Nuveen Investments Reports 3rd Quarter Earnings And Assets Under Management of $170 Billion.CHICAGO Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. -- Nuveen Investments Nuveen Investments is a public company in the asset management industry. References http://www.nuveen.com Nuveen's Corporate Website , Inc. (NYSE NYSE See: New York Stock Exchange : JNC JNC Joint National Committee JNC Japan Nuclear Cycle Development Institute JNC Judicial Nominating Commission JNC Jet Navigation Chart JNC Journal of Nuclear Cardiology JNC JNet Consultancy (Netherlands) ), a leading provider of diversified diversified (di·verˑ·s investment services, today reported third quarter earnings of $43.6 million, down 6% from the prior year. Third quarter earnings per share (diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ), which included several significant items, was $0.51, a decrease of 9% from a year ago. The Company's third quarter operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. of $214.2 million increased 18% over the prior year with advisory fee income up 15% year over year. This quarter's results were negatively impacted by several significant items totaling $19.7 million in expense before taxes, including $7.9 million in equity compensation expense as a result of accelerated vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: of certain options upon the approval by the Company's shareholders of the previously announced proposed acquisition of the Company by private equity investors led by Madison Dearborn Madison Dearborn Partners (MDP) is a private equity firm specializing in buyouts of private or publicly held companies, or divisions of larger companies; recapitalizations of family-owned or closely held companies; balance sheet restructurings; acquisition financings; and growth Partners, $3.3 million in additional transaction-related expenses, $6.2 million in payments to Merrill Lynch Merrill Lynch & Co., Inc. (NYSE: MER TYO: 8675 ), through its subsidiaries and affiliates, provides capital markets services, investment banking and advisory services, wealth management, asset management, insurance, banking and related products and services on a global basis. to terminate Terminate (terminat.exe) was a shareware modem terminal and host program for MS-DOS and compatible operating systems developed from the early to the late 1990s by the Dane Bo Bendtsen. The last release (5. closed-end fund Closed-end fund An investment company that issues shares like any other corporation and usually does not redeem its shares. A publicly traded fund sold on stock exchanges or over the counter that may trade above or below its net asset value. Related: Open-end fund. trailer fee Trailer Fee A fee that a mutual fund manager pays to a salesperson who sells the fund to investors. Notes: The trailer fee pays the salesperson for providing the investor with ongoing investment advice and services. obligations on four funds, and $2.3 million in recruiting and relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. expenses. These items reduced reported net income by $11.9 million and adversely affected earnings per share by $0.14 on a fully-diluted basis. After adjusting for significant items, third quarter income before taxes increased 12% compared to the prior year. See Table 1. Third quarter gross sales Gross Sales A measure of overall sales that isn't adjusted for customer discounts or returns, calculated simply by adding all sales invoices, and not including operating expenses, cost of goods sold, payment of taxes, or any other charge. were $5.1 billion. Gross sales in the period were comprised of $2.1 billion in institutional separate accounts, $1.8 billion in retail managed accounts, and $1.2 billion in mutual funds. No closed-end funds were launched in the quarter. Due to unfavorable market conditions during the quarter, gross sales were down 23% from the prior year. As a result, net outflows for the quarter were $1.4 billion, primarily driven by $1.8 billion in retail managed account outflows. Institutional net flows were a positive $0.4 billion in the quarter while mutual fund flows were flat. The challenging market environment in the third quarter drove increased redemptions and dampened sales in both equity and fixed-income mutual funds and retail managed accounts as well as in institutional equity accounts. Total assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. were $170.4 billion at September September: see month. 30, 2007, compared to $154.2 billion a year ago, $161.6 billion at the beginning of the year and $171.6 billion at the end of the prior quarter. The 11% increase in assets under management over the prior year was driven by $5.5 billion of net flows, $10.3 billion of market appreciation and $0.4 billion from the acquisition of HydePark Investment Strategies. From the beginning of the year, assets under management increased 5% due to $3.5 billion of net flows, $4.9 billion of market appreciation and $0.4 billion from the acquisition of HydePark. Commenting on the Company's results, John Amboian, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Nuveen Investments, said, "Our third quarter results were negatively impacted by several significant items, the dramatically heightened market volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the that affected many financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. and investment firms, and Tradewinds' prior relative performance. Our strong revenue and adjusted net income growth, despite the recent global credit crunch Credit Crunch An economic condition whereby investment capital is difficult to obtain. Banks and investors become weary of lending funds to corporations thereby driving up the price of debt products for borrowers. and the July July: see month. and August equity market declines, demonstrates our ability to deliver high-quality, consistent results across a variety of market conditions." Operating revenue of $214.2 million in the third quarter increased 18% from the prior year driven by a 15% increase in advisory fees due to increased assets under management and a $6.4 million increase in performance fees and other revenue primarily due to increased performance fees on Symphony symphony [Gr.,=sounding together], a sonata for orchestra. The Italian operatic overture, called sinfonia, was standardized by Alessandro Scarlatti at the end of the 17th cent. equity accounts. Operating revenue increased 5% compared to the prior quarter as a result of increased advisory fee revenue from one extra day in the quarter and higher assets under management at the beginning of the quarter, since many managed accounts earn fees based on asset levels at the beginning of each quarter. Compensation expense as a percent of revenue was 42%, an increase compared to the prior quarter and full year 2006 level of 37%. This increase was driven by $7.9 million in increased equity compensation as a result of accelerated vesting of certain options that vested vested adj. referring to having an absolute right or title, when previously the holder of the right or title only had an expectation. Examples: after 20 years of employment Larry Loyal's pension rights are now vested. (See: vest, vested remainder) on September 18, 2007 upon shareholder approval of the pending transaction led by Madison Dearborn. Excluding the $7.9 million in increased equity compensation, compensation expense as a percent of revenue was 38%. Compensation expense also increased as a result of increased bonus expense related to slightly higher performance fees this quarter. Other income/(expense) includes $6.2 million in payments to Merrill Lynch to buy out future trailer fees on four closed end funds. This buy out will result in approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $0.9 million in incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. operating revenue annually. Other income/(expense) in the current quarter also includes $3.3 million in transaction-related expenses due to the pending transaction led by Madison Dearborn Partners. Cash and cash equivalents were $189 million as of September 30, 2007 compared to $223 million at the beginning of the year. The Company's strong, stable cash flow enabled a $50 million pay down on the revolving line of credit Revolving line of credit A bank line of credit on which the customer pays a commitment fee and can take and repay funds at will. Normally a revolving LOC involves a firm commitment from the bank for a period of several years. in the first quarter and another $50 million pay down in the third quarter. The Company's total debt balance was $545 million as of September 30, 2007. As previously announced, on Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , October October: see month. 12, 2007 the shareholders of 119 of the 171 funds offered by Nuveen approved new investment management and sub-advisory agreements to take effect upon the closing of the pending transaction led by Madison Dearborn Partners. As a result the Company anticipates that another condition to the closing of this transaction will be satisfied later this month. This condition in effect requires that fund shareholder approvals and client consents be obtained so that the Company's revenue run-rate, as defined in the merger agreement for the proposed transaction, will be at least 80% of its revenue run-rate prior to the signing of the merger agreement. The Company continues to expect the transaction to close by the end of the fourth quarter. Nuveen Investments provides high-quality investment services designed to help secure the long-term goals Long-term goals Financial goals expected to be accomplished in five years or longer. of institutions and high-net-worth investors as well as the consultants and financial advisors who serve them. Nuveen Investments markets its growing range of specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. investment solutions under the high-quality brands of NWQ, Santa Barbara Santa Barbara (săn'tə bär`brə, –bərə), city (1990 pop. 85,571), seat of Santa Barbara co., S Calif., on the Pacific Ocean; inc. 1850. , Tradewinds, Rittenhouse, Symphony and Nuveen, including the Nuveen HydePark Group. In total, the Company managed $170 billion in assets as of September 30, 2007. Nuveen Investments is listed on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. and trades under the symbol "JNC." FORWARD-LOOKING STATEMENTS forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Certain statements made by the Company in this release are forward-looking statements. The Company's actual future results may differ significantly from those anticipated in any forward-looking statements due to numerous factors. These include, but are not limited to, the effects of the substantial competition in the investment management business, including competition for access to brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. firms' retail distribution systems, the Company's reliance on revenues from investment management contracts which renew annually, regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. developments, accounting pronouncements, and other additional risks and uncertainties as set forth in the Company's filings with the SEC. The Company undertakes no responsibility to update publicly or revise any forward-looking statements. Financial Tables Follow
NUVEEN INVESTMENTS
CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended December 31, 2006 and the Quarter Ended
September 30, 2007
In thousands, except share data
2006
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total
REVENUES:
Investment advisory
fees from assets under
management (1) $156,275 168,923 176,925 183,725 685,847
Product distribution 1,237 733 1,697 1,077 4,745
Performance fees/other
revenue 2,635 2,519 3,284 10,798 19,236
Total operating
revenues 160,146 172,175 181,906 195,600 709,828
EXPENSES:
Compensation and benefits 53,821 59,646 72,911 77,307 263,686
Advertising and
promotional costs 2,670 2,676 3,728 4,427 13,500
Occupancy and equipment
costs 5,931 5,975 6,032 6,246 24,184
Amortization of
intangible assets 1,673 2,798 1,995 1,967 8,433
Travel and entertainment 2,108 2,677 2,290 3,082 10,158
Outside and professional
services 7,144 7,543 7,411 8,713 30,811
Minority interest expense 1,481 1,607 1,398 1,744 6,230
Other operating expenses 5,758 9,083 9,324 7,618 31,782
Total operating
expenses 80,586 92,004 105,089 111,104 388,783
OTHER INCOME/(EXPENSE) 2,329 3,286 6,721 3,391 15,726
NET INTEREST EXPENSE (8,345) (7,389) (6,678) (5,753) (28,166)
INCOME BEFORE TAXES 73,544 76,068 76,859 82,134 308,605
INCOME TAXES:
Federal 24,122 24,950 24,901 25,975 99,948
State 4,560 4,716 5,775 5,925 20,976
Total income taxes 28,682 29,666 30,676 31,900 120,924
NET INCOME $ 44,862 46,402 46,183 50,234 187,680
AVERAGE COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING:
Basic 77,804 78,028 77,669 77,908 77,852
Diluted 83,044 83,069 82,934 83,401 83,148
EARNINGS PER SHARE:
Basic $ 0.58 0.59 0.59 0.64 2.41
Diluted $ 0.54 0.56 0.56 0.60 2.26
GROSS SALES (in millions):
Mutual funds $ 1,347 1,505 1,374 1,416 5,642
Managed accounts-retail 7,230 4,875 2,500 2,517 17,122
Managed accounts
-institutional 1,532 2,581 2,450 2,183 8,747
Closed-end funds - 226 369 - 595
Total funds and
accounts $ 10,109 9,187 6,694 6,116 32,106
NET FLOWS (in millions):
Mutual funds $ 864 856 886 1,015 3,622
Managed accounts-retail 4,114 2,178 (454) (350) 5,488
Managed accounts
-institutional 932 1,811 1,590 1,275 5,607
Closed-end funds (6) 228 380 15 616
Total funds and
accounts $ 5,903 5,072 2,402 1,955 15,332
MANAGED FUNDS AND ACCOUNTS
(in millions):
ASSETS UNDER MANAGEMENT:
Beginning of period $136,117 145,017 148,994 154,167 136,117
Acquisition of
HydePark accounts - - - - -
Sales - funds and
accounts 10,109 9,187 6,694 6,116 32,106
Dividend reinvestments 64 86 102 247 498
Redemptions and
withdrawals (4,269) (4,200) (4,394) (4,409) (17,272)
Total net flows into
funds and accounts 5,903 5,072 2,402 1,955 15,332
Appreciation/
(depreciation) of
managed assets 2,997 (1,096) 2,771 5,487 10,160
End of period $145,017 148,994 154,167 161,609 161,609
RECAP BY PRODUCT TYPE:
Mutual funds $ 15,398 16,133 17,407 18,532
Closed-end funds 51,813 51,388 52,791 52,958
Managed accounts-retail 53,651 55,277 55,633 58,556
Managed accounts
- institutional 24,154 26,195 28,335 31,563
Total assets
under management $145,017 148,994 154,167 161,609
RECAP BY MANAGER:
Nuveen $ 75,005 75,072 77,195 78,328
NWQ 31,806 32,145 33,066 35,564
Rittenhouse 5,072 4,159 3,687 3,519
Santa Barbara 4,037 4,169 4,429 4,576
Symphony 6,247 6,870 7,168 7,651
Tradewinds 22,850 26,579 28,623 31,970
HydePark - - - -
Total assets
under management $145,017 148,994 154,167 161,609
RECAP BY STYLE:
Equity-based $ 70,019 73,759 76,811 82,819
Municipals 60,585 60,643 62,765 63,751
Taxable income-oriented 14,414 14,591 14,591 15,039
Total assets
under management $145,017 148,994 154,167 161,609
2007
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total
REVENUES:
Investment advisory fees
from assets under
management (1) $189,716 197,981 203,154 - 590,851
Product distribution 1,422 2,152 1,421 - 4,996
Performance fees/other
revenue 5,689 4,133 9,658 - 19,480
Total operating
revenues 196,827 204,266 214,234 - 615,327
EXPENSES:
Compensation and benefits 73,475 75,009 89,577 - 238,061
Advertising and
promotional costs 3,391 4,258 4,605 - 12,254
Occupancy and equipment
costs 6,741 6,638 6,793 - 20,172
Amortization of
intangible assets 1,967 2,036 2,071 - 6,074
Travel and entertainment 2,185 2,676 3,026 - 7,887
Outside and professional
services 8,005 8,387 10,346 - 26,739
Minority interest expense 2,335 2,043 1,867 - 6,245
Other operating expenses 7,673 18,434 10,219 - 36,325
Total operating
expenses 105,772 119,481 128,504 - 353,757
OTHER INCOME/(EXPENSE) 1,314 2,054 (8,968) - (5,600)
NET INTEREST EXPENSE (5,906) (6,536) (4,679) - (17,121)
INCOME BEFORE TAXES 86,464 80,303 72,083 - 238,850
INCOME TAXES:
Federal 28,239 26,227 23,542 - 78,008
State 5,914 5,493 4,931 - 16,337
Total income taxes 34,153 31,720 28,473 - 94,346
NET INCOME $ 52,310 48,583 43,610 - 144,504
AVERAGE COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING:
Basic 77,965 78,306 78,841 - 78,374
Diluted 83,370 83,935 85,048 - 84,163
EARNINGS PER SHARE:
Basic $ 0.67 0.62 0.55 - 1.84
Diluted $ 0.63 0.58 0.51 - 1.72
GROSS SALES (in millions):
Mutual funds $ 1,682 1,859 1,212 - 4,752
Managed accounts-retail 2,759 2,260 1,764 - 6,783
Managed accounts
-institutional 3,398 2,576 2,112 - 8,086
Closed-end funds 296 1,133 47 - 1,476
Total funds and
accounts $ 8,134 7,827 5,135 - 21,097
NET FLOWS (in millions):
Mutual funds $ 1,015 621 (3) - 1,633
Managed accounts-retail (547) (1,253) (1,782) - (3,582)
Managed accounts
-institutional 2,249 1,390 337 - 3,976
Closed-end funds 316 1,147 38 - 1,501
Total funds and
accounts $ 3,033 1,906 (1,411) - 3,528
MANAGED FUNDS AND ACCOUNTS
(in millions):
ASSETS UNDER MANAGEMENT:
Beginning of period $161,609 166,095 171,602 - 161,609
Acquisition of
HydePark accounts - 363 - - 363
Sales - funds and
accounts 8,134 7,827 5,135 - 21,097
Dividend reinvestments 103 108 109 - 319
Redemptions and
withdrawals (5,204) (6,029) (6,655) - (17,888)
Total net flows into
funds and accounts 3,033 1,906 (1,411) - 3,528
Appreciation/
(depreciation) of
managed assets 1,453 3,238 203 - 4,894
End of period $166,095 171,602 170,394 - 170,394
RECAP BY PRODUCT TYPE:
Mutual funds $ 19,584 20,160 19,967 -
Closed-end funds 53,091 53,423 53,234 -
Managed accounts-retail 58,713 59,495 58,119 -
Managed accounts
- institutional 34,707 38,524 39,074 -
Total assets
under management $166,095 171,602 170,394 -
RECAP BY MANAGER:
Nuveen $ 79,430 78,703 78,717 -
NWQ 36,277 38,599 37,352 -
Rittenhouse 3,333 3,235 3,258 -
Santa Barbara 4,583 5,040 5,073 -
Symphony 8,953 10,293 10,427 -
Tradewinds 33,518 35,316 35,143 -
HydePark - 415 425 -
Total assets
under management $166,095 171,602 170,394 -
RECAP BY STYLE:
Equity-based $ 85,572 90,728 89,276 -
Municipals 64,519 64,014 64,156 -
Taxable income-oriented 16,004 16,859 16,962 -
Total assets
under management $166,095 171,602 170,394 -
(1) Advisory fee revenue will fluctuate based on the number of days
in the quarter - In 2007, Q1 has 90 days, Q2 has 91 days, Q3 and Q4
have 92 days.
Nuveen Investments 3rd Quarter Earnings - Supplemental Tables The following tables set forth our adjusted income before taxes and our adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become which are non-GAAP financial measures. Adjusted income before taxes and adjusted EBITDA have been included because they are a basis upon which our management assesses and will assess our operating performance. Adjusted income before taxes and adjusted EBITDA are not measures of our liquidity or financial performance under GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). and should not be considered as alternatives to income before taxes, net income, income (loss) from operations or any other performance measure derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP, or as an alternative to cash flow from operating activities as a measure of our liquidity. The use of adjusted income before taxes and adjusted EBITDA instead of income before taxes or income (loss) from operations has limitations as an analytical analytical, analytic pertaining to or emanating from analysis. analytical control control of confounding by analysis of the results of a trial or test. tool. Management compensates for these limitations by relying primarily on our GAAP results and by using adjusted income before taxes and adjusted EBITDA supplementally. Our management believes adjusted income before taxes and adjusted EBITDA are useful to investors because they enable investors to evaluate how management views our business. Our measure of adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation. [TABLE OMITTED] [TABLE OMITTED] |
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