Attached files
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM 10-Q
(Mark
One)
ý
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For
the quarterly period ended September 30, 2009
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|
OR
|
|
o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For
the transition period
from to
Commission
File No. 001-09818
AllianceBernstein
Holding l.p.
(Exact
name of registrant as specified in its charter)
Delaware
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13-3434400
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
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1345
Avenue of the Americas, New York, NY 10105
(Address
of principal executive offices)
(Zip
Code)
(212)
969-1000
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes
ý
|
No
o
|
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes
o
|
No
o
|
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of “accelerated filer,” “large accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large
accelerated filer ý
|
Accelerated
filer o
|
|
Non-accelerated
filer o (Do
not check if a smaller reporting company)
|
Smaller
reporting company o
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes
o
|
No
ý
|
The
number of units representing assignments of beneficial ownership of limited
partnership interests outstanding as of September 30, 2009 was
92,752,989.*
*includes
100,000 units of general partnership interest having economic interests
equivalent to the economic interests of the units representing assignments of
beneficial ownership of limited partnership interests.
ALLIANCEBERNSTEIN HOLDING L.P.
Index to
Form 10-Q
Page
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Part I
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FINANCIAL
INFORMATION
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Item
1.
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1
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2
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3
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4-8
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9
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Item
2.
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10-12
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Item
3.
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12
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Item
4.
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12
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Part II
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OTHER
INFORMATION
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Item
1.
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13
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Item
1A.
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13
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Item
2.
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13
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Item
3.
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13
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Item
4.
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13
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Item
5.
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13
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Item
6.
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14
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15
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Part I
FINANCIAL
INFORMATION
Item
1.
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Financial
Statements
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ALLIANCEBERNSTEIN
HOLDING L.P.
Condensed
Statements of Financial Condition
(in
thousands, except unit amounts)
September 30,
2009
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December 31,
2008
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|||||||
(unaudited)
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||||||||
ASSETS
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||||||||
Investment
in AllianceBernstein
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$ | 1,680,106 | $ | 1,600,045 | ||||
Other
assets
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10 | 1,397 | ||||||
Total
assets
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$ | 1,680,116 | $ | 1,601,442 | ||||
LIABILITIES
AND PARTNERS’ CAPITAL
|
||||||||
Liabilities:
|
||||||||
Payable
to AllianceBernstein
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$ | 1,199 | $ | 4,825 | ||||
Other
liabilities
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119 | 462 | ||||||
Total
liabilities
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1,318 | 5,287 | ||||||
Commitments
and contingencies (See
Note 7)
|
||||||||
Partners’
capital:
|
||||||||
General
Partner: 100,000 general partnership units issued and
outstanding
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1,672 | 1,633 | ||||||
Limited
partners: 92,652,989 and 90,223,767 limited partnership units issued and
outstanding
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1,686,153 | 1,618,985 | ||||||
Accumulated
other comprehensive income (loss)
|
(9,027 | ) | (24,463 | ) | ||||
Total
partners’ capital
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1,678,798 | 1,596,155 | ||||||
Total
liabilities and partners’ capital
|
$ | 1,680,116 | $ | 1,601,442 |
See
Accompanying Notes to Condensed Financial Statements.
ALLIANCEBERNSTEIN HOLDING L.P.
Condensed
Statements of Income
(in
thousands, except per unit amounts)
(unaudited)
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
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|||||||||||||||
2009
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2008
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2009
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2008
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|||||||||||||
Equity
in net income attributable to AllianceBernstein
Unitholders
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$ | 68,723 | $ | 72,936 | $ | 125,427 | $ | 247,975 | ||||||||
Income
taxes
|
6,193 | 8,575 | 17,909 | 27,267 | ||||||||||||
Net
income
|
$ | 62,530 | $ | 64,361 | $ | 107,518 | $ | 220,708 | ||||||||
Net
income per unit:
|
||||||||||||||||
Basic
|
$ | 0.67 | $ | 0.73 | $ | 1.17 | $ | 2.52 | ||||||||
Diluted
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$ | 0.67 | $ | 0.73 | $ | 1.17 | $ | 2.52 |
See
Accompanying Notes to Condensed Financial Statements.
ALLIANCEBERNSTEIN HOLDING L.P.
Condensed
Statements of Cash Flows
(in
thousands)
(unaudited)
Nine
Months Ended September 30,
|
||||||||
2009
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2008
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|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ | 107,518 | $ | 220,708 | ||||
Adjustments
to reconcile net income to net cash used in operating
activities:
|
||||||||
Equity
in net income attributable to AllianceBernstein
Unitholders
|
(125,427 | ) | (247,975 | ) | ||||
Changes
in assets and liabilities:
|
||||||||
Decrease
(increase) in other assets
|
1,387 | (223 | ) | |||||
(Decrease)
in payable to AllianceBernstein
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(3,626 | ) | (769 | ) | ||||
(Decrease)
increase in other liabilities
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(343 | ) | 32 | |||||
Net
cash used in operating activities
|
(20,491 | ) | (28,227 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Investment
in AllianceBernstein with proceeds from exercise of compensatory options
to buy Holding Units
|
— | (13,353 | ) | |||||
Cash
distributions received from AllianceBernstein
|
91,382 | 277,127 | ||||||
Net
cash provided by investing activities
|
91,382 | 263,774 | ||||||
Cash
flows from financing activities:
|
||||||||
Cash
distributions to unitholders
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(70,891 | ) | (248,900 | ) | ||||
Proceeds
from exercise of compensatory options to buy Holding Units
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— | 13,353 | ||||||
Net
cash used in financing activities
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(70,891 | ) | (235,547 | ) | ||||
Change
in cash and cash equivalents
|
— | — | ||||||
Cash
and cash equivalents as of beginning of period
|
— | — | ||||||
Cash
and cash equivalents as of end of period
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$ | — | $ | — | ||||
Non-cash
investing activities:
|
||||||||
Change
in accumulated other comprehensive income (loss)
|
$ | 15,436 | $ | (14,042 | ) | |||
Awards
of Holding Units made by AllianceBernstein under deferred compensation
plans, net of forfeitures
|
30,812 | 68,720 | ||||||
Non-cash
financing activities:
|
||||||||
Purchases
of Holding Units by AllianceBernstein to fund deferred compensation plans,
net
|
(232 | ) | (3,202 | ) |
See
Accompanying Notes to Condensed Financial Statements.
ALLIANCEBERNSTEIN HOLDING L.P.
Notes
to Condensed Financial Statements
September 30,
2009
(unaudited)
The
words “we” and “our” refer collectively to AllianceBernstein Holding L.P.
(“Holding”) and AllianceBernstein L.P. and its subsidiaries
(“AllianceBernstein”), or to their officers and employees. Similarly, the word
“company” refers to both Holding and AllianceBernstein. Where the context
requires distinguishing between Holding and AllianceBernstein, we identify which
of them is being discussed. Cross-references are in italics.
1.
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Business Description and
Organization
|
Holding’s
principal source of income and cash flow is attributable to its investment in
AllianceBernstein limited partnership interests. The condensed financial
statements and notes of Holding should be read in conjunction with the condensed
consolidated financial statements and notes of AllianceBernstein included as an
exhibit to this quarterly report on Form 10-Q and with Holding’s and
AllianceBernstein’s audited financial statements included in Holding’s
Form 10-K for the year ended December 31, 2008.
AllianceBernstein
provides research, diversified investment management and related services
globally to a broad range of clients. Its principal services
include:
|
•
|
Institutional Investment Services
– servicing its institutional clients, including unaffiliated corporate
and public employee pension funds, endowment funds, domestic and foreign
institutions and governments, and affiliates such as AXA and certain of
its insurance company subsidiaries, by means of separately managed
accounts, sub-advisory relationships, structured products, collective
investment trusts, mutual funds, hedge funds and other investment
vehicles.
|
|
•
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Retail Services – servicing its
individual clients, primarily by means of retail mutual funds sponsored by
AllianceBernstein or an affiliated company, sub-advisory relationships
with mutual funds sponsored by third parties, separately managed account
programs sponsored by financial intermediaries worldwide and other
investment vehicles.
|
|
•
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Private Client Services –
servicing its private clients, including high-net-worth individuals,
trusts and estates, charitable foundations, partnerships, private and
family corporations, and other entities, by means of separately managed
accounts, hedge funds, mutual funds and other investment
vehicles.
|
|
•
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Institutional Research Services –
servicing its institutional clients seeking independent research,
portfolio strategy and brokerage-related
services.
|
AllianceBernstein
also provides distribution, shareholder servicing and administrative services to
the mutual funds it sponsors.
AllianceBernstein
provides a broad range of services with expertise in:
|
•
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Value equities, generally
targeting stocks that are out of favor and that may trade at bargain
prices;
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•
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Growth equities, generally
targeting stocks with under-appreciated growth
potential;
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•
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Fixed income securities,
including both taxable and tax-exempt
securities;
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•
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Blend strategies, combining
style-pure investment components with systematic
rebalancing;
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•
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Passive
management, including both index and enhanced index
strategies;
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•
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Alternative
investments, such as hedge funds, currency management strategies and
venture capital; and
|
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•
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Asset allocation by which
AllianceBernstein offers specifically-tailored investment solutions for
its clients (e.g., customized target-date fund retirement services for
institutional defined contribution plan
clients).
|
AllianceBernstein
manages these services using various investment disciplines, including market
capitalization (e.g., large-, mid- and small-cap equities), term (e.g., long-,
intermediate- and short-duration debt securities), and geographic location
(e.g., U.S., international, global and emerging markets), as well as local and
regional disciplines in major markets around the world.
Recently,
AllianceBernstein was selected by the U.S. Treasury Department as one of only
three firms to manage its portfolio of assets issued by banks and other
institutions taking part in the Capital Purchase Program of the Troubled Assets
Relief Program. In addition, AllianceBernstein was selected by the U.S. Treasury
Department as one of nine pre-qualified fund managers under the Public-Private
Investment Program.
AllianceBernstein’s
independent research is the foundation of its business. AllianceBernstein’s
research disciplines include fundamental research, quantitative research,
economic research and currency forecasting capabilities. In addition,
AllianceBernstein has created several specialized research units, including one
unit that examines global strategic changes that can affect multiple industries
and geographies, and another dedicated to identifying potentially successful
innovations within private early-stage growth companies.
As of
September 30, 2009, AXA, a société anonyme organized
under the laws of France and the holding company for an international group of
insurance and related financial services companies, through certain of its
subsidiaries (“AXA and its subsidiaries”) owned approximately 1.6% of the issued
and outstanding units representing assignments of beneficial ownership of
limited partnership interests in Holding (“Holding Units”).
As of
September 30, 2009, the ownership structure of AllianceBernstein, expressed as a
percentage of general and limited partnership interests, was as
follows:
AXA
and its subsidiaries
|
63.5
|
%
|
||
Holding
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34.5
|
|||
Unaffiliated
holders
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2.0
|
|||
100.0
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%
|
AllianceBernstein
Corporation (an indirect wholly-owned subsidiary of AXA, “General Partner”) is
the general partner of both Holding and AllianceBernstein. AllianceBernstein
Corporation owns 100,000 general partnership units in Holding and a 1% general
partnership interest in AllianceBernstein. Including both the general
partnership and limited partnership interests in Holding and AllianceBernstein,
AXA and its subsidiaries had an approximate 64.1% economic interest in
AllianceBernstein as of September 30, 2009.
2.
|
Summary of Significant Accounting
Policies
|
Basis
of Presentation
The
interim condensed financial statements of Holding included herein have been
prepared in accordance with the instructions to Form 10-Q pursuant to the
rules and regulations of the U.S. Securities and Exchange Commission
(“SEC”). In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of the interim
results, have been made. The preparation of the condensed financial statements
requires management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the dates of the condensed financial statements and the
reported amounts of revenues and expenses during the interim reporting periods.
Actual results could differ from those estimates. The December 31, 2008
condensed statement of financial condition was derived from audited financial
statements but does not include all disclosures required by accounting
principles generally accepted in the United States of America.
FASB
Codification
For
annual and interim periods ending after September 15, 2009, the Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (the
“Codification”) became the single authoritative source of generally accepted
accounting principles (“GAAP”) in the United States.
Subsequent
Events
We
evaluated subsequent events through October 29, 2009, the date the financial
statements were issued.
Investment
in AllianceBernstein
Holding
records its investment in AllianceBernstein using the equity method of
accounting. Holding’s investment is increased to reflect its proportionate share
of income of AllianceBernstein and decreased to reflect its proportionate share
of losses of AllianceBernstein and cash distributions made by AllianceBernstein
to its unitholders. In addition, Holding’s investment is adjusted to reflect
certain capital transactions of AllianceBernstein.
Cash
Distributions
Holding
is required to distribute all of its Available Cash Flow, as defined in the
Amended and Restated Agreement of Limited Partnership of Holding (“Holding
Partnership Agreement”), to its unitholders pro rata in accordance with their
percentage interests in Holding. Available Cash Flow is defined as the cash
distributions Holding receives from AllianceBernstein minus such amounts as the
General Partner determines, in its sole discretion, should be retained by
Holding for use in its business.
On
October 29, 2009, the General Partner declared a distribution of $62.1 million,
or $0.67 per unit, representing Available Cash Flow for the three months ended
September 30, 2009. Each general partnership unit in Holding is entitled to
receive distributions equal to those received by each Holding Unit. The
distribution is payable on November 19, 2009 to holders of record at the close
of business on November 9, 2009.
Compensatory
Option Plans
AllianceBernstein
maintains certain compensation plans under which options to buy Holding Units
have been, or may be, granted to employees of AllianceBernstein and independent
directors of the General Partner. AllianceBernstein recognizes compensation
expense related to grants of compensatory options in its financial statements.
Under the fair value method, compensatory expense is measured at the grant date
based on the estimated fair value of the award (determined using the
Black-Scholes option valuation model) and is recognized ratably over the vesting
period. Holding exchanges the proceeds from exercises of Holding Unit options
for AllianceBernstein Units and thereby increases its investment in
AllianceBernstein.
3.
|
Net Income Per
Unit
|
Basic net
income per unit is derived by dividing net income by the basic weighted average
number of units outstanding for each period. Diluted net income per unit is
derived by adjusting net income for the assumed dilutive effect of compensatory
options (“Net income – diluted”) and dividing by the diluted weighted average
number of units outstanding for each period.
Three Months Ended September
30,
|
Nine Months
Ended September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(in
thousands, except per unit amounts)
|
||||||||||||||||
Net
income – basic
|
$ | 62,530 | $ | 64,361 | $ | 107,518 | $ | 220,708 | ||||||||
Additional
allocation of equity in net income attributable to AllianceBernstein
resulting from assumed dilutive effect of compensatory
options
|
306 | 251 | 154 | 1,531 | ||||||||||||
Net
income – diluted
|
$ | 62,836 | $ | 64,612 | $ | 107,672 | $ | 222,239 | ||||||||
Weighted
average units outstanding – basic
|
92,657 | 87,582 | 92,146 | 87,433 | ||||||||||||
Dilutive
effect of compensatory options
|
635 | 515 | 174 | 909 | ||||||||||||
Weighted
average units outstanding – diluted
|
93,292 | 88,097 | 92,320 | 88,342 | ||||||||||||
Basic
net income per unit
|
$ | 0.67 | $ | 0.73 | $ | 1.17 | $ | 2.52 | ||||||||
Diluted
net income per unit
|
$ | 0.67 | $ | 0.73 | $ | 1.17 | $ | 2.52 |
For the
three months and nine months ended September 30, 2009, we excluded 6,120,480
out-of-the-money options (i.e., options
with an exercise price greater than the weighted average closing price of a unit
for the relevant period) from the diluted net income per unit computation due to
their anti-dilutive effect. For the three months and nine months ended September
30, 2008, we excluded 5,073,605 and 3,664,405, respectively, out-of-the-money
options from the diluted net income per unit computation due to their
anti-dilutive effect.
4.
|
Investment in
AllianceBernstein
|
Changes
in Holding’s investment in AllianceBernstein for the nine-month period ended
September 30, 2009 were as follows (in thousands):
Investment
in AllianceBernstein as of December 31, 2008
|
$
|
1,600,045
|
||
Equity
in net income attributable to AllianceBernstein
Unitholders
|
125,427
|
|||
Changes
in accumulated other comprehensive income
|
15,436
|
|||
Cash
distributions received from AllianceBernstein
|
(91,382
|
)
|
||
Purchases
of Holding Units by AllianceBernstein to fund deferred compensation plans,
net
|
(232
|
)
|
||
Awards
of Holding Units by AllianceBernstein under deferred compensation plans,
net of forfeitures
|
30,812
|
|||
Investment
in AllianceBernstein as of September 30, 2009
|
$
|
1,680,106
|
5.
|
Units
Outstanding
|
The
following table summarizes the activity in Holding Units during the first nine
months of 2009:
Outstanding
as of December 31, 2008
|
90,323,767
|
|||
Options
exercised
|
—
|
|||
Units
issued
|
2,430,742
|
|||
Units
forfeited
|
(1,520
|
)
|
||
Outstanding
as of September 30, 2009
|
92,752,989
|
Units
issued pertain to Holding Units newly issued under our Amended and Restated 1997
Long Term Incentive Plan and include: (i) restricted unit awards to independent
members of the Board of Directors of the General Partner, (ii) restricted unit
awards to certain key employees, (iii) unit issuances to fund deferred
compensation notional investment elections by plan participants, (iv) Century
Club Plan unit awards to AllianceBernstein employees whose primary
responsibilities are to assist in the distribution of company-sponsored mutual
funds, and (v) unit issuances in connection with certain employee separation
agreements.
6.
|
Income
Taxes
|
Holding
is a publicly-traded partnership for federal tax purposes and, accordingly, is
not subject to federal or state corporate income taxes. However, Holding is
subject to the 4.0% New York City unincorporated business tax (“UBT”), net of
credits for UBT paid by AllianceBernstein, and to a 3.5% federal tax on
partnership gross income from the active conduct of a trade or business.
Holding’s partnership gross income is derived from its interest in
AllianceBernstein.
In order
to preserve Holding’s status as a “grandfathered” publicly-traded partnership
for federal income tax purposes, management ensures that Holding does not
directly or indirectly (through AllianceBernstein) enter into a substantial new
line of business. If Holding were to lose its status as a “grandfathered”
publicly-traded partnership, it would be subject to corporate income tax, which
would reduce materially Holding’s net income and its quarterly distributions to
Holding unitholders.
7.
|
Commitments and
Contingencies
|
Legal and
regulatory matters described below pertain to AllianceBernstein and are included
here due to their potential significance to Holding’s investment in
AllianceBernstein.
With
respect to all significant litigation matters, we consider the likelihood of a
negative outcome. If we determine the likelihood of a negative outcome is
probable, and the amount of the loss can be reasonably estimated, we record an
estimated loss for the expected outcome of the litigation. If the likelihood of
a negative outcome is reasonably possible and we are able to determine an
estimate of the possible loss or range of loss, we disclose that fact together
with the estimate of the possible loss or range of loss. However, it may be
difficult to predict the outcome or estimate a possible loss or range of loss
because litigation is subject to inherent uncertainties, particularly when
plaintiffs allege substantial or indeterminate damages, or when the litigation
is highly complex or broad in scope. In such cases, we disclose that we are
unable to predict the outcome or estimate a possible loss or range of
loss.
On
October 2, 2003, a purported class action complaint entitled Hindo, et al. v. AllianceBernstein
Growth & Income Fund, et al. (“Hindo Complaint”) was filed
against, among others, AllianceBernstein, Holding and the General Partner. The
Hindo Complaint alleges that certain defendants failed to disclose that they
improperly allowed certain hedge funds and other unidentified parties to engage
in “late trading” and “market timing” of certain of our U.S. mutual fund
securities, violating various securities laws.
Following
October 2, 2003, additional lawsuits making factual allegations generally
similar to those in the Hindo Complaint were filed in various federal and state
courts against AllianceBernstein and certain other defendants. On
September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Holding; and claims
brought under the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”) by participants in the Profit Sharing Plan for Employees of
AllianceBernstein.
On
April 21, 2006, AllianceBernstein and attorneys for the plaintiffs in the
mutual fund shareholder claims, mutual fund derivative claims and ERISA claims
entered into a confidential memorandum of understanding containing their
agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date. The settlement amount ($30 million), which we previously expensed and
disclosed, has been disbursed. The derivative claims brought on behalf of
Holding, in which plaintiffs seek an unspecified amount of damages, remain
pending.
We intend
to vigorously defend against the lawsuit involving derivative claims brought on
behalf of Holding. At the present time, we are unable to predict the outcome or
estimate a possible loss or range of loss in respect of this matter because of
the inherent uncertainty regarding the outcome of complex litigation, and the
fact that the plaintiffs did not specify an amount of damages sought in their
complaint.
We are
involved in various other matters, including regulatory inquiries,
administrative proceedings and litigation, some of which allege substantial
damages. While any inquiry, proceeding or litigation has the element of
uncertainty, management believes that the outcome of any one of the other
regulatory inquiries, administrative proceedings, lawsuits or claims that is
pending or threatened, or all of them combined, will not have a material adverse
effect on our results of operations or financial condition.
8.
|
Comprehensive
Income
|
Partners’
capital is adjusted to reflect certain capital transactions of
AllianceBernstein. Comprehensive income consisted of:
Three Months Ended September
30,
|
Nine Months
Ended September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Net
income
|
$ | 62,530 | $ | 64,361 | $ | 107,518 | $ | 220,708 | ||||||||
Other
comprehensive income (loss), net of tax:
|
||||||||||||||||
Unrealized
gains (losses) on investments
|
1,043 | (108 | ) | 1,509 | (1,305 | ) | ||||||||||
Foreign currency translation
adjustment
|
(1,671 | ) | (15,977 | ) | 13,981 | (12,607 | ) | |||||||||
Changes
in retirement plan related items
|
8 | (33 | ) | (54 | ) | (130 | ) | |||||||||
(620 | ) | (16,118 | ) | 15,436 | (14,042 | ) | ||||||||||
Comprehensive
income
|
$ | 61,910 | $ | 48,243 | $ | 122,954 | $ | 206,666 |
Report of
Independent Registered Public Accounting Firm
To the
General Partner and Unitholders
AllianceBernstein
Holding L.P.
We have
reviewed the accompanying condensed statement of financial
condition of AllianceBernstein Holding L.P. (“AllianceBernstein Holding”)
as of September 30, 2009, the related condensed statements of income for the
three-month and nine-month periods ended September 30, 2009 and 2008, and the
condensed statements of cash flows for the nine-month periods ended September
30, 2009 and 2008. These interim financial statements are the responsibility of
the management of AllianceBernstein Corporation, the General
Partner.
We
conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on
our review, we are not aware of any material modifications that should be made
to the accompanying condensed interim financial
statements for them
to be in conformity with accounting principles generally accepted in the United
States of America.
We
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the statement of financial condition
as of December 31, 2008, and the related statements of income, of changes in
partners’ capital and comprehensive income, and of cash flows for the year then
ended (not presented herein), and in our report dated February 20, 2009, we
expressed an unqualified opinion on those financial statements. In our opinion,
the information set forth in the accompanying condensed statement of financial
condition as of December 31, 2008 is fairly stated in all material respects in
relation to the statement of financial condition from which it has been
derived.
/s/
PricewaterhouseCoopers LLP
|
|
New
York, New York
|
|
October
29, 2009
|
Item 2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
Holding’s
principal source of income and cash flow is attributable to its investment in
AllianceBernstein limited partnership interests. The Holding interim condensed
financial statements and notes and management’s discussion and analysis of
financial condition and results of operations (“MD&A”) should be read in
conjunction with those of AllianceBernstein included as Exhibit 99.1 to this
Form 10-Q. They should also be read in conjunction with AllianceBernstein’s
audited financial statements and notes and MD&A included as an exhibit in
Holding’s Form 10-K for the year ended December 31, 2008.
Results
of Operations
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||||||||||
2009
|
2008
|
%
Change
|
2009
|
2008
|
%
Change
|
|||||||||||||||||||
(in
millions, except per unit amounts)
|
||||||||||||||||||||||||
Net
income attributable to AllianceBernstein Unitholders
|
$ | 199.3 | $ | 219.5 | (9.2 | )% | $ | 364.5 | $ | 747.3 | (51.2 | )% | ||||||||||||
Weighted
average equity ownership interest
|
34.5 | % | 33.2 | % | 34.4 | % | 33.2 | % | ||||||||||||||||
Equity
in net income attributable to AllianceBernstein
Unitholders
|
$ | 68.7 | $ | 72.9 | (5.8 | ) | $ | 125.4 | $ | 248.0 | (49.4 | ) | ||||||||||||
Net
income of Holding
|
$ | 62.5 | $ | 64.4 | (2.8 | ) | $ | 107.5 | $ | 220.7 | (51.3 | ) | ||||||||||||
Diluted
net income per Holding Unit
|
$ | 0.67 | $ | 0.73 | (8.2 | ) | $ | 1.17 | $ | 2.52 | (53.6 | ) | ||||||||||||
Distribution
per Holding Unit(1)
|
$ | 0.67 | $ | 0.60 | 11.7 | $ | 1.15 | $ | 2.39 | (51.9 | ) |
_________________
(1)
|
Third
quarter 2008 distribution excludes a $35.3 million insurance reimbursement
received in that quarter.
|
Net
income for the three months and nine months ended September 30, 2009 decreased
$1.9 million and $113.2 million, respectively, to $62.5 million and $107.5
million from net income of $64.4 million and $220.7 million, for the
corresponding prior year periods. The decrease reflects lower equity in net
income attributable to AllianceBernstein Unitholders. See AllianceBernstein’s MD&A
contained in Exhibit 99.1.
Capital
Resources and Liquidity
The
following table identifies selected items relating to capital resources and
liquidity:
Nine
Months Ended
September
30,
|
||||||||||||
2009
|
2008
|
%
Change
|
||||||||||
(in
millions)
|
||||||||||||
Partners’
capital, as of September 30
|
$
|
1,678.8
|
$
|
1,604.1
|
4.7
|
%
|
||||||
Distributions
received from AllianceBernstein
|
91.4
|
277.1
|
(67.0
|
)
|
||||||||
Distributions
paid to unitholders
|
(70.9
|
)
|
(248.9
|
)
|
(71.5
|
)
|
||||||
Proceeds
from exercise of compensatory options to buy Holding Units
|
—
|
13.4
|
(100.0
|
)
|
||||||||
Investment
in AllianceBernstein with proceeds from exercise of compensatory options
to buy Holding Units
|
—
|
(13.4
|
)
|
(100.0
|
)
|
|||||||
Purchases
of Holding Units by AllianceBernstein to fund deferred compensation plans,
net
|
(0.2
|
)
|
(3.2
|
)
|
(92.8
|
)
|
||||||
Awards
of Holding Units made by AllianceBernstein under deferred compensation
plans, net of forfeitures
|
30.8
|
68.7
|
(55.2
|
)
|
||||||||
Available
Cash Flow
|
106.4
|
209.0
|
(49.1
|
)
|
Cash and
cash equivalents were zero as of September 30, 2009 and 2008. Cash inflows
from AllianceBernstein distributions received were offset by cash distributions
paid to unitholders and income taxes paid. Holding is required to distribute all
of its Available Cash Flow, as defined in the Holding Partnership Agreement, to
its unitholders (including the General Partner). Management believes that the
cash flow from its investment in AllianceBernstein will provide Holding with the
resources to meet its financial obligations. See Note 2 to the condensed
financial statements contained in Item 1 for a description of
Available Cash Flow.
Commitments
and Contingencies
See Note 7 to the condensed
financial statements contained in Item 1.
CAUTIONS
REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements provided by management in this report and in the portion of
AllianceBernstein’s Form 10-Q attached hereto as Exhibit 99.1 are
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks, uncertainties and other factors that could cause actual results to differ
materially from future results expressed or implied by such forward-looking
statements. The most significant of these factors include, but are not limited
to, the following: the performance of financial markets, the investment
performance of sponsored investment products and separately managed accounts,
general economic conditions, industry trends, future acquisitions, competitive
conditions and government regulations, including changes in tax regulations and
rates and the manner in which the earnings of publicly-traded partnerships are
taxed. We caution readers to carefully consider such factors. Further, such
forward-looking statements speak only as of the date on which such statements
are made; we undertake no obligation to update any forward-looking statements to
reflect events or circumstances after the date of such statements. For further
information regarding these forward-looking statements and the factors that
could cause actual results to differ, see “Risk Factors” in Part I,
Item 1A of our Form 10-K for the year ended December 31, 2008 (“Form
10-K”) and Part II, Item 1A in this Form 10-Q. Any or
all of the forward-looking statements that we make in the Form 10-K, this
Form 10-Q, other documents we file with or furnish to the SEC, and any
other public statements we issue, may turn out to be wrong. It is important to
remember that other factors besides those listed in “Risk Factors” and those
listed below could also adversely affect our revenues, financial condition,
results of operations and business prospects.
The
forward-looking statements referred to in the preceding paragraph include
statements regarding:
|
•
|
Our backlog of new
institutional mandates not yet funded: Before they are funded,
institutional mandates do not represent legally binding commitments to
fund and, accordingly, the possibility exists that not all mandates will
be funded in the amounts and at the times we currently
anticipate.
|
|
•
|
The possibility that
prolonged weakness in the value of client assets under management may
result in impairment of goodwill, intangible assets and the deferred sales
commission asset: To the extent that securities valuations are
depressed for prolonged periods of time, client assets under management
and our revenues, profitability and unit price may be adversely affected.
As a result, subsequent impairment tests may be based upon different
assumptions and future cash flow projections, which may result in an
impairment of goodwill, intangible assets and the deferred sales
commission asset.
|
|
•
|
The cash flow Holding
realizes from its investment in AllianceBernstein providing Holding with
the resources necessary to meet its financial obligations:
Holding’s cash flow is dependent on the quarterly cash distributions it
receives from AllianceBernstein. Accordingly, Holding’s ability to meet
its financial obligations is dependent on AllianceBernstein’s cash flow
from its operations, which is subject to the performance of the capital
markets and other factors beyond our
control.
|
|
•
|
Our financial
condition and access to public and private debt providing adequate
liquidity for our general business needs: Our financial condition
is dependent on our cash flow from operations, which is subject to the
performance of the capital markets, our ability to maintain and grow
client assets under management and other factors beyond our control. Our
access to public and private debt, as well as the market for debt or
equity we may choose to issue on reasonable terms, may be limited by
adverse market conditions, our profitability and changes in government
regulations, including tax rates and interest
rates.
|
|
•
|
The outcome of
litigation: Litigation is inherently unpredictable, and excessive
damage awards do occur. Though we have stated that we do not expect
certain legal proceedings to have a material adverse effect on our results
of operations or financial condition, any settlement or judgment with
respect to a legal proceeding could be significant, and could have such an
effect.
|
|
•
|
Our expectation that
the global economy will grow modestly in 2010: The extent to which
global economies may have recently stabilized is not necessarily
indicative of future results. Global economies face significant obstacles
to sustained future growth. The actual performance of the capital markets
and other factors beyond our control will affect our investment success
for clients and asset flows.
|
|
•
|
The leverage inherent
in our business model increasing should our AUM and revenues continue to
grow and our lower expense base remains stable: Unanticipated
events and factors, including strategic initiatives, may cause us to
expand our expense base, thus limiting the extent to which we benefit from
any positive leverage in future periods. Growth in our revenues will
depend on the level of our assets under management, which in turn depends
on factors such as the actual performance of the capital markets, the
performance of our investment products and other factors beyond our
control.
|
OTHER
INFORMATION
With
respect to the unaudited condensed interim financial information of Holding for
the three months and nine months ended September 30, 2009 included in this
quarterly report on Form 10-Q, PricewaterhouseCoopers LLP reported that
they have applied limited procedures in accordance with professional standards
for a review of such information. However, their separate report dated October
29, 2009 appearing herein states that they did not audit and they do not express
an opinion on the unaudited condensed interim financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
PricewaterhouseCoopers LLP is not subject to the liability provisions of
Section 11 of the Securities Act of 1933, as amended (“Securities Act”) for
their report on the unaudited condensed interim financial information because
that report is not a “report” or a “part” of registration statements prepared or
certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11
of the Securities Act.
Item
3.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
There
have been no material changes to Holding’s market risk for the quarter ended
September 30, 2009.
Item
4.
|
Controls
and Procedures
|
Disclosure
Controls and Procedures
Holding
and AllianceBernstein each maintains a system of disclosure controls and
procedures that is designed to ensure that information required to be disclosed
in our reports under the Securities Exchange Act of 1934, as amended, is (i)
recorded, processed, summarized and reported in a timely manner, and (ii)
accumulated and communicated to management, including the Chief Executive
Officer and the Chief Financial Officer, to permit timely decisions regarding
our disclosure.
As of the
end of the period covered by this report, management carried out an evaluation,
under the supervision and with the participation of the Chief Executive Officer
and the Chief Financial Officer, of the effectiveness of the design and
operation of the disclosure controls and procedures. Based on this evaluation,
the Chief Executive Officer and the Chief Financial Officer concluded that the
disclosure controls and procedures are effective.
Changes
in Internal Control over Financial Reporting
No change
in our internal control over financial reporting occurred during the third
quarter of 2009 that materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
Part II
OTHER
INFORMATION
Item
1.
|
Legal
Proceedings
|
See Note 7 to the condensed
financial statements contained in Part I, Item 1.
Item
1A.
|
Risk
Factors
|
In 2007
and again in 2009, Congress proposed tax legislation that would cause certain
publicly-traded partnerships (“PTPs”) to be taxed as corporations, thus
subjecting their income to a higher level of income tax. Holding is a PTP that
derives its income from asset manager or investment management services through
its ownership interest in AllianceBernstein. However, the legislation, in the
form proposed, would not affect Holding’s tax status. In addition, we continue
to receive consistent indications from a number of individuals involved in the
legislative process that Holding’s tax status is not the focus of the proposed
legislation, and that they do not expect to change that approach. However, we
cannot predict whether, or in what form, the proposed tax legislation will pass,
and are unable to determine what effect any new legislation might have on us. If
Holding were to lose its federal tax status as a “grandfathered” PTP, it would
be subject to corporate income tax which would reduce materially its net income
and quarterly distributions to Holding unitholders.
In its
current form, the proposed legislation would not affect AllianceBernstein
because it is a private partnership.
In
addition to the information set forth in this report, please consider carefully
“Risk Factors” in Part I,
Item 1A of our Form 10-K for
the year ended December 31, 2008. Such factors could materially affect
our revenues, financial condition, results of operations and business prospects.
See also “Cautions Regarding
Forward-Looking Statements” in Part I, Item 2.
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
There
were no Holding Units sold by Holding in the period covered by this report that
were not registered under the Securities Act.
The
following table provides information relating to any purchases of Holding Units
by AllianceBernstein made in the quarter covered by this report:
ISSUER
PURCHASES OF EQUITY SECURITIES
Period
|
(a)
Total Number
of
Units
Purchased
|
(b)
Average
Price
Paid
Per Unit, net of
Commissions
|
(c)
Total
Number of
Units Purchased as
Part of
Publicly
Announced
Plans
or
Programs
|
(d)
Maximum
Number
(or
Approximate
Dollar
Value) of
Units
that May Yet
Be Purchased Under
the
Plans or
Programs
|
||||||||||||
7/1/09
- 7/31/09
|
29,990
|
$
|
20.24
|
—
|
—
|
|||||||||||
8/1/09
- 8/31/09
|
1,084
|
20.72
|
—
|
—
|
||||||||||||
9/1/09
- 9/30/09
|
23
|
21.38
|
—
|
—
|
||||||||||||
Total
|
31,097
|
$
|
20.26
|
—
|
—
|
All
Holding Units were purchased from employees to allow them to fulfill statutory
withholding tax requirements at the time of distribution of deferred
compensation awards.
Item
3.
|
Defaults
Upon Senior Securities
|
None.
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
None.
Item
5.
|
Other
Information
|
None.
Item
6.
|
Exhibits
|
Letter
from PricewaterhouseCoopers LLP, our independent registered public
accounting firm, regarding unaudited interim financial
information.
|
|
Certification
of Mr. Kraus furnished pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
Certification
of Mr. Joseph furnished pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
Certification
of Mr. Kraus furnished for the purpose of complying with
Rule 13a-14(b) or Rule 15d-14(b) of the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
Certification
of Mr. Joseph furnished for the purpose of complying with
Rule 13a-14(b) or Rule 15d-14(b) of the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
Part
I, Items 1 through 4 of the AllianceBernstein L.P. Quarterly Report on
Form 10-Q for the quarter ended September 30,
2009.
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Date:
October 29, 2009
|
AllianceBernstein
Holding l.p.
|
||
By:
|
/s/
Robert H. Joseph, Jr.
|
||
Robert
H. Joseph, Jr.
|
|||
Senior
Vice President and Chief Financial
Officer
|
15