10-Q 1 rcap-2015630x10q.htm 10-Q RCAP-2015.6.30-10Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-35924
RCS Capital Corporation
(Exact name of registrant as specified in its charter)
Delaware
 
38-3894716
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
405 Park Avenue, 14th Floor
New York, New York
 
10022
(Address of Principal Executive Office)
 
(Zip Code)
(866) 904-2988
(Registrant’s Telephone Number, Including Area Code)

Not applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
 
Accelerated filer x
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of outstanding shares of the registrant’s Class A common stock and Class B common stock on August 10, 2015 was 77,296,297 shares and one share, respectively.




RCS Capital Corporation and Subsidiaries
Index to Consolidated Financial Statements
Form 10-Q
June 30, 2015



 
Page

i


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements



RCS CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(Dollars in thousands, except shares and par value amounts)
 
June 30, 2015
 
December 31, 2014
 
(Unaudited)
 
 
Assets
 
 
 
Cash and cash equivalents
$
175,652

 
$
199,435

Cash and securities segregated under federal and other regulations
19,073

 
19,030

Available-for-sale securities
2,701

 
11,473

Trading securities
10,777

 
10,242

Accounts receivable:
 
 
 
Due from related parties
19,725

 
31,580

Due from non-related parties
155,598

 
141,309

Prepaid expenses and other assets
81,900

 
85,674

Property and equipment (net of accumulated depreciation of $9,527 and $5,488, respectively)
39,276

 
24,746

Deferred compensation plan investments
86,654

 
83,456

Notes receivable (net of allowance of $1,086 and $914, respectively)
75,039

 
68,989

Deferred financing fees
36,993

 
27,808

Intangible assets (net of accumulated amortization of $122,214 and $68,106, respectively)
1,122,969

 
1,243,525

Goodwill
530,949

 
519,361

Total assets
$
2,357,306

 
$
2,466,628

 
 
 
 
Liabilities, Mezzanine Equity and Stockholders’ Equity
 
 
 
Payable to customers
$
22,764

 
$
13,832

Commissions payable
113,556

 
102,056

Accrued expenses and accounts payable:
 
 
 
Due to related parties
1,847

 
2,479

Due to non-related parties
111,551

 
93,898

Derivative contracts
39,647

 
81,032

Other liabilities
51,147

 
37,036

Deferred compensation plan accrued liabilities
87,297

 
84,963

Net deferred tax liability
220,639

 
266,202

Contingent and deferred consideration
109,298

 
145,430

Long-term debt
804,285

 
804,411

Total liabilities
1,562,031

 
1,631,339

 
 
 
 
Commitments and contingencies — See Note 16 for more information.

 

 
 
 
 
Mezzanine Equity
 
 
 
11% Series B Preferred Stock $0.001 par value, 100,000,000 shares authorized, 5,800,000 issued and outstanding as of June 30, 2015, and December 31, 2014
152,458

 
146,700

7% Series C Convertible Preferred Stock $0.001 par value, 100,000,000 shares authorized, 4,400,000 issued and outstanding as of June 30, 2015, and December 31, 2014
114,145

 
111,288

 
 
 
 
Stockholders’ Equity
 
 
 
Class A common stock, $0.001 par value, 300,000,000 shares authorized, 77,151,089 issued and outstanding as of June 30, 2015, and 100,000,000 shares authorized, 70,571,540 issued and outstanding as of December 31, 2014
77

 
71

Class B common stock, $0.001 par value, 100,000,000 shares authorized, 1 issued and outstanding as of June 30, 2015, and December 31, 2014

 

Additional paid-in capital
755,808

 
723,113

Accumulated other comprehensive income (loss)
80

 
(120
)
Retained deficit
(259,106
)
 
(179,804
)
Total stockholders’ equity
496,859

 
543,260

Non-controlling interests
31,813

 
34,041

Total liabilities, mezzanine and stockholders’ equity
$
2,357,306

 
$
2,466,628

See Notes to Consolidated Financial Statements.

1

RCS CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except per share data)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Revenues:
 
 
 
 
 
 
 
Retail commissions
$
283,426

 
$
175,229

 
$
561,494

 
$
223,118

Selling commissions:
 
 
 
 
 
 
 
Related party products
55,588

 
169,591

 
100,071

 
262,011

Non-related party products
15,124

 
2

 
28,417

 
159

Dealer manager fees:
 
 
 
 
 
 
 
Related party products
26,322

 
78,632

 
47,262

 
123,070

Non-related party products
6,802

 

 
12,782

 
72

Investment banking fees:
 
 
 
 
 
 
 
Related party products
6,489

 
17,677

 
11,903

 
49,409

Non-related party products

 
3,375

 

 
3,375

Advisory and asset-based fees (non-related party)
176,901

 
98,822

 
334,167

 
130,533

Transfer agency revenue (related party products)
4,745

 
5,638

 
9,011

 
9,024

Services revenue:
 
 
 
 
 
 
 
Related party products
8,511

 
12,066

 
15,274

 
20,166

Non-related party products
3,165

 
101

 
6,037

 
182

Reimbursable expenses:
 
 
 
 
 
 
 
Related party products
465

 
1,803

 
799

 
7,836

Non-related party products

 
33

 
154

 
63

Investment fee revenue
10,927

 

 
23,093

 

Transaction fees
44,807

 
23,015

 
92,794

 
29,596

Other revenue
35,094

 
59,035

 
60,692

 
59,773

Total revenues
678,366

 
645,019

 
1,303,950

 
918,387

 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
Retail commissions and advisory
409,101

 
253,132

 
794,978

 
321,602

Wholesale commissions:
 
 
 
 
 
 
 
Related party products
36,730

 
147,148

 
64,873

 
234,144

Non-related party products
14,118

 
2

 
26,802

 
159

Wholesale reallowance:
 
 
 
 
 
 
 
Related party products
5,839

 
22,794

 
10,318

 
35,615

Non-related party products
2,370

 

 
4,560

 
29

Investment fee expense
6,387

 

 
13,273

 

Internal commissions, payroll and benefits
84,147

 
73,385

 
166,423

 
116,744

Conferences and seminars
12,325

 
11,015

 
21,195

 
18,011

Travel
4,377

 
2,925

 
8,420

 
5,417

Marketing and advertising
4,047

 
3,056

 
8,213

 
6,130

Professional fees
16,207

 
9,933

 
28,290

 
14,533

Data processing
11,085

 
8,772

 
21,531

 
12,549

Quarterly fee (related party)

 
248

 

 
2,030

Acquisition and related integration costs
5,200

 
6,546

 
7,656

 
13,263

Interest expense
18,603

 
12,699

 
37,045

 
12,930

Occupancy
8,438

 
5,792

 
16,182

 
8,831

Depreciation and amortization
29,152

 
15,529

 
58,502

 
17,546

Goodwill and intangible assets impairment charge
156,801

 

 
156,801

 

Clearing and exchange fees
10,803

 
5,118

 
20,981

 
7,106

Outperformance bonus (related party)

 
2,559

 

 
9,709

Change in fair value of contingent and deferred consideration
(54,023
)
 
156

 
(50,367
)
 
163

Other expenses
14,881

 
4,898

 
28,916

 
7,512

Total expenses
796,588

 
585,707

 
1,444,592

 
844,023

Income (loss) before taxes
(118,222
)
 
59,312

 
(140,642
)
 
74,364

Provision for (benefit from) income taxes
(52,073
)
 
10,840

 
(59,112
)
 
13,743

Net income (loss)
(66,149
)
 
48,472

 
(81,530
)
 
60,621

Less: net income (loss) attributable to non-controlling interests
(1,002
)
 
256

 
(2,228
)
 
9,120

Less: preferred dividends and deemed dividend
7,001

 
198,077

 
13,602

 
198,077

Net loss attributable to Class A common stockholders
$
(72,148
)
 
$
(149,861
)
 
$
(92,904
)
 
$
(146,576
)
 
 
 
 
 
 
 
 
Per Share Data
 
 
 
 
 
 
 
Net (loss) income per share attributable to Class A common stockholders (Note 14)
 
 
 
 
 
 
 
Basic
$
(0.97
)
 
$
(3.49
)
 
$
(1.28
)
 
$
(4.21
)
Diluted
$
(1.11
)
 
$
(3.59
)
 
$
(1.59
)
 
$
(4.53
)
 
 
 
 
 
 
 
 
Weighted-average basic shares
74,006,580

 
43,030,018

 
72,576,193

 
34,975,636

Weighted-average diluted shares
88,605,947

 
48,295,269

 
87,175,560

 
37,622,806

Cash dividend declared per common share
$

 
$
0.18

 
$

 
$
0.36

See Notes to Consolidated Financial Statements.

2

RCS CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)
(Dollars in thousands)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Net income
$
(66,149
)
 
$
48,472

 
$
(81,530
)
 
$
60,621

Other comprehensive income (loss) adjustments, net of tax:
 
 
 
 
 
 
 
Available-for-sale securities
(52
)
 
92

 
200

 
508

Total other comprehensive income (loss), net of tax
(52
)
 
92

 
200

 
508

Total comprehensive income
(66,201
)
 
48,564

 
(81,330
)
 
61,129

Less: net comprehensive income (loss) attributable to non-controlling interests
(1,002
)
 
256

 
(2,228
)
 
9,575

Less: preferred dividends and deemed dividends
7,001

 
198,077

 
13,602

 
198,077

Net comprehensive income (loss) attributable to RCS Capital Corporation
$
(72,200
)
 
$
(149,769
)
 
$
(92,704
)
 
$
(146,523
)

See Notes to Consolidated Financial Statements.

3

RCS CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
(Dollars in thousands, except share amounts)

 
Class A common stock
 
Class B common stock
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of Shares
 
Par Value
 
Number of Shares
 
Par Value
 
Additional Paid-In Capital
 
Retained Earnings (Deficit)
 
Accumulated Other Comprehensive Gain (Loss)
 
Total Stockholders’ Equity
 
Non-Controlling Interests
 
Stockholders’ Equity and Non-controlling Interest
Balance, December 31, 2013
13,764,929

 
$
14

 
24,000,000

 
$
24

 
$
180,528

 
$
1,164

 
$
(46
)
 
$
181,684

 
$
34,670

 
$
216,354

Equity-based compensation (OPP)

 

 

 

 

 

 

 

 
210

 
210

Unrealized gain on available for sale securities, net of tax

 

 

 

 

 

 
47

 
47

 
455

 
502

Net income

 

 

 

 

 
917

 

 
917

 
8,840

 
9,757

Balance, February 10, 2014
13,764,929

 
14

 
24,000,000

 
24

 
180,528

 
2,081

 
1

 
182,648

 
44,175

 
226,823

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exchange Transactions
23,999,999

 
24

 
(23,999,999
)
 
(24
)
 
44,676

(a) 

 

 
44,676

 
(43,473
)
 
1,203

Equity-based compensation (OPP)

 

 

 

 

 

 

 

 
9,499

 
9,499

Issuance of restricted stock awards
2,366,703

 
3

 

 

 
14,214

 
(5,243
)
 

 
8,974

 

 
8,974

Unrealized gain on available-for-sale securities, net of tax

 

 

 

 

 

 
6

 
6

 

 
6

Public offering of common stock, net of offering costs
19,870,248

 
20

 

 

 
373,851

 

 

 
373,871

 

 
373,871

Private offering of common stock, net of offering costs
2,469,136

 
2

 

 

 
47,725

 

 

 
47,727

 

 
47,727

Shares issued in connection with the Summit acquisition
498,884

 

 

 

 
10,431

 

 

 
10,431

 

 
10,431

Shares issued in connection with the J.P. Turner acquisition
239,362

 

 

 

 
4,860

 

 

 
4,860

 

 
4,860

Dividends declared on LTIP units

 

 

 

 

 

 

 

 
(280
)
 
(280
)
Net loss

 

 

 

 
(161,997
)
 
14,504

 

 
(147,493
)
 
280

 
(147,213
)
Dividend equivalents on restricted stock, net of tax

 

 

 

 
(327
)
 
(384
)
 

 
(711
)
 

 
(711
)
Dividends declared on Class A common stock

 

 

 

 
(4,770
)
 
(10,958
)
 

 
(15,728
)
 

 
(15,728
)
Balance June 30, 2014
63,209,261

 
$
63

 
1

 
$

 
$
509,191

 
$

 
$
7

 
$
509,261

 
$
10,201

 
$
519,462

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2014
70,571,540

 
$
71

 
1

 
$

 
$
723,113

 
$
(179,804
)
 
$
(120
)
 
$
543,260

 
$
34,041

 
$
577,301

Retirement of shares
(161
)
 

 

 

 

 

 

 

 

 

Preferred stock conversion(b)
2,042,022

 
2

 

 

 
(2
)
 

 

 

 

 

First Allied restricted stock plan issuance
69,427

 

 

 

 
1,283

 

 

 
1,283

 

 
1,283

Issuance of restricted stock awards and warrants
1,236,490

 
1

 

 

 
9,168

 

 

 
9,169

 

 
9,169

Shares issued in connection with the settling of contingent consideration due to the JP Turner acquisition
245,813

 

 

 

 
2,730

 

 

 
2,730

 

 
2,730

Shares issued in connection with the VSR acquisition
2,436,429

 
2

 

 

 
26,772

 

 

 
26,774

 

 
26,774

Shares issued in connection with the Girard acquisition
549,529

 
1

 

 

 
6,346

 

 

 
6,347

 

 
6,347

Unrealized gain on available-for-sale securities, net of tax

 

 

 

 

 

 
200

 
200

 

 
200

Net loss

 

 

 

 
(13,602
)
 
(79,302
)
 

 
(92,904
)
 
(2,228
)
 
(95,132
)
Balance, June 30, 2015
77,151,089

 
$
77

 
1

 
$

 
$
755,808

 
$
(259,106
)
 
$
80

 
$
496,859

 
$
31,813

 
$
528,672

_____________________
(a) Includes deferred tax impact of $1.2 million due to the exchange of Class B units in the Company’s operating subsidiaries for shares of Class A common stock.
(b) Represents shares of Class A common stock issued on February 23, 2015 on account of shares of Series A preferred stock submitted for conversion on December 12, 2014.
See Notes to Consolidated Financial Statements.

4

RCS CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)


 
Six Months Ended June 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net (loss) income
$
(81,530
)
 
$
60,621

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Depreciation
4,394

 
2,014

Amortization
54,108

 
15,532

Goodwill and intangible assets impairment
156,801

 

Equity-based compensation
9,168

 
18,683

Deferred income taxes
(62,040
)
 
3,668

Loss/(gain) on the sale of available-for-sale securities
369

 
(171
)
Change in fair value of contingent and deferred consideration
(50,367
)
 
163

Gain on derivative contracts
(56,393
)
 
(58,452
)
Deferred compensation plan investments, net
(864
)
 
135

Forgiveness of notes receivable
4,124

 
2,507

Change in fair value of trading securities
576

 
(908
)
Deferred financing fees amortization
6,178

 
1,280

Other
(213
)
 
(36
)
Increase (decrease) resulting from changes in:
 
 
 
Cash and securities segregated under federal and other regulations
(43
)
 
2,000

Trading securities
5,190

 
(301
)
Accounts receivable:
 
 
 
Due from related parties
11,855

 
31,018

Due from non-related parties
(13,792
)
 
(32,521
)
Prepaid expenses and other assets
5,902

 
(2,372
)
Notes receivable
(10,294
)
 
(7,160
)
Payable to customers
8,932

 
(6,588
)
Commissions payable
11,261

 
36,117

Accrued expenses and accounts payable:
 
 
 
Due to related parties
(632
)
 
(2,629
)
Due to non-related parties
17,544

 
(16,048
)
Other liabilities
4,380

 
(77,161
)
Payment of contingent consideration in excess of acquisition date fair value
(2,680
)
 
(18
)
Net cash provided by (used in) operating activities
21,934

 
(30,627
)
 
 
 
 
Cash flows from investing activities:
 
 
 
Change in restricted cash

 
(26,000
)
Purchases of available-for-sale securities
(26
)
 
(215
)
Proceeds from the sale of available-for-sale securities
8,780

 
9,013

Purchase of property and equipment
(7,286
)
 
(2,221
)
Proceeds from the written put option

 
21,216

Payment for Cetera acquisition, net of cash acquired

 
(891,101
)
Payment for Summit acquisition, net of cash acquired

 
(33,374
)
Payment for Hatteras acquisition, net of cash acquired

 
(29,195
)
Payment for J.P. Turner acquisition, net of cash acquired

 
(2,615
)
Payment for SK Research — intangible assets and property and equipment

 
(10,092
)
Payment for VSR acquisition, net of cash acquired
(19,104
)
 

Payment for Girard acquisition, net of cash acquired
(9,107
)
 

Net cash used in investing activities
(26,743
)
 
(964,584
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Proceeds from the issuance of first lien revolving facility and term loans, respectively
23,000

 
685,633

Payments on long-term debt
(21,831
)
 
(1,352
)
Payment of contingent and deferred consideration
(7,877
)
 
(13,154
)
Net proceeds from the issuance of convertible notes (including embedded derivative)

 
83,551

Net proceeds from issuance of Series A convertible preferred stock (including embedded derivative)

 
197,504

Net proceeds from issuance of common stock

 
421,598

Dividends paid

 
(5,515
)
Payment of consent and arrangement fees
(12,266
)
 

Net cash (used in) provided by financing activities
(18,974
)
 
1,368,265

 
 
 
 
Net (decrease) increase in cash
(23,783
)
 
373,054

Cash and cash equivalents, beginning of period
199,435

 
70,059

Cash and cash equivalents, end of period
$
175,652

 
$
443,113

See Notes to Consolidated Financial Statements.

5

RCS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2015


1. Organization and Description of the Company
Formation. RCS Capital Corporation (“we”, “us”, “our company” or the “Company”) is a holding company incorporated under the laws of the State of Delaware on December 27, 2012, originally named 405 Holding Corporation. On February 19, 2013, 405 Holding Corporation changed its name to RCS Capital Corporation. The Company was initially formed to hold Realty Capital Securities, LLC (“Realty Capital Securities”), RCS Advisory Services, LLC (“RCS Advisory”) and American National Stock Transfer, LLC (“ANST” and together with Realty Capital Securities and RCS Advisory, the “Original Operating Subsidiaries”) and to grow business lines under the Original Operating Subsidiaries.
During the year ended December 31, 2014, the Company entered into a series of restructuring transactions beginning in February and ending in December (the “2014 Restructuring Transactions”) designed to help simplify the Company’s capital structure. As a result of the completion of the 2014 Restructuring Transactions, the non-controlling interests in the Original Operating Subsidiaries and RCS Capital Holdings, LLC (“RCS Holdings”), an intermediate holding company formed to own the Original Operating Subsidiaries in connection with the 2014 Restructuring Transactions, were eliminated. Pursuant to the 2014 Restructuring Transactions, (i) the Company formed RCS Holdings, (ii) all of the Class B Units in each of the Original Operating Subsidiaries (each, an “Original Operating Subsidiaries Unit”), which had been held by RCAP Holdings, LLC (“RCAP Holdings”) were exchanged for shares of Class A common stock of the Company, par value $0.001 per share (“Class A common stock”), or canceled, (iii) all but one share of the Class B common stock of the Company, par value $0.001 per share (“Class B common stock”), was canceled, (iv) RCS Capital Management, LLC (“RCS Capital Management”), the Company’s external services provider, contributed to RCS Holdings all of its LTIP Units in the Original Operating Subsidiaries in exchange for LTIP Units in RCS Holdings, (v) a portion of the LTIP Units in RCS Holdings, all of which were held by the individual members (the “Members”) of RCS Capital Management, who were also members of RCAP Holdings, were determined by the board of directors to be earned in April 2014 and the balance of the LTIP Units in RCS Holdings not earned at that date were terminated, and (vi) all of the Class C Units in RCS Holdings held by the Members, which were received upon automatic conversion of the LTIP Units in RCS Holdings due to their early vesting on December 31, 2014, were exchanged for shares of Class A common stock.
During the year ended December 31, 2014, the Company also completed a public offering and a concurrent private offering of Class A common stock and issued long-term debt and preferred stock. This allowed the Company to undertake a series of acquisitions, which are described in Note 2, aimed at diversifying the Company’s revenue stream. The Company is now engaged in the Independent Retail Advice; Wholesale Distribution; Investment Banking, Capital Markets and Transaction Management Services; Investment Management and Investment Research businesses.
2. Recent Acquisitions
During the year ended December 31, 2014, the Company completed the acquisitions of Cetera Financial Holdings, Inc. (“Cetera”), Summit Financial Services Group, Inc. (“Summit”), J.P. Turner & Company, LLC and J.P. Turner & Company Capital Management, LLC (together, “J.P. Turner”), Hatteras Funds Group (“Hatteras”), First Allied Holdings Inc. (“First Allied”), Investors Capital Holdings, Ltd. (“ICH”), Validus/Strategic Capital Partners, LLC (“StratCap”), Trupoly, LLC (“Trupoly”) and a controlling interest in Docupace Technologies, LLC (“Docupace”) and during the six months ended June 30, 2015, the Company completed the acquisitions of VSR Group, Inc. (“VSR”) and Girard Securities, Inc. (“Girard”) (collectively, the “recent acquisitions”). The recent acquisitions were made in order for the Company to diversify its revenue stream. The resulting goodwill associated with the recent acquisitions is made up of synergies related to higher strategic partner revenues as well as expense synergies associated with back office management, technology efficiencies, savings from the renegotiation of the Company’s clearing contracts, the elimination of duplicative public company expenses and other factors. All of the recent acquisitions have been accounted for using the purchase method of accounting except for the First Allied acquisition.
The First Allied acquisition, which closed on June 30, 2014, was accounted for at historical cost in a manner similar to a pooling-of-interest accounting because First Allied and the Company were under the common control of RCAP Holdings at the time of the acquisition of First Allied by RCAP Holdings. Our financial statements as of and for the three and six months ended June 30, 2014 have been prepared to reflect the financial position and results of operations of First Allied as if we had acquired it on September 25, 2013, the date that First Allied was acquired by RCAP Holdings.
Following the announcement concerning certain accounting errors by VEREIT, Inc., formally known as American Realty Capital Properties, Inc. (“ARCP”), the market price of the Company’s Class A Common stock as well as its market capitalization declined.

6

RCS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2015

During the second quarter of 2015, as a result of our determination that it would be more effective if J.P. Turner no longer operated independently under its own brand, downward changes in our expectations of future growth and profitability for certain reporting units and the sustained decline in our market capitalization, the Company determined that it would be appropriate to test its goodwill and intangible assets for impairment as of June 30, 2015 for its most significant reporting units. For purposes of goodwill and intangible asset testing the Company’s reporting units are based on how management reviews its operating results at one level below our reportable segment. Therefore individual impairment testing was performed for each of Cetera, Summit, J.P. Turner, Hatteras, First Allied, ICH and StratCap.
The Company tested goodwill for impairment at the reporting unit level using income and market-based approaches with the exception of the goodwill related to J.P. Turner and StratCap, where a net asset approach was used.
The Company also tested its intangible assets for impairment using the income approach with the exception of the intangible assets related to J.P. Turner and StratCap, where a net asset approach was used.
The Company believes the income and market-based methods selected are the most reliable indicators of the fair values of the reporting units within the independent retail, wholesale distribution and investment management businesses acquired except for J.P. Turner and StratCap where a net-asset methodology is a more reliable indicator, given that during the second quarter of 2015, the Company determined that it would be more effective if J.P. Turner no longer operated as a separate subsidiary and that it would no longer use the J.P. Turner brand. The Company has invited certain J.P. Turner financial advisors to join Summit. The change is expected to take place near the end of October 2015, at which time any advisors who have not been invited to join Summit will be terminated, and therefore, the operations of J.P. Turner are effectively considered to be in a run-off mode. As a result, J.P. Turner’s advisor relationships were not expected to generate future cash flows sufficient enough to justify the intangible assets, despite the fact that certain financial advisors will be retained.
Because Step 1 of the quantitative goodwill impairment test indicated that the carrying value of each of StratCap, which is part of the Wholesale Distribution segment, and J.P. Turner, which is part of the Independent Retail Advice segment, exceeded its estimated fair value, a second phase of the quantitative goodwill impairment test (“Step 2”) was performed specific to StratCap and J.P. Turner. Under Step 2, the fair value of all of the assets and liabilities of StratCap and J.P. Turner were estimated, including tangible assets, advisor relationships and sponsor relationships for the purpose of deriving an estimate of the implied fair value of goodwill. The implied fair value of the goodwill was then compared to the carrying value of the goodwill to determine the amount of the impairment. Assumptions used in measuring the fair value of these assets and liabilities included the discount rates, long-term growth rates of revenues, profitability and cash flows, profit margins, control premiums as well as benchmarking the company-specific assumptions to market participant levels and assumptions associated with revenues and EBITDA of the comparable companies.
As a result of the Step 2 analysis, during the three and six months ended June 30, 2015, the Company wrote-off $30.6 million and $13.6 million in goodwill which represented all of the goodwill related to the acquisitions of StratCap and J.P. Turner, respectively.
The impairments were the result of these acquired companies experiencing slower growth in 2015 and the Company’s expectations of future growth and profitability are now lower than previous estimates and in the case of J.P. Turner, the decisions with respect to terminating the ongoing business operations, except for a limited number of financial advisors.
In addition, as a result of our assessment of the fair value of the StratCap and J.P. Turner intangible assets, during the three and six months ended June 30, 2015, the Company also wrote-off intangible assets of $100.0 million related to sponsor relationships from the StratCap acquisition and $12.6 million related to the advisor relationships, non-compete agreements and trade names which represented all of J.P. Turner’s intangible assets. The decision to impair the StratCap intangible assets reflects, in part, the more transparent market price of the intangible assets in connection with the valuation of the StratCap reporting unit in the strategic transactions entered into on August 6, 2015. See Note 21 for more information. These impairments were all recorded in goodwill and intangible assets impairment in the statements of operations. For more information on the Company’s goodwill and intangible assets see Note 7.
The Company’s results of operations only include the results of operations of Cetera, Summit, J.P. Turner, Hatteras, ICH, StratCap, Trupoly, Docupace, VSR and Girard beginning on the date of each respective acquisition.

7

RCS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2015

Details of each recent acquisition are as follows:
Cetera Financial Holdings. On April 29, 2014, the Company completed the acquisition of Cetera. The purchase price was $1.15 billion (subject to certain adjustments), and the Company paid $1.13 billion in cash after adjustments. Cetera is a financial services holding company formed in 2010 that provides independent broker-dealer services and investment advisory services through four distinct independent broker-dealer platforms: Cetera Advisors LLC, Cetera Advisor Networks LLC, Cetera Investment Services LLC and Cetera Financial Specialists LLC. The acquisition, including related costs, was financed with a $575.0 million senior secured first lien term loan, a $150.0 million senior secured second lien term loan (together, with a $25.0 million senior secured first lien revolving credit facility, the “Bank Facilities”), the issuance of $120.0 million (aggregate principal amount) of 5.0% Senior Convertible Notes due 2021 (the “convertible notes”) and $270.0 million (aggregate stated liquidation value) of 7.0% Series A Convertible Preferred Stock, $0.001 par value per share (“Series A Preferred Stock”), as described in further detail in Notes 8 and 10, and cash on hand.
The assignment of the total consideration for the Cetera acquisition as of the date of the acquisition was as follows:
($ in thousands)
 
Cash and cash equivalents
$
241,641

Cash and segregated securities
7,999

Trading securities
741

Receivables
49,443

Property and equipment
17,735

Prepaid expenses
15,083

Deferred compensation plan investments
76,010

Notes receivable
38,805

Other assets
37,096

Accounts payable
(94,074
)
Accrued expenses
(32,421
)
Other liabilities
(112,977
)
Deferred compensation plan accrued liabilities
(75,294
)
Total fair value excluding goodwill and intangible assets
169,787

Goodwill
292,165

Intangible assets
944,542

Deferred tax liability
(273,752
)
Total consideration
$
1,132,742

As of June 30, 2015, approximately $7.9 million of the goodwill from Cetera’s historic pre-acquisition goodwill is deductible for income tax purposes.
The total Cetera consideration consisted of the following:
($ in thousands)
 
Contractual purchase price
$
1,150,000

Purchase price adjustments
17,258

Total consideration
$
1,132,742

The Company’s supplemental pro forma results of operations for Cetera for the six months ended June 30, 2014 are as follows:
 
Six Months Ended June 30,
($ in millions)
2014
Total revenues
$
600.5

Loss before taxes
(37.0
)

8

RCS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2015

The supplemental pro forma results of operations for the six months ended June 30, 2014 include adjustments which reflect a full six months of amortization of intangible assets in connection with the closing of the acquisition on April 29, 2014. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses. For the six months ended June 30, 2014, the Company adjusted the pro forma results to exclude acquisition-related expenses of $15.6 million based on the assumption that this acquisition was completed on January 1, 2013. Acquisition-related costs are costs incurred by the acquiree to engage in a business combination. Such costs may include accounting fees, valuation fees, consulting fees and legal fees.
Summit Financial Services Group. On June 11, 2014, the Company completed the acquisition of Summit. Summit was a publicly traded company that had financial advisors providing securities brokerage and investment retail advice in the United States with its common stock listed on the OTC Markets Group, Inc. under the symbol “SFNS.”
Pursuant to the merger agreement, each share of Summit common stock issued and outstanding immediately prior to the effective time of the merger was converted into the right to receive $1.588 in merger consideration, which consisted of cash and Class A common stock. Summit shareholders who received merger consideration were also entitled to receive the pro rata portion of certain tax refunds generated after the closing of the merger as a result of certain net operating losses incurred by Summit in 2014 and which were not acquired by the Company pursuant to the merger agreement. The aggregate amount of these refunds was $2.5 million, or approximately $0.06 per share of Summit common stock, which was paid (without interest) on June 29, 2015.
As consideration in the merger, the Company issued 498,884 shares of Class A common stock pursuant to a registration statement on Form S-4 and paid consideration in cash of $38.6 million, which does not include cash distributed by Summit to its shareholders. The aggregate cash consideration paid was $46.7 million which is inclusive of the cash distributed by Summit.
The assignment of the total consideration for the Summit acquisition as of the date of the acquisition was as follows:
($ in thousands)
 
Cash and cash equivalents
$
13,353

Receivables
3,147

Property and equipment
362

Prepaid expenses
1,531

Notes receivable
1,092

Other assets
2,366

Accounts payable
(9,973
)
Accrued expenses
(3,100
)
Total fair value excluding goodwill and intangible assets
8,778

Goodwill
23,891

Intangible assets
31,240

Deferred tax liability
(6,751
)
Total consideration
$
57,158

As of June 30, 2015, approximately $0.1 million of the goodwill from Summit’s historic pre-acquisition goodwill is deductible for income tax purposes.
The total Summit consideration consisted of the following:
($ in thousands)
 
Cash paid by the Company
$
46,727

Stock issued by the Company
10,431

Total consideration
$
57,158

The Company’s supplemental pro forma results of operations for Summit for the six months ended June 30, 2014 are as follows:
 
Six Months Ended June 30,
($ in millions)
2014
Total revenues
$
48.8

Loss before taxes
(0.7
)

9

RCS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2015

The supplemental pro forma results of operations for the six months ended June 30, 2014 include adjustments which reflect a full six months of amortization of intangible assets. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses. For the six months ended June 30, 2014, the Company adjusted the pro forma results to exclude acquisition-related expenses of $4.7 million based on the assumption that this acquisition was completed on January 1, 2013. Acquisition-related costs are costs incurred by the acquiree to engage in a business combination. Such costs may include accounting fees, valuation fees, consulting fees and legal fees.
J.P. Turner & Company. On June 12, 2014, the Company completed the acquisition of J.P. Turner for cash in the aggregate amount of $12.8 million, subject to post-closing adjustments, plus 239,362 shares of Class A common stock in a private placement offering exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). J.P. Turner is a retail broker-dealer and investment adviser which also offers a variety of other services, including investment banking.
Pursuant to the purchase agreement, on June 12, 2015 (the one-year anniversary of the closing date of the J.P. Turner acquisition), the Company agreed to an additional aggregate cash payment of $7.6 million to the sellers and issue to the sellers an aggregate number of shares of Class A common stock equal to (i) $3.2 million divided by (ii) the average of the per share closing price of Class A common stock for the five trading days ending on the trading day immediately prior to June 12, 2015.
Pursuant to the purchase agreement, the Company also agreed to make earn-out payments to the sellers with respect to each of the fiscal years ending December 31, 2014, December 31, 2015 and December 31, 2016, based on the achievement of certain agreed-upon revenue or earnings before interest, taxes and depreciation and amortization (“EBITDA”) performance targets in those years (subject to an annual combined minimum performance hurdle of 8.0% and an annual dollar cap of $2.5 million). Each earn-out payment, if any, was to be made by the Company 50% in cash and 50% in the form of Class A common stock (unless the sellers elect to receive a greater amount of Class A common stock). On the date of the acquisition, the Company recorded liabilities for contingent consideration and deferred payments, at fair value, of $4.5 million and $10.6 million, respectively.
On March 4, 2015, the Company amended its agreement with the sellers of J.P. Turner to settle the remaining consideration. As part of the amendment, the Company paid aggregate consideration of $9.1 million, which consisted of $6.4 million in cash and 245,813 shares of Class A common stock, or an aggregate value of $2.7 million based on $11.106 per share, the average of the per share closing price of Class A common stock for the five trading days prior to March 4, 2015. In addition, the Company recorded new deferred consideration of $4.8 million payable six months from the settlement date which will be paid 50% in cash and 50% in shares of Class A common stock. The Company also settled its receivable in respect of an indemnification claim of $1.8 million as part of the amendment which resulted in a gain of $1.2 million for the six months ended June 30, 2015 which was reflected as a reduction in other expenses in the statement of operations.
During the second quarter of 2015, the Company determined that it would be more effective if J.P. Turner no longer operated as a separate broker-dealer subsidiary and that it would no longer use the J.P. Turner brand. The Company has invited certain J.P. Turner financial advisors to join Summit. The change is expected to take place near the end of October 2015 at which time any advisors who have not been invited to join Summit will be terminated.
During the three and six months ended June 30, 2015, the Company wrote-off $13.6 million in goodwill and $12.6 million in intangible assets, which represented all of the goodwill and remaining intangible assets related to the acquisition of J.P. Turner.
The assignment of the total consideration for the J.P. Turner acquisition as of the date of the acquisition was as follows:
($ in thousands)
 
Cash and cash equivalents
$
10,171

Receivables
712

Property and equipment
232

Prepaid expenses
892

Notes receivable
1,660

Other assets
2,171

Accounts payable
(1,710
)
Accrued expenses
(8,543
)
Other liabilities
(656
)
Total fair value excluding goodwill and intangible assets
4,929

Goodwill
13,579

Intangible assets
14,200

Total consideration
$
32,708


10

RCS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2015

As of June 30, 2015, approximately $4.0 million of the goodwill from the J.P. Turner acquisition is deductible for income tax purposes.
The total J.P. Turner consideration consisted of the following:
($ in thousands)
 
Cash paid by the Company
$
12,786

Stock issued by the Company
4,860

Contingent consideration
4,500

Deferred consideration
10,562

Total consideration
$
32,708

The Company’s supplemental pro forma results of operations with J.P. Turner for the six months ended June 30, 2014 are as follows:
 
Six Months Ended June 30,
($ in millions)
2014
Total revenues
$
29.6

Income before taxes
2.0

The supplemental pro forma results of operations include adjustments which reflect a full six months of amortization of intangible assets. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses.
Hatteras Funds Group. On June 30, 2014, the Company completed the purchase of substantially all the assets related to the business and operations of Hatteras and assumed certain liabilities of Hatteras. Hatteras was a private company, and it is the sponsor of, investment advisor to and distributor for the Hatteras Funds complex, a family of alternative investment funds registered as investment companies with the SEC.
Pursuant to the purchase agreement, the aggregate initial purchase price was $40.0 million (subject to certain adjustments for net working capital, net assets under management and consolidated pre-tax net income) payable as follows: (A) 75.0% was paid on the closing date of the Hatteras acquisition; (B) 7.5% was payable on June 30, 2015, the first anniversary of the closing date of the Hatteras acquisition. The payment due on June 30, 2015 has not been made and is accruing interest in accordance with the purchase agreement. (C) 7.5% will be payable on June 30, 2016, the second anniversary of the closing date of the Hatteras acquisition; and (D) 10.0% will be payable on June 30, 2017, the third anniversary of the closing date of the Hatteras acquisition. Additionally, pursuant to the purchase agreement, the Company will pay additional consideration calculated and payable based on the consolidated pre-tax net operating income generated by the businesses of Hatteras in the fiscal years ending December 31, 2016 and December 31, 2018. On the date of the acquisition, the Company recorded liabilities for contingent consideration and deferred payments, at fair value, of $24.9 million and $9.4 million, respectively. As of June 30, 2015, the fair value of the contingent consideration was $30.5 million. The change in the fair value of the contingent consideration was recorded in other expenses on the consolidated statement of operations. The fair value was determined by an independent third-party valuation firm using projected pre-tax net income and discounted cash flow analysis which was reviewed by the Company.
The assignment of the total consideration for the Hatteras acquisition as of the date of the acquisition was as follows:
($ in thousands)
 
Cash and cash equivalents
$
805

Receivables
7,747

Property and equipment
192

Prepaid expenses
326

Other assets
120

Accounts payable
(3,721
)
Accrued expenses
(5,277
)
Total fair value excluding goodwill and intangible assets
192

Goodwill
15,348

Intangible assets
48,770

Total consideration
$
64,310


11

RCS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2015

As of June 30, 2015, the goodwill from the Hatteras acquisition is not deductible for income tax purposes.
The total Hatteras consideration consisted of the following:
($ in thousands)
 
Cash paid by the Company
$
30,000

Contingent consideration
24,880

Deferred consideration
9,430

Total consideration
$
64,310

The contingent and deferred consideration in the table above represents the fair value at the date of acquisition which includes discounting for the time value of money. The estimated range of undiscounted outcomes of the contingent consideration as of June 30, 2015 was as follows:
($ in thousands)
Low Case
 
High Case
Estimated contingent consideration amount
$
12,300

 
$
84,740

The Company’s supplemental pro forma results of operations for Hatteras for the six months ended June 30, 2014 are as follows:
 
Six Months Ended June 30,
($ in millions)
2014
Total revenues
$
29.7

Income before taxes
3.1

The supplemental pro forma results of operations for the six months ended June 30, 2014 include adjustments which reflect a full six months of amortization of intangible assets. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses. For the six months ended June 30, 2014, the Company adjusted the pro forma results to exclude acquisition-related expenses of $0.6 million based on the assumption that this acquisition was completed on January 1, 2013. Acquisition-related costs are costs incurred by the acquiree to engage in a business combination. Such costs may include accounting fees, valuation fees, consulting fees and legal fees.
First Allied Holdings. On June 30, 2014, RCAP Holdings contributed all its equity interests in First Allied to the Company. As consideration for the contribution, 11,264,929 shares of Class A common stock were issued to RCAP Holdings in a private placement offering exempt from registration under the Securities Act. First Allied is an independent broker-dealer with financial advisors in branch offices across the United States. First Allied was acquired by RCAP Holdings through a merger transaction on September 25, 2013 for an effective cost of $177.0 million, consisting of $145.0 million in merger consideration (including exchangeable notes issued by RCAP Holdings in the initial aggregate principal amount of $26.0 million (the “First Allied notes”)) paid to the former owners of First Allied and $32.0 million in bank indebtedness of First Allied outstanding immediately following consummation of the merger.
The number of shares issued as consideration was determined based on a value of $207.5 million for the equity of First Allied and the one-day volume weighted average price (“VWAP”) of Class A common stock on January 15, 2014, the day prior to the announcement of the signing of the Cetera merger agreement. The value of $207.5 million for the equity of First Allied established by the Company’s board of directors in January 2014 was determined as the effective cost to RCAP Holdings for First Allied of $177.0 million (consisting of $145.0 million in merger consideration (including First Allied notes) paid by RCAP Holdings to the former owners of First Allied and $32.0 million in bank indebtedness of First Allied outstanding immediately following consummation of the merger), minus indebtedness (net of cash) of First Allied of $7.0 million plus a carrying cost of $37.5 million. The value of the shares of Class A common stock issued by the Company as consideration in the First Allied acquisition was $239.2 million, based on the closing price for Class A common stock of $21.23 per share on June 30, 2014, the date of the consummation of the contribution. Accordingly, the effective cost to the Company for the First Allied acquisition was $271.2 million (including $32.0 million of First Allied indebtedness), which is $94.2 million more than the effective cost to RCAP Holdings for First Allied on September 25, 2013 under the terms of the original First Allied merger agreement. As of September 25, 2013, the date of common control, the Company recorded $137.2 million of net assets related to First Allied as a result of the contribution.

12

RCS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2015

In addition, following consummation of the contribution, $32.0 million of First Allied indebtedness was outstanding. On July 28, 2014, the First Allied outstanding indebtedness was repaid by the Company as required by the terms of the Bank Facilities, which the Company entered into in connection with the acquisition of Cetera on April 29, 2014.
The Company’s acquisition of First Allied was accounted for at historical cost in a manner similar to a pooling-of-interest accounting because First Allied and the Company were under the common control of RCAP Holdings immediately following the acquisition of First Allied by RCAP Holdings on September 25, 2013. See Note 3 for additional detail.
As of June 30, 2015, approximately $7.1 million of the goodwill from First Allied’s historic pre-acquisition goodwill was deductible for income tax purposes.
Investors Capital Holdings. On July 11, 2014, the Company completed the acquisition of ICH. ICH was a publicly traded company with its common stock listed on the NYSE MKT under the symbol “ICH”. ICH provides broker-dealer services to investors in support of trading and investment in securities, alternative investments and variable life insurance as well as investment advisory and asset management services.
The aggregate consideration was $52.5 million. The Company issued 2,027,966 shares of Class A common stock (2,029,261 shares issued on July 11, 2014, of which 1,295 shares were subsequently canceled on October 6, 2014 as an adjustment to the final consideration) pursuant to a registration statement on Form S-4 and paid aggregate consideration in cash of $8.4 million.
The assignment of the total consideration for the ICH acquisition as of the date of the acquisition was as follows:
($ in thousands)
 
Cash and cash equivalents
$
6,881

Short term investments and securities owned
499

Receivables
7,500

Property and equipment
275

Notes receivable
1,875

Deferred compensation
2,250

Deferred tax asset
2,613

Other assets
1,055

Accounts payable and accrued expenses
(1,945
)
Other liabilities
(7,593
)
Notes payable and long-term debt
(2,918
)
Non-qualified deferred compensation
(2,611
)
Total fair value excluding goodwill, intangible assets, and deferred tax liability
7,881

Goodwill
26,680

Intangible assets
30,100

Deferred tax liability
(12,152
)
Total consideration
$
52,509

As of June 30, 2015, the goodwill from the ICH acquisition is not deductible for income tax purposes.
The total ICH consideration consisted of the following:
($ in thousands)
 
Cash paid by the Company
$
8,412

Stock issued by the Company
44,097

Total consideration
$
52,509

The Company’s supplemental pro forma results of operations for ICH for the six months ended June 30, 2014 are as follows:
 
Six Months Ended June 30,
($ in millions)
2014
Total revenues
$
46.4

Loss before taxes
(1.5
)

13

RCS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2015

The supplemental pro forma results of operations include adjustments which reflect a full six months of amortization of intangible assets. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses.
Validus/Strategic Capital Partners. On August 29, 2014, the Company completed the acquisition of StratCap. StratCap, through its subsidiaries, is a wholesale distributor of alternative investment programs. StratCap’s subsidiaries distribute a platform of offerings consisting of two non-traded REITs, a non-traded business development company (“BDC”) and two public, non-traded limited liability companies. StratCap holds minority interests in four of the investment programs that it distributes, and is a joint venture partner along with the sponsor to the fifth investment program.
The aggregate consideration paid on the date of the acquisition was $77.5 million. The Company issued 464,317 shares of Class A common stock in a private placement offering exempt from registration under the Securities Act and $67.5 million paid in cash. Additionally, the Company paid $10.0 million in cash on December 1, 2014 and will pay earn-out payments in 2016 and 2017 based on the achievement of certain agreed-upon EBITDA performance targets. On the date of the acquisition, the Company recorded liabilities for contingent consideration and deferred payments, at fair value, of $75.0 million and $10.0 million, respectively. As of June 30, 2015, the fair value of the contingent consideration was $24.4 million. The change in the fair value of the contingent consideration was recorded in other expenses on the consolidated statements of operations. The fair value was determined by an independent third-party valuation firm using projected pre-tax net income and discounted cash flow analysis which was reviewed by the Company.
During the quarter-end close as of and for the three and six months ended June 30, 2015, the Company became aware that previous calculations of the contingent consideration were incorrectly calculated.  This miscalculation had an impact on the Goodwill and the Contingent consideration recorded in the Statement of Financial Condition and presented in the tables below as of the acquisition date.  The tables have been updated to reflect an increase in goodwill of $7.7 million with a corresponding increase in the contingent consideration. As a result of this error, the results of operations as of and for the three and nine months ended September 31, 2014, as of and for the year ended December 31, 2014 and as of and for the three months ended March 31, 2015 were misstated by an immaterial amount.  The current period three and six months ended June 30, 2015 consolidated statement of operations includes an out of period adjustment of $2.8 million and $3.0 million, respectfully, as an increase to Other expenses.  The Company has evaluated this error and determined that it was not material to the previously issued audited and unaudited financial statements as well as the current unaudited financial statements.
As mentioned above, during the three and six months ended June 30, 2015, the Company completed an analysis of all of its goodwill and intangible assets as of June 30, 2015, and determined that all of the goodwill associated with StratCap was impaired and the intangible assets were also impaired. During the three and six months ended June 30, 2015, the Company therefore wrote-off $30.6 million in goodwill and $100.0 million in intangible assets related to the acquisition of StratCap.
In addition, as discussed in “Management’s Discussion and Analysis - Results of Operations”, the Company recorded a substantial decrease in the fair value of the contingent consideration liability reflecting a decline in expected future revenues from StratCap.
The assignment of the total consideration for the StratCap acquisition as of the date of the acquisition was as follows:
($ in thousands)
 
Cash and cash equivalents
$
4,522

Short term investments and securities owned
2,239

Receivables
4,858

Property and equipment
96

Prepaid expenses and other assets
629

Accounts payable
(706
)
Accrued expenses
(201
)
Other liabilities
(908
)
Total fair value excluding goodwill and intangible assets
10,529

Goodwill
30,571

Intangible assets
121,380

Total consideration
$
162,480


14

RCS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2015

As of June 30, 2015, the goodwill from the StratCap acquisition is not deductible for income tax purposes.
The total StratCap consideration consisted of the following:
($ in thousands)
 
Cash paid by the Company
$
67,510

Stock issued by the Company
10,000

Contingent consideration
75,000

Deferred consideration
9,970

Total consideration
$
162,480

The contingent and deferred consideration in the table above represents the fair value at the acquisition date which includes discounting for the time value of money. The estimated range of undiscounted outcomes of the contingent consideration as of June 30, 2015 was as follows:
($ in thousands)
Low Case
 
High Case
Estimated contingent consideration amount
$
30,110

 
$
36,790

The Company’s supplemental pro forma results of operations for StratCap for the six months ended June 30, 2014 are as follows:
 
Six Months Ended June 30,
($ in millions)
2014
Total revenues
$
113.2

Loss before taxes
(0.2
)
The supplemental pro forma results of operations include adjustments which reflect a full six months of amortization of intangible assets. For the six months ended June 30, 2014, the Company adjusted the pro forma results to exclude acquisition-related expenses of $0.1 million based on the assumption that this acquisition was completed on January 1, 2013. Acquisition-related costs are costs incurred by the acquiree to engage in a business combination. Such costs may include accounting fees, valuation fees, consulting fees and legal fees.
Trupoly. On July 21, 2014, the Company announced that it is establishing a crowdfunding investment platform which it has rebranded under the name, “DirectVest.” In connection with this initiative, the Company acquired substantially all the assets of New York based Trupoly, a white-label investor relationship management portal, which will be integrated into the Company’s new crowdfunding investment platform. The assets of Trupoly primarily consist of intangible assets related to existing technology and a non-compete agreement.
On the closing date of the Trupoly acquisition, the Company issued shares of Class A common stock in a private placement offering exempt from registration under the Securities Act and paid the remaining consideration in cash. The Company paid 50.0% of the deferred consideration in shares of Class A common stock and 50.0% in cash on July 17, 2015.
As of June 30, 2015, approximately $0.7 million of the goodwill from the Trupoly acquisition is deductible for income tax purposes.
Docupace. On November 21, 2014, the Company completed the acquisition of a controlling financial interest in Docupace, a provider of integrated, electronic processing technologies and systems for financial institutions and wealth management firms.
The aggregate consideration on the date of the acquisition was $35.1 million, excluding $0.3 million of accrued interest on the deferred payment. On the closing date, the Company paid cash consideration of $18.8 million to the seller of Docupace and acquired a 51.0% ownership interest.
In addition, the Company made a $4.0 million capital contribution on the date of the acquisition, which increased its total ownership interest to 53.525%. Subject to certain covenants in the operating agreement, and if needed to achieve the strategic goals of Docupace’s business as determined by the board of managers, the Company may be required by Docupace’s management to make additional capital contributions of $28.0 million and $20.0 million in cash during the years ended December 31, 2015 and 2016, respectively.

15

RCS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2015

The post-closing consideration under the agreement between the Company and Docupace is to be adjusted, if necessary, in accordance with Docupace’s 2014 revenues. The Company has determined that the appropriate clawback amount is $2.4 million, which if implemented would reduce the Company’s ownership in Docupace to 52.043%. The Company expects to pay net post-closing consideration equal to $16.3 million, excluding the accrued interest, in cash, Class A common stock or a combination thereof, contingent upon resolution of certain matters under discussion.
The total preliminary fair value of Docupace on the date of the acquisition prior to the capital contribution was $68.8 million. The fair value of the non-controlling interest as of the date of the acquisition prior to the capital contribution was $33.7 million. The fair value of the non-controlling interest was determined based on the fair value of the controlling interest held by the Company grossed-up to 100% value in order to derive a per-share price to be applied to the non-controlling shares. This method assumes that the non-controlling shareholder will participate equally with the controlling shareholder in the economic benefits of the post combination entity.
On July 10, 2015, the Company made a $1.5 million capital contribution to Docupace, which increased its total ownership interest to 52.981%.
Based on the preliminary purchase price allocations, approximately $23.6 million of the goodwill from the Docupace acquisition is deductible for income tax purposes as of June 30, 2015.
VSR. On March 11, 2015, the Company completed the acquisition of VSR.
The aggregate consideration was $68.1 million (subject to certain adjustments detailed below). At the closing, the Company issued 2,436,429 shares of Class A common stock in a private placement with an aggregate value of $26.8 million, based on $10.989 per share, the VWAP of Class A common stock for the ten trading days ending March 9, 2015, and paid aggregate consideration in cash of $26.8 million. In addition, the Company will pay deferred consideration of $9.4 million, which will increase or decrease by the amount by which total revenue, adjusted EBITDA, group capital, net capital, indebtedness and certain transaction expenses, each as measured at the closing date (the “Adjustment Amounts”) is greater than or less than their respective target amounts. The deferred consideration will be paid upon resolution of a final settlement statement specifying the Adjustment Amounts initially delivered by the Company to the sellers no later than 120 days after the closing date, at which time the sellers will have 30 days to review the Adjustment Amounts. The sellers have a right to contest the Adjustment Amounts within 30 days of the initial receipt of Adjustment Amounts. Subsequently, the buyer and the seller have 30 days to resolve any of the seller’s objections. Also, the Company will pay deferred consideration, at fair value, of $5.1 million (payable 50% in cash and 50% in shares of Class A common stock) no later than 20 days after the second anniversary of the closing date, subject to reduction for amounts paid by the Company in connection with certain claims for which the sellers have agreed to indemnify the Company pursuant to the purchase agreement. Additionally, pursuant to the purchase agreement, the Company has established a preliminary $1.7 million indemnification asset since legal expenses incurred by the Company for matters indemnified under the purchase agreement are required to be reimbursed by the sellers. The indemnification asset is included in other assets on the Company’s statement of financial condition.
As of June 30, 2015, the goodwill from the VSR acquisition is not deductible for income tax purposes.
Girard. On March 18, 2015 (the “Girard Closing Date”), the Company completed the acquisition of Girard.
The aggregate consideration on acquisition day was $27.8 million (subject to certain adjustments below), which is inclusive of the preliminary estimate of amounts payable on the first, second and third anniversaries of the Girard Closing Date pursuant to an advisor recruiting plan (the “Girard Recruiting and Retention Payments”) and the deferred consideration. The Company issued 549,529 shares of Class A common stock in a private placement with an aggregate value of $6.3 million, based on $11.549 per share, the VWAP of Class A common stock for the ten trading days ending March 17, 2015 (such price, the “Girard Closing Date VWAP”), and paid aggregate consideration in cash of $14.5 million. In addition, pursuant to the purchase agreement, within 20 days after the 15th-month anniversary of the Girard Closing Date, the Company will issue the number of shares of Class A common stock equivalent to $1.6 million divided by the Girard Closing Day VWAP, subject to reduction for amounts paid by the Company in connection with certain losses for which the sellers have agreed to indemnify the Company pursuant to the purchase agreement. The preliminary fair value as of the Girard Closing Date of the Girard Recruiting and Retention Payment is $5.4 million and it is payable 60% in cash and 40% in shares of Class A common stock. The Girard Recruiting and Retention payments will increase or decrease based on the amount of gross dealer concessions generated by Girard’s financial advisors for the twelve-month period prior to each anniversary.
On July 24, 2015, the Company paid a $0.3 million post-closing adjustment pursuant to the purchase agreement. The Company issued 6,563 shares of Class A common stock in a private placement with an aggregate value of $0.08 million, based on the Girard Closing Date VWAP, and paid aggregate consideration in cash of $0.2 million.
As of June 30, 2015, the goodwill from the Girard acquisition is not deductible for income tax purposes.

16

RCS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2015

Consolidated pro forma results. The Company’s supplemental pro forma results of operations, which include the Original Operating Subsidiaries, Cetera, Summit, J.P. Turner, Hatteras, First Allied, ICH and StratCap for the six months ended June 30, 2014, are as follows:
 
Six Months Ended June 30,
($ in millions)
2014
Total revenues
$
1,577.9

Income before taxes
34.9

Provision for income taxes(1)
14.0

Net income
20.9

Less: income attributable to non-controlling interest
9.1

Less: preferred dividends and deemed dividend(2)
204.3

Net loss attributable to Class A common stockholders
$
(192.5
)
________________________
(1) Reflects pro forma adjustment to record the income tax provision based on the assumed 40% tax rate.
(2) Includes deemed dividend of $194.8 million representing the difference between redemption value of the Series A Preferred Stock (based on the if-converted price) and the amount of the proceeds that were allocated to the convertible preferred stock excluding the embedded derivative. The convertible preferred stock can be settled in cash in certain situations; therefore, the Company was required to accrete up to the redemption value. This accretion was recognized in its entirety resulting in a reduction in the income attributable to the common stockholders.
The consolidated supplemental pro forma results of operations do not include pro forma results for Trupoly, Docupace, VSR and Girard as they would have had an immaterial impact. The consolidated supplemental pro forma results of operations include adjustments which reflect a full six months of amortization of intangible assets and interest expense. In addition, the Company recorded pro forma adjustments to eliminate intercompany revenues and expenses. For the six months ended June 30, 2014, the Company adjusted the pro forma results to exclude acquisition-related expenses of $32.0 million based on the assumption that these transactions were completed on January 1, 2013. Acquisition-related costs are costs incurred by the acquiree or the Company to engage in a business combination. Such costs may include accounting fees, valuation fees, consulting fees and legal fees.
3. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of the Company, Realty Capital Securities, RCS Advisory, ANST, SK Research, LLC (“SK Research”), Cetera, Summit, J.P. Turner, Hatteras, ICH, StratCap, Trupoly, Docupace, VSR and Girard for the periods since acquisition and of First Allied for the periods since it was under the control of RCAP Holdings. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and Regulation S-X. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair statement of results.
The consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2014. The statement of financial condition as of December 31, 2014 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP.
The Company’s acquisition of First Allied was accounted for at historical cost in a manner similar to a pooling-of-interest accounting because First Allied and the Company were under the common control of RCAP Holdings at the time of the acquisition of First Allied by RCAP Holdings. Our financial statements have been prepared to reflect the results of operations and financial position of First Allied as if we had acquired it on September 25, 2013, the date that First Allied was acquired by RCAP Holdings. The acquisition of First Allied by RCAP Holdings was accounted for by RCAP Holdings using the purchase method of accounting; therefore, the purchase price was allocated to First Allied’s assets and liabilities at fair value and any excess purchase price was then attributed to intangible assets and goodwill. When the Company acquired First Allied from RCAP Holdings, no additional intangible assets or goodwill was recorded.

17

RCS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2015

Reclassifications
Certain reclassifications have been made to the prior period financial statement presentation to conform to the current period presentation primarily as a result of the need to harmonize the financial statements of the Company with those of the entities acquired during 2014.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates, and these differences could be material.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”) to clarify the principles for recognizing revenue and to develop common revenue accounting guidance for U.S. GAAP and International Financial Reporting Standards. For public entities, the amendments were to be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. However, in July 2015, the FASB deferred the effective date of ASU 2014-09 and the guidance will be effective for public entities for annual reporting periods beginning after December 15, 2017. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. The Company is still evaluating the impact of ASU 2014-09.
In November 2014, the FASB issued Accounting Standards Update 2014-16, “Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity” (“ASU 2014-16”), which requires an entity to determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for separate accounting from the host contract, when evaluating whether the host contract is more akin to debt or equity. The amendments in ASU 2014-16 did not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required but rather clarified how U.S. GAAP should be interpreted in concluding on the nature of the host contract. The Company adopted ASU 2014-16 during the fourth quarter of 2014. The adoption of ASU 2014-16 did not have an impact on the Company’s previously reported financial condition or results of operations.
In February 2015, the FASB issued Accounting Standards Update 2015-02, “Amendments to the Consolidation Analysis” (“ASU 2015-02”). The new guidance applies to entities in all industries and amends the current consolidation guidance. The amendments are effective for fiscal years beginning after December 15, 2016 and for interim periods within fiscal periods beginning after December 15, 2017. Early application is permitted. The Company is still evaluating the impact of ASU 2015-02 but does not expect the adoption to have a material impact to its financial condition or results of operations.
In April 2015, the FASB issued Accounting Standards Update 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). The key provisions of ASU 2015-03 are a) that debt issuance costs be reported on the statement of financial condition as a reduction in the liability for long-term debt rather than as an asset and b) that the amortization of debt issuance costs be reported as interest expense. For public companies, ASU 2015-03 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. A reporting entity will apply ASU 2015-03 retrospectively to all prior periods. The Company intends to adopt ASU 2015-03 beginning with the financial statements as of and for the year ended December 31, 2015. The adoption of ASU 2015-03 is expected to have an impact on the Company’s statement of financial condition as the deferred financing fees will be reported net against the long-term debt. The adoption of ASU 2015-03 is not expected to have an impact on the Company’s statement of operations.
In May 2015, the FASB issued Accounting Standards Update 2015-07, “Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)” (“ASU 2015-07”). ASU 2015-07 removes the requirement to categorize investments within the fair value hierarchy for which their fair value is measured at net asset value using the practical expedient. ASU 2015-07 also removes the requirement to make certain disclosures for investments that are eligible to be measured at fair value using the net asset value practical expedient. Instead, those disclosures would be limited to investments for which the entity has elected to estimate the fair value using that practical expedient. For public companies, the final consensus will be effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. Early adoption is permitted. A reporting entity will apply the final consensus retrospectively. While the Company is still evaluating the impact of ASU 2015-07, it will not have an impact on the Company’s financial condition, results of operations or cash flows because the update only affects disclosure requirements. ASU 2015-07 is not expected to have a significant impact on the Company’s fair value disclosures as the Company currently has few investments for which their fair values are determined using net asset value.

18

RCS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2015

4. Fair Value Disclosures
Fair Value of Instruments by Level. The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. U.S. GAAP defines three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability
Level 3 - Unobservable inputs that reflect the entity’s own assumptions about the data inputs that market participants would use in the pricing of the asset or liability and are consequently not based on market activity
The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is the most significant to the fair value measurement in its entirety.
A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets. The Company assumes all transfers occur at the beginning of the quarterly reporting period in which they occur. For the six months ended June 30, 2015 and for the year ended December 31, 2014 there were no transfers in or out of Level 3.
Cash equivalents include money market mutual fund instruments, which are short term in nature with readily determinable values derived from active markets. Mutual funds, substantially all deferred compensation plan investments and publicly traded securities with sufficient trading volume are fair valued by management using quoted prices for identical instruments in active markets. Accordingly, these securities are primarily classified within Level 1. Government bonds, U.S. Treasury securities, corporate bonds, certificates of deposit and mutual funds are fair valued by management using references to prices for similar instruments, quoted prices or recent transactions in less active markets and these securities are primarily classified within Level 2. The Company’s free-standing and embedded derivative contracts are not traded on an exchange. Consequently, the fair value was determined by a third-party valuation company and reviewed by the Company. A binomial lattice model was used to derive the fair value for the embedded derivatives related to the Series C preferred stock while the embedded derivatives related to the Series A preferred stock, convertible notes and the put/call were based on a Monte Carlo simulation that incorporates assumptions including duration, probability of redemption, the volatility of the market price of Class A common stock, the risk free rate of interest and the discount rate. The derivative contracts are classified as Level 3 in the Company’s fair value hierarchy.
The fair value of the Company’s investments in private equity funds is based on the net asset value (“NAV”) as a practical expedient since there is no readily available market. Adjustments to the NAV would be considered if it was probable that the private equity funds would be sold at a value materially different than the reported NAV. The private equity funds do not have notice periods, or restrictions on redemptions. The private equity funds primarily invest in nonpublic companies and other private equity funds, and distributions from will be received as the underlying investments of the funds are liquidated. The Company also holds an investment in a REIT whose fair value is based on NAV. Given the use of unobservable inputs used in the valuation, investments in private equity funds and the REIT are classified as Level 3 in the Company’s fair value hierarchy.
Pursuant to the terms of the related purchase agreements, the Company is obligated to pay contingent consideration to the sellers of Hatteras, StratCap and Girard and contingent consideration related to acquisitions made by First Allied prior to its acquisition by RCAP Holdings in September 2013. During the three months ended March 31, 2015, the Company settled the contingent consideration related to the J.P. Turner acquisition and substantially all of the contingent consideration related to acquisitions made by First Allied prior to its acquisition by RCAP Holdings in September 2013.
The Company estimated the fair value of the contingent consideration at the close of the transactions using discounted cash flows. The fair value of the contingent consideration was based on financial forecasts determined by management that included assumptions about growth in assets under administration, assets under management, earnings, financial advisor retention and discount rates. The financial targets are sensitive to financial advisor retention, market fluctuations and the ability of financial advisors to grow their businesses. The Company evaluates the actual progress toward achieving the financial targets quarterly and adjusts the estimated fair value of the contingent consideration based on the probability of achievement, with any changes in fair value recognized in earnings. Given the significant unobservable inputs used in the valuation the contingent consideration is classified as Level 3 in the Company’s fair value hierarchy.

19

RCS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2015

The Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis by product category as of June 30, 2015 are as follows:
($ in thousands)
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
Cash equivalents - money market funds
$
64,067

 
$

 
$

 
$
64,067

Available-for-sale securities:
 
 
 
 
 
 
 
Mutual funds
2,701

 

 

 
2,701

Total available-for-sale
2,701

 

 

 
2,701

Trading securities:
 
 
 
 
 
 
 
Equity securities
163

 

 

 
163

Mutual funds
9,592

 

 

 
9,592

Certificate of deposits

 
429

 

 
429

U.S. government bonds
2

 
9

 

 
11

State and municipal bonds
1

 

 

 
1

Corporate bonds

 
72

 

 
72

Other
39

 

 
470

 
509

Total trading securities
9,797

 
510

 
470

 
10,777

Deferred compensation plan investments:
 
 
 
 
 
 
 
Money market fund
4,470

 

 

 
4,470

International global funds
19,126

 

 

 
19,126

U.S. equity funds
49,035

 

 

 
49,035

U.S. fixed-income funds
10,937

 

 

 
10,937

Mutual funds

 
3,086

 

 
3,086

Total deferred compensation plan investments
83,568

 
3,086

 

 
86,654

Prepaid expenses and other assets(1)

 
1,365

 
4,443

 
5,808

Total
$
160,133

 
$
4,961

 
$
4,913

 
$
170,007

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Derivative contracts
$

 
$

 
$
46,515

(2) 
$
46,515

Other liabilities:
 
 
 
 
 
 
 
Equity securities
43

 

 

 
43

Mutual funds and unit investment trusts
158

 

 

 
158

State and municipal government obligations
130

 
202

 

 
332

Certificate of deposit

 

 

 

Contingent consideration

 

 
60,635

(3) 
60,635

Total
$
331

 
$
202

 
$
107,150

 
$
107,683

_____________________
(1) Primarily represents investments in REITs, oil and gas interests and other illiquid investments.
(2) Includes $6.9 million of derivatives classified in long-term debt.
(3) Excludes deferred payments, which are measured at fair value on a non-recurring basis.

20

RCS Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2015

The Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis by product category as of December 31, 2014 are as follows:
($ in thousands)
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
Cash equivalents - money market funds
$
82,973

 
$

 
$

 
$
82,973

Available-for-sale securities:
 
 
 
 
 
 
 
Mutual funds
11,473

 

 

 
11,473

Total available-for-sale
11,473

 

 

 
11,473

Trading securities:
 
 
 
 
 
 
 
Equity securities
262

 

 

 
262

Mutual funds
9,457

 

 

 
9,457

U.S. government bonds
2

 
10

 

 
12

Other
41

 

 
470

 
511

Total trading securities
9,762

 
10

 
470

 
10,242

Deferred compensation plan investments:
 
 
 
 
 
 
 
Money market fund
6,246

 

 

 
6,246

International global funds
17,722

 

 

 
17,722

U.S. equity funds
46,999

 

 

 
46,999

U.S. fixed-income funds
9,787

 

 

 
9,787

Mutual funds

 
2,702

 

 
2,702

Total deferred compensation plan investments
80,754

 
2,702

 

 
83,456

Prepaid expenses and other assets - oil and gas interests

 

 
151

 
151

Total
$
184,962

 
$
2,712

 
$
621

 
$
188,295

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Derivative contracts
$

 
$

 
$
102,908

(1) 
$
102,908

Other liabilities:
 
 
 
 
 
 
 
Equity securities
161

 

 

 
161

Mutual funds and unit investment trusts
4

 

 

 
4

State and municipal government obligations
222