AllianceBernstein Holding L.P. Announces Second Quarter Results GAAP Diluted Net Income of $0.21 per Unit; Includes Impact of $6.8 Million Real Estate Charge

Adjusted Diluted Net Income of $0.24 per Unit

Cash Distribution of $0.21 per Unit

NEW YORK, Aug. 2, 2012 /PRNewswire/ -- AllianceBernstein L.P. ("AllianceBernstein") and AllianceBernstein Holding L.P. ("AllianceBernstein Holding") (NYSE: AB) today reported financial and operating results for the quarter ended June 30, 2012. 

"After a very strong start to the year, global markets took a turn in the second quarter of 2012," said Peter S. Kraus, Chairman and Chief Executive Officer.  "Disappointing U.S. economic indicators, rising concerns over European sovereign debt and the effect of the U.S. fiscal cliff, and signs of slowing growth in emerging markets created market volatility that weighed on investment performance and caused investors to once again flee riskier assets."  


Financial Results 

2Q 2012

1Q 2012

2Q 2012 vs
1Q 2012

2Q 2011

2Q 2012 vs
2Q 2011

($ millions except per Unit amounts)

AllianceBernstein L.P.

GAAP basis:

Net Revenues






Operating Income 






Operating Margin, excl. non-controlling interests




Adjusted basis: (1)

Net Revenues (2)






Operating Income (3)






Operating Margin




AllianceBernstein Holding L.P.

GAAP Diluted Net Income per Unit






Distribution per Unit






Adjusted Diluted Net Income per Unit(1)






(1)See pages 9-11 for reconciliations of GAAP Financial Results to Adjusted Financial Results

(2)Adjusted net revenues exclude investment gains and losses and dividends and interest on deferred compensation-related investments, and 90% of the investment gains and losses of our consolidated venture capital fund attributable to non-controlling interests. In addition, adjusted net revenues offset distribution-related payments to third parties as well as amortization of deferred sales commissions against distribution revenues. They also exclude certain revenues that are reimbursements of pass-through expenses (primarily through our transfer agency).

(3)Adjusted operating income represents operating income on a GAAP basis excluding (1) the impact on net revenues and compensation expense of the mark-to-market gains and losses (as well as the dividends and interest) associated with employee deferred compensation-related investments, (2) the deferred compensation charge, (3) real estate charges, (4) insurance proceeds, and (5) the net loss or income of consolidated entities attributable to non-controlling interests.

Kraus continued:  "In this environment, our large cap equity services, which had outperformed in the first quarter, underperformed and net outflows in these services persisted. Beyond this part of our business, however, we continue to see positive momentum. Second quarter gross sales were up by double-digits year-over-year in each of our Institutions and Retail channels, while redemptions were at multi-year lows, resulting in our firm's lowest net outflow quarter since early 2008. Retail was net flow positive for the second consecutive quarter, driven by ongoing strength in fixed income across all regions. We finished the quarter with an $11 billion Institutional pipeline, up 70% sequentially, with wins across our top-performing fixed income categories. And we continue to make progress in the growth areas we've targeted in pivoting our business to be more diverse and global. Asset allocation services and our newer, risk-aware equity offerings have attracted net new assets, with clients responding well to the services we offer that meet their needs and deliver solid performance. In alternatives, we had the final closing for our first US opportunistic real estate fund during the quarter, with nearly $700 million in capital commitments, and launched a new tail hedge fund, designed to mitigate tail risk in investment portfolios during periods of extreme market stress. And in Defined Contribution, we recently introduced the first-ever multi-insurer backed Lifetime Income Strategy for United Technologies Corporation (UTC) employees as the investment default for their DC plan. Finally, we've stayed diligent on cost reductions, with particular focus on real estate, our largest non-comp expense item."

Added Kraus:  "As we've discussed in the past, we are keenly focused on reducing our global real estate footprint. To that end, we recently completed a comprehensive review of our worldwide office locations and will begin implementing a space consolidation plan during the third quarter of this year. We expect that the actions we will take going forward to vacate and market space for sublease will result over time in projected non-cash real estate charges of $225 to $250 million, with the bulk of the charges occurring in the second half of this year.  These charges are in addition to the earlier non-cash real estate charges our firm has recorded, and they will not affect our future quarterly distributions. Ultimately, we expect to realize annual cost savings of $38 to $43 million once we've successfully subleased the vacated space. Of course, these projections are based on current market conditions and could change over time as conditions evolve. We believe implementing this plan will prove effective in meaningfully improving our cost structure, even if current weak market conditions persist, and will play an important part in positioning our firm for a stronger future."

The firm's cash distribution per unit of $0.21 is payable on August 30, 2012, to holders of record of AllianceBernstein Holding Units at the close of business on August 13, 2012.

Market Performance

The global equity markets declined in the second quarter of 2012.  The S&P 500 was down 2.8% and the MSCI World's total return was -5.1% for the second quarter. In fixed income, the Barclays U.S. Aggregate Index returned 2.1% during the quarter, and the Barclays Global Aggregate Index's total return was 0.6%.

Assets Under Management ($ Billions)

Total assets under management as of June 30, 2012 were $407.3 billion, down 2.8% from March 31, 2012, and down $53.7 billion, or 11.7%, compared to June 30, 2011. 



Private Client


Assets Under Management 6/30/12





Net Flows for Three Months Ended 6/30/12






Total net outflows of $2.8 billion were significantly lower versus both periods. The sequential decline was largely driven by the absence of $5.8 billion in outflows we sustained in the first quarter as a result of Canadian and Australian asset dispositions by the AXA Group, largely from the Institutions channel. Net outflows in the Institutions channel were $3.7 billion, compared to net outflows of $12.9 billion in the first quarter, with $5.2 billion of the improvement coming from the absence of outflows related to prior period AXA asset dispositions.  Institutions gross sales increased 47% sequentially, to $5.6 billion from the prior quarter's $3.8 billion. The pipeline of awarded but unfunded Institutional mandates increased from $6.6 billion to $11.3 billion at June 30, 2012, largely the result of new and diverse fixed income mandates awarded during the second quarter. The Retail channel experienced second quarter 2012 net inflows of $3.5 billion, up from the prior quarter's $2.3 billion.  Retail gross sales declined 7% sequentially to $11.9 billion from $12.9 billion in the first quarter.  In the Private Client channel, net outflows were $2.6 billion versus $1.5 billion in the prior quarter. Private Client gross sales of $0.8 billion in the second quarter of 2012 were down 41% from the prior quarter's $1.4 billion.

Second Quarter Financial Results


Net revenues of $642 million declined 12% compared to the second quarter of 2011, driven primarily by lower base fees on lower overall assets and lower Bernstein Research Services revenues, partially offset by higher distribution revenues from non-US markets and lower losses on investments held. Sequentially, net revenues decreased 6%. The most significant drivers of the decline were current quarter losses on investments held versus prior quarter gains, lower Bernstein Research Services revenues and lower base fees, partially offset by higher distribution revenues from non-US markets. Bernstein Research Services revenues declined 5% from the second quarter of 2011, and 3% from the first quarter of 2012, as overall market volumes continued to decline.

Adjusted net revenues of $546 million were down 14% compared to the second quarter of 2011, driven primarily by lower base fees on lower overall assets and lower Bernstein Research Services revenues. Sequentially, adjusted net revenues decreased 3%, driven by current quarter investment losses, primarily in seed capital, versus gains in the prior quarter, as well as lower Bernstein Research Services revenues and lower base and performance fees.


Operating expenses were $563 million for the second quarter, a year-over-year decrease of 8%, due to lower employee compensation and benefits, travel and entertainment, and trade and clearing costs, partly offset by a $6.8 million real estate charge we recorded as a result of adjusting a prior period charge in response to weaker current market conditions. Operating expenses decreased by 3% sequentially, with lower employee compensation and benefits, partially offset by higher promotion and servicing and general and administrative expenses. Within promotion and servicing, distribution plan payments, amortization of deferred sales commissions and advertising expenses increased compared to the first quarter of 2012. Within G&A, the sequential increase was driven by the absence of the benefit of a $6.5 million cash receipt recorded in the prior quarter related to the finalization of a claims processing contingency. The current quarter's real estate charge compares with a $9.3 million charge taken in the first quarter of 2012 associated with consolidating and subleasing space in New York City.

Operating income and margin:

The Company reported operating income of $79 million and an operating margin of 12.5% for the second quarter of 2012, compared to operating income of $116 million and an operating margin of 16.8% for the second quarter of 2011.  Sequentially, operating income was down 22% from the prior quarter's $101 million and the margin was down from 13.8%.

Adjusted operating income decreased 30% from the second quarter of 2011, to $88 million, and the adjusted operating margin decreased to 16.1% from 19.7%, due to lower revenues and an increase in the ratio of compensation expenses to revenues. On a sequential basis, adjusted operating income decreased 13% from $101 million, and the adjusted operating margin decreased from 18.0%.

Net income and cash distribution per Unit:

Diluted net income per Unit for the second quarter of 2012 was $0.21 compared to $0.34 for the second quarter of 2011 and $0.26 for the first quarter of 2012.

Adjusted diluted net income per Unit for the publicly-traded partnership decreased to $0.24 from $0.35 in the second quarter of 2011 and $0.29 in the first quarter of 2012.

The cash distribution per Unit for the publicly-traded partnership was $0.21 for the second quarter of 2012.

Unit Repurchases

AllianceBernstein engages in open-market purchases of Holding Units to help fund anticipated obligations under its incentive compensation award program and for other corporate purposes under a plan pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The amount of Holding Units AllianceBernstein buys each quarter is subject to SEC regulations, the terms of the 10b5-1 plan and the trading volume of Holding Units on the New York Stock Exchange. In addition, AllianceBernstein purchases Holding Units from employees to allow them to fulfill statutory tax requirements at the time of distribution of long-term incentive compensation awards. During the second quarter of 2012, AllianceBernstein purchased 2.1 million Holding Units for $28.2 million. These amounts reflect open-market purchases of 2.1 million Holding Units for $27.5 million, with the remainder primarily relating to employee tax withholding purchases, offset by Holding Units purchased by employees as part of a distribution reinvestment election. 

Second Quarter 2012 Earnings Conference Call Information

Management will review second quarter 2012 financial and operating results during a conference call beginning at 8:00 a.m. (ET) on Thursday, August 2, 2012. The conference call will be hosted by Peter S. Kraus, Chairman and Chief Executive Officer and John C. Weisenseel, Chief Financial Officer.

Parties may access the conference call by either webcast or telephone:

  1. To listen by webcast, please visit AllianceBernstein's Investor Relations website at at least 15 minutes prior to the call to download and install any necessary audio software.
  2. To listen by telephone, please dial (866) 556-2265 in the U.S. or (973) 935-8521 outside the U.S. 10 minutes before the scheduled start time. The conference ID# is 10756616.

The presentation that will be reviewed during the conference call will be available on AllianceBernstein's Investor Relations website shortly after the release of second quarter 2012 financial and operating results on August 2, 2012.

A replay of the webcast will be made available beginning approximately one hour after the conclusion of the conference call and will be available on AllianceBernstein's website for one week.  An audio replay of the conference call will also be available for one week.  To access the audio replay, please call (855) 859-2056 in the U.S., or (404) 537-3406 outside the U.S., and provide the conference ID #: 10756616.

Cautions Regarding Forward-Looking Statements

Certain statements provided by management in this news release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.  The most significant of these factors include, but are not limited to, the following: the performance of financial markets, the investment performance of sponsored investment products and separately-managed accounts, general economic conditions, industry trends, future acquisitions, competitive conditions, and current and proposed government regulations, including changes in tax regulations and rates and the manner in which the earnings of publicly-traded partnerships are taxed. AllianceBernstein cautions readers to carefully consider such factors.  Further, such forward-looking statements speak only as of the date on which such statements are made; AllianceBernstein undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.  For further information regarding these forward-looking statements and the factors that could cause actual results to differ, see "Risk Factors" and "Cautions Regarding Forward-Looking Statements" in AllianceBernstein's Form 10-K for the year ended December 31, 2011 and subsequent Forms 10-Q.  Any or all of the forward-looking statements made in this news release, Form 10-K, Forms 10-Q, other documents AllianceBernstein files with or furnishes to the SEC and any other public statements issued by AllianceBernstein, may turn out to be wrong.  It is important to remember that other factors besides those listed in "Risk Factors" and "Cautions Regarding Forward-Looking Statements", and those listed below, could also adversely affect AllianceBernstein's financial condition, results of operations and business prospects.

The forward-looking statements referred to in the preceding paragraph include statements regarding:

  • Our belief that our plan to reduce our real estate footprint will be effective in meaningfully improving our cost structure, even if current weak market conditions persist, and will play an important part in positioning our firm for a stronger future.  The charges that we expect to begin recording during the second half of 2012 and our estimates of reduced occupancy costs in future years are based on our current assumptions regarding sublease marketing periods, costs to prepare the properties to market, market rental rates, broker commissions and subtenant allowances/incentives, all of which are factors largely beyond our control. If our assumptions prove to be incorrect, we may be forced to record an additional charge and/or our estimated occupancy cost reduction may be less than we currently project.

    In addition, changes and volatility in political, economic, capital market or industry conditions can result in changes in demand for our products and services or impact the value of our assets under management, all of which may adversely affect our results of operations.  The actual performance of the capital markets and other factors beyond our control will affect our investment success for clients and asset flows.  Furthermore, improved flows depend on a number of factors, including our ability to deliver consistent, competitive investment performance, which cannot be assured, conditions of financial markets, consultant recommendations, and changes in our clients' investment preferences, risk tolerances and liquidity needs.
  • The pipeline of new institutional mandates not yet funded:  Before they are funded, institutional mandates do not represent legally binding commitments to fund and, accordingly, the possibility exists that not all mandates will be funded in the amounts and at the times currently anticipated.
  • Our intention to continue to engage in open market purchases of Holding Units to help fund anticipated obligations under our incentive compensation award program:  The number of Holding Units needed in future periods to make incentive compensation awards is dependent upon various factors, some of which are beyond our control, including the fluctuation in the price of a Holding Unit.

Qualified Tax Notice

This announcement is intended to be a qualified notice under Treasury Regulation §1.1446-4(b).  Please note that 100% of AllianceBernstein Holding's distributions to foreign investors is attributable to income that is effectively connected with a United States trade or business.  Accordingly, AllianceBernstein Holding's distributions to foreign investors are subject to federal income tax withholding at the highest applicable tax rate, currently 35%.

About AllianceBernstein

AllianceBernstein is a leading global investment management firm that offers high-quality research and diversified investment services to institutional investors, individuals and private clients in major world markets.

At June 30, 2012, AllianceBernstein Holding L.P. owned approximately 37.9% of the issued and outstanding AllianceBernstein Units and AXA, one of the largest global financial services organizations, owned an approximate 63.5% economic interest in AllianceBernstein.

Additional information about AllianceBernstein may be found on our website,


AllianceBernstein L.P. (The Operating Partnership)


Three Months Ended

$ thousands, unaudited





Base fees




Performance fees




Bernstein research services




Distribution revenues




Dividend and interest income




Investment gains (losses)




Other revenues




   Total revenues




Less: Interest expense




   Net revenues





Employee compensation & benefits




Promotion & servicing

    Distribution-related payments




    Amortization of deferred sales commissions








General & administrative




Real estate charge




Interest on borrowings




Amortization of intangible assets




   Total expenses




Operating income 




Income taxes 




Net income 




Net (loss) income of consolidated entities attributable to non-

controlling interests




Net Income Attributable to AllianceBernstein Unitholders




Operating margin(1)




(1)Operating income excluding net (loss) income attributable to non-controlling interests as a percentage of net revenues.

AllianceBernstein Holding L.P. (The Publicly-Traded Partnership)


Three Months Ended

$ thousands except per Unit amounts, unaudited




Equity in Net Income Attributable to AllianceBernstein Unitholders




Income Taxes




Net Income




Additional Equity in Earnings of Operating Partnership (1)




Net Income - Diluted




Diluted Net Income per Unit




Distribution per Unit




(1)To reflect higher ownership in the Operating Partnership resulting from application of the treasury stock method to outstanding options.

AllianceBernstein L.P. and AllianceBernstein Holding L.P.


Weighted Average Units

Period End

Three Months Ended 6/30/12




AllianceBernstein L.P.




AllianceBernstein Holding L.P.





AllianceBernstein L.P.


($ billions)

Ending and Average

Three Months Ended



Ending Assets Under Management



Average Assets Under Management



Three-Month Changes By Distribution Channel



Private Client


Beginning of Period





Sales/New accounts










Net Cash Flows





Net Flows





Investment Performance





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Fixed Income

Other  (2)


Beginning of Period






Sales/New accounts












Net Cash Flows






Net Flows






Investment Performance






End of Period(1)






(1)Approximately $40 billion in Blend Strategies AUM are reported in their respective services.

(2)Includes index, structured, asset allocation services and certain other alternative investments.

By Client Domicile



Private Client


U.S. Clients


$ 74.5



Non-U.S. Clients