- Operating Income, As Adjusted, Improves from $0.8 Million to $3.2
Million - Operating Loss Improves by $2.2 Million to $(0.6) Million
- Gross Inflows up 16%; Second Consecutive Quarter of Positive Net
Flows - Assets Under Management Grow 10% to $24.6 Billion HARTFORD,
Conn., Nov. 4 /PRNewswire-FirstCall/ -- Virtus Investment Partners,
Inc. (NASDAQ:VRTS), which operates a multi-manager asset management
business, today reported operating income, as adjusted, of $3.2
million for the quarter ended September 30, 2009, a sequential
improvement of $2.4 million from the previous quarter. The
improvement resulted from top-line revenue growth of 12 percent and
benefits from the company's ongoing cost management program. The
company recorded a 16 percent increase in gross inflows and a
second consecutive quarter of positive net flows that contributed
to a 10 percent growth in assets under management to $24.6 billion
from $22.4 billion at the end of the second quarter. Virtus had an
operating loss for the quarter of $0.6 million compared with an
operating loss of $2.8 million in the second quarter of 2009. Net
income for the third quarter was $0.1 million, while the net loss
attributable to common stockholders, after dividends to preferred
shareholders, was $0.8 million or $0.14 per share, a 75 percent
improvement from the net loss attributable to common stockholders
of $3.1 million or $0.54 per share in the second quarter of 2009.
For the nine months ended September 30, 2009, Virtus had an
operating loss of $7.9 million and operating income, as adjusted,
of $2.6 million on revenue of $83.8 million and revenue, as
adjusted, of $62.0 million. By comparison, the company had an
operating loss of $446.2 million and operating income, as adjusted,
of $6.4 million on revenue of $143.4 million and revenue, as
adjusted, of $92.4 million for the nine months ended September 30,
2008. The 2008 period included a pre-tax, non-cash intangible asset
impairment charge of $432.2 million. In evaluating its performance,
the company considers certain non-GAAP measures, including
operating income, as adjusted, and revenue, as adjusted, that are
described and reconciled to GAAP-reported amounts in the Schedule
of Non-GAAP Information at the end of the release. These non-GAAP
measures net the distribution and administration expenses against
the related revenue and remove certain non-cash and other
identified amounts. In addition, non-GAAP measures exclude revenue,
expenses, and earnings attributed to Goodwin Capital Advisors, a
former subsidiary that remained with Virtus' former parent when
Virtus was spun off on December 31, 2008. Financial Highlights
(Dollars in thousands, except per share data or as noted) Three
Months Three Months Ended Ended ------------------ ---------
9/30/2009 9/30/2008 Change 6/30/2009 Change --------- ---------
------ --------- ------ Ending Assets Under Management (1) (in
billions) $24.6 $27.0 (9)% $22.4 10% Average Assets Under
Management (1) (in billions) $23.7 $30.9 (23)% $21.9 8% Gross Flows
(1) (in millions) $1,135.4 $928.1 22% $975.8 16% Net Flows (1) (in
millions) $287.4 $(639.7) N/M $42.5 N/M Revenue $30,395 $44,806
(32)% $27,181 12% Revenue, as adjusted (2) $22,885 $28,507 (20)%
$19,732 16% Operating loss $(622) $(427,816) 100% $(2,822) 78%
Operating income, as adjusted (2) $3,213 $2,220 45% $791 N/M Net
loss attributable to common stockholders $(788) $(337,269) 100%
$(3,148) 75% Net loss per basic and diluted share $(0.14) $(58.43)
100% $(0.54) 74% Operating margin (2)% (955)% (10)% Operating
margin, as adjusted (2) 14% 8% 4% Nine Months Ended
----------------- 9/30/2009 9/30/2008 Change --------- ---------
------ Ending Assets Under Management (1) (in billions) $24.6 $27.0
(9)% Average Assets Under Management (1) (in billions) $22.6 $34.7
(35)% Gross Flows (1) (in millions) $2,819.0 $3,177.0 (11)% Net
Flows (1) (in millions) $(168.7) $(7,051.2) 98% Revenue $83,827
$143,387 (42)% Revenue, as adjusted (2) $62,030 $92,377 (33)%
Operating loss $(7,915) $(446,248) 98% Operating income, as
adjusted (2) $2,571 $6,394 (60)% Net loss attributable to common
stockholders $(10,774) $(349,877) 97% Net loss per basic and
diluted share $(1.86) $(60.62) 97% Operating margin (9)% (311)%
Operating margin, as adjusted (2) 4% 7% N/M - Not Meaningful (1)
The assets and business of Goodwin Capital Advisers, a former
subsidiary, are not included in Virtus' results after December 31,
2008 and amounts from prior periods are excluded from these results
for comparison purposes. Ending AUM, including Goodwin, were $41.2
billion as of September 30, 2008. Average AUM, including Goodwin,
were $45.3 and $48.7 billion for the three and nine months ended
September 30, 2008, respectively. (2) See "Schedule of Non-GAAP
Information" at the end of the release. Management Discussion
George R. Aylward, president and chief executive officer, said the
improved financial markets, a second consecutive quarter of
positive net flows, and continued expense management were the
primary factors for the sequential improvements in revenue,
operating income, and operating margin. "Positive investment
performance from the improved markets, coupled with strong sales,
particularly in our long-term mutual funds, and solid net flows
drove growth in revenues during the quarter," Aylward said.
"Expenses rose slightly as increases in profit- and sales-based
variable costs were partially offset by our ongoing expense
management efforts. We continue to make progress on one of our key
objectives of improving our operating margin, as adjusted, which
was 14 percent this quarter, compared with four percent in the last
quarter and a negative margin in the first quarter." Aylward cited
long-term mutual fund sales that improved 26 percent from the
second quarter, contributing to the double-digit growth in gross
inflows for all products in the quarter. "This was our strongest
quarter in two years with $790 million of mutual fund sales, which
also put our mutual funds into net positive flows for the
year-to-date period." Revenue increased 12 percent to $30.4 million
from $27.2 million in the second quarter of 2009 and revenue, as
adjusted, increased 16 percent to $22.9 million from $19.7 million
in the prior quarter. Total operating expenses of $31.0 million
were three percent higher than the prior quarter, and operating
expenses, as adjusted, which exclude distribution and
administration expenses, restructuring and severance charges, and
certain non-cash charges, were $19.7 million, up four percent from
the second quarter. Employment expenses of $14.1 million were seven
percent higher in the third quarter compared with the second
quarter, reflecting increases in profit- and sales-based
compensation costs, partially offset by reduced base compensation
from staff reductions in the current and prior quarters. The
company made an additional two percent reduction to its workforce
during the quarter and has now reduced its staff by nine percent
for the nine-month period ending September 30, 2009, following a 27
percent reduction in staffing during 2008. During the third quarter
of 2009, the company had $0.5 million in restructuring and
severance expenses, compared with $0.2 million in the second
quarter of the year. Other operating expenses were down six percent
to $6.5 million from $7.0 million in the 2009 second quarter, which
included $0.5 million of non-cash costs related to the equity
portion of directors' annual retainer. Assets Under Management
Assets under management at September 30, 2009 were $24.6 billion,
up 10 percent from $22.4 billion at the end of the prior quarter.
The growth came from $1.8 billion in market appreciation as well as
$287.4 million of net flows. Average assets under management, which
correspond to the company's fee-earning asset levels, increased
eight percent during the quarter as increases in long-term mutual
funds and managed account assets were partially offset by lower
money market fund assets. Gross product inflows in the third
quarter were $1.1 billion, up 16 percent from $975.8 million in the
second quarter and the second consecutive increase in quarterly
sales. For the first nine months of 2009, Virtus had gross product
inflows of $2.8 billion and net outflows of $168.7 million,
compared with gross product inflows of $3.2 billion and net
outflows of $7.0 billion for the first nine months of 2008. The
outflows in 2008 included a $3.7 billion redemption from a low-fee,
non-affiliated general account institutional client. Long-term
mutual fund assets ended the third quarter at $12.4 billion, up 13
percent from $10.9 billion in the prior quarter. Long-term mutual
fund sales were $790.0 million, an increase of 26 percent from the
second quarter, and net inflows of $249.0 million were 98 percent
better than net inflows of $125.7 million in the second quarter.
For the first nine months of 2009, Virtus' long-term mutual funds
had positive net flows of $174.3 million on gross sales of $1.9
billion, compared with $392.4 million in net outflows on gross
sales of $2.0 billion for the first nine months of 2008. Mutual
fund product initiatives during the third quarter included the
introduction of the AlphaSector Rotation Strategy from F-Squared
Investments in two funds, the Virtus AlphaSector(TM) Rotation Fund
(Class A: PWBAX ) and the Virtus AlphaSector(TM) Allocation Fund
(Class A: PSWAX). Virtus also offers F-Squared's AlphaSector
Rotation Strategy in separate account form. Separately managed
account assets at September 30, 2009, which will form the basis for
fourth-quarter revenue, were up 12 percent from June 30, 2009.
Gross inflows improved by four percent to $291.4 million from
$281.5 million in the second quarter, and net flows improved to
$60.3 million from $2.6 million in the prior quarter. Institutional
sales were $54.0 million in the third quarter, compared with $68.1
million in the second quarter, while net outflows improved to $21.9
million from $85.8 million in the prior quarter due to the reduced
level of outflows. Liquidity and Capital Resources At September 30,
2009 the company had $23.7 million of cash and cash equivalents and
$30.9 million in working capital, compared with $25.6 million of
cash and cash equivalents and $22.8 million in working capital as
of June 30, 2009. The increase in working capital from June 30 is
primarily attributable to the refinancing of Virtus' note payable
which increased working capital by $8.0 million. The change in cash
during the quarter included a $1.8 million dividend payment on the
company's convertible preferred shares, and a $3.0 million payment
to retire prior debt. In the quarter, Virtus closed on a new senior
secured revolving credit facility for an initial aggregate amount
of $30.0 million. The company extinguished its previously
outstanding debt of $18.0 million using $15.0 million under the new
credit facility and $3.0 million of its cash resources. The $30.0
million facility has a term of two years, with the maximum amount
available reducing to $18.0 million in the second year. The
facility will have a variable interest rate benchmarked to standard
market indices. The company's effective interest rate for the
quarter was 8.5 percent, down from 9.0 percent in the prior
quarter, driven by a 6.9 percent variable interest rate, inclusive
of the amortization of deferred financing costs, on the new
facility that was put in place on September 1, 2009. In September,
Virtus' former parent filed its 2008 federal income tax return,
which included Virtus as a majority-owned subsidiary. Through a tax
separation agreement, as amended, between the two companies, Virtus
was provided a waiver necessary to preserve its tax basis in
certain intangible assets. The waivers and elections were taken
into consideration in establishing deferred tax assets in Virtus'
2008 financial statements and are not anticipated to be
significantly affected by this September tax filing. As of
September 30, 2009, Virtus had approximately $115.3 million of
gross deferred tax assets, consisting primarily of tax basis in
intangible assets, and has recorded a valuation allowance of $108.6
million for these assets. 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. The company
provides investment management products and services through its
affiliated managers and select subadvisers, each with a distinct
investment style, autonomous investment process and individual
brand. Virtus Investment Partners offers access to a variety of
investment styles across multiple disciplines to meet a wide array
of investor needs. Virtus Mutual Funds are distributed by VP
Distributors, Inc., a subsidiary of Virtus Investment Partners.
Additional information can be found at http://www.virtus.com/.
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," "should," 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, expected cost savings, 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 the following: (a) the effects of recent
adverse market and economic developments on all aspects of our
business; (b) any poor performance in the securities markets; (c)
any poor relative investment performance of some of our asset
management strategies and any resulting outflows in our assets
under management; (d) any lack of availability of additional
financing, as may be needed, on satisfactory terms or at all; (e)
any inadequate performance of third-party relationships; (f) the
withdrawal of assets from under our management; (g) the impact of
our separation from our former parent; (h) our ability to attract
and retain key personnel in a competitive environment; (i) the
ability of independent trustees of our mutual funds and closed-end
funds, intermediary program sponsors, managed account clients and
institutional asset management clients to terminate their
relationships with us; (j) the possibility that our goodwill or
intangible assets could become further impaired, requiring a charge
to earnings; (k) the strong competition we face in our business
from mutual fund companies, banks and asset management firms, most
of which are larger than we are; (l) potential adverse regulatory
and legal developments; (m) the difficulty of detecting misconduct
by our employees, sub-advisors and distribution partners; (n)
changes in accounting standards; (o) the ability to satisfy the
financial covenants under our senior secured revolving Credit
Facility or other future credit facilities; and (p) certain other
risks and uncertainties described in our 2008 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
the our website at http://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.
Financial Highlights (Unaudited) (Dollars in thousands, except per
share data or as noted) Three Months Three Months Ended Ended
------------------ ------- 9/30/2009 9/30/2008 Change 6/30/2009
Change --------- --------- ------ --------- ------ Ending Assets
Under Management (1) (in billions) $24.6 $27.0 (9)% $22.4 10%
Average Assets Under Management (2) (in billions) $23.7 $30.9 (23)%
$21.9 8% Gross Flows (1) (in millions) $1,135.4 $928.1 22% $975.8
16% Net Flows (1) (in millions) $287.4 $(639.7) N/M $42.5 N/M
Revenue $30,395 $44,806 (32)% $27,181 12% Revenue, as adjusted (3)
$22,885 $28,507 (20)% $19,732 16% Operating expenses $31,017
$472,622 (93)% $30,003 3% Operating expenses, as adjusted (3)
$19,672 $26,287 (25)% $18,941 4% Operating loss $(622) $(427,816)
100% $(2,822) 78% Operating income, as adjusted (3) $3,213 $2,220
45% $791 N/M Operating margin (2)% (955)% (10)% Operating margin,
as adjusted (3) 14% 8% 4% Net loss attributable to common
stockholders $(788) $(337,269) 100% $(3,148) 75% Avg. shares
outstanding - basic and diluted (in thousands) 5,824 5,772 5,811
Net loss per basic and diluted share $(0.14) $(58.43) 100% $(0.54)
74% Nine Months Ended ----------------- 9/30/2009 9/30/2008 Change
--------- --------- ------ Ending Assets Under Management (1) (in
billions) $24.6 $27.0 (9)% Average Assets Under Management (2) (in
billions) $22.6 $34.7 (35)% Gross Flows (1) (in millions) $2,819.0
$3,177.0 (11)% Net Flows (1) (in millions) $(168.7) $(7,051.2) 98%
Revenue $83,827 $143,387 (42)% Revenue, as adjusted (3) $62,030
$92,377 (33)% Operating expenses $91,742 $589,635 (84)% Operating
expenses, as adjusted (3) $59,459 $85,983 (31)% Operating loss
$(7,915) $(446,248) 98% Operating income, as adjusted (3) $2,571
$6,394 (60)% Operating margin (9)% (311)% Operating margin, as
adjusted (3) 4% 7% Net loss attributable to common stockholders
$(10,774) $(349,877) 97% Avg. shares outstanding - basic and
diluted (in thousands) 5,808 5,772 Net loss per basic and diluted
share $(1.86) $(60.62) 97% As of As of ----- ----- 9/30/2009
9/30/2008 Change 6/30/2009 Change --------- --------- ------
--------- ------ Cash and cash equivalents $23,702 $22,610 5%
$25,589 (7)% Marketable securities $8,679 $11,980 (28)% $7,233 20%
Current portion of long term note payable $- $12,000 N/M $10,000
N/M Long-term note payable $15,000 $21,019 (29)% $8,000 88%
Convertible preferred shares $45,900 $- N/M $46,800 (2)%
Stockholders' equity $28,532 $274,927 (90)% $28,388 1% Working
capital (4) $30,921 $(6,579) N/M $22,850 35% N/M - Not Meaningful
(1) Ending AUM, including Goodwin, were $41.2 billion as of
September 30, 2008. (2) The assets and business of Goodwin Capital
Advisers, a former subsidiary, are not included in Virtus' results
after Dec. 31, 2008. Average AUM, including Goodwin, were $45.3 and
$48.7 billion for the three and nine months ended September 30,
2008. (3) See "Schedule of Non-GAAP Information" at the end of the
release. (4) Working capital is defined as current assets less
current liabilities. Consolidated Statements of Operations (Dollars
in thousands, except per share data) Three Months Three Months
Ended Ended ------------------ ------- 9/30/2009 9/30/2008* Change
6/30/2009 Change --------- ---------- ------ --------- ------
Revenues Investment management fees $20,599 $32,261 (36)% $18,188
13% Distribution and service fees 5,992 7,873 (24)% 5,653 6%
Administration and transfer agent fees 3,290 4,317 (24)% 2,982 10%
Other income and fees 514 355 45% 358 44% --- --- --- Total
revenues 30,395 44,806 (32)% 27,181 12% ------ ------ ------
Operating Expenses Employment expenses 14,083 19,478 (28)% 13,167
7% Distribution and administration expenses 7,510 10,659 (30)%
7,449 1% Other operating expenses 6,538 10,515 (38)% 6,977 (6)%
Restructuring and severance 450 2,639 (83)% 193 133% Goodwill
impairment - 331,706 N/M - 0% Intangible asset impairment - 90,040
N/M - 0% Depreciation and other amortization 686 200 N/M 375 83%
Amortization of intangible assets 1,750 7,385 (76)% 1,842 (5)%
----- ----- ----- Total operating expenses 31,017 472,622 (93)%
30,003 3% ------ ------- ------ Operating Loss (622) (427,816) 100%
(2,822) 78% ---- -------- ------ Other Income (Expense) Realized
and unrealized appreciation (depreciation) on trading securities
1,249 (862) N/M 1,268 (1)% Other income (expense) (21) (25) 16% 1
N/M --- --- --- Total other income (expense), net 1,228 (887) N/M
1,269 (3)% ----- ---- ----- Interest (Expense) Income Interest
expense (373) (629) 41% (662) 44% Interest income 68 146 (53)% 114
(40)% -- --- --- Total interest income (expense), net (305) (483)
37% (548) 44% ---- ---- ---- Income (Loss) Before Income Taxes 301
(429,186) N/M (2,101) N/M Income tax expense (benefit) 189 (91,917)
N/M 147 29% --- ------- --- Net Income (Loss) 112 (337,269) N/M
(2,248) N/M Preferred stockholder dividends (900) - N/M (900) 0%
---- ---- ---- Net Loss Attributable to Common Stockholders $(788)
$(337,269) 100% $(3,148) 75% ===== ========= ======= Weighted
Average Shares Outstanding (in thousands) 5,824 5,772 5,811 =====
===== ===== Loss Per Share - Basic and Diluted $(0.14) $(58.43)
$(0.54) ====== ======= ====== Nine Months Ended -----------------
9/30/2009 9/30/2008* Change --------- ---------- ------ Revenues
Investment management fees $56,577 $102,211 (45)% Distribution and
service fees 16,912 24,345 (31)% Administration and transfer agent
fees 9,139 15,072 (39)% Other income and fees 1,199 1,759 (32)%
----- ----- Total revenues 83,827 143,387 (42)% ------ -------
Operating Expenses Employment expenses 41,596 63,460 (34)%
Distribution and administration expenses 21,797 33,586 (35)% Other
operating expenses 20,348 34,123 (40)% Restructuring and severance
1,080 3,306 (67)% Goodwill impairment - 331,706 N/M Intangible
asset impairment - 100,492 N/M Depreciation and other amortization
1,429 549 160% Amortization of intangible assets 5,492 22,413 (75)%
----- ------ Total operating expenses 91,742 589,635 (84)% ------
------- Operating Loss (7,915) (446,248) 98% ------ -------- Other
Income (Expense) Realized and unrealized appreciation
(depreciation) on trading securities 1,656 (2,350) N/M Other income
(expense) (16) 580 N/M --- --- Total other income (expense), net
1,640 (1,770) N/M ----- ------ Interest (Expense) Income Interest
expense (1,465) (2,037) 28% Interest income 285 675 (58)% --- ---
Total interest income (expense), net (1,180) (1,362) 13% ------
------ Income (Loss) Before Income Taxes (7,455) (449,380) 98%
Income tax expense (benefit) 459 (99,503) N/M --- ------- Net
Income (Loss) (7,914) (349,877) 98% Preferred stockholder dividends
(2,860) - N/M ------ ------ Net Loss Attributable to Common
Stockholders $(10,774) $(349,877) 97% ======== ========= Weighted
Average Shares Outstanding (in thousands) 5,808 5,772 ===== =====
Loss Per Share - Basic and Diluted $(1.86) $(60.62) ====== =======
N/M - Not Meaningful * GAAP-reported amounts for the 2008 periods
include revenue, expenses and earnings attributed to Goodwin
Capital Advisors. Assets Under Management - Product and Asset Class
(Dollars in millions) Three Months Ended Sep 30, Jun 30, Mar 31,
Dec 31, Sep 30, 2009 2009 2009 2008 2008 -------- -------- --------
-------- -------- By product (period end): Mutual Funds - Long-term
$12,358.9 $10,963.3 $9,658.1 $10,744.3 $13,370.7 Mutual Funds -
Money Market 4,068.2 3,995.2 4,293.2 4,654.0 4,389.9 Separately
Managed Accounts 3,405.5 3,041.3 2,731.9 3,074.3 3,774.8
Institutional Products (1) 4,762.6 4,440.4 4,122.5 4,163.8 5,445.1
------- ------- ------- ------- ------- Total $24,595.2 $22,440.2
$20,805.7 $22,636.4 $26,980.5 ========= ========= =========
========= ========= By product (average) (2) Mutual Funds -
Long-term $11,932.2 $10,717.5 $10,319.1 $11,393.6 $14,677.9 Mutual
Funds - Money Market 4,094.2 4,178.4 4,611.7 4,447.7 5,959.0
Separately Managed Accounts 3,041.3 2,731.9 3,074.3 3,774.8 4,328.7
Institutional Products (3) 4,600.0 4,281.5 4,236.1 4,775.0 5,886.3
------- ------- ------- ------- ------- Total $23,667.7 $21,909.3
$22,241.2 $24,391.1 $30,851.9 ========= ========= =========
========= ========= By asset class (period end): Equity $11,027.5
$9,668.5 $8,347.3 $9,825.0 $12,619.0 Fixed Income (1) 9,499.5
8,776.5 8,165.2 8,157.4 9,971.6 Money Market 4,068.2 3,995.2
4,293.2 4,654.0 4,389.9 ------- ------- ------- ------- -------
Total $24,595.2 $22,440.2 $20,805.7 $22,636.4 $26,980.5 =========
========= ========= ========= ========= Assets Under Management -
Average Net Management Fees Earned (4) (In basis points) Three
Months Ended Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, 2009 2009 2009
2008 2008 -------- -------- -------- -------- -------- Mutual Funds
- Long- term (5) 44.1 42.7 41.9 47.6 48.1 Mutual Funds - Money
Market (5) 5.1 5.2 5.3 5.4 5.7 Separately Managed Accounts 49.5
49.1 45.9 47.0 46.2 Institutional Products (6) 26.1 26.8 27.4 25.9
31.7 All Products 34.5 33.3 32.4 35.6 36.5 (1) Excludes assets
managed by Goodwin of $13,950.9 and $14,161.5 at December 31, 2008
and September 30, 2008, respectively. (2) Averages are calculated
as follows: - Mutual Funds - average daily balances - Separately
Managed Accounts - prior quarter ending balance (on which the
current quarter's fees are earned) - Institutional Products -
average of month-end balances in quarter (3) Excludes average
assets managed by Goodwin of $14,002.1 and $14,473.1 for the
three-month periods ending December 31, 2008 and September 30,
2008, respectively. (4) Average fees earned is calculated as
revenue earned by product divided by average product assets, as
described in note (2). (5) Average fees earned for money market and
long-term mutual funds are net of sub-advisory fees. (6) Includes
structured finance products. Assets Under Management - Asset Flows
by Product (Dollars in millions) Three Months Ended 9/30/2009
6/30/2009 3/31/2009 12/31/2008 9/30/2008 --------- ---------
--------- ---------- --------- Retail Products ---------------
Mutual Funds - Long-term Beginning balance $10,963.3 $9,658.1
$10,744.3 $13,370.7 $14,785.2 Inflows 790.0 626.2 456.0 475.6 679.8
Outflows (541.0) (500.5) (656.4) (1,044.6) (820.1) ------ ------
------ -------- ------ Net flows 249.0 125.7 (200.4) (569.0)
(140.3) Market appreciation (depreciation) 1,184.3 1,122.5 (789.0)
(2,076.2) (1,268.4) Acquisitions (dispositions) / Other (37.7) 57.0
(96.8) 18.8 (5.8) ----- ---- ----- ---- ---- Ending balance
$12,358.9 $10,963.3 $9,658.1 $10,744.3 $13,370.7 =========
========= ======== ========= ========= Mutual Funds - Money Market
Beginning balance $3,995.2 $4,293.2 $4,654.0 $4,389.9 $6,465.0
Change in cash management products 73.0 (298.0) (360.8) 264.1
(2,075.1) ---- ------ ------ ----- -------- Ending balance $4,068.2
$3,995.2 $4,293.2 $4,654.0 $4,389.9 ======== ======== ========
======== ======== Separately Managed Accounts Beginning balance
$3,041.3 $2,731.9 $3,074.3 $3,774.8 $4,328.7 Inflows 291.4 281.5
216.5 301.8 184.3 Outflows (231.1) (278.9) (376.4) (490.6) (315.5)
------ ------ ------ ------ ------ Net flows 60.3 2.6 (159.9)
(188.8) (131.2) Market appreciation (depreciation) 303.9 306.8
(182.5) (511.7) (95.4) Acquisitions (dispositions) / Other - - - -
(327.3) --- --- --- --- ------ Ending balance $3,405.5 $3,041.3
$2,731.9 $3,074.3 $3,774.8 ======== ======== ======== ========
======== Institutional Products ----------------------
Institutional Accounts Beginning balance $3,662.3 $3,403.3 $3,415.2
$4,370.4 $4,841.8 Inflows 54.0 68.1 35.3 51.5 64.0 Outflows (75.9)
(153.9) (173.6) (478.0) (411.2) ----- ------ ------ ------ ------
Net flows (21.9) (85.8) (138.3) (426.5) (347.2) Market appreciation
(depreciation) 288.6 211.3 (178.2) (321.9) (57.6) Change in cash
management products 6.6 125.0 22.4 (219.8) (66.6) Acquisitions
(dispositions) / Other (22.6) 8.5 282.2 13.0 - ----- --- ----- ----
--- Ending balance $3,913.0 $3,662.3 $3,403.3 $3,415.2 $4,370.4
======== ======== ======== ======== ======== Structured Products
Beginning balance $778.1 $719.2 $748.6 $1,074.7 $1,171.1 Inflows -
- - 0.6 - Outflows - - - (16.4) (21.0) --- --- --- ----- ----- Net
flows - - - (15.8) (21.0) Market appreciation (depreciation) 71.5
58.9 (29.4) (310.3) (75.4) --- --- --- --- -------- Ending balance
$849.6 $778.1 $719.2 $748.6 $1,074.7 ====== ====== ====== ======
======== Total ----- Beginning balance $22,440.2 $20,805.7
$22,636.4 $26,980.5 $31,591.8 Inflows 1,135.4 975.8 707.8 829.5
928.1 Outflows (848.0) (933.3) (1,206.4) (2,029.6) (1,567.8) ------
------ -------- -------- -------- Net flows 287.4 42.5 (498.6)
(1,200.1) (639.7) Market appreciation (depreciation) 1,848.3
1,699.5 (1,179.1) (3,220.1) (1,496.8) Change in cash management
products 79.6 (173.0) (338.4) 44.3 (2,141.7) Acquisitions
(dispositions) / Other (60.3) 65.5 185.4 31.8 (333.1) ----- ----
----- ---- ------ Ending balance (1) $24,595.2 $22,440.2 $20,805.7
$22,636.4 $26,980.5 ========= ========= ========= =========
========= Nine Months Ended ----------------- 9/30/2009 9/30/2008
--------- --------- Retail Products --------------- Mutual Funds -
Long-term Beginning balance $10,744.3 $16,127.4 Inflows 1,872.2
2,049.4 Outflows (1,697.9) (2,441.8) -------- -------- Net flows
174.3 (392.4) Market appreciation (depreciation) 1,517.8 (2,290.9)
Acquisitions (dispositions) / Other (77.5) (73.4) ----- -----
Ending balance $12,358.9 $13,370.7 ========= ========= Mutual Funds
- Money Market Beginning balance $4,654.0 $6,203.6 Change in cash
management products (585.8) (1,813.7) ------ -------- Ending
balance $4,068.2 $4,389.9 ======== ======== Separately Managed
Accounts Beginning balance $3,074.3 $5,447.7 Inflows 789.4 698.3
Outflows (886.4) (1,388.9) ------ -------- Net flows (97.0) (690.6)
Market appreciation (depreciation) 428.2 (655.0) Acquisitions
(dispositions) / Other - (327.3) --- ------ Ending balance $3,405.5
$3,774.8 ======== ======== Institutional Products
---------------------- Institutional Accounts Beginning balance
$3,415.2 $9,313.7 Inflows 157.4 428.1 Outflows (403.4) (5,219.0)
------ -------- Net flows (246.0) (4,790.9) Market appreciation
(depreciation) 321.7 (182.2) Change in cash management products
154.0 29.8 Acquisitions (dispositions) / Other 268.1 - ----- ---
Ending balance $3,913.0 $4,370.4 ======== ======== Structured
Products Beginning balance $748.6 $3,324.3 Inflows - 1.2 Outflows -
(1,178.5) --- -------- Net flows - (1,177.3) Market appreciation
(depreciation) 101.0 (1,072.3) --- --- Ending balance $849.6
$1,074.7 ====== ======== Total ----- Beginning balance $22,636.4
$40,416.7 Inflows 2,819.0 3,177.0 Outflows (2,987.7) (10,228.2)
-------- --------- Net flows (168.7) (7,051.2) Market appreciation
(depreciation) 2,368.7 (4,200.4) Change in cash management products
(431.8) (1,783.9) Acquisitions (dispositions) / Other 190.6 (400.7)
----- ------ Ending balance (1) $24,595.2 $26,980.5 =========
========= -------- (1) Excludes assets managed by Goodwin of
$13,950.9 and $14,161.5, comprising $12,373.9 and $12,452.4 of
Phoenix assets and $1,577.0 and $1,709.1 of Institutional and
Structured Finance products at December 31, 2008 and September 30,
2008, respectively. Schedule of Non-GAAP Information (Dollars in
thousands) The company reports its financial results on a Generally
Accepted Accounting Principles (GAAP) basis; however management
believes that evaluating the company's ongoing operating results
may be enhanced if investors have additional non-GAAP financial
measures. Management reviews non-GAAP financial measures to assess
ongoing operations and considers them to be additional metrics for
both management and investors to evaluate the company's financial
performance over time, as noted in the footnotes below. Management
does not advocate that investors consider such non-GAAP financial
measures in isolation from, or as a substitute for, financial
results prepared in accordance with GAAP. Reconciliation of
Revenues, Operating Expenses and Operating Income on a GAAP Basis
to Revenues, Operating Expenses and Operating Income, as Adjusted
Three Months Ended Nine Months Ended Sept 30, Sept 30, June 30,
Sept 30, Sept 30, 2009 2008 2009 2009 2008 ---- ---- ---- ---- ----
Revenues, GAAP basis $30,395 $44,806 $27,181 $83,827 $143,387 Less:
Goodwin revenues - 5,640 - - 17,424 Distribution and administration
expenses 7,510 10,659 7,449 21,797 33,586 ----- ------ ----- ------
------ Revenues, as adjusted (1) 22,885 28,507 19,732 62,030 92,377
------ ------ ------ ------ ------ Operating Expenses, GAAP Basis
31,017 472,622 30,003 91,742 589,635 Less: Goodwin expenses - 4,136
- - 12,562 Distribution and administration expenses 7,510 10,659
7,449 21,797 33,586 Depreciation and amortization (2) 2,436 6,919
2,217 6,921 20,965 Impairment charges - 421,746 - - 432,198
Stock-based compensation (3) 949 236 1,203 2,485 1,035
Restructuring and severance charges 450 2,639 193 1,080 3,306 ---
----- --- ----- ----- Operating Expenses, as adjusted (4) 19,672
26,287 18,941 59,459 85,983 ------ ------ ------ ------ ------
Operating Income, as adjusted (5) 3,213 2,220 791 2,571 6,394 -----
----- --- ----- ----- Operating margin, GAAP basis (2)% (955)%
(10)% (9)% (311)% Operating margin, as adjusted (4) 14% 8% 4% 4% 7%
(1) Revenues, as adjusted, is a non-GAAP financial measure
calculated by deducting distribution and administration expenses
from GAAP revenues. Management believes revenues, as adjusted,
provides useful information to investors because distribution and
administrative expenses are costs that are generally passed
directly through to external parties. Goodwin's results are
excluded from 2008 periods to aid in comparability between 2008 and
2009 results since Goodwin is no longer part of Virtus' operations,
effective December 31, 2008. (2) Excludes Goodwin-related expenses
of $666 and $1,997 for the three- and nine-month periods ended
September 30, 2008. (3) Excludes Goodwin-related expenses of $275
and $816 for the three- and nine-month periods ended September 30,
2008. (4) Operating expenses, as adjusted, is a non-GAAP financial
measure that management believes provides investors with useful
information because of the nature of the specific excluded
operating expenses Specifically, management adds back amortization
and impairments attributable to acquisition related intangible
assets as this is useful to an investor to measure our operating
results with the results of other asset management firms that have
not engaged in significant acquisitions. In addition, we add back
restructuring and severance charges as we believe that operating
expenses exclusive of these costs will aid comparability of the
information to prior reporting periods. We believe that because of
the variety of equity awards used by companies and the varying
methodologies for determining stock-based compensation expense,
excluding stock-based compensation enhances the ability of
management and investors to compare financial results over periods.
Distribution and administrative expenses are excluded for the
reason set forth above. Goodwin's results are excluded from 2008
periods to aid in comparability between 2008 and 2009 results since
Goodwin is no longer part of Virtus' operations, effective December
31, 2008. (5) Operating income (loss), as adjusted, and operating
margin, as adjusted, are calculated using the basis of revenues
used for operating margin, as adjusted, and expenses used for
operating margin, as adjusted, as described above. These measures
should not be considered as substitutes for any measures derived in
accordance with GAAP and may not be comparable to similarly titled
measures of other companies. DATASOURCE: Virtus Investment
Partners, Inc. CONTACT: Joe Fazzino, +1-860-263-4725, Web Site:
http://www.virtus.com/
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