Artio Global Investors Reports First Quarter 2013 Results

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Artio Global Investors Reports First Quarter 2013 Results

NEW YORK--(BUSINESS WIRE)-- Artio Global Investors Inc. (NYS: ART) ("Artio Global Investors", together with its subsidiaries, "Artio Global" or the "Company") today reported its results for the quarter ended March 31, 2013.

FinancialUpdate

  • Adjusted1 net loss attributable to Artio Global Investors of $5.2 million, or $0.09 per diluted share, for the first quarter of 2013 (GAAP net loss attributable to Artio Global Investors of $10.7 million, or $0.18 per diluted share)
  • Assets under management of $11.5 billion as of March 31, 2013
  • Investment management fees of $15.3 million for the first quarter of 2013
  • Effective fee rate2 of 48.0 basis points for the first quarter of 2013

First quarter 2013 adjusted results are presented to provide a more meaningful comparison between periods and exclude the after-tax impact of certain items, including, but not limited to, certain general and administrative costs associated with the pending acquisition by Aberdeen Asset Management PLC (the "acquisition").

For the first quarter of 2013, adjusted net loss attributable to Artio Global Investors was $5.2 million, or $0.09 per diluted share, a decrease from adjusted net income attributable to Artio Global Investors of $1.5 million, or $0.02 per diluted share, for the fourth quarter of 2012, and a decrease from adjusted net income attributable to Artio Global Investors of $6.5 million, or $0.11 per diluted share, for the first quarter of 2012.

On a GAAP basis, net loss attributable to Artio Global Investors for the first quarter of 2013 was $10.7 million, or $0.18 per diluted share, as compared to a net loss attributable to Artio Global Investors of $1.5 million, or $0.03 per diluted share, for the fourth quarter of 2012, and a decrease from net income attributable to Artio Global Investors of $4.6 million, or $0.08 per diluted share, for the first quarter of 2012.

The following tables compare the Company's GAAP results and adjusted results. See Exhibits 3 - 4 of this news release for a reconciliation of the Company's GAAP results to adjusted results.

     

 

   

Three Months Ended

(unaudited, in millions, except per share amounts)

Mar. 31,

2013

 

Mar. 31,

2012

 

%

Change

 

Dec. 31,

2012

 

%

Change

Revenue3, GAAP

$15.6$43.9(64%)$20.8(25%)
Operating income (loss), GAAP($11.6)$8.2NM($4.1)182%
Operating income (loss), adjusted($8.2)$10.8(176%)$0.7NM
Net income (loss) attributable to Artio Global Investors, GAAP

($10

.7)

$4

.6

NM

($1

.5)

NM

Net income (loss) attributable to Artio Global Investors, adjusted

($5

.2)

$6

.5

(180

%)

$1

.5

NM

Diluted EPS, GAAP($0.18)$0.08NM($0.03)NM
Diluted EPS, adjusted($0.09)$0.11(182%)$0.02NM
NM - Not Meaningful            
 

First Quarter of 2013 Comparison with First Quarter of 2012

Assets Under Management and Net Client Cash Flows

Assets under management were $11.5 billion as of March 31, 2013, down $15.1 billion, or 57%, from $26.6 billion as of March 31, 2012, due primarily to net client cash outflows.

Net client cash outflows for the first quarter of 2013 were $3.1 billion, driven by net client cash outflows in our International Equity I and II strategies.4

Revenues and Other Operating Income

Revenues and other operating income for the first quarter of 2013 totaled $15.6 million, down 64% from $43.9 million for the first quarter of 2012. The decrease was driven primarily by lower investment management fees of $15.3 million for the first quarter of 2013, down 64% from $42.8 million for the first quarter of 2012, due primarily to lower average assets under management and a decrease in the effective fee rate.

Expenses

Employee Compensation and Benefits

For the first quarter of 2013, adjusted employee compensation and benefits expenses were $14.6 million, down 27% from $19.9 million for the first quarter of 2012. The decrease was due primarily to a reduction in incentive compensation accruals and a decrease in costs associated with lower headcount.

GAAP employee compensation and benefits expenses for the first quarter of 2013 were $14.6 million, a decrease of 35% from $22.3 million for the first quarter of 2012, due primarily to the reasons noted above and the elimination of the amortization expense related to RSUs awarded at the time of the Company's Initial Public Offering.

Shareholder Servicing and Marketing Expenses

Shareholder servicing and marketing expenses for the first quarter of 2013 were $1.9 million, down 46% from $3.6 million for the first quarter of 2012, driven primarily by lower platform costs, reflecting a decrease in average assets under management in proprietary funds and a decline in marketing costs.

General and Administrative Expenses

Adjusted general and administrative expenses for the first quarter of 2013 were $7.3 million, a decrease of 24% from $9.6 million for the first quarter of 2012, due primarily to a decrease in expenses associated with lower headcount, and other cost saving initiatives.

GAAP general and administrative expenses for the first quarter of 2013 were $10.7 million, an increase of 10% from $9.7 million for the first quarter of 2012, due primarily to legal fees related to the acquisition, partly offset by the reasons noted above.

Non-operating Income

Adjusted non-operating income for the first quarter of 2013 was $1.1 million, a decrease of 42% from $1.9 million for the first quarter of 2012, primarily reflecting a decrease in gains from seed capital investments during the first quarter of 2013.

GAAP non-operating income for the first quarter of 2013 was $1.7 million, a decrease of 34% from $2.6 million for the first quarter of 2012, due primarily to the reason noted above.

Income Taxes

For the first quarter of 2013, adjusted income tax benefit was $1.9 million, as compared to adjusted income tax expense of $6.3 million in the first quarter of 2012, due primarily to a decrease in taxable income.

GAAP income tax expense was $0.3 million for the first quarter of 2013, compared to $5.3 million for the first quarter of 2012. The first quarter of 2013 included a valuation allowance taken on the Company's deferred tax assets recorded in the first quarter of 2013, and the non-deductibility of project costs related to the acquisition.

First Quarter of 2013 Comparison with Fourth Quarter of 2012

Assets Under Management

Assets under management were $11.5 billion as of March 31, 2013, a decrease of $2.8 billion, or 20%, from $14.3 billion as of December 31, 2012, due to net client cash outflows, partly offset by market appreciation.

Revenues and Other Operating Income

Revenues and other operating income for the first quarter of 2013 totaled $15.6 million, down 25% from $20.8 million for the fourth quarter of 2012, driven primarily by lower investment management fees. Investment management fees were $15.3 million for the first quarter of 2013, down 25% from $20.5 million for the fourth quarter of 2012, due primarily to a decrease in average assets under management and a decline in the effective fee rate.

Expenses

Employee Compensation and Benefits

For the first quarter of 2013, adjusted employee compensation and benefits expenses were $14.6 million, an increase of 39% from $10.4 million for the fourth quarter of 2012, due primarily to an increase in accruals related to the Company's long-term incentive plan.

GAAP employee compensation and benefits expenses for the first quarter of 2013 were $14.6 million, a decrease of 4% from $15.1 million for the fourth quarter of 2012, due primarily to the compensation charge associated with organizational changes in the fourth quarter of 2012, partly offset by the reason noted above.

Shareholder Servicing and Marketing Expenses

Shareholder servicing and marketing expenses for the first quarter of 2013 were $1.9 million, a decrease of 9% from $2.1 million for the fourth quarter of 2012, due primarily to lower platform costs, reflecting a decrease in average assets under management in proprietary funds.

General and Administrative Expenses

Adjusted general and administrative expenses were $7.3 million for the first quarter of 2013, a decrease of 3% from $7.6 million for the fourth quarter of 2012, due primarily to lower expenses across most categories.

GAAP general and administrative expenses were $10.7 million for the first quarter of 2013, an increase of 40% from $7.7 million for the fourth quarter of 2012, due primarily to legal fees related to the acquisition, partly offset by the reason noted above.

Non-operating Income

Adjusted non-operating income for the first quarter of 2013 was $1.1 million, a decrease of 33% from $1.7 million for the fourth quarter of 2012, primarily reflecting a decrease in gains from seed capital investments.

GAAP non-operating income for the first quarter of 2013 was $1.7 million, a decrease of 37% from $2.7 million for the fourth quarter of 2012, due primarily to the reason noted above.

Income Taxes

For the first quarter of 2013, adjusted income tax benefit was $1.9 million, compared to adjusted income tax expense of $0.8 million in the fourth quarter of 2012, due primarily to a decrease in taxable income.

GAAP income tax expense for the first quarter of 2013 was $0.3 million, compared to GAAP income tax benefit of $0.5 million for the fourth quarter of 2012. The change was due primarily to a valuation allowance taken on the Company's deferred tax assets recorded in the first quarter of 2013, a write-off of deferred tax assets associated with the vesting of equity awards at a price below their grant date fair value in the first quarter of 2013 and the non-deductibility of project costs related to the acquisition, partly offset by the reason noted above.

Liquidity and Capital

As of March 31, 2013, the Company had cash (excluding amounts held in the Company's Consolidated Investment Products) of $66.6 million, seed capital investments5 in our strategies of $45.8 million and investments held for deferred compensation of $10.2 million.

Total stockholders' equity on the Statement of Financial Position was $133.4 million as of March 31, 2013, compared to $141.0 million as of December 31, 2012.

Share Repurchase

No shares were repurchased during the first quarter of 2013. As of March 31, 2013, the Company retained authorization from the Board of Directors to repurchase 2,226,061 shares of its Class A common stock through December 31, 2013. Pursuant to the terms of the merger agreement with Aberdeen Asset Management PLC ("Aberdeen") , the Company may not repurchase shares of its Class A common stock without consent from Aberdeen, except in connection with the terms of share-based payments.

Shares

As of March 31, 2013, there were 60,548,105 total shares of Class A common stock outstanding.

* * * *

About Us

Artio Global Investors Inc. is the indirect holding company of Artio Global Management LLC ("Artio Global"), a registered investment adviser that actively invests in global fixed income and equity markets, primarily for institutional and intermediary clients.

Headquartered in New York City, Artio Global offers a select group of investment strategies, including High Grade Fixed Income, High Yield, International Equity and Global Equity. Access to these strategies is offered through a variety of investment vehicles, including separate accounts, commingled funds and mutual funds.

For more information, please visit www.artioglobal.com.

* * * *

Cautionary Note Regarding Forward-Looking Statements

In addition to historical information, this news release may contain forward‐looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regardingthe intrinsic value of our common stock, investor behavior, net client cash flows, our compensation costs and adjusted compensation ratio, use of our free cash flow and declaration of dividends. These forward‐looking statements are based on the Company's current assumptions, expectations and projections about future events. Words like "believe", "anticipate", "intend", "estimate", "expect", "project", and similar expressions are used to identify forward‐looking statements, although not all forward-looking statements contain these words. These forward‐looking statements discuss matters that necessarily involve a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward‐looking statements.

Among the factors that could cause actual results to differ from those expressed or implied by a forward‐looking statement are those described in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's report on Form 10‐K (File No. 001‐34457) filed with the Securities and Exchange Commission on March 4, 2013. Other unknown or unpredictable factors also could have material adverse effects on the Company's future results, performance, or achievements.

Any forward‐looking statements in this news release speak only as of the date of this news release. The Company is not under any obligation and does not intend to make publicly available any update or other revisions to any forward‐looking statements to reflect circumstances existing after the date of this news release or to reflect the occurrence of future events even if experience or future events make it clear that any expected results expressed or implied by those forward‐looking statements will not be realized.

* * * *

This news release is not sales material, nor is it an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state or jurisdiction in which any such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

1 See Exhibits 3 - 4 of this news release for a reconciliation of the Company's U.S. GAAP results to its non-GAAP adjusted results ("adjusted").

2 Effective fee rate is defined as annualized investment management fees (based on the number of days in the period) divided by the average assets under management for the period.

3 Represents total revenues and other operating income.

4 See Exhibit 8 for more information on "Assets under Management by Investment Strategy".

5 See Exhibit 6 for more information.

 
ARTIO GLOBAL INVESTORS INC. AND SUBSIDIARIESExhibit - 1
Consolidated Statements of Operations
(unaudited, in thousands, except share and per share amounts or as noted)
       
Three Months Ended% Change From
Mar. 31, 2013Mar. 31, 2012Dec. 31, 2012Mar. 31, 2012 Dec. 31, 2012
Revenues and other operating income:
Investment management fees$15,336$42,771$20,484(64%)(25%)
Net gains (losses) on funds held for deferred compensation2991,160315(74%)(5%)
Foreign currency losses (39) (1) (10)NMNM
Total revenues and other operating income 15,596  43,930  20,789 (64%)(25%)
 
Expenses:
Employee compensation and benefits14,55122,33415,094(35%)(4%)
Shareholder servicing and marketing1,9413,6242,135(46%)(9%)
General and administrative 10,718  9,738  7,673 10%40%
Total expenses 27,210  35,696  24,902 (24%)9%
 
Operating income (loss) before income tax expense(11,614)8,234(4,113)NM182%
 
Non-operating income 1,681  2,556  2,670 (34%)(37%)
Income (loss) before income tax expense(9,933)10,790(1,443)(192%)NM
 
Income taxes 270  5,322  (522)(95%)152%
Net income (loss)(10,203)5,468(921)NMNM
 
Net income attributable to non-controlling interests in AGH (1)-190-(100%)NM
Net income attributable to non-controlling interests in CIP (2) 539  678  617 (21%)(13%)
Net income (loss) attributable to Artio Global Investors$(10,742)$4,600 $(1,538)NMNM
 
Net income (loss) per share attributable to Artio Global Investors:
Basic$(0.18)$0.08$(0.03)NMNM
Diluted$(0.18)$0.08$(0.03)NMNM
 
Weighted average shares used in net income (loss) per share
attributable to Artio Global Investors:
Basic60,349,98058,192,57359,994,4254%1%
Diluted (3)60,349,98058,474,69759,994,4253%1%
 
NM - Not Meaningful
              
 
Assets under management ($ in millions)$11,513$26,645$14,332(57%)(20%)
 
Average assets under management ($ in millions) (4)$12,968$28,551$15,932(55%)(19%)
 
Effective fee rate (basis points) (5)48.060.351.1
 
Effective tax rate-2.7%49.3%36.2% Read Full Story

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