TIDMTAM
RNS Number : 3567J
Titanium Asset Management Corp
06 August 2012
Titanium Asset Management Corp.
Reports 2012 Second Quarter Results
Milwaukee, WI, August 6, 2012 - Titanium Asset Management Corp.
(AIM - TAM) today reported results for the second quarter ended
June 30, 2012.
Highlights are as follows:
-- Managed assets of $8,575.6 million were largely unchanged
during the second quarter of 2012 reflecting significant inflows
and positive market returns that largely offset significant
outflows related to the final liquidation of leveraged TALF
assets.
-- Average managed assets of $8,581.7 million for the second
quarter of 2012 were 1.8% higher relative to the $8,430.0 million
for the same period last year. Investment management fee revenues
were $5,493,000 for the second quarter of 2012, a 9.4% increase
from investment management fee revenues of $5,113,000 for the same
period last year primarily due to the higher average managed asset
levels and a higher average fee rate. For the year to date, average
managed assets of $8,493.4 million were 2.0% higher than the
average managed assets of $8,328.3 million for the same period last
year. Investment management fee revenue were $10,752,000 for 2012
year to date period, a 5.8% increase from investment management fee
revenues of $10,160,000 for the same period last year due to the
higher average managed asset levels and a higher average fee
rate.
-- Distributed assets, which represent assets that have been
referred to a hedge fund manager on which we receive referral fees,
further declined from $382.2 million to $199.1 million during the
second quarter of 2012 with further declines expected over the
second half of 2012. Referral fee revenues were $74,000 for the
second quarter of 2012, a 78.7% decrease from referral fee revenues
of $347,000 for the second quarter of 2011. Referral fee revenues
for the 2012 year to date period were $199,000, a 73.2% decrease
from referral fee revenues of $742,000 for the same period last
year.
-- Adjusted EBITDA(1) continued to improve during the second
quarter of 2012. Adjusted EBITDA was $591,000 for the second
quarter of 2012, compared to Adjusted EBITDA of $259,000 for the
same period last year. Adjusted EBITDA was $856,000 for the 2012
year to date period, compared to Adjusted EBITDA of $190,000 for
the same period last year. The ongoing improvements in Adjusted
EBITDA primarily reflect the improved investment management fee
revenues and the structural cost reductions achieved over the last
two years, which have more than offset the decrease in referral fee
revenue.
-- Net investment income of $70,000 for the second quarter of
2012 compared to net investment income of $89,000 for the same
period last year. Net investment income was $305,000 for the 2012
year to date period compared to $464,000 for the same period last
year.
-- Net loss of $1,772,000, or $0.09 per diluted common share,
for the second quarter of 2012 compared to a net loss of
$1,073,000, or $0.22 per diluted common share, for the second
quarter of 2011. Net loss of $3,704,000, or $0.18 per diluted
common share, for the first half of 2012 compared to a net loss of
$5,510,000, or $0.27 per diluted common share, for the first half
of 2011.
(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.
Commenting on these results, Robert Brooks, CEO of Titanium
Asset Management Corp. said:
"We are pleased to report continued year-over-year improvement
to EBITDA for the second quarter of 2012. The improvement largely
reflects higher investment management fees and the ongoing benefits
of the significant reductions to our cost structure that were
implemented over the last two years. The higher investment
management fees resulted from both an increase average managed
assets and a higher average fee rate."
"During the second quarter of 2012, we liquidated assets related
to the TALF program as we neared the end of that short term
program. Those liquidations reduced our managed assets at June 30,
2012 by about $280 million. Apart from that decrease, we again
achieved significant growth in managed assets from both net inflows
and positive market returns."
"Our investment management teams continue to achieve solid
investment performance and several of our fixed income strategies
are performing in the upper deciles of our peer group rankings for
their three year investment performance. We believe these strong
performance rankings position us for strong asset growth over the
next year."
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 $8.6 billion at June 30, 2012 were
higher than the $8.3 billion reported at December 31, 2011 due to
positive investment returns. The following table presents summary
activity for the 2012 and 2011 periods.
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
(in millions) 2012 2011 2012 2011
---------- ---------- ---------- ----------
Periodic Activity:
Beginning balance $ 8,587.8 $ 8,457.4 $ 8,316.8 $ 8,125.0
Inflows 587.1 373.5 1,083.1 870.1
Outflows (701.5) (550.6) (1,084.1) (817.7)
---------- ---------- ---------- ----------
Net flows (114.4) (177.1) (1.0) 52.4
---------- ---------- ---------- ----------
Market value change 102.2 122.2 259.8 225.1
---------- ---------- ---------- ----------
Ending balance $ 8,575.6 $ 8,402.5 $ 8,575.6 $ 8,402.5
========== ========== ========== ==========
Average Assets Under
Management $ 8,581.7 $ 8,430.0 $ 8,493.4 $ 8,328.3
Average Fee Rate
(basis points) 25.6 24.3 25.3 24.4
The principle factors affecting our net flows during the periods
ended June 30, 2012 and 2011 include the following:
-- Multiemployer pension and welfare plans represent
approximately 36% of our client base, and these plans have been
faced with a challenging economic environment over the last several
years. The current economic environment has generally led to
reduced employer contributions and increased withdrawals. These
factors have led to increased levels of outflows from our fixed
income strategies throughout the last several years and resulted in
modest growth or net outflows. Net inflows from multiemployer
pension and welfare plans were approximately $100 million for the
three months ended June 30, 2012 compared to net outflows of
approximately $22 million for the prior year period. For the six
month period ended June 30, 2012, net inflows were approximately
$212 million, compared to net inflows of approximately $2 million
for the prior year period. The improvements in 2012 reflect a
moderation withdrawals and new investments in a real estate
strategy. The net inflows for the six months ended June 30, 2012
include approximately $80 million in new real estate investments,
which carry higher average fee rates.
-- Outflows for the three and six month periods ended June 30, 2012 include the liquidation of approximately $280 million of investments related to the TALF investment strategy. These assets carried annualized fees of approximately $280,000.
-- Inflows and outflows are also significantly affected by the
timing of tax receipts and disbursements for several public entity
accounts that we manage. Net outflows related to these accounts
were $48 million for the three months ended June 30, 2012 compared
to net outflows of $29 million for the prior year period. For the
six months ended June 30, 2012 the net inflows related to these
accounts were $14 million compared to net inflows of $162 million
for the prior year period. 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.
Market value changes reflect our investment performance. Fixed
income assets comprised approximately 90% of our total assets under
management at June 30, 2012. Fixed income returns as measured by
the Barclay's Aggregate Index were 2.1% for the three months ended
June 30, 2012 (0.4% for the comparable 2011 period). For the three
months ended June 30, 2012, approximately 81% of our fixed income
assets with defined performance benchmarks outperformed their
respective benchmarks.
Equity assets comprised approximately 7% of our total assets
under management at June 30, 2012. Equity returns as measured by
the S&P 500 Index were down 2.8% for the three months ended
June 30, 2012 (versus an increase of 5.9% for the comparable 2011
period). Approximately 23% of our equity assets outperformed their
respective benchmarks for the three months ended June 30, 2012.
The following table presents summary breakdowns for our assets
under management at June 30, 2012 and December 31, 2011.
June 30, % of December % of
31,
(in millions) 2012 total 2011 Total
---------- ------- ---------- -------
By investment strategy:
Fixed income $ 7,672.1 90% $ 7,483.4 90%
Equity 609.5 7% 621.4 7%
Real estate 294.0 3% 212.0 3%
---------- ------- ---------- -------
Total $ 8,575.6 100% $ 8,316.8 100%
========== ======= ========== =======
By client type:
Institutional $ 7,507.7 88% $ 7,178.9 86%
Retail 1,067.9 12% 1,137.9 14%
---------- ------- ---------- -------
Total $ 8,575.6 100% $ 8,316.8 100%
========== ======= ========== =======
By investment vehicle:
Separate accounts $ 7,898.3 92% $ 7,540.2 91%
Private funds 677.3 8% 776.6 9%
---------- ------- ---------- -------
Total $ 8,575.6 100% $ 8,316.8 100%
========== ======= ========== =======
Our mix of assets under management by investment strategy was
relatively unchanged as fixed income assets comprised 90% of total
assets under management at June 30, 2012 compared to 90% at
December 31, 2011.
Our mix of assets under management by client type was relatively
unchanged as institutional accounts comprised 88% of total assets
under management at June 30, 2012 compared to 86% at December 31,
2011.
Our mix of assets under management by investment vehicle was
relatively unchanged as separate accounts comprised 92% of total
assets under management as of June 30, 2012 compared to 91% at
December 31, 2011.
Distributed Assets
We earn referral fees on clients referred to a hedge fund
manager with whom we have a referral arrangement. The assets
managed under this referral arrangement decreased from $374.0
million at December 31, 2011 to $199.1 million at June 30, 2012.
The activity related to these referred assets was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
(in millions) 2012 2011 2012 2011
---------- --------- --------- ---------
Periodic Activity:
Beginning balance $ 382.8 $ 908.5 $ 374.0 $ 894.4
Inflows - 8.2 - 8.2
Outflows (181.1) (83.5) (181.1) (83.5)
Market value change (2.6) (18.5) 6.2 (4.4)
---------- --------- --------- ---------
Ending balance $ 199.1 $ 814.7 $ 199.1 $ 814.7
========== ========= ========= =========
Average Assets Under
Management $ 291.0 $ 861.6 $ 318.6 $ 872.5
Average Referral
Fee Rate (basis points) 10.3 16.1 12.6 17.0
During 2011, we experienced significant decreases in the
referred assets as a result of several factors, including the
overall fee rates for the hedge funds, the absolute and relative
investment performance of the hedge funds, and certain changes in
the hedge fund manager's management. Starting January 1, 2011, the
hedge fund manager reduced its average fee rates, which reduced our
referral fee rate and revenue. The combination of these factors
resulted in outflows totaling $500 million during 2011 and a
reduction of $1,400,000 in annualized referral fees. During the six
months ended June 30, 2012, additional outflows totaled $181
million, which further reduced our annualized referral fees by
approximately $280,000.
The hedge fund manager has informed us that they have received
further redemption requests that are expected to be effective at
the beginning of the third and fourth quarters of 2012. These
additional redemption requests total approximately $70 million
(representing approximately $60,000 of annualized referral fees).
These redemptions would reduce the referred assets under management
to approximately $120 million, with an annualized referral fee rate
of approximately $240,000.
Operating Results
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ----------------------------
2012 2011 2012 2011
------------ ------------ ------------- -------------
Average assets under management
(in millions) $ 8,581.7 $ 8,430.0 $ 8,493.4 $ 8,328.3
Average fee rate (basis
points) 25.6 24.3 25.3 24.4
Average distributed assets
under management (in millions) $ 291.0 $ 861.6 $ 318.6 $ 872.5
Average referral fee rate
(basis points) 10.3 16.1 12.6 17.0
Investment management
fees $ 5,493,000 $ 5,113,000 $ 10,752,000 $ 10,160,000
Referral fees 74,000 347,000 199,000 742,000
------------ ------------ ------------- -------------
Total operating revenue 5,567,000 5,460,000 10,951,000 10,902,000
Adjusted EBITDA(1) 591,000 259,000 856,000 190,000
Amortization of intangible
assets 2,401,000 1,392,000 4,802,000 2,609,000
Impairment of goodwill - - - 3,500,000
Operating loss (1,842,000) (1,162,000) (4,009,000) (5,974,000)
Net investment income 70,000 89,000 305,000 464,000
Net loss (1,772,000) (1,073,000) (3,704,000) (5,510,000)
Earnings per share:
Basic and diluted $ (0.09) $ (0.05) $ (0.18) $ (0.27)
(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.
For the three month periods, our investment advisory fees
increased by $380,000, or 7%, due to a 2% increase in our average
assets under management and a 5% increase in our average fee rate.
For the six month periods, our investment advisory fees increased
by $592,000, or 6%, due to a 2% increase in the our average assets
under management and a 2% increase in our average fee rate.
For the three month periods, our referral fees decreased by
$273,000, or 77%, due to a 66% decrease in the average assets under
the referral arrangement and a 36% decrease in the average referral
fee rate. For the six month periods, our referral fees decreased
$543,000 decrease due to a 63% decrease in the average assets under
the referral arrangement and a 26% decrease in our average referral
fee rate.
We also receive incentive fees on an annual basis from the
management of certain of our private funds, including one that
invests in preferred stocks. Because investment returns on
preferred stocks can be volatile, the level of incentive fees
earned can vary significantly from year to year. These fees
generally are based on a calendar year performance period and we
recognize the fees at the conclusion of the performance period. In
2011, we earned incentive fees of $262,000, which were recognized
in December 2011. Based on performance through June 30, 2012, we
would have earned incentive fees of approximately $530,000, but
results for the first half of the year are not necessarily
indicative of results to be expected for the full year.
Our Adjusted EBITDA for the three months ended June 30, 2012 was
$591,000, an increase of $332,000, over the comparable amount for
the 2011 period. Our Adjusted EBITDA for the six months ended June
30, 2012 was $856,000, an increase of $666,000 over the comparable
amount for the 2011 period. The improvement to Adjusted EBITDA in
the 2012 periods primarily reflects the increase in investment
management fees and continuing reductions in administrative
expenses.
Amortization of intangible assets
Throughout 2011, we considered the impact of recurring
redemptions of the referred assets and their impact on the
remaining useful life of its NIS referral relationship intangible
asset. The most recent assessment at 2011 year end resulted in
reducing the estimated remaining useful life to approximately 15
months as of October 1, 2011. The $2,193,000 increase in
amortization expense in 2012 reflects these revisions to the
remaining estimated useful life of the intangible asset related to
the referral relationship. As a result of the most recent revision
to the estimated remaining useful life, we expect that the total
annual amortization expense will increase to $9,604,000 for
2012.
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 quarter
ended June 30, 2012, is expected to be filed with the Securities
and Exchange Commission on or about August 15, 2012. 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
June 30, December
31, 2011
2012
------------- -------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 2,864,000 $ 2,787,000
Investments 3,796,000 2,990,000
Accounts receivable 3,793,000 3,718,000
Other current assets 600,000 828,000
------------- -------------
Total current assets 11,053,000 10,323,000
Investments in equity investees 4,851,000 4,707,000
Property and equipment, net 451,000 478,000
Goodwill 13,264,000 13,264,000
Intangible assets, net 10,111,000 14,913,000
Total assets $ 39,730,000 $ 43,685,000
============= =============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 144,000 $ 91,000
Other current liabilities 2,014,000 2,334,000
------------- -------------
Total current liabilities and total liabilities 2,158,000 2,425,000
Commitments and contingencies
Stockholders' equity
Common stock, $0.0001 par value; 54,000,000
shares authorized; 20,634,232 shares issued
and outstanding at June 30, 2012 and December
31, 2011 2,000 2,000
Restricted common stock, $0.0001 par value;
720,000 shares authorized; none issued at
June 30, 2012 and 612,716 issued and outstanding
at December 31, 2011 - -
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 (63,322,000) (59,618,000)
Other comprehensive loss (79,000) (95,000)
Total stockholders' equity 37,572,000 41,260,000
------------- -------------
Total liabilities and stockholders' equity $ 39,730,000 $ 43,685,000
============= =============
Titanium Asset Management Corp.
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
2012 2011 2012 2011
-------------- -------------- -------------- --------------
Operating revenues $ 5,567,000 $ 5,460,000 $ 10,951,000 $ 10,902,000
Operating expenses:
Administrative 5,008,000 5,230,000 10,158,000 10,767,000
Amortization of intangible
assets 2,401,000 1,392,000 4,802,000 2,609,000
Impairment of goodwill - - - 3,500,000
-------------- -------------- -------------- --------------
Total operating expenses 7,409,000 6,622,000 14,960,000 16,876,000
Operating loss (1,842,000) (1,162,000) (4,009,000) (5,974,000)
Other income
Interest income 20,000 23,000 37,000 45,000
Net realized gains (losses)
on investments (5,000) 5,000 (7,000) (1,000)
Income from equity investees 55,000 61,000 275,000 420,000
Loss before income taxes (1,772,000) (1,073,000) (3,704,000) (5,510,000)
Income tax benefit - - - -
Net loss $ (1,772,000) $ (1,073,000) $ (3,704,000) $ (5,510,000)
============== ============== ============== ==============
Earnings (loss) per share
Basic $ (0.09) $ (0.05) $ (0.18) $ (0.27)
Diluted $ (0.09) $ (0.05) $ (0.18) $ (0.27)
Weighted average number of
common shares outstanding:
Basic 20,634,232 20,634,232 20,634,232 20,634,232
Diluted 20,634,232 20,634,232 20,634,232 20,634,232
Titanium Asset Management Corp.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
------------------------------
2012 2011
-------------- --------------
Cash flows from operating activities
Net loss $ (3,704,000) $ (5,510,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of intangible assets 4,802,000 2,609,000
Impairment of goodwill - 3,500,000
Depreciation 63,000 55,000
Net realized losses on investments 7,000 1,000
Income from equity investees (275,000) (420,000)
Income distributions from equity investees 131,000 268,000
Changes in assets and liabilities:
Decrease in accounts receivable (75,000) 1,248,000
Decrease in other current assets 228,000 393,000
Increase in accounts payable 53,000 98,000
Decrease in other current liabilities (320,000) (1,431,000)
-------------- --------------
Net cash provided by operating activities 910,000 811,000
-------------- --------------
Cash flows from investing activities
Purchases of investments (3,111,000) (2,962,000)
Sales and redemptions of investments 2,314,000 2,533,000
Purchases of property and equipment (36,000) (113,000)
Acquisitions of subsidiaries, net of cash acquired - (4,000,000)
Net cash used in investing activities (833,000) (4,542,000)
-------------- --------------
Net increase (decrease) in cash and cash equivalents 77,000 (3,731,000)
Cash and cash equivalents:
Beginning 2,787,000 4,698,000
-------------- --------------
Ending $ 2,864,000 $ 967,000
============== ==============
Titanium Asset Management Corp.
Reconciliation of Adjusted EBITDA
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
2012 2011 2012 2011
-------------- -------------- -------------- --------------
Operating loss $ (1,842,000) $ (1,162,000) $ (4,009,000) $ (5,974,000)
Amortization of intangible
assets 2,401,000 1,392,000 4,802,000 2,609,000
Impairment of goodwill - - - 3,500,000
Depreciation expense 32,000 29,000 63,000 55,000
-------------- --------------
Adjusted EBITDA (deficit) $ 591,000 $ 259,000 $ 856,000 $ 190,000
============== ============== ============== ==============
Notes:
(1) Adjusted EBITDA 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 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 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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