TIDMTAM
RNS Number : 1031S
Titanium Asset Management Corp
15 November 2011
Titanium Asset Management Corp.
Reports 2011 Third Quarter Results
Milwaukee, WI, November 15, 2011 - Titanium Asset Management
Corp. (AIM - TAM) today reported results for the third quarter
ended September 30, 2011.
Highlights for the third quarter are as follows:
-- Managed assets increased slightly from $8,402.5 million to
$8,434.4 million during the third quarter of 2011 primarily
reflecting market gains.
-- Average managed assets of $8,418.4 million for the third
quarter of 2011 were modestly lower relative to the $8,489.3
million for the same period last year. Investment management fee
revenues were $5,186,000 for the third quarter of 2011, a 0.7%
decrease from investment management fee revenues of $5,220,000 for
the same period last year primarily due to the modestly lower
managed assets. For the year to date periods, average managed
assets of $8,351.1 for 2011 were also modestly lower relative to
the $8,492.2 million for the same period last year. Investment
management fee revenues were marginally higher at $15,347,000 for
the first nine months of 2011, compared to $15,240,000 for the
first half of 2010, reflecting a slightly higher average fee
rate.
-- Distributed assets decreased by 9.6% from $814.7 million to
$736.5 million during the third quarter of 2011 reflecting
continued referred client redemptions. The combination of the
continued erosion in the distributed asset client base and the
reduction in our average referral fee rates due to the decrease in
the hedge fund adviser's fees have led to significant decreases in
our referral fee revenues. Referral fee revenues were $204,000 for
the third quarter of 2011, a 66.1% decrease from referral fee
revenues of $602,000 for the third quarter of 2010 and referral fee
revenues for the first nine months of 2011 were $945,000, a 48.2%
decrease from referral fee revenues of $1,824,000 for the first
nine months of 2010.
-- Adjusted EBITDA(1) continued to improve during the third
quarter of 2011 and for the first nine months of 2011. Adjusted
EBITDA deficit of $67,000 for the third quarter of 2011 compared to
Adjusted EBITDA of $174,000 for the same period last year. However,
the Adjusted EBITDA deficit for the third quarter of 2011 includes
severance costs of $469,000. Excluding severance costs, our
Adjusted EBITDA for the third quarter of 2011 would have been
$402,000, representing an increase of $228,000, or 131%, over the
comparable amount for the same period last year. Excluding
severance costs, our Adjusted EBITDA for the first nine months of
2011 would have been $592,000. Excluding severance costs of
$813,000 for the first nine months of 2010, the Adjusted EBITDA
deficit for the first nine months of 2010 would have been $252,000.
The ongoing improvements in Adjusted EBITDA primarily reflect the
structural cost reductions achieved since the beginning of 2010,
offset in part by the decrease in referral fee revenue.
-- Net investment loss of $74,000 for the third quarter of 2011
compared to net investment income of $290,000 for the same period
last year. Net investment income of $390,000 for the first nine
months of 2011 compared to $1,009,000 for the same period last
year.
-- Net loss of $1,566,000, or $0.08 per diluted common share,
for the third quarter of 2011 compared to a net loss of $5,484,000,
or $0.27 per diluted common share, for the third quarter of 2010.
Net loss of $7,076,000, or $0.34 per diluted common share, for the
first nine months of 2011 compared to a net loss of $7,570,000, or
$0.37 per diluted common share, for the first nine months of
2010.
(1) See the table below for a definition of Adjusted EBITDA
(deficit), 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 $8.4 billion at September 30, 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 Nine months ended 2011
September 30, vs. September 30, vs.
--------------------- --------------------
(in millions) 2011 2010 2010 2011 2010 2010
---------- --------- ----- --------- --------- -----
Periodic Activity:
Beginning balance $8,402.5 $8,415.8 $8,125.0 $8,151.4
Inflows 473.6 324.2 1,343.7 1,157.9
Outflows (491.0) (492.4) (1,308.6) (1,284.1)
--------- --------- ---------- ----------
Net flows (17.4) (168.2) 35.1 (126.2)
--------- --------- ---------- ----------
Market value change 49.3 315.2 274.3 537.6
--------- --------- ---------- ----------
Ending balance $8,434.4 $8,562.8 $8,434.4 $8,562.8
========= ========= ========== ==========
Average Assets
Under Management $8,418.4 $8,489.3 -1% $8,351.1 $8,492.2 -2%
Average Fee Rate
(basis points) 24.6 24.6 0% 24.5 23.9 2%
The principle factors affecting our net flows during the periods
ended September 30, 2011 and 2010 include the following:
-- Net flows for the 2011 period were negatively impacted by the
loss of several equity accounts managed under a quantitative
strategy. These accounts totaled approximately $140 million and
represented substantially all the accounts managed under this
strategy. The loss of these accounts is not expected to have a
significant impact on profitability as they were subject to a
significant revenue sharing arrangement with the portfolio
manager.
-- 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. Net
flows from multiemployer pension and welfare plans were
approximately $24 million for the three months ended September 30,
2011 compared to net outflows of approximately $15 million for the
prior year period. For the nine month year-to-date periods, net
flows were approximately $84 million in 2011, compared to net flows
of approximately $23 million in 2010. The improved flows from
multiemployer pensions and welfare plans reflect a slowdown in
withdrawals in the 2011 periods.
-- 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.
-- Net flows for nine months ended September 30, 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 91% of our total assets under
management at September 30, 2011. Fixed income returns as measured
by the Barclay's Aggregate Index were 3.8% for the three months
ended September 30, 2011 and 6.7% for the year-to-date period ended
September 30, 2011 (for the comparable 2010 periods the returns
were 2.5% and 8.0%, respectively). Approximately 50% of our fixed
income assets with defined performance benchmarks outperformed
their respective benchmarks for the nine months ended September 30,
2010.
Equity assets comprised approximately 7% of our total assets
under management at September 30, 2011. Equity returns as measured
by the S&P 500 Index were -13.9% for the three months ended
September 30, 2011 and -8.7% for the year-to-date period ended (for
the comparable 2010 periods the returns were 11.3% and 3.9%,
respectively). Approximately 40% of our equity assets outperformed
their respective benchmarks for the nine months ended September 30,
2011.
The following table presents summary breakdowns for our assets
under management at September 30, 2011 and December 31, 2010.
September % of December % of
30, 31,
(in millions) 2011 total 2010 total
------------ ------- ------------ -------
By investment strategy:
Fixed income $ 7,672.7 91% $ 7,137.4 88%
Equity 560.9 7% 781.3 10%
Real estate 200.8 2% 206.3 2%
------------ ------- ------------ -------
Total $ 8,434.4 100% $ 8,125.0 100%
============ ======= ============ =======
By client type:
Institutional $ 7,259.6 86% $ 6,902.8 85%
Retail 1,174.8 14% 1,222.2 15%
------------ ------- ------------ -------
Total $ 8,434.4 100% $ 8,125.0 100%
============ ======= ============ =======
By investment vehicle:
Separate accounts $ 7,595.0 90% $ 7,246.9 89%
Private funds 839.3 10% 878.1 11%
------------ ------- ------------ -------
Total $ 8,434.4 100% $ 8,125.0 100%
============ ======= ============ =======
Our mix of assets under management by investment strategy was
relatively unchanged as fixed income assets comprised 91% of total
assets under management at September 30, 2011, compared to 88% at
December 31, 2010.
Our mix of assets under management by client type was relatively
unchanged as institutional accounts comprised 86% of total assets
under management as of September 30, 2011 compared to 85% at
December 31, 2010.
Our mix of assets under management by investment vehicle was
relatively unchanged as separate accounts comprised 90% of total
assets under management as of September 30, 2011 compared to 89% at
December 31, 2010.
Distributed Assets
We earn referral fees on clients referred to Attalus Capital LLC
("Attalus"), a hedge fund manager with whom we have a referral
arrangement. The assets managed by Attalus under this arrangement
decreased from $894.4 million at December 31, 2010 to $736.5
million at September 30, 2011, primarily due to client redemptions.
The activity related to these assets was as follows:
For the three months For the nine months
ended ended
September 30, September 30,
----------------------- ----- ---------------------- -----
(in millions) 2011 2010 2011 2010
----------- ---------- ----- ---------- ---------- -----
Periodic Activity:
Beginning balance $ 814.7 $ 955.6 $ 894.4 $ 974.9
Inflows - - 8.2 24.2
Outflows (80.1) - (163.5) -
Market value change 1.9 41.9 (2.5) (1.6)
----------- ---------- ---------- ----------
Ending balance $ 736.5 $ 997.5 $ 736.5 $ 997.5
=========== ========== ========== ==========
Average Assets Under
Management $ 775.6 $ 976.6 -21% $ 838.5 $ 980.0 -14%
Average Referral
Fee Rate (basis points) 10.5 24.7 -43% 15.0 24.8 -40%
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.
Starting January 1, 2011, Attalus reduced its average fee rates.
The reduction in their fees reduced our average referral rate from
approximately 24.6 basis points to 15.0 points and reduced our
annualized referral fees by approximately $850,000.
Since the fourth quarter of 2010, the outflows from redemptions
have totaled approximately $280 million (representing approximately
$450,000 of annualized referral fees). Based on the most recent
information from Attalus, current pending redemption requests total
approximately $350 million (representing approximately $460,000 of
annualized referral fees) that may occur in the third and fourth
quarters. If all of these additional redemptions occur as
scheduled, they would further reduce our annualized referral fees
to approximately $650,000.
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. During the
first nine months of 2011, Attalus' relative investment performance
has improved.
Operating Results
Three Months Ended Nine Months Ended
June 30, June 30,
---------------------------- ------------------------------
2011 2010 2011 2010
------------- ------------- -------------- --------------
Average assets under management
(in millions) $ 8,418.4 $ 8,489.3 $ 8,351.1 $ 8,492.2
Average fee rate (basis
points) 24.6 24.6 24.5 23.9
Average distributed assets
under management (in millions) $ 775.6 $ 976.6 $ 838.5 $ 980.0
Average referral fee rate
(basis points) 10.5 24.7 15.0 24.8
Investment management
fees $ 5,186,000 $ 5,220,000 $ 15,347,000 $ 15,240,000
Referral fees 204,000 602,000 945,000 1,824,000
------------- ------------- -------------- --------------
Total operating revenue 5,390,000 5,822,000 16,292,000 17,064,000
Adjusted EBITDA (deficit)(1) (67,000) 174,000 123,000 (1,065,000)
Impairment of goodwill - 5,100,000 3,500,000 5,100,000
Operating loss (1,492,000) (5,774,000) (7,466,000) (8,579,000)
Net investment income
(loss) (74,000) 290,000 390,000 1,009,000
Net loss (1,566,000) (5,484,000) (7,076,000) (7,570,000)
Earnings per share:
Basic $ (0.08) $ (0.27) $(0.34) $(0.37)
Diluted $(0.08) $(0.27) $(0.34) $(0.37)
(1) See the table below 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 third quarter investment management fees decreased
$34,000, or 0.7%, relative to the third quarter of 2010 due to a
modest decrease in the average assets under management. For the
nine month periods, our investment management fees increased
$107,000, or 0.7%, due to a modest increase in our average fee
rate.
Referral fee revenue decreased $398,000, or 66.1%, compared to
the referral fee revenue for the third quarter of 2010. Referral
fee revenue for the first nine months of 2011 decreased by
$879,000, or 48.2%, compared to the referral fee revenue for the
same period last year. The decreases reflect a combination of asset
redemptions incurred by Attalus in the fourth quarter of 2010 and
through the first nine months of 2011 and a 39.5% reduction in our
average referral fee rate due to Attalus' reduction in its
fees.
Adjusted EBITDA deficit for the third quarter of 2011 includes
severance costs of $469,000. Excluding severance costs, our
Adjusted EBITDA for the third quarter of 2011 would have been
$402,000, an increase of $228,000, or 131%, over the comparable
amount for the 2010 period. Excluding severance costs, our Adjusted
EBITDA for the nine months ended September 30, 2011 would have been
$592,000. Adjusted EBITDA deficit for the nine months ended
September 30, 2010 includes severance costs of $813,000. Excluding
severance costs, our Adjusted EBITDA deficit for the nine months
ended September 30, 2010 would have been $252,000. The improvement
to EBITDA in the 2011 periods primarily reflects the cost
reductions, offset in part by the decrease in referral fee
revenue.
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 September 30, 2011, was filed with the Securities and
Exchange Commission on or about November 14, 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
September December
30, 31, 2010
2011
-------------- --------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 947,000 $ 4,698,000
Investments 3,955,000 3,354,000
Accounts receivable 3,370,000 4,783,000
Other current assets 1,191,000 1,179,000
-------------- --------------
Total current assets 9,463,000 14,014,000
Investments in affiliates 5,802,000 5,898,000
Property and equipment, net 496,000 455,000
Goodwill 22,187,000 25,147,000
Intangible assets, net 17,605,000 21,605,000
Total assets $ 55,553,000 $ 67,119,000
============== ==============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 55,000 $ 42,000
Acquisition payments due 540,000 4,000,000
Other current liabilities 2,524,000 3,539,000
-------------- --------------
Total current liabilities and total liabilities 3,119,000 7,581,000
Commitments and contingencies
Stockholders' equity
Common stock, $0.0001 par value; 54,000,000
shares authorized; 20,634,232 shares issued
and outstanding at September 30, 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 September 30, 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 (48,444,000) (41,368,000)
Other comprehensive income (95,000) (67,000)
Total stockholders' equity 52,434,000 59,538,000
-------------- --------------
Total liabilities and stockholders' equity $ 55,553,000 $67,119,000
============== ==============
Titanium Asset Management Corp.
Condensed Consolidated Statements of Operations
(unaudited)
Three months ended Nine months ended
September 30, September 30,
---------------------------------- ----------------------------------
2011 2010 2011 2010
---------------- ---------------- ---------------- ----------------
Operating revenues $ 5,390,000 $ 5,822,000 $ 16,292,000 $ 17,064,000
Operating expenses:
Administrative 5,491,000 5,668,000 16,258,000 18,057,000
Amortization of intangible
assets 1,391,000 828,000 4,000,000 2,486,000
Impairment of goodwill - 5,100,000 3,500,000 5,100,000
---------------- ----------------
Total operating expenses 6,882,000 11,596,000 23,758,000 25,643,000
---------------- ----------------
Operating loss (1,492,000) (5,774,000) (7,466,000) (8,579,000)
Other income
Interest income 21,000 69,000 66,000 233,000
Gain (loss) on investments (17,000) 54,000 (18,000) 181,000
Income (loss) from equity
investees (78,000) 167,000 342,000 611,000
Interest expense - - - (16,000)
---------------- ----------------
Loss before taxes (1,566,000) (5,484,000) (7,076,000) (7,570,000)
Income tax benefit - - - -
Net loss $ (1,566,000) $ (5,484,000) $ (7,076,000) $ (7,570,000)
================ ================ ================ ================
Earnings (loss) per share
Basic $ (0.08) $ (0.27) $ (0.34) $ (0.37)
Diluted $ (0.08) $ (0.27) $ (0.34) $ (0.37)
Weighted average number
of common shares outstanding:
Basic 20,634,232 20,683,824 20,634,232 20,691,303
Diluted 20,634,232 20,683,824 20,634,232 20,691,303
Titanium Asset Management Corp.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Nine months ended
September 30,
------------------------------
2011 2010
-------------- --------------
Cash flows from operating activities
Net loss $(7,076,000) $(7,570,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization of intangible assets 4,000,000 2,486,000
Impairment of goodwill 3,500,000 5,100,000
Depreciation 89,000 67,000
Share compensation credit - (139,000)
Loss (gain) on investments 18,000 (181,000)
Income from equity investees (342,000) (611,000)
Income distributions from equity investees 438,000 367,000
Accretion of acquisition payments - 16,000
Changes in assets and liabilities:
Decrease in accounts receivable 1,413,000 1,016,000
Increase in other current assets (12,000) (347,000)
Increase (decrease) in accounts payable 13,000 (173,000)
Decrease in other current liabilities (1,015,000) (576,000)
-------------- --------------
Net cash provided by (used in) operating
activities 1,026,000 (545,000)
-------------- --------------
Cash flows from investing activities
Purchases of property and equipment (130,000) (128,000)
Purchases of investments (4,563,000) (12,163,000)
Sales and redemptions of investments 3,916,000 15,406,000
Investments in equity investees - (4,000,000)
Acquisitions of subsidiaries, net of cash
acquired (4,000,000) (1,744,000)
Net cash used in investing activities (4,777,000) (2,629,000)
-------------- --------------
Net decrease in cash and cash equivalents (3,751,000) (3,174,000)
Cash and cash equivalents:
Beginning 4,698,000 4,773,000
-------------- --------------
Ending $ 947,000 $ 1,599,000
============== ==============
Non-cash investing and financing activities
-
Additional acquisition obligations $ 540,000 $ -
Titanium Asset Management Corp.
Reconciliation of Adjusted EBITDA
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ----------------------------------
2011 2010 2011 2010
---------------- --------------- ---------------- ----------------
Operating loss $ (1,492,000) $(5,774,000) $ (7,466,000) $ (8,579,000)
Amortization of intangible
assets 1,391,000 828,000 4,000,000 2,486,000
Impairment of goodwill - 5,100,000 3,500,000 5,100,000
Depreciation expense 34,000 20,000 89,000 67,000
Share compensation credit - - - (139,000)
---------------- --------------- ---------------- ----------------
Adjusted EBITDA (deficit) $ (67,000) $ 174,000 $ 123,000 $ (1,065,000)
================ =============== ================ ================
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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