EQUITY COMPENSATION

6 Months Ended

Jun. 30, 2016

EQUITY COMPENSATION

EQUITY COMPENSATION

13. EQUITY COMPENSATION

Ares Management, L.P. 2014 Equity Incentive Plan

In 2014, the Company adopted its Equity Incentive Plan, under which the Company granted options to acquire 24,835,227 common units, 4,936,051 restricted units to be settled in common units and 686,395 phantom common units to be settled in cash. Based on a formula as defined in the Equity Incentive Plan, the total number of units available to be issued under the Equity Incentive Plan resets and increases on January 1 each year. Accordingly, on January 1, 2016, the total number of units available for issuance under the Equity Incentive Plan increased to 31,962,710 units. During the six months ended June 30, 2016, a total of 731,499 units and unit options, net of forfeitures and vesting, were issued and 31,231,211 units remain available to be issued as of June 30, 2016.

Equity‑based compensation expense, net of forfeitures is included in the following table:

	For the three months ended					For the six months ended
	June 30,					June 30,
	2016		2015			2016	2015
Restricted units	$	4,686	$	3,465	$	9,449	$	6,910
Options		4,547		3,876		8,460		7,729
Phantom units		305		457		801		1,080
Equity-based compensation expense	$	9,538	$	7,798	$	18,710	$	15,719

No options or phantom units were granted in the six months ended June 30, 2016.

Restricted Units

Each restricted unit represents an unfunded, unsecured right of the holder to receive a common unit on a specific date. The restricted units generally vest and are settled in common units either (i) at a rate of one‑third per year, beginning on the third anniversary of the grant date, (ii) in their entirety on the fifth anniversary of the grant date, or (iii) at a rate of one-quarter per year, beginning on the first anniversary of the grant date. Compensation expense associated with restricted units is recognized on a straight‑line basis over the requisite service period of the award. 

The holders of restricted units generally have the right to receive as current compensation an amount in cash equal to (i) the amount of any distribution paid with respect to a common unit multiplied by (ii) the number of restricted units held at the time such distributions are declared (“Distribution Equivalent”). For the three and six months ended June 30, 2016, Distribution Equivalents were made to the holders of restricted units in the amount of $0.9 million and $2.1 million, respectively, which are presented as distributions within the Condensed Consolidated Statements of Changes in Equity until forfeited, at which time the cumulative payments are reclassified to compensation and benefits expense.

The following table presents unvested restricted units’ activity during the six months ended June 30, 2016 and 2015:

	2016				2015
			Weighted Average				Weighted Average
			Grant Date Fair				Grant Date Fair
	Restricted Units		Value Per Unit		Restricted Units		Value Per Unit
Balance - January 1		4,657,761	$	18.01		4,776,053	$	18.08
Granted		1,822,623		11.32		171,444		17.27
Vested		(24,368)		16.77		(8,463)		18.49
Forfeited		(348,125)		17.23		(170,352)		18.05
Balance - June 30		6,107,891	$	16.08		4,768,682	$	18.06

The total compensation expense expected to be recognized in all future periods associated with the restricted units is approximately $61.3 million as of June 30, 2016 and is expected to be recognized over the remaining weighted average period of 2.99 years.

Adoption of ASU 2016-09

The Company adopted ASU 2016-09 effective January 1, 2016 using a modified retrospective approach and recorded a cumulative-effect adjustment with the following impact to beginning equity:

	Partners' Capital			Non-Controlling Interest in Ares Operating Group Entities		Redeemable Interest in Ares Operating Group Entities
Balance at December 31, 2015	$	251,537	$	397,883	$	23,505
Retained earnings		(3,357)		(5,470)		(38)
Paid-in-capital - Equity compensation		3,767		6,138		43
Distributions - dividend equivalent		(410)		(668)		(5)
Balance at December 31, 2015 (as adjusted)	$	251,537	$	397,883	$	23,505