For the year ended December 31, 2015, total Adjusted EBITDA was $58.4 million, a decrease of $0.5 million from 2014. The key drivers of the change in Adjusted EBITDA were the factors impacting income from continuing operations, including unrealized and realized losses on CLO subordinated notes, plus additional depreciation in our senior living segment, both of which were offset by the sale of PFG, which contributed $32.5 million of Adjusted EBITDA, including the $15.6 million gain, in the year ended December 31, 2015 versus $34.8 million in the year ended December 31, 2014. See “-Non-GAAP Reconciliations” for a reconciliation to GAAP net income.
Pre-tax income was $25.3 million compared with a loss of $6.8 million for the 2015 period, an increase of $32.0 million. Revenues, comprised primarily of asset management fees, including incentive management fees on unconsolidated CLOs, and warehouse interest income and realized gains, totaled $13.1 million in the year ended December 31, 2016, compared to $6.8 million for the prior year period. The increase was driven by warehouse realized gains in 2016 against losses in 2015, an increase in incentive fees in the second half of 2016 and the launch of Telos 7 in the second quarter of 2016. Expenses for 2016 were $8.1 million compared to $6.6 million
Pre-tax income for 2015 was a loss of $6.8 million, compared to income of $19.5 million for 2014. Revenues totaled $6.8 million in the year ended December 31, 2015, compared to $7.1 million for the prior year period, primarily driven by declines in the legacy tax exempt portfolio offset by management fees from the deconsolidated CLOs. Expenses for 2015 were $6.6 million compared to $8.5 million for 2014, primarily driven by declines in legacy tax exempt security portfolios and lower incentive compensation given reductions in management and incentive fees. Net income attributable to consolidated CLOs was down $26.4 million from 2014, driven primarily by $17.9 million of higher realized and unrealized losses incurred on the Company’s holdings of CLO subordinated notes and the reclassification to revenue of the management fees on Telos 1-4 as they were deconsolidated when the subordinated notes related to these CLOs were sold.
In Triple Net Lease Properties, we own the real estate and enter into a long term lease with an operator who is typically responsible for bearing operating costs, including maintenance, utilities, taxes, insurance, repairs and capital improvements. The operations of the Triple Net Lease Properties are not consolidated since we do not manage or own the underlying operations. For Triple Net Lease Properties’ operations, we recognize primarily rental income from the lease since substantially all expenses are passed through to the tenant. In Managed Properties, we generally own between 65-90% of the real estate and the operations with affiliates of the management company owning the remainder. We therefore consolidate all of the assets, liabilities, income and expense of the Managed Properties operations in segment reporting. For each of the years ended December 31, 2016, 2015 and 2014, operating results present revenues and expenses, which include amounts attributable to non-controlling interests.
Expenses are comprised of interest expenses on borrowings, payroll expenses (including employees of the managers at each of Care’s Managed Properties), professional fees, depreciation and amortization of properties and leases acquired and other expenses.
NOI Margin % is the relationship between Managed Property segment NOI and Rental and related revenue.
NOI margin decreased from 35.3% in 2014 to 24.6% in 2015 as a result of the lag in revenue growth related to the property acquisitions where the enhancements and capital upgrades were being performed and the increase in mix of Managed Properties.
compared with $48.7 million in 2015, an increase of $38.6 million or 79.3%. The increases are primarily driven by the acquisition of Reliance and increased originations volume within our mortgage and commercial finance lending businesses.
Book value per share, as exchanged assumes full exchange of the limited partners units of TFP for Tiptree Class A common stock. Management believes the use of this financial measure provides supplemental information useful to investors as book value is frequently used by the financial community to analyze company growth on a relative per share basis. The following table provides a reconciliation between total stockholders’ equity and total shares outstanding, net of treasury shares, for the fiscal years ended December 31, 2016, 2015 and 2014.
Cash used in investing activities - VIEs was $551.5 million for the year ended December 31, 2014. The primary driver of the use of cash in investing activities - VIEs was investments in new loans in the CLOs, net of repayments and sales.
The Company evaluates whether insurance related deferred acquisition costs are recoverable at year-end, and considers investment income in the recoverability analysis. As a result of the Company's evaluations, no write-offs for unrecoverable insurance related deferred acquisition costs were recognized during the years ended December 31, 2016, 2015 and 2014, respectively.
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) and include the accounts of the Company and its controlled subsidiaries.
Carrying value of goodwill and other intangibles, including estimated amortization period and useful lives
The Company defers nonrefundable loan origination and commitment fees collected on originated loans and amortizes the net amount as an adjustment of the interest income over the contractual life of the loan. If a loan is prepaid, the net deferred amount is recognized in loan fee income within the Consolidated Statements of Operations in the period. Loan fee income includes prepayment fees and late charges collected.
The initial measurement of goodwill and intangibles requires judgment concerning estimates of the fair value of the acquired assets and liabilities. Goodwill and indefinite-lived intangible assets are not amortized but subject to tests for impairment annually or if events or circumstances indicate it is more likely than not they may be impaired. Other intangible assets are amortized over their estimated useful lives and are subject to impairment if events or circumstances indicate a possible inability to realize the carrying amount. The Company carries intangible assets, which represent customer and agent relationships, trade names, insurance licenses (certificates of authority granted by individual state departments of insurance), the value of in-force insurance policies acquired, software acquired or internally developed, and leases in-place. Management has deemed the insurance licenses to have indefinite useful life. Costs incurred to renew or maintain insurance licenses are recorded as operating costs in the period in which they arise. See Note -(10) Goodwill and Intangible Assets, net.
Supplemental pro forma results of operations have not been presented for the above 2016 business acquisitions as they are not material in relation to the Company’s reported results.
On July 1, 2015, the Company completed the acquisition of Reliance First Capital, LLC (Reliance) for total consideration of $24,441, which was comprised of cash of $10,281, a total of 1,625,000 shares of its Class A common stock (market value of $11,960 at the time of issuance), and an earn-out to issue additional shares valued at $2,200 in exchange for 100% ownership. The primary reason for the Company’s acquisition of Reliance is to expand its mortgage origination operations. The results of Reliance, from its closing date, are included in the Company’s specialty finance segment and was considered an acquisition of a business in accordance with ASC 805.
U.S Treasury Securities, Obligations of U.S. Government Authorities and Agencies, Obligations of State and Political Subdivisions, Corporate Securities, Asset-Backed Securities, and Obligations of Foreign Governments: Fair values were obtained from an independent pricing service and a third party investment manager. The prices provided by the independent
NPLs that have become REOs were measured at fair value on a non-recurring basis during the year ended December 31, 2016 (the Company did not have investments in REO status in prior year period). The carrying value of REOs at December 31, 2016 was $13,366. Upon conversion to REO, the fair value is estimated using broker price opinion (BPO). BPOs are subject to judgments of a particular broker formed by visiting a property, assessing general home values in an area, reviewing comparable listings, and reviewing comparable completed sales. These judgments may vary among brokers and may fluctuate over time based on housing market activities and the influx of additional comparable listings and sales. REO is included in real estate, net.
As of December 31, 2016 and December 31, 2015, the Company’s specialty insurance business held $20,913 and $13,698 in notes receivable, net, respectively. The majority of these notes totaling $20,615 and $12,216 at December 31, 2016 and December 31, 2015, respectively, consist of receivables from specialty insurance business’s premium financing program. At December 31, 2016 and December 31, 2015, respectively, a total of $298 and $1,482 was for notes receivable under its Pay us Later Program, which allows customers to finance the purchase of electronic mobile devices and/ or the costs of the protection programs on these devices. The Company has established an allowance for uncollectible amounts against its notes receivable of $1,444 and $768 as of December 31, 2016 and December 31, 2015, respectively. As of December 31, 2016 and December 31, 2015, there were $2,188 and $1,553 in balances classified as 90 days plus past due, respectively.
On September 14, 2016, subsidiaries of Tiptree purchased 1,000,000 shares of Class A common stock of Tiptree from entities affiliated with Nomura Securities Co., Ltd. (a principal owner of the Company’s Class A common stock prior to the purchase) for aggregate consideration of $6,150. The shares acquired by subsidiaries of Tiptree are accounted for as treasury shares and are not outstanding for accounting or voting purposes.
On November 8, 2016, TAMCO Manager, Inc., a subsidiary of Tiptree, which owned 99% of TAMCO, purchased the remaining 1% of TAMCO from TFPLP Holdings I, LLC (TFPLP I) for 28,977 shares of the Company’s Class A common stock. Tricadia is the managing member of TFPLP I and Michael Barnes, the Company’s Executive Chairman owns an economic interest in TFPLP I. At the time of the transaction, the shares of the Company’s Class A common stock issued to TFPLP had a market value of $174 based on the closing stock price of $6.00 per share.
525.5%, which does not bear a customary relationship to statutory income tax rates. Differences from the statutory income tax rate are primarily the result of: (i) state income taxes; (ii) non-deductible transaction costs incurred on the Fortegra acquisition; and (iii) the effect of changes in valuation allowance on net operating losses reported by Tiptree Inc., Siena Capital Finance Acquisition Corp., Luxury and MFCA Funding, Inc.