VIRTUS INVESTMENT PARTNERS, INC. HARTFORD, Conn., Jan. 29, 2016 /PRNewswire/ --Virtus Investment Partners, Inc. (NASDAQ: VRTS), which operates a multi-manager asset management business, today reported financial results for the three months ended December 31, 2015.
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Management Commentary
"The market environment continued to present challenges for asset managers as concerns about global growth as well as other factors negatively impacted investor confidence and behavior," said George R. Aylward, president and chief executive officer.
"Despite the challenging markets, total sales improved 24 percent sequentially, led by a 36 percent increase in mutual fund sales as well as higher sales in separately managed accounts and institutional. Net flows improved to ($1.1) billion from ($1.6) billion, representing our best quarter since third quarter 2014. Flows for the full year, excluding the former AlphaSector products, were positive $0.4 billion.
"Operating income, as adjusted, and the related margin were impacted by lower average assets and higher operating expenses that included discrete items, as well as a negative $4.6 million variable incentive fee. Excluding the negative variable incentive fee, our operating margin, as adjusted, remained strong at 34 percent.
"Our share repurchases were at the highest quarterly level at $35.0 million, which continued our commitment of returning capital to shareholders and contributed to a 6.4 percent reduction in our ending shares outstanding from December 31, 2014. Going forward we will evaluate capital return opportunities while continuing to invest in the business, which remains a priority.
"We believe that our strong balance sheet, multi-manager approach and differentiated product offerings, including our risk managed and quality-oriented strategies, present opportunities during current market conditions."
Financial Highlights (Unaudited)
(Dollars in millions, except per share data or as noted)
Three Months Ended Three
Months
Ended Twelve Months Ended
------------------ -------------------- -------------------
12/31/2015 12/31/2014 Change 9/30/2015 Change 12/31/2015 12/31/2014 Change
---------- ---------- ------ --------- ------ ---------- ---------- ------
Non-GAAP Financial Measures (1)
------------------------------
Revenues, as adjusted $66.7 $85.2 (22)% $71.1 (6)% $295.0 $337.2 (13)%
Operating expenses, as adjusted $47.3 $46.0 3% $45.8 3% $186.7 $186.7 -
Operating income, as adjusted $19.4 $39.2 (51)% $25.3 (23)% $108.3 $150.5 (28)%
Operating margin, as adjusted 29.1% 46.0% 35.6% 36.7% 44.6%
Net income attributable to common stockholders, as adjusted $11.9 $24.7 (52)% $15.5 (23)% $67.8 $93.9 (28)%
Earnings per share - diluted, as adjusted $1.37 $2.68 (49)% $1.74 (21)% $7.57 $10.10 (25)%
U.S. GAAP Financial Measures
----------------------------
Revenues $86.1 $112.1 (23)% $92.4 (7)% $382.0 $450.6 (15)%
Operating expenses $69.6 $75.5 (8)% $69.3 1% $301.6 $319.9 (6)%
Operating income $16.5 $36.7 (55)% $23.1 (29)% $80.4 $130.7 (39)%
Operating margin 19.2% 32.7% 25.0% 21.0% 29.0%
Net income (loss) attributable to common stockholders $6.6 $18.9 (65)% $(0.6) N/M $35.1 $97.7 (64)%
Earnings (loss) per share - diluted $0.76 $2.05 (63)% $(0.07) N/M $3.92 $10.51 (63)%
Assets Under Management and Flows (in billions)
----------------------------------------------
Ending Assets Under Management $47.4 $56.7 (16)% $47.9 (1)% $47.4 $56.7 (16)%
Average Assets Under Management (2) $48.5 $58.3 (17)% $50.6 (4)% $52.3 $58.0 (10)%
Gross Sales $3.2 $3.4 (8)% $2.5 24% $12.7 $15.2 (17)%
Net Flows $(1.1) $(2.2) 48% $(1.6) 31% $(6.3) $(1.2) (425)%
(1) See the information on pages 11 through 15 for a reconciliation to their most directly comparable U.S. GAAP measures and the notes beginning on page 16 for other
important disclosures.
(2) Represents assets under management excluding money market funds that were liquidated in October 2014
N/M - Not Meaningful
Asset Flows and Assets Under Management
Assets under management were $47.4 billion at December 31, 2015 compared with $56.7 billion at December 31, 2014 and $47.9 billion at September 30, 2015. The change from the prior year is attributable to net flows of ($6.3) billion and market depreciation of ($2.2) billion. The sequential change reflects ($1.1) billion of net flows, which more than offset $0.9 billion of market appreciation.
Total sales were $3.2 billion in the fourth quarter compared with $3.4 billion in the prior-year quarter and $2.5 billion in the sequential quarter. Net flows improved to ($1.1) billion in the fourth quarter from ($2.2) billion in the prior-year quarter and ($1.6) billion in the sequential quarter. Net outflows in the quarter were primarily attributable to open-end mutual funds, which offset positive flows in institutional and ETFs.
Open-end mutual fund sales were $2.5 billion in the fourth quarter compared with $2.9 billion in the prior-year quarter and $1.9 billion in the sequential quarter. The increase from the prior quarter was primarily due to higher sales of international equity and fixed income strategies. Mutual fund net flows improved to ($1.2) billion in the fourth quarter from ($2.2) billion in the prior-year quarter and ($1.9) billion in the sequential quarter, reflecting an improvement in flows in the former AlphaSector funds. Excluding the former AlphaSector funds, mutual fund net flows improved to ($0.5) billion from ($0.9) billion in the sequential quarter.
ETF sales were $57.7 million in the fourth quarter compared with $217.7 million in the sequential quarter that included the introduction of an affiliate managed fund. For the respective periods, ETF net flows were $34.7 million compared with $203.9 million.
Institutional sales were $226.6 million in the fourth quarter compared with $309.9 million in the prior-year quarter and $199.5 million in the sequential quarter. Net flows were positive for the fifth consecutive quarter at $45.3 million compared with $177.8 million in the prior-year quarter and $89.2 million in the sequential quarter.
Earnings Summary
Non-GAAP Results
Management believes that a series of non-GAAP financial measures most accurately reflect the company's operating results from providing investment management and related services to individuals and institutions, and uses these measures to evaluate financial performance. Quarterly and annual reconciliations of the most comparable U.S. GAAP measure to each non-GAAP measure can be found on pages 11 through 15 of this earnings release.
Revenues, as Adjusted
Total revenues, as adjusted, were $66.7 million in the fourth quarter compared with $85.2 million in the prior-year quarter and $71.1 million in the sequential quarter. The decline from the prior periods reflects lower investment management and administration and transfer agent fees.
Investment management fees, as adjusted, were $60.9 million in the fourth quarter compared with $75.9 million in the prior-year quarter and $65.2 million in the sequential quarter. Average assets under management were $48.5 billion in the fourth quarter compared with $58.3 billion in the prior-year quarter and $50.6 billion in the sequential quarter. The average fee rate in the quarter decreased to 48.4 basis points from 51.5 basis points in the prior-year quarter and 49.4 basis points in the sequential quarter. The average fee rate in the fourth and third quarters each included the impact of a negative $4.6 million variable incentive fee; excluding that fee the open-end fund fee rate for the fourth and third quarters would have been 52.1 basis points and 53.1 basis points, respectively.
Administration and transfer agent fees, as adjusted, were $11.1 million in the fourth quarter compared with $14.3 million in the prior-year quarter and $11.7 million in the sequential quarter. The decrease from the prior periods reflects the decline in average open-end fund assets under management.
Operating Expenses, as Adjusted
Total operating expenses, as adjusted, were $47.3 million in the fourth quarter compared with $46.0 million in the prior-year quarter and $45.7 million in the sequential quarter. The increase from prior periods reflects higher employment expenses, as adjusted, and other operating expenses, as adjusted.
Employment expenses, as adjusted, were $34.4 million in the fourth quarter compared with $34.1 million in the prior-year quarter and $33.5 million in the sequential quarter. The increase over the sequential quarter includes higher sales-based compensation due to higher sales and incremental costs associated with additional resources to support quantitative strategies.
Other operating expenses, as adjusted, were $12.0 million in the fourth quarter compared with $11.2 million in the prior-year quarter and $11.3 million in the sequential quarter. The current quarter includes $0.8 million of discrete professional fees and fund-related expenses.
Operating Income, as Adjusted, and Related Margin
Operating income, as adjusted, was $19.4 million for the fourth quarter compared with $39.2 million in the prior-year quarter and $25.3 million in the sequential quarter. The related margin was 29 percent compared with 46 percent and 36 percent for the respective prior periods, reflecting lower revenues, as adjusted. Excluding the negative impact of the variable incentive fee, fourth quarter operating income, as adjusted, and related margin would have been $24.0 million and 34 percent, compared with $29.9 million and 40 percent in the sequential quarter.
Net Income Attributable to Common Stockholders, as Adjusted
Net income attributable to common stockholders, as adjusted, was $11.9 million, or $1.37 per diluted share, compared with $24.7 million or $2.68 per share in the prior-year quarter and $15.5 million or $1.74 per share in the sequential quarter. Current and prior quarter adjusted earnings per share included ($0.33) and ($0.32) related to the variable incentive fee. Excluding the impact of that fee, current and prior quarter adjusted earnings per share would have been $1.70 and $2.06, respectively.
Effective Tax Rate, as Adjusted
The effective tax rate, as adjusted, was 39 percent for the fourth quarter compared with 37 percent in the prior-year quarter and 38 percent in the sequential quarter.
GAAP Results
Total revenues were $86.1 million in the fourth quarter compared with $112.1 million in the prior-year quarter and $92.4 million in the sequential quarter due to lower average assets and fee rates.
Operating expenses were $69.6 million in the fourth quarter compared with $75.5 million in the prior-year quarter and $69.3 million in the sequential quarter. Operating expenses decreased from the prior-year quarter due to lower distribution and other asset-based expenses.
In the fourth quarter, the company reported net income attributable to common stockholders of $6.6 million, or $0.76 per fully diluted common share, that includes ($8.5) million, or ($0.97) per share, of unrealized losses on investments. This compares with net income of $18.9 million, or $2.05 per share, in the prior-year quarter that included ($8.4) million, or ($0.91) per share, of unrealized losses. In the sequential quarter, the company reported a net loss of ($0.6) million, or ($0.07) per share, that included ($16.6), million or ($1.89) per share, of unrealized losses.
The effective fourth quarter tax rate was 60 percent compared with 45 percent in the prior-year quarter and 162 percent in the sequential quarter. The tax rates for the respective periods were impacted by valuation allowances of $2.5 million, $2.4 million and $6.2 million related to the unrealized loss position of the company's marketable securities portfolio.
Investment Capabilities and Products
The Virtus DFA Target Date Retirement Income funds(1), managed by Dimensional Fund Advisors, were introduced in January. The funds seek to help individuals invest toward future retirement income and support income needs in retirement with a focus on managing risks, including inflation and changes in interest rates.
Balance Sheet and Liquidity
Cash and investments were $421.5 million at December 31, 2015 compared with $469.5 million at December 31, 2014 and $444.7 million at September 30, 2015. The decrease from prior periods was primarily due to return of capital to shareholders that offset cash generated. On a per share basis, cash and investments were $50 at December 31, 2015 compared with $52 at December 31, 2014 and $51 at September 30, 2015. At December 31, 2015, the company had no debt outstanding and $75.0 million of unused capacity on its credit facility.
Working capital was $71.8 million at December 31, 2015 compared with $190.6 million at December 31, 2014 and $106.6 million at September 30, 2015. The change from December 31, 2014 reflects return of capital, increased seed activity and an equity investment in an entity created for a potential CLO. The change from September 30, 2015 was primarily due to the highest level of capital return to shareholders and an additional investment of $20.0 million in the potential CLO, bringing the total investment in the CLO entity to $40.0 million.
The company's seed capital investments were $273.7 million at December 31, 2015 compared with $238.2 million at December 31, 2014 and $276.8 million at September 30, 2015. The change from the prior-year quarter reflects $49.2 million of net seed activity partially offset by unrealized mark-to-market adjustments.
In the fourth quarter, the company returned $38.9 million to shareholders, including share repurchases of $35.0 million. As a result of share repurchases, ending shares outstanding decreased to 8.4 million at December 31, 2015, a decline of 6.4 percent from December 31, 2014 and 3.1 percent from September 30, 2015.
Balance Sheet Highlights (Unaudited)
(in millions)
As of As of
----- -----
12/31/2015 12/31/2014 Change 9/30/2015 Change
---------- ---------- ------ --------- ------
Cash and cash equivalents $87.6 $202.8 (57)% $126.5 (31)%
Seed capital investments (1) 273.7 238.2 15% 276.8 (1)%
Investments - other (2) 60.2 28.5 111% 41.4 45%
---- ---- ----
Total - cash and investments $421.5 $469.5 (10)% $444.7 (5)%
Deferred taxes, net $54.1 60.2 (10)% $59.7 (9)%
Dividends payable $4.2 $4.3 (1)% $4.3 (1)%
Total equity attributable to stockholders $509.6 $563.5 (10)% $539.6 (6)%
Working capital (3) $71.8 $190.6 (62)% $106.6 (33)%
(1) Represents the company's investments in sponsored investment products including the company's investment in consolidated sponsored investment products (CSIPs), net of non-controlling interests. For the periods ending December 31, 2015, December 31, 2014, and September 30,
2015, net assets of CSIPs represent $343.5 million, $252.3 million, and $338.7 million, of total assets, $15.4 million, $12.6 million, and $29.8 million of total liabilities, and $73.9 million, $23.1 million, and $49.9 million of redeemable noncontrolling interests,
respectively
(2) Investments that are not related to the company's seed investments including mutual funds and a potential CLO
(3) Defined as cash and investments plus accounts receivable, net, less seed capital investments, a potential CLO, accrued compensation and benefits, accounts payable and accrued liabilities, and dividends payable
N/M - Not Meaningful
Conference Call
Virtus Investment Partners management will host an investor conference call on Friday, January 29, at 10 a.m. Eastern to discuss these financial results and related matters. The webcast of the call will be available in the Investor Relations section of www.virtus.com or by telephone at 877-930-7765 if calling from within the U.S. or 253-336-7413 if calling from outside the U.S. (Conference ID: 37387004). A replay of the call will be available through March 1 via webcast or by telephone at 855-859-2056 if calling from within the U.S. or 404-537-3406 if calling from outside the U.S. (Conference ID: 37387004). The presentation that will be reviewed as part of the conference call will be available in the Presentations section of www.virtus.com.
About Virtus Investment Partners
Virtus Investment Partners (NASDAQ: VRTS) is a distinctive partnership of boutique investment managers singularly committed to the long-term success of individual and institutional investors. Virtus offers access to a variety of investment styles across multiple disciplines to meet a wide array of investor needs, and provides products and services through affiliated managers and select subadvisers, each with a distinct investment style, autonomous investment process and individual brand. Its affiliates include Cliffwater Investments, Duff & Phelps Investment Management, Euclid Advisors, Kayne Anderson Rudnick Investment Management, Kleinwort Benson Investors International, Newfleet Asset Management, Rampart Investment Management, Virtus ETF Solutions, and Zweig Advisers. Additional information can be found at www.virtus.com.
U.S. GAAP Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Three
Months
Ended Twelve Months Ended
------------------ -------------------- -------------------
12/31/2015 12/31/2014 Change 9/30/2015 Change 12/31/2015 12/31/2014 Change
---------- ---------- ------ --------- ------ ---------- ---------- ------
Revenues
Investment management fees $60,611 $75,374 (20)% $64,891 (7)% $264,865 $300,663 (12)%
Distribution and service fees 14,246 21,901 (35)% 15,587 (9)% 67,066 91,950 (27)%
Administration and transfer agent fees 11,014 14,197 (22)% 11,614 (5)% 48,247 56,016 (14)%
Other income and fees 244 665 (63)% 283 (14)% 1,799 1,969 (9)%
Total revenues 86,115 112,137 (23)% 92,375 (7)% 381,977 450,598 (15)%
------ ------- ------ ------- -------
Operating Expenses
Employment expenses 34,376 34,053 1% 33,504 3% 137,095 139,809 (2)%
Distribution and other asset-based expenses 19,831 27,526 (28)% 21,717 (9)% 89,731 123,665 (27)%
Other operating expenses 12,498 11,579 8% 11,165 12% 63,901 46,531 37%
Other operating expenses of consolidated sponsored investment 1,239 664 87% 1,120 11% 4,134 3,038 36%
products
Restructuring and severance - - - - - - 294 N/M
Depreciation and other amortization 881 723 22% 910 (3)% 3,443 2,763 25%
Amortization expense 784 927 (15)% 837 (6)% 3,295 3,778 (13)%
Total operating expenses 69,609 75,472 (8)% 69,253 1% 301,599 319,878 (6)%
------ ------ ------ ------- -------
Operating Income 16,506 36,665 (55)% 23,122 (29)% 80,378 130,720 (39)%
------ ------ ------ ------ -------
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net 332 (798) N/M (2,082) N/M (862) 914 N/M
Realized and unrealized (loss) gain on investments of (4,910) (5,798) 15% (17,619) 72% (23,181) (4,648) 399%
consolidated sponsored investment products, net
Realized and unrealized loss on investments of consolidated (2,784) - N/M (721) 286% (3,505) - N/M
investment product, net
Other income, net 75 318 (76)% 141 (47)% 898 891 1%
Total other (expense), net (7,287) (6,278) (16)% (20,281) 64% (26,650) (2,843) N/M
------ ------ ------- ------- ------
Interest Income (Expense)
Interest expense (141) (125) (13)% (138) 2% (523) (537) 3%
Interest and dividend income 355 653 (46)% 324 10% 1,261 1,706 (26)%
Interest and dividend income of investments of consolidated 3,184 2,534 26% 2,898 10% 11,504 7,268 58%
sponsored investment products
Interest income of investments of consolidated investment 1,632 - N/M 41 N/M 1,673 - N/M
product
Total interest income, net 5,030 3,062 64% 3,125 61% 13,915 8,437 65%
----- ----- ----- ------ -----
Income Before Income Taxes 14,249 33,449 (57)% 5,966 139% 67,643 136,314 (50)%
Income tax expense 8,612 15,038 (43)% 9,669 (11)% 36,972 39,349 (6)%
Net Income (Loss) 5,637 18,411 (69)% (3,703) N/M 30,671 96,965 (68)%
----- ------ ------ ------ ------
Noncontrolling interests 999 468 113% 3,054 (67)% 4,435 735 N/M
Net Income (Loss) Attributable to Common Stockholders $6,636 $18,879 (65)% $(649) N/M $35,106 $97,700 (64)%
====== ======= ===== ======= =======
Earnings (Loss) Per Share - Basic $0.78 $2.09 (62)% $(0.07) N/M $3.99 $10.75 (63)%
===== ===== ====== ===== ======
Earnings (Loss) Per Share - Diluted $0.76 $2.05 (63)% $(0.07) N/M $3.92 $10.51 (63)%
===== ===== ====== ===== ======
Cash Dividends Declared Per Share $0.45 $0.45 - $0.45 - $1.80 $1.35 33%
===== ===== ===== ===== =====
Weighted Average Shares Outstanding - Basic 8,562 9,021 (5)% 8,775 (2)% 8,797 9,091 (3)%
===== ===== ===== ===== =====
Weighted Average Shares Outstanding - Diluted 8,726 9,203 (5)% 8,775 (1)% 8,960 9,292 (4)%
===== ===== ===== ===== =====
N/M - Not Meaningful
Non-GAAP Consolidated Income Statement Information
(in thousands, except per share data)
Three Months Ended Three
Months
Ended Twelve Months Ended
------------------ -------------------- -------------------
12/31/2015 12/31/2014 Change 9/30/2015 Change 12/31/2015 12/31/2014 Change
---------- ---------- ------ --------- ------ ---------- ---------- ------
Revenues, As Adjusted
Investment management fees, as adjusted $60,853 $75,866 (20)% $65,193 (7)% $267,168 $301,059 (11)%
Distribution and service fees, as adjusted 14,272 21,919 (35)% 15,614 (9)% 67,162 91,998 (27)%
Administration and transfer agent fees, as adjusted 11,123 14,275 (22)% 11,714 (5)% 48,617 56,233 (14)%
Other income and fees, as adjusted 244 665 (63)% 283 (14)% 1,799 1,969 (9)%
Distribution and other asset-based expenses, as adjusted (19,831) (27,526) 28% (21,717) 9% (89,731) (114,089) 21%
Total revenues, as adjusted 66,661 85,199 (22)% 71,087 (6)% 295,015 337,170 (13)%
------ ------ ------ ------- -------
Operating Expenses, As Adjusted
Employment expenses, as adjusted 34,376 34,053 1% 33,504 3% 137,095 138,441 (1)%
Other operating expenses, as adjusted 12,001 11,220 7% 11,335 6% 46,153 45,481 1%
Depreciation and other amortization, as adjusted 881 723 22% 910 (3)% 3,443 2,763 25%
Total operating expenses, as adjusted 47,258 45,996 3% 45,749 3% 186,691 186,685 -
------ ------ ------ ------- -------
Operating Income, As Adjusted 19,403 39,203 (51)% 25,338 (23)% 108,324 150,485 (28)%
------ ------ ------ ------- -------
Other Income (Expense), as adjusted
Realized and unrealized (loss) on investments, net, as adjusted (202) (282) 28% (159) 27% (21) (349) 94%
Other income, net, as adjusted 75 318 (76)% 141 (47)% 898 891 1%
Total other income (expense), net, as adjusted (127) 36 N/M (18) N/M 877 542 62%
---- --- --- --- ---
Interest Income (Expense), as adjusted
Interest expense, as adjusted (141) (125) (13)% (138) 2% (523) (537) 3%
Interest and dividend income, as adjusted 204 269 (24)% 247 (17)% 845 957 (12)%
Total interest income, net, as adjusted 63 144 (56)% 109 (42)% 322 420 (23)%
--- --- --- --- ---
Pre-Tax Income, As Adjusted 19,339 39,383 (51)% 25,429 (24)% 109,523 151,447 (28)%
Income tax expense, as adjusted 7,475 14,738 (49)% 9,787 (24)% 41,889 57,725 (27)%
Net Income, As Adjusted 11,864 24,645 (52)% 15,642 (24)% 67,634 93,722 (28)%
------ ------ ------ ------ ------
Noncontrolling interests, as adjusted 67 43 54% (94) N/M 175 129 36%
Net Income Attributable to Common Stockholders, As Adjusted $11,931 $24,688 (52)% $15,548 (23)% $67,809 $93,851 (28)%
======= ======= ======= ======= =======
Earnings Per Share - Basic, As Adjusted $1.39 $2.74 (49)% $1.77 (21)% $7.71 $10.32 (25)%
===== ===== ===== ===== ======
Earnings Per Share - Diluted, As Adjusted $1.37 $2.68 (49)% $1.74 (21)% $7.57 $10.10 (25)%
===== ===== ===== ===== ======
Weighted Average Shares Outstanding - Basic 8,562 9,021 (5)% 8,775 (2)% 8,797 9,091 (3)%
===== ===== ===== ===== =====
Weighted Average Shares Outstanding - Diluted 8,726 9,203 (5)% 8,931 (2)% 8,960 9,292 (4)%
===== ===== ===== ===== =====
N/M - Not Meaningful
Assets Under Management - Product and Asset Class
(in millions)
Three Months Ended
Dec 31, 2015 Sep 30, 2015 Jun 30, 2015 Mar 31, 2015 Dec 31, 2014
------------ ------------ ------------ ------------ ------------
By product (period end):
Open-End Funds (1) $28,882.1 $29,716.4 $33,345.3 $35,317.8 $37,514.2
Closed-End Funds 6,222.3 6,349.8 6,901.0 7,288.0 7,581.4
Exchange Traded Funds 340.8 306.9 132.6 - -
Separately Managed Accounts
(2) 6,784.4 6,539.6 6,952.1 7,131.0 6,884.8
Institutional Accounts (2) 5,155.7 5,025.0 5,070.0 5,036.2 4,722.0
Total $47,385.3 $47,937.7 $52,401.0 $54,773.0 $56,702.4
========= ========= ========= ========= =========
By product (average) (3)
Open-End Funds (1) $30,017.6 $31,627.1 $34,852.2 $36,663.7 $39,550.2
Closed-End Funds 6,378.5 6,714.5 7,256.5 7,435.8 7,551.8
Exchange Traded Funds 343.4 269.9 103.9 - -
Money Market Funds - - - - 176.5
Separately Managed Accounts
(2) 6,552.7 6,930.9 7,125.3 6,846.3 6,620.4
Institutional Accounts (2) 5,199.9 5,082.4 5,054.8 4,786.7 4,602.6
Total $48,492.1 $50,624.8 $54,392.7 $55,732.5 $58,501.5
========= ========= ========= ========= =========
By asset class (period end):
Equity $28,314.9 $28,231.0 $31,908.8 $33,129.0 $34,180.7
Fixed Income 15,115.6 15,580.6 16,010.8 16,521.1 16,681.6
Alternatives (4) 3,468.7 3,681.7 4,031.2 4,703.8 5,372.4
Other (5) 486.1 444.4 450.2 419.1 467.7
Total $47,385.3 $47,937.7 $52,401.0 $54,773.0 $56,702.4
========= ========= ========= ========= =========
Assets Under Management - Average Net Management Fees Earned (6)
(In basis points)
Three Months Ended
Dec 31, 2015 Sep 30, 2015 Jun 30, 2015 Mar 31, 2015 Dec 31, 2014
------------ ------------ ------------ ------------ ------------
Open-End Funds (1) 46.0 47.3 49.2 49.9 50.6
Closed-End Funds 66.3 66.9 66.9 66.7 67.2
Exchange Traded Funds 29.1 21.9 8.9 - -
Separately Managed Accounts
(2) 54.4 54.5 53.5 54.2 51.7
Institutional Accounts (2) 34.4 34.2 34.9 36.3 35.2
All Products 48.4 49.4 50.7 51.5 51.5
(1) Includes assets under management of open-end and variable insurance funds
(2) Includes assets under management related to option strategies
(3) Averages are calculated as follows:
- Funds - average daily or weekly balances
- Separately Managed Accounts - prior quarter ending balance or average of month-end balances in quarter
- Institutional Accounts - average of month-end balances in quarter
(4) Consists of long/short equity, real estate securities, master-limited partnerships, and other
(5) Consists of option strategies
(6) Represents net investment management fees divided by average assets. Net investment management fees are defined as investment management fees, as adjusted, less fees paid to third party service providers for investment management related services. For the three
months ended December 31, 2015, the impact of third party service providers for investment management related services on Open-End Funds and All Products was 2.2 and 1.4 basis points, respectively.
Assets Under Management - Asset Flows by Product
(in millions)
Three Months Ended Twelve Months Ended
------------------ -------------------
12/31/2015 9/30/2015 6/30/2015 3/31/2015 12/31/2014 12/31/2015 12/31/2014
---------- --------- --------- --------- ---------- ---------- ----------
Open-End Funds (1)
Beginning balance $29,716.4 $33,345.3 $35,317.8 $37,514.2 $41,076.3 $37,514.2 $37,679.5
Inflows 2,546.9 1,866.2 2,619.5 3,014.2 2,856.2 10,046.8 12,733.7
Outflows (3,702.0) (3,736.0) (4,174.5) (5,398.0) (5,090.2) (17,010.5) (13,428.1)
-------- -------- -------- -------- -------- --------- ---------
Net Flows (1,155.1) (1,869.8) (1,555.0) (2,383.8) (2,234.0) (6,963.7) (694.4)
Market performance 425.2 (1,780.9) (352.9) 197.1 (348.1) (1,511.5) 1,297.2
Other (2) (104.4) 21.8 (64.6) (9.7) (980.0) (156.9) (768.1)
Ending balance $28,882.1 $29,716.4 $33,345.3 $35,317.8 $37,514.2 $28,882.1 $37,514.2
========= ========= ========= ========= ========= ========= =========
Closed-End Funds
Beginning balance $6,349.8 $6,901.0 $7,288.0 $7,581.4 $7,568.1 $7,581.4 $6,499.6
Inflows - - - - - - 493.8
Outflows - - - - - - -
--- --- --- --- --- --- ---
Net Flows - - - - - - 493.8
Market performance 18.7 (380.4) (281.6) (168.6) 123.2 (811.9) 799.3
Other (2) (146.2) (170.8) (105.4) (124.8) (109.9) (547.2) (211.3)
Ending balance $6,222.3 $6,349.8 $6,901.0 $7,288.0 $7,581.4 $6,222.3 $7,581.4
======== ======== ======== ======== ======== ======== ========
Exchange Traded Funds
Beginning balance $306.9 $132.6 $ - $ - $ - $ - $ -
Inflows 57.7 217.7 67.4 - - 342.8 -
Outflows (23.0) (13.8) (12.2) - - (49.0) -
----- ----- ----- --- --- ----- ---
Net Flows 34.7 203.9 55.2 - - 293.8 -
Market performance 1.6 (29.1) (0.4) - - (27.9) -
Other (2) (2.4) (0.5) 77.8 - - 74.9 -
Ending balance $340.8 $306.9 $132.6 $ - $ - $340.8 $ -
====== ====== ====== ================ ================ ====== ================
Money Market Funds
Beginning balance $ - $ - $ - $ - $1,231.9 $ - $1,556.6
Other (2) - - - - (1,231.9) - (1,556.6)
Ending balance $ - $ - $ - $ - $ - $ - $ -
================ ================ ================ ================ ================ ================ ================
Separately Managed Accounts
Beginning balance $6,539.6 $6,952.1 $7,131.0 $6,884.8 $6,653.0 $6,884.8 $7,433.1
Inflows 332.8 263.8 366.8 328.5 263.7 1,291.9 1,333.6
Outflows (396.6) (334.5) (342.2) (355.3) (412.5) (1,428.6) (2,244.8)
------ ------ ------ ------ ------ -------- --------
Net Flows (63.8) (70.7) 24.6 (26.8) (148.8) (136.7) (911.2)
Market performance 312.0 (353.2) (65.5) 177.4 397.6 70.7 355.5
Other (2) (3.4) 11.4 (138.0) 95.6 (17.0) (34.4) 7.4
Ending balance $6,784.4 $6,539.6 $6,952.1 $7,131.0 $6,884.8 $6,784.4 $6,884.8
======== ======== ======== ======== ======== ======== ========
Institutional Accounts (3)
Beginning balance $5,025.0 $5,070.0 $5,036.2 $4,722.0 $4,348.3 $4,722.0 $4,570.8
Inflows 226.6 199.5 214.1 368.1 309.9 1,008.3 650.5
Outflows (181.3) (110.3) (87.3) (147.2) (132.1) (526.1) (743.0)
------ ------ ----- ------ ------ ------ ------
Net Flows 45.3 89.2 126.8 220.9 177.8 482.2 (92.5)
Market performance 120.4 (109.9) (81.9) 117.6 216.8 46.2 389.2
Other (2) (35.0) (24.3) (11.1) (24.3) (20.9) (94.7) (145.5)
Ending balance $5,155.7 $5,025.0 $5,070.0 $5,036.2 $4,722.0 $5,155.7 $4,722.0
======== ======== ======== ======== ======== ======== ========
Total
Beginning balance $47,937.7 $52,401.0 $54,773.0 $56,702.4 $60,877.6 $56,702.4 $57,739.6
Inflows 3,164.0 2,547.2 3,267.8 3,710.8 3,429.8 12,689.8 15,211.6
Outflows (4,302.9) (4,194.6) (4,616.2) (5,900.5) (5,634.8) (19,014.2) (16,415.9)
-------- -------- -------- -------- -------- --------- ---------
Net Flows (1,138.9) (1,647.4) (1,348.4) (2,189.7) (2,205.0) (6,324.4) (1,204.3)
Market performance 877.9 (2,653.5) (782.3) 323.5 389.5 (2,234.4) 2,841.2
Other (2) (291.4) (162.4) (241.3) (63.2) (2,359.7) (758.3) (2,674.1)
Ending balance $47,385.3 $47,937.7 $52,401.0 $54,773.0 $56,702.4 $47,385.3 $56,702.4
========= ========= ========= ========= ========= ========= =========
(1) Includes assets under management of open-end and variable insurance funds
(2) Represents open-end and closed-end mutual fund distributions, net of reinvestments, net flows of cash management strategies, net flows and market performance of structured products, which are a component of institutional accounts, and net flows from non-sales related activities such as asset acquisitions/(dispositions), marketable
securities investments/(withdrawals), and the impact on assets from the use of leverage
(3) Includes assets under management related to option strategies
Reconciliation of U.S. GAAP Consolidated Statement of Operations to Non-GAAP Consolidated Income Statement Information
(Unaudited, in thousands)
Three months ended December 31, 2015
Reclassifications Adjustments
----------------- -----------
U.S. GAAP
Basis Distribution
and other
asset-
based
expenses Consolidated
investment
products Amortization
of intangible
assets Seed capital and
CLO investments Other Non-GAAP
Basis
----------------- -------------------------------- ---------------------------------- ------------------------------------ ---------------------------------- ----- ----------------
Revenues
Investment management fees $60,611 $ - $242 $ - $ - $ - $60,853
Distribution and services fees 14,246 - 26 - - - 14,272
Administration and transfer agent fees 11,014 - 109 - - - 11,123
Other income and fees 244 - - - - - 244
Distribution and other asset-based expenses - (19,831) - - - - (19,831)
Total revenues 86,115 (19,831) 377 - - - 66,661
------ ------- --- --- --- --- ------
Operating Expenses
Employment expenses 34,376 - - - - - 34,376
Distribution and other asset-based expenses 19,831 (19,831) - - - - -
Other operating expense 12,498 - - - - (497) 12,001
Other operating expenses of consolidated sponsored 1,239 - (1,239) - - - -
investment products
Restructuring and severance - - - - - - -
Depreciation and other amortization 881 - - - - - 881
Amortization expense 784 - - (784) - - -
Total operating expenses 69,609 (19,831) (1,239) (784) - (497) 47,258
------ ------- ------ ---- --- ---- ------
Operating Income 16,506 - 1,616 784 - 497 19,403
------ --- ----- --- --- --- ------
Other Income (Expense)
Realized and unrealized (loss) gain on investments, net 332 - (5,539) - 5,005 - (202)
Realized and unrealized (loss) gain on investments (4,910) - 4,910 - - - -
of consolidated sponsored investment products, net
Realized and unrealized (loss) gain on investments (2,784) - 2,784 - - - -
of consolidated investment product, net
Other income, net 75 - (1,155) - 1,155 - 75
Total other (expense) income, net (7,287) - 1,000 - 6,160 - (127)
------ --- ----- --- ----- --- ----
Interest Income (Expense)
Interest expense (141) - - - - - (141)
Interest and dividend income 355 - 3,132 - (3,283) - 204
Interest and dividend income of investments of consolidated 3,184 - (3,184) - - - -
sponsored investment products, net
Interest income of investments of consolidated investment 1,632 - (1,632) - - - -
product, net
Total interest income, net 5,030 - (1,684) - (3,283) - 63
----- --- ------ --- ------ --- ---
Income Before Income Taxes 14,249 - 932 784 2,877 497 19,339
Income tax expense 8,612 - - 303 (1,387) (53) 7,475
Net Income 5,637 - 932 481 4,264 550 11,864
----- --- --- --- ----- --- ------
Noncontrolling interests 999 - (932) - - - 67
--- --- ---- --- --- --- ---
Net Income Attributable to Common Stockholders $6,636 $ - $ - $481 $4,264 $550 $11,931
====== ========================= ============================ ==== ====== ==== =======
Earnings Per Share - Basic $0.78 $1.39
===== =====
Earnings Per Share - Diluted $0.76 $1.37
===== =====
Weighted Average Shares Outstanding - Basic (in thousands) 8,562 8,562
===== =====
Weighted Average Shares Outstanding - Diluted (in thousands) 8,726 8,726
===== =====
See pages 16 through 17 for notes to the reconciliation
Reconciliation of U.S. GAAP Consolidated Statement of Operations to Non-GAAP Consolidated Income Statement Information
(Unaudited, in thousands, except per share data)
Three months ended December 31, 2014
Reclassifications Adjustments
----------------- -----------
U.S. GAAP
Basis Distribution
and other
asset-based
expenses Consolidated
sponsored
investment
products Amortization
of intangible
assets Seed capital
investments Other Non-GAAP
Basis
----------------- ------------------------------------- -------------------------------------------- ----------------------------------- -------------------------- ----- ----------------
Revenues
Investment management fees $75,374 $ - $492 $ - $ - $ - $75,866
Distribution and service fees 21,901 - 18 - - - 21,919
Administration and transfer agent fees 14,197 - 78 - - - 14,275
Other income and fees 665 - - - - - 665
Distribution and other asset-based expenses - (27,526) - - - - (27,526)
Total revenues 112,137 (27,526) 588 - - - 85,199
------- ------- --- --- --- --- ------
Operating Expenses
Employment expenses 34,053 - - - - - 34,053
Distribution and other asset-based expenses 27,526 (27,526) - - - - -
Other operating expenses 11,579 - - - - (359) 11,220
Other operating expenses of consolidated
sponsored investment products 664 - (664) - - - -
Restructuring and severance - - - - - - -
Depreciation and other amortization 723 - - - - - 723
Amortization expense 927 - - (927) - - -
Total operating expenses 75,472 (27,526) (664) (927) - (359) 45,996
------ ------- ---- ---- --- ---- ------
Operating Income 36,665 - 1,252 927 - 359 39,203
------ --- ----- --- --- --- ------
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net (798) - (5,207) - 5,723 - (282)
Realized and unrealized gain (loss) on investments
of consolidated sponsored investment products, net (5,798) - 5,798 - - - -
Other income (expense), net 318 - - - - - 318
Total other income (expense), net (6,278) - 591 - 5,723 - 36
------ --- --- --- ----- --- ---
Interest Income (Expense)
Interest expense (125) - - - - - (125)
Interest and dividend income 653 - 1,116 - (1,500) - 269
Interest and dividend income of investments
of consolidated sponsored investment products 2,534 - (2,534) - - - -
Total interest income (expense), net 3,062 - (1,418) - (1,500) - 144
----- --- ------ --- ------ --- ---
Income Before Income Taxes 33,449 - 425 927 4,223 359 39,383
Income tax expense 15,038 - - 347 (782) 135 14,738
Net Income 18,411 - 425 580 5,005 224 24,645
------ --- --- --- ----- --- ------
Noncontrolling interests 468 - (425) - - - 43
--- --- ---- --- --- --- ---
Net Income Attributable to Common Stockholders $18,879 $ - $ - $580 $5,005 $224 $24,688
======= ========================= ========================= ==== ====== ==== =======
Earnings Per Share - Basic $2.09 $2.74
===== =====
Earnings Per Share - Diluted $2.05 $2.68
===== =====
Weighted Average Shares Outstanding - Basic 9,021 9,021
===== =====
Weighted Average Shares Outstanding - Diluted 9,203 9,203
===== =====
See pages 16 through 17 for notes to the reconciliation
Reconciliation of U.S. GAAP Consolidated Statement of Operations to Non-GAAP Consolidated Income Statement Information
(Unaudited, dollars in thousands except per share data)
Three months ended September 30, 2015
Reclassifications Adjustments
----------------- -----------
U.S. GAAP
Basis Distribution and
other asset-based
expenses Consolidated
investment
products Amortization
of intangible
assets Seed capital and
CLO investments Other Non-GAAP
Basis
----------------- --------------------------------------------- ---------------------------------- ----------------------------------- ---------------------------------- ----- ----------------
Revenues
Investment management fees $64,891 $ - $302 $ - $ - $ - $65,193
Distribution and services fees 15,587 - 27 - - - 15,614
Administration and transfer agent fees 11,614 - 100 - - - 11,714
Other income and fees 283 - - - - - 283
Distribution and other asset-based expenses - (21,717) - - - - (21,717)
Total revenues 92,375 (21,717) 429 - - - 71,087
------ ------- --- --- --- --- ------
Operating Expenses
Employment expenses 33,504 - - - - - 33,504
Distribution and other asset-based expenses 21,717 (21,717) - - - - -
Other operating expense 11,165 - - - - 170 11,335
Other operating expenses of consolidated sponsored investment products 1,120 - (1,120) - - - -
Restructuring and severance - - - - - - -
Depreciation and other amortization 910 - - - - - 910
Amortization expense 837 - - (837) - - -
Total operating expenses 69,253 (21,717) (1,120) (837) - 170 45,749
------ ------- ------ ---- --- --- ------
Operating Income 23,122 - 1,549 837 - (170) 25,338
------ --- ----- --- --- ---- ------
Other Income (Expense)
Realized and unrealized (loss) gain on investments, net (2,082) - (14,145) - 16,068 - (159)
Realized and unrealized (loss) gain on investments (17,619) - 17,619 - - - -
of consolidated sponsored investment products, net
Realized and unrealized (loss) gain on investments (721) - 721 - - - -
of consolidated investment product, net
Other income, net 141 - (680) - 680 - 141
Total other (expense) income, net (20,281) - 3,515 - 16,748 - (18)
------- --- ----- --- ------ --- ---
Interest Income (Expense)
Interest expense (138) - - - - - (138)
Interest and dividend income 324 - 1,023 - (1,100) - 247
Interest and dividend income of investments of consolidated 2,898 - (2,898) - - - -
sponsored investment products, net
Interest income of investments of consolidated investment 41 - (41) - - - -
product, net
Total interest income, net 3,125 - (1,916) - (1,100) - 109
----- --- ------ --- ------ --- ---
Income Before Income Taxes 5,966 - 3,148 837 15,648 (170) 25,429
Income tax expense 9,669 - - 322 (139) (65) 9,787
Net Income (3,703) - 3,148 515 15,787 (105) 15,642
------ --- ----- --- ------ ---- ------
Noncontrolling interests 3,054 - (3,148) - - - (94)
----- --- ------ --- --- --- ---
Net Income Attributable to Common Stockholders $(649) $ - $ - $515 $15,787 $(105) $15,548
===== =========================== =========================== ==== ======= ===== =======
Earnings Per Share - Basic $(0.07) $1.77
====== =====
Earnings Per Share - Diluted $(0.07) $1.74
====== =====
Weighted Average Shares Outstanding - Basic (in
thousands) 8,775 8,775
===== =====
Weighted Average Shares Outstanding - Diluted (in
thousands) 8,775 8,931
===== =====
See pages 16 through 17 for notes to the reconciliation
Reconciliation of U.S. GAAP Consolidated Statement of Operations to Non-GAAP Consolidated Income Statement Information
(Unaudited, in thousands)
Twelve Months Ended December 31, 2015
Reclassifications Adjustments
----------------- -----------
U.S. GAAP
Basis Distribution and
other asset-based
expenses Consolidated
investment
products Amortization
of intangible
assets Seed capital and
CLO investments Other Non-GAAP
Basis
----------------- --------------------------------------------- ---------------------------------- ----------------------------------- ---------------------------------- ----- ----------------
Revenues
Investment management fees $264,865 $ - $1,137 $ - $ - $1,166 $267,168
Distribution and services fees 67,066 - 96 - - - 67,162
Administration and transfer agent fees 48,247 - 370 - - - 48,617
Other income and fees 1,799 - - - - - 1,799
Distribution and other asset-based expenses - (89,731) - - - - (89,731)
Total revenues 381,977 (89,731) 1,603 - - 1,166 295,015
------- ------- ----- --- --- ----- -------
Operating Expenses
Employment expenses 137,095 - - - - - 137,095
Distribution and other asset-based expenses 89,731 (89,731) - - - - -
Other operating expense 63,901 - - - - (17,748) 46,153
Other operating expenses of consolidated sponsored 4,134 - (4,134) - - - -
investment products
Restructuring and severance - - - - - - -
Depreciation and other amortization 3,443 - - - - - 3,443
Amortization expense 3,295 - - (3,295) - - -
Total operating expenses 301,599 (89,731) (4,134) (3,295) - (17,748) 186,691
------- ------- ------ ------ --- ------- -------
Operating Income 80,378 - 5,737 3,295 - 18,914 108,324
------ --- ----- ----- --- ------ -------
Other Income (Expense)
Realized and unrealized (loss) gain on investments, net (862) - (19,173) - 20,014 - (21)
Realized and unrealized (loss) gain on investments (23,181) - 23,181 - - - -
of consolidated sponsored investment products, net
Realized and unrealized (loss) gain on investments (3,505) - 3,505 - - - -
of consolidated investment product, net
Other income, net 898 - (1,835) - 1,835 - 898
Total other (expense) income, net (26,650) - 5,678 - 21,849 - 877
------- --- ----- --- ------ --- ---
Interest Income (Expense)
Interest expense (523) - - - - - (523)
Interest and dividend income 1,261 - 6,022 - (6,438) - 845
Interest and dividend income of investments of consolidated 11,504 - (11,504) - - - -
sponsored investment products, net
Interest income of investments of consolidated investment 1,673 - (1,673) - - - -
product, net
Total interest income, net 13,915 - (7,155) - (6,438) - 322
------ --- ------ --- ------ --- ---
Income Before Income Taxes 67,643 - 4,260 3,295 15,411 18,914 109,523
Income tax expense 36,972 - - 1,262 (2,525) 6,180 41,889
Net Income 30,671 - 4,260 2,033 17,936 12,734 67,634
------ --- ----- ----- ------ ------ ------
Noncontrolling interests 4,435 - (4,260) - - - 175
----- --- ------ --- --- --- ---
Net Income Attributable to Common Stockholders $35,106 $ - $ - $2,033 $17,936 $12,734 $67,809
======= ======================================= ========================================= ====== ======= ======= =======
Earnings Per Share - Basic $3.99 $7.71
===== =====
Earnings Per Share - Diluted $3.92 $7.57
===== =====
Weighted Average Shares Outstanding - Basic (in thousands) 8,797 8,797
===== =====
Weighted Average Shares Outstanding - Diluted (in thousands) 8,960 8,960
===== =====
See pages 16 through 17 for notes to the reconciliation
Reconciliation of U.S. GAAP Consolidated Statement of Operations to Non-GAAP Consolidated Income Statement Information
(Unaudited, dollars in thousands except per share data)
Twelve months ended December 31, 2014
Reclassifications Adjustments
----------------- -----------
U.S. GAAP
Basis Distribution and
other asset-based
expenses Consolidated
sponsored
investment
products Closed-end fund
launch costs Amortization
of intangible
assets Seed capital
investments Other Non-GAAP
Basis
----------------- --------------------------------------------- -------------------------------------------- ------------------------------ ----------------------------------- -------------------------- ----- ----------------
Revenues
Investment management fees $300,663 $ - $396 $ - $ - $ - $ - $301,059
Distribution and services fees 91,950 - 48 - - - - 91,998
Administration and transfer agent fees 56,016 - 217 - - - - 56,233
Other income and fees 1,969 - - - - - - 1,969
Distribution and other asset-based expenses - (114,089) - - - - - (114,089)
Total revenues 450,598 (114,089) 661 - - - - 337,170
------- -------- --- --- --- --- --- -------
Operating Expenses
Employment expenses 139,809 - - (509) - - (859) 138,441
Distribution and other asset-based expenses 123,665 (114,089) - (9,576) - - - -
Other operating expense 46,531 - - - - - (1,050) 45,481
Other operating expenses of consolidated
sponsored investment products 3,038 - (3,038) - - - - -
Restructuring and severance 294 - - - - - (294) -
Depreciation and other amortization 2,763 - - - - - - 2,763
Amortization expense 3,778 - - - (3,778) - - -
Total operating expenses 319,878 (114,089) (3,038) (10,085) (3,778) - (2,203) 186,685
------- -------- ------ ------- ------ --- ------ -------
Operating Income 130,720 - 3,699 10,085 3,778 - 2,203 150,485
------- --- ----- ------ ----- --- ----- -------
Other Income (Expense)
Realized and unrealized (loss) gain on investments, net 914 - (3,495) - - 2,232 - (349)
Realized and unrealized (loss) gain on investments (4,648) - 4,648 - - - - -
of consolidated sponsored investment products, net
Other income, net 891 - - - - - - 891
Total other income (expense), net (2,843) - 1,153 - - 2,232 - 542
------ --- ----- --- --- ----- --- ---
Interest Income (Expense)
Interest expense (537) - - - - - - (537)
Interest and dividend income 1,706 - 3,022 - - (3,771) - 957
Interest and dividend income of investments of consolidated 7,268 - (7,268) - - - - -
sponsored investment products, net
Total interest income, net 8,437 - (4,246) - - (3,771) - 420
----- --- ------ --- --- ------ --- ---
Income Before Income Taxes 136,314 - 606 10,085 3,778 (1,539) 2,203 151,447
Income tax expense 39,349 - - 3,861 1,441 (2,981) 16,055 57,725
Net Income 96,965 - 606 6,224 2,337 1,442 (13,852) 93,722
------ --- --- ----- ----- ----- ------- ------
Noncontrolling interests 735 - (606) - - - - 129
--- --- ---- --- --- --- --- ---
Net Income Attributable to Common Stockholders $97,700 $ - $ - $6,224 $2,337 $1,442 $(13,852) $93,851
======= ========================= ========================= ====== ====== ====== ======== =======
Earnings Per Share - Basic $10.75 $10.32
====== ======
Earnings Per Share - Diluted $10.51 $10.10
====== ======
Weighted Average Shares Outstanding - Basic
(in thousands) 9,091 9,091
===== =====
Weighted Average Shares Outstanding - Diluted
(in thousands) 9,292 9,292
===== =====
See pages 16 through 17 for notes to the reconciliation
Virtus Investment Partners, Inc.
Notes
The following are notes to the reconciliations of the most comparable U.S. GAAP measure to each non-GAAP measure for the periods presented on pages 11 through 15.
The non-GAAP financial measures included in this release differ from financial measures determined in accordance with U.S. GAAP as a result of the reclassification of certain income statement items, as well as the adjustment of certain expenses and other items that are not reflective of the earnings generated from providing investment management and related services. Non-GAAP financial measures have material limitations and should not be viewed in isolation or as a substitute for U.S. GAAP measures.
In particular, the company reclassifies:
1. Distribution and other asset-based expenses - These costs are generally
passed directly through to external parties. Management believes that
making this adjustment aids in comparing the company's operating results
with other asset management firms that do not distribute products through
intermediary distribution partners or utilize third party service
providers for investment management related services.
2. Consolidated investment products - Management believes that excluding the
operating activities of majority-owned funds and CLOs to reflect revenues
and expenses of the company prior to the consolidation of these products
is consistent with the approach of reflecting its operating results as
only revenues generated and expenses incurred related to providing
investment management and related services will be included in operating
income, as adjusted.
Net income attributable to common stockholders, as adjusted, excludes from net income:
-- Closed-end fund launch costs - Expenses related to the launch of
closed-end funds, or similar products, including structuring fees and
sales-based compensation related to the launch. The timing of closed-end
fund issuances can be unpredictable, and related costs can fluctuate
considerably. In addition, revenue associated with these costs will not
fully impact financial results until future periods. Management believes
that making these adjustments aids in comparing the company's operating
results with prior periods and with other asset management firms that do
not issue closed-end funds, or similar products.
-- Amortization of intangible assets - Non-cash amortization expense or
impairment expense, if any, attributable to acquisition-related
intangible assets. Management believes that making this adjustment aids
in comparing the company's operating results with other asset management
firms that have not engaged in acquisitions.
-- Seed capital and CLO investments - Gains and losses (realized and
unrealized), dividends and interest income generated by seed capital and
CLO investments. Earnings or losses generated by investments in seed
capital products can vary significantly from period-to-period and do not
reflect the company's operating results from providing investment
management and related services. Management believes that making this
adjustment aids in comparing the company's operating results with prior
periods and with other asset management firms that do not have
meaningful seed capital and CLO investments.
-- Other - Certain expenses and losses related to restructuring, severance,
regulatory matters, and transition items that are not reflective of the
ongoing earnings generation of the business. In addition, income tax
expense/(benefit) items, such as adjustments for uncertain tax
positions, valuation allowances and other unusual items not related to
current operating results to reflect a normalized effective rate.
Management believes that making these adjustments aids in comparing the
company's operating results with prior periods. Components of Other for
the respective periods are shown in the table below:
Three Months Ended Twelve Months Ended
------------------ -------------------
Other (in thousands) 12/31/2015 9/30/2015 12/31/2014 12/31/2015 12/31/2014
---------- --------- ---------- ---------- ----------
Loss contingency $ - $ - $ - $16,500 $ -
Tax impact of loss contingency - - - (5,507) -
Transition related revenues - - - 1,166 -
Tax impact of transition related
revenues - - - (442) -
System transition expenses 497 (170) 359 1,248 1,050
Tax impact of system transition
expenses (192) 65 (135) (476) (400)
Newfleet transition expenses - - - - 859
Tax impact of Newfleet transition
expenses - - - - (329)
Restructuring and severance - - - - 294
Tax impact of restructuring and
severance - - - - (113)
Discrete tax adjustments 245 - - 245 (15,213)
Total Other $550 $(105) $224 $12,734 $(13,852)
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Revenues, as adjusted, comprise the fee revenues paid by clients for investment management and related services. Revenues, as adjusted, for purposes of calculating net income attributable to common stockholders, as adjusted, differ from U.S. GAAP revenues in that they are reduced by distribution and other asset-based expenses that are generally passed through to external parties, and exclude the impact of consolidated sponsored investment products.
Operating expenses, as adjusted, is calculated to reflect expenses from ongoing continuing operations attributable to stockholders. Operating expenses, as adjusted, for purposes of calculating net income attributable to common stockholders, as adjusted, differ from U.S. GAAP expenses in that they exclude amortization or impairment, if any, of intangible assets, restructuring and severance, the impact of consolidated sponsored investment products, and certain other expenses that do not reflect the ongoing earnings generation of the business.
Operating margin, as adjusted, is a metric used to evaluate efficiency represented by operating income, as adjusted, divided by revenues, as adjusted.
Earnings per share, as adjusted, represent net income attributable to common stockholders, as adjusted, divided by weighted average shares outstanding, on either a basic or diluted basis.
(1) The Virtus DFA Target Date Retirement Income funds are subject to the risks of equity securities, credit and interest, foreign and emerging markets, inflation protected securities, allocation and fund of funds.
Investors should carefully consider the investment objectives, risks, charges and expenses of any Virtus Mutual Fund before investing. The prospectus and summary prospectus contains this and other information about the fund. Please contact your financial representative, call 1-800- 243-4361 or visit www.virtus.com to obtain a current prospectus and/or summary prospectus. You should read the prospectus and/or summary prospectus carefully before you invest or send money.
Mutual funds distributed by VP Distributors, LLC, member FINRA and subsidiary of Virtus Investment Partners, Inc.
Forward-Looking Information
This press release contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are "forward-looking statements" within the meaning of The Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as "expect," "estimate," "plan," "intend," "believe," "anticipate," "may," "will," "should," "could," "continue," "project," or similar statements or variations of such terms.
Our forward-looking statements are based on a series of expectations, assumptions and projections about our company, are not guarantees of future results or performance, and involve substantial risks and uncertainty, including assumptions and projections concerning our assets under management, cash inflows and outflows, operating cash flows, our ability to expand distribution and product offerings, and future credit facilities, for all forward periods. All of our forward-looking statements are as of the date of this release only. The company can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially.
Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including those discussed under "Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2014 Annual Report on Form 10-K, as well as the following risks and uncertainties: (a) any reduction in our assets under management, (b) the withdrawal, renegotiation or termination of our investment advisory agreements; (c) damage to our reputation; (d) our inability to attract and retain key personnel; (e) the competition we face in our business; (f) adverse regulatory and legal developments; (g) limitations on our deferred tax assets; (h) adverse developments with respect to, or changes in our relationships with, unaffiliated subadvisers; (i) changes in key distribution relationships; (j) interruptions in service or failure to provide service by third-party service providers; (k) any reduction in value of our marketable securities; (l) our inability to make intended quarterly distributions; (m) lack of availability of required and necessary capital on satisfactory terms; and (n) liabilities and losses not covered by our insurance policies and (o) certain other risks and uncertainties described in our 2014 Annual Report on Form 10-K or in any of our filings with the Securities and Exchange Commission ("SEC").
Certain other factors which may impact our continuing operations, prospects, financial results and liquidity or which may cause actual results to differ from such forward-looking statements are discussed or included in the company's periodic reports filed with the SEC and are available on our website at www.virtus.com under "Investor Relations." You are urged to carefully consider all such factors.
The company does not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections, or other circumstances occurring after the date of this release, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. If there are any future public statements or disclosures by us which modify or impact any of the forward-looking statements contained in or accompanying this release, such statements or disclosures will be deemed to modify or supersede such statements in this release.
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SOURCE Virtus Investment Partners, Inc.
