Form 8-K VIRTUS INVESTMENT PARTNE For: Apr 14

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

________________

 

FORM 8-K

________________

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): April 14, 2015

 

________________________

 

Virtus Investment Partners, Inc.

(Exact name of registrant as specified in charter)

 

________________________

 

Delaware (State or other jurisdiction of incorporation)	1-10994 (Commission File Number)	95-4191764 (I.R.S. Employer Identification No.)
100 Pearl St., Hartford, CT (Address of principal executive offices)		06103 (Zip Code)

Registrant’s telephone number, including area code: (800) 248-7971

 

________________

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 7.01

Regulation FD

 

Beginning with the release of its first quarter 2015 results, Virtus Investment Partners, Inc. (the “Company”) will introduce a series of new non-GAAP financial measures including net income attributable to common stockholders, as adjusted, which will be the Company’s primary performance measure going forward. Management believes that net income attributable to common stockholders, as adjusted, most accurately reflects its operating results from providing investment management and related services to individuals and institutions.

 

Other new non-GAAP financial measures that will be used include the following on an “as adjusted” basis: revenues, operating expenses, operating income, operating margin, and earnings per share. The definition of operating income, as adjusted (and, by calculation, operating margin, as adjusted), will be revised to no longer adjust for expenses related to stock-based compensation or depreciation of fixed assets.

 

Management uses these measures to evaluate the Company’s financial performance, make operational and resource allocation decisions, determine levels of investments, evaluate methods and levels of capital return, and determine performance-based incentive compensation.

 

Reconciliations to GAAP Measures

 

Non-GAAP financial measures differ from financial measures determined in accordance with U.S. GAAP as a result of the reclassification of certain income statement items, as well as the adjustment of certain expenses and other items that are not reflective of the earnings generated from providing investment management and related services.

 

In particular, the Company reclassifies:

 

·

Distribution and administration expenses as these costs are generally passed directly through to external parties. Management believes that making this adjustment aids in comparing the Company’s operating results with other asset management firms that do not distribute products through intermediary distribution partners.

·

The effect of consolidated sponsored investment products. Management believes that excluding the operating activities of majority-owned funds to reflect revenues and expenses of the Company prior to the consolidation of these products is consistent with the approach of reflecting its operating results as only revenues generated and expenses incurred related to providing investment management and related services will be included in operating income, as adjusted.

 

Net income attributable to common stockholders, as adjusted, excludes from net income:

 

·

Non-cash amortization expense or impairment expense, if any, attributable to acquisition-related intangible assets. Management believes that making this adjustment aids in comparing the Company’s operating results with other asset management firms that have not engaged in acquisitions.

·

Gains and losses (realized and unrealized), dividends, and interest income generated by seed capital investments. Earnings or losses generated by investments in seed capital products can vary significantly from period-to-period and do not reflect the Company’s operating results from providing investment management and related services. Management believes that making this adjustment aids in comparing the Company’s operating results with prior periods and with other asset management firms that do not have meaningful seed capital investments.

·

Expenses related to the launch of closed-end funds, or similar products, including structuring fees and sales-based compensation related to the launch. The timing of closed-end fund issuances can be unpredictable and related costs can fluctuate considerably. In addition, revenue associated with these costs will not fully impact financial results until future periods. Management believes that making these adjustments aids in comparing the Company’s operating results with prior periods and with other asset management firms that do not issue closed-end funds, or similar products.

·

Expenses related to restructuring, severance and certain transition items that are not reflective of the ongoing earnings generation of the business. Management believes that making these adjustments aids in comparing the Company’s operating results with prior periods.

·

Income tax expense/(benefit) items, such as adjustments for uncertain tax positions, valuation allowances and other unusual items not related to current operating results to reflect a normalized effective rate.

 

 

Revenues, as adjusted, comprise the fee revenues paid by clients for investment management and related services. Revenues, as adjusted, for purposes of calculating net income attributable to common stockholders, as adjusted, differ from U.S. GAAP revenues in that they are reduced by distribution and administrative expenses that are generally passed through to external parties, and exclude the impact of consolidated sponsored investment products.

 

Operating expenses, as adjusted, is calculated to reflect expenses from ongoing continuing operations attributable to stockholders. Operating expenses, as adjusted, for purposes of calculating net income attributable to common stockholders, as adjusted, differ from U.S. GAAP expenses in that they exclude amortization or impairment, if any, of intangible assets, restructuring and severance, the impact of consolidated sponsored investment products, and certain other expenses that do not reflect the ongoing earnings generation of the business.

 

Operating margin, as adjusted, is a metric used to evaluate efficiency represented by operating income, as adjusted, divided by revenues, as adjusted.

 

Earnings per share, as adjusted, represent net income attributable to common stockholders, as adjusted, divided by weighted average shares outstanding, on either a basic or diluted basis.

 

Additional adjustments and reclassifications the Company may make in the future may include, but are not limited to:

 

·

Exclusion of capital transaction costs, including the costs of raising debt or equity, gains or losses realized as a result of redeeming debt or equity, and direct incremental costs associated with acquisitions of businesses or assets;

·

Inclusion of cash tax benefits associated with deductions allowed for acquired intangibles and goodwill that are not recognized within earnings;

·

Exclusion of non-cash expenses representing changes in the value of profits or equity interests held by minority investors in majority-owned affiliates;

·

Proportional exclusion of non-controlling interests in majority-owned affiliates that are fully consolidated;

·

Proportional consolidation of minority-owned affiliates that are accounted for as equity in earnings of unconsolidated affiliates; and

·

Reclassification of third-party service provider expenses that are calculated based on revenues or assets under management and are directly related to managing client assets.

 

Limitations of Net Income Attributable to Common Stockholders, As Adjusted, and Related Non-GAAP Financial Measures

 

Because the calculation of net income attributable to common stockholders, as adjusted, and related measures excludes certain ongoing expenses and/or reclassifies certain income statement items, these non-GAAP financial measures have material limitations and should not be viewed in isolation or as a substitute for U.S. GAAP measures. Furthermore, net income attributable to common stockholders, as adjusted, and related measures are not audited, and the Company’s definition and calculation of net income attributable to common stockholders, as adjusted, and related measures could differ from similarly titled measures disclosed by other companies.

 

Reconciliations

 

In conjunction with this new presentation, the Company is providing quarterly reconciliations of the most comparable U.S. GAAP measure to each new non-GAAP measure for the first quarter of 2013 through the fourth quarter of 2014 and full year reconciliations for fiscal 2013 and 2014. This supplemental information, which is attached hereto as Exhibit 99.1 and incorporated herein by reference, does not restate or amend any financial results presented in any of the Company’s periodic filings.

  

Item 9.01

Financial Statements and Exhibits

 

(d)

Exhibits.

 

Exhibit No.		Exhibit
99.1		Reconciliation Information

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	VIRTUS INVESTMENT PARTNERS, INC.
Date: April 14, 2015	By:	/s/ Michael A. Angerthal
		Name:	Michael A. Angerthal
		Title:	Chief Financial Officer

 

 

 

 

EXHIBIT INDEX

 

Exhibit No.		Exhibit
99.1		Reconciliation Information

 

 

 

 

 Exhibit 99.1

 

Virtus Investment Partners, Inc.

Reconciliation of U.S. GAAP Consolidated Statement of Operations to Consolidated Non-GAAP Income Statement Information

(Unaudited, dollars in thousands except per share)

 

Twelve months ended December 31, 2014

 

						Reclassifications								Adjustments
		U.S. GAAP Basis				Distribution and administration expenses				Consolidated sponsored investment products				Closed-end fund launch costs				Amortization of intangible assets				Seed capital investments impact				Other 1				Non-GAAP Basis
Revenues
Investment management fees		$	300,663			$	-			$	396			$	-			$	-			$	-			$	-			$	301,059
Distribution and service fees			91,950				-				48				-				-				-				-				91,998
Administration and transfer agent fees			56,016				-				217				-				-				-				-				56,233
Other income and fees			1,969				-				-				-				-				-				-				1,969
Distribution and administration expenses			-				(114,089	)			-				-				-				-				-				(114,089	)
Total revenues			450,598				(114,089	)			661				-				-				-				-				337,170
Operating Expenses
Employment expenses			139,809				-				-				(509	)			-				-				(859	)			138,441
Distribution and administration expenses			123,665				(114,089	)			-				(9,576	)			-				-				-				-
Other operating expenses			46,531				-				-				-				-				-				(1,050	)			45,481
Other operating expenses of consolidated sponsored investment products			3,038				-				(3,038	)			-				-				-				-				-
Restructuring and severance			294				-				-				-				-				-				(294	)			-
Depreciation and other amortization			2,763				-				-				-				-				-				-				2,763
Amortization expense			3,778				-				-				-				(3,778	)			-				-				-
Total operating expenses			319,878				(114,089	)			(3,038	)			(10,085	)			(3,778	)			-				(2,203	)			186,685
Operating Income			130,720				-				3,699				10,085				3,778				-				2,203				150,485
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net			914				-				(3,495	)			-				-				2,232				-				(349	)
Realized and unrealized gain (loss) on investments of consolidated sponsored investment products, net			(4,648	)			-				4,648				-				-				-				-				-
Other income (expense), net			891				-				-				-				-				-				-				891
Total other income (expense), net			(2,843	)			-				1,153				-				-				2,232				-				542
Interest Income (Expense)
Interest expense			(537	)			-				-				-				-				-				-				(537	)
Interest and dividend income			1,706				-				3,022				-				-				(3,771	)			-				957
Interest and dividend income of investments of consolidated sponsored investment products			7,268				-				(7,268	)			-				-				-				-				-
Total interest income (expense), net			8,437				-				(4,246	)			-				-				(3,771	)			-				420
Income Before Income Taxes			136,314				-				606				10,085				3,778				(1,539	)			2,203				151,447
Income tax expense			39,349				-				-				3,861				1,441				(2,981	)			16,055				57,725
Net Income			96,965				-				606				6,224				2,337				1,442				(13,852	)			93,722
Noncontrolling interests			735				-				(606	)			-				-				-				-				129
Net Income Attributable to Common Stockholders		$	97,700			$	-			$	-			$	6,224			$	2,337			$	1,442			$	(13,852	)		$	93,851
Earnings Per Share - Basic		$	10.75																											$	10.32
Earnings Per Share - Diluted		$	10.51																											$	10.10
Weighted Average Shares Outstanding - Basic (in thousands)			9,091																												9,091
Weighted Average Shares Outstanding - Diluted (in thousands)			9,292																												9,292

 

¹  Reflects the following items and the associated income tax impact: Newfleet transition expenses, system transition expenses, restructuring and severance charges, and certain income tax items including valuation allowances, uncertain tax positions and other unusual items.

 

 

Virtus Investment Partners, Inc.

Reconciliation of U.S. GAAP Consolidated Statement of Operations to Consolidated Non-GAAP Income Statement Information

(Unaudited, dollars in thousands except per share)

 

Twelve months ended December 31, 2013

 

						Reclassifications								Adjustments
		U.S. GAAP Basis				Distribution and administration expenses				Consolidated sponsored investment products				Amortization of intangible assets				Seed capital investments impact				Other 1				Non-GAAP Basis
Revenues
Investment management fees		$	260,557			$	-			$	(138	)		$	-			$	-			$	-			$	260,419
Distribution and service fees			78,965				-				40				-				-				-				79,005
Administration and transfer agent fees			48,185				-				85				-				-				-				48,270
Other income and fees			1,508				-				-				-				-				-				1,508
Distribution and administration expenses			-				(97,786	)			-				-				-				-				(97,786	)
Total revenues			389,215				(97,786	)			(13	)			-				-				-				291,416
Operating Expenses
Employment expenses			131,768				-				-				-				-				(2,172	)			129,596
Distribution and administration expenses			97,786				(97,786	)			-				-				-				-				-
Other operating expenses			38,321				-				-				-				-				-				38,321
Other operating expenses of consolidated sponsored investment products			798				-				(798	)			-				-				-				-
Restructuring and severance			203				-				-				-				-				(203	)			-
Depreciation and other amortization			2,422				-				-				-				-				-				2,422
Amortization expense			4,413				-				-				(4,413	)			-				-				-
Total operating expenses			275,711				(97,786	)			(798	)			(4,413	)			-				(2,375	)			170,339
Operating Income			113,504				-				785				4,413				-				2,375				121,077
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net			2,350				-				1,855				-				(4,230	)			-				(25	)
Realized and unrealized gain (loss) on investments of consolidated sponsored investment products, net			3,515				-				(3,515	)			-				-				-				-
Other income (expense), net			74				-				-				-				-				-				74
Total other income (expense), net			5,939				-				(1,660	)			-				(4,230	)			-				49
Interest Income (Expense)
Interest expense			(782	)			-				-				-				-				-				(782	)
Interest and dividend income			664				-				1,460				-				(1,849	)			-				275
Interest and dividend income of investments of consolidated sponsored investment products			2,583				-				(2,583	)			-				-				-				-
Total interest income (expense), net			2,465				-				(1,123	)			-				(1,849	)			-				(507	)
Income Before Income Taxes			121,908				-				(1,998	)			4,413				(6,079	)			2,375				120,619
Income tax expense			44,778				-				-				1,669				(2,326	)			1,553				45,674
Net Income			77,130				-				(1,998	)			2,744				(3,753	)			822				74,945
Noncontrolling interests			(1,940	)			-				1,998				-				-				-				58
Net Income Attributable to Common Stockholders		$	75,190			$	-			$	-			$	2,744			$	(3,753	)		$	822			$	75,003
Earnings Per Share - Basic		$	9.18																							$	9.16
Earnings Per Share - Diluted		$	8.92																							$	8.89
Weighted Average Shares Outstanding - Basic (in thousands)			8,188																								8,188
Weighted Average Shares Outstanding - Diluted (in thousands)			8,433																								8,433

 

¹  Reflects the following items and the associated income tax impact: Newfleet transition expenses, system transition expenses, restructuring and severance charges, and certain income tax items including valuation allowances, uncertain tax positions and other unusual items.

 

Consolidated Non-GAAP Income Statement Information

(Dollars in thousands, except per share data)

   

		Twelve Months Ended
		12/31/14				12/31/13				Change
Revenues, as Adjusted
Investment management fees		$	301,059			$	260,419			16%
Distribution and service fees			91,998				79,005			16%
Administration and transfer agent fees			56,233				48,270			16%
Other income and fees			1,969				1,508			31%
Distribution and administration expenses			(114,089	)			(97,786	)		17%
Total Revenues, as Adjusted			337,170				291,416			16%
Operating Expenses, as Adjusted
Employment expenses			138,441				129,596			7%
Other operating expenses			45,481				38,321			19%
Depreciation of fixed assets			2,763				2,422			14%
Total Operating Expenses, as Adjusted			186,685				170,339			10%
Operating Income, as Adjusted			150,485				121,077			24%
Operating Margin, as Adjusted			44.6%				41.5%
Other Income (Expense)
Realized and unrealized loss on investments, net			(349	)			(25	)		N/M
Other income, net			891				74			N/M
Total other income, net			542				49			N/M
Interest Income (Expense)
Interest expense			(537	)			(782	)		(31)%
Interest and dividend income			957				275			248%
Total interest (expense), net			420				(507	)		(183)%
Pre-tax Income, as Adjusted			151,447				120,619			26%
Income tax expense, as adjusted			57,725				45,674			26%
Net Income, as Adjusted			93,722				74,945			25%
Noncontrolling interests			129				58			122%
Net Income Attributable to Common Stockholders, as Adjusted		$	93,851			$	75,003			25%
Earnings Per Share, as Adjusted - Basic		$	10.32			$	9.16			13%
Earnings Per Share, as Adjusted - Diluted		$	10.10			$	8.89			14%
Weighted Average Shares Outstanding - Basic (in thousands)			9,091				8,188			11%
Weighted Average Shares Outstanding - Diluted (in thousands)			9,292				8,433			10%

  

N/M - Not Meaningful 

 

 

Virtus Investment Partners, Inc.

Reconciliation of U.S. GAAP Consolidated Statement of Operations to Consolidated Non-GAAP Income Statement Information

(Unaudited, dollars in thousands except per share)

 

Three months ended December 31, 2014

 

						Reclassifications								Adjustments
		U.S. GAAP Basis				Distribution and administration expenses				Consolidated sponsored investment products				Amortization of intangible assets				Seed capital investments impact				Other 1				Non-GAAP Basis
Revenues
Investment management fees		$	75,374			$	-			$	492			$	-			$	-			$	-			$	75,866
Distribution and service fees			21,901				-				18				-				-				-				21,919
Administration and transfer agent fees			14,197				-				78				-				-				-				14,275
Other income and fees			665				-				-				-				-				-				665
Distribution and administration expenses			-				(27,526	)			-				-				-				-				(27,526	)
Total revenues			112,137				(27,526	)			588				-				-				-				85,199
Operating Expenses
Employment expenses			34,053				-				-				-				-				-				34,053
Distribution and administration expenses			27,526				(27,526	)			-				-				-				-				-
Other operating expenses			11,579				-				-				-				-				(359	)			11,220
Other operating expenses of consolidated sponsored investment products			664				-				(664	)			-				-				-				-
Restructuring and severance			-				-				-				-				-				-				-
Depreciation and other amortization			723				-				-				-				-				-				723
Amortization expense			927				-				-				(927	)			-				-				-
Total operating expenses			75,472				(27,526	)			(664	)			(927	)			-				(359	)			45,996
Operating Income			36,665				-				1,252				927				-				359				39,203
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net			(798	)			-				(5,207	)			-				5,723				-				(282	)
Realized and unrealized gain (loss) on investments of consolidated sponsored investment products, net			(5,798	)			-				5,798				-				-				-				-
Other income (expense), net			318				-				-				-				-				-				318
Total other income (expense), net			(6,278	)			-				591				-				5,723				-				36
Interest Income (Expense)
Interest expense			(125	)			-				-				-				-				-				(125	)
Interest and dividend income			653				-				1,116				-				(1,500	)			-				269
Interest and dividend income of investments of consolidated sponsored investment products			2,534				-				(2,534	)			-				-				-				-
Total interest income (expense), net			3,062				-				(1,418	)			-				(1,500	)			-				144
Income Before Income Taxes			33,449				-				425				927				4,223				359				39,383
Income tax expense			15,038				-								347				(782	)			135				14,738
Net Income			18,411				-				425				580				5,005				224				24,645
Noncontrolling interests			468				-				(425	)			-				-				-				43
Net Income Attributable to Common Stockholders		$	18,879			$	-			$	-			$	580			$	5,005			$	224			$	24,688
Earnings Per Share - Basic		$	2.09																							$	2.74
Earnings Per Share - Diluted		$	2.05																							$	2.68
Weighted Average Shares Outstanding - Basic (in thousands)			9,021																								9,021
Weighted Average Shares Outstanding - Diluted (in thousands)			9,203																								9,203

 

¹  Reflects the following items and the associated income tax impact: Newfleet transition expenses, system transition expenses, restructuring and severance charges, and certain income tax items including valuation allowances, uncertain tax positions and other unusual items.

 

 

Virtus Investment Partners, Inc.

Reconciliation of U.S. GAAP Consolidated Statement of Operations to Consolidated Non-GAAP Income Statement Information

(Unaudited, dollars in thousands except per share)

 

Three months ended September 30, 2014

 

						Reclassifications								Adjustments
		U.S. GAAP Basis				Distribution and administration expenses				Consolidated sponsored investment products				Amortization of intangible assets				Seed capital investments impact				Other 1				Non-GAAP Basis
Revenues
Investment management fees		$	78,960			$	-			$	(111	)		$	-			$	-			$	-			$	78,849
Distribution and service fees			23,671				-				10				-				-				-				23,681
Administration and transfer agent fees			14,804				-				68				-				-				-				14,872
Other income and fees			406				-				-				-				-				-				406
Distribution and administration expenses			-				(29,180	)			-				-				-				-				(29,180	)
Total revenues			117,841				(29,180	)			(33	)			-				-				-				88,628
Operating Expenses
Employment expenses			35,246				-				-				-				-				-				35,246
Distribution and administration expenses			29,180				(29,180	)			-				-				-				-				-
Other operating expenses			11,288				-				-				-				-				(216	)			11,072
Other operating expenses of consolidated sponsored investment products			1,246				-				(1,246	)			-				-				-				-
Restructuring and severance			294				-				-				-				-				(294	)			-
Depreciation and other amortization			713				-				-				-				-				-				713
Amortization expense			947				-				-				(947	)			-				-				-
Total operating expenses			78,914				(29,180	)			(1,246	)			(947	)			-				(510	)			47,031
Operating Income			38,927				-				1,213				947				-				510				41,597
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net			(1,039	)			-				(4,872	)			-				5,585				-				(326	)
Realized and unrealized gain (loss) on investments of consolidated sponsored investment products, net			(5,330	)			-				5,330				-				-				-				-
Other income (expense), net			233				-				-				-				-				-				233
Total other income (expense), net			(6,136	)			-				458				-				5,585				-				(93	)
Interest Income (Expense)
Interest expense			(149	)			-				-				-				-				-				(149	)
Interest and dividend income			326				-				851				-				(951	)			-				226
Interest and dividend income of investments of consolidated sponsored investment products			2,222				-				(2,222	)			-				-				-				-
Total interest income (expense), net			2,399				-				(1,371	)			-				(951	)			-				77
Income Before Income Taxes			35,190				-				300				947				4,634				510				41,581
Income tax expense			(1,805	)			-				-				364				1,782				15,652				15,993
Net Income			36,995				-				300				583				2,852				(15,142	)			25,588
Noncontrolling interests			345				-				(300	)			-				-				-				45
Net Income Attributable to Common Stockholders		$	37,340			$	-			$	-			$	583			$	2,852			$	(15,142	)		$	25,633
Earnings Per Share - Basic		$	4.10																							$	2.82
Earnings Per Share - Diluted		$	4.02																							$	2.76
Weighted Average Shares Outstanding - Basic (in thousands)			9,096																								9,096
Weighted Average Shares Outstanding - Diluted (in thousands)			9,279																								9,279

 

¹  Reflects the following items and the associated income tax impact: Newfleet transition expenses, system transition expenses, restructuring and severance charges, and certain income tax items including valuation allowances, uncertain tax positions and other unusual items.

 

 

Virtus Investment Partners, Inc.

Reconciliation of U.S. GAAP Consolidated Statement of Operations to Consolidated Non-GAAP Income Statement Information

(Unaudited, dollars in thousands except per share)

 

Three months ended June 30, 2014

 

						Reclassifications								Adjustments
		U.S. GAAP Basis				Distribution and administration expenses				Consolidated sponsored investment products				Closed-end fund launch costs				Amortization of intangible assets				Seed capital investments impact				Other 1				Non-GAAP Basis
Revenues
Investment management fees		$	74,537			$	-			$	63			$	-			$	-			$	-			$	-			$	74,600
Distribution and service fees			23,940				-				7				-				-				-				-				23,947
Administration and transfer agent fees			13,942				-				52				-				-				-				-				13,994
Other income and fees			330				-				-				-				-				-				-				330
Distribution and administration expenses			-				(29,646	)			-				-				-				-				-				(29,646	)
Total revenues			112,749				(29,646	)			122				-				-				-				-				83,225
Operating Expenses
Employment expenses			35,481				-				-				(509	)			-				-				(367	)			34,605
Distribution and administration expenses			39,222				(29,646	)			-				(9,576	)			-				-				-				-
Other operating expenses			13,130				-				-				-				-				-				(475	)			12,655
Other operating expenses of consolidated sponsored investment products			797				-				(797	)			-				-				-				-				-
Restructuring and severance			-				-				-				-				-				-				-				-
Depreciation and other amortization			670				-				-				-				-				-				-				670
Amortization expense			947				-				-				-				(947	)			-				-				-
Total operating expenses			90,247				(29,646	)			(797	)			(10,085	)			(947	)			-				(842	)			47,930
Operating Income			22,502				-				919				10,085				947				-				842				35,295
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net			905				-				6,169				-				-				(6,921	)			-				153
Realized and unrealized gain (loss) on investments of consolidated sponsored investment products, net			6,444				-				(6,444	)			-				-				-				-				-
Other income (expense), net			189				-				-				-				-				-				-				189
Total other income (expense), net			7,538				-				(275	)			-				-				(6,921	)			-				342
Interest Income (Expense)
Interest expense			(125	)			-				-				-				-				-				-				(125	)
Interest and dividend income			344				-				715				-				-				(816	)			-				243
Interest and dividend income of investments of consolidated sponsored investment products			1,639				-				(1,639	)			-				-				-				-				-
Total interest income (expense), net			1,858				-				(924	)			-				-				(816	)			-				118
Income Before Income Taxes			31,898				-				(280	)			10,085				947				(7,737	)			842				35,755
Income tax expense			12,106				-								3,861				363				(2,962	)			322				13,690
Net Income			19,792				-				(280	)			6,224				584				(4,775	)			520				22,065
Noncontrolling interests			(249	)			-				280				-				-				-				-				31
Net Income Attributable to Common Stockholders		$	19,543			$	-			$	-			$	6,224			$	584			$	(4,775	)		$	520			$	22,096
Earnings Per Share - Basic		$	2.14																											$	2.42
Earnings Per Share - Diluted		$	2.10																											$	2.37
Weighted Average Shares Outstanding - Basic (in thousands)			9,133																												9,133
Weighted Average Shares Outstanding - Diluted (in thousands)			9,325																												9,325

 

¹  Reflects the following items and the associated income tax impact: Newfleet transition expenses, system transition expenses, restructuring and severance charges, and certain income tax items including valuation allowances, uncertain tax positions and other unusual items.

 

 

Virtus Investment Partners, Inc.

Reconciliation of U.S. GAAP Consolidated Statement of Operations to Consolidated Non-GAAP Income Statement Information

(Unaudited, dollars in thousands except per share)

 

Three months ended March 31, 2014

 

						Reclassifications								Adjustments
		U.S. GAAP Basis				Distribution and administration expenses				Consolidated sponsored investment products				Amortization of intangible assets				Seed capital investments impact				Other 1				Non-GAAP Basis
Revenues
Investment management fees		$	71,792			$	-			$	(48	)		$	-			$	-			$	-			$	71,744
Distribution and service fees			22,438				-				13				-				-				-				22,451
Administration and transfer agent fees			13,073				-				19				-				-				-				13,092
Other income and fees			568				-				-				-				-				-				568
Distribution and administration expenses			-				(27,737	)			-				-				-				-				(27,737	)
Total revenues			107,871				(27,737	)			(16	)			-				-				-				80,118
Operating Expenses
Employment expenses			35,029				-				-				-				-				(492	)			34,537
Distribution and administration expenses			27,737				(27,737	)			-				-				-				-				-
Other operating expenses			10,534				-				-				-				-				-				10,534
Other operating expenses of consolidated sponsored investment products			331				-				(331	)			-				-				-				-
Restructuring and severance			-				-				-				-				-				-				-
Depreciation and other amortization			657				-				-				-				-				-				657
Amortization expense			957				-				-				(957	)			-				-				-
Total operating expenses			75,245				(27,737	)			(331	)			(957	)			-				(492	)			45,728
Operating Income			32,626				-				315				957				-				492				34,390
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net			1,846				-				415				-				(2,155	)			-				106
Realized and unrealized gain (loss) on investments of consolidated sponsored investment products, net			36				-				(36	)			-				-				-				-
Other income (expense), net			151				-				-				-				-				-				151
Total other income (expense), net			2,033				-				379				-				(2,155	)			-				257
Interest Income (Expense)
Interest expense			(138	)			-				-				-				-				-				(138	)
Interest and dividend income			383				-				340				-				(504	)			-				219
Interest and dividend income of investments of consolidated sponsored investment products			873				-				(873	)			-				-				-				-
Total interest income (expense), net			1,118				-				(533	)			-				(504	)			-				81
Income Before Income Taxes			35,777				-				161				957				(2,659	)			492				34,728
Income tax expense			14,010				-				-				367				(1,019	)			(54	)			13,304
Net Income			21,767				-				161				590				(1,640	)			546				21,424
Noncontrolling interests			171				-				(161	)			-				-				-				10
Net Income Attributable to Common Stockholders		$	21,938			$	-			$	-			$	590			$	(1,640	)		$	546			$	21,434
Earnings Per Share - Basic		$	2.41																							$	2.35
Earnings Per Share - Diluted		$	2.34																							$	2.29
Weighted Average Shares Outstanding - Basic (in thousands)			9,116																								9,116
Weighted Average Shares Outstanding - Diluted (in thousands)			9,361																								9,361

 

¹  Reflects the following items and the associated income tax impact: Newfleet transition expenses, system transition expenses, restructuring and severance charges, and certain income tax items including valuation allowances, uncertain tax positions and other unusual items.

 

 

Virtus Investment Partners, Inc.

Reconciliation of U.S. GAAP Consolidated Statement of Operations to Consolidated Non-GAAP Income Statement Information

(Unaudited, dollars in thousands except per share)

 

Three months ended December 31, 2013

 

						Reclassifications								Adjustments
		U.S. GAAP Basis				Distribution and administration expenses				Consolidated sponsored investment products				Amortization of intangible assets				Seed capital investments impact				Other 1				Non-GAAP Basis
Revenues
Investment management fees		$	71,186			$	-			$	65			$	-			$	-			$	-			$	71,251
Distribution and service fees			21,958				-				25				-				-				-				21,983
Administration and transfer agent fees			12,937				-				39				-				-				-				12,976
Other income and fees			417				-				-				-				-				-				417
Distribution and administration expenses			-				(26,653	)			-				-				-				-				(26,653	)
Total revenues			106,498				(26,653	)			129				-				-				-				79,974
Operating Expenses
Employment expenses			33,457				-				-				-				-				(487	)			32,970
Distribution and administration expenses			26,653				(26,653	)			-				-				-				-				-
Other operating expenses			10,543				-				-				-				-				-				10,543
Other operating expenses of consolidated sponsored investment products			251				-				(251	)			-				-				-				-
Restructuring and severance			-				-				-				-				-				-				-
Depreciation and other amortization			640				-				-				-				-				-				640
Amortization expense			1,062				-				-				(1,062	)			-				-				-
Total operating expenses			72,606				(26,653	)			(251	)			(1,062	)			-				(487	)			44,153
Operating Income			33,892				-				380				1,062				-				487				35,821
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net			463				-				3,863				-				(4,322	)			-				4
Realized and unrealized gain (loss) on investments of consolidated sponsored investment products, net			5,975				-				(5,975	)			-				-				-				-
Other income (expense), net			(8	)			-				-				-				-				-				(8	)
Total other income (expense), net			6,430				-				(2,112	)			-				(4,322	)			-				(4	)
Interest Income (Expense)
Interest expense			(148	)			-				-				-				-				-				(148	)
Interest and dividend income			238				-				507				-				(675	)			-				70
Interest and dividend income of investments of consolidated sponsored investment products			891				-				(891	)			-				-				-				-
Total interest income (expense), net			981				-				(384	)			-				(675	)			-				(78	)
Income Before Income Taxes			41,303				-				(2,116	)			1,062				(4,997	)			487				35,739
Income tax expense			14,443				-				-				409				(1,925	)			842				13,769
Net Income			26,860				-				(2,116	)			653				(3,072	)			(355	)			21,970
Noncontrolling interests			(2,104	)			-				2,116				-				-				-				12
Net Income Attributable to Common Stockholders		$	24,756			$	-			$	-			$	653			$	(3,072	)		$	(355	)		$	21,982
Earnings Per Share - Basic		$	2.72																							$	2.41
Earnings Per Share - Diluted		$	2.65																							$	2.35
Weighted Average Shares Outstanding - Basic (in thousands)			9,103																								9,103
Weighted Average Shares Outstanding - Diluted (in thousands)			9,347																								9,347

 

¹  Reflects the following items and the associated income tax impact: Newfleet transition expenses, system transition expenses, restructuring and severance charges, and certain income tax items including valuation allowances, uncertain tax positions and other unusual items.

 

 

Virtus Investment Partners, Inc.

Reconciliation of U.S. GAAP Consolidated Statement of Operations to Consolidated Non-GAAP Income Statement Information

(Unaudited, dollars in thousands except per share)

 

Three months ended September 30, 2013

 

						Reclassifications								Adjustments
		U.S. GAAP Basis				Distribution and administration expenses				Consolidated sponsored investment products				Amortization of intangible assets				Seed capital investments impact				Other 1				Non-GAAP Basis
Revenues
Investment management fees		$	67,119			$	-			$	(112	)		$	-			$	-			$	-			$	67,007
Distribution and service fees			20,322				-				7				-				-				-				20,329
Administration and transfer agent fees			12,492				-				15				-				-				-				12,507
Other income and fees			476				-				-				-				-				-				476
Distribution and administration expenses			-				(25,253	)			-				-				-				-				(25,253	)
Total revenues			100,409				(25,253	)			(90	)			-				-				-				75,066
Operating Expenses
Employment expenses			33,022				-				-				-				-				(485	)			32,537
Distribution and administration expenses			25,253				(25,253	)			-				-				-				-				-
Other operating expenses			8,538				-				-				-				-				-				8,538
Other operating expenses of consolidated sponsored investment products			231				-				(231	)			-				-				-				-
Restructuring and severance			-				-				-				-				-				-				-
Depreciation and other amortization			610				-				-				-				-				-				610
Amortization expense			1,125				-				-				(1,125	)			-				-				-
Total operating expenses			68,779				(25,253	)			(231	)			(1,125	)			-				(485	)			41,685
Operating Income			31,630				-				141				1,125				-				485				33,381
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net			1,285				-				240				-				(1,521	)			-				4
Realized and unrealized gain (loss) on investments of consolidated sponsored investment products, net			324				-				(324	)			-				-				-				-
Other income (expense), net			111				-				-				-				-				-				111
Total other income (expense), net			1,720				-				(84	)			-				(1,521	)			-				115
Interest Income (Expense)
Interest expense			(207	)			-				-				-				-				-				(207	)
Interest and dividend income			126				-				315				-				(377	)			-				64
Interest and dividend income of investments of consolidated sponsored investment products			600				-				(600	)			-				-				-				-
Total interest income (expense), net			519				-				(285	)			-				(377	)			-				(143	)
Income Before Income Taxes			33,869				-				(228	)			1,125				(1,898	)			485				33,353
Income tax expense			12,567				-				-				420				(709	)			180				12,458
Net Income			21,302				-				(228	)			705				(1,189	)			305				20,895
Noncontrolling interests			(213	)			-				228				-				-				-				15
Net Income Attributable to Common Stockholders		$	21,089			$	-			$	-			$	705			$	(1,189	)		$	305			$	20,910
Earnings Per Share - Basic		$	2.64																							$	2.62
Earnings Per Share - Diluted		$	2.56																							$	2.54
Weighted Average Shares Outstanding - Basic (in thousands)			7,995																								7,995
Weighted Average Shares Outstanding - Diluted (in thousands)			8,227																								8,227

 

¹  Reflects the following items and the associated income tax impact: Newfleet transition expenses, system transition expenses, restructuring and severance charges, and certain income tax items including valuation allowances, uncertain tax positions and other unusual items.

 

 

Virtus Investment Partners, Inc.

Reconciliation of U.S. GAAP Consolidated Statement of Operations to Consolidated Non-GAAP Income Statement Information

(Unaudited, dollars in thousands except per share)

 

Three months ended June 30, 2013

 

						Reclassifications								Adjustments
		U.S. GAAP Basis				Distribution and administration expenses				Consolidated sponsored investment products				Amortization of intangible assets				Seed capital investments impact				Other 1				Non-GAAP Basis
Revenues
Investment management fees		$	64,475			$	-			$	(24	)		$	-			$	-			$	-			$	64,451
Distribution and service fees			19,324				-				5				-				-				-				19,329
Administration and transfer agent fees			12,061				-				15				-				-				-				12,076
Other income and fees			280				-				-				-				-				-				280
Distribution and administration expenses			-				(24,252	)			-				-				-				-				(24,252	)
Total revenues			96,140				(24,252	)			(4	)			-				-				-				71,884
Operating Expenses
Employment expenses			32,878				-				-				-				-				(544	)			32,334
Distribution and administration expenses			24,252				(24,252	)			-				-				-				-				-
Other operating expenses			10,283				-				-				-				-				-				10,283
Other operating expenses of consolidated sponsored investment products			132				-				(132	)			-				-				-				-
Restructuring and severance			-				-				-				-				-				-				-
Depreciation and other amortization			597				-				-				-				-				-				597
Amortization expense			1,116				-				-				(1,116	)			-				-				-
Total operating expenses			69,258				(24,252	)			(132	)			(1,116	)			-				(544	)			43,214
Operating Income			26,882				-				128				1,116				-				544				28,670
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net			(223	)			-				(2,427	)			-				2,614				-				(36	)
Realized and unrealized gain (loss) on investments of consolidated sponsored investment products, net			(3,156	)			-				3,156				-				-				-				-
Other income (expense), net			(11	)			-				-				-				-				-				(11	)
Total other income (expense), net			(3,390	)			-				729				-				2,614				-				(47	)
Interest Income (Expense)
Interest expense			(206	)			-				-				-				-				-				(206	)
Interest and dividend income			203				-				344				-				(478	)			-				69
Interest and dividend income of investments of consolidated sponsored investment products			612				-				(612	)			-				-				-				-
Total interest income (expense), net			609				-				(268	)			-				(478	)			-				(137	)
Income Before Income Taxes			24,101				-				589				1,116				2,136				544				28,486
Income tax expense			9,318				-				-				421				806				206				10,751
Net Income			14,783				-				589				695				1,330				338				17,735
Noncontrolling interests			602				-				(589	)			-				-				-				13
Net Income Attributable to Common Stockholders		$	15,385			$	-			$	-			$	695			$	1,330			$	338			$	17,748
Earnings Per Share - Basic		$	1.97																							$	2.27
Earnings Per Share - Diluted		$	1.91																							$	2.20
Weighted Average Shares Outstanding - Basic (in thousands)			7,821																								7,821
Weighted Average Shares Outstanding - Diluted (in thousands)			8,058																								8,058

 

¹  Reflects the following items and the associated income tax impact: Newfleet transition expenses, system transition expenses, restructuring and severance charges, and certain income tax items including valuation allowances, uncertain tax positions and other unusual items.

 

 

Virtus Investment Partners, Inc.

Reconciliation of U.S. GAAP Consolidated Statement of Operations to Consolidated Non-GAAP Income Statement Information

(Unaudited, dollars in thousands except per share)

 

Three months ended March 31, 2013

 

						Reclassifications								Adjustments
		U.S. GAAP Basis				Distribution and administration expenses				Consolidated sponsored investment products				Amortization of intangible assets				Seed capital investments impact				Other 1				Non-GAAP Basis
Revenues
Investment management fees		$	57,777			$	-			$	(67	)		$	-			$	-			$	-			$	57,710
Distribution and service fees			17,361				-				3				-				-				-				17,364
Administration and transfer agent fees			10,695				-				16				-				-				-				10,711
Other income and fees			335				-				-				-				-				-				335
Distribution and administration expenses			-				(21,628	)			-				-				-				-				(21,628	)
Total revenues			86,168				(21,628	)			(48	)			-				-				-				64,492
Operating Expenses
Employment expenses			32,411				-				-				-				-				(656	)			31,755
Distribution and administration expenses			21,628				(21,628	)			-				-				-				-				-
Other operating expenses			8,957				-				-				-				-				-				8,957
Other operating expenses of consolidated sponsored investment products			184				-				(184	)			-				-				-				-
Restructuring and severance			203				-				-				-				-				(203	)			-
Depreciation and other amortization			575				-				-				-				-				-				575
Amortization expense			1,110				-				-				(1,110	)			-				-				-
Total operating expenses			65,068				(21,628	)			(184	)			(1,110	)			-				(859	)			41,287
Operating Income			21,100				-				136				1,110				-				859				23,205
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net			825				-				179				-				(1,001	)			-				3
Realized and unrealized gain (loss) on investments of consolidated sponsored investment products, net			372				-				(372	)			-				-				-				-
Other income (expense), net			(18	)			-				-				-				-				-				(18	)
Total other income (expense), net			1,179				-				(193	)			-				(1,001	)			-				(15	)
Interest Income (Expense)
Interest expense			(221	)			-				-				-				-				-				(221	)
Interest and dividend income			97				-				294				-				(319	)			-				72
Interest and dividend income of investments of consolidated sponsored investment products			480				-				(480	)			-				-				-				-
Total interest income (expense), net			356				-				(186	)			-				(319	)			-				(149	)
Income Before Income Taxes			22,635				-				(243	)			1,110				(1,320	)			859				23,041
Income tax expense			8,450				-				-				419				(498	)			325				8,696
Net Income			14,185				-				(243	)			691				(822	)			534				14,345
Noncontrolling interests			(225	)			-				243				-				-				-				18
Net Income Attributable to Common Stockholders		$	13,960			$	-			$	-			$	691			$	(822	)		$	534			$	14,363
Earnings Per Share - Basic		$	1.79																							$	1.84
Earnings Per Share - Diluted		$	1.73																							$	1.78
Weighted Average Shares Outstanding - Basic (in thousands)			7,820																								7,820
Weighted Average Shares Outstanding - Diluted (in thousands)			8,088																								8,088

 

¹  Reflects the following items and the associated income tax impact: Newfleet transition expenses, system transition expenses, restructuring and severance charges, and certain income tax items including valuation allowances, uncertain tax positions and other unusual items.

 

 

Consolidated Non-GAAP Income Statement Information

(Dollars in thousands, except per share data)

   

		Three Months Ended
		3/31/13				6/30/13				9/30/13				12/31/13				3/31/14				6/30/14				9/30/14				12/31/14
Revenues, as Adjusted
Investment management fees		$	57,710			$	64,451			$	67,007			$	71,251			$	71,744			$	74,600			$	78,849			$	75,866
Distribution and service fees			17,364				19,329				20,329				21,983				22,451				23,947				23,681				21,919
Administration and transfer agent fees			10,711				12,076				12,507				12,976				13,092				13,994				14,872				14,275
Other income and fees			335				280				476				417				568				330				406				665
Distribution and administration expenses			(21,628	)			(24,252	)			(25,253	)			(26,653	)			(27,737	)			(29,646	)			(29,180	)			(27,526	)
Total Revenues, as Adjusted			64,492				71,884				75,066				79,974				80,118				83,225				88,628				85,199
Operating Expenses, as Adjusted
Employment expenses			31,755				32,334				32,537				32,970				34,537				34,605				35,246				34,053
Other operating expenses			8,957				10,283				8,538				10,543				10,534				12,655				11,072				11,220
Depreciation of fixed assets			575				597				610				640				657				670				713				723
Total Operating Expenses, as Adjusted			41,287				43,214				41,685				44,153				45,728				47,930				47,031				45,996
Operating Income, as Adjusted			23,205				28,670				33,381				35,821				34,390				35,295				41,597				39,203
Operating Margin, as Adjusted			36.0%				39.9%				44.5%				44.8%				42.9%				42.4%				46.9%				46.0%
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net			3				(36	)			4				4				106				153				(326	)			(282	)
Other income (expense), net			(18	)			(11	)			111				(8	)			151				189				233				318
Total other income (expense), net			(15	)			(47	)			115				(4	)			257				342				(93	)			36
Interest Income (Expense)
Interest expense			(221	)			(206	)			(207	)			(148	)			(138	)			(125	)			(149	)			(125	)
Interest and dividend income			72				69				64				70				219				243				226				269
Total interest (expense), net			(149	)			(137	)			(143	)			(78	)			81				118				77				144
Pre-tax Income, as Adjusted			23,041				28,486				33,353				35,739				34,728				35,755				41,581				39,383
Income tax expense, as adjusted			8,696				10,751				12,458				13,769				13,304				13,690				15,993				14,738
Net Income, as Adjusted			14,345				17,735				20,895				21,970				21,424				22,065				25,588				24,645
Noncontrolling interests			18				13				15				12				10				31				45				43
Net Income Attributable to Common Stockholders, as Adjusted		$	14,363			$	17,748			$	20,910			$	21,982			$	21,434			$	22,096			$	25,633			$	24,688
Earnings Per Share, as Adjusted - Basic		$	1.84			$	2.27			$	2.62			$	2.41			$	2.35			$	2.42			$	2.82			$	2.74
Earnings Per Share, as Adjusted - Diluted		$	1.78			$	2.20			$	2.54			$	2.35			$	2.29			$	2.37			$	2.76			$	2.68
Weighted Average Shares Outstanding - Basic (in thousands)			7,820				7,821				7,995				9,103				9,116				9,133				9,096				9,021
Weighted Average Shares Outstanding - Diluted (in thousands)			8,088				8,058				8,227				9,347				9,361				9,325				9,279				9,203