TIDMTAM
RNS Number : 3845Q
Titanium Asset Management Corp
06 November 2012
Titanium Asset Management Corp.
Reports 2012 Third Quarter Results
Milwaukee, WI, November 6, 2012 - Titanium Asset Management
Corp. (AIM - TAM) today reported results for the third quarter
ended September 30, 2012.
Highlights are as follows:
-- Managed assets increased 1.6% during the third quarter of
2012 to $8,713.2 million reflecting positive market returns that
were partially offset by net outflows.
-- Average managed assets of $8,644.4 million for the third
quarter of 2012 were 2.7% higher relative to the $8,418.4 million
for the same period last year. Investment management fee revenues
were $5,715,000 for the third quarter of 2012, a 10.2% increase
from investment management fee revenues of $5,186,000 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 $8,548.4 million were 2.4% higher than the
average managed assets of $8,351.1 million for the same period last
year. Investment management fee revenue were $16,467,000 for 2012
year to date period, a 7.3% increase from investment management fee
revenues of $15,347,000 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 $199.1 million to $140.0 million during the
third quarter of 2012 with further declines expected over the
fourth quarter of 2012. Referral fee revenues were $64,000 for the
third quarter of 2012, a 68.6% decrease from referral fee revenues
of $204,000 for the third quarter of 2011. Referral fee revenues
for the 2012 year to date period were $263,000, a 72.2% decrease
from referral fee revenues of $945,000 for the same period last
year.
-- Adjusted EBITDA(1) continued to improve during the third
quarter of 2012. Adjusted EBITDA was $761,000 for the third quarter
of 2012, compared to an Adjusted EBITDA deficit of $67,000 for the
same period last year. Adjusted EBITDA was $1,616,000 for the 2012
year to date period, compared to Adjusted EBITDA of $123,000 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 $213,000 for the third quarter of
2012 compared to net investment loss of $74,000 for the same period
last year. Net investment income was $519,000 for the 2012 year to
date period compared to $390,000 for the same period last year.
-- Net loss of $1,460,000, or $0.07 per diluted common share,
for the third quarter of 2012 compared to a net loss of $1,566,000,
or $0.08 per diluted common share, for the third quarter of 2011.
Net loss of $5,164,000, or $0.25 per diluted common share, for the
first nine months of 2012 compared to a net loss of $7,076,000, or
$0.34 per diluted common share, for the first nine months 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 third 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 in average managed
assets and a higher average fee rate."
"In 2012, we have successfully marketed strategies that have
been developed to provide our clients with above average returns in
this low interest rate environment and carry higher than average
fee rates for us. For the nine months ended September 30, 2012, we
have added approximately $80 million in new investments to a real
estate strategy and approximately $80 million in new investments in
our preferred stock strategy."
"Our investment management team continues 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
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 September 30, 2012, is expected to be filed with the
Securities and Exchange Commission on or about November 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.
Assets Under Management
Assets under management of $8.7 billion at September 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 Nine months ended
September 30, September 30,
-------------------------- --------------------------
(in millions) 2012 2011 2012 2011
------------ ------------ ------------ ------------
Periodic Activity:
Beginning balance $ 8,575.6 $ 8,402.5 $ 8,316.8 $ 8,125.0
Inflows 438.5 473.6 1,521.6 1,343.7
Outflows (489.3) (491.0) (1,573.3) (1,308.6)
------------ ------------ ------------ ------------
Net flows (50.8) (17.4) (51.7) 35.1
------------ ------------ ------------ ------------
Market value change 188.4 49.3 448.1 274.3
------------ ------------ ------------ ------------
Ending balance $ 8,713.2 $ 8,434.4 $ 8,713.2 $ 8,434.4
============ ============ ============ ============
Average Assets Under
Management $ 8,644.4 $ 8,418.4 $ 8,548.4 $ 8,351.1
Average Fee Rate
(basis points) 26.4 24.6 25.7 24.5
The principle factors affecting our net flows during the periods
ended September 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. For the three
months ended September 30, 2012, net inflows from multiemployer
pension and welfare plans were approximately $73 million compared
to net inflows of approximately $43 million for the prior year
period. For the nine month period ended September 30, 2012, net
inflows were approximately $285 million compared to net inflows of
approximately $51 million for the prior year period. The
improvements in 2012 generally reflect new investments in both a
real estate strategy and a preferred stock strategy, both of which
carry higher than average fee rates. The net inflows for the nine
months ended September 30, 2012 include approximately $80 million
in the new investments in the real estate strategy and
approximately $80 million in new investments in the preferred stock
strategy.
-- Outflows for the nine month period ended September 30, 2012
include the liquidation of approximately $375 million of
investments related to the TALF investment strategy. These assets
carried annualized fees of approximately $375,000.
-- 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 $14 million for the three months ended September 30, 2012
compared to net outflows of $90 million for the prior year period.
For the nine months ended September 30, 2012 the net flows related
to these accounts were approximately breakeven compared to net
inflows of $72 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 89% of our total assets under
management at September 30, 2012. Fixed income returns as measured
by the Barclay's Aggregate Index were 1.6% for the three months
ended September 30, 2012 (3.8% for the comparable 2011 period). For
the nine months ended September 30, 2012, the Barclay's Aggregate
Index gained 4.0% (6.7% for the comparable 2011 period). For the
twelve months ended September 30, 2012, approximately 85% 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 September 30, 2012. Equity returns as measured
by the S&P 500 Index were up 6.4% for the three months ended
September 30, 2012 (compared to a decrease of 13.9% for the
comparable 2011 period). For the nine months ended September 30,
2012, the S&P 500 Index gained 16.4% (compared to a decrease of
8.7% for the comparable 2011 period). Approximately 11% of our
equity assets outperformed their respective benchmarks for the
twelve months ended September 30, 2012.
The following table presents summary breakdowns for our assets
under management at September 30, 2012 and December 31, 2011.
September % of December % of
30, 31,
(in millions) 2012 total 2011 Total
------------ ------- ------------ -------
By investment strategy:
Fixed income $ 7,772.4 89% $ 7,483.4 90%
Equity 630.3 7% 621.4 7%
Real estate 310.5 4% 212.0 3%
------------ ------- ------------ -------
Total $ 8,713.2 100% $ 8,316.8 100%
============ ======= ============ =======
By client type:
Institutional $ 7,571.2 87% $ 7,178.9 86%
Retail 1,142.0 13% 1,137.9 14%
------------ ------- ------------ -------
Total $ 8,713.2 100% $ 8,316.8 100%
============ ======= ============ =======
By investment vehicle:
Separate accounts $ 7,950.7 91% $ 7,540.2 91%
Private funds 762.5 9% 776.6 9%
------------ ------- ------------ -------
Total $ 8,713.2 100% $ 8,316.8 100%
============ ======= ============ =======
Our mix of assets under management by investment strategy was
relatively unchanged as fixed income assets comprised 89% of total
assets under management at September 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 87% of total assets
under management at September 30, 2012 compared to 86% at December
31, 2011.
Our mix of assets under management by investment vehicle was
unchanged as separate accounts comprised 91% of total assets under
management as of September 30, 2012 and 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 under
this referral arrangement have decreased significantly over the
last two years for a variety of factors and as a result, our
referral fees have been substantially reduced. In September 2012,
the hedge fund manager announced that it would complete an orderly
liquidation of the remaining assets of the primary fund in which
the majority of the referred assets are invested. As a result, we
expect that the referred assets and referral fees will be
substantially eliminated as of December 31, 2012.
Operating Results
Three Months Ended Nine months Ended
September 30, September 30,
---------------------------- ------------------------------
2012 2011 2012 2011
------------- ------------- -------------- --------------
Average assets under management
(in millions) $ 8,644.4 $ 8,418.4 $ 8,548.4 $ 8,351.1
Average fee rate (basis
points) 26.4 24.6 25.7 24.5
Average distributed assets
under management (in millions) $ 169.6 $ 775.6 $ 274.0 $ 838.5
Average referral fee rate
(basis points) 14.9 10.5 12.8 15.0
Investment management
fees $ 5,715,000 $ 5,186,000 $ 16,467,000 $ 15,347,000
Referral fees 64,000 204,000 263,000 945,000
------------- ------------- -------------- --------------
Total operating revenue 5,779,000 5,390,000 16,730,000 16,292,000
Adjusted EBITDA (deficit)
(1) 761,000 (67,000) 1,616,000 123,000
Amortization of intangible
assets 2,401,000 1,391,000 7,203,000 4,000,000
Impairment of goodwill - - - 3,500,000
Operating loss (1,673,000) (1,492,000) (5,683,000) (7,466,000)
Net investment income 213,000 (74,000) 519,000 390,000
Net loss (1,460,000) (1,566,000) (5,164,000) (7,076,000)
Earnings per share:
Basic and diluted $ (0.07) $ (0.08) $ (0.25) $ (0.34)
(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 period, our investment advisory fees
increased by $529,000, or 10%, due to a 3% increase in our average
assets under management and a 7% increase in our average fee rate.
For the nine month period, our investment advisory fees increased
by $1,120,000, or 7%, due to a 2% increase in the our average
assets under management and a 5% increase in our average fee
rate.
For the three month period, our referral fees decreased by
$140,000, or 69%, primarily due to a 78% decrease in the average
assets under the referral arrangement. For the nine month period,
our referral fees decreased $682,000, or 72%, due to a 67% decrease
in the average assets under the referral arrangement and a 15%
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 September 30, 2012,
we would have earned incentive fees of approximately $900,000, but
results for the first nine months of the year are not necessarily
indicative of results to be expected for the full year.
Our Adjusted EBITDA for the three months ended September 30,
2012 was $761,000, an increase of $828,000, over the comparable
amount for the 2011 period. Our Adjusted EBITDA for the nine months
ended September 30, 2012 was $1,616,000, an increase of $1,493,000
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 $3,203,000 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
intangible asset will be fully amortized at the end of 2012 and
that the total annual amortization expense will increase to
$9,604,000 for 2012. For 2013, we expect that the total annual
amortization expense will decrease to $970,000.
Titanium Asset Management Corp.
Condensed Consolidated Balance Sheets
September December
30, 31, 2011
2012
-------------- --------------
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 3,210,000 $ 2,787,000
Investments 5,089,000 2,990,000
Accounts receivable 3,980,000 3,718,000
Other current assets 780,000 828,000
-------------- --------------
Total current assets 13,059,000 10,323,000
Investments in equity investees 3,878,000 4,707,000
Property and equipment, net 471,000 478,000
Goodwill 13,264,000 13,264,000
Intangible assets, net 7,710,000 14,913,000
Total assets $ 38,382,000 $ 43,685,000
============== ==============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 90,000 $ 91,000
Other current liabilities 2,165,000 2,334,000
-------------- --------------
Total current liabilities and total liabilities 2,255,000 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 September 30, 2012 and
December 31, 2011 2,000 2,000
Restricted common stock, $0.0001 par value;
720,000 shares authorized; none issued at
September 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 (64,782,000) (59,618,000)
Other comprehensive loss (64,000) (95,000)
Total stockholders' equity 36,127,000 41,260,000
-------------- --------------
Total liabilities and stockholders' equity $ 38,382,000 $ 43,685,000
============== ==============
Titanium Asset Management Corp.
Condensed Consolidated Statements of Operations
(unaudited)
Three months ended Nine months ended
September 30, September 30,
---------------------------------- ----------------------------------
2012 2011 2012 2011
---------------- ---------------- ---------------- ----------------
Operating revenues $ 5,779,000 $ 5,390,000 $ 16,730,000 $ 16,292,000
Operating expenses:
Administrative 5,051,000 5,491,000 15,210,000 16,258,000
Amortization of intangible
assets 2,401,000 1,391,000 7,203,000 4,000,000
Impairment of goodwill - - - 3,500,000
---------------- ---------------- ---------------- ----------------
Total operating expenses 7,452,000 6,882,000 22,413,000 23,758,000
Operating loss (1,673,000) (1,492,000) (5,683,000) (7,466,000)
Other income
Interest income 23,000 21,000 61,000 66,000
Net realized gains (losses)
on investments 13,000 (17,000) 6,000 (18,000)
Income (loss) from equity investees 177,000 (78,000) 452,000 342,000
Loss before income taxes (1,460,000) (1,566,000) (5,164,000) (7,076,000)
Income tax benefit - - - -
Net loss $ (1,460,000) $ (1,566,000) $ (5,164,000) $ (7,076,000)
================ ================ ================ ================
Earnings (loss) per share
Basic $ (0.07) $ (0.08) $ (0.25) $ (0.34)
Diluted $ (0.07) $ (0.08) $ (0.25) $ (0.34)
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)
Nine months Ended
September 30,
--------------------------------
2012 2011
--------------- ---------------
Cash flows from operating activities
Net loss $ (5,164,000) $ (7,076,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of intangible assets 7,203,000 4,000,000
Impairment of goodwill - 3,500,000
Depreciation 96,000 89,000
Net realized losses (gains) on investments (6,000) 18,000
Income from equity investees (452,000) (342,000)
Income distributions from equity investees 96,000 438,000
Changes in assets and liabilities:
Decrease (increase) in accounts receivable (262,000) 1,413,000
Decrease (increase) in other current assets 48,000 (12,000)
Increase (decrease) in accounts payable (1,000) 13,000
Decrease in other current liabilities (169,000) (1,015,000)
--------------- ---------------
Net cash provided by operating activities 1,389,000 1,026,000
--------------- ---------------
Cash flows from investing activities
Purchases of investments (5,748,000) (4,563,000)
Sales and redemptions of investments 3,686,000 3,916,000
Capital distributions from equity investee 1,185,000 -
Purchases of property and equipment (89,000) (130,000)
Acquisitions of subsidiaries, net of cash acquired - (4,000,000)
Net cash used in investing activities (966,000) (4,777,000)
--------------- ---------------
Net increase (decrease) in cash and cash equivalents 423,000 (3,751,000)
Cash and cash equivalents:
Beginning 2,787,000 4,698,000
--------------- ---------------
Ending $ 3,210,000 $ 947,000
=============== ===============
Titanium Asset Management Corp.
Reconciliation of Adjusted EBITDA
(unaudited)
Three months ended Nine months ended
September 30, September 30,
---------------------------------- ----------------------------------
2012 2011 2012 2011
---------------- ---------------- ---------------- ----------------
Operating loss $ (1,673,000) $ (1,492,000) $ (5,683,000) $ (7,466,000)
Amortization of intangible
assets 2,401,000 1,391,000 7,203,000 4,000,000
Impairment of goodwill - - - 3,500,000
Depreciation expense 33,000 34,000 96,000 89,000
---------------- ----------------
Adjusted EBITDA (deficit) $ 761,000 $ (67,000) $ 1,616,000 $ 123,000
================ ================ ================ ================
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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