Last checked at 12 Aug 2010 13:45
Titanium Asset Management Corp.
Reports 2010 Second Quarter Results
Milwaukee, WI, August 12, 2010 - Titanium Asset Management Corp. (AIM - TAM) today reported results for the second quarter ended June 30, 2010.
Highlights for the second quarter are as follows:
·; Managed and fee paying assets decreased by 1.3% from $9,490.2 million to $9,371.4 million during the second quarter of 2010 primarily reflecting decreases in equity asset values.
·; Average managed and fee paying assets of $9,430.8 million for the second quarter of 2010, an increase of 11.8% over $8,436.7 million for the same period last year.
·; Operating revenues of $5,691,000 for the second quarter of 2010, a 10.9% increase over operating revenues of $5,132,000 for the same period last year.
·; Adjusted EBITDA deficit of $549,000 for second quarter of 2010 compared to an Adjusted EBITDA deficit of $1,032,000 for the same period last year. Excluding severance costs, the Adjusted EBITDA deficit was $156,000 for the second quarter of 2010.
·; Net loss of $816,000, or $0.04 per diluted common share, for the second quarter of 2010 compared to a net loss of $1,195,000, or $0.06 per diluted common share, for the second quarter of 2009.
Highlights for the first half of the year are as follows:
·; Average managed and fee paying assets of $9,369.5 million for the first half of 2010, an increase of 11.4% over $8,412.8 million for the same period last year.
·; Operating revenues of $11,242,000 for the first half of 2010, a 9.2% increase over operating revenues of $10,295,000 for the same period last year.
·; Adjusted EBITDA deficit of $1,239,000 for the first half of 2010 compared to an Adjusted EBITDA deficit of $2,027,000 for the same period last year. Excluding severance costs, the Adjusted EBITDA deficit was $426,000 for the first half of 2010.
·; Net loss of $2,086,000, or $0.10 per diluted common share, for the first half of 2010 compared to a net loss of $2,736,000, or $0.13 per diluted common share, for the first half of 2009.
Commenting on these results, Robert Brooks, CEO of Titanium Asset Management Corporation said:
"In the second quarter we continued our positive momentum with our average managed assets for the second quarter of 2010 increasing 11.4% over the prior year average and with our average distributed assets increasing 15.5%. As a result, revenue in the second quarter of 2010 grew by $559,000, or approximately 10.9% over the same period in 2009."
"While the equity markets have been quite volatile, the fixed income markets and our performance have been strong. With this strong performance, we believe we are well positioned to gain significant new fixed income business over the second half of 2010. Our entry into real estate asset management continues to gain traction in the marketplace. We have won several investment mandates and frequently are seeing new opportunities to manage assets."
"While we are back to growing our asset and revenue base, during the second quarter we further reduced our structural operating costs principally through additional staff reductions. We continue to look for additional ways to reduce our structural costs and improve our operating leverage."
"We are fortunate to have many talented people within all aspects of our business, and our number one challenge remains to empower them to generate excellent performance for our clients, and grow revenue and profits for our shareholders."
For further information please contact:
Titanium Asset Management Corp.
Robert Brooks, CEO 312-335-8300
Seymour Pierce Ltd
Jonathan Wright +44 20 7107 8000
Penrose FinancialGay Collins/Laura Jakob +44 20 7786 4882 or +44 7798 626282
titanium@penrose.co.uk
Assets Under Management
Our managed and fee paying assets totaled $9,371.4 million at June 30, 2010, an increase of 2.7% over the amount at December 31, 2009, and an increase of 10.6% over the year ago amount. The changes in managed and distributed assets over the three months ended June 30, 2010 were as follows:
|
| Managed Assets | Distributed Assets | Total |
|
| (in millions) | ||
|
|
|
|
|
| Balance at March 31, 2010 | $ 8,498.1 | $ 992.1 | $ 9,490.2 |
| Net inflows | (141.4) | 18.4 | (123.0) |
| Market value change | 59.1 | (54.9) | 4.2 |
| Balance at June 30, 2010 | $ 8,415.8 | $ 955.6 | $ 9,371.4 |
| Average assets under management | $ 8,457.0 | $ 973.8 | $ 9,430.8 |
Distributed assets are those managed by a hedge fund advisor on which we earn referral fees. Net inflows (outflows) are a combination of new and lost accounts plus contributions and withdrawals from existing accounts. Outflows for the three and six month periods ended June 30, 2010 include the elimination of approximately $100 million of advisory-only accounts whose fees are not asset-based.
The changes in managed in distributed assets over the six months ended June 30, 2010 were as follows:
|
| Managed Assets | Distributed Assets | Total |
|
| (in millions) | ||
|
|
|
|
|
| Balance at December 31, 2009 | $ 8,151.4 | $ 974.9 | $ 9,126.3 |
| Net inflows | 42.0 | 23.6 | 65.6 |
| Market value change | 222.4 | (42.9) | 179.5 |
| Balance at June 30, 2010 | $ 8,415.8 | $ 955.6 | $ 9,371.4 |
| Average assets under management | $ 8,390.8 | $ 978.7 | $ 9,369.5 |
The increase in managed assets was driven by three factors: the stabilization of assets under management at our Sovereign Holdings subsidiary; new business mandates won; and strong positive returns in the fixed income markets. While we experienced withdrawals due to the cash needs of our clients, they moderated in the first quarter of 2010 compared to previous periods.
For the six months ended June 30, 2010, 66% of our managed and fee paying assets with defined performance benchmarks outperformed their respective benchmarks.
Our assets under management by major investment strategy were as follows:
|
| June 30, 2010 | June 30, 2009 | ||
|
| (in millions) | % of total | (in millions) | % of total |
|
|
|
|
|
|
| Fixed income | $ 7,603.1 | 90.3% | $ 6,907.4 | 90.7% |
| Equity | 697.6 | 8.3% | 707.5 | 9.3% |
| Real estate | 115.1 | 1.4% | - | 0.0% |
| Balance at end of period | $ 8,415.8 | 100.0% | $ 7,614.9 | 100.0% |
Our assets under management by broad client type were as follows:
|
| June 30, 2010 | June 30, 2009 | ||
|
| (in millions) | % of total | (in millions) | % of total |
|
|
|
|
|
|
| Institutional | $ 7,061.0 | 83.9% | $ 5,913.7 | 77.7% |
| Retail | 1,354.8 | 16.1% | 1,701.2 | 22.3% |
| Balance at end of period | $ 8,415.8 | 100.0% | $ 7,614.9 | 100.0% |
Operating Results
|
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|
| 2010 | 2009 | 2010 | 2009 |
|
|
|
|
|
|
| Average assets under management (in millions) | $ 8,547.0 | $ 7,593.6 | $ 8,390.8 | $ 7,583.2 |
| Average fee rate (basis points) | 24 | 24 | 24 | 24 |
|
|
|
|
|
|
| Operating revenue | $ 5,691,000 | $ 5,132,000 | $ 11,242,000 | $ 10,295,000 |
| Adjusted EBITDA deficit(1) | (549,000) | (1,032,000) | (1,239,000) | (2,027,000) |
| Operating loss | (1,220,000) | (2,261,000) | (2,805,000) | (4,325,000) |
| Net loss | (816,000) | (1,195,000) | (2,086,000) | (2,736,000) |
|
|
|
|
|
|
| Earnings per share: |
|
|
|
|
| Basic | $ (0.04) | $ (0.06) | $ (0.10) | $ (0.13) |
| Diluted | $ (0.04) | $ (0.06) | $ (0.10) | $ (0.13) |
(1) See the accompanying table on page 9 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.
Our second quarter revenues increased $559,000, or 10.9%, relative to the first quarter of 2009 due to the increase in average assets under management. The increase in average assets under management reflects asset gains from our participation in the TALF program and from our new real estate investment advisory business, as well as strong market returns for fixed income assets. For the year to date periods, our 2010 revenues increased by $947,000, or 9.2%, relative to 2009 due to the increase in average assets under management.
Our Adjusted EBITDA deficit of $549,000 for the second quarter of 2010 includes $393,000 of severance costs. Excluding severance costs, our Adjusted EBITDA deficit would have been $156,000, an improvement of $876,000 over the prior year amount. The improvement reflects the 10.9% increase in revenues and a 9.7% decrease in administrative expenses, excluding severance costs. Our administrative expenses, excluding severance costs, declined $608,000, as a result of the ongoing integration activities and reduced operating staff. Since March 31, 2009, we have reduced our headcount from 97 to 81.
Our Adjusted EBITDA deficit of $1,239,000 for the first half of 2010 includes $813,000 of severance costs. Excluding severance costs, our Adjusted EBITDA deficit would have been $426,000, an improvement of $1,600,000 over the prior year amount. The improvement reflects the 9.2% increase in revenues and a 8.0% decrease in administrative expenses, excluding severance costs. Our administrative expenses, excluding severance costs, declined $1,005,000, as a result of the ongoing integration activities and reduced operating staff.
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. Results may differ significantly due to market fluctuations that alter our assets under management; termination of investment advisory agreements; impairment of goodwill and other intangible assets; our inability to compete; market pressure on investment advisory fees; ineffective management of risk; changes in interest rates, equity prices, liquidity of global markets and international and regional political conditions; or actions taken by Clal Finance Ltd., as our significant stockholder. Additional factors that could influence Titanium's financial results are included in its Securities and Exchange Commission filings, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
The Company's Quarterly Report on Form 10-Q for the three months ended June 30, 2010, is expected to be filed with the Securities and Exchange Commission on or before August 16, 2010. The report will be available on the SEC's website at www.sec.gov and on the Company's website at www.ti-am.com.
| Titanium Asset Management Corp. Condensed Consolidated Balance Sheets |
|
| June 30, 2010 | December 31, 2009 |
|
| (unaudited) |
|
| Assets |
|
|
| Current assets |
|
|
| Cash and cash equivalents | $ 1,224,000 | $ 4,773,000 |
| Investments | 9,987,000 | 12,549,000 |
| Accounts receivable | 3,894,000 | 5,030,000 |
| Other current assets | 948,000 | 1,162,000 |
| Total current assets | 16,053,000 | 23,514,000 |
|
|
|
|
| Investments in affiliates | 6,377,000 | 2,179,000 |
| Property and equipment, net | 386,000 | 427,000 |
| Goodwill | 28,147,000 | 28,147,000 |
| Intangible assets, net | 23,263,000 | 24,920,000 |
| Total assets | $ 74,226,000 | $ 79,187,000 |
|
|
|
|
| Liabilities and Stockholders' Equity |
|
|
| Current liabilities |
|
|
| Accounts payable | $ 229,000 | $ 237,000 |
| Acquisition payments due | - | 1,746,000 |
| Other current liabilities | 2,710,000 | 3,504,000 |
| Total current liabilities | 2,939,000 | 5,487,000 |
|
|
|
|
| Acquisition payments due | 960,000 | 960,000 |
| Total liabilities | 3,899,000 | 6,447,000 |
| Commitments and contingencies |
|
|
| Stockholders' equity |
|
|
| Common stock, $0.0001 par value; 54,000,000 shares authorized; 20, 491,824 shares issued and outstanding at June 30, 2010 and 20,564,816 shares issued and outstanding at December 31, 2009 | 2,000 | 2,000 |
| Restricted common stock, $0.0001 par value; 720,000 shares authorized; 612,716 issued and outstanding at June 30, 2010 and December 31, 2009 | - | - |
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued | - | - |
| Additional paid-in capital | 100,135,000 | 100,332,000 |
| Accumulated deficit | (29,852,000) | (27,766,000) |
| Other comprehensive income | 42,000 | 172,000 |
| Total stockholders' equity | 70,327,000 | 72,740,000 |
| Total liabilities and stockholders' equity | $ 74,226,000 | $ 79,187,000 |
| Titanium Asset Management Corp. Condensed Consolidated Statements of Operations (unaudited) |
|
| Three Months Ended June 30, | Six Months Ended June 30, | ||
|
| 2010 | 2009 | 2010 | 2009 |
|
|
|
|
|
|
| Operating revenues | $ 5,691,000 | $ 5,132,000 | $ 11,242,000 | $ 10,295,000 |
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
| Administrative | 6,082,000 | 6,297,000 | 12,389,000 | 12,581,000 |
| Amortization of intangible assets | 829,000 | 1,096,000 | 1,658,000 | 2,039,000 |
| Total operating expenses | 6,911,000 | 7,393,000 | 14,047,000 | 14,620,000 |
| Operating loss | (1,220,000) | (2,261,000) | (2,805,000) | (4,325,000) |
|
|
|
|
|
|
| Other income |
|
|
|
|
| Interest income | 76,000 | 114,000 | 164,000 | 234,000 |
| Gain (loss) on investments | 24,000 | 193,000 | 127,000 | (188,000) |
| Income from equity investees | 304,000 | - | 444,000 | - |
| Interest expense | - | (15,000) | (16,000) | (29,000) |
| Loss before taxes | (816,000) | (1,969,000) | (2,086,000) | (4,308,000) |
|
|
|
|
|
|
| Income tax benefit | - | (774,000) | - | (1,572,000) |
|
|
|
|
|
|
| Net loss | $ (816,000) | $ (1,195,000) | $ (2,086,000) | $ (2,736,000) |
|
|
|
|
|
|
| Earnings (loss) per share |
|
|
|
|
| Basic | $ (0.04) | $ (0.06) | $ (0.10) | $ (0.13) |
| Diluted | $ (0.04) | $ (0.06) | $ (0.10) | $ (0.13) |
|
|
|
|
|
|
| Weighted average number of common shares outstanding: |
|
|
|
|
| Basic | 20,694,693 | 20,546,490 | 20,698,074 | 20,546,490 |
| Diluted | 20,694,693 | 20,546,490 | 20,698,074 | 20,546,490 |
|
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|
|
|
|
|
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| Titanium Asset Management Corp. Condensed Consolidated Statements of Cash Flows (unaudited) |
|
| Six Months Ended June 30, | |
|
| 2010 | 2009 |
|
|
|
|
| Cash flows from operating activities |
|
|
| Net loss | $ (2,086,000) | $ (2,736,000) |
| Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
| Amortization of intangible assets | 1,658,000 | 2,039,000 |
| Depreciation | 46,000 | 54,000 |
| Share compensation expense (credit) | (139,000) | 205,000 |
| Loss (gain) on investments | (127,000) | 188,000 |
| Income from equity investees | (444,000) | - |
| Accretion of acquisition payments | 16,000 | 25,000 |
| Deferred income taxes | - | (1,572,000) |
| Changes in assets and liabilities: |
|
|
| Decrease in accounts receivable | 1,136,000 | 562,000 |
| Decrease in other current assets | 214,000 | 170,000 |
| Decrease in accounts payable | (8,000) | (348,000) |
| Decrease in other current liabilities | (870,000) | (25,000) |
| Net cash used in operating activities | (604,000) | (1,438,000) |
|
|
|
|
| Cash flows from investing activities |
|
|
| Purchases of property and equipment | (6,000) | (121,000) |
| Purchases of investments | (8,874,000) | (8,437,000) |
| Sales and redemptions of investments | 11,433,000 | 10,690,000 |
| Investments in equity investees | (4,000,000) | - |
| Distributions from equity investees | 246,000 | - |
| Cash paid for acquisition of subsidiaries, net of cash acquired | (1,744,000) | (8,151,000) |
| Net cash used in investing activities | (2,945,000) | (6,019,000) |
|
|
|
|
| Net decrease in cash and cash equivalents | (3,549,000) | (7,457,000) |
|
|
|
|
| Cash and cash equivalents: |
|
|
| Beginning | 4,773,000 | 18,753,000 |
| Ending | $ 1,224,000 | $ 11,296,000 |
|
|
|
|
| Titanium Asset Management Corp. Reconciliation of Adjusted EBITDA (unaudited) |
|
| Three Months Ended March 31, | Six Months Ended March 31, | ||
|
| 2010 | 2009 | 2010 | 2009 |
|
|
|
|
|
|
| Operating loss | $ (1,220,000) | $ (2,261,000) | $ (2,805,000) | $ (4,325,000) |
|
|
|
|
|
|
| Amortization of intangible assets | 829,000 | 1,096,000 | 1,658,000 | 2,039,000 |
| Depreciation expense | 23,000 | 26,000 | 46,000 | 54,000 |
| Share compensation expense (credit) | (181,000) | 107,000 | (139,000) | 205,000 |
|
|
|
|
|
|
| Adjusted EBITDA deficit(1) | $ (549,000) | $ (1,032,000) | $ (1,239,000) | $ (2,027,000) |
Notes:
(1) Adjusted EBITDA is defined as operating income or loss before non-cash charges for amortization and impairment of intangible assets and goodwill, depreciation, and share compensation expense. We believe Adjusted EBITDA is useful as an indicator of our ongoing performance and our ability to service debt, make new investments, and meet working capital obligations. Adjusted EBITDA, as we calculate it may not be consistent with computations made by other companies. We believe that many investors use this information when analyzing the operating performance, liquidity, and financial position of companies in the investment management industry.