results for its fiscal third quarter ended September 30, 2014. The press release is furnished as Exhibit 99.1 to this Report.

�

As provided in General Instruction B.2 of Form 8-K, the information in this Item 2.02 and the exhibit attached hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

�

Non-GAAP Financial Measures

�

The Company makes reference to certain non-GAAP financial measures in the attached press release. A reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP is contained in the attached press release.

�

Under GAAP, the Company is required to consolidate (a) entities in which the Company holds a majority voting interest or have majority ownership and control over the operational, financial and investing decisions of that entity, including affiliated funds, for which the Company is the general partner and are presumed to have control, and (b) entities that the Company concludes are variable interest entities, for which the Company is deemed the primary beneficiary. In order to make operating decisions, assess performance and allocate resources, management uses information derived from the Company’s combined and consolidated balance sheets and statements of operations that has been adjusted to eliminate the consolidating effects of certain funds on the Company’s combined and consolidated balance sheets and statements of operations, which the Company refers to as “standalone financial information” or information presented on a “standalone basis.” Revenues from management fees, performance fees and investment income on a standalone basis are greater than those presented on a combined and consolidated basis in accordance with GAAP because certain revenues recognized in certain segments received from these consolidated funds are eliminated in consolidation. Furthermore, expenses on a standalone basis are lower than related amounts presented on a combined and consolidated basis in accordance with GAAP due to the exclusion of the expenses of the consolidated funds. Standalone measures used by management include Core Net Income and Core EBITDA. Core Net Income is an income measure used by management to assess the performance of the Company’s business through the removal of non-core items, as well as non-recurring expenses associated with the Company’s initial public offering. Core Net Income is calculated by adjusting standalone net income attributable to the controlling and non-controlling interests in Medley LLC to exclude reimbursable expenses associated with the launch of funds, certain one-time severance costs and the amortization of equity compensation expense associated with grants of restricted stock units. In addition, Core Net Income includes the pro-forma adjustment to reflect guaranteed payments to Medley LLC members as compensation expense. Core earnings before interest, income taxes, depreciation and amortization, or Core EBITDA, is an income measure also used by management to assess the performance of the Company’s business. Core EBITDA is calculated as Core Net Income before interest expense, as well as taxes, depreciation and amortization.

�

These non-GAAP financial measures supplement and should be considered in addition to and not in lieu of the Company’s consolidated results of operations calculated and presented in accordance with GAAP.

�

Item 9.01

Financial Statements and Exhibits.

�

(d)

Exhibits.

�

Exhibit No.

Description

�

99.1

Press Release, dated November 13, 2014

� �

�

SIGNATURE

�

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

�

�	�	�	�
�	MEDLEY MANAGEMENT INC.
�	�
�	�
�	By:��	��/s/ Richard T. Allorto Jr.
�	�	Name:��	Richard T. Allorto Jr.
�	�	Title:��	Chief Financial Officer

�

Date: November 13, 2014

�

Exhibit 99.1

�

MEDLEY MANAGEMENT INC. ANNOUNCES THIRD QUARTER 2014 RESULTS AND DECLARES $0.20 PER SHARE DIVIDEND

�

79% increase in year over year Core Net Income per share to $0.25 for Q3 2014

�

For the period during Q3 2014 that the Company was public, Net Income attributable to Medley Management Inc. was $378,000

�

Declared $0.20 per share dividend for Q4 2014 payable on January 5, 2015

�

66% increase in year over year fee earning AUM to $3.0 billion

�

New York, NY (November 13, 2014) Medley Management Inc. (NYSE: MDLY) (the “Company” or “Medley”) today reported its financial results for the quarter ended September 30, 2014. Although Medley was a public company for only a portion of the reporting period, the financial results herein reflect the full period results of the Company and our operating subsidiaries, Medley LLC and Medley GP Holdings LLC, and their consolidated subsidiaries.

�

On September 29, 2014, Medley completed its IPO pursuant to which 6,000,000 shares of Class A common stock were sold at a price of $18.00 per share. Total proceeds from the offering, net of underwriting discount, were $100.4 million.

�

“We are pleased to report a strong quarter for Medley Management Inc. Growth in assets under management, origination, and financial performance for our shareholders exceeded our expectations” commented Brook Taube, Chief Executive Officer of Medley.

�

“Our broad origination platform continues to produce high quality assets at attractive yields for investors.� Our diversified fundraising platform continues to demonstrate the ability to grow assets in both retail and institutional channels. Permanent capital increased to 65% of fee earning assets under management at Medley, underpinning our ability to drive steady and consistent cash earning for our investors.� We are pleased to report our first dividend of $0.20 per share payable on January 5, 2015,” continued Mr. Taube.

�

Standalone Results of Operations

Total revenues increased by 57%, or $8.6 million, to $23.8 million for the three months ended September 30, 2014 as compared to $15.2 million for the same period in 2013. The growth in total revenues was driven by a 66% increase in year over year fee earning AUM, as well as a $3.4 million increase in performance fees.

�

Total expenses increased by 32%, or $2.5 million, to $10.1 million for the three months ended September 30, 2014 compared to $7.6 million for the same period in 2013. The increase is due primarily to increases in compensation expense, as well as general, administrative and other expenses as a result of the overall growth of our business. In addition, interest expense increased by $1.7 million due to an increase in our debt outstanding.

�

Core Net Income increased by 76%, or $5.5 million, to $12.7 million during the three months ended September 30, 2014 as compared to $7.2 million for the same period in 2013. Core Net Income Per Share increased by 79% to $0.25 per share for the three months ended September 30, 2014 as compared to $0.14 per share in the comparable period in 2013.�

�

Key Performance Indicators

�

Three Months Ended
September 30,

�

Nine Months Ended
September 30,

�

(unaudited)

�

(unaudited)

�

2014

�

2013

�

2014

�

2013

�

(Dollars in thousands, except per share data)

�

Consolidated Financial Data:

�

Net income attributable to Medley Management Inc. and non-controlling interests in Medley LLC

�

12,513

�

7,316

�

28,482

�

13,361

�

Standalone Data:

�

Core Net Income ⁽¹⁾

�

12,713

�

7,237

�

29,858

�

13,009

�

Core EBITDA

�

15,416

�

7,827

�

34,594

�

14,758

�

Core Net Income Per Share⁽²⁾

�

0.25

�

0.14

�

0.58

�

0.25

�

Core Net Income Margin⁽³⁾

�

31.8

�

27.9

�

26.6

�

18.9

Pro-Forma Weighted Average Shares Outstanding�⁽⁴⁾

�

30,484,637

�

30,484,722

�

30,484,693

�

30,484,722

�

Other Data (at period end, in millions):

�

Fee Earning AUM

�

3,036

�

1,829

�

3,036

�

1,829

�

AUM

�

3,635

�

2,265

�

3,635

�

2,265

�

(1)

Core Net Income reflects standalone net income attributable to Medley Management Inc. and non-controlling interests in Medley LLC adjusted to exclude reimbursable expenses associated with the launch of funds, certain one-time severance costs and stock-based compensation associated with restricted stock units that were granted in connection with our initial public offering (“IPO”). In addition, Core Net Income includes the pro-forma adjustment to reflect guaranteed payments to Medley LLC members as compensation expense. Prior to our reorganization and IPO, these guaranteed payments were recorded as distributions from member’s capital. Please refer to the reconciliation of net income attributed to controlling and non-controlling interests in Medley LLC to Core Net Income in Exhibit B for additional details.

(2)

Core Net Income Per Share reflects an adjustment for federal, state and local corporate income taxes. Please refer to the calculation of Core Net Income Per Share in Exhibit C for additional details.

(3)

Core Net Income Margin equals Core Net Income Per Share divided by total standalone revenue per share.

(4)

The calculation of Pro-Forma Weighted Average Shares Outstanding assumes that the following transactions had occurred at the beginning of each period presented: (1) the issuance of 6,000,000 Class A common shares in connection with our IPO (2) conversion by the pre-IPO holders of 23,333,333 Medley LLC units for 23,333,333 Class A shares and (3) 1,151,389 restricted stock units granted on the consummation of the IPO, adjusted for actual forfeitures during the period.

�

Fee Earning AUM

�

The table below presents the quarterly roll forward of our total fee earning AUM:

�

% of AUM

�

Long-dated

�

Long-dated

�

Permanent

�

Private

�

Permanent

�

Private

�

Capital

�

Funds and

�

Capital

�

Funds and

�

Vehicles

�

SMAs

�

Total

�

Vehicles

�

SMAs

�

(Dollars in millions)

�

Beginning balance, June 30, 2014

�

1,505

�

946

�

2,451

�

61%

�

39%

�

Commitments

�

465

�

157

�

622

�

Capital reduction

�

—

�

—

�

—

�

Distributions

�

(29

)

�

(26

)

�

(55

)

�

Change in fund value

�

)

�

Ending balance, September 30, 2014

�

1,967

�

1,069

�

3,036

�

65%

�

35%

�

Total fee earning AUM increased by 24%, or $585 million, to $3.0 billion at September 30, 2014 compared to June 30, 2014. The permanent capital vehicles’ share of fee earning AUM increased to 65% at September 30, 2014 compared to 61% at June 30, 2014. During the three months ended September 30, 2014, fee earning AUM at MCC and SIC increased 21% and 58%, respectively.

�

Dividend Declaration

�

On November 10, 2014, the Company’s board of directors declared a quarterly dividend of $0.20 per share, for the fourth quarter 2014, payable on January 5, 2015 to shareholders of record as of the close of business on December 17, 2014.

�

Conference Call and Webcast Information

�

We will host an earnings conference call and audio webcast at 10:00 a.m. (Eastern Time) on Friday, November 14, 2014 to discuss our third quarter 2014 financial results.

�

All interested parties may participate in the conference call and audio webcast by dialing (866) 314-5232 approximately 5-10 minutes prior to the call, international callers should dial (617) 213-8052. Participants should reference Medley Management Inc. and the participant passcode of 86141972 when prompted. Following the call you may access a replay of the event via audio webcast. This conference call will be broadcast live over the Internet and can be accessed by all interested parties through the Company's website, www.mdly.com. To listen to the live call, please go to the Company's website at least 15 minutes prior to the start of the call to register and download any necessary audio software. For those who are not able to listen to the live broadcast, a replay will be available shortly after the call on the Company's website.

�

About Medley Management Inc.

�

Medley Management Inc. is an asset management firm offering yield solutions to retail and institutional investors through Medley LLC and several registered investment advisors. Medley's national direct origination franchise, with over 75 people, is a premier provider of capital to the middle market in the U.S. As of September 30, 2014, Medley had in excess of $3.6 billion of investable capital in business development companies, Medley Capital Corporation (NYSE:MCC) and the Sierra Income Corporation, and private investment vehicles. Over the past 12 years, we have invested in excess of $5.1 billion to help over 285 companies grow across 35 industries. For additional information, please visit Medley Management Inc. at www.mdly.com

�

Forward-Looking Statements

�

Statements included herein may contain “forward-looking statements”.� Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including those described from time to time in filings by the Company with the Securities and Exchange Commission, including those described under the section entitled, “Risk Factors” in our prospectus dated September 23, 2014 as filed with the Securities and Exchange Commission on September 25, 2014 pursuant to Rule 424(b) of the Securities Exchange Act of 1933, as amended, as such factors may be updated from time to time in our filing with the Securities and Exchange Commission, which are accessible on its website at www.sec.gov. Except as required by law, the Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements in this press release speak only as of the date of this press release.

�

This press release does not constitute an offer for any Medley fund.

�

Available Information

�

Medley Management Inc.’s filings with the Securities and Exchange Commission, press releases, earnings releases and other financial information are available at www.mdly.com.

�

Contact

�

Sam Anderson

212.759.0777

�

Exhibit A. Standalone Statements of Operations for Medley Management Inc. (Prior to September 29, 2014, Medley LLC and Medley GP Holdings LLC)

�

Three Months Ended
September 30,
(unaudited)

�

Nine Months Ended
September 30,
(unaudited)

�

2014

�

2013

�

2014

�

2013

�

(in thousands)

�

Revenues

�

Management fees

�

17,616

�

13,875

�

47,516

�

34,315

�

Performance fees

�

3,395

�

(37

)

�

11,471

�

2,826

�

Other income and fees

�

2,787

�

1,328

�

7,183

�

3,347

�

Total revenues

�

23,798

�

15,166

�

66,170

�

40,488

�

Expenses

�

Compensation and benefits

�

5,677

�

3,498

�

15,010

�

10,062

�

Performance fee compensation

�

(921

)

�

928

�

2,237

�

6,199

�

General, administrative and other expenses

�

3,458

�

3,160

�

12,821

�

9,034

�

Total expenses

�

8,214

�

7,586

�

30,068

�

25,295

�

Other income (expense)

�

Dividend income

�

222

�

222

�

665

�

665

�

Interest expense

�

(2,016

)

�

(345

)

�

(3,380

)

�

(1,083

)

Other income (expenses), net

�

(87

)

�

(1,707

)

�

(936

)

Total other expense, net

�

(1,881

)

�

(46

)

�

(4,422

)

�

(1,354

)

Income before income taxes

�

13,703

�

7,534

�

31,680

�

13,839

�

Provision for income taxes

�

578

�

218

�

1,026

�

478

�

Net income

�

13,125

�

7,316

�

30,654

�

13,361

�

Net income attributable to non-controlling interests in consolidated subsidiaries

�

612

�

2,172

�

Net income attributable to Medley Management Inc. and non-controlling interests in Medley LLC

�

12,513

�

7,316

�

28,482

�

13,361

�

Exhibit B. Reconciliation of net income attributable to Medley Management Inc. and non-controlling interests in Medley LLC to Core Net Income and Core Net Income to Core EBITDA (Standalone)

�

Three Months Ended

�

Nine Months Ended

�

September 30,

�

September 30,

�

(unaudited)

�

(unaudited)

�

2014

�

2013

�

2014

�

2013

�

(in thousands)

�

Net income attributable to Medley Management Inc. and non-controlling interests in Medley LLC

�

12,513

�

7,316

�

28,482

�

13,361

�

Reimbursable fund startup expenses ⁽¹⁾

�

1,195

�

1,226

�

4,591

�

2,603

�

Severance expense ⁽¹⁾

�

)

�

725

�

IPO date award stock-based compensation ⁽¹⁾

�

Adjustment for pre-IPO guaranteed payments to members ⁽¹⁾⁽²⁾

�

(1,069

)

�

(1,311

)

�

(3,284

)

�

(3,680

)

Core Net Income

�

12,713

�

7,237

�

29,858

�

13,009

�

Interest expense

�

2,016

�

345

�

3,380

�

1,083

�

Income taxes

�

584

�

179

�

1,067

�

390

�

Depreciation and amortization

�

103

�

289

�

276

�

Core EBITDA

�

15,416

�

7,827

�

34,594

�

14,758

�

(1)

Amounts are presented net of income taxes.

(2)

Represents a pro-forma adjustment to reflect guaranteed payments to Medley LLC members as compensation expense. Prior to our reorganization and IPO, these payments were recorded as distributions from member’s capital.

�

Exhibit C. Calculation of Core Net Income Per Share (Standalone)

�

Three Months Ended
September 30,
(unaudited)

�

Nine Months Ended
September 30,
(unaudited)

�

2014

�

2013

�

2014

�

2013

�

Numerator

�

(in thousands, except per share data)

�

Core Net Income

�

12,713

�

7,237

�

29,858

�

13,009

�

Add: Income taxes

�

584

�

179

�

1,067

�

390

�

Pre-tax Core Net Income

�

13,297

�

7,416

�

30,925

�

13,399

�

Denominator

�

Class A shares issued in IPO

�

6,000,000

�

6,000,000

�

6,000,000

�

6,000,000

�

Conversion of LLC Units to Class A shares

�

23,333,333

�

23,333,333

�

23,333,333

�

23,333,333

�

Restricted stock units

�

1,151,304

�

1,151,389

�

1,151,360

�

1,151,389

�

Pro-Forma Weighted Average Shares Outstanding

�

30,484,637

�

30,484,722

�

30,484,693

�

30,484,722

�

Pre-tax Core Net Income Per Share

�

0.44

�

0.24

�

1.01

�

0.44

�

Less: corporate income taxes per share ⁽¹⁾

�

(0.19

)

�

(0.10

)

�

(0.43

)

�

(0.19

)

Core Net Income Per Share

�

0.25

�

0.14

�

0.58

�

0.25

�

(1)

Represents a per share adjustment for income taxes assuming that all of our pre-tax earnings were subject to federal, state and local corporate income taxes. We assumed an annualized effective corporate tax rate of approximately 43.0% for all periods presented.

�

Exhibit D. Consolidated Statements of Operations for Medley Management Inc. (Prior to September 29, 2014, Medley LLC and Medley GP Holdings LLC)

�

Three Months Ended
September 30,

�

Nine Months Ended
September 30,

�

(unaudited)

�

(unaudited)

�

2014

�

2013

�

2014

�

2013

�

(dollars in thousands, except per share data)

�

Revenues

�

Management fees

�

17,013

�

9,271

�

43,466

�

24,129

�

Performance fees

�

965

�

830

�

3,337

�

1,081

�

Other income and fees

�

2,787

�

1,328

�

7,183

�

3,347

�

Total revenues

�

20,765

�

11,429

�

53,986

�

28,557

�

Expenses

�

Compensation and benefits

�

5,677

�

3,498

�

15,010

�

10,062

�

Performance fee compensation

�

(921

)

�

928

�

2,237

�

6,199

�

Consolidated Funds expenses

�

296

�

306

�

1,129

�

921

�

General, administrative and other expenses

�

3,458

�

3,160

�

12,821

�

9,034

�

Total expenses

�

8,510

�

7,892

�

31,197

�

26,216

�

Other income (expense)

�

Dividend income

�

222

�

222

�

665

�

665

�

Interest expense

�

(2,016

)

�

(345

)

�

(3,380

)

�

(1,083

)

Other income (expenses), net

�

(268

)

�

(1,586

)

�

(175

)

Interest and other income of Consolidated Funds

�

15,356

�

13,495

�

45,890

�

37,398

�

Net realized gain (loss) on investments of Consolidated Funds

�

(499

)

�

(5,486

)

�

789

�

(18,065

)

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

�

(1,069

)

�

2,535

�

(9,437

)

�

(751

)

Total other income, net

�

11,726

�

10,424

�

32,941

�

17,989

�

Income before income taxes

�

23,981

�

13,961

�

55,730

�

20,330

�

Provision for income taxes

�

923

�

462

�

2,174

�

1,138

�

Net income

�

23,058

�

13,499

�

53,556

�

19,192

�

Net income attributable to non-controlling interests in Consolidated Funds

�

9,933

�

6,183

�

22,902

�

5,831

�

Net income attributable to non-controlling interests in consolidated subsidiaries

�

612

�

2,172

�

Net income attributable to non-controlling interests in Medley LLC

�

12,135

�

7,316

�

28,104

�

13,361

�

Net income attributable to Medley Management Inc.

�

378

�

378

�

Net income per share attributable to stockholders of

�

Class A common stock of Medley Management Inc:

�

Basic (Note 10)

�

0.05

⁽¹⁾

�

0.05

⁽¹⁾

�

Diluted (Note 10)

�

0.05

⁽¹⁾

�

0.05

⁽¹⁾

�

Weighted average shares - Basic and Diluted

�

7,151,304

�

7,151,304

�

⁽¹⁾��Based on net income attributable to Medley Management Inc. from September 29, 2014 through September 30, 2014

�

Exhibit E. Consolidated Balance Sheets for Medley Management Inc. (Prior to September 29, 2014, Medley LLC and Medley GP Holdings LLC)

�

�	�	September 30, 2014 (unaudited)		�	�	December 31, 2013		�
�	�	(dollars in thousands)
Assets	�	�	�	�	�	�	�	�
Cash and cash equivalents	�	$	101,494	�	�	$	5,395	�
Investment, at fair value	�	�	10,226	�	�	�	10,173	�
Management fees receivable	�	�	13,599	�	�	�	8,921	�
Performance fees receivable	�	�	6,860	�	�	�	3,339	�
Other assets	�	�	7,770	�	�	�	5,308	�
Assets of Consolidated Funds:	�	�	�	�	�	�	�	�
Cash and cash equivalents	�	�	41,606	�	�	�	60,355	�
Investments, at fair value	�	�	553,836	�	�	�	412,218	�
Interest and dividends receivable	�	�	4,093	�	�	�	2,804	�
Other assets	�	�	3,334	�	�	�	436	�
Total assets	�	$	742,818	�	�	$	508,949	�
Liabilities and Equity	�	�	�	�	�	�	�	�
Loans payable	�	$	119,177	�	�	$	27,990	�
Accounts payable, accrued expenses and other liabilities	�	�	27,543	�	�	�	17,613	�
Performance fee compensation payable	�	�	17,022	�	�	�	16,225	�
Liabilities of Consolidated Funds:	�	�	�	�	�	�	�	�
Accounts payable, accrued expenses and other liabilities	�	�	4,310	�	�	�	1,160	�
Total liabilities	�	�	168,052	�	�	�	62,988	�
�	�	�	�	�	�	�	�	�
Equity	�	�	�	�	�	�	�	�
Class A Common Stock, $0.01 par value, 3,000,000,000	�	�	�	�	�	�	�	�
�shares authorized; 6,000,000 shares issued and outstanding	�	�	60	�	�	�	-	�
Class B Common Stock, $0.01 par value, 1,000,000	�	�	�	�	�	�	�	�
�shares authorized; 100 shares issued and outstanding	�	�	-	�	�	�	-	�
Additional paid-in-capital	�	�	(3,096	)	�	�	-	�
Retained earnings	�	�	378	�	�	�	-	�
Total stockholder’s deficit, Medley Management Inc.	�	�	(2,658	)	�	�	-	�
Non-controlling interests in Consolidated Funds	�	�	585,007	�	�	�	464,475	�
Non-controlling interests in consolidated subsidiaries	�	�	3,140	�	�	�	40	�
Non-controlling interests in Medley LLC	�	�	(10,723	)	�	�	-	�
Medley LLC members' capital prior to reorganization	�	�	-	�	�	�	(18,554	)
Total equity	�	�	574,766	�	�	�	445,961	�
Total liabilities and equity	�	$	742,818	�	�	$	508,949	�

�

Exhibit F. Consolidating Statements of Operations for Medley Management Inc. (Prior to September 29, 2014, Medley LLC and Medley GP Holdings LLC)

�

Three Months Ended September 30, 2014
(unaudited)

�

Standalone

�

Consolidated Funds

�

Eliminations

�

Consolidated

�

(dollars in thousands)

�

Revenues:

�

Management fees

�

17,616

�

(603

)

�

17,013

�

Performance fees

�

3,395

�

(2,430

)

�

965

�

Other income and fees

�

2,787

�

2,787

�

Total revenues

�

23,798

�

(3,033

)

�

20,765

�

Expenses:

�

Compensation and benefits

�

5,677

�

5,677

�

Performance fee compensation

�

(921

)

�

(921

)

Consolidated Funds expenses

�

899

�

(603

)

�

296

�

General, administrative and other expenses

�

3,458

�

3,458

�

Total operating expenses

�

8,214

�

899

�

(603

)

�

8,510

�

Other income (expense):

�

Dividend income

�

222

�

222

�

Interest expense

�

(2,016

)

�

(2,016

)

Other expense, net

�

(87

)

�

(181

)

�

(268

)

Interest and other income of Consolidated Funds

�

15,356

�

15,356

�

Net realized loss on investments of Consolidated Funds

�

(499

)

�

(499

)

Net change in unrealized depreciation on investments of Consolidated Funds

�

(1,069

)

�

(1,069

)

Total other income (expense)

�

(1,881

)

�

13,788

�

(181

)

�

11,726

�

Income before income taxes

�

13,703

�

12,889

�

(2,611

)

�

23,981

�

Provision for income taxes

�

578

�

345

�

923

�

Net income

�

13,125

�

12,544

�

(2,611

)

�

23,058

�

Net income attributable to non-controlling interests in Consolidated Funds

�

9,933

�

9,933

�

Net income attributable to non-controlling interests in subsidiaries

�

612

�

612

�

Net income attributable to non-controlling interests in Medley LLC

�

12,135

�

12,135

�

Net income attributable to Medley Management Inc.

�

378

�

12,544

�

(12,544

)

�

378

�

�Nine Months Ended September 30, 2014
(unaudited)

�

Standalone

�

Consolidated Funds

�

Eliminations

�

Consolidated

�

(dollars in thousands)

�

Revenues:

�

Management fees

�

47,516

�

(4,050

)

�

43,466

�

Performance fees

�

11,471

�

(8,134

)

�

3,337

�

Other income and fees

�

7,183

�

7,183

�

Total revenues

�

66,170

�

(12,184

)

�

53,986

�

Expenses:

�

Compensation and benefits

�

15,010

�

15,010

�

Performance fee compensation

�

2,237

�

2,237

�

Consolidated Funds expenses

�

5,179

�

(4,050

)

�

1,129

�

General, administrative and other expenses

�

12,821

�

12,821

�

Total operating expenses

�

30,068

�

5,179

�

(4,050

)

�

31,197

�

Other income (expense):

�

Dividend income

�

665

�

665

�

Interest expense

�

(3,380

)

�

(3,380

)

Other income (expense)

�

(1,707

)

�

121

�

(1,586

)

Interest and other income of Consolidated Funds

�

45,890

�

45,890

�

Net realized gain on investments of Consolidated Funds

�

789

�

789

�

Net change in unrealized depreciation on investments of Consolidated Funds

�

(9,437

)

�

(9,437

)

Total other income (expense)

�

(4,422

)

�

37,242

�

121

�

32,941

�

Income before income taxes

�

31,680

�

32,063

�

(8,013

)

�

55,730

�

Provision for income taxes

�

1,026

�

1,148

�

2,174

�

Net income

�

30,654

�

30,915

�

(8,013

)

�

53,556

�

Net income attributable to non-controlling interests in Consolidated Funds

�

22,902

�

22,902

�

Net income attributable to non-controlling interests in subsidiaries

�

2,172

�

2,172

�

Net income attributable to non-controlling interests in Medley LLC

�

28,104

�

28,104

�

Net income attributable to Medley Management Inc.

�

378

�

30,915

�

(30,915

)

�

378

�

Three� Months Ended September 30, 2013
(unaudited)

�

Standalone

�

Consolidated Funds

�

Eliminations

�

Consolidated

�

(dollars in thousands)

�

Revenues:

�

Management fees

�

13,875

�

(4,604

)

�

9,271

�

Performance fees

�

(37

)

�

867

�

830

�

Other income and fees

�

1,328

�

1,328

�

Total revenues

�

15,166

�

(3,737

)

�

11,429

�

Expenses:

�

Compensation and benefits

�

3,498

�

3,498

�

Performance fee compensation

�

928

�

928

�

Consolidated Funds expenses

�

4,910

�

(4,604

)

�

306

�

General, administrative and other expenses

�

3,160

�

3,160

�

Total operating expenses

�

7,586

�

4,910

�

(4,604

)

�

7,892

�

Other income (expense):

�

Dividend income

�

222

�

222

�

Interest expense

�

(345

)

�

(345

)

Other income (expense)

�

(74

)

�

Interest and other income of Consolidated Funds

�

13,495

�

13,495

�

Net realized loss on investments of Consolidated Funds

�

(5,486

)

�

(5,486

)

Net change in unrealized appreciation on investments of Consolidated Funds

�

2,535

�

2,535

�

Total other income (expense)

�

(46

)

�

10,544

�

(74

)

�

10,424

�

Income before income taxes

�

7,534

�

5,634

�

793

�

13,961

�

Provision for income taxes

�

218

�

244

�

462

�

Net income

�

7,316

�

5,390

�

793

�

13,499

�

Net income attributable to non-controlling interests in Consolidated Funds

�

6,183

�

6,183

�

Net income attributable to Medley LLC

�

7,316

�

5,390

�

(5,390

)

�

7,316

�

Nine� Months Ended September 30, 2013
(unaudited)

�

Standalone

�

Consolidated Funds

�

Eliminations

�

Consolidated

�

(dollars in thousands)

�

Revenues:

�

Management fees

�

34,315

�

(10,186

)

�

24,129

�

Performance fees

�

2,826

�

(1,745

)

�

1,081

�

Other income and fees

�

3,347

�

3,347

�

Total revenues

�

40,488

�

(11,931

)

�

28,557

�

Expenses:

�

Compensation and benefits

�

10,062

�

10,062

�

Performance fee compensation

�

6,199

�

6,199

�

Consolidated Funds expenses

�

11,107

�

(10,186

)

�

921

�

General, administrative and other expenses

�

9,034

�

9,034

�

Total operating expenses

�

25,295

�

11,107

�

(10,186

)

�

26,216

�

Other income (expense):

�

Dividend income

�

665

�

665

�

Interest expense

�

(1,083

)

�

(1,083

)

Other income (expense)

�

(936

)

�

761

�

(175

)

Interest and other income of Consolidated Funds

�

37,398

�

37,398

�

Net realized loss on investments of Consolidated Funds

�

(18,065

)

�

(18,065

)

Net change in unrealized depreciation on investments of Consolidated Funds

�

(751

)

�

(751

)

Total other income (expense)

�

(1,354

)

�

18,582

�

761

�

17,989

�

Income before income taxes

�

13,839

�

7,475

�

(984

)

�

20,330

�

Provision for income taxes

�

478

�

660

�

1,138

�

Net income

�

13,361

�

6,815

�

(984

)

�

19,192

�

Net income attributable to non-controlling interests in Consolidated Funds

�

5,831

�

5,831

�

Net income attributable to Medley LLC

�

13,361

�

6,815

�

(6,815

)

�

13,361

�

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