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10-Q - FORM 10-Q - Titanium Asset Management Corp | y80387e10vq.htm |
EX-10.1 - EX-10.1 - Titanium Asset Management Corp | y80387exv10w1.htm |
EX-10.2 - EX-10.2 - Titanium Asset Management Corp | y80387exv10w2.htm |
EX-32.2 - EX-32.2 - Titanium Asset Management Corp | y80387exv32w2.htm |
EX-32.1 - EX-32.1 - Titanium Asset Management Corp | y80387exv32w1.htm |
EX-31.2 - EX-31.2 - Titanium Asset Management Corp | y80387exv31w2.htm |
EX-31.1 - EX-31.1 - Titanium Asset Management Corp | y80387exv31w1.htm |
Exhibit 99.1
Titanium Asset Management Corp.
Reports Third Quarter 2009 Results
Milwaukee, WI, November 10, 2009 Titanium Asset Management Corp. (AIM TAM) today reported
results for the third quarter of 2009.
Highlights are as follows:
| Revenues of $5,047,000 for the third quarter of 2009, a 30% increase over the same period last year. | ||
| Performance fees generated year to date but not yet recognized of $1,072,000 (Q3 2008 nil). | ||
| Managed and fee paying assets increase by 10.9% from $8,379.4 million to $9,290.0 million in the year to date. | ||
| A reduction in our EBITDA deficit to $557,000 from $1,033,000 in the second quarter of 2009. | ||
| A goodwill impairment charge of $4,847,000 mainly reflecting very subdued activity in the retail equity markets. | ||
| Net loss of $6,197,000, or $0.30 per diluted common share, compared to a loss of $1,602,000, or $0.08 per diluted common share, for the third quarter of 2008. |
Commenting on these results, Nigel Wightman, Chairman and CEO of Titanium Asset Management
Corporation said:
During the quarter we saw a significant rise in managed and fee paying assets from institutional
clients, reflecting better markets, fixed income inflows (including assets invested in the U.S.
Governments TALF program) and encouraging growth in our hedge fund business. Our new real estate
division also began managing assets for its first client.
Our retail U.S. equity business however remained subdued, in line with the rest of the industry.
While we expect some growth in 2010 we have scaled back our long-term forecasts for U.S. equity
inflows. We have therefore taken a write-down of goodwill to reflect both this and the continuing
high legal and professional costs associated with our being a public reporting company.
Other expenses are continuing to decline as we integrate our four subsidiaries and reduce
headcount. Net asset flows have remained positive in the early part of the fourth quarter and it
is in this quarter that we will recognize performance fees (the figure of $1,072,000 at the end of
the third quarter is subject to change, in either direction, over the balance of the year).
For further information please contact:
Titanium Asset Management Corp. Nigel Wightman, Chairman and CEO |
+44 20 7822 1881 or + 44 7789 277849 | |
Seymour Pierce Ltd Jonathan Wright |
+44 20 7107 8000 | |
Penrose Financial Gay Collins/Elisha Vincent |
+44 20 7786 4882 or +44 7798 626282 | |
titanium@penrose.co.uk |
Titanium Asset Management Corp. Third Quarter 2009 Operating Results
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Fee income |
$ | 5,047,000 | $ | 3,886,000 | $ | 14,887,000 | $ | 10,592,000 | ||||||||
EBITDA(1) |
(557,000 | ) | (1,023,000 | ) | (2,585,000 | ) | (305,000 | ) | ||||||||
Net loss |
(6,197,000 | ) | (1,602,000 | ) | (8,934,000 | ) | (3,090,000 | ) | ||||||||
Earnings per share: |
||||||||||||||||
Basic |
$ | (0.30 | ) | $ | (0.08 | ) | $ | (0.43 | ) | $ | (0.15 | ) | ||||
Diluted |
$ | (0.30 | ) | $ | (0.08 | ) | $ | (0.43 | ) | $ | (0.15 | ) |
(1) | See accompanying table for definition of 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. |
Assets Under Management
Our managed and fee paying assets increased by 10.9% over the nine months ended September 30, 2009,
totaling $9,290.0 million at the end of the third quarter 2009:
Managed Assets | Distributed Assets | |||||||
(in millions) | ||||||||
Balance at December 31, 2008 |
$ | 7,573.2 | $ | 806.2 | ||||
Net contributions |
194.8 | 67.6 | ||||||
Market movement |
552.1 | 96.1 | ||||||
Balance at June 30, 2009 |
$ | 8,320.1 | $ | 969.9 | ||||
Distributed assets are those managed by a hedge fund advisor on which we earn referral fees. Net
contributions are a combination of new and lost accounts plus contributions and withdrawals from
existing accounts. Market movement is a combination of the change in financial market plus the
effect (positive or negative) of active management.
Our net contributions were primarily driven by contributions from new and existing accounts for
investments in the U.S. Governments Term Asset-Backed Securities Loan Facility (TALF) program,
offset partially by withdrawals driven by cash requirements of certain institutional clients of our
NIS subsidiary. In addition, we experienced net withdrawals at our Sovereign subsidiary as a
result of poor performance of certain strategies in 2008 and reduction of some wrap business.
The market movement reflects strong fixed income returns and recovery in the U.S. equity markets
from their low points in March 2009. The market movement also reflects positive returns from
absolute return (hedge fund) strategies.
During the nine months ended September 30, 2009, 86% of our managed and fee paying assets with
defined performance benchmarks outperformed their respective benchmarks.
2
Our assets under management by major investment strategy were as follows:
September 30, 2009 | December 31, 2008 | |||||||||||||||
(in millions) | % of total | (in millions) | % of total | |||||||||||||
U.S. fixed income |
$ | 7,516.9 | 90.3 | % | $ | 6,674.8 | 88.2 | % | ||||||||
U.S. equity |
754.2 | 9.1 | % | 874.6 | 11.5 | % | ||||||||||
International equity |
25.9 | 0.3 | % | 23.8 | 0.3 | % | ||||||||||
Real estate |
23.2 | 0.3 | % | | | |||||||||||
Balance at end of period |
$ | 8,320.2 | 100.0 | % | $ | 7,573.2 | 100.0 | % | ||||||||
Our assets under management by broad client type were as follows:
September 30, 2009 | December 31, 2008 | |||||||||||||||
(in millions) | % of total | (in millions) | % of total | |||||||||||||
Institutional Retirement plans |
$ | 3,871.6 | 46.5 | % | $ | 3,633.3 | 48.0 | % | ||||||||
Institutional Other |
2,762.7 | 33.2 | % | 2,197.3 | 29.0 | % | ||||||||||
Retail Broker/dealer accounts |
854.7 | 10.3 | % | 948.6 | 12.5 | % | ||||||||||
Retail Other |
831.2 | 10.0 | % | 794.0 | 10.5 | % | ||||||||||
Balance at end of period |
$ | 8,320.2 | 100.0 | % | $ | 7,573.2 | 100.0 | % | ||||||||
Operating Results
Our revenues increased relative to the third quarter of 2008 as a result of the acquisition of Boyd
Watterson Asset Management, offset in part by decreased revenues at our Wood and Sovereign
subsidiaries as a result of weaker markets and net business losses over the past twelve months. We
believe we have a strong pipeline of new institutional business opportunities at September 30, 2009
and are encouraged by the general recovery in the financial markets over the last two quarters. In
particular, we expect our participation in the TALF program on behalf of our clients will increase.
We have also secured our first real estate client and expect to secure more real estate business
in the coming months.
Performance fees of $1,072,000 were generated during the first nine months of 2009; these fees are
not recognized as revenues because they are based on a calendar year performance period. As such
this figure is subject to change, up or down, over the balance of the year.
Our EBITDA deficit of $557,000 for the third quarter of 2009 was an improvement over the $1,033,000
EBITDA deficit for the second quarter of 2009 and over the $1,023,000 EBITDA deficit for third
quarter of 2008. The improvement over the second quarter of 2009 reflects a modest increase in
revenue and the cost savings from our ongoing integration activities. The benefits of greater
operational integration that is taking place and the consequent reduction in headcount should also
be felt over the balance of this year and next year. During the third quarter we further reduced
our headcount from 92 to 90, with additional reductions planned for the fourth quarter. The
improvement over the third quarter of 2008 reflects the acquisition of Boyd Watterson and
reductions to the significant legal and professional fees that were incurred during the
registration process for our common stock under the Securities and Exchange Act of 1934 in 2008.
In connection with the initial preparation of our 2010 annual budget, we completed an evaluation of
the fair value of the Company and the impact of such on our goodwill balance as of September 30,
2009. We estimate fair value using a discounted cash flow analysis, which measures fair value by
reference to projected future cash flows over a five-year forecast period and an estimated residual
value and through the application of a discount rate to reflect those amounts at a present value.
In preparing our cash flow forecasts, we consider historical and projected growth rates, our
business plans, prevailing relevant business conditions and trends, anticipated needs for working
capital and capital expenditures, and historical and expected levels and trends in operating
profitability. In preparing our current forecast, we specifically considered that over the first
nine months of 2009, we have not met our expectations for new customer growth in our retail
marketing channel, particularly in our managed equity assets.
3
We have noted that despite the recovery that has occurred in the equity markets over the last six
months, overall funds flowing into the U.S. equity markets through mutual funds and exchange traded
funds (EFTs) have been significantly negative. While we expect this trend to revert back to more
normal patterns in time, we have reduced our current forecast to reflect more modest growth in our
equity managed funds in the near term. In addition, while we have achieved substantial progress in
integrating the operations of our four operating subsidiaries and reducing headcount, we continue
to bear significant legal and professional costs as a result of being both a U.S. reporting company
and listed on the London AIM market. While we continue to aggressively look for additional
business efficiencies and related cost savings, we have reduced our current forecast for achieving
overall cost savings over the short term.
Based on the changes in our current forecast, our evaluation of fair value at September 30, 2009
indicated potential impairment of goodwill. As a result, we completed a required second step to
assess the implied fair value of goodwill and concluded that the value of our goodwill was impaired
by $4,847,000.
4
Forward-looking Statements
This press release contains certain statements that are 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 the control of Titanium.
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 the Company undertakes no
obligation to update any such statements. Additional factors that could influence Titaniums
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 Companys Quarterly Report on Form 10-Q for the three months ended September 30, 2009, is
expected to be filed with the Securities and Exchange Commission on or before November 14, 2009.
The report will be available on the SECs website at
www.sec.gov and on the Companys website at
www.ti-am.com.
5
Titanium Asset Management Corp.
Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets
September 30, | December 31, | |||||||
2009 | 2008 | |||||||
(unaudited) | ||||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 6,383,000 | $ | 18,753,000 | ||||
Securities available for sale |
11,473,000 | 10,683,000 | ||||||
Accounts receivable |
3,592,000 | 4,041,000 | ||||||
Other current assets |
1,932,000 | 1,420,000 | ||||||
Total current assets |
23,380,000 | 34,897,000 | ||||||
Securities available for sale |
2,074,000 | 672,000 | ||||||
Property and equipment, net |
485,000 | 456,000 | ||||||
Goodwill |
31,271,000 | 32,757,000 | ||||||
Intangible assets, net |
27,468,000 | 32,206,000 | ||||||
Deferred income taxes |
5,821,000 | 4,202,000 | ||||||
Total assets |
$ | 90,499,000 | $ | 105,190,000 | ||||
Liabilities and Stockholders Equity |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | 271,000 | $ | 663,000 | ||||
Acquisition payments due |
2,677,000 | 8,145,000 | ||||||
Other current liabilities |
2,182,000 | 1,789,000 | ||||||
Total current liabilities |
5,130,000 | 10,597,000 | ||||||
Acquisition payments due |
960,000 | 1,889,000 | ||||||
Total liabilities |
6,090,000 | 12,486,000 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity |
||||||||
Common stock, $0.0001 par value; 54,000,000 shares
authorized; 20,509,502 and 20,464,002 shares issued
and outstanding at September 30, 2009 and December 31,
2008, respectively |
2,000 | 2,000 | ||||||
Restricted common stock, $0.0001 par value; 720,000
shares authorized; 612,716 issued and outstanding at
September 30, 2009 and December 31, 2008 |
| | ||||||
Preferred stock, $0.0001 par value; 1,000,000 shares
authorized; none issued |
| | ||||||
Additional paid-in capital |
99,775,000 | 99,462,000 | ||||||
Accumulated deficit |
(15,531,000 | ) | (6,597,000 | ) | ||||
Other comprehensive income loss |
163,000 | (163,000 | ) | |||||
Total stockholders equity |
84,409,000 | 92,704,000 | ||||||
Total liabilities and stockholders equity |
$ | 90,499,000 | $ | 105,190,000 | ||||
6
Titanium Asset Management Corp.
Condensed Consolidated Statement of Operations
(unaudited)
Condensed Consolidated Statement of Operations
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Fee income |
$ | 5,047,000 | $ | 3,886,000 | $ | 14,887,000 | $ | 10,592,000 | ||||||||
Operating expenses: |
||||||||||||||||
Administrative |
5,737,000 | 4,913,000 | 17,865,000 | 10,901,000 | ||||||||||||
Amortization of intangible assets |
1,020,000 | 1,093,000 | 3,059,000 | 3,095,000 | ||||||||||||
Impairment of goodwill |
4,847,000 | | 4,847,000 | | ||||||||||||
Impairment of intangible assets |
| | | 1,792,000 | ||||||||||||
Total operating expenses |
11,604,000 | 6,006,000 | 25,771,000 | 15,788,000 | ||||||||||||
Operating loss |
(6,557,000 | ) | (2,120,000 | ) | (10,884,000 | ) | (5,196,000 | ) | ||||||||
Other income |
||||||||||||||||
Interest income |
98,000 | (94,000 | ) | 333,000 | 774,000 | |||||||||||
Interest expense |
(15,000 | ) | (14,000 | ) | (44,000 | ) | (14,000 | ) | ||||||||
Gain (loss) on investments |
28,000 | (38,000 | ) | (160,000 | ) | (38,000 | ) | |||||||||
Loss before taxes |
(6,446,000 | ) | (2,266,000 | ) | (10,755,000 | ) | (4,474,000 | ) | ||||||||
Income tax benefit |
(249,000 | ) | (664,000 | ) | (1,821,000 | ) | (1,384,000 | ) | ||||||||
Net loss |
$ | (6,197,000 | ) | $ | (1,602,000 | ) | $ | (8,934,000 | ) | $ | (3,090,000 | ) | ||||
Earnings (loss) per share |
||||||||||||||||
Basic |
$ | (0.30 | ) | $ | (0.08 | ) | $ | (0.43 | ) | $ | (0.15 | ) | ||||
Diluted |
$ | (0.30 | ) | $ | (0.08 | ) | $ | (0.43 | ) | $ | (0.15 | ) | ||||
Weighted average number of common
shares outstanding: |
||||||||||||||||
Basic |
20,546,490 | 20,451,502 | 20,546,490 | 20,451,502 | ||||||||||||
Diluted |
20,546,490 | 20,451,502 | 20,546,490 | 20,451,502 | ||||||||||||
7
Titanium Asset Management Corp.
Condensed Consolidated Statement of Cash Flows
(unaudited)
Condensed Consolidated Statement of Cash Flows
(unaudited)
Nine Months Ended September 30, | ||||||||
2009 | 2008 | |||||||
Cash flows from operating activities |
||||||||
Net loss |
$ | (8,934,000 | ) | $ | (3,090,000 | ) | ||
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities: |
||||||||
Depreciation and amortization |
3,139,000 | 3,099,000 | ||||||
Impairment of intangible assets |
| 1,792,000 | ||||||
Impairment of goodwill |
4,847,000 | | ||||||
Noncash share compensation |
313,000 | | ||||||
Accretion of acquisition payments |
40,000 | 12,000 | ||||||
Loss on investments |
160,000 | 39,000 | ||||||
Deferred income taxes |
(1,821,000 | ) | (1,531,000 | ) | ||||
Changes in assets and liabilities: |
||||||||
Decrease (increase) in accounts receivable |
538,000 | (140,000 | ) | |||||
Decrease (increase) in other current assets |
(441,000 | ) | 425,000 | |||||
Decrease in accounts payable |
(398,000 | ) | 129,000 | |||||
Decrease in other current liabilities |
878,000 | (855,000 | ) | |||||
Net cash provided by (used in) operating activities |
(1,679,000 | ) | (120,000 | ) | ||||
Cash flows from investing activities |
||||||||
Purchases of property and equipment |
(128,000 | ) | (72,000 | ) | ||||
Cash and cash equivalents released from trust |
| 55,587,000 | ||||||
Purchases of securities available for sale |
(16,341,000 | ) | (1,000,000 | ) | ||||
Sales and redemptions of securities available for sale |
13,929,000 | 34,000 | ||||||
Cash paid for acquisition of subsidiaries, net of cash acquired |
(6,000 | ) | (31,226,000 | ) | ||||
Net cash provided by (used in) investing activities |
(2,546,000 | ) | 23,323,000 | |||||
Cash flows from financing activities |
||||||||
Payment of deferred acquisition obligations |
(8,145,000 | ) | | |||||
Redemption of common stock |
| (12,017,000 | ) | |||||
Net cash used in financing activities |
(8,145,000 | ) | (12,017,000 | ) | ||||
Net increase (decrease) in cash and cash equivalents |
(12,370,000 | ) | 11,186,000 | |||||
Cash and cash equivalents: |
||||||||
Beginning |
18,753,000 | 19,388,000 | ||||||
Ending |
$ | 6,383,000 | $ | 30,574,000 | ||||
Supplemental disclosure of cash flow information |
||||||||
Income taxes refunded (paid) |
$ | 512,000 | $ | (630,000 | ) | |||
Supplemental disclosure of non-cash investing and financing
activities |
||||||||
Paid-in
capital attributed to common stock repurchase rights not executed |
$ | | $ | 55,587,000 | ||||
Payments due in connection with acquisitions |
$ | 1,708,000 | $ | 1,903,000 | ||||
8
Titanium Asset Management Corp.
Reconciliation of EBITDA
(unaudited)
Reconciliation of EBITDA
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net loss |
$ | (6,197,000 | ) | $ | (1,602,000 | ) | $ | (8,934,000 | ) | $ | (3,090,000 | ) | ||||
Amortization of intangible assets |
1,020,000 | 1,093,000 | 3,059,000 | 3,095,000 | ||||||||||||
Impairment of goodwill |
4,847,000 | | 4,847,000 | | ||||||||||||
Impairment of intangible assets |
| | | 1,792,000 | ||||||||||||
Depreciation expense |
26,000 | 4,000 | 80,000 | 4,000 | ||||||||||||
Share compensation expense |
107,000 | | 313,000 | | ||||||||||||
Interest income |
(98,000 | ) | 94,000 | (333,000 | ) | (774,000 | ) | |||||||||
Interest expense |
15,000 | 14,000 | 44,000 | 14,000 | ||||||||||||
Investment losses (gains) |
(28,000 | ) | 38,000 | 160,000 | 38,000 | |||||||||||
Income tax benefit |
(249,000 | ) | (664,000 | ) | (1,821,000 | ) | (1,384,000 | ) | ||||||||
EBITDA(1) |
$ | (557,000 | ) | $ | (1,023,000 | ) | $ | (2,585,000 | ) | $ | (305,000 | ) | ||||
Notes:
(1) | EBITDA is defined as net loss before non-cash charges for amortization and impairment of intangible assets, depreciation, and share compensation expense, interest income and expense, investment gains and losses, and income taxes. This supplemental non-GAAP liquidity measure is provided in addition to, but not as a substitute for, cash flows from operations. As a measure of liquidity, we believe EBITDA is useful as an indicator of our ability to service debt, make new investments, and meet working capital requirements. EBITDA, as we calculate it, may not be consistent with computations of EBITDA 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. |
9