2013 1st Quarter Results

RNS Number : 7739D

Titanium Asset Management Corp

01 May 2013

 



Titanium Asset Management Corp. 

Reports 2013 First Quarter Results

Milwaukee, WI, May 1, 2013 - Titanium Asset Management Corp. (AIM - TAM) today reported results for the first quarter ended March 31, 2013.

Highlights are as follows:

·      Assets under management (AUM) increased 1.3% during the first quarter of 2013 to $8,966.8 million reflecting both net inflows and positive market returns.

·      Average AUM of $8,910.7 million for the first quarter of 2013 were 5.4% higher relative to the average AUM of $8,452.3 million for the same period last year.  Investment management fee revenues were $5,883,000 for the first quarter of 2013, an 11.9% increase from investment management fee revenues of $5,259,000 for the same period last year, primarily due to the higher average AUM levels and a higher average fee rate.

·      Adjusted EBITDA⁽¹⁾ continued to improve during the first quarter of 2013.  Adjusted EBITDA was $652,000 for the first quarter of 2013, compared to Adjusted EBITDA of $264,000 for the same period last year.  The improvement primarily reflects the increased investment management fee revenues.

·      Net investment income of $119,000 for the first quarter of 2013 compared to net investment income of $236,000 for the same period last year.

·      Net income of $491,000, or $0.02 per diluted common share, for the first quarter of 2013 compared to a net loss of $1,932,000, or $0.09 per diluted common share, for the first quarter of 2012.

(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 further information please contact:

Titanium Asset Management Corp.

Robert Brooks, Chairman                                                          312-335-8300

Titanium Asset Management Corp.

Brian Gevry, Chief Executive Officer                                          216-771-3450

Cantor Fitzgerald Europe

David Foreman / Rishi Zaveri                                                     [phone]

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 TAMCO Holdings, LLC, as our significant stockholder.  Additional factors that could influence our financial results are included in our Securities and Exchange Commission filings, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, is expected to be filed with the Securities and Exchange Commission on or about May 3, 2013. The report will be available on the SEC's website at www.sec.gov and on our website at www.ti-am.com.

Assets Under Management

Assets under management of $9.0 billion at March 31, 2013 were 1% higher than the $8.9 billion reported at December 31, 2012 due to net inflows and positive investment returns.   The following table presents summary activity for 2013 and 2012 periods.

		Three Months Ended
		March 31,
(in millions)		2013		2012
Annual Activity:
Beginning balance		$     8,854.6		$     8,316.8
	Inflows		432.1		496.0
	Outflows		(397.3)		(382.6)
	Net flows		34.8		113.4
	Market value change		77.4		157.6
	Ending balance		$     8,966.8		$     8,587.8
	Average Assets Under Management (1)		$     8,910.7		$     8,452.3
	Average Fee Rate (basis points)		26.4		24.9

 ⁽¹⁾        Average assets under management are calculated based on the quarter end balances.

The principle factors affecting our net flows during the periods ended March 31, 2013 and 2012 include the following:

·      Multiemployer pension and welfare plans represent approximately 38% 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.  For the three months ended March 31, 2013, net inflows from multiemployer pension and welfare plans were approximately $13 million compared to net inflows of approximately $112 million for the prior year period.

·      Inflows and outflows are also significantly affected by the timing of tax receipts and disbursements for several public entity accounts that we manage.  Net inflows related to these accounts were $41 million for the three months ended March 31, 2013 compared to net inflows of $62 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 March 31, 2013. The overall market value change related to fixed income assets was approximately $20.5 million, or 0.3%, for the three months ended March 31, 2013 ($93.5 million, or 1.3% for the comparable 2012 period).  Fixed income returns as measured by the Barclay's Aggregate Index were -0.1% for the three months ended March 31, 2013 (0.3% for the comparable 2012 period). For the twelve months ended March 31, 2013, approximately 93% 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 March 31, 2013.  The overall market value change related to equity assets was approximately $59.5 million, or 9.8%, for the three months ended March 31, 2013 ($64.0 million, or 10.3% for the comparable 2012 period).  Equity returns as measured by the S&P 500 Index were up 10.6% for the three months ended March 31, 2013 (compared to an increase of 12.6% for the comparable 2012 period). Approximately 15% of our equity assets outperformed their respective benchmarks for the twelve months ended March 31, 2013.

The following table presents summary breakdowns for our assets under management at March 31, 2013 and December 31, 2012.

(in millions)		March 31,  2013	% of total	December 31, 2012	% of total
	By investment strategy:
	Fixed income	$        7,983.0	89%	$        7,914.9	89%
	Equity	647.6	7%	595.6	7%
	Real estate	336.2	4%	344.1	4%
	Total	$        8,966.8	100%	$        8,854.6	100%
	By client type:
	Institutional	$        7,938.0	89%	$        7,748.7	88%
	Retail	1,028.8	11%	1,105.9	12%
	Total	$        8,966.8	100%	$        8,854.6	100%
	By investment vehicle:
	Separate accounts	$        8,103.4	90%	$        8,009.1	90%
	Private funds	863.4	10%	845.5	10%
	Total	$        8,966.8	100%	$        8,854.6	100%

Our mix of assets under management by investment strategy was unchanged as fixed income assets comprised 89% of total assets under management at March 31, 2013 and December 31, 2012. 

Our mix of assets under management by client type was relatively unchanged as institutional accounts comprised 89% of total assets under management at March 31, 2013 compared to 88% at December 31, 2012.

Our mix of assets under management by investment vehicle was unchanged as separate accounts comprised 90% of total assets under management at March 31, 2013 and December 31, 2012.

Operating Results

	Three Months Ended March 31,
	2013	2012
Average assets under management (in millions)	$           8,910.7	$           8,452.3
Average fee rate (basis points)	26.4	24.9
Investment management fees	$       5,883,000	$        5,259,000
Incentive fees	32,000	-
Referral fees	-	125,000
Total operating revenue	5,915,000	5,384,000
Adjusted EBITDA(1)	652,000	264,000
Amortization of intangible assets	243,000	2,401,000
Operating income (loss)	372,000	(2,168,000)
Net investment income	119,000	236,000
Net income (loss)	491,000	(1,932,000)
Earnings (loss) per share:
Basic and diluted	$                  0.02	$               (0.09)

(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 management fees increased by $624,000, or 12%, due to a 5% increase in our average assets under management and a 6% increase in our average 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 2012, we earned incentive fees of $1,165,000, which were recognized in December 2012.  Based on performance through March 31, 2013, we would have earned incentive fees of approximately $350,000 (of which $32,000 was recognized due to withdrawals).  Because these fees are primarily earned on a calendar year performance, the results for the first three months are not necessarily indicative of the fees to be expected for the full year.

Our Adjusted EBITDA for the three months ended March 31, 2013 was $652,000, an increase of $388,000, over the comparable amount for the 2012 period.  The improvement to Adjusted EBITDA primarily reflects the increases in investment management fees.

Amortization of intangible assets

Amortization of intangible assets decreased by $2,158,000 for the three months ended March 31, 2013.  The reduction reflects the elimination of amortization expense related to the NIS referral relationship intangible asset in 2013 as the asset was fully amortized as of December 31, 2012.

Titanium Asset Management Corp. Condensed Consolidated Balance Sheets

	March 31, 2013	December 31, 2012
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$        5,222,000	$        3,092,000
Investments	4,298,000	5,644,000
Accounts receivable	3,982,000	5,015,000
Other current assets	678,000	854,000
Total current assets	14,180,000	14,605,000
Investment in equity investee	4,067,000	3,970,000
Property and equipment, net	466,000	483,000
Goodwill	13,264,000	13,264,000
Intangible assets, net	5,066,000	5,309,000
Total assets	$      37,043,000	$      37,631,000
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$           107,000	$           166,000
Other current liabilities	1,982,000	2,246,000
Total current liabilities and total liabilities	2,089,000	2,412,000
Commitments and contingencies
Stockholders' equity
Common stock, $0.0001 par value; 54,000,000 shares authorized; 19,744,824 shares issued and outstanding at March 31, 2013 and 20,634,232 issued and outstanding at December 31, 2012	2,000	2,000
Restricted common stock, $0.0001 par value; 720,000 shares authorized; none issued	-	-
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued	-	-
Additional paid-in capital	100,227,000	100,971,000
Accumulated deficit	(65,220,000)	(65,711,000)
Other comprehensive loss	(55,000)	(43,000)
Total stockholders' equity	34,954,000	35,219,000
Total liabilities and stockholders' equity	$      37,043,000	$      37,631,000

Titanium Asset Management Corp. Condensed Consolidated Statements of Operations  (unaudited)

	Three Months Ended March 31,
	2013	2012
Operating revenues	$        5,915,000	$        5,384,000
Operating expenses:
Administrative	5,300,000	5,151,000
Amortization of intangible assets	243,000	2,401,000
Total operating expenses	5,543,000	7,552,000
Operating income (loss)	372,000	(2,168,000)
Other income
Interest income	1,000	17,000
Net realized gains (losses) on investments	21,000	(1,000)
Income (loss) from equity investees	97,000	220,000
Income (loss) before income taxes	491,000	(1,932,000)
Income tax benefit	-	-
Net income (loss)	$           491,000	$      (1,932,000)
Earnings (loss) per share
Basic	$               0.02	$              (0.09)
Diluted	$               0.02	$              (0.09)
Weighted average number of common shares outstanding:
Basic	20,114,578	20,634,232
Diluted	20,114,578	20,634,232

Titanium Asset Management Corp. Condensed Consolidated Statements of Cash Flows  (unaudited)

	Three Months Ended March 31,
	2013	2012
Cash flows from operating activities
Net income (loss)	$           491,000	$      (1,932,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of intangible assets	243,000	2,401,000
Depreciation	37,000	31,000
Net realized losses (gains) on investments	(21,000)	1,000
Income from equity investees	(97,000)	(220,000)
Income distributions from equity investees	-	92,000
Changes in assets and liabilities:
Decrease in accounts receivable	1,033,000	141,000
Decrease in other current assets	176,000	316,000
Increase (decrease) in accounts payable	(59,000)	123,000
Decrease in other current liabilities	(264,000)	(204,000)
Net cash provided by operating activities	1,539,000	749,000
Cash flows from investing activities
Purchases of investments	(1,100,000)	(1,374,000)
Sales and redemptions of investments	2,455,000	661,000
Purchases of property and equipment	(20,000)	(34,000)
Net cash provided by (used in) investing activities	1,335,000	(747,000)
Cash flows from financing activities
Repurchase of common stock	(744,000)	-
Net cash used for financing activities	(744,000)	-
Net increase in cash and cash equivalents	2,130,000	2,000
Cash and cash equivalents:
Beginning	3,092,000	2,787,000
Ending	$        5,222,000	$        2,789,000

Titanium Asset Management Corp. Reconciliation of Adjusted EBITDA  (unaudited)

	Three months ended
	March 31,
	2013	2012
Operating income (loss)	$          372,000	$      (2,168,000)
Amortization of intangible assets	243,000	2,401,000
Depreciation expense	37,000	31,000
Adjusted EBITDA	$          652,000	$          264,000

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-based 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.

 

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