Invesco Reports Results for Three Months Ended March 31, 2012

ATLANTA, April 26, 2012 /PRNewswire/ -- Invesco Ltd. (NYSE: IVZ) today reported financial results for three months ended March 31, 2012.

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"Reflecting our third consecutive year of strong long-term net flows and continued confidence in our business, we are increasing our return to shareholders by raising our quarterly dividend to 17.25 cents per share, an increase of 41%," said Martin L. Flanagan, president and CEO of Invesco.  "During the first quarter, growth was driven by continued strong client interest in our balanced risk allocation and real estate capabilities and ETFs."

Assets Under Management

Total assets under management (AUM) at March 31, 2012, were $672.8 billion (December 31, 2011: $625.3 billion), an increase of $47.5 billion during the first quarter. Total net inflows were $8.1 billion for the first quarter as detailed below:

Net market gains led to a $37.3 billion increase in AUM during the first quarter, compared to a $20.8 billion increase in the fourth quarter 2011. Foreign exchange rate movements led to a $2.1 billion increase in AUM during the first quarter, compared to a $0.1 billion increase in the fourth quarter 2011.

Average AUM during the first quarter were $658.2 billion, compared to $621.7 billion for the fourth quarter 2011, a 5.9% increase. Further analysis is included in the supplementary schedules to this release.

Earnings Summary

The company is presenting both U.S. GAAP earnings information and non-GAAP earnings information in this release. The company believes that the additional disclosure of non-GAAP earnings, as described more fully in the Form 10-K for the year ended December 31, 2011, provides further transparency into the business and allows more appropriate comparisons with our industry peers. Management uses these non-GAAP performance measures to evaluate the business and they are consistent with internal management reporting.

Non-GAAP Earnings

This section discusses the company's first quarter 2012 compared to the fourth quarter 2011 non-GAAP financial results. The phrase "as adjusted" is used in the following earnings discussion to identify non-GAAP information, together with the non-GAAP financial measures of net revenues, adjusted operating margin, adjusted net income attributable to common shareholders and adjusted diluted EPS. The most directly comparable U.S. GAAP items are reconciled to these non-GAAP items on pages 7 through 12 of this release.

Net revenues increased by $19.5 million (2.7%) to $736.3 million in the first quarter from $716.8 million in the fourth quarter 2011. The change was principally due to increases in investment management fees. Foreign exchange rate changes increased first quarter net revenues by $2.0 million when compared to the fourth quarter 2011.

Investment management fees, as adjusted, increased $41.3 million (5.4%) to $812.1 million in the first quarter from $770.8 million in the fourth quarter 2011. The increase correlates with the higher average AUM.  Foreign exchange rate changes increased first quarter management fees by $2.9 million when compared to fourth quarter 2011.

Service and distribution fees, as adjusted, increased $7.9 million (4.4%) to $189.0 million in the first quarter from $181.1 million in the fourth quarter 2011, also reflecting the higher average AUM. Foreign exchange rate changes increased first quarter management fees by $0.4 million when compared to fourth quarter 2011.

Performance fees, as adjusted, were $21.2 million in the first quarter compared to $24.0 million in the fourth quarter 2011.  The first quarter fees were generated from certain investment trusts in the UK and real estate portfolios. Other revenues, as adjusted, decreased by $11.8 million (26.3%) in the first quarter to $33.1 million compared to $44.9 million in the fourth quarter 2011 principally due to lower transaction fees related to private equity and real estate activities.

Third-party distribution, service and advisory expenses, as adjusted, were $319.1 million in the first quarter compared to $304.0 million in the fourth quarter 2011. The increase of $15.1 million (5.0%) primarily reflects the increase in investment management fees and service and distribution fees. Foreign exchange rate changes increased the first quarter third-party distribution, services and advisory expenses by $1.2 million.

Total operating expenses, as adjusted, increased by $6.6 million (1.4%) to $467.1 million in the first quarter from $460.5 million in the fourth quarter 2011. Foreign exchange rate changes increased operating expenses, as adjusted, by $1.4 million when compared to the fourth quarter 2011.

Employee compensation expenses, as adjusted, increased by $0.7 million (0.2%) to $313.0 million in the first quarter from $312.3 million in the fourth quarter 2011.  Seasonally higher payroll tax costs and retirement costs were offset by reduced variable compensation costs when compared to the fourth quarter 2011. Foreign exchange rate changes increased first quarter employee compensation expenses by $0.8 million when compared to the fourth quarter 2011.

Marketing expenses, as adjusted, increased by $4.9 million (22.2%) to $27.0 million in the first quarter from $22.1 million in the fourth quarter 2011 principally due to increased advertising spend in the UK and US. Foreign exchange rate changes increased first quarter marketing expenses by $0.1 million when compared to the fourth quarter 2011.

Property, office and technology expenses, as adjusted, increased $4.4 million (7.1%) to $66.3 million in the first quarter from $61.9 million in the fourth quarter 2011 reflecting higher property lease expenses and continued investment in portfolio management and client engagement technology initiatives. Foreign exchange rate changes increased first quarter property, office and technology expenses by $0.3 million when compared to the fourth quarter 2011.

General and administrative expenses, as adjusted, decreased $3.4 million (5.3%) to $60.8 million in the first quarter from $64.2 million in the fourth quarter 2011. Foreign exchange rate changes increased first quarter general and administrative expenses by $0.2 million when compared to the fourth quarter 2011.

Non-operating other income and expenses, as adjusted, included improved equity in earnings from partnership investments and gains from seed investments in the first quarter when compared to the fourth quarter 2011. The effective tax rate increased to 25.1% for the first quarter from 22.9% for the fourth quarter 2011.  The fourth quarter tax rate was lower than anticipated due to adjustments to tax positions to reflect actual tax returns filed.

U.S. GAAP Earnings

Operating revenues increased 3.7% to $1,033.7 million in the first quarter from $997.1 million in the fourth quarter 2011. Operating expenses increased by 2.3% to $803.9 million in the first quarter from $785.5 million in the fourth quarter 2011.

Operating expenses included $1.5 million of transaction and integration charges relating to the final round of fund mergers incurred in the first quarter compared to $5.5 million in the fourth quarter 2011. Operating expenses also included $4.1 million of European infrastructure transformational initiative expenses for the first quarter compared to $7.7 million for the fourth quarter 2011.  Fourth quarter non-operating other income and expenses included a $45.0 million credit related to a legal settlement.

The effective tax rate, excluding noncontrolling interests, increased to 27.5% for the first quarter from 27.3% for the fourth quarter 2011.

Capital Management

Cash and cash equivalents were $592.3 million at March 31, 2012, compared to $727.4 million at December 31, 2011. Total debt was $1,325.7 million at March 31, 2012, compared to $1,284.7 million at December 31, 2011. The credit facility balance was $580.0 million at March 31, 2012, compared to $539.0 million at December 31, 2011.

During the first quarter, the company repurchased $75.0 million of its shares, representing 3.1 million shares at a weighted average share price of $24.35.  The annual cash bonus payments were also funded during the first quarter and occurred in conjunction with the granting of new share-based awards that will vest over four years.

On April 17, 2012, the company repaid the $215.1 million of outstanding 5.625% Senior Notes that matured on that date.  The repayment was funded from the credit facility and existing cash on hand.

Today the company is announcing a first-quarter cash dividend of 17.25 cents per share to holders of common shares. The dividend is payable on June 8, 2012, to shareholders of record at the close of business on May 18, 2012.

Headcount

As of March 31, 2012, the company had 6,153 employees compared to 6,162 employees as of December 31, 2011.

Invesco Ltd. is a leading independent global investment management firm, dedicated to helping investors worldwide achieve their financial objectives. By delivering the combined power of our distinctive investment management capabilities, Invesco provides a wide range of investment strategies and vehicles to our retail, institutional and high net worth clients around the world. Operating in more than 20 countries, the firm is listed on the New York Stock Exchange under the symbol IVZ. Additional information is available at www.invesco.com.

Members of the investment community and general public are invited to listen to the conference call today, Thursday, April 26, 2012, at 9:00 a.m. ET by dialing one of the following numbers: 1-866-617-1526 for U.S. and Canadian callers and 0800-279-9630 for U.K. callers or 1-210-795-0624 for international callers. An audio replay of the conference call will be available until Thursday, May 24, 2012 at 5:00 p.m. ET by calling 1-888-296-6948 for U.S. and Canadian callers or 1-203-369-3028 for international callers. The presentation will be made available via a simultaneous Webcast at www.invesco.com. The presentation slides that will be reviewed during the conference call will also be available on Invesco's Web site at www.invesco.com.

This release, and comments made in the associated conference call today, may include "forward-looking statements." Forward-looking statements include information concerning future results of our operations, expenses, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, AUM, acquisitions, debt and our ability to obtain additional financing or make payments, regulatory developments, demand for and pricing of our products and other aspects of our business or general economic conditions. In addition, words such as "believes," "expects," "anticipates," "intends," "plans," "estimates," "projects," "forecasts," and future or conditional verbs such as "will," "may," "could," "should," and "would" as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements.

Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q, filed with the Securities and Exchange Commission. You may obtain these reports from the SEC's Web site at www.sec.gov . We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.

Invesco Ltd.
Notes to the Reconciliation of U.S. GAAP Condensed Consolidated Income Statements to Non-GAAP Condensed Consolidated Income Statement Information

The following are notes to the reconciliations presented on pages 7 through 9. Further explanations of the reasons the company considers it appropriate to present these adjustments in arriving at the non-GAAP measures can be found in the Form 10-K for the year ended December 31, 2011. Non-GAAP measures should not be considered as substitutes for any measures derived in accordance with U.S. GAAP and may not be comparable to other similarly titled measures of other companies

1. Acquisition related adjustments

Acquisition related adjustments are comprised of amounts incurred by the company in connection with business combinations, including transaction and integration expenses, intangible asset amortization (including any increased amortization related to the write-off of related management contract intangible assets), changes in estimates of acquisition earn-out liabilities booked from prior acquisitions, and all related tax effects. Additionally, in the first quarter an acquisition related loan note gain of $3.5 million, recorded in other gains and losses, has been reclassified into equity in earnings of unconsolidated affiliates to reflect the hedging purpose of the note.  Adjustment amounts are as follows: