TIDMTAM
RNS Number : 9649G
Titanium Asset Management Corp
20 May 2011
Titanium Asset Management Corp.
Reports 2011 First Quarter Results
Milwaukee, WI, May 19, 2011 - Titanium Asset Management Corp.
(AIM - TAM) today reported results for the first quarter ended
March 31, 2011.
Highlights for the first quarter are as follows:
-- Managed assets increased by 4.0% from $8,125.0 million to
$8,457.4 million during the first quarter of 2011 primarily
reflecting net asset flows and market gains for both fixed income
and equity strategies.
-- Average managed assets of $8,291.2 million for the first
quarter of 2011 were substantially unchanged relative to the
$8,324.8 million for the same period last year. Investment
management fee revenues were $5,047,000 for the first quarter of
2011, a 2.1% increase over investment management fee revenues of
$4,943,000 for the same period last year primarily due to a
marginally higher average fee rate.
-- Distributed assets increased by 1.6% from $894.4 million to
$908.5 million during the first quarter of 2011 reflecting market
gains on the hedge fund strategies.
-- Average distributed assets of $901.5 million for the first
quarter of 2011 were 8.3% lower than the $983.5 million for the
same period last year reflecting significant redemptions in the
fourth quarter of 2010. Referral fee revenues were $395,000 for the
first quarter of 2011, a 34.9% decrease from referral fee revenues
of $607,000 for the first quarter of 2010 reflecting both the lower
average distributed assets and a 29% decrease in our average
referral fees due to a decrease in the hedge fund adviser's
fees.
-- An Adjusted EBITDA deficit (1) of $69,000 for the first
quarter of 2011 compared to an Adjusted EBITDA deficit of $690,000
for the same period last year.
-- A goodwill impairment charge of $3,500,000 recognized in the
first quarter of 2011, primarily due to the long-term impact of the
reductions to our referral revenue stream.
-- Net investment income of $375,000 for the first quarter of
2011 compared to $315,000 for the same period last year.
-- Net loss of $4,437,000, or $0.22 per diluted common share,
for the first quarter of 2011 compared to a net loss of $1,270,000,
or $0.06 per diluted common share, for the first quarter of
2010.
(1) See the accompanying table on page 10 for a definition of
Adjusted EBITDA, a non-GAAP financial measure. The table provides a
description of this non-GAAP financial measure and a reconciliation
to the most directly comparable GAAP measure.
For further information please contact:
Titanium Asset Management Corp.
Robert Brooks, CEO 312-335-8300
Seymour Pierce Ltd
Jonathan Wright +44 20 7107 8000
Assets Under Management
Assets under management of $8.5 billion at March 31, 2011 were
higher than the $8.1 billion reported at December 31, 2010 due to
both positive net flows and positive investment returns. The
following table presents summary activity for 2011 and 2010
periods.
Three Months Ended 2011
March 31, vs.
----------------------
(in millions) 2011 2010 2010
---------- ---------- --------
Annual Activity:
Beginning balance $ 8,125.0 $ 8,151.4
Inflows 496.6 513.1
Outflows (267.0) (329.7)
---------- ----------
Net flows 229.6 183.4
---------- ----------
Market value change 102.9 163.3
---------- ----------
Ending balance $ 8,457.4 $ 8,498.1
========== ==========
Average Assets Under Management $ 8,291.2 $ 8,324.8 -0.4%
Average Fee Rate (basis
points) 24.3 23.7 2.5%
The principle factors affecting our net flows during the periods
ended March 31, 2011 and 2010 include the following:
-- Multiemployer pension and welfare plans represent
approximately 33% of our client base, and these plans have been
faced with a challenging economic environment over the last several
years due to the equity market collapse of 2008 and general
business conditions that affect their contribution and withdrawal
levels. These factors have led to increased levels of outflows from
our fixed income strategies throughout the last several years.
Inflows from multiemployer pension and welfare plans were
approximately $87 million for the three months ended March 31, 2011
compared to approximately $120 million for the prior year period,
which included the addition of a significant new real estate
client. Outflows from multiemployer pension and welfare plans
moderated somewhat as outflows were approximately $62 million for
the three months ended March 31, 2011 compared to $97 million for
the prior year period.
-- Inflows and outflows are also significantly affected by the
timing of tax receipts and disbursements for several public entity
accounts that we manage. While these flows can fluctuate
significantly from period to period, they do not have a significant
impact on our overall fees due to low or fixed fee rates.
-- Inflows and net flows for 2011 were positively impacted by
the addition of approximately $20 million of equity assets of a
mutual fund for which Clal Finance serves as investment adviser,
and for which we serve as sub-adviser pursuant to a sub-advisory
agreement with Clal Finance.
Market value changes reflect our investment performance. Fixed
income assets comprised approximately 87% of our total assets under
management at March 31, 2011. Fixed income returns as measured by
the Barclays Capital Aggregate Bond Index were 0.4% for the three
months ended March 31, 2011 (1.8% for the comparable 2010 period).
For the three months ended March 31, 2011, approximately 90% of our
fixed income assets with defined performance benchmarks
outperformed their respective benchmarks.
Equity assets comprised approximately 10% of our total assets
under management at March 31, 2011. Equity returns as measured by
the S&P 500 Index were 5.9% for the three months ended March
31, 2011 (5.4% for the comparable 2010 period). Our equity assets
generally underperformed their respective benchmarks for the three
months ended March 31, 2011.
The following table presents summary breakdowns for our assets
under management at March 31, 2011 and December 31, 2010.
March 31, % of December % of
(in millions) 2011 total 31, 2010 total
---------- -------- ---------- --------
By investment strategy:
Fixed income $ 7,378.9 87.2% $ 7,137.4 87.9%
Equity 867.5 10.3% 781.3 9.6%
Real estate 211.0 2.5% 206.3 2.5%
---------- -------- ---------- --------
Total $ 8,457.4 100.0% $ 8,125.0 100.0%
========== ======== ========== ========
By client type:
Institutional $ 7,126.2 84.3% $ 6,902.8 85.0%
Retail 1,331.2 15.7% 1,222.2 15.0%
---------- -------- ---------- --------
Total $ 8,457.4 100.0% $ 8,125.0 100.0%
========== ======== ========== ========
By investment vehicle:
Separate accounts $ 7,555.3 89.3% $ 7,246.9 89.2%
Private funds 902.1 10.7% 878.1 10.8%
---------- -------- ---------- --------
Total $ 8,457.4 100.0% $ 8,125.0 100.0%
========== ======== ========== ========
Our mix of assets under management by investment strategy was
relatively unchanged as fixed income assets comprised 87.2% of
total assets under management at March 31, 2011, compared to 87.9%
at December 31, 2010.
Our mix of assets under management by client type was relatively
unchanged as institutional accounts comprised 84.3% of total assets
under management as of March 31, 2011 compared to 85.0% at December
31, 2010.
Our mix of assets under management by investment vehicle was
relatively unchanged as separate accounts comprised 89.3% of total
assets under management as of March 31, 2011 compared to 89.2% at
December 31, 2010.
We earn referral fees on clients referred to Attalus Capital LLC
("Attalus"), a hedge fund manager with whom we have a referral
arrangement. The distributed assets managed by Attalus under this
arrangement increased from $894.4 million at December 31, 2010 to
$908.5 million at March 31, 2011. The activity related to these
distributed assets was as follows:
For the Three Months
Ended
March 31,
----------------------- -------
(in millions) 2011 2010
---------- ----------- -------
Annual Activity:
Beginning balance $ 894.4 $ 974.9
Inflows - 5.2
Outflows - -
Market value change 14.1 12.0
---------- -----------
Ending balance $ 908.5 $ 992.1
========== ===========
Average Assets Under Management $ 901.5 $ 983.5 -8%
Average Referral Fee Rate
(basis points) 17.5 24.6 -29%
The assets managed by Attalus came under significant pressure in
the fourth quarter of 2010 as a result of several factors,
including Attalus' overall fee rates, the investment performance of
the hedge funds managed by Attalus relative to the performance of
other hedge funds, and certain changes in Attalus' management. The
combination of these factors resulted in outflows totaling
approximately $125 million (representing approximately $260,000 of
annualized referral fees) during the fourth quarter of 2010.
Starting January 1, 2011, Attalus has reduced its average fee
rates. The reduction in their fees reduced our average referral
rate from approximately 24.6 basis points to 17.5 points and will
reduce our annualized referral fees by approximately $650,000.
Prior to completing the Company's forecast for its 2010 year end
valuation of goodwill, Attalus notified the Company that they had
received further redemption requests that could be effected at the
end of the first and second quarter of 2011. This information was
utilized by the Company in its year end goodwill impairment
analysis.
Attalus has informed us that they have received additional
redemption requests since that time. Based on the most recent
information from Attalus, the current total of redemption requests
is approximately $260 million (representing approximately $380,000
of annualized referral fees) that may occur in the second, third
and fourth quarters. If all these additional redemptions occur as
scheduled, they would further reduce 2011 referral fees by
approximately $200,000.
Attalus investment performance improved during the first quarter
of 2011 and Attalus and our client service personnel have been
actively communicating with our mutual clients regarding Attalus'
investment strategies, the changes in Attalus' management, and the
reduction in Attalus' fees in efforts to limit the redemptions.
Despite these efforts, redemptions have continued as described
above. From ensuing discussions with the management of Attalus, we
became aware of additional concerns with the relationship that may
impact our marketing relationship beyond the current contractual
period. These factors caused the Company to further reduce its long
term forecast of referral fee revenues and triggered a reassessment
of the carrying amount of goodwill as of March 31, 2011.
Operating Results
Three Months Ended
March 31,
--------------------------
2011 2010
------------ ------------
Average assets under management
(in millions) $ 8,291.2 $ 8,324.8
Average fee rate (basis
points) 24.3 23.8
Average distributed assets
under management (in millions) $ 901.5 $ 983.5
Average referral fee rate
(basis points) 17.5 24.7
Investment management
fees $ 5,047,000 $ 4,943,000
Referral fees 395,000 607,000
------------ ------------
Total operating revenue 5,442,000 5,550,000
Adjusted EBITDA deficit(1) (69,000) (690,000)
Impairment of goodwill 3,500,000 -
Operating loss (4,812,000) (1,585,000)
Net investment income 375,000 315,000
Net loss (4,437,000) (1,270,000)
Earnings per share:
Basic $ (0.22) $ (0.06)
Diluted $ (0.22) $ (0.06)
(1) See the accompanying table on page 10 for a definition of
Adjusted EBITDA, a non-GAAP financial measure. The table provides a
description of this non-GAAP financial measure and a reconciliation
to the most directly comparable GAAP measure.
Our 2011 first quarter investment management fees increased
$104,000, or 2.1%, relative to the first quarter of 2010 due to a
modest increase in the average fee rate.
Referral fee revenue decreased to $395,000 in the first quarter
of 2011, a 34.9% decrease compared to the referral fee revenue of
$607,000 in the first quarter of 2010, due to a combination of
redemptions incurred by Attalus in the fourth quarter of 2010 and a
29.1% reduction in our average referral fee rate due to Attalus'
reduction in its fees.
Our Adjusted EBITDA deficit of $69,000 for the first quarter of
2011 reflects an improvement of $621,000 over the prior year amount
as a result of cost reductions achieved during 2010, the
elimination of $420,000 of severance costs incurred in the 2010
period, offset in part by the decrease in referral fee revenue.
Goodwill Impairment
During April 2011, the Company was notified by Attalus of
further redemptions and a further reduction in our referral fee
rates. From ensuing discussions with the management of Attalus, we
became aware of additional concerns with the relationship that may
impact our marketing relationship beyond the current contractual
period. These factors caused the Company to further reduce its long
term forecast of referral fee revenues and triggered a reassessment
of the carrying amount of goodwill.
In preparing the current forecasts, we have increased our
estimates of potential redemptions of the Attalus assets for 2011
from approximately $200 million to $260 million and we have
forecasted a continued decline in the referral fee asset base
through 2015. In addition, we have moderated our estimate of
average fee rates based on an expected renewal of the referral
contract at reduced terms. The combination of these factors
resulted in estimated annual referral fees of approximately $1.1
million, reduced from a previous estimate of approximately $2.0
million.
The reduction in the forecasted long-term referral fee revenues
resulted in a reduced estimate of the Company's value and we have
concluded that our goodwill balance was further impaired and
recognized an impairment charge of $3,500,000.
Forward-looking Statements
Statements in this press release which are not historical facts
may be "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements
are subject to a number of assumptions, risks, and uncertainties,
many of which are beyond our control.
Any forward-looking statements made in this press release speak
as of the date made and are not guarantees of future performance.
Actual results or developments may differ materially from the
expectations expressed or implied in the forward-looking
statements, and we undertake no obligation to update any such
statements. Results may differ significantly due to market
fluctuations that alter our assets under management; a further
decline in our distributed assets; termination of investment
advisory agreements; impairment of goodwill and other intangible
assets; our inability to compete; market pressure on investment
advisory fees; ineffective management of risk; changes in interest
rates, equity prices, liquidity of global markets and international
and regional political conditions; or actions taken by Clal Finance
Ltd., as our significant stockholder. Additional factors that could
influence Titanium's financial results are included in its
Securities and Exchange Commission filings, including its Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K.
The Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2011, was filed with the Securities and
Exchange Commission on May 18, 2011. The report will be available
on the SEC's website at www.sec.gov and on the Company's website at
www.ti-am.com.
Titanium Asset Management Corp.
Condensed Consolidated Balance Sheets
December
March 31, 31,
2011 2010
------------- -------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 187,000 $ 4,698,000
Investments 4,074,000 3,354,000
Accounts receivable 3,755,000 4,783,000
Other current assets 805,000 1,179,000
------------- -------------
Total current assets 8,821,000 14,014,000
Investments in affiliates 6,126,000 5,898,000
Property and equipment, net 467,000 455,000
Goodwill 21,647,000 25,147,000
Intangible assets, net 20,388,000 21,605,000
Total assets $ 57,449,000 $ 67,119,000
============= =============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 101,000 $ 42,000
Acquisition payments due - 4,000,000
Other current liabilities 2,255,000 3,539,000
------------- -------------
Total current liabilities and total
liabilities 2,356,000 7,581,000
Commitments and contingencies
Stockholders' equity
Common stock, $0.0001 par value;
54,000,000 shares authorized;
20,634,232 issued and outstanding at
March 31, 2011 and 20,442,232 shares
issued and outstanding at December 31,
2010 2,000 2,000
Restricted common stock, $0.0001 par
value; 720,000 shares authorized;
612,716 issued and outstanding at March
31, 2011 and December 31, 2010 - -
Preferred stock, $0.0001 par value;
1,000,000 shares authorized; none
issued - -
Additional paid-in capital 100,971,000 100,971,000
Accumulated deficit (45,805,000) (41,368,000)
Other comprehensive income (75,000) (67,000)
Total stockholders' equity 55,093,000 59,538,000
------------- -------------
Total liabilities and
stockholders' equity $ 57,449,000 $ 67,119,000
============= =============
Titanium Asset Management Corp.
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Ended
March 31,
------------------------------
2011 2010
-------------- --------------
Operating revenues $ 5,442,000 $ 5,550,000
Operating expenses:
Administrative 5,537,000 6,306,000
Amortization of intangible
assets 1,217,000 829,000
Impairment of goodwill 3,500,000 -
Total operating expenses 10,254,000 7,135,000
Operating loss (4,812,000) (1,585,000)
Other income
Interest income 22,000 88,000
Net realized gain (loss) on
investments (6,000) 104,000
Income from equity investees 359,000 139,000
Interest expense - (16,000)
Loss before taxes (4,437,000) (1,270,000)
Income tax benefit - -
Net loss $ (4,437,000) $ (1,270,000)
============== ==============
Earnings (loss) per share
Basic $ (0.22) $ (0.06)
Diluted $ (0.22) $ (0.06)
Weighted average number of
common shares outstanding:
Basic 20,634,232 20,701,493
Diluted 20,634,232 20,701,493
Titanium Asset Management Corp.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended
March 31,
------------------------------
2011 2010
-------------- --------------
Cash flows from operating activities
Net loss $ (4,437,000) $ (1,270,000)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Amortization of intangible assets 1,217,000 829,000
Impairment of goodwill 3,500,000 -
Depreciation 26,000 25,000
Share compensation expense - 41,000
Loss (gain) on investments 6,000 (104,000)
Income from equity investees (359,000) (139,000)
Income distributions from equity
investees 131,000 -
Accretion of acquisition payments - 16,000
Changes in assets and liabilities:
Decrease in accounts
receivable 1,028,000 1,241,000
Decrease in other current
assets 374,000 41,000
Increase (decrease) in
accounts payable 59,000 (39,000)
Increase (decrease) in
other current liabilities (1,284,000) (981,000)
-------------- --------------
Net cash provided by (used in) operating
activities 261,000 (340,000)
-------------- --------------
Cash flows from investing activities
Purchases of property and equipment (38,000) -
Purchases of investments (1,717,000) (6,675,000)
Sales and redemptions of investments 983,000 7,189,000
Investments in equity investees - (4,000,000)
Acquisitions of subsidiaries, net of
cash acquired (4,000,000) -
-------------- --------------
Net cash used in investing activities (4,772,000) (3,486,000)
-------------- --------------
Net decrease in cash and cash equivalents (4,511,000) (3,826,000)
Cash and cash equivalents:
Beginning 4,698,000 4,773,000
-------------- --------------
Ending $ 187,000 $ 947,000
============== ==============
Titanium Asset Management Corp.
Reconciliation of Adjusted EBITDA
(unaudited)
Three Months Ended
March 31,
------------------------------
2011 2010
-------------- --------------
Operating loss $ (4,812,000) $ (1,585,000)
Amortization of intangible
assets 1,217,000 829,000
Impairment of goodwill 3,500,000 -
Depreciation expense 26,000 25,000
Share compensation expense - 41,000
Adjusted EBITDA deficit(1) $ (69,000) $ (690,000)
============== ==============
Notes:
(1) Adjusted EBITDA deficit is defined as operating income or
loss before non-cash charges for amortization and impairment of
intangible assets and goodwill, depreciation, and share
compensation expense. We believe Adjusted EBITDA deficit is useful
as an indicator of our ongoing performance and our ability to
service debt, make new investments, and meet working capital
obligations. Adjusted EBITDA deficit, as we calculate it may not be
consistent with computations made by other companies. We believe
that many investors use this information when analyzing the
operating performance, liquidity, and financial position of
companies in the investment management industry.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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